IRS Grants PAB Carryforward Extension

A nonprofit student loan bond issuer has been granted a 45-day extension to make a carryforward election of its unused private-activity bond volume capacity by the Internal Revenue Service, after a personnel shake-up at the corporation resulted in a failure to file the paperwork on time.

The IRS concluded in a private-letter ruling that the issuer, which was identified only as “a nonprofit corporation organized under the laws of the state,” acted “reasonably and in good faith” and that an extension would not “prejudice the interests” of the federal government. The ruling was dated Sept. 30 but was not released until this week.

According to the PLR, the person responsible for filing the Form 8328 — the document that must be filed with the IRS if an issuer wants to carry forward unused volume cap — left late in the year. There apparently was a miscommunication between the issuer and an unidentified governmental department that administers the state’s system for allocating PAB volume cap. The department had approved the issuer’s carryforward request but there was confusion over whether it or the issuer was to file the form and it was never sent to the IRS.

Eventually, an attorney for the issuer realized that the form had never been filed. The discovery led the issuer to request a ruling from the IRS on whether it could have an extension on the filing deadline. The IRS had not discovered the paperwork error by the time the ruling request was made.

According to the tax rules, the IRS has the discretion to grant reasonable extensions in cases where the taxpayer acted reasonably, in good faith, and the extension would not jeopardize the government’s interests.

Furthermore, the rules state that generally a taxpayer is deemed to have acted reasonably and in good faith if it requests an extension to address an error that has not yet been discovered by the IRS.

Private-letter rulings are supposed to be applicable only to the issuers that request them and their particular facts and circumstances. The IRS explicitly states that they cannot be cited or used as precedent in other tax matters. Nevertheless, they are believed to provide insights into the agency’s thinking, particularly on tax matters where little guidance exists or market participants have questions.

In addition to not naming the issuer, the ruling did not disclose the state in which the issuer is located, the amount of carryforward requested, or the year in which it was requested.

Rulings of this type generally are seen as routine by municipal market participants, bond lawyers said. In June the service granted an identical extension to another student-loan bond issuer that failed to file carryforward paperwork on time.

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Tax Washington
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