Revenue Procedure 2008-60: Election Involving the Repeal of the Bonding Requirement under § 42(j)(6)

26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also Part I, § 42.)

Rev. Proc. 2008–60
SECTION 1. PURPOSE
This revenue procedure affects taxpayers who are maintaining a surety bond or a
Treasury Direct Account (TDA) to satisfy
the low-income housing tax credit recapture exception in § 42(j)(6) of the Internal
Revenue Code (the Code), as in effect on
or before July 30, 2008. This revenue procedure provides the procedures for taxpayers to follow when making the election under section 3004(i)(2)(B)(ii) of the Housing Assistance Tax Act of 2008 (Pub. L.
110–289) (the Act) to no longer maintain a
surety bond or a TDA to avoid recapture.
SECTION 2. BACKGROUND
.01 Section 42 of the Code allows a
10-year tax credit for investment in qualified low-income buildings placed in service after December 31, 1986. If, as of the
close of any taxable year in the compliance
period, the amount of the qualified basis of
any building with respect to the taxpayer
is less than the amount of such basis as
of the close of the preceding taxable year,
§ 42(j)(1) provides that the taxpayer’s tax
for the taxable year shall be increased by
the credit recapture amount.
.02 Prior to the Act, § 42(j)(6) of the
Code provided that in the case of a disposition of a building or an interest therein the
taxpayer would be discharged from liability for any additional tax by reason of such
disposition if (A) the taxpayer furnished to
the Secretary a bond in an amount satisfactory to the Secretary and for the period required, and (B) it was reasonably expected
that such building would continue to be operated as a qualified low-income building
for the remainder of the building’s compliance period. A building’s compliance period is defined in § 42(i)(1).
.03 Form 8693, Low-Income Housing
Credit Disposition Bond, was developed
by the Service for use as a “surety bond”
for taxpayers to use to avoid or defer recapture of low-income housing tax credits under § 42(j)(6) of the Code following a disposition of a building (or interest

2008–43 I.R.B.

therein). Rev. Rul. 90–60, 1990–2 C.B.
3, provides guidance to taxpayers on the
amount of “surety bond” considered satisfactory by the Secretary and the period of
the bond required by the Secretary under
§ 42(j)(6).
.04 Rev. Proc. 99–11, 1999–1 C.B.
275, establishes a collateral program as
an alternative to providing a surety bond
to avoid or defer recapture of low-income
housing tax credits under § 42(j)(6) of the
Code. Under this program, taxpayers may
establish a TDA and pledge certain United
States Treasury securities to the Internal
Revenue Service as security for the taxpayer’s recapture liability.
.05 Taxpayers must use Form 8693 in
posting a surety bond and in establishing a
TDA. The Internal Revenue Service must
approve Form 8693 before it will take effect.
.06 Section 42(j)(6)(A) of the Code, as
amended by section 3004(c) of the Act,
provides that, in general, the increase in
tax under § 42(j)(1) shall not apply solely
by reason of the disposition of a building
(or an interest therein) if it is reasonably
expected that such building will continue
to be operated as a qualified low-income
building for the remainder of the building’s
compliance period.
.07 Section 42(j)(6)(B) of the Code, as
amended by section 3004(c) of the Act,
provides that if a building (or interest
therein) is disposed of during any taxable
year and there is any reduction in the qualified basis of such building which results
in an increase in tax for such taxable or
any subsequent taxable year, then (i) the
statutory period for the assessment of any
deficiency with respect to such increase in
tax shall not expire before the expiration
of 3 years from the date the Secretary is
notified by the taxpayer (in such manner
as the Secretary may prescribe) of such
reduction in qualified basis, and (ii) such
deficiency may be assessed before the
expiration of such 3-year period notwithstanding the provisions of any other law or
rule of law which would otherwise prevent
such assessment.
.08 Under section 3004(i) of the Act,
the amendments made to § 42(j)(6) of the
Code by section 3004(c) of the Act apply
to interests in buildings disposed of after
July 30, 2008, the date of enactment of
the Act. In addition, the amendments also
apply to interests in buildings disposed of

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on or before July 30, 2008, if (i) it is
reasonably expected that such building(s)
will continue to be operated as qualified
low-income building(s) (within the meaning of § 42) for the remainder of the compliance period with respect to such building(s), and (ii) the taxpayer elects the application of these rules to such disposition.
SECTION 3. SCOPE
.01 Except as provided in section 3.02
of this revenue procedure, this revenue
procedure applies to all taxpayers that disposed of a qualified low-income building
(or an interest therein) on or before July
30, 2008, for which the Internal Revenue
Service has approved a Form 8693. Under this revenue procedure, these taxpayers may elect to have section 3004(c) of
the Act apply to the disposition if at the
time of the election the building covered
by a surety bond or TDA is reasonably expected to continue to be operated as a qualified low-income building for the remainder of the building’s compliance period.
.02 This revenue procedure does not apply to any taxpayer who opted to satisfy the
bond posting exception to recapture under § 42(j)(6) of the Code by setting up a
TDA, and who received a Form 8693 that
was approved by the Internal Revenue Service before January 1, 2008, but who did
not fund the TDA within the period for
funding the TDA prescribed by Rev. Proc.
99–11.
SECTION 4. PROCEDURE FOR
MAKING ELECTION
.01 A taxpayer who seeks to make
the election provided by section
3004(i)(2)(B)(ii) of the Act must submit
a letter to the Internal Revenue Service
containing the following information:
(1) The taxpayer’s name, address, and
taxpayer identification number;
(2) A statement affirming that the taxpayer reasonably expects that the building
will continue to be operated as a qualified
low-income building (within the meaning
of § 42) for the remainder of the building’s
compliance period;
(3) A declaration stating: “Under penalties of perjury, I declare that I have examined this letter and the representations
made therein, and to the best of my knowl-

October 27, 2008

edge and belief, they are true, correct, and
complete.”
.02 The taxpayer must attach to the letter required by Section 4.01 of this revenue
procedure a copy of the Form 8693 that
was approved by the Internal Revenue Service for the building, signature page only,
and mail the letter and attached page to:
Internal Revenue Service
Box 331
Attn: LIHC Unit, DP 607 South
Philadelphia Campus
Bensalem, PA 19020
SECTION 5. EFFECT OF ELECTION
If a taxpayer makes the election under
this revenue procedure, section 3004(c) of
the Act applies to a disposition of a building (or interest therein) on or before July
30, 2008. Thus, the disposition is treated
as if § 42(j)(6) of the Code, as in effect on
or before July 30, 2008, contained no provision for the posting of a bond to avoid or
defer recapture and the taxpayer is treated
as if no surety bond or TDA had been established for that disposition.
SECTION 6. PAPERWORK
REDUCTION ACT
The collection of information contained in this revenue procedure has been

October 27, 2008

reviewed and approved by the Office
of Management and budget in accordance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number
1545–2120.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
The reporting requirement is contained
in section 4 of this revenue procedure. The
information is required so that taxpayers
may elect to terminate surety bonds or
TDA accounts furnished or established under former § 42(j)(6).
The likely respondents are taxpayers
who have currently in effect a surety bond
or TDA to avoid or defer recapture of
low-income housing tax credits arising
from a disposition of a building (or interest
therein) on or before July 30, 2008. The
estimated total annual reporting burden is
7,800 hours. The estimated annual burden
per respondent is 1 hour, depending on the
individual circumstances. The estimated
total number of respondents is 7,800.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.

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SECTION 7. EFFECTIVE DATE
This revenue procedure is effective for
elections under section 3004(i)(2)(B)(ii) of
the Act made on or after October 2, 2008.
An election request submitted by a taxpayer to the Internal Revenue Service after July 30, 2008, but prior to October 2,
2008, that does not satisfy all of the procedures required by Section 4 of this revenue
procedure will be deemed valid as of the
date originally submitted if the taxpayer
corrects the election to comply with these
procedures by the close of December 31,
2008.
SECTION 8. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Julie Hanlon Bolton of
the Office of Associate Chief Counsel
(Passthroughs and Special Industries). For
further information regarding this revenue
procedure, contact Ms. Hanlon Bolton at
(202) 622–3040 (not a toll-free call).

2008–43 I.R.B.