1 4 7 T.C. No . 1 8

UNITED STATES TAX COURT

SILVER M EDICAL, INC., Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 2 6 7-1 4. Fi l edDecem b er 1 9 , 2 01 6
.
P, a cal en d ar y ear t ax pay er, ap p l i edt o h av e i ts i n v es t m en ts i n a th erap eu t i c d i s co v ery

p ro jectcert i fi edu n d er I.R.C. s ec. 4 8D. Oni t s ap p l icat i o n P req u es t edcert i fi cat i o n o f i n v es t m en t s m ad e i n i t s 2 0 0 9 an d2 0 1 0 t ax y ears . Wh i l e cert i fi cat io n g en eral l y res u l t s i n a t ax cred it , P el ect ed t o recei v e cas h g ran t s i n l ieu o f a cred i t . P recei v ed cert i fi cat i on . P th en ch an g edi t s 2 0 1 0 t ax y ear fro m a cal en d ar y ear t o a s h o rtt ax y ear en d i n g No v em b er 3 0, 2 0 10 . P fi l ed a s eco n d ap p l icat i o n u n der I.R.C. s ec. 4 8 D requ es t i n g cert i fi cat io n o f i n v es t m en t s m ad e i n i t s fi s cal y ear en d in g (FYE) No v em b er 3 0 , 2 01 1
. P’ s s eco n d ap p l i cat i on d i dn o t res u l ti n cert i fi cat i o n . Hel d : P i s n o ten t i t l ed t o a g ran trel at ed t o i n v es t m en t s m ad e aft er t he 2 0 1 0 cal en d ar y ear b ecau s e P was n o tcert i fi edt o m ak e qu al ifi edi n ves t m en t s aft er t h aty ear. Hel d , fu rt h er, g ran tfu n d s at tri b u t ab l e t o es t i m at edqu al i fi ed i n v es t m en t s th atex ceed edactu al i nv es t m en ts m ad e du ri n g t h e 2 0 1 0 cal en d ar y ear m

u s tb e recap tu redas t ax .- 2
- Hel d , fu rt h er, P m

u s trecap tu re t h e ex ces s g ran tfu n d s fo r i t s FYE No v em

b er 3 0 , 2 0 11 , b ecau s e t h aty ear i n cl u des th e p eri odi n wh i ch th e rel ev an tg ran twas m ad e.

J am es H. Si l v er (an o ffi cer), fo r p et i t io n er. Au dra M . Di neen , fo r res p on d en t . VASQUEZ, Ju d ge: Res p o n d en td et erm i n eda d efi ci en cy i n p et i t i o n er’ s Fed eral i nco m e t ax o f $ 4 1 ,0 3 2 fo r t h e fi scal y ear en di n g (FYE) No vem b er 3 0 , 2 0 1 1 , an dan accu racy -rel at ed p en al ty u n der s ect i o n 6 6 6 2 (a) o f $ 8 ,2 0 6
. 1 Aft er a
co n ces si o n , 2 th e i s s ues fo r d eci s i o n are: (1 ) wh et h er p et i t i o ner m u strecap tu re as t ax $ 4 1,0 3 2 p rev i o u s l y

recei v edas a g ran tan d , i f s o , (2 ) wh et h er recap tu re s h o u l d
o ccu r fo r p et i t i o ner’ s FYE No v em b er 3 0 , 2 01 1
. FINDINGS OF FACT So m e o f t h e fact s h av e b een s ti p u lat ed an dare s o fo u n d. Th e s t ip u l at i o n o f fact s an dth e at t ach ed ex h i b i ts are i n co rp o rat ed b y th is referen ce. Pet i t i o n er i s a

1 Al l s ect i o n referen ces are t o th e In t ern al Rev en u e Co d e i n effect fo r t h e y ear i n i s s u e, an d al l Ru l e referen ces are t o the Tax Co urtRu l es o f Pract ice an d Pro cedure.

2 Res p o n den tco n ced es th atp et i t i o n er i s n o tl i ab l e fo r t he accu racy -rel at ed p en al ty .- 3
-

co rp o rat i o n o rg an izedu n d er Del aware l aw. Atth e t i m e t h e p et i t i o n was t i m el y fi led , p et i t io n er’ s p ri n ci pal p lace o f b u s i n es s was Pal o Al t o , Cal i fo rn i a. Pet i t i o ner i s a m ed i cal d ev i ce co m p an y fo cu s edo n d ev el op i n g a s y s t em fo r
m o re effi ci en t l y

d et ect i n g cereb ral i s ch em i a (i .e., s tro k e) i n p at i en t s u nd erg o i n g
s u rg ery . Duri n g al l rel ev an tt i m es J am es H. Si lv er s erv edas p et i ti o n er’ s p res i d en t . M r. Si l ver h o l d s a d o ct o rat e i n ch em i cal en gi n eeri ng an dh as o v er 1 7 y ears o f
ex p eri en ce i n t h e m ed ical d ev i ce i n dus try . Sh o rt l y aft er p et i t io n er t i m el y

fi l edi ts 2 0 0 9 retu rn , th e Pat i en tPro t ect i o n
an d Affo rd ab l e Care Act (ACA), Pub
. L. No . 1 1 1 -1 4 8 , 1 24 St at . 1 1 9 (2 0 10 ), was
en act ed . ACA s ec. 9 0 2 3 (a), 1 2 4 St at . at8 7 7 , es t ab l i s h eda n ew s ect i o n 4 8 D i n th e In t ern al Rev enu e Co d e al l o wi n g a t ax p ay er t o cl ai m a t ax cred it(o r al t ern at i v el y ap p ly fo r a cas h g ran t i n l i euo f a cred i t ) i f t h e t ax p ay er m ad e i n v es tm en t s i n a

“ qu al i fy i n g th erap eu t i c d i s co v ery p ro j ect ” (QTDP). Th e cred i t o r g ran twas l i m i ted t o 5 0 % o f qu al i fi edi nv es t m en t s m ad e i n t ax ab l e y ears b eg i n n i n g i n 2 0 0 9
o r 2 0 10 . Sec. 4 8 D(a), (b )(5 ).- 4
-

Pu rs uan tt o s ect i o n 4 8 D(d )(1 )(A), t h e Secret ary 3 an dth e In t ern al Rev en u e Serv i ce (IRS) jo i n t l y p ub li s h edNo t i ce 2 0 1 0 -4 5 , 2 0 1 0-2 3 I.R.B. 7 3 4 , es t ab l i s h i n g th e QTDP p ro g ram

an dd es cri b i n g th e p ro ces s b y wh i ch t ax p ay ers co ul dap p l y t o h av e a th erap eu t i c d i sco veryp ro jectcert i fi ed as el i g i b l e fo r a cred ito r g ran t . Th e IRS al s o rel eas edFo rm

8 94 2 , Ap p l i cat i o n fo r Cert i fi cat i o n o f Qu al i fi ed In v es t m en t s El i g i b le fo r Cred i t s an dGran ts Un d er t he Qu al i fy i n g Th erap eu t i c Di s co v ery

Pro jectPro gram , wh i ch al l o wedt ax p ay ers t o ap p l y fo r t h e cred i to r g ran t . Onth e Fo rm

8 9 42 , a t ax p ay er h adt o d es cri b e i t s th erap eu t ic d i s co v ery p ro ject an dl i s ti t s i n v es t m en t i n th e p ro jectfo r each y ear fo r wh i ch i twas cl ai m i n g th e cred i to r req u es t i n g a g ran t. Th e IRS (i n co n su l t at i o n wi th th e Dep art m en to f Heal th an dHu m an Serv ices ) wo u l drev i ew t h e ap p l i cat i o n an dd eci d e wh et h er t o cert ify the p ro j ect an d th e cl ai m ed i n v es t m en t s . No t i ce 2 0 1 0 -4 5 , s ec. 5 , 2 0 1 0 -2 3 I.R.B. at7 35 -7 3 7 . If th e QTDP was cert ifi ed , th e t ax p ay er wo ul db e al l o weda cred i to r g ran to f 5 0 % o f i t s qu al i fi edi n v es tm en t s . Sec. 4 8D(a) an d(b ). Becau s e

3 Th e t erm

“ Secret ary ” m ean s “ th e Secret ary o f t h e Treas u ry

o r h i s d el eg at e”, s ec. 7 7 01 (a)(1 1 )(B), an dthe t erm “ o r h i s d el eg at e” m ean s “ an y o ffi cer, em pl o y ee, o r ag en cy o f t h e Treas u ry Dep art m en tdu l y

au th ori zedb y

the Secret ary o f t h e Treas u ry di rect l y , o r i n d i rect l y b y o n e o r m o re red el eg at i o n s o f au th o ri ty , t o p erfo rm th e fu nct i o n m en t i o n edo r d es cri b ed i n th e co n t ex t”, s ec. 7 7 0 1 (a)(1 2 )(A)(i ).- 5
-

s ect i on 4 8 D was ad d edt o the Co d e i n 2 0 1 0 an d ap p l i edo nl y t o t ax y ears b eg in n i n g i n 2 0 0 9 an d2 0 1 0 , th e t ax p ay er wo u l d h av e g en eral l y kn own th e
am ou n t s o f i t s i nv es t m en t s m ad e i n 2 0 0 9 b u t wo u l dh av e h adt o es t im at e th e
am ou n t s o f i n v es tm en t s fo r 2 0 1 0 . If th e t ax p ay er’ s es t i m at e ex ceed edth e actu al i n v es t m en t s m ad e, th e g ran t at tri b u t ab l e t o thatex ces s am o u n th adt o b e recap tu red as t ax . No t i ce 2 0 1 0-4 5 , s ec. 8 .0 3(5 ), 2 0 1 0 -2 3 I.R.B. at7 3 9 (ci t i n g ACA s ec. 9 0 23 (e)(5 )(B)(i ), 1 2 4 St at . at 8 8 2 ). Pet i t i o ner t i m el y

s ub m i t t eda Fo rm 8 9 4 2 req u es t i n g cert i fi cat i on o f qu al i fi ed i n v es t m en t s fo r i t s two t ax y ears b eg i n n i ng i n 2 0 0 9 an d2 0 1 0 . Oni t s Fo rm 8 9 4 2 , wh ere t ax p ay ers are req u i redt o i n d i cat e t he en d in g d at es fo r t h e t ax y ears fo r wh i ch th ey

are s eek i n g cert ifi cat i o n , p et i t i o n er l i s tedth e d at es fo r i t s cal en d ar y ears en d i n g Decem

b er 3 1 , 2 0 0 9 an d2 0 10 . Pet i ti o n er al so l i s t edwh at i n v es t m en t s were m ad e i n co n n ect i o n wi th th e p ro jectdu ri n g 2 0 0 9 an des t i m at ed wh ati n v es t m en ts wo ul db e m ad e i n co n n ect io n wi th th e p ro jectfo r 2 0 1 0. Res p o n d en ts en tp et i t i o n er a Let t er 4 6 1 5 o n Oct ob er 2 9 , 2 01 0 , ap p ro v i n g p et i t i o n er’ s p ro

ject , cert i fy i n g $ 2 9 2 ,7 3 7 o f qu al i fi edi n v es tm en t s , an dap p ro v i n g a g ran to f $ 1 4 6 ,3 6 8
. 5 0 . Pet i ti o n er’ s cert i fi cat i o n l et t er s t at es : “ Fo r cal en d ar y ear 2 0 0 9 , a g ran t p aym en to f $ 1 0 , 8 6 8 .5 0 h as b een au th o ri zedt o y o u r Paym en t M an ag em en t Sy s t em

acco u n t o n Oct o b er 2 9 , 2 0 1 0. Th e rem ai n i n g al l ocat ed- 6
-

am ou n to f $ 1 3 5 ,5 0 0
. 0 0 wi ll b e au th o ri zed fo r p aym en t n o l at er th an3 0 d ay s aft er th e en do f y o ur 2 0 1 0 cal en d ar y ear en d i n g Decem b er 3 1, 2 0 1 0 .” Th e cert i fi cat i o n l et t er al s o n o ti fi edp et i t i o n er t h atthe am o u n t o f t h e g ran t m i g h tb e redu ced b ecau s e th e QTDP p ro g ram was o v ers ub s cri b ed
. Onth e s am e d ay

th e cert i fi cat i o n l et t er was i s s u ed , $ 1 0 , 8 6 8 .5 0 i n g ran t
m o ney at tri b u t ab l e t o cal en d ar y ear 2 0 09 was d ep o s it edi n p et i t i o n er’ s acco u n t . 4 Sev eral m o n th s l at er, o n J anu ary 2 8 , 2 0 1 1 , th e rem ai n i n g $ 1 3 5 ,5 0 0 i n g ran tm o n ey at tri b u t ab l e t o cal en d ar y ear 2 01 0 was d ep os i t edi n th e s am e acco un t . 5 Sh o rt l y aft er recei v i n g th e cert i fi cat i o n l et t er b u tb efo re recei v i n g th e g ran t
m o ney fo r 2 0 1 0 , p et i t io ner s ub m i t t eda Fo rm 1 1 2 8, Ap p l i cat i o n To Ad o pt , Ch an g e, o r Ret ai n a Tax Year, req u es t i ng a ch an ge fo r i t s 2 0 1 0 t ax y ear fro m a cal en d ar y ear t o a s h o rtt ax y ear en d i n g No v em ber 3 0 , 2 0 1 0
. 6 Pet it i on er’ s req u es t

4 Th i s rep res en t s 5 0% o f th e qu al i fi edi n v es tm en t s p et i t i o n er m ad e i n th e 2 0 0 9 cal en d ar y ear.

5 Th i s rep res en t s 5 0% o f th e qu al i fi edi n v es tm en t s th atp et i t i o ner es t i m at ed wo u l db e m ad e i n th e 2 0 1 0 cal en d ar y ear.

6 Attri al M r. Si l ver arg uedth atp et i t i o n er h adch an g edi t s t ax ab l e y ear fo r b u s i n es s reas o n s b ecau s e n o cl i n i cal tri al s o ccu rredi n Decem b er. Ho wev er, n o d o cu m en t ary

ev i d en ce was ad m i t t edth ats up po rt s M r. Si l v er’ s t es t i m o n y .- 7
-

was ap p ro v eds ev eral m o n th s l at er. 7 Becau s e o f t h e ch an g e i n t ax y ear, p et i t i o n er
n o w h ad th ree t ax y ears b eg i n n i n g i n ei th er 2 0 0 9 o r 2 0 1 0. 8 Pres um ab l y

i n an effo rt t o co n fo rm

i t s cert i fi cat i o n ap p l i cat i o n wi th th e
recen t l y ap p ro v edch an g e i n t ax y ears , p et i t i o n er s ub m i t t ed an ot h er Fo rm 8 9 4 2 d at edDecem

b er 1 4 , 2 01 1 , requ es t i n g cert i fi cat i o n fo r i ts FYE No v em b er 3 0 , 2 0 1 1. Th e reco rds h o ws thatthe IRS recei vedth e s eco n dFo rm 8 9 4 2 . Ho w ev er, t h e
reco rdd o es n o ts h o w th at th e es t i m at edi n ves t m en t s were cert i fi edo r t h atth e Fo rm 8 9 4 2 was o th erwi s e accep t edo r p ro ces s ed
. Pet i t i o ner fi l edretu rn s cl ai m i n g i th ad i n cu rredqu al i fi edi n v es t m en t s du ri n g th e 2 0 09 cal en d ar y ear, t h e s h o rtt ax y ear en d i n g No v em b er 3 0 , 2 0 1 0 , an di t s FYE
en d in g No v em

b er 3 0 , 2 01 1 . Becau s e p et i t i o n er cl ai m edi th adqu al i fi ed i n v es t m en t s ex ceed i n g actu al i n v es tm en t s m ad e du ri ng th es e th ree p eri o ds , p et i t i o n er recap tu red$ 73 ,9 60 o f t h e g ran t . 9 Ho wev er, t h e am o u n trecap tu redd i d

7 Al l o f t he fu n d s at tri bu t ab l e t o th e 2 0 1 0 cal en d ar y ear h ad al read y b een d ep os i t edi n p et it i o n er’ s b an kacco u n tb y th e t i m e p et it i on er’ s ap p l icat i o n t o ch an ge i ts t ax y ear was ap p ro v ed
.

8 Pet i t i o n er’ s t ax y ears b eg i n n i n g i n 2 0 0 9 o r 2 0 1 0 i n cl u ded : (1 ) t h e fu l l cal en d ar y ear b eg in n i n g J anu ary 1 , 2 0 0 9 , an den d in g Decem b er 3 1, 2 0 0 9 ; (2 ) t h e s h o rtt ax y ear b eg i n n i n g J an u ary 1 , 2 0 1 0 , an den d in g No vem b er 3 0 , 2 01 0 ; an d (3 ) t h e fi s cal y ear b eg i n ni n g Decem b er 1 , 2 0 1 0 , an den d in g No vem b er 3 0 , 2 0 1 1
. 9 Pet i t i o n er rep o rt edthe recap tu re o n i t s retu rn fo r i t s FYE No v em b er 3 0 , (co n ti n u ed ...)- 8
-

n o ti n cl u d e an y

g ran tfu n d s rel at edt o i n ves t m en t s m ad e du ri n g p et i t io n er’ s FYE No v em b er 3 0 , 2 0 1 1
. Res p o n d en ti s su edth e n o t i ce o f d efi ci en cy wh i ch d i s al l o wedthe QTDP g ran trel at edt o i n ves tm en t s m ad e aft er Decem b er 3 1 , 2 0 1 0 (i .e., res p on d en t d i s al lo wedp et it i o n er’ s cl ai m edg ran tfo r t h e p eri o d b et ween J an u ary 1 an d No v em b er 3 0 , 2 0 1 1 ), an d recap tu redth atam ou n t o f t h e g ran tas t ax . Th i s res u l ted i n a d efi ci en cy o f $ 4 1,0 3 2
. OPINION I. Qu al i fi ed In v es t m en t s As d i s cu s s edearl i er, s ect i o n 4 8 D al l o ws t ax p ay ers t o cl ai m a cred i t(o r recei v e a g ran ti n l i euo f a cred i t ) eq u al t o 5 0% o f qu al i fi edi n v es t m en t s t he t ax p ay er m ak es wi th res p ectt o a QTDP o f an el i gi b le t ax pay er. Th e p art ies ag ree th atat al l rel ev an tt im es p et i ti o n er was an el i g i b l e t ax p ay er an dth at p et it i on er’ s p ro ject was a QTDP. Wh ere t h e p art i es d i s ag ree i s wh eth er al l o f p et i t i o n er’ s cl ai m edi n v es t m en t s m ad e aft er t h e 2 0 10 cal en d ar y ear were “ qu al i fi ed i n v es t m en t s ” wi th i n t h e m ean i n g o f s ect i o n 4 8 D(b ). Th i s i s an i s s ue o f fi rs t i m p res s i o n .

9 (...co n t in u ed ) 2 0 1 1
.- 9
-

W e b eg i n b y

reco gn i zi n g th ats t atut es s h ou l db e i nt erp ret edas a wh o l e t o g i v e effect t o ev ery cl au se, s en t en ce, an d wo rdth erei n , s ee M ark etCo . v . Ho ffm an , 1 0 1 U.S. 1 1 2, 1 15 (1 8 7 9 ), an d the du ty o f a co u rti s t o ren d er t h atty p e
o f i n t erp ret at i o n wh en ev er p o s si b l e, Un i t ed St at es v . M en as ch e, 3 4 8 U.S. 5 2 8 , 5 3 8 -5 3 9 (1 9 5 5 ). Su ch an ap p ro ach i s a “ card i n al p ri n ci p le o f s tatu t o ry
co n st ru ct i o n ”. W i l l i am s v . Tay l o r, 5 2 9 U.S. 3 6 2 , 4 0 4 (2 0 00 ). Acco rd i n g l y , we ap p ly th e p l ai n m ean i n g o f t h e wo rd s s etfo rt h i n s ect i o n 4 8 D an dACA s ec. 9 0 2 3 , Un i ted St at es v . Am . Tru ck i n g As s ’ ns , In c., 3 1 0 U.S. 5 3 4, 5 4 3 (1 9 4 0), an dwe d o
s o m in d fu l o f t h e s t atu t es as a wh ol e. Th e rel ev an tp arag rap h s o f s ect i o n 4 8D(b ) p ro v id e: (1 ) In g en eral .--Fo r p u rp os es o f s ubs ect i o n (a), t h e qu al i fi ed i n v es t m en tfo r an y

t ax ab l e y ear i s th e ag g reg at e am o u n to f t h e co st s p ai d o r i n cu rred i n s u ch t ax ab l e y ear fo r ex p en ses n eces s ary fo r an d d i rect l y rel at edt o th e co n du cto f a qu al ify i n g t h erap eu t i c d is co v ery p ro ject
. * * * * * * * (5 ) Ap p l i cat i o n o f s ub s ect i o n .--An i n v es tm en ts h al l b e co n s i d ereda qu al i fi ed i n v es t m en tu n der t hi s s ubs ect i o n o n l y i f s u ch i n v es t m en ti s m ad e i n a t ax ab l e y ear b eg i n n in g i n 2 0 0 9 o r 2 0 1 0
. ACA s ec. 9 0 23 (e)(4 ), 1 2 4 St at . at8 8 2 , ad d s th at“ th e t erm ‘ qu al i fi ed i n v es t m en t ’
m ean s a qu al i fi edi nv es t m en tthati s cert i fi ed u n d er s ect i o n 4 8 D (d )”.- 1 0 -

Th e p art i es d i s ag ree o ver wh et h er p et it io n er’ s i nv es t m en t s m ad e i n 2 0 1 1 were q u al i fi edi n v es t m en t s . Pet i t io n er’ s arg u m en tfo cu ses h eav i l y o n p arag rap h (5 ), s ee s upra p . 9 , wh i ch p ro v i des th atan i n ves t m en ti s qu al ifi eds o l o n g as i ti s m ad e “ i n a t ax ab l e y ear b eg i n n i ng i n 2 0 0 9 o r 2 0 1 0 .” Pet i t io n er, t ak i n g a p l ai n m ean i n g ap pro ach , b el i ev es th atb y ch an gi n g i t s t ax y ears s o th atthree t ax y ears b eg i n i n 2 00 9 an d2 0 10 , i ts h o u l db e al l o wedt o m ak e qu al ifi edi n ves t m en t s
o v er t h e t h ree y ears . Res po n d en tco u n t ers thatwh en s ect i o n 4 8 D i s read as a wh o l e, i ts h o u l db e cl ear t h at Co n g res s i n t en d edfo r t ax p ay ers t o b e ab le t o m ak e qu al i fi edi n v es t m en t s o n l y o ver a m ax i m

u m o f t wo y ears (i .e., 2 4 m o n th s ). Res po n d en tfu rth er arg u es th atp et i t i o n er can m ak e qu al i fi edi n v es t m en t s o n l y i n th e t wo cal en d ar y ears en d i ng i n 2 0 0 9 an d2 0 1 0 b ecau s e t h o s e were t h e t ax y ears fo r wh i ch p et i ti o n er’ s p ro jecth adrecei vedcert ifi cat i o n. W e n eedn o tan dwi l l n o tad dres s p et i t i o n er’ s arg u m en t i n res ol v i n g th e i n s t an tcas e. W e fo cu s o n res p o n den t ’ s al t ern at i v e arg u m en t an d reco g n i ze t h at
ev en if Co n g res s d i di nt en dt o al l o w t ax p ay ers l i k e p et i t i o n er t o m ak e qu al i fi ed i n v es t m en t s o v er t h ree t ax y ears (an i s s u e we d ecl i ne t o d eci d e), p et i t i o n er d i dn o t actu al l y recei v e cert i fi cat i o n t o d o s o .- 1 1 -

Sect io n 4 8 D(d )(2 )(A) g i v es th e Secret ary the au th o ri ty

t o req u i re t ax p ay ers t o p ro v i d e s p eci fi c i n fo rm at i o n i n an ap p l icat i o n fo r cert i fi cat i o n. 1 0 Th e Secret ary
ex erci s edth is au th o ri ty

wh enh e an dth e IRS jo i nt l y i s s u edNo t i ce 2 0 1 0 -4 5 . See No t ice 2 01 0 -4 5, s ec. 3 , 2 01 0 -2 3 I.R.B. at7 3 5 . No t ice 2 01 0 -4 5 , s ec. 6 .0 2, 2 0 1 0 -2 3 I.R.B. at7 37 , s t at es th at ap p li cat i o n s fo r cert i fi cat i o n m u stb e m ad e o n Fo rm

8 9 4 2
. Onth atfo rm , t ax p ay ers are req u i redt o s p eci fy th e t ax ab l e y ears b eg i nn i n g i n 2 0 0 9
an d/o r 2 0 1 0 fo r wh i ch th ey are s eek i n g p ro jectcert i fi cat io n an dare req u es t i n g th e cred i to r g ran t . On ly

th e 2 0 0 9 an d2 0 1 0 cal en d ar y ears were s p eci fi edo n p et i t i o n er’ s Fo rm

8 9 42 . Fu rt herm ore, t h e cert i fi cat i o n l et t er res u l t i n g fro m p et i t i o n er’ s ap pl i cat i on au th o ri zedg ran ts o n l y fo r t h e t wo cal en d ar y ears . Co n s equ en t l y , th o s e were t he o n l y p eri o d s fo r wh i ch p et i t io n er was cert i fi edt o i n cu r qu al i fi ed i n v es t m en ts fo r QTDP g ran t p u rp o ses . Wh i l e p et i t i o n er l at er fi l edan am en d edFo rm 8 9 4 2 , l i k el y

i n an effo rtt o cert ify i nv es t m en t s m ad e i n th e fi s cal y ear ex t en d i n g i n t o 2 0 1 1 , p et i t i o n er was n o t i s su eda s eco n d cert i fi cat i o n l et t er. Th erefo re, p et i t i o n er can no trep o rtth ati tm ad e qu al i fi edi n v es t m en t s aft er Decem b er 3 1 , 2 0 1 0, b ecau s e cert i fi cat i o n t o d o s o was

1 0 Sec. 4 8 D(d )(2 )(A) p ro v i d es : “ Each ap p l i can tfo r cert i fi cat i o n u n d er t h i s p arag rap h s h al l s ub m i tan ap p li cat i o n co n t ai n in g s u ch i n fo rm at i o n as th e Secret ary m ay req u i re du ri n g the p eri o db eg i n n i n g o n t h e d at e t h e Secret ary es t ab l i s h es th e p ro g ram ”.- 1 2 -

n o trecei v ed
. See ACA s ec. 9 0 2 3 (e)(4 ). Pet i t i o n er was en t i t l ed t o m ak e qu al i fi ed i n v es t m en t s o n l y

i n th e 2 0 0 9 an d2 0 1 0 cal en d ar y ears . To th e ex ten t p et i t i o n er’ s qu al i fi edi n v es t m en t s at tri b u tab l e t o th o s e t wo y ears ex ceed actu al i n v es t m en t s
m ad e, t h e g ran tfu n d s p et it i o n er recei vedat tri bu t ab le t o t h o se ex ces s qu al i fi ed i n v es t m en t s m

u s tb e recap tu redas t ax . See No t i ce 2 0 1 0 -4 5, s ec. 8 .0 3 (5 ) (ci t i n g ACA s ec. 9 0 23 (e)(5 )(B)(i )). II. Recap tu re Nex t , we m

us t d et erm i n e t h e y ear fo r wh i ch p et i t i on er m u s t recap tu re t h e
ex ces s g ran t . Pet i t i o n er arg u es th atrecap tu re s h o u l d o ccu r fo r i t s s h o rtt ax y ear
en d in g No v em

b er 3 0 , 2 01 0
. 1 1 W e d i s ag ree. Fo r t h e reas on s s tat edb el ow, we fi n d th atp et i t i o n er m

u s trecap tu re t h e ex ces s g ran tfo r i ts FYE No v em b er 3 0 , 2 0 1 1
. ACA s ec. 9 0 23 (e)(5 )(B)(i ) p ro v i d es : Recap tu re o f ex ces s i v e g ran tam o u nt s .--If t he am o u n t o f a g ran t m ad e u n d er t h i s s ub s ect i on ex ceed s th e am o u n tal l o wab l e as a g ran tu nd er th i s s ub sect i o n , s uch ex ces s s h al l b e recap tu redu nd er s ub p arag rap h (A) as i f t h e i n v es t m en t t o wh i ch s u ch ex ces s p o rt i o n o f t h e g ran t rel at es h adceas edt o b e a qu al i fi ed i n v es t m en ti m m ed i at el y aft er s u ch g ran t was m ad e. [Em

p h as i s ad d ed .] W e read th i s p ro v i s i o n as req u i ri n g recap tu re o f a d i s al l o wedp o rt i o n o f a g ran t i m m ed i at el y aft er t h e rel ev an t g ran twas “ m ad e”. Pet i ti o n er arg u es th ata s i n g l e

1 1 As s es s m en ti n th aty ear wo u ldb e b arredb y th e p eri o do f l im it at i o n s .- 1 3 -

g ran tfo r al l t ax y ears was “ m ad e” o n Oct ob er 2 9 , 2 0 1 0 , wh en p et it i o n er recei v ed th e cert i fi cat i o n l et ter an dth atrecap tu re s h o u l d h av e t h erefo re o ccu rred i m m ed i at el y aft er t h at d at e. W e d i s ag ree. W e b el i ev e th atg ran t s were “ m ad e” o n
s ep arat e d at es : Oct o b er 2 9 , 2 0 1 0 , fo r t h e t ax y ear b eg i n ni n g i n 2 0 09 an d J an u ary 2 8 , 2 0 1 1 , fo r t he t ax y ear b eg i nn i n g i n 2 0 1 0
. In d et erm in i n g th atth e g ran t s were m ad e o n s ep arat e d at es , we fo cu s p ri m ari l y o n th e fact th at th e g ran tfu n d s at tri b u t ab l e t o each y ear were p ai d o n
s ep arat e d at es . Th e t erm s o f t he QTDP p ro g ram p ro v i d e t h at g ran ts fo r t ax y ears b eg in n i n g i n 2 0 0 9 wi l l g en eral l y b e p ai dn o l at er t han Oct o ber 2 9 , 2 0 10 , an dth at g ran t s fo r t ax y ears b eg i n n in g i n 2 0 1 0 wi l l g en eral l y b e p ai d wi th i n 3 0 d ay s o f t h e l as td ay o f t h e 2 0 1 0 t ax ab l e y ear. See No ti ce 2 0 1 0 -4 5 , s ec. 8 .0 2 (6 ) an d(7 ), 2 0 1 0
- 2 3 I.R.B. at7 3 8. W e b el i ev e t hatth e p aym en t s fo r each t ax y ear are s u ffi ci en t l y d i s t i n ctt o warran ta fi n d i ng th atth e u n d erl y i ng g ran t s are s ep arat el y “ m ad e” i n each y ear wh en p ai d
. In arri v i n g atthi s co n cl u s i o n , we o b s erv e th atth e cert i fi cat i o n l et ter ap p ro v i n g th e g ran t d i d n o tres u l ti n an u n res tri ct edri g htt o a fi x edg ran tam o u n t . In fact , th e cert i fi cat io n l et t er n o t i fi edp et i t i o n er t hatth e am o u n to f t h e g ran taward
was s ub jectt o ch an g e. Its t at es : “ Si n ce t h i s p ro g ram was o v ers ub s cri b ed , y o u r g ran tm ay b e l es s than 5 0 % o f t h e am o u n t o f qu al ifi edi n v es t m en ts h o wno n y o u r- 1 4 -

Fo rm 8 9 4 2 .” Un d er t h es e ci rcu m s t an ces , we b el iev e t hata s in gl e g ran tfo r al l rel ev an t y ears was no t“ m ad e” wi th th e i s s uan ce o f th e cert i fi cat i o n l et t er as p et i t i o n er arg u es . Rat h er, t h e g ran tfo r each y ear was m ad e wh enp ai db ecau s e i t
was n otu n ti l th e g ran twas fi n al l y p ai d th atth e Secret ary

rel i n qu i s h edd o m i n i o n
an d co n tro l o f a fi x edam ou n to f g ran tfu n d s t o p et i t i o n er. W e fi n dfu rth er s up p o rtfo r o u r h o l d in g b y l o o k in g atth e au th o ri ty

g u i d i n g th e g ran t m ak in g p ro ces s. No t i ce 2 0 1 0-4 5 , s ec. 8 .0 2 (1 ), al l o w edt ax p ay ers t o
s ub m i ta s i n g l e g ran tap p l i cat i o n th atwo u l d co ver t ax y ears b eg i n n in g i n 2 0 0 9 an d 2 0 1 0 . See al s o i d . s ec. 5 .0 2 (3 ), 2 0 1 0 -2 3 I.R.B. at 7 36 . Th e ap p l i cat i on was req u i redt o b e s ub m i t t edb y J ul y 2 1 , 2 0 1 0 ; co n s equ en tl y , ap p l i cat i o n s were g en eral l y s ub m i tt edb efo re t h e en do f m o s t t ax p ay ers ’ 2 0 1 0 t ax y ears . See i d . s ec. 5 .0 2(2 ). Aft er an ap pl i cat i on was s ub m it t ed , th e Secret ary was req u i red t o ap p ro v e o r d en y

th e ap p l i cat i o n b y

Oct o b er 3 1 , 2 0 1 0
. See s ec. 4 8 D(d )(2 )(B); No t ice 2 01 0 -4 5 s ec. 5 .0 2(3 ). 1 2 Wh i l e m o s t t ax pay ers ’ ap p l i cat i on s were g en eral l y s ub m i t t edb efo re t h e t ax p ay ers ’ 2 0 1 0 y earen d , No t i ce 2 0 1 0 -4 5 , s up ra, s t at edth atth e g ran tap pl i cat i o n s

1 2 Th e ap p li cat i o n p ro ces s was u n d ers t an d ab l y craft edt o g iv e t h e Secret ary th e ab i l i ty

t o rev i ew m o stap p l i cat i o n s s i m u l t an eo us l y

b ecau s e t h ere was a $ 1 b i l l i on l i m ito f fu n d s fo r t h e en t i re p ro g ram th atn eed ed t o b e effi ci en t l y al l o cat edam o n g al l ap p l i can t s . See s ec. 4 8 D(d )(1 )(B); No t i ce 2 0 1 0 -4 5 s ec. 5 .0 2(1 ), 2 0 1 0-2 3 I.R.B. 7 3 4, 7 36
.- 1 5 -

as th ey rel at edt o 2 0 1 0 d i d n o t b eco m e effect i v e u n ti l aft er th e 2 01 0 y earen d . See No t ice 2 01 0 -4 5, s ec. 8 .0 2 (2 ) (s t at i n g th atan el ect i o n t o ap p l y fo r a g ran to n Fo rm 8 9 4 2 s ub m i t tedb efo re t he 2 0 1 0 t ax y earen dwas n o tco n s i d eredeffect i v e u n t i l

“ th e d ay aft er t h e l as td ay

o f t h e t ax p ay er’ s 2 01 0 t ax ab l e y ear”). 1 3 Th us , p et i t i o n er’ s g ran t ap p l icat i o n fo r i t s 2 0 1 0 cal en d ar y ear, al th o u gh ap p ro v edo n Oct o b er 2 9 , 2 0 1 0 , d i d n o t b eco m e effect i v e u n t i l J an u ary 1 , 2 0 1 1 (t h e d ay

aft er t h e l as td ay o f p et i t io ner’ s 2 0 1 0 t ax ab l e y ear). Un d er t h o s e ci rcu m s t an ces , we
co n cl u d e th atth e g ran tap pl i cat i o n fo r t h aty ear was effect i v e o n J an uary1 , 2 0 1 1 , an d th atth e g ran tfo r t h e 2 0 1 0 cal en d ar y ear was actu al l y “ m ad e” wh en p ai do n J an u ary 2 8 , 2 0 1 1. No w th atwe h av e d et erm i n edth atth e g ran t at tri b u tab l e t o the 2 0 1 0 cal en d ar y ear was m ad e i n Jan uary2 0 1 1, we m u s tretu rn t o th e recap ture p ro v i s i o n i n ACA s ec. 9 0 2 3 (e)(5 )(B)(i ) an dd et erm i n e wh at am o un tm u s t b e recap tu red . A t ax p ay er i s al l o weda g ran t i n an am o un t equ al t o 5 0 % o f t he q u al i fi ed i n v es t m en t s
m ad e du ri n g each t ax y ear. Sec. 4 8 D (a). To th e ex t en t p et i t i o n er recei v edg ran t fu n d s rel at edt o qu al ifi edi n v es t m en t s p et i t i o n er d i dn o tm ak e, p et i t i on er m u s t

1 3 Th i s co n fo rm s wi th th e Pat i en tPro t ect i o n an d Affo rd ab l e Care Act , Pub. L. No . 1 1 1 -1 4 8, s ec. 9 0 23 (e)(2 )(B), 1 2 4 St at . at 8 8 1 , wh i ch p ro v i des th ata t ax p ay er ap p l y i n g fo r a g ran tfo r 2 0 1 0 m u s td o s o aft er t h e l as td ay fo r t h e 2 0 1 0 t ax y ear b u tn o tl at er t h an th e du e d at e fo r fi l i n g a retu rn fo r t h aty ear.- 1 6 -

recap tu re t h o s e g ran tfu n d s as t ax . See ACA s ec. 9 0 23 (e)(5 )(A) an d(B)(i ), 1 2 4 St at . at 8 82 ; No t i ce 2 0 1 0 -4 5 , s ec. 8 .0 3(4 ) an d (5 ), 2 0 1 0-2 3 I.R.B. at 7 3 9
. Pet i t i o ner recei vedcert ifi cat i o n t o m ak e $ 2 7 1 ,0 00 i n qu al i fi edi n v es t m en ts du ri n g th e 2 0 1 0 cal en d ar y ear an drecei v ed$ 13 5 , 5 0 0 i n g ran tfu n ds . Becau s e p et i t i o n er act u al l y

m ad e o n l y

$ 4 1 ,0 1 6 i n qu al i fi edi n v es t m en t s duri n g th e 2 0 1 0 cal en d ar y ear, i t was en ti t ledt o a g ran to f o n ly $ 2 0 , 5 0 8 . Th e ex ces s g ran twh i ch
m u stb e recap turedi s $ 1 1 4 ,9 92 ($ 1 3 5 ,5 00 g ran t recei v edfo r 2 0 10 l es s $ 20 ,5 0 8 al l o wab le as a g ran t). Pet i t io n er h as al read y recap tu red$ 73 ,9 6 0 o f th e g ran t . Th erefo re, p et it i o n er m

us trecap tu re t he rem ai n i n g $ 4 1,0 3 2
. Th e p ro p er y ear fo r recap tu re i s FYE No v em b er 3 0 , 2 0 1 1 , b ecau s e i t i n cl u d es th e d at e wh en th e g ran tfo r t h e 2 0 1 0 cal en d ar y ear was m ad e. See ACA
s ec. 9 0 23 (e)(5 )(B)(i ) (req ui ri n g recap tu re o f d i s al l o wedp o rt i o n o f g ran t i m m ed i at el y aft er rel ev an t g ran twas m ad e). In reach i n g o u r h o ld in g , we h av e co ns i d ered al l arg u m en t s m ad e, an dt o t h e
ex t en tn o tm en t i o n ed , we co n s i d er t h em i rrel ev an t , m o o t , o r wi th o u t m eri t . To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t ered
u n der Ru l e 1 5 5
.