Housing project receives late section 42 election relief

Plain-English summary

A taxpayer inadvertently failed to make its intended section 42(i)(2)(B) election for every building in a low-income housing project for which the state agency issued Forms 8609. The election concerned the treatment of tax-exempt bond proceeds in determining the buildings' eligible basis. Based on the taxpayer's submitted facts and representations, the IRS found that the requirements for discretionary late-election relief were met. It granted 120 days to file amended Forms 8609 making the election for all project buildings and required the taxpayer to attach a copy of the ruling. The IRS did not decide whether the original forms were timely or correct, the effect for closed years, or whether the project otherwise qualified for low-income housing credits.

Ruling snapshot

• Question: May the taxpayer make a late section 42(i)(2)(B) election for all buildings in the project?
• Outcome: Yes, by filing amended Forms 8609 within 120 days.
• Key authorities: IRC §§ 42 and 103; Treas. Reg. §§ 301.9100-1, 301.9100-3, and 301.9100-7T

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201606026                                              Third Party Communication: None
Release Date: 2/5/2016                                         Date of Communication: Not Applicable
Index Number: 9100.01-00, 42.00-00,
              142.04-00                                        Person To Contact:
                                                               ----------------------, ID No. -----------------
---------------------------                                    Telephone Number:
------------------------------------------                     ---------------------
----------------------------------------------                 Refer Reply To:
------------------------------                                 CC:PSI:B05
                                                               PLR-134273-15
In Re:                                                         Date:
         -----------------------------------------             November 02, 2015




LEGEND:

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

Project           =        --------------------

N                 =        --

BIN/Address =               ------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------

Agency            =        --------------------------------------------------------


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

This letter responds to Taxpayer’s authorized representative’s letter dated October 15,
2015, requesting an extension of time pursuant to §§ 301.9100-1 and 301.9100-3 of the
Procedure and Administration Regulations to make an election under § 42(i)(2)(B) of the
Internal Revenue Code.

Project consists of N buildings identified by BIN/Address. According to information
submitted, Taxpayer, through inadvertence, failed to make an election under
§ 42(i)(2)(B) intended for all N buildings in Project for which Forms 8609 were issued by
Agency, consistent with Taxpayer’s intent not to exclude from the eligible basis of these
buildings the proceeds of tax-exempt bond obligations.
PLR-134273-15                                  2

Section 42(i)(2)(A) provides that for purposes of § 42(b)(1), a new building shall be
treated as federally subsidized for any taxable year if, at any time during such taxable
year or any prior taxable year, there is or was outstanding any obligation the interest on
which is exempt from tax under § 103 the proceeds of which are or were used (directly
or indirectly) with respect to such building or the operation thereof. Section 42(i)(2)(B)
provides that a tax-exempt obligation shall not be taken into account under § 42(i)(2)(A)
if the taxpayer elects to exclude from the eligible basis of the building the proceeds of
such obligation.

Section 42(l)(1)(E) provides that following the close of the first taxable year in the credit
period with respect to any qualified low-income building, the taxpayer shall certify to the
Secretary (at such time and in such form and in such manner as the Secretary
prescribes) such information as the Secretary may require.

Section 301.9100-7T(b) of the temporary Procedure and Administration Regulations
provides that the election under § 42(i)(2) must be made for the taxable year in which
the project is placed in service and shall be made in the certification required to be filed
pursuant to § 42(l)(1). Section 301.9100-7T(a)(4)(i) provides that an election under
§ 42(i)(2) is irrevocable.

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 a regulatory election.
Section 301.9100-1(b) defines an “election” as an application for relief in respect of tax,
and a “regulatory election” as 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. Section 301.9100-1(c)
provides that 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 certain regulatory
elections (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.

Section 301.9100-3(a) provides that applications for relief that fall within § 301.9100-3
will be granted when the taxpayer provides sufficient evidence to establish that the
taxpayer acted reasonably and in good faith, and that granting such relief will not
prejudice the interests of the Government. Section 301.9100-3(b) provides when a
taxpayer is deemed to have acted reasonably and in good faith. Section 301.9100-3(c)
provides when the interests of the Government are prejudiced. Section 301.9100-3(e)
provides that the taxpayer must provide evidence that satisfies the requirements of
§ 301.9100-3(a) and (b).
PLR-134273-15                                 3

In the instant case, based solely on Taxpayer’s facts submitted and its 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 an election under
§ 42(i)(2)(B) not to exclude from the eligible basis of all N buildings in Project identified
by BIN/Address the proceeds of tax-exempt bond obligations by filing within 120 days
from the date of this letter amended Forms 8609 that include this intended election. The
amended Forms 8609 (along with a copy of this letter) are 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 provision of
the Code or Regulations. Specifically, we express no opinion on whether the Forms
8609 were timely or correctly filed, the effect of Taxpayer’s election not to reduce basis
under § 42(i)(2)(B) for any closed year, or whether Project otherwise qualifies for the
low-income housing tax credits under § 42.

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.

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

                                           Sincerely,

                                           Associate Chief Counsel
                                           (Passthroughs & Special Industries)



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




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

cc: