PLR 200112051: Extension granted for low-income housing set-aside election

Plain-English summary

A taxpayer failed to make a proper section 42(g)(1) set-aside election for a low-income housing project. That election specifies which income and occupancy test the project will use for the housing credit. The IRS found good cause and granted an extension under Treasury Regulations §§ 301.9100-1 and 301.9100-3. The taxpayer must file amended Forms 8609 containing the intended election for all open tax years within 45 days of the ruling, and send the specified copies to the IRS. The ruling does not determine whether the project otherwise qualifies for the low-income housing tax credit.

Ruling snapshot

• Question: May the taxpayer make its section 42(g)(1) project election after the deadline?
• Outcome: Approved, subject to filing amended Forms 8609 within 45 days.
• Key authorities: IRC §§ 42(g)(1), 42(l)(1); Treas. Reg. §§ 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200112051
Release Date: 3/23/2001
Washington, DC 20224
Index Numbers: 42.07-01 42.07-03
9100.01-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:5 –– PLR-119035-00
Date: December 21, 2000

Legend:
Taxpayer =

Agency
=
Project
=

y
=
Dear

This letter responds to your authorized representative’s letter dated September 28, 2000, submitted on behalf of Taxpayer, requesting an extension of time to make an election under § 42(g)(1) of the Internal Revenue Code pursuant to § 301.9100-1 of the Procedure and Administration Regulations.

Taxpayer did not make a proper election for Project under § 42(g)(1) for its taxable year ending on y.

Section 42(g)(1) defines the term "qualified low-income housing project" as any project for residential rental property if the project meets the requirements of § 42(g)(1)(A) or (B), whichever is elected by the taxpayer. The project meets the requirements of § 42(g)(1)(A) if 20 percent or more of the residential units in such project are both rent-restricted and occupied by individuals whose income is 50 percent or less of area median gross income. The project meets the requirements of § 42(g)(1)(B) if 40 percent or more of the residential units in such project are both rent-restricted and occupied by individuals whose income is 60 percent or less of area median gross income.

In addition, § 42(g)(4) applies certain rules of § 142(d) for purposes of determining if a project is a qualified low-income housing project eligible for the low- income housing tax credit. Therefore, under § 42(g)(4), a deep rent skewed project, as defined in § 142(d)(4)(B), is a qualified low-income housing project.

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Section 142(d)(4)(B) defines a deep rent skewed project as a project whose owner elects to have §142(d)(4) apply and, at all times during the qualified project period, meets the following requirements: (i) 15 percent or more of the low-income units in the project are occupied by individuals whose income is 40 percent or less of area median gross income, (ii) the gross rent for each low-income unit in the project does not exceed 30 percent of the applicable income limitation that applies to individuals occupying the unit, and (iii) the gross rent for each low-income unit in the project does not exceed 1/2 of the average gross rent for units of comparable size that are not occupied by individuals who meet the applicable income limit.

Section 301.9100-7T(b) of the temporary Income Tax Regulations, provides that, for elections under the Tax Reform Act of 1986, the election under § 42(g)(1) must be made for the taxable year in which the project is placed in service and shall be made in the certification required to be filed pursuant to § 42(l)(1). Section 301.9100-7T(a)(4)(i) provides that the election under § 42(g)(1) is irrevocable.

Section 42(l)(1)(D) provides that following the close of the 1st taxable year in the credit period with respect to any qualified low-income building, the taxpayer shall certify to the Secretary (at such time and in such form and in such manner as the Secretary prescribes) the election made under § 42(g) with respect to the qualified low-income housing project of which such building is a part. In the case of a failure to make the certification required by the preceding sentence on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, no credit shall be allowable by reason of § 42(a) with respect to such building for any taxable year ending before such certification is made.

Under § 1.42-1T(e)(1), a taxpayer is required to complete the Form 8609 on which a housing credit agency made the applicable housing credit allocation and submit a copy of such Form 8609 with its Federal income tax return for each year in the compliance period.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election.

Section 301.9100-1(b) defines the term "regulatory election" as including an election whose due date is prescribed by a regulation, revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

Under § 301.9100-1(c), the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make a regulatory election, or a statutory election (but no more than 6 months except in the case of a taxpayer who is abroad), under all subtitles of the Code except subtitles E, G, H, and I.

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Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 301.9100-2.

Requests for relief under § 301.9100-3(a) will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government.

In this case, based solely on the facts submitted and the representations made, we conclude that good cause has been shown and the requirements of §§ 301.9100-1 and 301.9100-3 have been met. Accordingly, Partnership is granted an extension of time to make the election under § 42(g)(1) for Project by filing within 45 days from the date of this letter for all open taxable years an amended Form 8609, “Low-Income Housing Credit Allocation Certification”, that includes the intended election. The amended Form 8609 is to be filed with the Service Center where Partnership files its return. In addition, a copy of this letter along with a copy of the Form 8609 should be sent to the Director, Compliance, SB/SE Area 8, Nashville. A copy of this letter is enclosed for this purpose.

No opinion is expressed or implied regarding the application of any other provisions of the Code or regulations. Specifically, we express no opinion on whether Partnership’s low-income housing project otherwise qualifies for the low-income housing tax credit under § 42.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

In accordance with the power of attorney on file, a copy of this letter is being sent to Partnership's authorized legal representative.

Sincerely yours,
PAUL F. KUGLER
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosure:
6110 copy