PLR 1114008: IRS grants 120 days to make low-income housing elections

Plain-English summary

The IRS granted a taxpayer 120 days to make elections for a low-income housing project under IRC §§ 42(g)(1) and 142(d)(4)(B). The taxpayer had intended to make the elections and had filed its return consistently with that intent, but the elections were not effective. The IRS allowed the taxpayer to file an amended Form 8609 with the elections and a copy of the ruling. The ruling did not decide whether the project otherwise qualified under §§ 42 and 142(d)(4).

Ruling snapshot

• Question: Could the taxpayer make late low-income housing and deep-rent-skewing elections for the project?
• Outcome: Approved, 120-day extension granted.
• Key authorities: IRC §§ 42, 142, and 6110; Treas. Reg. §§ 301.9100-1 through 301.9100-3 and 301.9100-7T.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201114008 Third Party Communication: None
Release Date: 4/8/2011 Date of Communication: Not Applicable
Index Number: 9100.01-00, 42.07-00,
142.04-00 Person To Contact:
----------------------------, ID No. --------------
---------------------------- -----------------
------------------------- Telephone Number:
-------------------------------- ---------------------
--------------------------- Refer Reply To:
----------------------------------------- CC:PSI:B05
In Re: PLR-130003-10
------------------------ Date:
December 14, 2010

LEGEND:

Taxpayer = ---------------------------------

Project = -----------------------

-------------------------------------------------------------------

Year 1 = ------------------------------------------------------

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

   This letter responds to a letter dated July 7, 2010, submitted on behalf of

Taxpayer by its authorized representative, requesting an extension of time to make the
election under § 42(g)(1) and the election under § 142(d)(4)(B) (made applicable by
§ 42(g)(4)) of the Internal Revenue Code pursuant to § 301.9100-1 of the Procedure
and Administration Regulations.

   According to the information submitted, Taxpayer placed Project in service in

Year 1. Taxpayer failed to make effective elections under § 42(g)(1) and § 142(d)(4)(B)
consistent with Taxpayer’s intent, as evidenced by Taxpayer’s contemporaneous
documentation, and its return filing consistent with this intent.

  Section 42(g)(1) defines 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 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
PLR-130003-10 2

the residential units are both rent-restricted and occupied by individuals whose income
is 60 percent or less of area median gross income.

    Section 42(l)(1) 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) (D) the election made under § 42(g) with respect to the qualified low-income
housing project of which such building is a part, and (E) such other information as the
Secretary may require. 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.

   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).
Form 8609 serves the purpose of the certification required to be filed pursuant to
§ 42(l)(1) and includes the election under § 42(g)(1). Section 301.9100-7T(a)(4)(i)
provides that the election under § 42(g)(1) is irrevocable.

     Section 42(g)(4) makes applicable to § 42 projects the special rule under

§ 142(d)(4) for deep rent-skewing. Section 142(d)(4)(B) provides that a project is a
deep rent skewed project if the owner of the project elects to have § 142(d)(4) apply
and, at all times during the qualified project period, the project 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 with respect to each low-income unit in the project does not exceed 30
percent of the applicable income limit that applies to individuals occupying the unit; and
(iii) the gross rent with respect to each low-income unit in the project does not exceed
50 percent of the average gross rent with respect to units of comparable size that are
not occupied by individuals who meet the applicable income limit.

   Section 301.9100-7T(a)(2)(i) of the temporary Procedure and Administration

Regulations provides that the election under § 142(d)(4)(B) must be made by the due
date (taking extensions into account) of the tax return for the first taxable year for which
the election is to be effective. Section 301.9100-7T(a)(3)(i) provides that the election
under § 142(d)(4)(B) must be made by attaching a statement to the tax return for the
taxable year for which the election is to be effective. The statement must (A) contain
the name, address, and taxpayer identification number of the electing taxpayer;
(B) identify the election; (C) indicate the section of the Code under which the election is
being made; (D) specify, as applicable, the period for which the election is being made
and/or the property or other items to which the election is to apply; and (E) provide any
PLR-130003-10 3

information required by the relevant statutory provisions and any information necessary
to show that the taxpayer is entitled to the election. For purposes of § 42, Form 8609
serves the purpose of the statement for making the § 142(d)(4)(B) election and the
information required by § 301.9100-7T(a)(3)(i). Section 301.9100-7T(a)(4)(i) provides
that the election under § 142(d)(4)(B) is irrevocable.

   Sections 301.9100-1 through 301.9100-3 provide the standards the

Commissioner of Internal Revenue 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 the requirements of §§ 301.9100-1 and 301.9100-3 have been
met. Accordingly, Taxpayer is granted an extension of time to make the elections under
§ 42(g)(1) and § 142(d)(4)(B) for Project by filing within 120 days from the date of this
letter an amended Form 8609 that includes the intended elections. The amended Form
8609 (along with a copy of this letter) is to be sent to the following address:

         Department of the Treasury
         Internal Revenue Service Center
         Philadelphia, PA 19255-0549

   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
Project otherwise qualifies under §§ 42 and 142(d)(4).
PLR-130003-10 4

  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 Taxpayer’s authorized representative.

                                      Sincerely,

                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)



                                      By: _______________________
                                          CHRISTOPHER J. WILSON
                                          Senior Counsel, Branch 5
                                          Office of Associate Chief Counsel
                                          (Passthroughs & Special Industries)

Enclosures
Copy for § 6110 purposes

cc: