Private Letter Ruling 202635003 allowed a taxpayer to file an amended Form 8609 after inadvertently omitting the intended Average Income minimum set-aside election. The ruling offers a possible path to relief, but it does not make a filed Form 8609 freely correctable.

The IRS has granted a Low-Income Housing Tax Credit owner additional time to make the Average Income minimum set-aside election after the owner filed Form 8609 without indicating the election. Private Letter Ruling 202635003, released August 28, 2026, authorized the taxpayer to submit an amended Form 8609 within 120 days of the ruling date.

The decision helps owners who discover a similar omission, but its limits are as important as its result. The taxpayer did not simply revise the form and treat the revision as effective. It requested discretionary relief from the IRS under Treasury Regulations Sections 301.9100-1 and 301.9100-3. The IRS granted relief based on the particular facts and representations presented.

What the taxpayer requested

The project consisted of one building for Section 42 purposes. The building was placed in service in one year, and the owner elected to begin the credit period in the following year. According to the ruling, the taxpayer intended to elect the Average Income test under Internal Revenue Code Section 42(g)(1)(C), and contemporaneous documents supported that intent. Nevertheless, the taxpayer omitted the election from the Form 8609 submitted to the IRS.

This distinction matters. The published facts describe a failure to make the intended election on the filed form. They do not describe an owner who intentionally selected the 20-50 or 40-60 test and later decided that Average Income would be more advantageous. The ruling therefore should not be read as general authority to replace one completed minimum set-aside election with another.

Why IRS relief was required

On Form 8609, Part II, line 10c, the building owner elects the project's minimum set-aside. The available elections include the 20-50 test, the 40-60 test, and the Average Income test. Section 42(g)(1) and the Form 8609 instructions provide that the election, once made, is irrevocable. The minimum set-aside is a project-based requirement and generally must be satisfied by the close of the first year of the credit period.

The IRS treated the omitted election as a regulatory election for which an extension may be available under the Section 9100 relief rules. Under Section 301.9100-3, a taxpayer must show that it acted reasonably and in good faith and that granting relief will not prejudice the government's interests. The regulations also guard against hindsight. Relief is ordinarily unavailable when changed facts make an election more favorable, and the taxpayer seeks to revisit an earlier decision.

Based solely on the submitted facts and representations, the IRS concluded that the taxpayer met those standards. It granted 120 days from the date of the letter to file an amended Form 8609 reflecting the Average Income election. The taxpayer also had to include a copy of the ruling with the amended form filed at the IRS Philadelphia campus.

What the ruling does not decide

The IRS expressly declined to rule on whether the project was a qualified low-income housing project or whether the building otherwise qualified for the credit. The decision addressed only the additional time permitted to make the election. It did not validate the project's unit designations, occupancy, rent compliance, first-year qualification, eligible basis, or credit calculation.

The ruling also applies only to the taxpayer who requested it. Under Section 6110(k)(3), a private letter ruling may not be used or cited as precedent. Other taxpayers may view the ruling as evidence of how the IRS analyzed a particular set of facts, but they cannot rely on it as an automatic correction procedure or as assurance that the IRS will grant the same relief.

Practical steps when an election error is discovered

An owner who discovers a missing or inconsistent minimum set-aside election should stop and determine exactly what was signed, issued, submitted, and reported. The owner should not assume that checking a different box on a copy of Form 8609 will correct the problem. Compare the executed agency form, the form filed with the IRS, the form provided to the allocating agency, and the election reflected on tax filings, building by building. The Form 8609 instructions specifically state that the Part II copy submitted to the housing credit agency should match the Part II form filed with the IRS.

Contemporaneous documents may determine the outcome

The ruling's reference to contemporaneous documents is particularly significant. The owner's best evidence consists of material created before the error was discovered and before anyone had a reason to prefer a different outcome. Allocation and underwriting records, partnership documents, investor approvals, unit targeting schedules, closing files, tax workpapers, and communications with the allocating agency may show that the project was consistently structured for Average Income, even though line 10c was left incomplete.

Documents prepared only after the omission is discovered are less persuasive because the Section 9100 regulations restrict the use of hindsight. Owners and managers should therefore preserve the original record, including drafts and communications, rather than reconstructing intent after the fact.

The compliance lesson

The immediate lesson is procedural. Review Form 8609 elections as part of a coordinated closing and first-year tax matter, not as a routine signature exercise. Before signing and filing Part II, the owner, tax preparer, investor, counsel, and compliance team should confirm that the project election aligns with the allocation, underwriting, partnership commitments, unit designations, and operating plan.

PLR 202635003 indicates that relief may be available when an intended Average Income election is inadvertently omitted and the record supports the taxpayer's original intent. It does not create a self-help amendment right. If an executed or filed Form 8609 omits the intended election, the owner should preserve all contemporaneous evidence and consult experienced tax counsel immediately.

Sources

IRS Private Letter Ruling 202635003, released August 28, 2026

Instructions for Form 8609

Treasury Regulation Section 301.9100-3

This article provides general information and is not legal or tax advice. Owners should consult qualified tax counsel about their specific facts.