PLR 200217013: Extension granted for a low-income housing project election

Plain-English summary

A taxpayer failed to properly elect a low-income housing project test under IRC § 42(g)(1). The IRS found that the taxpayer had shown good cause and met the regulatory requirements for an extension. It granted 45 days to file amended Forms 8609 for all open taxable years that included the intended election. The ruling did not decide whether the project otherwise qualified for the low-income housing tax credit.

Ruling snapshot

• Question: May the taxpayer receive more time to make the project's IRC § 42(g)(1) election?
• Outcome: Approved
• Key authorities: IRC § 42(g)(1), (l)(1)(D); Treas. Reg. §§ 301.9100-1, 301.9100-3, 301.9100-7T

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

P.O. Box 7604
Number: 200217013
Ben Franklin Station
Release Date: 4/26/2002
Washington, DC 20044
UIL: 42.07-03
Person to Contact:
9100.01-00
Telephone Number:

Refer Reply To:
CC:PSI:5 –– PLR-162871-01
Date:
January 16, 2002

Legend:

Taxpayer =

Project
=

Y
=

Dear :

This letter responds to your authorized representative’s letter dated November 13, 2001, 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 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 are both rent-restricted and occupied by individuals whose income is 60 percent or less of area median gross income.
PLR-162871-01
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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 first 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, “Low Income Housing Credit Allocation Certification”, 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 six months except in the case of a taxpayer who is abroad), under all subtitles of the Code, except subtitles E, G, H, and I.

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 the instant case, based solely on the facts submitted and the representations made, we conclude that good cause has been shown and the requirements of
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§§ 301.9100-1 and 301.9100-3 have been met. Accordingly, Taxpayer is granted an extension of time to make the election under § 42(g)(1) for the Project by filing within 45 days from the date of this letter for all open taxable years an amended Form 8609 that includes the intended election. The amended Form 8609 is to be filed with the Service Center where Taxpayer 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 4, Baltimore. 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 Taxpayer’s low-income housing project otherwise qualifies for the low-income housing tax credit under § 42.

This ruling is directed only at the taxpayer who requested it. Section 6110(k)(3) of the Internal Revenue Code 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 Taxpayer’s authorized representative.

Sincerely,
Paul F. Kugler
Associate Chief Counsel
(Passthroughs and Special
Industries)

Enclosures (2): Copy of this letter Copy for § 6110 purposes