9100 relief to make a late election out of bonus depreciation after the preparer forgot to attach the statement

Plain-English summary

A partnership (an LLC filing Form 1065) decided to elect out of bonus depreciation, the extra first-year write-off that section 168(k) otherwise allows, for all classes of qualified property it placed in service during a tax year. Its accounting firm prepared the return consistent with that choice and timely filed it, but the preparer forgot to attach the required election statement, so the election was never formally made. When the firm caught the mistake, the taxpayer asked the IRS for an extension of time under the section 301.9100 regulations, which let the IRS forgive a missed regulatory election when the taxpayer acted reasonably and in good faith and relief will not prejudice the government. The IRS found those standards met and granted 60 days from the date of the letter to make the election by filing an amended return with the required statement. The IRS expressed no opinion on whether any particular property actually qualifies or is classified correctly. This is a routine cure for a bonus-depreciation election that was intended and reflected on the return but not properly attached.

Ruling snapshot

• Question: Should the IRS grant a late-election extension under § 301.9100-3 to make the § 168(k)(7) election out of bonus depreciation?
• Outcome: Approved (60 days to make the election by filing an amended return with the statement)
• Key authorities: IRC § 168(k)(1), (k)(7); Treas. Reg. § 1.168(k)-2(f)(1); Treas. Reg. §§ 301.9100-1 and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                  Department of the Treasury
                                                           Washington, DC 20224

 Number: 202322002                                         Third Party Communication: None
 Release Date: 6/2/2023                                    Date of Communication: Not Applicable
 Index Number: 9100.04-00
                                                           Person To Contact:
 ---------------                                           ------------------, ID No. -----------------
 -------------------------                                 Telephone Number:
 -------------------------------                           --------------------
 -------------------------------                           Refer Reply To:
 --------------------------------                          CC:ITA:B07
                                                           PLR-100874-23
                                                           Date:
                                                           March 06, 2023

Legend

             Taxpayer     = -----------------------------------------------------------------------------
                            -----------------------
             Firm         = --------------------------------------
             Taxable Year = -----------------------------------------------------
             Date1        = --------------------------
             Date2        = ---------------------
             Date3        = -------------

Dear --------------:

       This letter responds to a letter dated December 21, 2022, submitted by
Taxpayer. In that letter, Taxpayer requests the consent of the Commissioner of Internal
Revenue (Commissioner) to grant an extension of time pursuant to §§ 301.9100-1 and
301.9100-3 of the Procedure and Administration Regulations to make the election not to
deduct the additional first year depreciation under § 168(k) of the Internal Revenue
Code for all classes of qualified property placed in service by Taxpayer during the
Taxable Year. This letter ruling is being issued electronically as permissible under
section 7.02(5) of Rev. Proc. 2022-1, 2022-1 I.R.B. 1, 35.

       All references in this letter ruling to § 168(k) refer to § 168(k) as in effect on the
day before the date of the enactment of the Taxpayer Certainty and Disaster Tax Relief
Act of 2020, enacted as Division EE of the Consolidated Appropriations Act, 2021, Pub.
L. No. 116-260, 134 Stat. 1182 (December 27, 2020).
PLR-100874-23                                 2

                                          FACTS

       Taxpayer represents that the facts are as follows:

        Taxpayer, a limited liability company, files a Form 1065, U.S. Return of
Partnership Income, on a calendar-year basis. Taxpayer’s overall method of accounting
is the cash receipts and disbursements method.

      Taxpayer engaged Firm to prepare and file its federal income tax return for the
Taxable Year. On Date1, Taxpayer’s owners and Firm’s team met to discuss various
accounting and tax matters. One item discussed was Taxpayer’s intent to elect not to
deduct additional first year depreciation for all classes of property that are qualified
property and that were placed in service by Taxpayer during the Taxable Year. Firm
personnel documented Taxpayer’s intent to make this election.

      Between Date1 and Date2, Firm prepared Taxpayer’s return, including Form
1065 and Form 4562, Depreciation and Amortization (Including Information on Listed
Property), consistent with an election not to claim the additional first year depreciation
deduction under § 168(k) for all classes of property placed in service in the Taxable
Year.

      On Date2, Taxpayer’s return was timely filed. However, Firm personnel
inadvertently failed to attach the required election statement to the Form 1065.

       In Date3, Firm discovered its error. Taxpayer then promptly filed this request to
obtain an extension of time pursuant to §§ 301.9100-1 and 301.9100-3 to make the
election not to deduct additional first year depreciation.

                                  RULING REQUESTED

      Accordingly, Taxpayer requests an extension of time pursuant §§ 301.9100-1
and 301.9100-3 to make the election under § 168(k)(7) not to deduct the additional first
year depreciation for all classes of qualified property that were placed in service by
Taxpayer during the Taxable Year.

                                           LAW

       Sections 168(k)(1) allows, in the taxable year that qualified property is placed in
service, a 100-percent additional first year depreciation deduction for qualified property
acquired by the taxpayer after September 27, 2017, and placed in service by the
taxpayer after September 27, 2017, and before January 1, 2023 (or before January 1,
2024 for qualified property described in § 168(k)(2)(B) or (C)).
PLR-100874-23                                   3

      Section 168(k)(7) allows a taxpayer to elect out of additional first year
depreciation for any class of property placed in service during the taxable year.

      For property acquired after September 27, 2017, § 1.168(k)-2(f)(1) of the Income
Tax Regulations provides the rules for making the § 168(k)(7) election. Pursuant to
§ 1.168(k)-2(f)(1)(i), the § 168(k)(7) election applies to all qualified property that is in the
same class of property and placed in service in the same taxable year.

      Section 1.168(k)-2(f)(1)(ii) defines the term “class of property” as meaning,
among other things, each class of property described in § 168(e) (for example, 5-year
property).

      Section 1.168(k)-2(f)(1)(iii) provides the time and manner of making the
§ 168(k)(7) election.

       Section 1.168(k)-2(f)(1)(iii)(A) provides that the election not to deduct the
additional first year depreciation must be made by the due date, including extensions, of
the Federal tax return for the taxable year in which the qualified property is placed in
service by the taxpayer.

       Section 1.168(k)-2(f)(1)(iii)(B) provides that the election not to deduct the
additional first year depreciation must be made in the manner prescribed on Form 4562,
“Depreciation and Amortization,” and its instructions. The instructions to Form 4562 for
the Taxable Year, provide that the election not to deduct the additional first year
depreciation is made by attaching a statement to the taxpayer's timely-filed tax return
indicating that the taxpayer is electing not to deduct the additional first year depreciation
and the class of property for which the taxpayer is making the election.

       Under § 301.9100-1(a), the Commissioner has discretion to grant a reasonable
extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make a
regulatory election.

       Section 301.9100-1(b) provides that the term “regulatory election” includes an
election whose due date is prescribed by a regulation published in the Federal Register.

       Sections 301.9100-1 through 301.9100-3 provide the standards that the
Commissioner will use to determine whether to grant an extension of time to make an
election. Section 301.9100-2 provides automatic extensions of time for making certain
elections. Section 301.9100-3 provides extensions of time for making elections that do
not meet the requirements of § 301.9100-2.

        Section 301.9100-3(a) provides that requests for relief under § 301.9100-3 will be
granted when the taxpayer provides evidence to establish to the satisfaction of the
Commissioner that the taxpayer acted reasonably and in good faith and that granting
relief will not prejudice the interests of the Government.
PLR-100874-23                                 4

                                      CONCLUSION

        Based solely on the facts and representations submitted, we conclude that the
requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly,
Taxpayer is granted an extension of 60 calendar days from the date of this letter ruling
to make the election under § 168(k)(7) not to deduct the additional first year
depreciation deduction under § 168(k) for all classes of property that are qualified
property and that were placed in service by Taxpayer in the Taxable Year. This election
must be made by Taxpayer filing an amended federal income tax return for the Taxable
Year, with a statement indicating that Taxpayer is electing not to deduct the additional
first year depreciation for all classes of property that are qualified property placed in
service during that taxable year.

       Except as specifically set forth above, no opinion is expressed or implied
concerning the federal income tax consequences of the facts described above under
any other provisions of the Code (including other subsections of § 168). Specifically, no
opinion is expressed or implied on whether: (1) any item of depreciable property placed
in service by Taxpayer in the Taxable Year, is eligible for the additional first year
depreciation deduction under § 168(k) or (2) Taxpayer’s classification of any item of
depreciable property under § 168(e) or Rev. Proc. 87-56, 1987-2 C.B. 674, is correct.

       The ruling contained in this letter is based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the request for rulings, it is subject to verification on examination.

      This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of
the Code provides that it may not be used or cited as precedent.

         In accordance with the Power of Attorney on file with this office, a copy of this
letter is being sent to your authorized representatives. We are also sending a copy of
this letter to the appropriate operating division director.

      A copy of this letter must be attached to any income tax return to which it is
relevant. Alternatively, taxpayers filing their returns electronically may satisfy this
PLR-100874-23                               5

requirement by attaching a statement to their return that provides the date and control
number of the letter ruling.

                                         Sincerely,

                                         Charles J. Magee

                                         CHARLES J. MAGEE
                                         Senior Counsel, Branch 7
                                         Office of Associate Chief Counsel
                                         (Income Tax and Accounting)

Enclosures (2):

copy of this letter
copy for section 6110 purposes

cc: