IRS written determination 201426022

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 201426022
Release Date: 6/27/2014
Index Number: 54F.00-00
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:FIP:B05
PLR-149991-13
Date:
April 2, 2014
LEGEND:
Authority=---------------------------------------------------------
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State=---------------------------------------------
Bonds=------------------------------------------------------------------------
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Date 1=---------------------
Date 2=-----------------------
Date 3=---------------------
Dear ----------------------:
This is in response to your request under § 54A(d)(2)(B)(iii) of the Internal Revenue
Code for an extension of the expenditure period for the available project proceeds of
qualified tax credit bonds.
Facts and Representations
You make the following factual representations. Authority is a body corporate and
politic constituting an instrumentality of State, empowered to issue bonds for any of its

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corporate purposes. Theprimary functions of Authority are to design and construct
office buildings, quarters, courts, warehouses, shops, schools, health facilities, social
welfare facilities, and related facilities for lease to State or any of its departments,
agencies, instrumentalities, or municipalities.
Authority issued the Bonds on Date 1 and designated the Bonds as qualified school
construction bonds within the meaning of § 54F(a)(3). All available project proceeds of
the Bonds were to be spent on a portion of the cost of constructing, renovating, and
improving approximately 100 public school facilities and acquiring land together with
equipment, furnishings, landscaping, and other site improvements (the “Project”), and
were expected to be spent before Date 2.
The original three-year expenditure period for the Bonds under § 54A(d)(2)(B)(i) will
expire on Date 2 (the “Original Expenditure Period”). However, several unexpected
events have resulted in an unforeseen delay in the expenditure of the available project
proceeds of the Bonds.
With respect to 12 of the approximately 100 public school facilities, the rehabilitation
and construction work is expected to be completed by Date 2, but certain unexpected
events have caused an unforeseen delay such that the available project proceeds
allocated to those 12 schools is not expected to be spent by Date 2. These unexpected
events involve either the contractor’s poor performance delaying completion of the work,
or resolving disputes over contract claims submitted by the contractor.
With respect to four of the approximately 100 public school facilities, due to unforeseen
situations, rehabilitation and construction work will not be completed by Date 2. These
unforeseen situations involve projects where either (1) a default noticehas been issued
to the contractor due to poor performance and negotiations are ongoing with the
contractor’s surety company for ratification of a project takeover agreement to complete
the project, (2) the scope of the contracted work is being revised, or(3) the start of
construction has been delayed because State has not yet granted the land use
authorization.
With respect to five of the approximately 100 public school facilities originally identified
as part of the Project, the proposed work has been cancelled and the schools removed
from the Project. Three new public school facility projects (the “Added Projects”) have
been added to the Project. One of the Added Projects has been completed and fully
disbursed. At the other two Added Projects, pre-construction activities have begun and
construction is expected to start in the near future.
All of the available project proceeds of the Bonds will be spent on the Project by Date 3,
or three years after the Original Expenditure Period expires. The Added Projects do not
extend the delay in spending all of the available project proceeds of the Bonds. Even

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without the addition of the Added Projects, all of the available project proceeds of the
Bonds would not be spent on the Project until Date 3.
Authoritysubmitted this request for a ruling prior to Date 2.
Law and Analysis
Section 54A(d)(1) provides that a qualified school construction bond is treated as a
qualified tax credit bond for purposes of Section 54A.
Section 54A(d)(2)(B)(i) provides in part that to the extent that less than 100 percent of
the available project proceeds of the issue are expended by the close of the expenditure
period for 1 or more qualified purposes, the issuer shall redeem all of the nonqualified
bonds within 90 days after the end of such period.
Section 54A(d)(2)(B)(ii) provides that for purposes of this subpart, the term “expenditure
period” means, with respect to any issue, the 3-year period beginning on the date of
issuance. Such term shall include any extension of such period under clause (iii).
Section 54A(d)(2)(B)(iii) provides that upon submission of a request prior to the
expiration of the expenditure period (determined without regard to any extension under
this clause), the Secretary may extend such period if the issuer establishes that the
failure to expend the proceeds within the original expenditure period is due to
reasonable cause and the expenditures for qualified purposes will continue to proceed
with due diligence.
Section 54A(d)((2)(C)(iv) provides that for purposes of this paragraph, in the case of a
qualified zone academy bond, a “qualified purpose” means a purpose specified in
§ 54E(a)(1).
Section 54A(e)(4) of the Code defines “available project proceeds” to mean (A) the
excess of (i) the proceeds from the sale of an issue, over (ii) the issuance costs
financed by the issue (to the extent that such costs do not exceed 2 percent of such
proceeds), and (B) the proceeds from any investment of the excess described in
subparagraph (A).
The Project was identified prior to the issuance of the Bonds and Authority reasonably
expected to spend all of its allocable available project proceeds within the three-year
period. The expected failure to spend all the available project proceeds of the Bonds by
the expiration of the three-year period on Date 2 has been caused by events that were
not reasonably expected at the time the Bonds were issued and were beyond the
control of Authority. However, Authority to the extent possible considering the
described unexpected external events that resulted in unforeseen delays, has and will
continue to exercise due diligence in spending the remaining available project proceeds

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on the Project. Authority expects to spend all available project proceeds not later than
Date 3,or three years after the Original Expenditure Period expires.
Conclusion
Under the facts and circumstances of this case, we conclude that Authority’s expected
failure to expend the available project proceeds of the Bonds by Date 2 is due to
reasonable cause and that Authority’s continued expenditure of the proceeds for
qualified purposes will proceed with due diligence. Therefore, Authority is granted an
extension of the Original Expenditure Period with respect to the Bonds until Date 3.
Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any transaction or item discussed or referenced in this letter.
This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.
In accordance with a Power of Attorney on file with this office, a copy of this letter is
being sent to Authority’s authorized representative.
The ruling contained in this letter is based upon information and representations
submitted by Authority and accompanied by a penalty of perjury statement executed by
an appropriate party. While this office has not verified any of the materials submitted in
support of the request for a ruling, it is subject to verification upon examination.
Sincerely,
Associate Chief Counsel
(Financial Institutions & Products)
/S/
By: _________________________
Timothy L. Jones
Senior Counsel, Branch 5