A low-income housing project got more time to make its 40-60 minimum set-aside election

Plain-English summary

A taxpayer owns a single-building low-income housing project and claims the low-income housing tax credit under Section 42. To qualify, a project must commit to a "minimum set-aside": renting enough units to lower-income tenants. The taxpayer intended to choose the 40-60 test (at least 40 percent of units rent-restricted and occupied by households at or below 60 percent of area median income) by making that election on Form 8609. It inadvertently failed to make the election on the forms it filed. Because the election deadline is set by regulation, the taxpayer asked for relief under the "9100" rules that let the IRS extend the time to make a missed election. Based on the taxpayer's facts and representations, the IRS found the taxpayer acted reasonably and in good faith and that relief would not prejudice the government. It granted an extension: the taxpayer has 120 days from the date of the letter to file amended Forms 8609 making the 40-60 election. The IRS expressed no opinion on whether the project otherwise qualifies for the credit.

Ruling snapshot

• Question: May the taxpayer get an extension of time to make the § 42(g)(1) minimum set-aside election it failed to make on its Forms 8609?
• Outcome: Approved (120 days to file amended Forms 8609 with the § 42(g)(1)(B) election)
• Key authorities: IRC § 42(g)(1), (l)(1); Treas. Reg. §§ 301.9100-1 through 301.9100-3, 301.9100-7T(b), 1.42-1(h)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202244012 Third Party Communication: None
Release Date: 11/4/2022 Date of Communication: Not Applicable
Index Number: 42.00-00, 9100.01-00
Person To Contact:
-------------------------- -----------------, ID No. -----------------
------------------- Telephone Number:
---------------------------------------- --------------------
-------------------------------- Refer Reply To:
CC:PSI:B05
In Re: ------------------- PLR-102003-22
Date:
July 22, 2022

LEGEND

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

Year 1 = -------

Year 2 = -------

BIN = ------------------

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

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

This letter responds to your authorized representative's letter dated January 21, 2022,
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.

According to the information submitted, Taxpayer owns a single-building low-income
housing project (Project) that was placed in service in Year 1 and elected to begin the
credit period in Year 2. The building identification number associated with the Project is
BIN. The Project is located at Address.

Taxpayer intended to make a 40-60 minimum set-aside election for the Project.
However, Taxpayer inadvertently failed to make such election on Forms 8609, Low-
PLR-102003-22 2

Income Housing Credit Allocation and Certification, Taxpayer submitted to the Internal
Revenue Service (IRS).

Section 42(g)(1) defined 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) or
(B), 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. 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 for any qualified low-income
building following the close the first taxable year in 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 prescribed date, unless it is shown that the failure is due to reasonable cause
and not to willful neglect, no credit is 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 Unit at the IRS Philadelphia campus 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.
PLR-102003-22 3

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. The election must be made 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 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 Forms
8609 for the Project were 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
the building in the Project qualifies 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.
PLR-102003-22 4

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: _________________________
                                   Nicole R. Cimino
                                   Branch Chief, Branch 5
                                   Office of Associate Chief Counsel
                                   (Passthroughs and Special Industries)

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

cc: