PLR 200422046: Bond authority receives more time to carry forward unused volume cap

Plain-English summary

A state housing bond authority learned after the filing deadline that it had been allocated unused private activity bond volume cap from 2002. The state department had initially used the wrong population figure and told the authority it would receive no unused cap. After the error was discovered, the authority sought extra time to file Form 8328 to carry the allocation forward. The IRS found that the authority acted reasonably and in good faith and that relief would not prejudice the government. It extended the filing deadline to May 20, 2004.

Ruling snapshot

• Question: Could the authority file a late election to carry forward its unused 2002 private activity bond volume cap?
• Outcome: Approved; Form 8328 was due by May 20, 2004.
• Key authorities: IRC § 146(f); Treas. Reg. §§ 301.9100-1, 301.9100-3; Notice 89-12.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200422046
Release Date: 5/28/04
Index Number: 146.07-00; 9100.00-00

------------------------------------------------------- Person To Contact:
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• Refer Reply To:
  CC:TEGE:EOEG:TEB – PLR-169174-
  03
  Date:
  - February 18, 2004

Legend:

Authority = --------------------------------------------------------------------
----------------------------------------------------

State = --------------------

Department = -----------------------------------------------------------------------------------

a = ----------------

Date 1 = ---------------------

Date 2 = ---------------------------

Dear ---------------

This is in response to your request for an extension of time under § 301.9100-1 of the Procedure and Administration Regulations to file Form 8328 (Carry forward Election of Unused Private Activity Bond Volume Cap) for the Authority to make a carry forward election under § 146(f) of the Internal Revenue Code with respect to $a of unused private activity bond volume cap from 2002.

Facts and Representations

You make the following factual representations. Authority is a State-supervised public agency authorized to issue obligations to finance the development of affordable housing described in § 143(a). Department administers the system established by State pursuant to § 146(e) to allocate State’s private activity bond volume cap. During the
PLR-169174-03
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latter part of 2002, Authority was informed by Department that it would not be allocated any unused 2002 volume cap. However, Department discovered during the summer of 2003, that it had used an incorrect State population figure to allocate the 2002 volume cap due to an inadvertent administrative error made by Department. On Date 1, which was soon after the administrative error had been discovered, Department approved an allocation of 2002 private activity bond volume cap to Authority in the amount of $a. Shortly thereafter, on Date 2, Authority submitted a ruling request for an extension of time to file a Form 8328 electing to carry forward the $a of 2002 bond volume cap. As of Date 2, the IRS had not discovered Authority’s failure to timely file the Form 8328.

Law and Analysis

Section 146(f)(1) provides that if an issuing authority’s volume cap for any calendar year after 1985 exceeds the aggregate amount of tax-exempt private activity bonds issued during the calendar year (by the authority), the authority may elect to treat all (or any portion) of the excess as a carry forward for one or more carry forward purposes.

The election is made by filing Form 8328 with the Internal Revenue Service Center, Ogden, UT 84201. Under Notice 89-12, 1989-1 C.B. 633, Form 8328 must be filed by the earlier of (1) February 15 of the calendar year following the year in which the excess amount arises, or (2) the date of issue of bonds issued pursuant to the carry forward election.

The election must identify the purpose for which the carry forward is elected, and specify the amount to be carried forward for that purpose. Section 146(f)(2). Carry forward elections (and any identifications or specifications stated therein) are irrevocable. Section 146(f)(4).

Section 301.9100-1 of the Procedure and Administration Regulations provides, in part, that the Commissioner has discretion to grant a reasonable extension of time to make a regulatory election (defined in § 301.9100-1(b) as an election whose due date is prescribed by regulations published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin), 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 Internal Revenue Code except subtitles E, G, H, and I.

Section 301.9100-3(a) provides that requests for extensions of time for regulatory elections that do not meet the requirements for automatic extensions in § 301.9100-2, must be made under the rules of § 301.9100-3. Requests for relief will be granted if the taxpayer provides evidence establishing to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that the grant of relief will not prejudice the interests of the Government.
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Section 301.9100-3(b)(1) provides, in part, that the taxpayer is deemed to have acted reasonably and in good faith if the taxpayer requested relief under that section before the failure to make the regulatory election is discovered by the IRS.

Section 301.9100-3(c)(1)(i) provides, in part, that the interests of the Government are prejudiced if granting relief would result in a taxpayer having a lower tax liability than the taxpayer would have had if the election had been timely (taking into account the time value of money).

Conclusion

Under the facts and circumstances of this case, we conclude that Authority acted reasonably and in good faith, and that granting an extension of time under § 301.9100-1 to file Form 8328 to carry forward $a of unused volume cap from calendar year 2002 will not prejudice the interests of the government. Authority is granted an extension of time to May 20, 2004, to file the Form 8328 to carry forward $a in unused 2002 volume cap.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any transaction or item discussed or referenced in this letter.

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 a Power of Attorney on file with this office, a copy of this letter is being sent to Authority’s authorized representative.

The ruling contained in this letter is based upon information and representations submitted by Authority and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the materials submitted in support of the request for a ruling, it is subject to verification upon examination.

Sincerely,

Assistant Chief Counsel
(Exempt Organizations/Employment
Tax/Government Entities)

By: _______
Timothy L. Jones
Senior Counsel, Tax Exempt Bond
Branch