IRS grants 120 more days to make a late election passing the rehabilitation credit through to a tenant

Plain-English summary

A limited liability company that owns a rehabilitated building asked the IRS for extra time to make a tax election it had missed. Under the rehabilitation credit rules (Code section 47), the owner of a building can elect to "pass through" the credit to its tenant by treating the tenant as if it had purchased the property (an election under Treasury Regulation section 1.48-4). Here the landlord and tenant had already agreed to pass the credit through, but the landlord's accounting firm inadvertently failed to timely file the tax return that would have contained the election. The taxpayer requested relief under the "9100" regulations (section 301.9100-3), which let the IRS grant more time for a missed regulatory election when the taxpayer acted reasonably and in good faith and granting relief will not prejudice the government. The IRS agreed the standard was met and gave the taxpayer 120 days from the date of the letter to make the election, by filing the required election statement and an amended return. The IRS expressed no opinion on whether the building actually qualifies for the rehabilitation credit, or on the tax classification of the LLCs or the lease.

Ruling snapshot

• Question: Should the IRS grant more time, under section 301.9100-3, to make a late § 1.48-4 election passing the rehabilitation credit through to a tenant?
• Outcome: approved (120-day extension granted)
• Key authorities: Treas. Reg. § 301.9100-1 and § 301.9100-3; Treas. Reg. § 1.48-4; IRC § 47; IRC §§ 38, 46, 50(d)(5) (and former § 48(d))

Full text (IRS public release)

Internal Revenue Service                          Department of the Treasury
                                                  Washington, DC 20224

Number: 202614027
Release Date: 4/3/2026
Index Number: 9100.00-00, 47.00-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
          --------------------------, ID No. --------------
Telephone Number:
          ---------------------
Refer Reply To:
          CC:ECE:B01
          PLR-116841-25
Date:
          January 09, 2026

In Re:
          ----------------------------------

LEGEND

 Taxpayer                  = --------------------------------------------------------
                             -----------------------
 State                     = -------------
 Property                  = ----------------------------
 Tenant                    = --------------------------------------------------------
                             ------------------------
 Date                      = --------------------------------------------
 Accounting Firm           = --------------------------
 Year                      = ------------------------------------------------------

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

      This letter responds to your letter dated September 10, 2025, requesting an
extension of time pursuant to § 301.9100-3 of the Procedure and Administration
Regulations to make an election under § 1.48-4 of the Income Tax Regulations for Year.

       According to the information submitted and representations made, Taxpayer, a
limited liability company organized under the laws of State, owns Property. Tenant, a
limited liability company organized under the laws of State, leases Property from
Taxpayer.

       On Date, Taxpayer and Tenant entered into an agreement to pass through
Taxpayer's qualified rehabilitation expenditures (QREs) relating to Property to Tenant.
Taxpayer intended to make the election under § 1.48-4 to treat Tenant as the purchaser
of Property. Taxpayer represents Property qualifies for the rehabilitation credit under
section 47 of the Internal Revenue Code (Code), and that Accounting Firm through
inadvertence failed to timely file the tax return of Taxpayer for Year containing the
election under § 1.48-4.

                                  LAW AND ANAYLYSIS

        Section 38(a) allows a credit for the taxable year in an amount equal to the sum
of (1) the business credit carryforwards carried to the taxable year, (2) the amount of the
current year business credit, plus (3) the business credit carrybacks carried to the
taxable year.

       Under section 38(b)(1), the amount of the current year business credit includes
the investment credit under section 46. The rehabilitation credit is a component of the
section 46 investment credit.

       Section 47(a)(1) provides for the purposes of section 46, for any taxable year
during the 5-year period beginning in the taxable year in which a qualified rehabilitation
building is placed in service, the rehabilitation credit for such year is an amount equal to
the ratable share of such year.

       Section 47(a)(2) defines the ratable share for any taxable year during the 5-year
period described in section 47(a)(1) as an amount equal to 20 percent of the qualified
rehabilitation expenditures with respect to any qualified rehabilitation building, as
allocated ratably to each year during the 5-year period.

      Section 47(b) provides that qualified rehabilitation expenditures with respect to
any qualified rehabilitation building are taken into account for the taxable year in which
such qualified rehabilitated building is placed in service.

        Section 50(d)(5) provides that rules similar to the rules of former section 48(d)
(relating to certain leased property) as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990 apply to the investment credit.

       Former section 48(d)(1) provides that a person who is a lessor of property may
(at such time, and in such manner, and subject to such conditions as are provided by
regulations prescribed by the Secretary) elect with respect to certain investment credit
property to treat the lessee as having acquired such property.

       Section 1.48-4(a)(1) allows a lessor of property to elect to treat the lessee of the
property as having purchased the property for purposes of the rehabilitation credit if the
conditions specified in § 1.48-4(a)(1)(i) through (v) are satisfied.

      Section 1.48-4(a)(1)(iv) requires a statement of election to treat the lessee as a
purchaser to be filed in the manner and within the time provided in § 1.48-4(f) or (g).

       Section 1.48-4(f)(1) states that the election of the lessor with respect to a
particular property (or properties) must be made by filing a statement with the lessee,
signed by the lessor and including the written consent of the lessee, containing the
information specified in § 1.48-4(f)(1)(i) through (vii).

        Section 1.48-4(f)(2) provides that the § 1.48-4(f)(1) election statement must be
filed with the lessee on or before the due date (including any extensions of time) of the
lessee's return for the lessee's taxable year during which possession of the property is
transferred to the lessee.

        Section 1.48-4(j) provides that the lessor and the lessee must keep as a part of
their records the election statement referred to in § 1.48-4(f)(1) and that the lessor must
attach to its income tax return a summary statement of all property leased during its
taxable year with respect to which an election is made. The summary statement must
contain the following information: (1) the name, address, and taxpayer account number
of the lessor; and (2) in numerical account number order, each lessee's account
number, name, and address, the estimated useful life category of the property (or, if
applicable, the estimated useful life expressed in years), and the basis or fair market
value of the property, whichever is applicable.

      Sections 301.9100-1, 301.9100-2, and 301.9100-3 of the Procedure and
Administration Regulations set forth the standards the Commissioner will use to
determine whether to grant an extension of time to make a regulatory extension.

       Section 301.9100-1(c) provides that the Commissioner 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, or a statutory election (but no more than six months except in the
case of taxpayer who is abroad), under all subtitles of the Code, except subtitles E, G,
H, and I.

        Section 301.9100-1(b) provides that the term "election" includes an application
for relief in respect of tax and that the term "regulatory election" includes an election
whose due date is prescribed by a regulation published in the Federal Register.

        Sections 301.9100-2 and 301.9100-3 provide the standards the Commissioner
will use to determine whether to grant an extension of time to make an election. Section
301.9100-2 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. A request for relief under § 301.9100-3 will be granted
when the taxpayer provides evidence to establish to the satisfaction of the
Commissioner that the taxpayer acted reasonably and in good faith, and that granting
relief will not prejudice the interests of the government.

                                       CONCLUSION

        Based solely on the information submitted and the representations made, we
conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied.
Accordingly, Taxpayer is granted an extension of time of 120 days from the date of this
letter to make an election under § 1.48-4 for Year. For this purpose, Taxpayer must file
a statement of election in accordance with § 1.48-4(f). Further, Taxpayer must file an
amended return for Year, attaching the summary statement required by § 1.48-4(j) and
a copy of this letter.

       Except as specifically set forth above, no opinion is expressed concerning the
federal income tax consequences of the facts described above under any other
provisions of the Code. In particular, no opinion is expressed on whether the Property
is a qualified rehabilitated building that qualifies for the rehabilitation credit under section
47. Further, no opinion is expressed on whether any of the limited liability companies
involved are partnerships for federal tax purposes, whether any of the members of the
limited liability companies are partners for federal tax purposes, or whether the lease at
issue is a lease for federal tax purposes.

      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.

      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 a power of attorney on file, a copy of this letter is being sent
to Taxpayer's authorized representatives.

                                              Sincerely,

                                              Associate Chief Counsel
                                              (Energy, Credits, & Excise Tax)

                                               Signed: Barbara J. Campbell

                                        By:
                                              Barbara J. Campbell
                                              Senior Technician Reviewer, Branch 1
                                              Office of Associate Chief Counsel
                                              (Energy, Credits, & Excise Tax)

Enclosure:
      Copy of this letter for section 6110 purposes

CC:
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