Bond issuer gets more time to file the carryforward election for unused private-activity-bond volume cap

Plain-English summary

States and their agencies get a yearly cap on how much tax-exempt private activity bonds they can issue. If an issuer does not use all of its allocation, it can "carry forward" the unused amount for certain purposes by filing Form 8328 under section 146(f). Here a housing bond issuer meant to carry forward its unused allocation to finance a qualified residential rental project, but because of a miscommunication within its bond counsel's office, the Form 8328 was never filed within the automatic six-month window allowed by Rev. Proc. 2005-30. The problem was discovered as the bond closing approached, and the issuer filed the form and asked for late-election relief under Treasury Regulation §§ 301.9100-1 and 301.9100-3. The IRS found the issuer acted reasonably and in good faith, requested relief before the IRS caught the failure, and that relief would not prejudice the government. It concluded the late-filed Form 8328 is deemed timely.

Ruling snapshot

• Question: May a bond issuer get more time under § 301.9100-3 to file Form 8328 and carry forward unused private-activity-bond volume cap under § 146(f)?
• Outcome: Approved (late-filed Form 8328 deemed timely).
• Key authorities: IRC § 146(f); Notice 89-12; Rev. Proc. 2005-30; Treas. Reg. §§ 301.9100-1 and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202224001 Third Party Communication: None
Release Date: 6/17/2022 Date of Communication: Not Applicable
Index Number: 146.07-00, 9100.03-00
Person To Contact:

-------------------------------------- ---------- --------------, ID No. -------------
--------------------------------------------------------- Telephone Number:
-------------------------- --------------------
-------------------------- Refer Reply To:
---------------------------- CC:FIP:B05
PLR-100379-22
Date:
March 17, 2022

LEGEND

Issuer = ------------------------------------------------------------------------------------------

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

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

Bond Counsel = -------------------

Year 1 = -------

Year 2 = -------

Year 3 = -------

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

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

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

This is in response to the request submitted on behalf of Issuer for an extension of time
under § 301.9100-1 of the Procedure and Administration Regulations to file a Form
8328, Carryforward Election of Unused Private Activity Bond Volume Cap, to make a
carryforward election under § 146(f) of the Internal Revenue Code (the Code) with
respect to $a of unused private activity bond volume cap from Year 1.
PLR-100379-22 2

Facts and Representations

Issuer was created by the Authority to provide low-income housing and related services
and is authorized under the State law to issue exempt facility bonds for qualified
residential rental projects as defined in § 142(d). In Year 1, Issuer received an
allocation of private activity bond volume cap pursuant to § 146 in the amount of $a (the
“Allocation”). Issuer intended to carry forward the Allocation to issue exempt f acility
bonds for a qualified residential rental project. Issuer hired Bond Counsel to, among
other things, prepare and file a Form 8328 with the Internal Revenue Service (the
Service) to make a carryforward election under § 146(f) with respect to the Allocation
within the six-month automatic extension period provided in Rev. Proc. 2005-30, 2005-1
C.B. 1148.

Due to a miscommunication between two offices within Bond Counsel, a Form 8328
with respect to the Allocation was inadvertently not filed within the six-month automatic
extension period provided in Rev. Proc. 2005-30. Preparations for the financing of the
project continued in Year 2, with the bonds scheduled to be issued pursuant to the
Allocation in Year 3. In anticipation of the closing of the bonds, it was discovered that a
Form 8328 had not been filed with the Service to carry forward the Allocation. Upon
discovering this oversight, Issuer and Bond Counsel began preparation of the request
for an extension of time to file the Form 8328. On Date 1, Form 8328 with respect to
the Allocation was filed, and the instant extension request was submitted. As of Date 1,
the Service had not discovered Issuer’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.

The election is made by filing Form 8328 with the Service. 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. Rev. Proc. 2005-30 provides for an
automatic extension of six months from the due date of the carryforward election to
make the carryforward election.

Section 301.9100-1(c) provides that the Commissioner in exercising the
Commissioner’s discretion may grant a reasonable extension of time under the rules set
forth in §§ 301.9100-2 and 301.9100-3 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
PLR-100379-22 3

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 301.9100-3(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. Pursuant to § 301.9100-3(a), 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, except as provided in § 301.9100-
3(b)(3)(i) through (iii), a taxpayer is deemed to have acted reasonably and in good faith
if the taxpayer requested relief under § 301.9100-3 before the failure to make the
regulatory election is discovered by the Service. Section 301.9100-3(b)(3)(ii) and (iii)
provide, however, that the taxpayer has not acted in good faith if it was informed in all
material respects of the required election and related tax consequences, but chose not
to file the election; or used hindsight in requesting relief.

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).

Upon discovering the inadvertent failure to file the Form 8328 pursuant to Rev. Proc.
2005-30 timely, Issuer promptly, on Date 1, submitted a ruling request for an extension
of time to file the Form 8328. As of Date 1, the Service had not discovered the failure to
timely file the Form 8328. At no point did Issuer decide not to file the Form 8328, nor
did Issuer use hindsight in requesting an extension of time to file the Form 8328. If the
requested relief is granted, no taxpayer will have a lower tax liability than if the election
had been timely made. Thus, Issuer acted reasonably and in good faith and the
interests of the government will not be prejudiced if we grant the relief requested by
Issuer.

Conclusion

Based solely on all of the facts and representations submitted, we conclude that the
requirements of §§ 301.9100-1 and 301.9100-3 have been met. The filing of the Form
8328 with the Service by Issuer on Date 1 is deemed timely.

Except as expressly provided herein, no opinion is expressed or implied conc erning the
tax consequences of any transaction or item discussed or referenced in this letter. This
ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that it
may not be used or cited as precedent.
PLR-100379-22 4

In accordance with a Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

The ruling contained in this letter is based upon information and representations
submitted by Issuer and accompanied by penalty of perjury statements executed by the
appropriate parties. 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 and Products)


                                       By:_______________________
                                          Zoran Stojanovic
                                          Assistant to the Branch Chief, Branch 5

cc: