PLR 200149005: Taxpayer may revoke alternative research credit election

Plain-English summary

A taxpayer had elected to calculate its research credit under the alternative incremental rules of § 41(c)(4). The IRS gave consent to revoke that election for a later tax year. The taxpayer was directed to use the general research credit rule in § 41(a) for that year and succeeding years unless it made a new alternative election. The IRS also directed the taxpayer to attach the ruling to its return and file within 60 days of the letter. The ruling expressed no opinion on whether the taxpayer's expenditures were qualified research expenses.

Ruling snapshot

• Question: Could the taxpayer revoke its alternative incremental research credit election?
• Outcome: Approved for the specified tax year and succeeding years, subject to any new election.
• Key authorities: IRC §§ 41(a), 41(c)(4)(B).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200149005
Washington, DC 20224
Release Date: 12/7/2001
Index Number: 41.01-00 Person to Contact:

Telephone Number:
(202) 622-3120
Refer Reply To:
CC:P&SI:Br.7-PLR-117483-01
Date:
August 6, 2001

Legend

Taxpayer:

x:
y:
z:

Dear

We received a letter from your authorized representative requesting permission for Taxpayer to revoke its election to compute its credit for increasing research activities (research credit) under the alternative incremental research credit rules of § 41(c)(4). This letter is in response to that request.

For the taxable year ending on x, Taxpayer elected to determine its research credit under the alternative incremental research credit rules of § 41(c)(4). On y, Taxpayer submitted a request to revoke its election to determine its research credit under the alternative incremental research credit rules of § 41(c)(4) for qualified research expenses paid or incurred during the taxable year ending on z.

For taxable years beginning after June 30, 1996, taxpayers may elect to determine their research credit under the alternative incremental research credit rules of § 41(c)(4).

Section 41(c)(4)(B) provides that any election under § 41(c)(4)(A) shall apply for the taxable year in which made and all succeeding taxable years unless revoked with the consent of the Secretary.

Based on the facts submitted and representations made, we grant permission for Taxpayer to revoke its election to determine its research credit under the alternative incremental research credit rules of § 41(c)(4) for qualified research expenses paid or incurred during the taxable year ending on z. Taxpayer should compute its research 2

credit for the taxable year ending on z and all succeeding taxable years using the general rule of § 41(a) provided that Taxpayer does not make a new election to determine its research credit under the alternative incremental research credit rules of
§ 41(c)(4). Taxpayer should attach a copy of this letter to its tax return for the tax year ending on z, and file that return and the attached letter with the applicable Service Center within 60 days from the date of this letter.

The ruling contained in this letter is based upon information and representations submitted by 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.

Except as expressly provided herein, we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. Further, we express or imply no opinion concerning expenditures Taxpayer treated as qualified research expenses. If there is a change in material fact or law (local or federal) before the transactions considered in this ruling take effect, the ruling will have no force or effect.

This ruling is directed only to the taxpayer(s) 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.

A copy of this letter must be attached to any income tax return to which it is relevant.

Sincerely,
Leslie H. Finlow
Chief, Branch 7
Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosure (1)