PLR 200339013: Taxpayer may revoke alternative research credit election

Plain-English summary

A taxpayer had elected the alternative incremental method for calculating its research credit under IRC § 41(c)(4). Before the filing deadline for a later tax year, it requested the IRS's consent to revoke the election. The IRS granted consent for that year. The taxpayer should use the general § 41(a) credit rule for that and later years unless it makes a new alternative incremental election. The IRS did not decide whether the taxpayer's expenditures qualified for the credit.

Ruling snapshot

• Question: May the taxpayer revoke its alternative incremental research credit election?
• Outcome: Approved for the specified tax year and later general-rule calculations.
• Key authorities: IRC § 41(a), (c)(4).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200339013
Release Date: 09/26/2003
Person to Contact:
Index Number: 41.01-00
Telephone Number:

Refer Reply To:
CC:PSI:7-PLR-150974-02
Date:
June 16, 2003

LEGEND:

Taxpayer: =
x: = y: =

:

We received a letter, dated September 16, 2002, from Taxpayer’s authorized representative requesting permission for Taxpayer to revoke its election under § 41(c)(4) of the Internal Revenue Code. This letter responds to that request.

The facts and representations submitted are as follows: Taxpayer is an accrual basis taxpayer and files its tax return on the basis of a calender year. For the taxable year ending on x, Taxpayer elected to determine its credit for increasing research activities under the alternative incremental research credit rules of § 41(c)(4). Taxpayer determined its research credit for that year using the alternative incremental research credit rules of § 41(c)(4).

Before the due date of its return (including extensions) for the taxable year ending 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 y and all subsequent taxable years.

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 an 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.

2
PLR-150974-02

Based solely on the facts submitted and representations made, we grant permission for Taxpayer to revoke its election to determine its credit for increasing research activities under the alternative incremental research credit rules of § 41(c)(4) for qualified research expenses paid or incurred during the taxable year ending on y. Taxpayer should compute its credit for increasing research activities for the taxable year ending on y and all succeeding taxable years using the general rule of § 41(a) provided that Taxpayer does not make a new election to determine its credit for increasing research activities under the alternative incremental research credit rules of § 41(c)(4).

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 expenses.

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

The rulings contained in this letter are 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.

Sincerely,

Brenda Stewart
Senior Counsel, Branch 7
Office of Associate Chief Counsel
(Passthroughs and Special Industries)

Enclosure:
Copy for § 6110 purposes

cc: