766 F.3d 127 (1st Cir. 2014), 12-1757, Jardin De Las Catalinas Ltd. P'ship v. Joyner

Docket Nº:12-1757
Citation:766 F.3d 127
Opinion Judge:SELYA, Circuit Judge.
Party Name:JARD
Attorney:Ignacio Fern
Judge Panel:Before Thompson, Baldock[*] and Selya, Circuit Judges.
Case Date:September 12, 2014
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

Plaintiffs, two limited partnerships, each owned an apartment building in Puerto Rico that qualified for low-income housing tax credits. Defendant was the agency responsible for allocating the credits. Plaintiffs and Defendant entered into agreements setting the applicable percentage for their covered projects at 8.12 percent. Thereafter, Congress passed legislation providing that the applicable... (see full summary)


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766 F.3d 127 (1st Cir. 2014)




No. 12-1757

United States Court of Appeals, First Circuit

September 12, 2014

Page 128

[Copyrighted Material Omitted]

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APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO. Hon. Francisco A. Besosa, U.S. District Judge. Hon. Camille Vélez-Rivé, U.S. Magistrate Judge.


Ignacio Ferná ndez de Lahongrais, with whom Bufete Fernández & Alcaraz, C.S.P. was on brief, for appellants.

Tomá s A. Román-Santos, with whom José L. Ramí rez-Coll and Fiddler, González & Rodríguez, PSC were on brief, for appellee.

Before Thompson, Baldock[*] and Selya, Circuit Judges.


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SELYA, Circuit Judge.

This is what might be called a " pick your poison" case. In the proceedings below, the district court identified three justifications supporting its grant of judgment on the pleadings: waiver, untimeliness, and the absence of a constitutionally protected property interest in the tax credits sought by the plaintiffs. Although all of these avenues appear promising, principles of judicial economy and restraint counsel that we write no more broadly than is necessary to resolve this appeal.

When we conduct the necessary triage, what jumps off the page is the tardiness of the plaintiffs' action. We therefore train our sights on this facet of the district court's decision. Concluding, as we do, that the plaintiffs' action was brought outside the applicable limitations period and that equitable tolling does not rescue it, we affirm.


We start with a brief exposition of the relevant statutory scheme. Section 42 of the Internal Revenue Code provides for tax credits designed to encourage investment in low-income housing. See I.R.C. § 42, 26 U.S.C. § 42. The statute requires each state agency to develop a qualified allocation plan, see id. § 42(m)(1)(B), and gives such agencies broad discretion to determine whether and to whom the credits will be allocated, see Barrington Cove Ltd. P'ship v. R.I. Hous. & Mortg. Fin. Corp., 246 F.3d 1, 5-6 (1st Cir. 2001). The allocation of such credits to particular taxpayers occurs through the issuance, annually, of Internal Revenue Service (IRS) 8609 forms. See Treas. Reg. § 1.42-1(h).

The amount of the annual credit is equal to the " applicable percentage" of the " qualified basis" of a covered project. See I.R.C. § 42(a). The qualified basis is determined with reference to (among other things) the cost of development and the ratio of low-income units to other units in the project. See id. § 42(c)(1), (d). For projects like those at issue here, the applicable percentage is a rate calculated to yield, over a tenyear period, a credit of 70% of the present value of the qualified basis. See id. § 42(b)(1)(B)(i). For any given project, this percentage typically is locked in either upon the execution of a binding agreement between the state agency and the taxpayer or when the building is placed into service. See id. § 42(b)(1).

Even though such allocation agreements are binding, the ultimate award of credits is subject to the state agency's assessment of financial feasibility. See Treas. Reg. § 1.42-8(a)(5). The agency may reduce the previously agreed credit amount if, after considering certain factors, it determines that the project would be financially viable without the full subsidy. See id.; I.R.C. § 42(m)(2).

Against this backdrop, we turn to the case at hand. Because this case was decided on a motion for judgment on the pleadings, we assume the accuracy of the well-pleaded facts and supplement those facts by reference to documents incorporated in the pleadings and matters susceptible to judicial notice. See Greenpack of P.R., Inc. v. Am. President Lines, 684 F.3d 20, 25-26 (1st Cir. 2012); see also

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Cruz v. Melecio, 204 F.3d 14, 21 (1st Cir. 2000).

The plaintiffs, Jardín delas Catalinas Limited Partnership and Jardí n de Santa Maria Limited Partnership, each own an apartment building in Puerto Rico that qualifies (under section 42) for low-income housing tax credits. The defendant is the Executive Director of the Puerto Rico Housing Finance Authority (the PRHFA), which is the agency responsible for allocating these credits in Puerto Rico.1

The events giving rise to this appeal began when the plaintiffs and the PRHFA entered into so-called carryover allocation agreements (the Agreements) setting the applicable percentage for their covered projects at 8.12%. Based on this rate and estimates of each project's qualified basis, the Agreements provided each plaintiff with a projected tax-credit allocation of more than $1,000,000 annually.

Congress thereafter passed the Housing and Economic Recovery Act of 2008 (HERA), Pub. L. No. 110-289, 122 Stat. 2654. Among its constellation of provisions, HERA amended section 42 to provide temporarily that the applicable percentage for developments such as those owned by the plaintiffs " shall not be less than 9 [%]." Id. § 3002(a)(1), 122 Stat. at 2879 (codified at I.R.C. § 42(b)(2)). The new 9% floor applied even to taxpayers, like the plaintiffs, who previously had agreed to lower applicable percentages. See I.R.S. Notice 2008-106, 2008-49 I.R.B. 1239 (Dec. 8, 2008).

The plaintiffs allege that, under the HERA amendment, they were entitled to additional credits aggregating over $278,000 annually for their two projects combined.2 The plaintiffs further aver that, on April 15, 2010, the PRHFA delivered to them over 300 IRS 8609 forms, each corresponding to a particular apartment unit within one of the covered projects. On each form, line 1b specified the dollar...

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