PLR 200404032: IRS declines to rule on bonus depreciation election request

Plain-English summary

A corporation omitted the statement electing out of 30 percent additional first year depreciation for qualified property, although its timely filed return did not claim the deduction. It asked for more time to make the election under § 168(k)(2)(C)(iii). The IRS said the request appeared to fall under Rev. Proc. 2003-50, which provides a deemed election when its conditions are met. It therefore declined to rule and said it would refund the user fee.

Ruling snapshot

• Question: Will the IRS extend the time to elect out of additional first year depreciation?
• Outcome: No ruling issued; the IRS referred the taxpayer to Rev. Proc. 2003-50.
• Key authorities: IRC § 168(k)(2)(C)(iii); Rev. Proc. 2003-50, § 3.02(2).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200404032
Release Date: 01/23/2004
Index Number: 9100.04-00

------------------------------------------------------------ Person To Contact:
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Telephone Number:
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Refer Reply To:
In Re: Request for an Extension of Time to CC:PSI:6 – PLR-138251-03
Make a Regulatory Election
Date:
--------------------------------------------------- October 22, 2003
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Taxpayer = -------------------------------------------------------------------------------------------------
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Parent = -------------------------------------------------------------------------------------------------
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x = -------------------
y = -------------------

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

This letter responds to a letter submitted by Parent on behalf of Taxpayer, dated x, requesting a letter ruling under ' 301.9100-3 of the Procedure and Administration Regulations to extend the time to make the election provided under section 168(k)(2)(C)(iii) of the Internal Revenue Code, not to deduct the 30-percent additional first year depreciation for qualified property placed in service in the taxable year that included September 11, 2001.

Parent and Taxpayer represent that Taxpayer is a member of an affiliated group that files a consolidated federal income tax return and the return for the taxable year ended y, which included September 11, 2001, was timely filed. On this return, Taxpayer did not deduct the 30-percent additional first year depreciation for all qualified property placed in service during the taxable year ended y, but inadvertently failed to attach the election out statement to the return.

Rev. Proc. 2003-50, 2003-29 I.R.B. 119, amplified and modified Rev. Proc. 2002- 33, 2002-1 C.B. 963, by providing additional time for any taxpayer that timely filed its federal income tax return for the taxable year that included September 11, 2001, to, among other things, elect not to deduct the 30-percent additional first year depreciation for a class of property that is qualified property or qualified New York Liberty Zone property placed in service after September 11, 2001, during the taxable year that included September 11, 2001. Section 3.02(2) of Rev. Proc. 2003-50 provides that such a taxpayer will be deemed as making the election not to deduct the 30-percent additional first year depreciation for a class of property that is qualified property or qualified New York Liberty Zone property placed in service by the taxpayer after September 10, 2001, during the taxable year that included September 11, 2001, if the taxpayer, on the federal income tax return for that taxable year, did not claim the 30- percent additional first year depreciation for that class of property but did claim depreciation, and does not file an amended federal tax return (or a qualified amended return) or a Form 3115, Application for Change in Accounting Method, within the time and the manner prescribed in section 3.01 of Rev. Proc. 2003-50 to claim the 30- percent additional first year depreciation for the class of property for the taxable year that included September 11, 2001.

Based solely on the information provided in Taxpayer=s request, we believe that this request falls under Rev. Proc. 2003-50. Accordingly, we will not rule on Taxpayer=s request.

We have attached a copy of Rev. Proc. 2003-50. We are taking steps to refund Taxpayer=s user fee and it will be returned under separate cover.

In accordance with the power of attorney, we are sending a copy of this letter to Parent=s and Taxpayer=s authorized representatives. We are also sending a copy of this letter to the appropriate Internal Revenue Service official in the operating division that has examination jurisdiction of Parent=s federal tax returns. If you have any questions regarding this matter, contact ---------------------.

Sincerely yours,

Kathleen Reed

KATHLEEN REED
Senior Technician Reviewer, Branch 6
Office of Associate Chief Counsel
(Passthroughs and Special Industries)

Attachment (1) copy of Rev. Proc. 2003-5--