PLR 1033020: IRS granted more time to elect deductions for intangible drilling costs

Plain-English summary

The IRS granted taxpayers an extension of time to make an election under IRC § 263(c) to deduct intangible drilling and development costs for a specified taxable year. The taxpayers did not make the election on time and provided representations explaining the delay. The extension runs until 60 days after the date of the ruling. The IRS did not determine whether the taxpayers owned working interests or whether particular costs qualified as deductible intangible drilling and development costs.

Ruling snapshot

• Question: Could the taxpayers receive additional time to make the election under IRC § 263(c)?
• Outcome: Approved
• Key authorities: IRC § 263(c); Treas. Reg. § 1.612-4; Treas. Reg. §§ 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201033020 Third Party Communication: None
Release Date: 8/20/2010 Date of Communication: Not Applicable
Index Number: 263.00-00, 9100.00-00
Person To Contact:
--------------------------------------------- -----------------------, ID No. -------------------
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---------------------------- Telephone Number:
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Refer Reply To:
CC:PSI:B06
PLR-150089-09

                                                           Date:
                                                           May 04, 2010

LEGEND:

Taxpayers: ----------------------------------------------------------
--------------------------------------------------

a: -------

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

     We received a letter from your authorized representative, requesting an

extension of time under § 301.9100-3 of the Procedure and Administration Regulations
to file an election under § 263(c) of the Internal Revenue Code for the a taxable year.
This letter responds to that request.

   According to the information submitted, Taxpayers did not timely make the

election under § 263(c) for the a taxable year. Taxpayers have made representations
explaining why the election under § 263(c) was not timely filed.

   Section 263(c) provides that regulations shall be prescribed by the Secretary

granting an option to deduct as expenses intangible drilling and development costs in
the case of oil and gas wells. Those regulations are set forth in § 1.612-4 of the Income
Tax Regulations.

     Section 1.612-4(d) provides that the election to deduct as expenses intangible

drilling and development costs in the case of oil and gas wells may be made by claiming
intangible drilling and development costs as a deduction on the taxpayer’s return for the
first taxable year in which the taxpayer pays or incurs such expenses; no formal
statement is necessary.

   Section 301.9100-1(c) provides that the Commissioner, in an exercise of

discretion, may grant a reasonable extension of time under rules set forth in

§§ 301.9100-2 and 301.9100-3 to make a regulatory election, or a statutory election (but
not more than 6 months except in the case of a taxpayer who is abroad), under all
subtitles of the Internal Revenue Code except subtitles E, G, H and I.

   Sections 301.9100-2 and 301.9100-3 provide the standards the Commissioner

will use to determine whether to grant an extension of time to make the election under
§ 301.9100-1(a).

  Requests for relief under § 301.9100-3 will be granted when the taxpayer

provides the evidence to establish that the taxpayer acted reasonably and in good faith,
and that granting relief will not prejudice the interests of the Government.

   Based on the facts and representations submitted with your request, we have

determined that the requirements of § 301.9100-3 have been satisfied with respect to
the a taxable year. Therefore, an extension of time is granted, until 60 days from the
date of this ruling, for making an election under § 263(c) for the a taxable year.

    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. Specifically, we express or imply no opinion concerning whether
Taxpayers own working interests in oil and gas properties or whether any costs paid are
incurred by Taxpayers qualify as intangible drilling and development costs under
§ 263(c) and § 1.612-4.

  This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3)

provides that it may not be used or cited as precedent.

  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.

  In accordance with the Power of Attorney on file with this office, we are sending a

copy of this letter to your authorized representative. A copy of this ruling must be
attached to any income tax return to which it is relevant. Alternatively, taxpayers filing

their returns electronically may satisfy this requirement by attaching a statement to their
return that provides the date and control number of the letter ruling.

                                   Sincerely,


                                   Associate Chief Counsel
                                   (Passthroughs & Special Industries)


                             By:
                                    Charles B. Ramsey, Chief
                                    Branch 6
                                    Office of Associate Chief Counsel
                                    (Passthroughs & Special Industries)