IRS Releases 2016-2017 Guidance Priority Plan

On Aug. 15, the Internal Revenue Service (IRS) released its 2016-2017 priority guidance plan and a fourth-quarter update to its 2015-2016 priority guidance plan. Through this plan year, the 12-month period from July 2016 to June 2017, the IRS plans to address 281 projects. Compared to the prior version of the plan, the IRS added issuing guidance on the right of first refusal under Section 42(i)(7).

The right of first refusal comes into play for a typical limited partner investor in a tax credit site after claiming its credits. The investor will seek to exit the joint venture toward the end of the compliance period. The Internal Revenue Code explicitly envisions that qualified nonprofits will have a right of first refusal to acquire the project back from the partnership for a minimal purchase price at the end of the compliance period, and nonprofit sponsors almost always obtain this right of first refusal.

A priority listed in the original 2015-2016 plan that were accomplished and subsequently omitted from the 2016-2017 plan include final regulations on utility allowances under Section 42(g)(2)(B)(ii) for submetered buildings.

The IRS intends to update and republish the 2016–2017 plan during the plan year to reflect additional items that have become priorities and guidance that the IRS has published during the plan year. The periodic updates allow the IRS flexibility throughout the plan year to consider comments received from taxpayers and tax practitioners relating to additional projects and to respond to developments arising during the plan year.