Private Letter Rulings

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A private letter ruling (PLR) is a written response issued by the IRS to an owner or taxpayer when the owner asks a question about the tax effects of its acts or transactions. The questions posed by site owners usually entail uncertainty about how to handle a situation and the need for guidance on how to avoid the recapture of tax credits. The IRS-issued PLR interprets and applies the law to a specific set of facts, and the owner or manager who requested the PLR can rely on the conclusions expressed in it.

Facts: The site owner of a single-building project requested an extension of time to make an election under Section 42(g)(1) of the Internal Revenue Code. Here, the owner inadvertently failed to make a timely, correct election for the building under Section 42(g)(1), consistent with the owner’s intent, as shown by submitted documentation. 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.

Facts: An owner requested a letter ruling on whether certain easement relocation costs incurred while constructing a site are includible in the eligible basis for purposes of Section 42(d)(1) of the Internal Revenue Code.

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.

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.

Facts: An owner of a multiple building project requested an extension of time to make the minimum set-aside election under Section 42(g)(1)(B) of the Internal Revenue Code. The owner elected on Form 8609, Low-Income Housing Credit Allocation and Certification, to begin the credit period for the site buildings in Year 1. The owner inadvertently failed to make timely, correct elections for the project buildings under Section 42(g)(1).

Facts: An owner’s site consists of multiple buildings located at a single address. The owner inadvertently failed to make an effective election for all buildings in the project for which Forms 8609 were issued, consistent with the owner’s intent to treat these buildings as part of a single, multiple-building project under Section 42(g)(3)(D).

Facts: The developer of a low-income housing tax credit site and a bond issuer had agreed that the site would meet the 40-60 test. Under the 40-60 test, the developer reserves 40 percent of its units for those earning 60 percent or less of the area median gross income. The issuer elects either the 20-50 test or the 40-60 test by checking the appropriate box on Form 8038 and filing the form with the IRS. Under Section 301.9100-7T(a)(4)(i) of the Temporary Procedure and Administration Regulations, the election is irrevocable.

Facts: When a low-income housing tax credit project owner violates the Vacant Unit Rule, all vacant units previously occupied by qualified households lose their low-income status and stop generating tax credits for the owner. A developer of a multi-building site asked the IRS if the Vacant Unit Rule could be waived under certain circumstances related to a necessary renovation.

Facts: The “eligible basis” of a project is the cost of acquiring an existing building if there is one (but not the cost of the land), plus construction and other construction-related costs to complete the project. This number is then multiplied by the percentage of the units that are “low income” to determine the project's “qualified basis” that actually qualifies for the credit.