[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
         ADMINISTRATION OF THE FIRST-TIME HOMEBUYER TAX CREDIT 
=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                       SUBCOMMITTEE ON OVERSIGHT
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 22, 2009

                               __________

                           Serial No. 111-34

                               __________

         Printed for the use of the Committee on Ways and Means

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                       COMMITTEE ON WAYS AND MEANS

                       SUBCOMMITTEE ON OVERSIGHT

                     JOHN LEWIS, Georgia, Chairman

XAVIER BECERRA, California           CHARLES W. BOUSTANY, Jr., 
RON KIND, Wisconsin                  Louisiana, Ranking Member
BILL PASCRELL, Jr., New Jersey       DAVID G. REICHERT, Washington
JOHN B. LARSON, Connecticut          PETER J. ROSKAM, Illinois
ARTUR DAVIS, Alabama                 PAUL RYAN, Wisconsin
DANNY K. DAVIS, Illinois             JOHN LINDER, Georgia
BOB ETHERIDGE, North Carolina
BRIAN HIGGINS, New York

             Janice Mays, Chief Counsel and Staff Director

                   Jon Traub, Minority Staff Director

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                            C O N T E N T S

                               __________
                                                                   Page

Advisory of October 15, 2010 announcing the hearing..............     2

                               WITNESSES

The Honorable J. Russell George, Inspector General, Treasury 
  Inspector General for Tax Administration.......................     5
Linda E. Stiff, Deputy Commissioner for Services and Enforcement, 
  Internal Revenue Service.......................................    25
James R. White, Director, Tax Issues, Government Accountability 
  Office.........................................................    35

                       SUBMISSIONS FOR THE RECORD

Georgia Aldridge, Ed.S., NCSP, Statement Letter..................    57
Jon R. Sias, Statement...........................................    57


           ADMINISTRATION OF THE FIRST-TIME HOMEBUYER CREDIT

                              ----------                              


                       THURSDAY, OCTOBER 22, 2009

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                 Subcommittee on Oversight,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:03 a.m. in 
1100 Longworth House Office Building, the Honorable John Lewis 
(Chairman of the Subcommittee) presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

 Lewis Announces Hearing on Administration of the First-Time Homebuyer 
                               Tax Credit

October 22, 2009

    House Ways and Means Oversight Subcommittee Chairman John Lewis (D-
GA) today announced that the Subcommittee on Oversight will hold a 
hearing on administration of the first-time homebuyer tax credit. The 
hearing will take place on Thursday, October 22, 2009, at 10:00 a.m., 
in the main Committee hearing room, 1100 Longworth House Office 
Building.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. Any 
individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Subcommittee and 
for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    In 2008, the ``Housing and Economic Recovery Act of 2008'' (Public 
Law 110-289) established a first-time homebuyer tax credit for low- and 
moderate-income taxpayers of up to $7,500. The tax credit applies to 
homes purchased after April 8, 2008, and before July 1, 2009. The 
credit must be repaid over a 15-year period, and repayment is 
accelerated if the home is sold within such period.
    In 2009, the ``American Recovery and Reinvestment Act of 2009'' 
(Public Law 111-5) extended and expanded the 2008 first-time homebuyer 
tax credit for homes purchased between January 1, 2009, and December 1, 
2009. The Act increased the maximum tax credit to $8,000. It also 
waived the repayment requirement unless the home ceases to be the 
taxpayer's principal residence within a 36-month period following 
purchase.
    The first-time homebuyer credit is fully refundable, which means 
that the credit will be paid out to eligible taxpayers even if they 
have no tax liability or the credit exceeds the amount of tax due. For 
homes purchased in 2008, the credit may be claimed on the 2008 income 
tax return. For homes purchased in 2009, the credit may be claimed on 
the 2008 income tax return (original or amended) or the 2009 income tax 
return.
    On July 29, 2009, the Internal Revenue Service (IRS) announced its 
first successful prosecution related to fraud involving the first-time 
homebuyer credit and warned taxpayers to beware of schemes. As of 
September 30, 2009, the IRS has identified 167 criminal schemes 
involving the credit and opened nearly 107,000 civil examinations 
involving the credit.
    In announcing the hearing, Chairman Lewis said, ``I am pleased that 
more than one million taxpayers claimed the first-time homebuyer 
credit. However, I am concerned about recent reports that there have 
been fraudulent schemes involving the credit. This hearing will allow 
the Subcommittee to hear what, if any, additional steps should be taken 
to allow the IRS to strike a balance between issuing timely refunds of 
the homebuyer tax credit and protecting federal revenue.''
      

FOCUS OF THE HEARING:

      
    The focus of the hearing is to review the IRS's administration of 
the first-time homebuyer tax credit. The Subcommittee will examine 
recent allegations of fraud involving the tax credit and consider 
opportunities to enhance administration during the 2010 filing season.
      

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                                  ***

                                 

    Chairman LEWIS. Good morning. The hearing is now called to 
order. Today's hearing is on the first-time homebuyer credit.
    Today the Subcommittee will examine the first-time 
homebuyer credit. We need to answer two basic questions. Are 
people claiming the credit who should not and what can be done 
to stop the abuse.
    The tax credit was created to stimulate the economy and 
home sales. It was estimated that at least 2.2 million 
households would claim about $18 billion of tax credits. To 
date, about 1.4 million households have claimed nearly $10 
billion. The majority of these households, 60 percent of them, 
have income below $50,000.
    To ensure the credit achieved its goals, the Internal 
Revenue Service developed a program to timely process returns 
and issue refunds for those claiming the credit. I salute this 
effort.
    I am mindful, however, that this quick response came at a 
cost. The Service processed over one million returns claiming 
the credit before new fraud filters were in place. The result 
so far is that more than 100,000 exams have been opened 
involving the credit.
    We will hear today that taxpayers claiming the credit 
include those who already owned a home, who had not yet bought 
a home, and who are children, some as young as four years old.
    There are possibly hundreds of millions of dollars that 
have been paid to taxpayers who are not entitled to the credit. 
We want to and we need to stop this fraud and abuse. I look 
forward to the recommendations of our witnesses.
    At this time, I would like to take a moment to thank the 
Deputy Commissioner, Linda Stiff, previously Acting 
Commissioner, for her outstanding and great service as a public 
official.
    I understand that you plan to retire in December after 30 
great years with the Service, and this is your last appearance 
before the Subcommittee.
    We have enjoyed working with you over the years and your 
retirement will be a great loss, not just to the Committee, the 
Subcommittee, the Full Committee, to the Congress and to the 
nation. It goes without saying that you will be deeply missed. 
We wish you the very, very best in whatever you decide to do in 
the days, weeks, months and years to come.
    Thank you for your service.
    I am pleased to recognize the distinguished Ranking Member, 
Dr. Boustany, for his opening statement.
    Mr. BOUSTANY. Thank you, Mr. Chairman. Thank you for 
yielding time. I want to thank you for holding this very 
important hearing.
    When the Ways and Means Committee and the Tax Code are used 
for purposes beyond raising the revenues necessary to fund the 
Federal Government, for instance, to pursue social and economic 
policy goals, the members of this Subcommittee have a very 
important responsibility to conduct oversight of those tax 
provisions just as the Appropriations Committee in the House 
conducts oversight programs it funds to ensure that precious 
resources are being used effectively and honestly.
    We are holding this hearing today to review the 
administration of the first-time homebuyer tax credit, examine 
allegations of fraud in claiming this refundable credit, and 
consider possible legislative changes to the credit.
    The credit expires at the end of next month and a debate is 
heating up here in Congress over whether we should extend it, 
for how long, and with what modifications.
    Determining whether or not we should extend the credit is 
not the purpose of this hearing today. Every time Congress 
creates a new refundable credit, meaning that individuals get a 
check from the Government, whether or not they have actual tax 
liability, the incentive for fraud is magnified, as we have 
seen for example with a high percentage of erroneous claims for 
the earned income tax credit and with recent videos showing 
ACORN officials advising people on how to fraudulently claim 
refundable child credits.
    Therefore, this Subcommittee has a responsibility to figure 
out how we can minimize the opportunities for fraud and to be 
good stewards of the taxpayers' money.
    If Congress decides to extend the home buyer tax credit, 
both Chairman Lewis and I believe Congress should consider 
reasonable proposals to reduce fraud and improve the IRS' 
ability to administer this credit.
    In addition, given the worsening fiscal crisis our 
Government faces, I believe any extension of the home buyer tax 
credit should be paid for by reducing wasteful spending 
elsewhere in the budget, such as perhaps canceling ineffective 
stimulus fundings that have not yet been spent.
    Finally, I want to share the same sentiments expressed by 
Chairman Lewis earlier regarding your service to our country, 
Ms. Stiff. Thank you very much. Thirty years of dedicated 
service to the American people is something that is quite 
remarkable, and we are thankful for that service.
    Congratulations on your well deserved retirement. Best of 
luck in your future endeavors. I look forward to hearing your 
final thoughts here today as well as the thoughts of our other 
witnesses.
    With that, Mr. Chairman, I yield back.
    Chairman LEWIS. Thank you very much, Dr. Boustany, for your 
statement.
    Now we will hear from our witnesses. I ask that you limit 
your testimony to five minutes. Without objection, your entire 
statement will be included in the record. I thank each of you 
for being here today.
    It is my pleasure to introduce the Inspector General for 
Tax Administration, the Honorable Russell George. This is your 
first appearance before the Subcommittee and we welcome you.

STATEMENT OF J. RUSSELL GEORGE, TREASURY INSPECTOR GENERAL FOR 
                       TAX ADMINISTRATION

    Mr. GEORGE. Thank you, Mr. Chairman. Chairman Lewis, Dr. 
Boustany, Members of the Subcommittee, thank you for the 
opportunity to appear before you today to discuss the subject 
of the Internal Revenue Service's administration of the first-
time homebuyer credit.
    Based on the administration of the credit to date, I am 
very concerned about the IRS' ability to effectively administer 
the credits that are claimed before the December 1 deadline, 
let alone any credits that may be claimed within future 
extended deadlines.
    The original credit was enacted in July of 2008, and my 
office provided our first memorandum to the IRS with 
recommendations on administering the credit on November 25, 
2008, which was before the start of the 2009 filing season.
    Despite that effort, several key controls to ensure the 
accuracy of claims for the credit have still not been designed 
or implemented.
    The President has called on Federal agencies to ensure that 
Recovery Act funds are used for authorized purposes and that 
every step is taken to prevent instances of fraud, waste, error 
and abuse.
    I am very concerned by the findings of our audit, given the 
stakes that are involved.
    The law requires that to claim a credit, a home must first 
be purchased. However, we identified more than 19,300 
electronically filed 2008 tax returns on which taxpayers 
claimed the home buyer credit for a home which had not yet been 
purchased, but alleged would be in the future.
    We alerted the IRS of the need to validate claims for the 
credit in the November 2008 memorandum. However, the IRS 
disagreed with our recommendations.
    Had the IRS timely implemented our suggestions to both 
capture and use the purchase date information from the forms 
taxpayers submit in order to claim the credit, these claims 
would not have been paid.
    The amount of the credits inappropriately claimed in this 
instance totaled more than $139 million. We have yet to 
determine the number of paper returns with similar claims.
    To its credit, the IRS has now implemented filters to 
reject claims with future purchase dates.
    IRS management, however, indicated that they had not 
decided whether to go back and review or correct the more than 
19,300 electronically filed returns that were processed before 
the filters were put in place or to identify how many paper 
filed returns with future purchase dates were similarly 
processed.
    We found that the taxpayers who had indications of prior 
home ownership within the preceding three years were claiming 
the credit. These indicators included deduction for home 
mortgage interest, real estate taxes, deductible points, and 
qualified mortgage insurance premiums.
    While these entries indicate home ownership, the homes 
involved may or may not have been the taxpayers' principal 
residences. The deduction should not automatically disqualify 
the taxpayers from receiving the credit. However, we believe 
these claims were not scrutinized by the IRS.
    The IRS reported that as of May 17, 2009, it had initiated 
the use of filters to identify such taxpayers for examination. 
Unfortunately, more than 70,000 questionable claims totaling 
almost half a billion dollars were processed by the IRS prior 
to the initiation of its examination filters.
    We reviewed a random sample of these taxpayers. None of the 
accounts had received scrutiny from the IRS relative to their 
claims for the credit.
    In addition, we identified more than 580 taxpayers younger 
than 18 who claimed almost $4 million in first-time homebuyer 
credits, the youngest of which were taxpayers who were four 
years of age.
    Contract law generally exempts children under the age of 18 
from being bound by the terms of a contract. It is highly 
unlikely that these taxpayers would have entered into arm's 
length transactions for the purchase of a home.
    We identified more than 3,200 taxpayers claiming the credit 
totaling over $20.8 million on tax returns filed with 
individual taxpayer identification numbers of ITINs. An ITIN 
does not indicate that an individual is authorized to live or 
work in the United States.
    The Recovery Act specifically denies home buyer credit to 
individuals who are non-resident aliens.
    We also determined that most of the approximately 48,500 
taxpayers who purchased a home in 2009 but claimed a credit of 
$7,500 even though they may be entitled to a credit of $8,000, 
did not have their IRS accounts properly coded to indicate that 
their homes were acquired in calendar year 2009.
    Proper coding is significant because it is an indicator 
that the IRS will use to distinguish between taxpayers who must 
repay the credit over 15 years and taxpayers who will not be 
required to do so unless they sell their homes within 36 
months.
    Unless the IRS properly codes these accounts, these 
taxpayers may eventually be subject to IRS collection 
procedures.
    Finally, Mr. Chairman, it is also very troubling that my 
auditors discovered that among those who apparently wrongly 
claimed the credit are a number of Internal Revenue Service 
employees. These cases have been referred to my Office of 
Investigations for review.
    Mr. Chairman, Members of the Subcommittee, this concludes 
my oral statement. I would be pleased to answer any questions 
at the appropriate time.
    [The prepared statement of J. Russell George follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman LEWIS. Thank you very much, Mr. Inspector General.
    It is my pleasure to call on the Deputy Commissioner, Linda 
Stiff.

STATEMENT OF LINDA STIFF, DEPUTY COMMISSIONER FOR SERVICES AND 
             ENFORCEMENT, INTERNAL REVENUE SERVICE

    Ms. STIFF. Chairman Lewis, Ranking Member Boustany, and 
Members of the Subcommittee on Oversight, thank you for this 
opportunity to testify on the IRS' efforts to effectively 
administer the American Recovery and Reinvestment Act's 
expanded first-time homebuyer credit.
    The Service moved aggressively to implement this important 
program as soon as it was enacted by Congress and signed by the 
President.
    There has been a strong response, as previously noted, to 
the program. Between January 2009 and September 2009, we have 
processed claims for more than 1.5 million individuals or 
families who have purchased homes.
    In administering this program, the IRS has undertaken 
significant outreach to ensure that taxpayers are aware of the 
benefit. We developed new forms and instructions to allow 
taxpayers to file the claim, and we instituted significant 
compliance programs to ensure the validity of the claims filed.
    As with any tax credit, the IRS must run a balanced program 
aimed at delivering the benefits that the legislation intended, 
while assuring that appropriate controls are in place to 
minimize errors and fraud.
    The genesis of the credit was the Housing and Economic 
Recovery Act of 2008. Under that Act, taxpayers who purchased a 
principal residence after April 2008 and before July 2009 were 
allowed to claim the credit equal to ten percent of the 
purchase price not to exceed $7,500.
    It also was required that taxpayers claiming that credit 
paid it back over a 15 year period beginning two years after 
the credit was claimed.
    With the February passage of the ARRA credit, the amount 
was increased to $8,000 and extended to purchases completed on 
or after January 2009 and before this December.
    Unlike the credit provided for in the 2008 Act, there is no 
repayment requirement if they retain the residence for three 
years.
    Taxpayers seeking to claim the ARRA credit may do so on 
either their 2008 or 2009 tax returns.
    The IRS was therefore faced with the administrative 
challenges of implementing two first-time homebuyer credit 
provisions during 2009. In response, we developed robust 
outreach and compliance strategies.
    Through a series of expansive outreach efforts, the IRS 
worked to make sure that taxpayers were aware of the expanded 
credit. These efforts included numerous media interviews, press 
events, pod casts, public service announcements, nationwide tax 
forums, a national marketing campaign, expanded use of our web 
site and working with business stakeholders and our partners in 
the tax community.
    Additionally, the IRS conducted extensive education and 
outreach activities with the return preparer and practitioner 
community. We sought to ensure that these individuals 
understood the eligibility requirements and endeavored to 
minimize inaccurate claims.
    The IRS recognizes that there is the potential for both 
fraud and errors whenever a new refundable tax credit like the 
first-time homebuyer credit is enacted. As we began 
implementing this credit in the days after the Recovery Act 
legislation was passed, we identified different types of 
potential errors or fraudulent claims and matched our 
compliance program to those abuses.
    We are and we will continue to vigorously pursue those who 
file fraudulent claims for the credit. It is important to put 
the administration of this credit in overall context of the tax 
filing process. The expanded credit was made available to 
taxpayers beginning in February, right in the middle of the 
filing season, at which time the IRS is processing 
approximately 140 million individual tax returns.
    In addition to developing a form to collect the information 
pertinent, the IRS took steps to ensure the accuracy of claims. 
This included compliance checks to identify and select for 
audit the high risk claims and criminal investigations of 
possible fraudulent activities.
    As with any other compliance program, the IRS is 
continuously refining the steps it takes to detect ineligible 
filers. The IRS has already identified more than 160 potential 
schemes resulting in scores of ongoing criminal investigations. 
We have selected more than 100,000 returns for audit.
    The first-time homebuyer credit has helped more than a 
million American families purchase homes. We cannot let 
fraudulent activity undermine a program that has benefitted so 
many.
    Mr. Chairman, the IRS administered the statute as written 
in a responsible way to meet the legislative intent of 
stimulating the economy quickly and providing first-time 
homebuyer's with the credit promptly.
    We appreciate and we welcome the independent feedback that 
we have received from a number of our stakeholders, including 
my colleagues from TIGTA and GAO.
    Thank you for the opportunity to testify. I will be happy 
to respond to any questions, and thank you for your 
acknowledgement and kind words as I approach retirement.
    [The prepared statement of Linda Stiff follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman LEWIS. Madam Deputy Commissioner, thank you very 
much for your statement and thank you for being here. As I said 
and the Ranking Member said, this is your last appearance 
before this Committee. Again, we appreciate your work.
    Now it is my pleasure to introduce Mr. Jim White, Director, 
Tax Issues, at the GAO. Thank you for being here, Mr. White.

 STATEMENT OF JAMES R. WHITE, DIRECTOR, TAX ISSUES, GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Mr. WHITE. Mr. Chairman and Members of the Subcommittee, I 
am pleased to be here to discuss how taxpayers have used the 
first-time homebuyer tax credit as well as the major 
implementation and compliance challenges faced by the IRS.
    As you know, there are two versions of the credit. The 2008 
credit was for $7,500 and must be repaid over 15 years in 
increments of $500. The 2009 credit is for $8,000 with no 
repayment. It was enacted in mid-February of this year and made 
retroactive to January 1.
    We summarized taxpayers' use of the credit in my statement. 
Table one on page three shows that over 1.4 million taxpayers 
claimed either the 2008 or 2009 credit so far and that the 
amount claimed is almost $10 billion.
    Table one also shows the number of claims for each year, 
but those numbers should be viewed with caution. One reason is 
that some of the 2008 claims will be re-coded as 2009 claims 
either because the 2009 credit was made retroactive or because 
of IRS coding errors.
    Further, 2009 is not over and many taxpayers are not 
expected to claim the 2009 credit until they file their tax 
returns in 2010. We expect the 2009 numbers to change 
significantly.
    Table two on page four shows the income level of people who 
claimed the credit. Based on claims to date, a clear majority, 
59 percent of credit claimants had adjusted gross incomes of 
less than $50,000. Compared to all taxpayers, credit claimants 
were disproportionately in the income range from $25,000 to 
$100,000.
    Because purchasing a home is such a major financial 
commitment, it is not surprising that people with incomes of 
less than $25,000 are under represented, those with incomes 
above $100,000 are under represented for a variety of reasons, 
including income caps on eligibility.
    Appendix three on page 11 shows credit claims by state. 
There is considerable variation in state claim rates measured 
as claims per capita. For example, Nevada's claim rate, the 
highest, is three times higher than New York's.
    Now I want to discuss implementation and enforcement. IRS 
had to balance quick implementation of the credit with 
enforcement. Despite having to implement many stimulus related 
tax law changes during the filing season, IRS quickly issued 
the new form for claiming the Credit Form 5405, communicated 
with taxpayers through a wide variety of media, and made 
necessary computer programming changes.
    IRS does face significant challenges ensuring compliance 
with the credit's complex rules. To determine eligibility, IRS 
must among other things determine that taxpayers have not owned 
a house in the previous three years and verify the closing date 
of the purchase.
    IRS must also enforce the 15-year payback provision for the 
2008 credit, which is important because the amount to be repaid 
is on the order of $7 billion, and IRS must also enforce the 
recapture provisions of the 2009 credit.
    One reason compliance is a challenge is that IRS did not 
require substantiation through supplemental documentation 
provided by taxpayers or third parties to validate the 
information on the 5405.
    IRS officials said they do not have the ability to accept 
supplemental documentation from taxpayers electronically, so 
requiring such documentation could cause more paper filing.
    Further, providing supplemental documentation would be 
burdensome. IRS has procedures to stop some credit fraud and 
detect some taxpayer mistakes so they can be corrected before 
refunds are issued. As a result of the pre-refund checks, IRS 
froze 110,000 refunds pending audits, identified 167 criminal 
schemes, and began 115 criminal investigations.
    IRS is also conducting post-refund audits but they are done 
after refunds are issued, making it more difficult to recoup 
the money.
    To reduce reliance on costly and burdensome audits, we 
suggested in a recent report that Congress consider providing 
IRS with additional legislative authority called Math Error 
authority, that allows IRS to correct obvious errors on tax 
returns without an audit.
    IRS has such authority for some tax provisions but we 
identified two more related to the homebuyer credit where the 
authority could reduce the need for audits.
    One is the 2008 payback provision which could be verified 
using tax return information. The other is the prohibition on 
claiming both the 2008 and 2009 credit, which could also be 
verified using tax return information.
    It is too early to tell whether IRS' enforcement actions 
and the proposed new math error authorities will be sufficient. 
Because of the complexity of the credit and the multi-year 
compliance issues, continued oversight of IRS' enforcement 
effort is warranted.
    Mr. Chairman, this concludes my statement. I would be happy 
to answer questions.
    [The prepared statement of James R. White follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman LEWIS. Thank you very much, Mr. White, for your 
statement.
    At this time, we will open the hearing for questions. I ask 
that each member follow the five minute rule. If the witnesses 
will respond with short answers, all members should have the 
opportunity to ask questions.
    Mr. George, you mentioned that 600 children received a 
credit. Do you think it would help the administration of the 
credit if there was an age limit?
    Mr. GEORGE. Yes, there is no question that would be 
helpful. Let me also add that there may be instances when 
someone under the age of 18 legitimately is purchasing a home, 
an emancipated youth, for example, but nonetheless, there is 
precedent for income levels or requirements in other refundable 
credit instances.
    I believe the EITC has an income/age requirement for 
certain individuals seeking that credit.
    Once again, sir, yes.
    Chairman LEWIS. Mr. George, how would you deal with the 
case of a child four years old, maybe five, six, seven, eight, 
nine or ten? I do not think a child that young is going to be 
filing a form. Should not the guardians or the parents be held 
liable/responsible?
    Mr. GEORGE. Again, without having completed our review, and 
obviously the IRS has not completed theirs yet, I cannot speak 
definitively, but there is no question that most indications 
are that the parent is attempting to bypass the income 
limitations for seeking the credit by attributing the home 
purchase to a minor.
    Some form of action would seem appropriate in terms of the 
adult who actually signs on behalf of the child.
    Chairman LEWIS. Mr. White, what is the most important tool 
we can give the IRS now to help with the credit?
    Mr. WHITE. One thing that would help ensure compliance is 
the additional math error authority that I discussed. The 
advantage of this is it shifts at least some of the compliance 
efforts from post-refund auditing to pre-refund compliance 
checks. It is also less burdensome for the taxpayer.
    Some errors can be identified as clear cut unambiguous 
errors and IRS can correct those without the need for back and 
forth correspondence with the taxpayer. IRS would correct the 
error and notify the taxpayer that the error has been 
corrected.
    There are two cases we found where such math error 
authority, we think, would be useful to IRS, where they don't 
have the math error authority right now that are in my 
statement.
    Chairman LEWIS. Thank you. Commissioner Stiff, I intend to 
introduce a bill to help with administration of this credit. 
Will any of the following help the IRS? Mr. White just 
mentioned math error authority. Would that help?
    Ms. STIFF. Yes, sir. We specifically would like to have 
math error authority based on indications of prior year home 
ownership. Secondly, we would like a requirement that the HUD-1 
document be attached with the filing of the return and that 
additionally, a failure to do so or an inaccurate or 
incomplete, that we would have math error authority to disallow 
it as we process the return.
    Chairman LEWIS. What about adding an age limit?
    Ms. STIFF. Absolutely.
    Chairman LEWIS. What about requiring people to prove they 
purchased the home?
    Ms. STIFF. Yes, sir. That goes back to what I was 
suggesting by asking them to include the HUD-1 or another legal 
settlement document that would allow us to math error it and 
catch it up front.
    Chairman LEWIS. What about increasing the number of 
electronic returns?
    Ms. STIFF. Yes, sir. That certainly facilitates our 
compliance efforts.
    Chairman LEWIS. Thank you very much. Now I will turn to the 
Ranking Member, Mr. Boustany, for his questions.
    Mr. BOUSTANY. Thank you, Mr. Chairman. Commissioner Stiff, 
your testimony concedes there is potential for both fraud and 
errors whenever a new refundable tax credit like the homebuyer 
tax credit is enacted.
    I believe this is an acknowledgement that refundable tax 
credits pose a higher risk for fraud than other types of tax 
credits. Is that your understanding?
    Ms. STIFF. Yes, sir. Based on experience with refundable 
credits, any time there is an opportunity to receive cash back, 
it tends to attract people that might have an intent to defraud 
the Government. Then you have another segment which is perhaps 
the largest where there is just simply inadvertent errors due 
to the complexity that Mr. White outlined in his testimony.
    Mr. BOUSTANY. Thank you. The Chairman started mentioning 
some remedies and additional tools that you may need. I just 
want to get a clarification. Initially, IRS did not feel that 
the HUD-1 form was necessary or it was going to impose an 
additional paperwork burden?
    Ms. STIFF. Let me clarify. We could have required the HUD-1 
document, but it would not impact our compliance efforts 
because we did not have math error authority.
    If there was something in question on that document, we 
would still have to go through the audit process that we are 
going through today. We created a form, the 5405, that asks 
taxpayers to provide some of that as the formal part of 
processing the tax return, and a failure to do that did allow 
us to math error on that basis.
    Granted, that was not as robust, but we felt like it was a 
reasonable alternative to get some of that stopped before it 
ever went out the door.
    Mr. BOUSTANY. You need additional statutory authority now 
for the math error authority?
    Ms. STIFF. Right. If you get the form, we need the ability 
to disallow on that basis because without it, we find ourselves 
where we are today.
    Mr. BOUSTANY. Finally, IRS is generally much more 
successful at identifying errors and fraud and so forth when 
there is third party reporting. I think the statistics are 
pretty clear on this.
    Given that the homebuyer credit has imposed serious 
auditing difficulties, I want to explore some of the options 
with third party verification. I would invite the entire panel 
to comment on this.
    How would you see this playing out? What types of statutory 
authority should we consider to help you with that tool of 
third party verification?
    Ms. STIFF. I think my best recommendation is the one we 
just discussed, requiring the attachment of the HUD-1 document 
or an alternative legal settlement document, and then math 
error authority.
    Mr. WHITE. We talked about math error authority but in 
terms of third parties, one alternative that at least is an 
option, I am not recommending this, but it is an option, is 
instead of having the HUD-1 submitted by the taxpayer, who in 
cases of fraud might be able to submit a phony HUD-1, to have 
it submitted by the settlement agent.
    There is a tradeoff there because that would impose burden 
on settlement agents who would have to submit that form and IRS 
would have to develop a procedure for processing those.
    Mr. BOUSTANY. Thank you. Mr. George.
    Mr. GEORGE. I would simply note that we have discovered 
that third party reporting in the context of wages results in 
almost a 98-percent compliance rate. We strongly advocate that.
    In this instance, whether or not you actually have a third 
party reporting the information, as long as you require the 
taxpayer to have the information, we believe it would serve as 
a deterrent on whether or not again they are ultimately 
required to submit it to the IRS, somewhat akin to charitable 
contributions when taxpayers are required to receive something 
in writing from the charities they donate to.
    Mr. BOUSTANY. Is it the consensus of the panel that there 
should be some third party verification mechanism, just for 
clarification?
    Mr. GEORGE. Let me answer only by saying the Secretary of 
the Treasury has given the tax policy authority within the 
Department to the Office of Tax Policy, but with that said, I 
think it would be helpful.
    Mr. BOUSTANY. Thank you.
    Mr. WHITE. I guess I would just repeat, we have not done an 
analysis of the tradeoffs there. There are some tradeoffs. It 
would be a burden imposed on closing agents. This would be 
something entirely new for them to have to submit a form to 
IRS.
    Mr. BOUSTANY. Commissioner Stiff, do you want to add 
anything to that?
    Ms. STIFF. Just to restate what I said before. I would 
neither promote involving the people closing the mortgages to 
do it so much as I would ask that taxpayers be required to 
provide the documentation with us because I believe that will 
get us a long way to where we all want to end up.
    Mr. BOUSTANY. Thank you. I will yield back.
    Chairman LEWIS. Now we turn to Mr. Pascrell for his 
questions.
    Mr. PASCRELL. Thank you, Mr. Chairman. Thank you all for 
being here and your service to this nation.
    We tried in February to deal with a growing problem, which 
seems to have subsided somewhat. Very concerned, and this is 
not what we are talking about today, but the foreclosures in 
this country are devastating. That, to me, would be a priority.
    If I have to make priorities in a limited budget, it would 
seem to me that we want to keep people in their homes and then 
secondly, we would want to encourage people to buy new homes 
because of that ripple effect in the economy.
    If I have to make a judgment, if I have to establish 
priorities, and that is what the Congress is all about--I was 
hoping we would talk about foreclosures today but this is the 
subject at hand.
    I wanted to ask you a question, Ms. Stiff. Are you saying 
you could not do more to review these applications for credit 
mainly because of a manpower situation? You mentioned it 
started right in the tax season, I think you said February or 
March.
    Or is it a statutory factor that is preventing you from 
going a step further? These are very disturbing things to all 
of us when we read about taxpayers' money, particularly in this 
atmosphere, going out the window and unretrievable to some 
degree.
    What is the main problem? Manpower?
    Ms. STIFF. Let me say it is a combination of things. It was 
that we were in the middle of the filing season. The credit was 
passed on February 17. Taxpayers were filing their tax returns. 
The next day, they could start filing the claims.
    Secondly, it was the need to get appropriate compliance 
filters in place that would enable us in that real time window 
to begin to detect questionable returns.
    Mr. PASCRELL. Did the Treasury, did the Administration 
alert you to the fact that this legislation, which was part of 
the February legislation, was going to be implemented?
    What kind of discussions did you have with the 
Administration before this even happened?
    Ms. STIFF. Let me say this. We generally do not enact or 
implement or reprogram our systems until we have legislation 
that is enacted because you are in the middle of a filing 
season, and our programming was designed for the credit that 
was passed the prior July.
    It required two different programmings in place. We tried 
to make those decisions in a responsible way so that we are not 
poised for one thing and then it does not happen on this day 
and taxpayers are held up in the system.
    The second thing is it would have required us to take--you 
had 1.1 million taxpayers that filed for this credit from 
February to May. You would have had to take every one of those 
out of the processing stream and make a contact with each and 
every one of those if you wanted to do that before they got 
their credit.
    Mr. PASCRELL. What added measures are in place or about to 
be put in place to protect the taxpayers' money?
    Ms. STIFF. Every one of the 1.5 million claims that have 
been filed are being reviewed through a set of filters and the 
high risk ones are being pursued as a part of the audit 
process.
    For next year, we have that robust process in place as we 
go in for the taxpayers who are actually going to file the 
claim on their 2009 return as opposed to the 2008 return, and I 
think we are poised to administer that in a way that will 
enable us to catch more of it as it is going through in real 
time.
    I think with the legislative tools that we have talked 
about earlier that will only enhance in strong measure our 
ability to do just that.
    Mr. PASCRELL. Thank you. Mr. White, what grade would you 
give IRS in reference to this particular program? How would you 
grade them?
    Mr. WHITE. I do not have a specific grade. As I said, IRS 
quickly implemented the credit and it was a challenging credit 
to implement. There were two versions of the credit, and they 
are both very complicated credits.
    There are a lot of rules and a lot of exceptions to the 
rules. It wa a challenge to implement.
    I think the strategy of trying to shift as much of the 
compliance checks to the pre-refund stage and doing that in an 
automated way is a good strategy because audits are labor 
intensive to do and they are burdensome on taxpayers.
    Mr. PASCRELL. Do you consider--does the GAO look at the 
effectiveness of this program?
    Mr. WHITE. We have not assessed the effectiveness of IRS' 
compliance efforts.
    Mr. PASCRELL. Would you do that?
    Mr. WHITE. We can do that; yes.
    Mr. PASCRELL. I think it would be significant because we 
would like to know if we are spending our money in the right 
ways. We want to encourage first-time homebuyers. There is no 
question about it. We can do that successfully or we can do it 
unsuccessfully.
    The IRS has to be tipped off by the Administration as to 
where we are going so they can establish this. We are flying by 
the seat of our pants. That is exactly what we are doing. That 
is why a lot of folks are taking advantage illegally of this 
program. That is why. It is not the IRS' problem. It is the 
Administration's problem.
    Mr. Chairman, I would hope you will look into that.
    Chairman LEWIS. Thank you very much. We all will look into 
it, not just the Chair. Thank you very much for your question.
    We turn to Mr. Reichert for his questions.
    Mr. REICHERT. Thank you, Mr. Chairman. First, I would like 
to go to Mr. George. You mentioned in your statement that you 
recommended a set of filters to the IRS which they refused to 
implement.
    Could you just give me a short list of some of the filters?
    Mr. GEORGE. One was an age filter. Even with that in place, 
would they have caught all of the examples that I cited in my 
testimony, the answer is no.
    In addition to the age filter, we would have recommended 
that they look at--bear with me one second.
    [Pause.]
    Mr. GEORGE. Let me supply that, a list of the filters for 
the record, if I may, sir.
    Mr. REICHERT. Great. Thank you.
    [The information follows:]

                                 
           Testimony By Georgia Aldridge, Ed.S., NCSP, Letter
Georgia Aldridge, Ed.S., NCSP, Letter

Dear Chairman Lewis,

    As a 20-year resident of the ethnically diverse area of Southern 
Queens, New York, a School Psychologist by profession, a wife and 
mother, who until now could not afford to purchase a home due to the 
unreasonable cost of houses in this area (prices increased by the 
$50,000 per year at regular intervals in the past few years until the 
average cost of 2-3 bedroom capes was $350-$400K), and the related 
costs of a down payment, closing, searching,
    who did not even hear of the poorly advertised Tax Credit until 
completing tax forms in March of this fiscal year 2009, and then as an 
educator could not begin to act on the possibility of purchase until 
July, when school is out, and then as a potential First Time Home Buyer 
on a shoe string budget with no real estate or legal connections, could 
not begin a search until considerable time was spent learning about the 
process,
    who with pre-approvals, excellent credit rating, and qualified real 
estate agent finally in hand, began in earnest a search at the 
beginning of September, only to find that the available price range in 
nearby areas was often filled with sales that were ``Short Sales'' 
subject to lengthy bank approvals or foreclosures with the seller or 
his agent requiring particular kinds of mortgages and monies at offer, 
all requiring additional time and arrangements,
    who in order to garner the down payment, must request a 
distribution from a retirement account that will ``increase'' the 
income level for that fiscal year,
    therefore, who will no longer be able to consider purchasing a 
home, since under the current constraints of the First Time Home Buyers 
Tax Credit (2009) and under the general timetable and purchasing 
conditions found in this geographical area, the deadline of a November 
31 Closing is not reachable, and since the Tax Credit would not be 
available to offset the higher taxes that would ensue because of the 
``increased'' income, purchasing a home would again become 
unaffordable,
    who has not received any individual benefits yet from any of the 
Economic Recovery Acts, by virtue of exclusion from Wall Street, only 
living in its shadow, or from the banking industry, only being subject 
to its apparent usury, and from any unfortunate lower socio-economic 
group, only serving such at work, and church, and in neighborhood, and 
of being Middle America in an Urban setting (yes, we do exist),
    I am requesting the relevant Committees of Congress to consider 
another extension and modification of ARRA of 2009 ``First Time Home 
Buyer's Tax Credit'' through December 31, 2010 to allow the momentum 
toward the American Dream and economic stimulation to continue.
    I propose, in order to reduce temptation to make fraudulent claims 
and to modulate the impact on the U.S. Government's Revenues, the tax 
credit not be refundable, and for it to appear as a ``Tax Credit,'' not 
a ``Payment'' within the Income Tax structure. I am asking for you 
therefore to consider a higher income eligibility structure in order 
for the FTHB of all tax brackets to realize some relief from taxes. I 
am proposing that the total possible amount of `pre-tax credit' be 
raised to the amount of the down payment up to $20,000. I am not asking 
the U.S. government for money-as some have; I am asking you for a tax 
break on the earnings my family has honestly made so that I can use 
that money to invest in America by purchasing a home in my own 
community.
    I sincerely thank you for this opportunity to be heard.
    Regards,
    Mrs. Georgia R. Aldridge

                                 
                  Testimony By Jon R. Sias, Statement
                        Statement of Jon R. Sias
    Thousands of borrowers who purchased under the 2008 program 
guidelines remain under the onus of repayment. Certain Committee text 
suggests the repayment dictated under 2008 guidelines were waived when 
the 2009 language and changes were adopted. Americans are certainly 
entitled to a clear delineation of this policy.
    Nothing bespeaks the value of extending the FTBTC than the strong 
success of the ``C4C'' program. In both cases financial transactions 
are driven down to the local level where the exchange of dollars for 
services ripples along the entire economic tendon. As successful as the 
FTBTC is, it stands in the shadow of the full-stride success it could 
be.
    Thousands of new buyer/borrowers would purchase first time homes, 
removing them from the large and growing glut of available inventory . 
. . if a portion of the tax credit were monetized in the form of a 3.5% 
grant to cover FHA minimum down payment guidelines.
    The infrastructure to make this happen is already in place, however 
much of it was designed and implemented using a neighborhood specific 
outcome approach. Going forward, rather than targeting specific 
neighborhoods, the target must be local economies and the philosophic 
stronghold in the value of home ownership.

                                 

    Mr. REICHERT. Commissioner Stiff, what is your date of 
retirement?
    Ms. STIFF. November 30.
    Mr. REICHERT. I have been in your position as the Sheriff 
in Seattle testifying to our County Council, and sometimes it 
is uncomfortable. Since you are retiring, we can ask pretty 
blunt questions and hope you might feel free to be as open as 
you can since you will be soon leaving.
    What do you think the impact has been to the extent that 
say homebuyers and home builders in my district, they 
benefitted from this, and because of the fraud, to what extent 
do you believe this fraudulent use of tax credits are 
undermining the credit's goal of stabilizing the housing 
market?
    Ms. STIFF. I cannot, I am not an economist. I cannot assess 
the impact. I know 1.5 million taxpayers and their families, as 
noted earlier, received the benefit of the credit.
    I also want to add as a matter of record that these numbers 
that we have been throwing around as potentially questionable 
are not--a determination has not been made that those taxpayers 
are not eligible for that credit.
    We found in our early audits in many instances they 
actually were eligible and what they had were other errors in 
the way they reported or how they reflected it on their return, 
so the tax might have been different, but their eligibility for 
the credit is sometimes not in question, despite having not 
passed a filter.
    Mr. REICHERT. As an old cop, I do not know the financial 
terms for what you deal with, but it seems to me prevention 
really should be the focus. I disagree with Mr. Pascrell just a 
little bit in that I think it is an IRS problem.
    I think it also is an Administration problem, and I think 
you need more resources. It is obvious to us you have kind of 
skirted that issue just a little bit.
    When you look at 1.5 million claims that you have to 
process, 167 schemes and scams that you are trying to 
investigate, another 115 investigations that you are involved 
in, and you are not requiring the supplemental documentation up 
front to screen some of these things so you do not have to 
conduct investigations and uncover scams and schemes, to assign 
more personnel, it seems to me you need more resources, more 
personnel, or you need to develop a program that is able to 
allow these supplemental documents to be reviewed.
    Ms. STIFF. I think your point goes to exactly what Chairman 
Lewis was proposing, that with the additional authorities, we 
will be able to front-end load a lot of our compliance and 
enforcement efforts, and additionally, I cannot resist the 
opportunity to pitch for the passage of the 2010 budget which 
will allow us to continue our efforts.
    Mr. REICHERT. How many agents or investigators do you have 
assigned to 160 scams and schemes?
    Ms. STIFF. I would have to get back to you with that 
number.
    Mr. REICHERT. Can you estimate it for me? Mr. George, do 
you know the number?
    Mr. GEORGE. I do not have that number. I just want to point 
out that to your question about filters, it is really common 
sense because one of the recommendations was that we simply 
have the IRS transcribe the information that they requested 
from taxpayers on the Form 5405 so that people could determine 
what it is that the taxpayers are reporting, and that was not 
being done.
    Mr. REICHERT. You have experience with tax credit before, 
and this should be one that you should have been able to 
implement using some of your past practices and policies and 
then implement, of course, new ones to accommodate this 
specific issue.
    How much more manpower/personnel do you need? How many more 
people do you need? This is an unfunded mandate, as far as I 
see it.
    Ms. STIFF. I believe that with the legislative tools that 
we have requested and with the passage of the 2010 budget, I 
believe we are poised to execute this with that.
    Mr. REICHERT. You believe the next Commissioner coming in 
is going to be just fine with the situation the way it exists 
now?
    Ms. STIFF. I think with the assistance of the new tools we 
have requested we are going to be positioned to responsibly 
deal with this on the front-end. I just need to say this again, 
the fact that it was not stopped on the front-end does not mean 
we are not addressing each and every one of those----
    Mr. REICHERT. I have one last question. It is very 
troubling to hear IRS agents actually have applied for these 
credits illegally. How do you intend to hold those people 
accountable?
    Ms. STIFF. We have an employee tax compliance program that 
we use year in and year out, day in and day out. The fact is 
there has been indications----
    Mr. REICHERT. If there is wrongdoing discovered, what 
happens?
    Ms. STIFF. It will depend upon the facts and circumstances 
specific to each case, just as it would with any other 
taxpayer.
    Mr. REICHERT. Do you know the numbers of your members that 
are involved in this?
    Ms. STIFF. I do not. I think that the numbers Mr. George 
referred to earlier were numbers where there were questionable 
things on the face of the return. I do not believe there have 
been any numbers established that something was done 
incorrectly. Those are ongoing audits, the same as what we are 
talking about with the other 100,000.
    Mr. REICHERT. Thank you, Mr. Chairman.
    Chairman LEWIS. Thank you. Now we turn to Mr. Etheridge for 
his questions.
    Mr. ETHERIDGE. Thank you, Mr. Chairman. Thank you, Chairman 
Lewis. Let me thank each of our panelists here this morning for 
testifying.
    I do not need to remind you the recession has hit all 
sectors of our economy but really the housing industry has been 
hit especially hard and their troubles continue.
    As a result, the first-time homebuyers tax credit really 
has helped to some extent lessen that sting in real estate 
companies, for home builders and the supply chain. We should 
not forget that this helps millions of people, consumers, 
purchase a home for the first time.
    Granted, we are beginning to learn that any time you put 
something out there, there are more crooks than cops. We just 
have to work to make it happen.
    As Congress considers extending or expanding this tax 
credit, we should make sure that this valuable economic tool is 
not only used wisely but that fraud and abuse are stamped out. 
That hurts every program and it really hurts a program that is 
meant to help people.
    Mr. White, you suggested that there are simple tools that 
the IRS could use to stop errors and fraud. Would it really be 
as simple as checking filings against the previous years' 
returns?
    How much delay would this add to the processing of returns, 
if any? How does the so-called math error authority compare to 
the screening Mr. George described earlier? In that, can you 
give us examples of how that would help?
    Mr. WHITE. The math error authority that I was discussing 
applies to specific cases. It clearly does not prevent all 
fraud. There still would be a need for some post-refund check, 
but to the extent that the checking can be done in an automated 
way before a refund is issued, IRS does those checks very 
quickly as part of their normal processing of tax returns. They 
do not slow down refunds. It is all computerized done in an 
automated fashion.
    In addition to being low cost for IRS, it is also much less 
burdensome for the taxpayer. The IRS does not have to 
correspond with taxpayers.
    Mr. ETHERIDGE. It is all done in-house?
    Mr. WHITE. It is done in-house. Taxpayers do not have to 
struggle trying to figure out what the notice means that they 
get from IRS.
    I think in general, there is some agreement here about the 
advantage of these kinds of pre-refund automated checks to the 
extent they can be used and reduce the need for audits done. 
After the refund goes out the door, those audits are labor 
intensive and involve interaction with the taxpayer.
    Mr. ETHERIDGE. If I am following you correctly, what you 
are suggesting is sort of like when you have health care. Do a 
little preventive on the front side to save a major cost on the 
back side. You can go through the audit process, you have a lot 
of manpower, you have a lot of expense that you could have 
prevented had you done the pre-audit before.
    Mr. WHITE. Yes.
    Mr. ETHERIDGE. You are saying number one, that should not 
slow it down?
    Mr. WHITE. It does not slow it down right now. IRS has this 
system in place now and it is all automated and invisible to 
the taxpayer and happens very quickly.
    Mr. ETHERIDGE. Ms. Stiff, let me ask you two questions. Is 
it your opinion that we could process this if we were to do it 
on the front side, we would then allay the fraud and abuse on 
the back side? I am not asking do we need people to follow up, 
obviously. Can we reduce the errors substantially, which is 
where we are right now?
    Ms. STIFF. I think with the proposed legislative tools that 
we talked about, which includes a requirement that if you are 
under 18, that we will automatically preclude it coming in the 
door. You can come in and make a case later.
    If you have to attach the HUD-1 or a legal settlement 
document and a failure to do so, we will preclude you in the 
systemic way that Mr. White described, and lastly, we screen 
you out and do it systemically if there is prior indications of 
home ownership. Again, not precluding you from making a case, 
but stopping it before it goes.
    Mr. ETHERIDGE. That would mean you would have to come in 
and make a case if you are an exception.
    Ms. STIFF. Right.
    Mr. ETHERIDGE. Let me follow that up with another question. 
How successful do you think your outreach efforts were? It was 
estimated about 2.2 million would be used and 1.5 million so 
far to date.
    What do you think can be done better to make sure that 
people who could benefit, number one, are aware, and number 
two, coming back to my first question, to reduce any fraud and 
abuse in that process?
    All of us lose when we are trying to do good and there are 
plenty of people out there figuring out how to take advantage 
of the system.
    Ms. STIFF. We and others around the country as a result of 
their own vested interests, there was expansive outreach and 
education for taxpayers, for consumers, regarding the credit.
    I think that speaks to the fact that we have had 1.5 
million, which I think actually exceeded what was originally 
estimated to occur this year, so I think we are going to have 
to continue that education campaign going into this next filing 
season because the Act provides eligibility on the returns that 
are filed next year.
    I think the other thing with the passage of the new 
legislative tools that there will be an education and outreach 
campaign with preparers and taxpayers as to what is going to be 
required and what they are going to need to do to be able to 
meet the eligibility requirements.
    I think as a result of our criminal investigative 
activities that is also going to serve both as an education and 
deterrent. I do not know if you saw yesterday, we had a 
sentencing of 30 months for a preparer that was involved in bad 
acts regarding the credit. I think those things start to give 
momentum and create awareness.
    Mr. ETHERIDGE. I could not agree more. Publicity on that 
always helps. I can assure you some people are getting the word 
out. I was home this weekend. A car passed me with a great big 
sign on the side and one on the back, and it says ``Ask me how 
to get $8,000.''
    Mr. Chairman, it did not take me long to realize it was a 
real estate agent. He did a pretty good job of advertising. He 
or she. I am not sure which it was.
    Thank you, Mr. Chairman. I yield back.
    Chairman LEWIS. Thank you very much. I just want to remind 
members we are operating on the five minutes rule, trying to 
get an opportunity for all the members to have an opportunity 
to ask questions.
    Now I turn to Mr. Davis for his questioning.
    Mr. DAVIS of Illinois. Thank you very much, Mr. Chairman. 
Let me thank all three of the witnesses.
    Inspector General George, let me go to you first and go 
back to the point that there were suggestions and 
recommendations and concerns made by your office to the IRS 
that went unheeded, and I guess in some instances, perhaps even 
disagreed with.
    Do you have any indication of why there might not have been 
the follow up or the follow through if the advice was not 
taken, why it was not taken?
    Mr. GEORGE. You know, while I am going to most likely yield 
to Linda to give a definitive response, I have to say at the 
outset that the IRS has been very responsive to most 
recommendations. I would say over 98 to 99 percent of the audit 
recommendations that we provided to them have been agreed with 
and implemented in one form or another.
    In this instance, again, Linda can speak for herself, they 
have to do a cost/benefit analysis at times. While I understand 
on one level why they need to make those determinations, given 
the fiduciary responsibility that they have to the American 
people, to the American taxpayer, there are times when whether 
or not it might be expensive to implement a particular 
procedure, they have an obligation to do so, and especially 
when the stakes are as high as they are in this instance with 
billions of dollars at stake, we believe every action that 
could have been taken should have been taken.
    Mr. DAVIS of Illinois. Let me just ask you, Commissioner 
Stiff, what your reaction is to that question relative to 
taking the advice.
    Ms. STIFF. I will echo what Mr. George said here. We take 
very seriously any recommendation that TIGTA offers us 
regarding any program.
    In this instance, and I will say I have to leave it to 
others to judge, we evaluated all the options available to us, 
we were in the middle of a filing season. If we had required 
the HUD-1 documentation, which is the point of disagreement, we 
would not have been able to not process the claim or not allow 
the claim.
    We would have had to engage in an audit in each and every 
one of those situations the same as we are today.
    Had we been loaded with more information going into that, 
we made a decision that since we did not have statutory math 
error authority to use that information to make a decision 
whether to process it or not, that we created a schedule and 
got some of that information there and were able to use the 
failure to comply with that as a screen for filtering returns.
    Lastly, requiring the HUD-1 documentation, another factor 
was it would have meant the 1.5 million taxpayers who filed 
that would not have been able to have easily filed 
electronically or get their refunds, those that were entitled 
to it, as quickly as they did.
    In looking at the full range of factors that we were 
considering, we made a decision that I still think is the right 
one at this time.
    I advocate for the additional legislative authority because 
I think that would be the breaking point in terms of how we use 
it going forward.
    Mr. DAVIS of Illinois. Mr. White, you acknowledged that the 
Internal Revenue Service moved quickly to implement the 
program. Do you think that perhaps had there been some 
additional pre-planning, that might have helped, or does it 
really look like they may have needed additional resources to 
do a more effective job?
    Mr. WHITE. It is clear that they did not have the 
legislative authority needed to do as many of the pre-refund 
checks that I have been talking about, as they actually could 
do. That would make a difference.
    Mr. DAVIS of Illinois. You indicated also in your report 
that if they had the authority to do math error corrections, 
tell us how that could actually reduce these instances of fraud 
and abuse?
    Mr. WHITE. For example, if IRS had the authority to check 
prior years' returns, they could easily tell from that whether 
taxpayers had a requirement to pay back in the $500 increments 
the 2008 credit.
    They could also check whether taxpayers were claiming both 
credits. You are not allowed to claim the 2008 and the 2009 
credit. You can only claim one.
    IRS did not have the legal authority to use math error 
authority to correct situations where taxpayers were making 
multiple claims. They needed legal authority to do that.
    Those are two cases that we found.
    Mr. DAVIS of Illinois. Let me just say it has always been 
my experience that the Internal Revenue Service was pretty 
tough. It seemed to me that in this instance, a little bit of 
that toughness was not there. Maybe it has to revert back to 
the times I have appeared before them.
    Thank you very much.
    Chairman LEWIS. Thank you. I now turn to Mr. Higgins for 
his questions.
    Mr. HIGGINS. Thank you, Mr. Chairman.
    First of all, I just want to make it very clear that this 
is a good program. It should be extended. 1.4 million 
households have claimed nearly $10 billion in credit. Over half 
of those have incomes under $50,000.
    While fraud is always going to be part of this, it should 
not be accepted. I would hope the IRS would embrace the 
Inspector General's report toward the goal of significantly 
reducing and ideally eliminating fraud altogether.
    I am just curious. If there is fraudulent claims or 
questionable claims, as you had characterized them, I presume 
that is true with any of the tax credit programs.
    How does this program compare in terms of the percentage of 
likely fraud versus that of let's say the earned income tax 
credit? Anybody.
    Ms. STIFF. I would answer and have to be candid with you, I 
am not trying to be evasive, but I think it is too early to 
know that. We need to finish the audits we have underway and be 
able to see how much of that actually winds up that we do not 
allow versus how many is allowed. It is just too soon after the 
passage of the program and the time it takes to do the 
enforcement efforts to have an answer to know what that is 
going to be and then compare it to another program.
    I think we are several months away from being able to give 
you a definitive answer there.
    Mr. HIGGINS. Let me put it to you another way. What would 
be a program that has been longer in duration, like the earned 
income tax credit, what is the percentage of fraud associated 
with that?
    Ms. STIFF. I don't know off the top of my head what the 
percentage of fraud is because we use fraud as that which meets 
a criminal standard, and then we have a number of questionable 
erroneous claims that are disallowed each year.
    I can get you a percentage or maybe one of these gentlemen 
know. I do not know off the top of my head.
    Mr. GEORGE. I do not know the percentage. I know that it is 
estimated that it is between 10 and $12 billion each year on 
the earned income tax credit that is inappropriately or 
improperly paid out.
    Mr. HIGGINS. 10 or $12 billion.
    Mr. GEORGE. Correct.
    Mr. WHITE. Mr. Higgins, if I could add, your questions 
highlight, I think, a point about the cost of doing audits to 
ensure compliance with the first-time homebuyer credit. If IRS 
does more homebuyer audits, it is able to do less audits on 
other provisions of the Code. That highlights the importance of 
shifting as much of the compliance checking again to these up 
front automated procedures so that IRS does not have to shift 
resources from auditing other tax provisions into auditing this 
one.
    Mr. HIGGINS. Got it. Just in conclusion, Mr. Chairman, I 
just wanted to again make very clear that I think the objective 
of the program has been met. Perhaps not to the exact numbers 
anticipated before its enactment, but it is a good program.
    I want to be sure that the 70,000 questionable claims 
representing half a billion dollars, which is very, very 
significant, do not serve to undermine those 1.4 million who 
have benefitted from this program.
    By extension, it has helped this economy at least in terms 
of staving off a deeper and longer recession.
    Thank you, Mr. Chairman.
    Chairman LEWIS. Thank you. Now we turn to Mr. Kind for your 
questions.
    Mr. KIND. Thank you, Mr. Chairman. I want to thank our 
witnesses for your testimony today, and just to dove tail into 
what Mr. Higgins was concluding upon, as we in Congress are 
deliberating on possibly extending the first-time homebuyer tax 
credit, there is a lot of information that we are going to have 
to digest, including this, what you guys are involved with 
right now.
    If there is a problem, we need to clean it up, especially 
if we are going to extending the program, so that we are more 
accountable and more responsible to the American taxpayer 
ultimately.
    I am still trying to wrap my head around what exactly is 
going on here. Commissioner Stiff, let me start with you. Maybe 
you can help clarify some things.
    Of the questionable claims that have been submitted 
already, do you have any indication or have you broken down 
what percentage of that is a clear case of criminal intent to 
defraud or just mistakes being made, harmless errors that you 
are detecting now that we need to intercept?
    Ms. STIFF. A couple ways to slice that. We have had 
indications on 115 cases of potential schemes involving about 
8,000 taxpayers and tax returns that are currently under 
criminal investigation. It remains to be seen whether indeed 
that is the case.
    Mr. KIND. How many schemes did you say?
    Ms. STIFF. We have identified, I think, potentially over 
160 and we have 115 currently under investigation.
    Mr. KIND. Of those, how many individual claims are 
involved?
    Ms. STIFF. A little more than 8,000 on the 115. On the 
audits, we have the 106,000 or so under exam. We have closed so 
few, that to somehow extrapolate that and project it onto the 
whole, I think, would be doing a disservice.
    Mr. KIND. I am a little more confused because somewhere I 
received some information that of the 167 schemes that you have 
detected, it could be as high as 25,000 different returns that 
might be involved. Does that number ring any bells?
    Ms. STIFF. Actually, it does. There are 8,000 where we had 
clear enough indications of being a part of the fraudulent 
activity that we stopped the processing and did not let the 
money go out of the 167. The difference is in that 106,000 we 
are looking at and it remains to be seen. The indications were 
not clear enough to characterize it as fraud.
    Mr. KIND. Of those that you stopped the process, that you 
were able to intercept, did you initiate criminal 
investigations or any type of criminal proceedings?
    Ms. STIFF. They are part of the investigation of the scheme 
itself because one of the first things that we look to is were 
they taken advantage of as part of the scheme or were they part 
of the scheme. That determination has not been made yet.
    Mr. KIND. How are these schemes set up? Are individual tax 
preparers involved with it or the real estate agents? Is it 
those who are purchasing the home?
    Ms. STIFF. I would have to get back to you to give you a 
complete answer. I know the ones that I am most familiar with 
have involved preparers.
    Mr. KIND. That would be helpful. If we knew where the 
problem existed, we would probably have a better idea where we 
need to concentrate resources and attention to.
    Ms. STIFF. We are looking at that because that is what we 
are going to want to do this next filing season.
    Mr. KIND. The audits that you have already initiated, what 
form are they taking? Are those written audits?
    Ms. STIFF. They are. We send a letter to each of the 
taxpayers and we tell them there appears to be a question with 
what they filed and we ask them to provide the documentation 
needed to validate it, and the taxpayers--the ones that have it 
all right there, they get right back to you, and those who do 
not, you are in a dialogue over a period of days and weeks and 
months in some instances trying to get it all finalized.
    Mr. KIND. Would I be safe here in assuming that the vast 
majority of the problem cases that lie out there that we are 
now detecting and trying to take action on are a result of just 
innocent errors, just making mistakes in filing?
    Ms. STIFF. Based on what we have seen thus far, I would say 
the indication suggests that, but it is too early for me to 
weigh in and say it is more one thing than the other.
    Mr. KIND. Right. What you are doing right now as far as 
intercepting some of the claims that have been submitted or 
anything else, is this going to impede or slow down the closing 
date process because we are bumping up against the end of 
November and there is a lot of concern that those purchasing a 
home for the first time will not be able to get in under the 
deadline?
    Ms. STIFF. Our investigation should not slow down their 
ability to qualify. It may slow down their ability to receive 
their funds.
    Mr. KIND. It should not hinder the ability of the closing 
date.
    Ms. STIFF. If they closed and they are eligible, they can 
claim it. If we have a question, we will resolve that after the 
fact.
    Mr. KIND. I want to ask a more general question. You 
touched upon it. I think it was with Mr. Etheridge. What is the 
turn around time at the IRS when we do enact a new law as far 
as updating the database or the filters that you have to 
install? Where is the state of technology and your ability to 
adjust on the dime what we are asking you to do?
    Ms. STIFF. The state of our technology is improving, as you 
know. We appreciate the support we have had to continue to 
focus on that. We are reaching a point in some instances, we 
can say weeks, and in other instances, we need months lead 
time.
    I think the reason we were able to do this as quickly as we 
did, admittedly not as quickly as it perhaps warranted, but it 
was a matter of weeks, was the fact that it was similar enough 
to other things that we had experience with that we were able 
to kind of jump start our effort to get the technology lined 
up.
    Mr. KIND. Not to be presumptuous, but since you are looking 
at a pending retirement, is this a legitimate area that the 
Committee needs to have a little more focus on, helping the IRS 
be able to make the adjustments you have to make in light of 
new tax changes that we are doing here?
    We are going to have some tax extenders, some measures that 
we are going to have to deal with at the end of this year 
because they are expiring. Usually, we sit around and wait 
until the 11th hour to do these things, and it puts you in a 
real box then.
    Is this a major issue that we have to be a little more 
focused on?
    Ms. STIFF. Yes, I think based on our experience in the last 
few years, I think you all have a good understanding of the 
challenges that late legislation proposes, and you have our 
commitment that we will continue to be responsive and implement 
in a responsible manner, regardless of whatever situation you 
find yourselves in with the passage of law.
    Mr. KIND. If we do not see you before, we wish you a very 
happy retirement and we thank you for your service.
    Ms. STIFF. Thank you.
    Mr. KIND. Thank you.
    Chairman LEWIS. Thank you. Do you have any evidence--when 
we think of schemes and fraud, sometimes we think of people 
getting together, people conspiring to do something. Do you 
have any evidence where there have been groups getting together 
to take advantage?
    Mr. GEORGE. Mr. Chairman, I would note that the report that 
we released today is an interim report. In our next report, we 
are specifically looking at that issue to determine whether 
there are related party transactions or claims by multiple 
parties for the same property. That is something that we will 
be able to address in the subsequent report.
    Chairman LEWIS. I think we would be interested in seeing 
that report. If we are going to extend this effort, we need to 
know.
    We now turn to Mr. Becerra for his questions.
    Mr. BECERRA. Mr. Chairman, thank you very much. Thank you 
for holding this hearing. Thank you to all the witnesses for 
their testimony.
    Ms. Stiff, we wish you very well and we thank you for all 
your years of service to the people of this country.
    Ms. STIFF. Thank you.
    Mr. BECERRA. From what I understand, and I missed some of 
the hearing, but from what I understand, there seems to be 
consensus that we should have math authority extended to the 
IRS, math error authority, third party verification, some type 
of age limit.
    Ms. Stiff, all that is going to require you to have a lot 
of very good people doing a lot of extremely diligent work to 
make sure this tax credit is being used by those who qualify 
for it.
    You are also having to do quite a few audits just to take 
care of the normal stream of activity from people who file 
their taxes, 130 to 150 million in America file their taxes.
    I know you sometimes have to rely on the marching orders 
you get from above or from down the street at the White House 
and OMB, the Office of Management and Budget, in terms of what 
you can do and say about what you need.
    I do not see how you do all this work well without having 
the resources to actually do the checks, the audits, the follow 
through, so that we can come back and say it really looks like 
we should extend this homebuyer tax credit to more Americans 
because we are still in a very difficult economic time, there 
is still a lot of families that would like to get into their 
first home, but if we continue to have errors or fraud in a 
system like this, we cannot sell this to the American public 
because we are running these deficits that are very large.
    I ask you this, and maybe you have a little bit more 
freedom as you are getting ready to exit the doors of the 
Service, are you able with the resources or the new authority 
we give you to fully examine this tax credit so that when you 
come back again, we will not find a situation where a four year 
old applied for a first-time homebuyer tax credit?
    Ms. STIFF. You did miss earlier. I will restate what I 
said.
    Mr. BECERRA. I heard what you said.
    Ms. STIFF. We need the legislative authorities that we have 
talked about, that you outlined. We need the passage of the 
fiscal year 2010 budget.
    Can I sit here and assure you that there will be absolutely 
no errors or no fraud under any circumstances? I suspect not. 
Experience would say I would be foolish to do that.
    I stand here to tell you that I believe with the 
legislative authority, I believe with the passage of the 2010 
budget that we stand ready to handle the work that you have put 
in front of us.
    Mr. BECERRA. Let me ask it a different way. Let me go to 
door number two. Do you right now have personnel at the IRS who 
are sitting around twiddling their thumbs because they do not 
have enough to do?
    Ms. STIFF. Absolutely not.
    Mr. BECERRA. Do you now have personnel who are handling a 
workload that is greater than it was for people working at the 
IRS say ten years ago?
    Ms. STIFF. I think the work available to the Agency has 
expanded.
    Mr. BECERRA. Would you say the workload of the Agency is 
growing or diminishing?
    Ms. STIFF. I would say the workload is growing based on the 
taxpayer base growing, but I would also say that the Agency has 
become much more efficient and productive in getting the work 
done. I do not think it requires the same level of people 
because we have found smarter ways to do work.
    Mr. BECERRA. Productivity helps us manage an ever 
increasing load of work in the IRS?
    Ms. STIFF. Yes, it does.
    Mr. BECERRA. I know, Mr. George, you would like to jump in 
on this but before you do, let me ask this. Ms. Stiff, I think 
you actually have some phenomenal people at the IRS. I think we 
place such burdens on them, emotional burdens on them because 
of the work that they do, and it is so easy to attack an IRS 
worker because they are coming after our money.
    At some point, I think it is unfair to us to expect the IRS 
to produce good results, to perform well, unless you have the 
ability to reward your workers for what they do. If we continue 
to rely on productivity increases only, I think we are going to 
diminish the public support for the work that we do to have a 
voluntary tax compliance system.
    I know you are shackled. I know you cannot say much more. I 
think you sort of answered my question to door number two by 
telling me that your workers do not twiddle their thumbs and 
they become very productive.
    We are about, I think, to give you more authority to do a 
better job of tracking. You have over 100,000 cases that you 
now have to examine that you did not have a year ago. You have 
some criminal prosecutions that you are going to engage in that 
you did not have a year ago. That is a lot of new work on top 
of all the extra work that is coming in because of the regular 
flow of activity.
    I hope, Mr. Chairman, we are able to move forward to do 
what we need to do to give you the ability to produce so when 
you give us numbers, we will be happy, and then we can make 
decisions on a program like the first-time homebuyer tax credit 
that are based on its effectiveness, not on whether there was 
fraud in the system.
    I know Mr. George wanted to say something, Mr. Chairman.
    Mr. GEORGE. Ever so briefly, Mr. Chairman, with your 
permission. Every year my office is required to list the top 
ten management performance challenges confronting the IRS for 
the upcoming fiscal year. Repeatedly, year after year, human 
capital has been foremost on that list or towards the top of 
that list.
    It is a Government-wide problem as we recognize, but given 
the technical nature of the subject matters being handled by 
the IRS, this is of utmost importance, sir.
    Mr. BECERRA. Thank you. Mr. White, I do not know if you 
want to add anything. You have a chance to examine the IRS and 
its working's. You do not get paid by the Commissioner, 
although you still get paid by the Government.
    Mr. WHITE. Yes. I would just add that the work we have done 
over the last 15 years clearly shows the IRS has made 
substantial improvements in terms of the quality of service 
they are providing to taxpayers and in terms of their 
productivity.
    Things like their ability to answer telephone calls and 
provide correct answers to taxpayers, their ability to more 
quickly turn around refunds, get those checks out to taxpayers 
faster, they made substantial strides over time.
    Mr. BECERRA. Thank you. Thank you, Mr. Chairman.
    Chairman LEWIS. Thank you very much. Now we turn to Mr. 
Crowley for his questions.
    Mr. CROWLEY. I thank the Chairman and the Committee for 
allowing me an opportunity to be here today, not as a member of 
the Subcommittee, as I once was, Mr. Chairman, and took a lot 
of decision making for me to not be on this Committee again. 
Hopefully, that is not held against me personally.
    Chairman LEWIS. Mr. Crowley, thank you for sitting in. You 
are a member of the Full Committee and we miss you being here 
but we feel very lucky and very blessed to have your presence 
here today. You are welcome to sit in at any time.
    Mr. CROWLEY. Mr. Chairman, would that compliment come out 
of my time or your time?
    [Laughter.]
    Chairman LEWIS. My time.
    Mr. CROWLEY. Thank you, Mr. Chairman.
    Thank you for your testimony today. I just have a couple of 
questions. There is a great deal of discussion as mentioned 
before in terms of even just piggy backing Mr. Becerra, about 
extending the first-time homebuyer tax credit.
    How can Congress again further help simplify the 
administration of this or any other tax credit that we may or 
may not put into law in the future? Is there any advice that 
the IRS can give us on that?
    Ms. STIFF. A couple of things. They are going to ring 
familiar because they are along the themes that we have 
discussed here today.
    With any refundable credit, to the extent that we have 
third party reporting, to the extent that the eligibility 
requirements are not complex, I think it enhances the chances 
that credit will be administered in the way and received in the 
way that the Congress intends.
    Mr. GEORGE. Mr. Crowley, this is going to be an 
extraordinarily difficult effort on the part of the IRS when 
you have two different classes of recipients of this credit. 
Again, those who received it in 2008 who will be required to 
repay this over the course of 15 years, and then those who 
received it under the Recovery Act who are not required to 
repay it unless they sell the home within 36 months.
    Keep in mind that statutorily the IRS only has authority to 
go back 10 years. How they are going to figure this out and 
especially as we noted in our written testimony and in my oral 
testimony, that they are not coding some of these taxpayer 
accounts accordingly.
    This is truly going to be a challenge.
    Mr. CROWLEY. Bureaucratic nightmare.
    Mr. GEORGE. It will be, sir.
    Mr. CROWLEY. Thank you. Ms. Stiff, you discussed the need 
for the IRS to receive statutory authority for math error 
authority. Could you tell me about math error authority and how 
it would assist the IRS? Just give me a little insight into 
that.
    Ms. STIFF. When we have math error authority, as we 
process, we receive your tax return, as it actually goes 
through our systemic processing, the system can be programmed 
and coded to detect those conditions or the existence of those 
conditions or the lack of those conditions, and stop the refund 
related to those conditions from being issued before it ever 
goes out the door.
    Without that, we have to go through a full audit and assess 
the refund under the statutory deficiency laws.
    Mr. CROWLEY. So you do not add more to the bureaucracy, so 
to speak, in retrieving that back.
    Ms. STIFF. Right.
    Mr. CROWLEY. Does anyone else want to comment on that?
    [No response.]
    Mr. CROWLEY. I have been given some statistics here about a 
break down by state per capita and their use of the first-time 
homebuyer tax credit. It seems to be benefitting states that 
are hardest hit by the real estate bubble.
    Is there any documentation of the type of taxpayer that is 
filing for this credit or the types of homes they may be 
buying? For instance, do you see a tendency towards buying 
foreclosed properties going on in some states? Properties that 
are really being done for speculative purposes, albeit they may 
be holding on to the properties for more than 36 months, but to 
take advantage of the tax credit?
    Just looking at my home state of New York, for instance, we 
are number 49, so 50,500 homes purchased in a state of 19.5 
million people, in comparison to say New Jersey, 30,000 in a 
state of 8 million people. I can go on. It is kind of 
interesting. Just looking at Utah, almost 20,000 in a state of 
2.5 million people.
    Can anyone comment on that?
    Mr. WHITE. Yes. First of all, we did not have information 
about the type of house that was being purchased. We did have 
some information about income levels. For example, about 59 
percent of taxpayers had incomes under $50,000 who made use of 
the tax credit.
    We did do a little bit of comparison with a list of states. 
One comparison we looked at was state foreclosure rates. We did 
find a pretty high correlation between states with high 
foreclosure rates--we did this comparison for 2008--for states 
that had high foreclosure rates in 2008, there was a 
correlation with the take up rates for the credit. Beyond that, 
we have not been able to do any analysis.
    Mr. CROWLEY. Does anyone else have a concern--not concern. 
I guess we have a concern or I have a concern that maybe some 
of these homes that were purchased would have been purchased 
because they were in foreclosure. A concern that maybe some of 
this would have happened anyway. That is what I am trying to 
get at.
    I think this overall is a very good program, and quite 
frankly, I would support the extension of the program and maybe 
even possibly the expansion of the program beyond first-time 
homebuyers. I think as Mr. Higgins has mentioned as well, I 
think this has helped in many ways to spur growth in our 
economy in many, many ways.
    I do have concerns about this being taken advantage of, 
especially if we were to extend this beyond first-time 
homebuyers. Again, even with the income limits, you could still 
have abuse of purchasing of homes that otherwise would have 
been sold anyway because they had been de-valued so much.
    Does anyone else have that concern or that observation?
    Mr. WHITE. That is one of the fundamental questions about 
the effectiveness of the credit, what fraction of these homes 
would have been purchased anyway, what fraction of these home 
buyers making use of the credit would have purchased anyway as 
opposed to stimulating completely new purchases.
    I do not have an answer to that question. That is the 
ultimate question about the effectiveness.
    Mr. CROWLEY. Thank you all for your testimony. Thank you, 
Mr. Chairman.
    Chairman LEWIS. Thank you very much. I believe the 
gentleman from California, Mr. Becerra, has one last question.
    Mr. BECERRA. Thank you, Mr. Chairman. Just a quick 
question. Any time someone prepares a form, tax form, for the 
actual filer, that preparer has to identify himself or herself 
on the form, I believe. Is that correct?
    Ms. STIFF. They should.
    Mr. BECERRA. Is it possible for the IRS to tell us, and 
perhaps Mr. George, you already know this, if we have a 
breakdown of the number of filings for this tax credit that 
were prepared by someone other than the filer who bought the 
home?
    Mr. GEORGE. Actually, that is a good question. I do not 
have that information.
    Mr. BECERRA. Ms. Stiff.
    Ms. STIFF. I do not have it off the top of my head, but 
that is certainly information we can get.
    Mr. BECERRA. Can we get that for the Committee?
    Ms. STIFF. Sure. I think as you know, we are working on a 
preparer study and hoping to have recommendations by the end of 
the year. I know some of what we have learned here will 
certainly bleed into that.
    Mr. BECERRA. That is precisely the reason for asking. If 
you could share that with us, that would help us as we prepare 
to take on the issue along with the IRS on how to deal with the 
various tax preparers who are out there in this country.
    Mr. GEORGE. If I may, Mr. Becerra, somewhat related issue. 
I do not know whether it is within the jurisdiction of this 
Committee, but if the HUD-1 form which is a document that 
taxpayers have completed, if it had an unique identification 
number or the use of a Social Security number on it, that would 
assist the IRS greatly in terms of matching the types of 
information that would determine whether or not this is a valid 
claim that the taxpayer is seeking.
    Mr. BECERRA. That is an excellent point. Thank you for 
that. Thank you, Mr. Chairman.
    Chairman LEWIS. Thank you very much. Let me thank the 
witnesses for their testimony. The Subcommittee appreciates 
your views. I want to thank the members for being here.
    Madam Deputy Commissioner, again, we wish you well and much 
success in your future.
    If there is any other business to come before the 
Subcommittee.
    [No response.]
    Chairman LEWIS. There being none, the hearing is now 
adjourned.
    [Whereupon, at 11:34 a.m., the subcommittee recessed.]

                                 
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