Owner Can Correct Error Regarding Credit Period of Building

Facts: The IRS gives owners the option of claiming tax credits at the end of the year the buildings are placed in service or deferring until the following year. Once credits are claimed, the qualified basis is set and can never go down. In addition, any low-income units leased after the first year are not calculated by the 10-year accelerated formula. Instead, they receive two-thirds of the credit amount up through Year 15.

In this case, a newly constructed building was placed in service and assigned a Building Identification Number by the IRS. The owner received Form 8609, Low-Income Housing Credit Allocation Certification, reflecting a maximum allowable housing credit dollar amount. The owner gave the form to its accountant. The owner intended to start the credit period for the building in Year 2, the year following the year the building was placed in service. But the accountant inadvertently checked the “No” box on line 10a of Form 8609, indicating that the credit period for the building was to begin in Year 1, the year the building was placed in service.

Section 42(f)(1) defines “credit period” to mean, with respect to any building, the period of 10 taxable years beginning with the taxable year in which the building is placed in service, or at the election of the taxpayer, the succeeding taxable year, but in either case only if the building is a qualified low-income building as of the close of the first year of such period. The election, once made, is irrevocable.

The owner asked the IRS for an extension of time to make an election under Section 42(f)(1) of the Internal Revenue Code.

Ruling: The IRS granted the extension to make election on Form 8609 to treat the credit period for the building as beginning in Year 2.

Reasoning: According to IRS regulations, the Commissioner has discretion to grant a reasonable extension of time to make a regulatory or statutory election [Section 301.9100-1 of the Procedure and Administration Regulations]. An extension may be granted if the taxpayer provides evidence that he or she acted reasonably and in good faith and that the grant of relief won’t prejudice the interests of the government, and the request is made before the failure to make the regulatory election is discovered by the IRS.

The IRS ruled that the owner acted reasonably and in good faith, and that granting relief wouldn’t prejudice the government’s interests. As a result, the issuer was granted an extension of time of 120 days from the date of this private letter ruling to file an amended Form 8609.

• PLR 201338010 (9/20/13)