IRS Grants Extension to Make Election

Facts: The site owner of a newly constructed building requested an extension of time to make an election under Section 42(g)(1) of the Internal Revenue Code. The owner received Form 8609, Low-Income Housing Credit Allocation Certification, reflecting a maximum allowable housing credit dollar amount sourced from tax-exempt bond financing. The owner failed to make an effective election under Section 42(g)(1)(B) for the taxable year. Section 42(g)(1) defines the term “qualified low-income housing project” as any project for residential rental property that meets the requirements of Section 42(g)(1)(A) or (B), whichever is elected by the taxpayer.

The project meets the requirements of Section 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 Section 42(g)(1)(B) if 40 percent or more of the residential units are both rent-restricted and occupied by individuals whose income is 60 percent or less of area median gross income.

Following the close of the first taxable year in the credit period with respect to any qualified low-income building, the owner must certify the election made under Section 42(g) with respect to the qualified low-income housing project of which the building is a part. In the case of a failure to make the certification required by the due date, unless it’s shown that the failure is due to reasonable cause and not to willful neglect, no tax credits are allowed for any taxable year ending before the certification is made.

Ruling: The IRS agreed to grant the owner a 120-day extension to make the elections under Section 42(g)(1)(B) for the site buildings.

Reasoning: Under Section 301.9100-1(c), the Commissioner has the discretion to grant a reasonable extension of time under the rules set forth in Sections 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’s abroad). Here, the IRS concluded that the owner had acted reasonably and in good faith, and that granting an extension wouldn’t prejudice the interests of the government. The owner must file an amended Form 8609 within 120 days from the date this private letter ruling was issued.

• PLR 104290-13, No. 201342003 (7/8/13)