Housing agency may correct credit allocations on Forms 8609

Plain-English summary

A state housing agency made two carryover allocations of low-income housing credit to a project whose buildings entered service across two years. The agency later issued two Forms 8609 for each building, but some forms incorrectly attributed credit from the later year's ceiling to buildings placed in service during the earlier year. The agency and project owner said the forms did not reflect their original intent. The IRS found an administrative error under Treas. Reg. § 1.42-13(b) and approved its correction because the agency acted within a reasonable time after discovery. The agency must file amended Forms 8609 with the intended building-level allocations and amend any affected Forms 8610.

Ruling snapshot

• Question: Could the housing agency correct Forms 8609 that attributed low-income housing credit to the wrong annual credit ceilings?
• Outcome: Approved, with amended Forms 8609 and any necessary Forms 8610 required
• Key authorities: IRC § 42(n)(4); Treas. Reg. § 1.42-13(b)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201451018 Third Party Communication: None
Release Date: 12/19/2014 Date of Communication: Not Applicable
Index Number: 42.00-00
Person To Contact:
------------------------------------------------------- ------------------------, ID No. ------------------
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--------------------------------------------- Telephone Number:
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Refer Reply To:
----------------------------- CC:PSI:B5
--------------------------------------- PLR-116599-14
---------------------------------------------- Date:
---------------------------------- August 28, 2014

Legend

Agency = --------------------------------------------------------
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Taxpayer = -----------------------------------------------------------------
------------------------

Address = --------------------------------
-------------------------------

BINs = ----------------------------------------------------
----------------------------------------------

Year 1 = -------

Year 2 = -------

Year 3 = -------

X = ----

Y = --

Z = --

A = ------------
PLR-116599-14 2

B = ---------------

C = ---------------

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

   This letter responds to a letter dated April 14, 2014 submitted on behalf of

Agency and Taxpayer by their authorized representatives requesting permission under
§ 42(n)(4) of the Internal Revenue Code and § 1.42-13(b) of the Income Tax
Regulations for Agency to correct an administrative error or omission relating to the
allocation of low-income housing credit dollar amounts.

   In Year 1, Agency issued Taxpayer a reservation certificate, reserving a total of

$A of low-income housing credit for a project to be completed at Address. The
reservation certificate required Taxpayer to place all of the project buildings in service
no later than the end of Year 3. The project consists of X buildings. Y of the buildings
were placed in service in Year 2, and the remaining Z buildings were placed in service
in Year 3.

   Agency issued a Year 1 carryover allocation of $B of low-income housing credit

to the project and assigned BINs to the X buildings. Agency issued a second carryover
allocation of $C of low-income housing credit to the project in Year 3, listing the same X
buildings identified by BINs as those listed in the Year 1 carryover allocation. Agency
and Taxpayer represent that both the Year 1 and Year 3 carryover allocations contain
the information for carryover allocations required in § 1.42-6(d)(2)(i)-(x). The Year 1
and Year 3 carryover allocations total $A of low-income housing credit, and neither of
the carryover allocations indicate specific amounts of low-income housing credit to any
of the X buildings identified by BINs.

    In Year 3, Agency issued two Forms 8609, Low-Income Housing Credit

Allocation and Certification, to each of the X buildings identified by BINs, intending to
specify how much each building received from the $A in total low-income housing credit
allocated to the project. The Forms 8609 reflect $B of credit allocations from Agency’s
Year 1 credit ceiling, and $C of credit allocations from Agency’s Year 3 credit ceiling,
totaling the intended allocation amount of $A of low-income housing credit for the
project. Some Forms 8609 incorrectly attribute credit from Agency’s Year 3 credit
ceiling to the Y buildings that were placed in service in Year 2. Agency represents it
intended that each building’s allocation amount for Year 1 and Year 3 was as follows:

    BIN Number                 Year 1 Housing Credit Allocation
    ----------------------------
    ----------------------------
    --------------------------

PLR-116599-14 3

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

  BIN Number                 Year 3 Housing Credit Allocation
  ----------------------------
  ----------------------------
  ----------------------------
  ----------------------------
  ----------------------------
  ----------------------------
  ----------------------------
  ----------------------------

   Section 42(n)(4) provides the Secretary shall prescribe such regulations as may

be necessary or appropriate to carry out the purposes of this section including
regulations providing the opportunity for housing credit agencies to correct
administrative errors and omissions with respect to allocations and record keeping
within a reasonable period after their discovery, taking into account the availability of
regulations and other administrative guidance from the Secretary.

   Section 1.42-13(b)(1) provides that an Agency may correct an administrative

error or omission with respect to allocations and recordkeeping, as described in § 1.42-
13(b)(2), within a reasonable period after the Agency discovers the administrative error
or omission. Whether a correction is made within a reasonable period depends on the
facts and circumstances of each situation. The administrative errors and omissions do
not include, for example, any misinterpretation of the applicable rules and regulations
under § 42.

   Section 1.42-13(b)(2) provides that an administrative error or omission is a

mistake that results in a document that inaccurately reflects the intent of the Agency at
the time the document is originally completed or, if the mistake affects a taxpayer, a
document that inaccurately reflects the intent of the Agency and the affected taxpayer at
the time the document is originally completed.

   Under § 1.42-13(b)(3)(iii), a state agency must obtain the Secretary’s approval to

correct an administrative error or omission, as described in § 1.42-13(b)(2), if the
PLR-116599-14 4

correction is not made before the close of the calendar year of the error or omission and
the correction--(A) is a numerical change to the housing credit dollar amount allocated
for the building or project; (B) affects the determination of any component of the State’s
housing credit ceiling under § 42(h)(3)(C); or (C) affects the State’s unused housing
credit carryover that is assigned to the Secretary under § 42(h)(3)(D).

   Based solely on the representations and the relevant law and regulations set

forth above, we conclude that Agency committed an administrative error that resulted in
documents that inaccurately reflected the intent of the Agency and the affected
Taxpayer at the time the documents were originally completed. Further, Agency
attempted to correct the administrative error within a reasonable time after discovery.
The correction was not made before the close of the calendar year of the error and the
correction results in a numerical change to the housing credit dollar amount allocated to
the X buildings identified by BINs. We approve of Agency correcting its administrative
error.

  To correct this administrative error, Agency must do the following:

1. File amended Forms 8609 to reflect that low-income housing credit from its Year
   1 credit ceiling is allocated to each of the X buildings identified by BINs in the
   following amounts:

   BIN Number Year 1 Housing Credit Allocation

   ---

   ---

   ---

   ---

   ---

   ---

   ---

   ---

   ---

   ---

   ---

   ---

   ---

2. File amended Forms 8609 to reflect that low-income housing credit from its Year
   3 credit ceiling is allocated to each of the Z buildings identified by BINs in the
   following amounts:

   BIN Number Year 3 Housing Credit Allocation

   ---

   ---

   PLR-116599-14 5

   ---

   ---

   ---

   ---

   ---

   ---

3. To the extent the corrections permitted by this ruling affect any information
   provided by Agency on any previously filed Form 8610, Annual Low-Income
   Housing Credit Agencies Report, Agency must file amended Form(s) 8610 to
   provide corrected information that is consistent with this ruling.

   Except as expressly provided herein, no opinion is expressed or implied
   concerning the tax consequences of any aspect of any transaction or item discussed or
   referenced in this letter. Specifically, we express no opinion on whether the Forms
   8609 for the X buildings identified by BINs were timely or correctly filed, or whether any
   of the X buildings identified by BINs otherwise qualify for credit under § 42.

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

    In accordance with the Powers of Attorney on file with this office, a copy of this
   

   letter is being sent to the authorized representatives.

   The rulings contained in this letter are based upon information and
   

   representations submitted by Agency and Taxpayer and accompanied by penalty of
   perjury statements executed by the appropriate parties. 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.

                                   Sincerely,
   
                                   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