Housing project receives 120 days to make average-income set-aside election

Plain-English summary

The owner of a single-building low-income housing project intended to choose
the average-income minimum set-aside under section 42(g)(1)(C). Its
contemporaneous records reflected that intent, but it inadvertently omitted the
election from Form 8609. Because the minimum set-aside election identifies
which income and occupancy test the project must satisfy, a valid election is
essential to low-income housing credit treatment. The IRS found that the
requirements for regulatory extension relief were met. It granted the owner 120
days to file an amended Form 8609 making the average-income election. The
ruling did not decide whether the project otherwise qualified for the
low-income housing credit or whether its Form 8609 was timely and correct for
other purposes.

Ruling snapshot

• Question: May a low-income housing project make a late average-income
  minimum set-aside election omitted from Form 8609?
• Outcome: Approved. The owner received 120 days to file an amended form.
• Key authorities: IRC §§ 42(g)(1), 42(l)(1), and 142(d)(6); Treas. Reg.
  §§ 1.42-1(h), 301.9100-1, and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202313005 Third Party Communication: None
Release Date: 3/31/2023 Date of Communication: Not Applicable
Index Number: 42.00-00, 9100.00-00
Person To Contact:
------------------------- -----------------, ID No. -----------------
-------------------- Telephone Number:
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------------------------------------- Refer Reply To:
----------------------------- CC:PSI:B5
PLR-115140-22
In Re: -------------------- Date:
December 22, 2022

LEGEND

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

Year 1 = -------

Year 2 = -------

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

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

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

This letter responds to your authorized representative's letter dated August 1, 2022,
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 and
301.9100-3 of the Procedure and Administration Regulations.

According to the information submitted, Taxpayer owns a single-building low-income
housing project (Project) that was placed in service in Year 1 and elected to begin the
credit period in Year 2. The building identification number associated with the Project is
BIN. The Project is located at Address.

Taxpayer intended, as evidenced by Taxpayer’s contemporaneous documentation, to
make the average income minimum set-aside election for the Project. However, on the
Form 8609, Low-Income Housing Credit Allocation and Certification, Taxpayer

PLR-115140-22 2

submitted to the Internal Revenue Service (IRS), Taxpayer inadvertently failed to make
such election.

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), (B),
or (C), 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 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 percent
or more of the residential units in the project are both rent-restricted and occupied by
individuals whose income is 60 percent or less of area median gross income. The
project meets the requirements of § 42(g)(1)(C) if 40 percent or more (25 percent or
more in the case of a project described in § 142(d)(6)) of the residential units in the
project are both rent restricted and occupied by individuals whose income does not
exceed the imputed income limitation designated by the taxpayer with respect to the
respective unit. Any election under § 42(g)(1), once made, is irrevocable.

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

Section 42(l)(1) describes the requisite certifications for any qualified low-income
building following the close the first taxable year in the credit period (first-year
certifications). In particular, § 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 required certification
on the prescribed date, unless it is shown that the failure is due to reasonable cause
and not to willful neglect, no credit is allowable by reason of § 42(a) for the building for
any taxable year ending before the certification is made.

Section 1.42-1(h) of the Income Tax Regulations provides, in part, that, unless
otherwise provided in forms or instructions, a completed Form 8609 (or any successor
form), which contains the first-year certifications, must be filed by the building owner
with the IRS. The instructions to Form 8609 state, in relevant part, that a building owner
must make a one-time submission of Form 8609 to the Low-Income Housing Credit Unit
at the IRS Philadelphia campus no later than the due date (including extensions) of the
first tax return with which the building owner is filing Form 8609-A, Annual Statement for
Low-Income Housing Credit.

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.

PLR-115140-22 3

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.

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)(C) for
the Project 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) is to be filed with the Philadelphia campus at the address provided in the
instructions to the form. A copy of this letter is enclosed for this purpose.

Except as specifically set forth above, we express or imply no opinion concerning the
federal tax consequences of the facts described above under any provisions of the
Code or regulations. In particular, we express or imply no opinion on whether the Form
8609 for the Project was timely or correctly filed for purposes other than the election
under § 42(g)(1), or whether the Project is a qualified low-income housing project and
the building in the Project qualifies for the low-income housing 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.

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

PLR-115140-22 4

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

                                           Sincerely,



                                           HOLLY PORTER
                                           Associate Chief Counsel
                                           (Passthroughs & Special Industries)



                                        By: _________________________
                                            Barbara J. Campbell
                                            Senior Technical Reviewer, Branch 5
                                            Office of Associate Chief Counsel
                                            (Passthroughs and Special Industries)

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

cc:

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