Housing building receives 120 days to correct section 42 election

Plain-English summary

A taxpayer owned a single-building low-income housing project and intended to make a section 42(g)(1) minimum set-aside election. It inadvertently failed to make a timely, correct election, despite contemporaneous documentation of its intent. The IRS found the discretionary relief standards satisfied and granted 120 days to file an amended Form 8609 containing the intended election. The ruling did not decide whether the original Form 8609 was timely or correct, the effect on closed years, or whether the building otherwise qualified for the low-income housing credit.

Ruling snapshot

• Question: May the taxpayer receive extra time to make the section 42(g)(1) election for its building?
• Outcome: approved
• Key authorities: IRC §§ 42(g)(1), 42(l)(1); Treas. Reg. §§ 301.9100-1, 301.9100-3, 301.9100-7T

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201741017                                              Third Party Communication: None
Release Date: 10/13/2017                                       Date of Communication: Not Applicable
Index Number: 42.00-00, 9100.00-00,
              9100.01-00                                       Person To Contact:
                                                               ---------------------------------, ID No. ---------
------------------------ ----------------                      ------------------
------------------------------------------------               Telephone Number:
--------------------------------------                         ----------------------
------------------------                                       Refer Reply To:
                                                               CC:PSI:B05
In Re: ------------------------------------------              PLR-117149-17
                                                               Date:
                                                               July 18, 2017


LEGEND

Taxpayer          =        ------------------------------------------
                           -------------------------

Year 1            =        -------

BIN               =        ------------------

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

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

This letter responds to your authorized representative's letter dated May 10, 2017,
submitted on behalf of Taxpayer, requesting an extension of time to make an election
under § 42(g)(1) of the Internal Revenue Code (Code) pursuant to § 301.9100-1 of the
Procedure and Administration Regulations.

According to the information submitted, Taxpayer owns a single-building project that
was placed in service in Year 1. The building identification number assigned to the
building is BIN. The building is located at Address. Taxpayer inadvertently failed to
make a timely, correct election for the building under § 42(g)(1), consistent with
Taxpayer’s intent, as evidenced by Taxpayer’s contemporaneous documentation.

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 rental units in the 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
PLR-117149-17                                 2

percent or more of the residential rental units in the project are both rent-restricted and
occupied by individuals whose income is 60 percent or less of area median gross
income.

Section 301.9100-7T(b) of the temporary Procedure and Administration Regulations
provides that for elections made 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 is to be made in the certification required to be filed pursuant to § 42(l)(1). Section
301.9100-7T(a)(4)(i) provides that the election under § 42(g)(1) is irrevocable.

Section 42(l)(1)(D) provides that following the close of the first taxable year in the credit
period for any qualified low-income building, the taxpayer is to certify to the Secretary
(at the time and in the form and in the manner as the Secretary prescribes) the election
made under § 42(g) for the qualified low-income housing project of which the building is
a part. In the case of a failure to make the certification required by the preceding
sentence on the date prescribed for it, unless it is shown that the failure is due to
reasonable cause and not to willful neglect, no credit is to be allowable by reason of
§ 42(a) for the building for any taxable year ending before the certification is made.

Sections 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 published in the Federal Register, or a
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 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
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) for the building identified by BIN by filing within 120 days from the date of this
PLR-117149-17                                  3

letter an amended Form 8609 that includes the intended election. The amended Form
8609 (along with a copy of this letter) is to be filed with the Philadelphia Service Center
at the address provided for the Service Center in that form. 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 the Form 8609
for the building was timely or correctly filed, the effect of Taxpayer's election under §
42(g)(1) for any closed year, or whether the building otherwise qualifies for low-income
housing tax credit under § 42.

This ruling is directed only to the 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 Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.


                                                   Sincerely,

                                                   Associate Chief Counsel
                                                   (Passthroughs and Special Industries)


                                                   By: _____________________________
                                                   CHRISTOPHER J. WILSON
                                                   Senior Counsel, Branch 5
                                                   Office of Associate Chief Counsel
                                                   (Passthroughs and Special Industries)




Enclosures (2):      Copy of this letter
                     Copy for section 6110 purposes



cc: