Housing project gets more time for low-income set-aside election

Plain-English summary

The owner of a low-income housing project began its credit period but inadvertently failed to make the intended election under IRC § 42(g)(1)(B) on Form 8609. That election requires at least 40 percent of the residential units to be rent-restricted and occupied by households at or below 60 percent of area median gross income. Contemporaneous documents supported the owner's stated intent. The IRS concluded that the regulatory relief standards were met and granted 120 days to file an amended Form 8609 making the election. The ruling did not decide whether the building otherwise qualified for the low-income housing credit.

Ruling snapshot

• Question: Could the project owner receive more time to make its intended IRC § 42(g)(1)(B) election?
• Outcome: Approved, subject to filing an amended Form 8609 within 120 days
• Key authorities: IRC § 42(g) and (l); Treas. Reg. §§ 301.9100-1, 301.9100-3, and 301.9100-7T

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201501005 Third Party Communication: None
Release Date: 1/2/2015 Date of Communication: Not Applicable
Index Number: 42.00-00, 9100.01-00
Person To Contact:
------------------------- --------------------------, ID No. ----------------
---------------------------------------------- -----------------
---------------------- Telephone Number:
--------------------------------- ----------------------
Refer Reply To:
CC:PSI:B06
PLR-114422-14
Date:
September 25, 2014

LEGEND:
Taxpayer = ----------------------------------------------
------------------------
BIN = -------------------
Year = -------

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

This letter responds to a letter dated March 31, 2014, from Taxpayer's representative
requesting an extension of time under §§ 301.9100-1 and 301.9100-3 of the Procedure
and Administration Regulations to make an election under § 42(g)(1)(B) of the Internal
Revenue Code.

According to the information submitted, Taxpayer owns a project building. The building
identification number assigned to the project building is BIN. Taxpayer elected on
Forms 8609, Low-Income Housing Credit Allocation and Certification, to begin the credit
period for the project building in Year. Taxpayer inadvertently failed to make a timely,
correct election for the project building under § 42(g)(1)(B), consistent with Taxpayer's
intent, as evidenced by Taxpayer's contemporaneous documentation.

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
the residential units are both rent-restricted and occupied by individuals whose income
is 60 percent or less of area median gross income.
PLR-114422-14 2

Section 42(l)(1) provides, in part, 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.

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 section 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
PLR-114422-14 3

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) for the project building identified by BIN by filing within 120 days from the
date of this letter an amended Form 8609 that includes the intended election. The
amended Form 8609 (along with a copy of this letter, enclosed herein) 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
buildings otherwise qualify for credit under § 42, including whether the project building
qualifies for credit prior to issuance of the Forms 8609.

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)

                                          Jaime C. Park
                                          Chief, Branch 6
                                          Office of Associate Chief Counsel
                                          (Passthroughs & Special Industries)