City receives extension to elect bond volume-cap carryforward

Plain-English summary

A city received an allocation of unused state private activity bond volume cap but failed to file Form 8328 to carry the allocation forward. The allocation was not tied to a specific project, so the city lacked the advisers who had assisted with prior allocations, and filing instructions did not reach the responsible finance official. The city discovered the omission while preparing a bond issue and requested relief before the IRS found the failure. The IRS concluded that the city acted reasonably and in good faith, that relief would not prejudice the government, and granted 45 days to file the carryforward election.

Ruling snapshot

• Question: May the city receive additional time to file Form 8328 and elect to carry forward unused private activity bond volume cap?
• Outcome: Approved
• Key authorities: IRC §§ 142(d), 146(f); Treas. Reg. §§ 301.9100-1, 301.9100-3; Notice 89-12

Full text (IRS public release)

Internal Revenue Service                                         Department of the Treasury
                                                                 Washington, DC 20224

Number: 201528005                                                Third Party Communication: None
Release Date: 7/10/2015                                          Date of Communication: Not Applicable
Index Number: 146.00-00, 146.07-00,
              9100.00-00, 9100.03-00                             Person To Contact:
                                                                 ----------------, ID No. ------------
-------------------------                                        Telephone Number:
-----------------------------------                              --------------------
---------------------                                            Refer Reply To:
------------------------------------------------------------     CC:FIP:B05
------                                                           PLR-106488-15
-------------------------------                                  Date:
                                                                 April 07, 2015




LEGEND:

City                       =         ---------------------
------------------------------------------------------------

State                      =        ------------

Department                 =        ----------------------------------------------------------

Bonds                     =          --------------------------------------------------------------------------------
                                    ----------

a                          =        ----------------

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

Date 2                     =        -----------------------

Date 3                     =        -----------------------

Year 1                     =        ------

Year 2                     =        ------


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

This is in response to your request for an extension of time under § 301.9100-1 of the
Procedure and Administration Regulations to file Form 8328 (Carryforward Election of
PLR-106488-15                                 2

Unused Private Activity Bond Volume Cap) to make a carryforward election under
§ 146(f) of the Internal Revenue Code with respect to $a of unused private activity bond
volume cap.

Facts and Representations

City is a political subdivision of State and regularly issues exempt facility bonds for
qualified residential rental projects as defined in § 142(d). Department administers the
system established by State to allocate State’s private activity bond volume cap
pursuant to § 146(e). City regularly receives allocation of volume cap under § 146 from
Department.

On Date 1, Department awarded to City a carryforward allocation of State’s unused
private activity bond volume cap from Year 1 in the amount of $a to apply towards
issuing § 142(d) bonds. City failed to file a Form 8328 with the Internal Revenue
Service (“Service”) for the Year 1 carryforward allocation. City discovered this failure as
it was preparing to issue the Bonds, which were issued on Date 2.

Unlike past carryforward allocations, the Year 1 carryforward allocation was not related
to a specific City project. Therefore, City did not have a financial advisor, bond counsel,
or underwriter in place to assist City with administering the carryforward allocation. In
addition, City has not been able to locate a copy of the original letter from Department
that would have provided City with instructions related to filing the Form 8328. The City
finally received a copy of this letter from Department, but this subsequent letter was not
addressed to the City’s Director of Finance, who is the party at City responsible for
ensuring appropriate and timely filings to the Service.

City was expecting to use the Year 1 carryforward allocation for the Bonds but could not
do so because of its failure to file Form 8328. City instead used an allocation of volume
cap from Year 2 for the Bonds. City requests this extension of time under § 301.9100-1
to file Form 8328 with respect to the Year 1 carryforward allocation in order to use such
allocation for bonds to be issued in the future by City.

This request was filed on Date 3, promptly after discovery of the failure to timely file the
Form 8328. As of Date 3, the IRS had not discovered City’s failure to timely file the
Form 8328.

Law and Analysis

Section 146(f)(1) provides that if an issuing authority’s volume cap for any calendar year
after 1985 exceeds the aggregate amount of tax-exempt private activity bonds issued
during the calendar year (by the authority), the authority may elect to treat all (or any
portion) of the excess as a carryforward for one or more carryforward purposes.
PLR-106488-15                                  3

The election is made by filing Form 8328 with the Internal Revenue Service Center,
Ogden, UT 84201. Under Notice 89-12, 1989-1 C.B. 633, Form 8328 must be filed by
the earlier of (1) February 15 of the calendar year following the year in which the excess
amount arises, or (2) the date of issue of bonds issued pursuant to the carryforward
election. While Revenue Procedure 2005-30, 2005-1 C.B. 1148, provides for an
automatic extension of six months from the due date of the carryforward election to
make the carryforward election, it does not apply in this case.

The election must identify the purpose for which the carryforward is elected, and specify
the amount to be carried forward for that purpose. Section 146(f)(2). Carryforward
elections (and any identifications or specifications stated therein) are irrevocable.
Section 146(f)(4).

Section 301.9100-1 of the Procedure and Administration Regulations provides, in part,
that the Commissioner has discretion to grant a reasonable extension of time to make a
regulatory election (defined in § 301.9100-1(b) as an election whose due date is
prescribed by regulations published in the Federal Register, or a revenue ruling,
revenue procedure, notice, or announcement published in the Internal Revenue
Bulletin), or a statutory election (but no more than 6 months except in the case of a
taxpayer who is abroad), under all subtitles of the Internal Revenue Code except
subtitles E, G, H, and I.

Section 301.9100-3(a) provides that requests for extensions of time for regulatory
elections that do not meet the requirements for automatic extensions in § 301.9100-2,
must be made under the rules of § 301.9100-3. Requests for relief will be granted if the
taxpayer provides evidence establishing to the satisfaction of the Commissioner that the
taxpayer acted reasonably and in good faith, and that the grant of relief will not
prejudice the interests of the Government.

Section 301.9100-3(b)(1) provides, in part, that the taxpayer is generally deemed to
have acted reasonably and in good faith if the taxpayer requested relief under that
section before the failure to make the regulatory election is discovered by the IRS.

Section 301.9100-3(c)(1)(i) provides, in part, that the interests of the Government are
prejudiced if granting relief would result in a taxpayer having a lower tax liability than the
taxpayer would have had if the election had been timely (taking into account the time
value of money).

Conclusion

Under the facts and circumstances of this case, we conclude that City acted reasonably
and in good faith, and that granting an extension of time under § 301.9100-1 to file Form
8328 to carry forward $a of unused volume cap awarded to City on Date 1 will not
prejudice the interests of the government. City is granted an extension of time to 45
PLR-106488-15                                  4

days from the date of this letter ruling to file the Form 8328 to carry forward the $a of
unused volume cap.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any transaction or item discussed or referenced in this letter.

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 a Power of Attorney on file with this office, a copy of this letter is
being sent to City’s authorized representative.

The ruling contained in this letter is based upon information and representations
submitted by City and accompanied by a penalty of perjury statement executed by an
appropriate party. While this office has not verified any of the materials submitted in
support of the request for a ruling, it is subject to verification upon examination.

                                           Sincerely,

                                           Associate Chief Counsel
                                           (Financial Institutions & Products)

                                           By: ___________/S/______________
                                               James Polfer
                                               Chief, Branch 5