IRS written determination 201428001

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: 201428001
Release Date: 7/11/2014
Index Number: 54F.00-00
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
----------------, ID No. ------------
Telephone Number:
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Refer Reply To:
CC:FIP:B05
PLR-108519-14
Date:
April 07, 2014
LEGEND:
District=--------------------------------------------
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State=------
City=---------------------
School=--------------------------------------------------------------
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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

PLR-108519-14
2
You make the following factual representations. District is a public school district and
political subdivision of State.
District 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 constructing, rehabilitating, and repairing School (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”). The Project entailed (1)
construction of a new gymnasium and classroom wing for School, (b)completely
rehabilitating School’s original building, (3) demolishing an unneeded previous addition
to School, and (4) acquiring real estate adjacent to School for use as parking space and
an outdoor play area. School is an historic three-story public school facility which is
approximately 140 years old and located in City. As of Date 1, District did expect that
all of the available project proceeds of the Bonds would be spent on the Project by the
expiration date of the Original Expenditure Period.
District is unable to expend all of the available project proceeds by the expiration date of
the Original Expenditure Period because several unexpected events have caused
unanticipated delays in the programming and design of the Project and in the
acquisition, construction, rehabilitation, and repair of the Project. The programming and
design phase of the Project was unexpectedly increased from 18 to 24 months because
of Project alterations made by each of the governing authorities of the two City historic
districts which School borders. These alterations were made over the course of several
meetings by the authorities and increased the time it took to design the Project. The
programming and design phase of the Project was also unexpectedly lengthened
because the magnitude of damage caused by a fire which had occurred prior to the
Bonds being issued was greater than anticipated, and required District to develop more
extensive rehabilitation and repair plans than it had originally thought necessary.
The acquisition, construction, rehabilitation, and repair phase of the Project was delayed
by several unexpected events. First, City was late in issuing a building permit, which
caused Project construction delays by pushing the construction of the building envelope
and site development for School into a winter season with above average snowfall and
uncharacteristically cold temperatures. Second, construction of a new addition to
School required that the foundation of the addition and the foundation of School tie-in
together. When the existing foundation of School was exposed it was discovered to
have deteriorated more than expected and was unusable in some areas. Rehabilitation
of this unanticipated condition caused additional Project construction delays. District
expects to expend the remaining available project proceeds of the Bonds by Date 3.
District submitted this request for a ruling prior to Date 2.

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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 District 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 ofDistrict. However, District 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 on the
Project. District expects to spend all available project proceeds of the Bonds not later
than Date 3.

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Conclusion
Under the facts and circumstances of this case, we conclude that District’s expected
failure to expend the available project proceeds of the Bonds by Date 2 is due to
reasonable cause and that District’s continued expenditure of the proceeds for qualified
purposes will proceed with due diligence. Therefore, District 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 District’s authorized representative.
The ruling contained in this letter is based upon information and representations
submitted by District 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