A housing bond issuer gets its late-filed carryforward election for unused private-activity bond volume cap treated as timely

Plain-English summary

States and local authorities get an annual "volume cap" limiting how much tax-exempt private-activity bond financing they can issue. If an authority does not use all of its cap in a year, it can elect to carry the unused amount forward for specific purposes by filing Form 8328. Here a housing bond issuer received a volume cap allocation and intended to carry part of it forward to the next year to finance a qualified residential rental project. It signed the Form 8328 and delivered it to bond counsel to file within the automatic extension window, but because of a miscommunication inside the law firm, the form was never actually filed. The issuer discovered the lapse while preparing to close the bonds, promptly filed the form, and requested an extension under section 301.9100-1. The IRS found the issuer acted reasonably and in good faith (it asked for relief before the IRS caught the error and did not use hindsight) and that granting relief would not prejudice the government, so it deemed the late-filed Form 8328 timely. This preserves the carried-forward bond authority needed to finance the affordable-housing project.

Ruling snapshot

• Question: Should a bond issuer get an extension to file a late Form 8328 carryforward election for unused private-activity bond volume cap under section 146(f)?
• Outcome: Approved (the Form 8328 filed on the later date is deemed timely).
• Key authorities: IRC § 146(f); IRC § 142(d); Treas. Reg. §§ 301.9100-1, 301.9100-3; Rev. Proc. 2005-30; Notice 89-12.

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202206018                                              Third Party Communication: None
 Release Date: 2/11/2022                                        Date of Communication: Not Applicable
 Index Number: 146.07-00, 9100.03-00
                                                                Person To Contact:
 ------------------------                                       -----------------, ID No. -----------------
 ------------------------------------------------------------   Telephone Number:
 ----------------                                               --------------------
 ----------------------------------                             Refer Reply To:
 ----------------------------------                             CC:FIP:B05
 -------------------------                                      PLR-121774-21
                                                                Date:
                                                                November 18, 2021




LEGEND:

Issuer                    =        -------------------------------------------------------------------

Authority                 =        --------------------------------------------------------

State                     =        --------

Bond Counsel              =        -------------------

Year 1                    =        -------

Year 2                    =        -------

Date 1                    =        ------------------

Date 2                    =        -----------------------

Date 3                    =        ----------------------

Date 4                    =        -----------------------

a                         =        ---------------


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

This is in response to your request for an extension of time under § 301.9100-1 of the
Procedure and Administration Regulations to file a Form 8328, Carryforward Election of
Unused Private Activity Bond Volume Cap, to make a carryforward election under § 146(f)
PLR-121774-21                                2

of the Internal Revenue Code (the Code) with respect to $a of unused private activity
bond volume cap from Year 1.

Facts and Representations

Issuer was created by the Authority to provide low-income housing and related services
and is authorized under State law to issue exempt facility bonds for qualified residential
rental projects as defined in § 142(d). In Year 1, Issuer received an allocation of private
activity bond volume cap pursuant to § 146 in the amount of $a. Issuer intended to carry
forward $a of its Year 1 allocation to Year 2 to issue exempt facility bonds for a qualified
residential rental project. Issuer intended to file a Form 8328 with the Internal Revenue
Service (the Service) to make a carryforward election under § 146(f) with respect to the
allocation within the six-month automatic extension period provided for in Revenue
Procedure 2005-30, 2005-1 C.B. 1148.

On Date 1, a Form 8328 was executed and delivered to Bond Counsel to be filed with the
Service. Due to a miscommunication between two offices within Bond Counsel, the form
was inadvertently not filed. Progress on the financing of the project continued in Year 2,
with the closing of the issuance of the Bonds scheduled to occur on Date 2. In anticipation
of the closing of the bonds, it was discovered on Date 3, that the executed Form 8328
had not been filed with the Service to carry forward the allocation. After discovering this
oversight, Issuer and Bond Counsel began preparation of the request for an extension of
time to file the Form 8328. On Date 4, the original of the Form 8328 executed on Date 1,
was filed, and the instant extension request was submitted. As of Date 4, the Service had
not discovered Issuer’s failure to timely file the Form 8328.

Law and Analysis

Section 146(f)(1) provides that if an issuing authority’s volume cap for any calendar year
after 1985, exceeds the aggregate amount of tax-exempt private activity bonds issued
during the calendar year by the authority, the authority may elect to treat all (or any
portion) of the excess as a carryforward for one or more carryforward purposes.

The election is made by filing Form 8328. Under Notice 89-12, 1989-1 C.B. 633, Form
8328 must be filed by the earlier of (1) February 15 of the calendar year following the year
in which the excess amount arises, or (2) the date of issue of bonds issued pursuant to
the carryforward election. Rev. Proc. 2005-30 provides for an automatic extension of six
months from the due date of the carryforward election to make the carryforward election.

Section 301.9100-1(c) provides that the Commissioner in exercising the Commissioner’s
discretion 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 (defined in § 301.9100-1(b)
as an election whose due date is prescribed by regulations published in the Federal
Register, or a revenue ruling, revenue procedure, notice, or announcement published in
the Internal Revenue Bulletin), or a statutory election (but no more than 6 months except
PLR-121774-21                                  3

in the case of a taxpayer who is abroad), under all subtitles of the Code except subtitles
E, G, H, and I.

Section 301.9100-3(a) provides that requests for extensions of time for regulatory
elections that do not meet the requirements for automatic extensions in § 301.9100-2
must be made under the rules of § 301.9100-3. Pursuant to § 301.9100-3(a), requests for
relief will be granted if the taxpayer provides evidence establishing to the satisfaction of
the Commissioner that the taxpayer acted reasonably and in good faith, and that the grant
of relief will not prejudice the interests of the Government.

Section 301.9100-3(b)(1) provides, in part, that, except as provided in § 301.9100-
3(b)(3)(i) through (iii), a taxpayer is deemed to have acted reasonably and in good faith if
the taxpayer requested relief under § 301.9100-3 before the failure to make the regulatory
election is discovered by the Service. Section 301.9100-3(b)(3)(ii) and (iii) provide,
however, that the taxpayer has not acted in good faith if it was informed in all material
respects of the required election and related tax consequences, but chose not to file the
election; or used hindsight in requesting relief.

Section 301.9100-3(c)(1)(i) provides, in part, that the interests of the Government are
prejudiced if granting relief would result in a taxpayer having a lower tax liability than the
taxpayer would have had if the election had been timely (taking into account the time
value of money).

After discovering the inadvertent failure to file the Form 8328 pursuant to Rev. Proc. 2005-
30, Issuer promptly, on Date 4, submitted a ruling request for an extension of time to file
the Form 8328. As of Date 4, the Service had not discovered the failure to timely file the
Form 8328. At no point did Issuer decide to not file the Form 8328, nor did Issuer use
hindsight in requesting an extension of time to file the Form 8328. If the requested relief
is granted, no taxpayer will have a lower tax liability than if the election had been timely
made. Thus, Issuer acted reasonably and in good faith upon discovery of the mistake and
the interests of the government will not be prejudiced if we grant the relief requested by
Issuer.

Conclusion

Based solely on all of the facts and representations submitted, we conclude that the
requirements of §§ 301.9100-1 and 301.9100-3 have been met. The filing of the Form
8328 with the Service by Issuer on Date 4 is deemed timely.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any transaction or item discussed or referenced in this letter. 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 a Power of Attorney on file with this office, a copy of this letter is being
sent to your authorized representative.
PLR-121774-21                               4


The ruling contained in this letter is based upon information and representations
submitted by Issuer and accompanied by penalty of perjury statements executed by the
appropriate parties. While this office has not verified any of the materials submitted in
support of the request for a ruling, it is subject to verification upon examination.

                                         Sincerely,

                                         Associate Chief Counsel
                                         (Financial Institutions and Products)




                                         By:_______________________
                                            Johanna Som de Cerff
                                            Senior Technician Reviewer, Branch 5




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