SECTION 2. BACKGROUND

.01 Notice 2011–14 provides guidance on the federal tax consequences of payments made to or on behalf of financially distressed homeowners under (1) programs designed by State HFAs with funds allocated from the Housing Finance Agency Innovation Fund for the Hardest-Hit Housing Markets (State Programs), and (2) HUD’s Emergency Homeowners’ Loan Program (EHLP) and any existing state program receiving funding from the EHLP (the substantially similar state programs, or SSSPs). Notice 2011–14 also provides guidance on the information reporting obligations for these payments.

.02 Section 6050H of the Internal Revenue Code requires every person engaged in a trade or business (including governments and their agencies) to (1) file an information return for each calendar year in which the person receives in the course of its trade or business payments from an individual of interest on a mortgage aggregating $600 or more, and (2) furnish a copy of the information return to that individual. See § 6050H(a) and (d) and § 1.6050H–1(a) of the Income Tax Regulations.

.03 Section 6721 of the Code imposes penalties on a person for failing to include all required information or including incorrect information on an information return. Section 6722 imposes penalties on a per

son for failing to include all required information or including incorrect information on a payee statement.

.04 Notice 2011–14 provides that the IRS will not assert penalties under §§ 6721 and 6722 of the Code against any State HFA for failing to file and furnish correct Forms 1098, Mortgage Interest Statement, for calendar years 2011 and 2012 if the State HFA provides each homeowner and the IRS a statement setting forth (1) the homeowner’s name and TIN, and (2) the amount of payments that the State HFA made to a mortgage servicer under the State Program or the SSSP during that year (separately stating the amount the State HFA paid and the amount the homeowner paid).

.05 Notice 2011–14 provides that, for calendar years 2011 and 2012, HUD should provide each homeowner and the IRS a statement setting forth (1) the homeowner’s name and TIN, and (2) the amount of payments HUD made to the mortgage servicer under the EHLP during that year (separately stating the amount HUD paid and the amount the homeowner paid).

.06 Notice 2011–14 advises State HFAs and HUD to use a single statement to provide the required names, TINs, and payment amounts of each homeowner to the IRS.

.07 Notice 2011–14 provides that the IRS intends to issue future guidance specifying the IRS office where the State HFAs and HUD should send the single statements.