Late average-income housing elections allowed

Plain-English summary

The owner of a multi-building housing project intended to choose the average-income minimum set-aside for the low-income housing credit. Contemporaneous documents showed that intent, but the owner inadvertently omitted the elections from the Forms 8609 filed with the IRS. Because a section 42(g)(1) minimum set-aside election is irrevocable and is made through the required first-year certification, the owner requested regulatory relief to correct the forms. The IRS found that the owner met the standards for acting reasonably and in good faith without prejudicing the government. It granted 120 days to file amended Forms 8609 making the section 42(g)(1)(C) elections, while expressing no view on the forms' timeliness or the project's substantive eligibility for the credit.

Ruling snapshot

• Question: May the project owner file amended Forms 8609 to make omitted average-income minimum set-aside elections?
• Outcome: Approved, with amended forms due within 120 days
• Key authorities: IRC §§ 42(a), 42(g)(1), 42(l)(1), 142(d)(6); Treas. Reg. §§ 1.42-1(h), 301.9100-1, 301.9100-3, 301.9100-7T(b)

Full text (IRS public release)

Internal Revenue Service                                         Department of the Treasury
                                                                 Washington, DC 20224

Number: 202350013                                                Third Party Communication: None
Release Date: 12/15/2023                                         Date of Communication: Not Applicable
Index Number: 42.00-00, 9100.00-00,                              Person To Contact:
              9100.01-00                                         --------------------, ID No. -----------------
                                                                 Telephone Number:

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                                                                 Refer Reply To:
------------------------------------                             [CC:PSI:B05]
---------------------------------------------                    PLR-115765-23
--------------------------------------------------               Date:
---------------------                                            September 19, 2023
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In Re: -----------------------------------------------------
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LEGEND

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PLR-115765-23                                  2

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Year              =        -------

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

      This letter responds to your authorized representative's letter dated July 26,
2023, and subsequent correspondence, submitted on behalf of Taxpayer, requesting an
extension of time, pursuant to §§ 301.9100-1 and 301.9100-3 of the Procedure and
Administration Regulations, to file amended Forms 8609, Low-Income Housing Credit
Allocation and Certification, with respect to the elections related to § 42(g)(1) of the
Internal Revenue Code (Code).

       According to the information submitted, Taxpayer owns and operates a multi-
building housing project (Project) that was placed in service in Year. The building
identification numbers associated with the Project are BINs. The Project is located at
Address.

      Taxpayer intended, as evidenced by Taxpayer’s contemporaneous documents,
to make the average income minimum set-aside election for the Project. However, on
the Forms 8609 that Taxpayer submitted to the Internal Revenue Service (IRS),
Taxpayer inadvertently failed to make such elections.

       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 generally 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 with respect to any qualified
low-income building for the first taxable year of the credit period (first-year
certifications). In the case of a failure to make the required certification on the date
prescribed for it, unless it is shown that the failure is due to reasonable cause and not to

PLR-115765-23                                  3

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.

       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 states, in relevant part, that a building
owner must make a one-time submission of Form 8609 to the Low-Income Housing
Credit (LIHC) Unit at the IRS Philadelphia campus (Service Center) 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.

      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 elections under §42(g)(1)(C) for
the Project by filing within 120 days from the date of this letter amended Forms 8609
that includes the intended election. The amended Forms 8609 (along with a copy of this
letter) are to be filed with the Philadelphia campus at the address provided in the
instructions to Form 8609. 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 Forms

PLR-115765-23                                   4

8609 for the Project was timely or correctly filed for purposes other than the intended
elections under § 42(g)(1), or whether the Project is a qualified low-income housing
project and the buildings in the Project qualify 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.

       In accordance with the Power of Attorney on file with this office, copies of this
letter are being sent to your authorized representatives.

                                            Sincerely,


                                            Holly Porter
                                            Associate Chief Counsel
                                            (Passthroughs and Special Industries)



                                      By:
                                            Dillon Taylor
                                            Senior Technician Reviewer, Branch 5
                                            Office of Associate Chief Counsel
                                            (Passthroughs and Special Industries)

Enclosure:
     Copy of this letter
     Copy for section 6110 purposes


Cc: