Housing authority gets 45 days for volume-cap election

Plain-English summary

A public housing authority received private activity bond volume cap for a qualified residential rental project but failed to file Form 8328 to carry the unused allocation forward. Responsibility for the filing had shifted between two departments, and the receiving department did not know the form was required. The authority discovered the omission while preparing to issue the bonds and sought relief before the IRS found it. The IRS concluded that the authority acted reasonably and in good faith and granted 45 days from the ruling date to file Form 8328.

Ruling snapshot

• Question: May the authority make a late election to carry forward unused private activity bond volume cap?
• Outcome: Approved
• Key authorities: IRC §§ 142(d) and 146(f); Treas. Reg. §§ 301.9100-1 and 301.9100-3; Notice 89-12

Full text (IRS public release)

Internal Revenue Service                                          Department of the Treasury
Washington, DC 20224

Number: 201615008                                                 Third Party Communication: None
Release Date: 4/8/2016                                            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-134494-15
Date:
January 13, 2016

LEGEND:

Authority                  =         --------------------------------------------
------------------------------------------------------------

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

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

County                     =        -----------------------------------

Department A               =        --------------------------------------------

Department B               =        ---------------------------

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

Bonds                      =         --------------------------------------------------------------------------------
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PLR-134494-15                                         2

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

Year 1                   =   -------

Year 2                   =   -------

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

Date 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
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

Authority is a public body corporate and politic created by City to provide low-income
housing and related services. Under State law, Authority is authorized to issue exempt
facility bonds for qualified residential rental projects as defined in § 142(d).

In Year 1, Authority received from City and County an allocation of private activity bond
volume cap pursuant to § 146 in the amount of $a. City is scheduled to issue § 142(d)
bonds (the “Bonds”) for the Project in the first quarter of Year 2.

Authority failed to file a Form 8328 with the Internal Revenue Service (“Service”) for the
Year 1 allocation. Authority discovered this failure on Date 1 as it was preparing to
issue the Bonds. Authority’s Department A had generally been responsible for
overseeing the process for receiving any volume cap. During Year 1, the ongoing
compliance responsibilities for filing any Form 8328 were transitioned to Authority’s
Department B. However, Department B was not aware that it needed to file Form 8328
for the Year 1 allocation. As a result, Department A believed that the obligation to file
Form 8328 for the Year 1 allocation had passed to Department B, but Department B
was not aware of its requirement to file Form 8328 for the Year 1 allocation. Thus,
neither department filed Form 8328 for the Year 1 allocation.

This request was filed on Date 2, promptly after discovery of the failure to timely file the
Form 8328. As of Date 2, the Service had not discovered Authority’s failure to timely file
the Form 8328.

PLR-134494-15                                  3

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.

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).

PLR-134494-15                                  4

Conclusion

Under the facts and circumstances of this case, we conclude that Authority 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 Authority in
Year 1 will not prejudice the interests of the government. Authority is granted an
extension of time to 45 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 each of Authority’s authorized representatives.

The ruling contained in this letter is based upon information and representations
submitted by Authority 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)

/S/

By: _________________________
James Polfer
Chief, Branch 5