Housing project gets 120 days to make 40-60 set-aside election

Plain-English summary

The owner of a multiple-building low-income housing project intended to elect the 40-60 minimum set-aside under section 42(g)(1)(B). It inadvertently omitted the election from the Form 8609 submitted to the IRS. The IRS found that the owner met the requirements for regulatory extension relief under Treasury regulations sections 301.9100-1 and 301.9100-3. It granted 120 days from the letter date to file an amended Form 8609 making the election effective for the redacted year. The ruling did not decide whether the form was timely or correct for other purposes, whether the project was a qualified low-income housing project, or whether its buildings otherwise qualified for the credit.

Ruling snapshot

• Question: May the housing project make a late 40-60 minimum set-aside election that was omitted from Form 8609?
• Outcome: approved
• Key authorities: IRC §§ 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: 202015016 Third Party Communication: None
Release Date: 4/10/2020 Date of Communication: Not Applicable
Index Number: 42.00-00, 9100.00-00,
9100.01-00 Person To Contact:
--------------------------------, ID No. ----------
-------------------------------------- -----------------
------------------------------- Telephone Number:
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---------------------------------- Refer Reply To:
CC:PSI:B05
In Re: -------------------------------- PLR-124847-19
Date:
January 8, 2020

LEGEND

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

Year = -------

BINs = -----------------
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-----------------
-----------------
-----------------

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

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

   This letter responds to your authorized representative's letter dated October 7,

2019, 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.
PLR-124847-19 2

    According to the information submitted, Taxpayer owns a multiple-building low-

income 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 to make a 40-60 minimum set-aside election for the Project.

However, on the Form 8609, Low-Income Housing Credit Allocation and Certification,
Taxpayer submitted to the Internal Revenue Service (IRS) in Year, 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 with respect to any qualified

low-income building for the first taxable year of 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 date prescribed for it, unless it is shown that the failure is due to reasonable
cause and not to 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
PLR-124847-19 3

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 election under § 42(g)(1)(B) for
the Project by filing within 120 days from the date of this letter an amended Form 8609
that includes the intended election, effective for Year. 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
any 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.
PLR-124847-19 4

  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:
                                         Jian H. Grant
                                         Senior Technician Reviewer, Branch 5
                                         Office of Associate Chief Counsel
                                         (Passthroughs and Special Industries)

Enclosures (2):

Copy of this letter
Copy for section 6110 purposes

cc: