PLR 1210006: IRS denies relief for late net operating loss carryback election

Plain-English summary

The IRS denied a taxpayer's request for more time to elect the extended net operating loss carryback under IRC § 172(b)(1)(H). The taxpayer had relied on a tax professional who did not explain the extended carryback rules, but the IRS concluded that this election was statutory because its deadline came from the Code itself. Relief under Treas. Reg. § 301.9100-3 is available for regulatory elections, not statutory elections. The ruling therefore concluded that the requested relief was unavailable.

Ruling snapshot

• Question: Could the taxpayer receive relief under § 301.9100-3 for a late § 172(b)(1)(H) election?
• Outcome: Denied, because the election was statutory and § 301.9100-3 did not apply.
• Key authorities: IRC §§ 172(a), 172(b)(1)(A)(i), and 172(b)(1)(H); Treas. Reg. §§ 301.9100-1, 301.9100-2, and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201210006 Third Party Communication: None
Release Date: 3/9/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.00-00 ----------------, ID No. ------------
Telephone Number:
---------------------
--------------------------- Refer Reply To:
------------------------------- CC:ITA:B05
------------------------------- PLR-123617-11
---------------------------------- Date:
In Re: November 22, 2011
-------------------------------------------

LEGEND:

Taxpayer = ---------------------------

Taxpayer’s IDs = -----------------

Taxable Year = -------

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

    This letter responds to your letter dated May 26, 2011 requesting an extension of

time to make an election under § 172(b)(1)(H) of the Internal Revenue Code. In
particular, Taxpayer requests that Taxpayer be granted additional time to make the
election under § 301.9100-3 of the Income Tax Regulations. We rely on the facts and
conditions set forth in Taxpayer’s submissions dated May 26, 2011.

    Taxpayer sustained a net operating loss (NOL) in Taxable Year. Taxpayer

represents that it relied on a qualified tax professional to prepare its tax return and make
timely elections. Taxpayer represents that its accountant did not inform Taxpayer of the
extended carryback rules under § 172(b)(1)(H) and Revenue Procedure 2009-52, 2009-
49 I.R.B. 744, which provides guidance on making an election under § 172(b)(1)(H).
Taxpayer did not make a timely election to apply the extended NOL carryback under
§ 172(b)(1)(H).

    Section 172(a) allows a deduction equal to the aggregate of the NOL carryovers

and carrybacks to the taxable year. Section 172(b)(1)(A)(i) provides that an NOL for
any taxable year generally must be carried back to each of the 2 years preceding the
taxable year of the NOL.

   Section 172(b)(1)(H)(i) permits a taxpayer to elect to carry back its applicable

NOL to 3, 4, or 5 years preceding the taxable year of the applicable NOL. Section
PLR-123617-11 2

172(b)(1)(H)(ii) provides that the applicable NOL means the taxpayer’s NOL for a
taxable year ending after December 31, 2007, and beginning before January 1, 2010.

   Section 172(b)(1)(H)(iii) provides that the election under § 172(b)(1)(H) is

required to be made in a manner prescribed by the Secretary, and must be made by the
due date (including extensions) for filing the return for the taxpayer’s last taxable year
beginning in 2009.

   Sections 301.9100-1 through 301.9100-3 provide the standards the

Commissioner of the Internal Revenue uses to determine whether to grant an extension
of time to make statutory and regulatory elections.

   Section 301.9100-1(b) defines (A) a statutory election as an election whose due

date is prescribed by statute, and (B) a regulatory election as an election whose due
date is prescribed by a regulation published in the Federal Register, or a revenue ruling,
revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

   Section 301.9100-2(b) provides a taxpayer with an automatic extension of 6

months from the due date of a timely filed return (excluding extensions) to make a
statutory election, provided the taxpayer takes “corrective action” within that 6-month
period. Under § 301.9100-2(b), a taxpayer cannot extend the due date of a statutory
election beyond the extended due date of the return on which the election should have
been made.

   Section 301.9100-3 provides the standard the Commissioner of Internal Revenue

uses to determine whether to grant an extension of time to make regulatory elections.

   Because the due date for an election under §172(b)(1)(H) is expressly prescribed

by the statutory provision, the election is by definition a statutory election within the
meaning of § 301.9100-1(b). Revenue Procedure 2009-52 does not dictate the due
date for the election, but simply restates the statutory due date with reference to
§ 172(b)(1)(H). The mere incorporation of a statutory due date does not change a
statutory election into a regulatory election.

   As a statutory election, § 301.9100-2 would apply to determine relief for late

elections under § 172(b)(1)(H). Under § 301.9100-2, Taxpayer would have had to have
taken corrective action within 6 months after the unextended due date for filing its return
for Taxpayer’s last taxable year beginning in 2009.

   While the Service has authority under § 301.9100-3 to grant relief in the case of a

regulatory election, § 301.9100-3 does not apply in the case of a statutory election.
Accordingly, the Service does not have authority under § 301.9100-3 to grant an
PLR-123617-11 3

extension to make the statutory election set forth in § 172(b)(1)(H). Under the given
facts, information, and representations, § 301.9100-3 relief is not available to Taxpayer.

DISCLAIMERS

   Except as provided above, no opinion is expressed as to the Federal tax

treatment of the transaction under any other provisions of the Internal Revenue Code
and the Income Tax Regulations that may be applicable or under any other general
principles of Federal income taxation. Neither is any opinion expressed as to the tax
treatment of any conditions existing at the time of, nor effects resulting from, the
transaction that are not specifically covered by the above ruling.

   This ruling is directed only to Taxpayer. Section 6110 (k)(3) provides that it may

not be cited as precedent. Pursuant to the Power of Attorney submitted by Taxpayer, a
copy of this letter will be sent to Taxpayer’s authorized representative.

                                     Sincerely,



                                     William A. Jackson
                                     Branch Chief, Branch 5
                                     Office of Associate Chief Counsel
                                     (Income Tax and Accounting)