PLR 1223011: IRS allows late homeowners association elections

Plain-English summary

The IRS granted a homeowners association 120 days to make late elections under IRC § 528 for two taxable years. The association's CPA firm had filed Forms 1120 instead of the required Forms 1120-H. The association consented to extend the assessment period for the affected years, and the IRS found that the requirements for relief under Treas. Reg. § 301.9100-3 were satisfied. The ruling did not determine whether the association otherwise qualified under § 528(c)(1).

Ruling snapshot

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

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201223011 Third Party Communication: None
Release Date: 6/8/2012 Date of Communication: Not Applicable
Index Number: 528.00-00, 9100.34-00
Person To Contact:
------------------------------------- -----------------------------, ID No. -------------
------------------------------------------------------------ -----------------
----------------------------------------- Telephone Number:
------------------------------------------------ ---------------------
------------------------ Refer Reply To:
---------------------------------------- CC:PSI:B05
PLR-137645-11
Date:
March 08, 2012

LEGEND:

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

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

a = -------

b = -------

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

This letter responds to Taxpayer’s letter, dated August 27, 2011, and subsequent
correspondence, 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 generally provides 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-137645-11 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) of the Income Tax Regulations 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. 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.

Section 301-9100-3(c)(1)(ii) provides, in part, that the interests of the government are
ordinarily prejudiced if the taxable year in which the election should have been made is
closed by the period of limitations on assessment under § 6501(a) before the taxpayer’s
receipt of a ruling granting relief under § 301.9100-3. Taxpayer has consented to
extend the period of limitations for the taxable years a and b.

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
taxable years a through b. Therefore, an extension of time is granted, until 120 days
from the date of this ruling, for making the elections required on Forms 1120-H for
Taxpayer to be treated as a homeowners association under § 528 with respect to
taxable years a through b.
PLR-137645-11 3

We note, however, that the burden is upon Taxpayer to produce, upon request, any
records necessary to establish to the satisfaction of the 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. Moreover, we express no opinion
concerning the assessment of interest, additions to tax, additional amounts, or penalties
for failure to file an income tax return with respect to any year. Specifically, 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 election for each year covered by
this letter.

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