Credit Period: BINs, Dates, and Elections

Form 8609, line 1a, date of allocation, identifies the date (1) the taxpayer and state agency entered into a carryover allocation, or (2) the state agency signed the completed Form 8609, Part I, if the taxpayer was able to receive the allocation and place the building in service all within one calendar year. However, because of the complexity of real estate development, most IRC §42 projects are developed using a carryover allocation under IRC §42(h) (1) (E) or (F). If the IRC §42 project is a qualified residential rental project under IRC §142(a) (7), line 1a is left blank.

Form 8609, line E, identifies the unique Building Identification Number (BIN) assigned to the low-income building and should consist of the two letter state abbreviation, a two-digit year for the year the allocation was made, and a five-digit number assigned by the state agency. The BIN is helpful in determining the lifecycle of buildings financed with tax-exempt bonds. However, once the BIN is assigned, it will also be the BIN for all subsequent allocations of credit.

Form 8609, line 5, date the building was placed in service, is the date the first unit in the building is ready and available for occupancy under state or local law. For taxpayers receiving carryover allocations of credit, the placed in service date should be no later than the close of the second calendar year following the calendar year in which the allocation was made. For example, if the allocation date is June 14, 2009, the placed in service date should be no later than December 31, 2011.

Form 8609, line 10a, documents the taxpayer's election to begin the credit period the first year after the building is placed in service. Based on the information on lines 5 and 10a, the first year of the credit period can be determined, which is important because:

• Generally, the applicable fraction is determined as of the last day of the taxable year. For the first year of the credit period, however, the applicable fraction is computed using an averaging methodology described in IRC §42(f) (2).

• If an adjustment to the credit is made and the recapture provisions under IRC §42(j) are triggered, a portion of the credit claimed for each prior year of the 15- year compliance period is recaptured. The recapture percentage is also dependent on the year of the compliance period for which the recapture provisions are triggered.