Questions and answers: Down payment assistance programs

1. What is a down payment assistance program operated by a tax-exempt organization?
2. Why is the IRS focusing on down payment assistance programs of exempt organizations?
3. How does an exempt organization's seller-funded down payment assistance program generally work?
4. Doesn’t a seller-funded down payment assistance program facilitate the ability of low-income individuals and families to purchase affordable housing, and therefore further the exempt purposes of a tax-exempt organization that sponsors the program?
5. What is the IRS doing to stop abuses involving down payment assistance programs sponsored by exempt organizations?
6. Has the IRS issued any guidance on the criteria for exemption, under section 501(c)(3), of organizations that sponsor down payment assistance programs??
7. How does Revenue Ruling 2006-27 affect seller-funded down payment assistance programs sponsored by tax-exempt organizations?
8. Is down payment assistance includable in the homebuyer’s income?

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