PLR 200437010: Bond issuer gets 45 more days for volume cap election

Plain-English summary

A public bond issuer received an allocation of unused private activity bond volume cap for solid waste disposal facility bonds. It inadvertently missed the deadline to file Form 8328 to carry that allocation forward. The issuer discovered the omission while preparing the bonds and requested relief before the IRS found it. The IRS concluded that the issuer had acted reasonably and in good faith and that an extension would not prejudice the government. It granted 45 days from the letter's date to file the carryforward election, while expressing no opinion on the bonds' other tax requirements.

Ruling snapshot

• Question: May the issuer file a late Form 8328 to carry forward unused bond volume cap?
• Outcome: Approved: a 45-day extension for the specified carryforward election.
• Key authorities: IRC § 146(f); Treas. Reg. § 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200437010
Release Date: 9/10/04
Index Number: 146.07-00, 9100.03-00

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Person To Contact:
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Refer Reply To:
CC:TEGE:EOEG:TEB– PLR-119383-04
Date:
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April 27, 2004

Legend

Issuer - -----------------------------------------------------------

Authority - --------------------------------------------------------

State - ----------------------

Date 1 - -----------------------

Date 2 - -------------------------

Year 1 - -------

Year 2 - -------

a - -------------

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

This is in response to your ruling request for an extension of time pursuant to ' 301.9100-3 of the Procedure and Administration Regulations to file Form 8328, Carryforward Election of Unused Private Activity Bond Volume Cap, to make a carryforward election under ' 146(f) of the Internal Revenue Code of $a in unused Year 1 private activity bond volume cap.
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Facts and Representations

You make the following representations. The Issuer is a public body corporate and politic of State created pursuant to amendments to the State Constitution and is authorized under State law to issue revenue bonds for, among other purposes, solid waste disposal facilities under § 142(a)(6). The Issuer intends to issue solid waste disposal facility bonds (the “Bonds”), the proceeds of which will be used to finance the costs of capital improvements to certain solid waste disposal facilities located in State. Authority is the administrator of state ceiling for State.

On Date 1 of Year 1, an application was submitted for the Issuer to Authority for a carryforward bond allocation of unused Year 1 private activity bond volume cap in the amount of $a. By letter dated as of Date 2 of Year 1, Authority notified the Issuer that it had been awarded $a in carryforward bond allocation.

Due to inadvertence, a Form 8328 was not filed on or before February 15 of Year 2 for the Issuer’s carryforward allocation of Year 1 state ceiling. Subsequently, after the time to file the Form 8328 had expired, in preparation of the documents for the Bonds, it was discovered that the Form 8328 had not been filed and, immediately thereafter, the Issuer requested relief from the Internal Revenue Service. Prior to requesting such relief, the failure to file the Form 8328 had not been discovered by the IRS.

Law and Analysis

Section 103(a) provides that, except as otherwise provided in § 103(b), gross income does not include interest on any state or local bond. Section 103(b) provides, in part, that ' 103(a) shall not apply to any private activity bond that is not a qualified bond (within the meaning of ' 141). Generally, under ' 141(e) of the Code, a private activity bond is not a qualified bond unless the bond meets the volume cap requirements of ' 146.

Section 146(a) provides that a private activity bond issued as part of an issue meets the volume cap requirements if the aggregate face amount of the private activity bonds issued pursuant to such issue, when added to the aggregate face amount of tax- exempt private activity bonds previously issued by the issuing authority during the calendar year, does not exceed such authority=s volume cap for the calendar year.

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 carryforward for one or more carryforward purposes. Section 146(f)(2) requires the issuing authority to identify the purpose for which the carryforward is elected and to specify the portion of the carryforward which is to be used for that purpose. Section 146(f)(5) defines Acarryforward purpose@ to mean four different purposes, including the purpose of issuing solid waste disposal facility bonds.
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Under ' 146(f)(4), any election (including any identification and specification contained therein), once made, shall be irrevocable.

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 carryforward election.

Section 301.9100-1 of the Procedure and Administrative Regulations provides, in part, that the Commissioner of Internal Revenue 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 regulation, 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.

Section 301.9100-3(b)(1) provides, in part, that generally a taxpayer is deemed to have acted reasonably and in good faith if the taxpayer requests 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 if the election had been made timely (taking into account the time value of money).

Conclusion

Under the facts and circumstances of this case, we conclude that the Issuer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the Government. Issuer is granted an extension of time of 45 days from the date of this letter ruling to file Form 8328 to carry forward Year 1 unused volume cap in the amount of $a for the purpose of issuing solid waste disposal facility bonds.

Except as specifically ruled above, no opinion is expressed or implied concerning this matter under any provision of the Code or the regulations thereunder, including '' 103, 142, 146, and 147. The ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of
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the material submitted in support of the request for a ruling, it is subject to verification upon examination.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. Pursuant to a Power of Attorney on file with this office, a copy of this letter is being sent to Issuer=s authorized representative.

Sincerely yours,

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

By _____
Rebecca L. Harrigal
Chief, Tax Exempt Bonds Branch

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