The Multiple Building Election on IRS Form 8609
The IRS Form 8609 is used by state tax credit allocating agencies to allocate low-income housing tax credits to a building. The Form 8609 is also used by the building owner to make certain elections related to the building. One such election is made on line 8b and indicates whether buildings are included in a multiple building project.
What Is a Project?
Under Internal Revenue Code Section 42 (“Section 42”), a project is the building grouping used to test whether the minimum set-aside and other LIHTC requirements are satisfied. Each building that receives a Form 8609 is treated as its own project unless the taxpayer makes the proper election timely on line 8b of the Form 8609 to combine buildings into a multiple building project. Buildings may be combined into one project or multiple projects. Two or more buildings may be included in a project if they meet certain requirements relating to location, ownership, financing, and comparability.
Why Does the Project Matter?
The election to create a multiple building project affects the operations of the property. Most notably, making the election is especially important because it affects how the minimum set-aside is calculated. The minimum set-aside is a project-based test, not a building test, therefore making the correct election on line 8b is critical to ensuring that the minimum set-aside is met in the first year of the credit period. If the owner does not make the multiple building election, each building that receives a Form 8609 must meet the minimum set-aside on its own. This can present an issue in mixed income projects. If the owner does make the multiple building election, then all the buildings in aggregate in the project must meet the minimum set-aside which means some individual buildings in the project can be below the minimum set-aside. Things can get even trickier for meeting the minimum set-aside in a development with multiple buildings when the buildings are placed in service in different years. For example, if some buildings are placed in service in 2026 and some are placed in service in 2027, then the buildings that are placed in service in 2026 must meet the minimum set-aside in 2026 apart from the buildings placed in service in 2027.
Another area of operations affected by the multiple building project election is a tenant transfer. Generally, if the multiple building project election is made, a new income certification is not required by the Internal Revenue Service when a tenant transfers between buildings in the project. If the election is not made, then the tenant is treated as moving out of one project and moving into a new project and must be income qualified each time they transfer to a new building in a separate project.
Other operational areas affected by the multiple building election include income limits, the Vacant Unit Rule, and the amount of units that come under state tax credit allocating agency review.
How to Make the Election
If an owner wants to make an election to treat a building as part of a multiple building project, they must answer line 8b on the Form 8609 “yes” AND attach a statement. The IRS requires that each building that is (or will be) part of a multiple building project be identified by attaching a statement to the Form 8609 which includes the name, address, and BIN of each building in the project, the aggregate credit amount for the project, and the credit allocated to each building in the project. Failure to attach this statement causes each building to be treated as a separate project, even if line 8b is answered “yes.”
Final Thoughts
It is important for owners of LIHTC properties to understand the implications of IRS Form 8609, Line 8b. Making a valid election requires several important steps, and the decision to elect – or not elect – can significantly affect the property’s future LIHTC compliance obligations. Experienced LIHTC consultants and LIHTC tax professionals can provide valuable guidance on these requirements and their consequences, as well as assist with the accurate completion of Part II of IRS Form 8609.
McKonly & Asbury, LLP is a leader in accounting for affordable housing developments. IRS regulations require specialized knowledge when completing Part II of the Form 8609. Our team has the specialized knowledge needed to help ensure you appropriately complete the Form 8609. For more information on these services and more, be sure to visit our Affordable Housing page, and don’t hesitate to contact us.
The information presented in this post is intended solely for informational purposes and should not be construed as accounting advice from McKonly & Asbury, LLP.
About the Author
Elizabeth Harriger, CPA, HCCP is a Partner as well as the Director of our firm’s Affordable Housing Services. Elizabeth leads the firm’s Low-Income Housing Tax Credit practice and provides technical review and consultation for a… Read more
