PLR 201342003: IRS grants more time to make a low-income housing credit election

Plain-English summary

A taxpayer that owned and operated a newly constructed low-income housing project failed to make an effective election under IRC § 42(g)(1)(B). The taxpayer showed that its contemporaneous records and tax return reflected its intent to make that election. The IRS concluded that the requirements for relief under Treas. Reg. §§ 301.9100-1 and 301.9100-3 were met. It granted 120 days from the ruling date to file an amended Form 8609 making the election. The IRS did not rule on whether the building otherwise qualified for the housing credit.

Ruling snapshot

• Question: Could the taxpayer receive more time to make the intended IRC § 42(g)(1)(B) election for its low-income housing project?
• Outcome: Approved, a 120-day extension was granted.
• Key authorities: IRC §§ 42(g), 42(l), and 6110(k)(3); 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: 201342003
[Third Party Communication:
Release Date: 10/18/2013
Date of Communication: Month DD, YYYY]
Index Number: 42.14-01
Person To Contact:
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------------------------------------------- Refer Reply To:
CC:PSI:5
In Re: ---------------------------------------------------- PLR-104290-13
------------------------------------------------------------ Date:
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July 08, 2013

Legend:

Taxpayer = -------------------------------------------------------
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Building = -------------------------------------------------
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BIN = ----------------------

Agency = ----------------------------------------------------------

c = ------------

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

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

This letter responds to your authorized representative’s letter dated January 16, 2013, and subsequent correspondence submitted on behalf of Taxpayer, requesting an extension of time to make an election under § 42(g)(1) pursuant to § 301.9100-3 of the Procedure and Administration Regulations.

According to information submitted, Taxpayer owns and operates Building, a newly constructed building assigned BIN by Agency. Taxpayer received from Agency one Form 8609, Low-Income Housing Credit Allocation Certification, reflecting a maximum allowable housing credit dollar amount of $c, sourced from tax-exempt bond financing. Taxpayer failed to make an effective election under § 42(g)(1)(B) for the
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taxable year ending on Date 1, consistent with Taxpayer’s intent, as evidenced by the Taxpayer’s contemporaneous documentation, and its return filing consistent with this intent.

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.

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.

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 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.
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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 (including affidavits described in § 301.9100-3(e)) 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 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 Building. The election must be made by filing within 120 days from the date of this letter an amended Form 8609 that includes this intended election. 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
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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 Building otherwise qualifies for credit under § 42.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

The ruling contained in this letter is based upon information and representations submitted by Taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.
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In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your 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 (2): Copy of this letter Copy for § 6110 purposes

cc: