PLR 1210007: Homeowners association receives more time to elect § 528 treatment

Plain-English summary

The IRS granted a homeowners association 120 days to file Forms 1120-H and make its election to be treated under IRC § 528 for two taxable years. The association had relied on an independent CPA firm that filed Forms 1120 instead. The IRS found that the requirements for relief under Treas. Reg. § 301.9100-3 were satisfied. The extension did not determine whether the association otherwise met every requirement of § 528(c)(1), and the IRS expressed no opinion on penalties or other tax consequences.

Ruling snapshot

• Question: Could the homeowners association make late § 528 elections for two taxable years?
• Outcome: Approved, with a 120-day extension to file Forms 1120-H.
• Key authorities: IRC § 528; Treas. Reg. §§ 1.528-1 and 1.528-8; § 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201210007 Third Party Communication: None
Release Date: 3/9/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 528.00-00, 9100.34-00 ----------------------------, ID No. ---------------
-----------------
Telephone Number:

                                                            ---------------------

-------------------------------- Refer Reply To:
--------------------------------------------------------------- CC:PSI:B05
---------------- PLR-125159-11
--------------------------------- Date:
------------------------------------- December 12, 2011
In Re: ---------------------------------------------------

LEGEND

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

a = -------

b = -------

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

This letter responds to Taxpayer’s letter requesting an extension of time under
§ 301.9100-1 of the Procedure and Administration Regulations to make an election to
be treated as a homeowners association under § 528 of the Internal Revenue Code for
its taxable years a and b.

The information submitted and the representations made are as follows: Taxpayer is a
homeowners association. Taxpayer relied on an independent CPA firm to prepare its
federal income tax returns for its taxable years a and b. The CPA firm filed Forms 1120
for the taxable years a and b. Upon becoming aware of the failure to file Forms 1120-H
for the taxable years a and b, Taxpayer submitted this request for a letter ruling.

Section 528 and § 1.528-1 of the Income Tax Regulations generally provide that
homeowners associations meeting the requirements of § 528(c) may be treated as tax-
exempt organizations, but only to the extent of their exempt function income.
PLR-125159-11 2

Section 528(c)(1) provides, in part, that the term “homeowners association” means an
organization that elects (at such time and in such manner as the Secretary of Treasury
by regulations prescribes) to have § 528 apply for the taxable year.

Section 1.528-8(a) provides that a separate election to be treated as a homeowners
association under § 528 must be made for each taxable year. This election must be
made by filing a properly completed Form 1120-H (or such other form as the Secretary
of Treasury may prescribe).

Section 1.528-8(b) provides that for taxable years ending after December 30, 1976, the
election must be made not later than the time, including extensions, for filing an income
tax return for the year in which the election is to apply.

Section 301.9100-1(c) provides that the Commissioner of Internal Revenue, in an
exercise of discretion, may grant a reasonable extension of time under the rules set
forth in §§ 301.9100-2 and 301.9100-3 to make a regulatory election, or a statutory
election (but not more than six 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). In addition, § 301.9100-2 provides automatic extensions of time for
making certain elections, and § 301.9100-3 provides extensions of time for making
elections that do not meet the requirements of § 301.9100-2.

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 Taxpayer’s request, we have
determined that the requirements of § 301.9100-3 have been satisfied with respect to its
taxable years a and b. Therefore, an extension of time is granted, until 120 days from
the date of this letter, for making the elections required on Forms 1120-H for Taxpayer
to be treated as a homeowners association under § 528 with respect to its taxable years
a and b.

We note, however, that the burden is upon Taxpayer to produce, upon request, any
records necessary to establish to the satisfaction of the Internal Revenue Service that
Taxpayer meets all of the requirements of § 528(c)(1).

Except as expressly ruled herein, no opinion is expressed or implied concerning the tax
consequences of any aspect of any transaction or item discussed or referenced in this
letter or under any other provisions of the Code. Specifically, we express no opinion
concerning the assessment of interest, additions to tax, additional amounts, or penalties
PLR-125159-11 3

for failure to file an income tax return with respect to any year. In addition, we express
or imply no opinion on whether Taxpayer qualifies as a homeowners association under
§ 528(c).

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.

A copy of this letter should be attached to Taxpayer’s Form 1120-H for each year
covered by this letter.

In accordance with a power of attorney on file with this office, a copy of this letter is
being mailed to Taxpayer’s authorized representative.

The rulings contained in this letter are 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.

                                       Sincerely,

                                       Associate Chief Counsel
                                       (Passthroughs & Special Industries)



                                       By: _______________________
                                           NICOLE R. CIMINO
                                           Senior Technician Reviewer, Branch 5
                                           Office of Associate Chief Counsel
                                           (Passthroughs & Special Industries)

Enclosures (2):
Copy of this letter
Copy for section 6110 purposes

CC: