PLR 200737011: Housing project gets more time to make 40/60 credit election

Plain-English summary

A taxpayer failed to make the intended low-income housing credit election for buildings in a rental project. The election it sought uses the standard that at least 40 percent of units be rent restricted and occupied by households at no more than 60 percent of area median income. The IRS granted 60 days from the letter date to make that election on amended Forms 8609 for the 2003 through 2005 tax years. The letter specified separate filing instructions for those forms. It did not decide whether the project otherwise qualified for the housing credit.

Ruling snapshot

• Question: Could the taxpayer make a late section 42(g)(1)(B) election for the project?
• Outcome: Approved, with amended Forms 8609 due within 60 days.
• Key authorities: IRC §§ 42(g)(1)(B), 42(l)(1)(D); Treas. Reg. §§ 301.9100-3, 301.9100-7T.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200737011
Third Party Communication: None
Release Date: 9/14/2007
Date of Communication: Not Applicable
Index Number: 42.00-00, 9100.01-00
Person To Contact:
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Refer Reply To:
CC:PSI:5
PLR-108410-07
Date: June 6, 2007

Legend:

Taxpayer = ---------------------------------------------
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Project = -----------------------------------

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

Dear ---------------:

This letter responds to a letter dated February 8, 2007, submitted on behalf of Taxpayer, requesting an extension of time to make an election under § 42(g)(1)(B) of the Internal Revenue Code pursuant to § 301.9100-1 of the Procedure and Administration Regulations.

Taxpayer did not make the proper election under § 42(g)(1) for the taxable year ending on Date 1, with respect to Buildings in the Project.

Section 42(g)(1) defines the term Aqualified 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
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§ 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. An election under § 42(g)(1), once made, is irrevocable.

Section 301.9100-7T(b) of the temporary Procedure and Administration 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 therefore, 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.

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 Aregulatory 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 the requirements of §§ 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)(B) with respect to Buildings in the Project. The election must be made within
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60 days from the date of this letter for Taxpayer's 2003 through 2005 taxable years on amended Forms 8609 that include the intended election. The amended Forms 8609 for Taxpayer's 2003 and 2004 taxable years and a copy of this letter are to be filed with the Service Center where Taxpayer's return is filed. The amended Forms 8609 for Taxpayer's 2005 taxable year with Taxpayer's original (i.e., not photocopied) signature and a copy of this letter are to be sent to: Internal Revenue Service, P.O. Box 331, Attn: LIHC Unit, DP 607 South, Philadelphia, PA 19020. Two copies of this letter are enclosed for this purpose. For Taxpayer's taxable years after 2005, Taxpayer is not required to file the Form 8609.

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 pursuant to § 42.

This ruling is directed only at 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 Taxpayer’s authorized representative.

Sincerely,

/s/
William P. O'Shea
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosures
Copy for § 6110 purposes
Two copies of this letter