Extension granted to elect out of bonus depreciation

Plain-English summary

A foreign corporation claimed bonus depreciation on its original return, then repeatedly tried to electronically file an amended return electing out for all qualified property classes before the extended deadline. The amended return was accepted one day late. The IRS concluded that the taxpayer met the discretionary-relief standards and granted 60 days to file an amended return with the required election statement. It did not determine whether any particular property qualified for bonus depreciation.

Ruling snapshot

• Request: Extend the time to elect out of additional first-year depreciation for every class of qualified property placed in service during the year
• Outcome: Approved; 60 days to file an amended return making the election
• Key authorities: I.R.C. § 168(k); Treas. Reg. §§ 1.168(k)-1(e), 301.9100-1 through -3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201544014                                              Third Party Communication: None
Release Date: 10/30/2015                                       Date of Communication: Not Applicable
Index Number: 9100.04-00
                                                               Person To Contact:
                                                               ------------------------, ID No. ------------------
                                                               ----------------------------------------------------
                                                               Telephone Number:
                                                               ------------------------
----------------------------------                             Refer Reply To:
------------------------------------------------------------   CC:ITA:7
--------------------------------------                         PLR-104782-15
---------------------------------                              Date:
-------------------------                                      July 29, 2015
 ---------------------------------------------




Re: ---------------------------------------------------------------------------------------------------------------
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Legend

Taxpayer              = ---------------------------------
                         -----------------------------
Country               = -------------
Date1                 = ---------------------------
Date2                 = ----------------------------
Date3                 = ----------------------------
Date4                 = ----------------------------
Year1                 = -------


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

       This letter responds to a letter dated January 30, 2015, and supplemental
correspondence, submitted by Taxpayer, requesting an extension of time pursuant to
§ 301.9100-3 of the Procedure and Administration Regulations to make the election
under § 168(k)(2)(D)(iii) of the Internal Revenue Code not to deduct the additional first
year depreciation deduction under § 168(k)(1) for all classes of qualified property placed
in service in the taxable year ended Date1 (the Year1 taxable year).

PLR-104782-15                                 2


                                          FACTS

       Taxpayer represents that the facts are as follows:

       Taxpayer, organized under the laws of Country, is an association taxable as a
corporation for Federal income tax purposes. Taxpayer uses an overall accrual method
of accounting and files its Federal income tax return on a calendar-year basis.
Taxpayer, through three entities that are disregarded for Federal income tax purposes,
is engaged in passenger car rentals and leasing and the licensing of car rental
concepts.

      Taxpayer timely filed Form 1120-F, U.S. Income Tax Return of a Foreign
Corporation, on Date2, for the Year1 taxable year (the “original return”). Taxpayer
placed in service qualified property (as defined in § 168(k)(2)) during the Year1 taxable
year. Taxpayer claimed the additional first year depreciation deduction for this qualified
property on its original return.

        Taxpayer made numerous attempts to electronically file an amended Form 1120-
F for the Year1 taxable year (the “amended return”) on Date 3, the extended due date of
Taxpayer’s Year1 Form 1120-F. On this amended return, Taxpayer claimed no
additional first year depreciation, attached the election statement required pursuant to
the instructions to Form 4562, Depreciation and Amortization, and was otherwise in
conformance with the requirements of § 301.9100-2. However, Taxpayer was
unsuccessful in electronically filing the Form 1120-F on or before Date3. Taxpayer
electronically filed the amended return on Date4, the day after the extended due date of
Taxpayer’s Year1 Form 1120-F. Accordingly, Taxpayer did not timely make the election
not to deduct the additional first year depreciation provided under § 168(k) for the Year1
taxable year.

      Taxpayer did not make the election under § 168(k)(4) to accelerate alternative
minimum tax credits (and, if applicable, research credits) in lieu of the additional first
year depreciation deduction for any class of property placed in service for any taxable
year.

                                  RULING REQUESTED

       Taxpayer requests an extension of time pursuant to § 301.9100-3 to make the
election under § 168(k)(2)(D)(iii) not to deduct the additional first year depreciation
provided under § 168(k)(1) for all classes of qualified property placed in service in the
taxable year ended Date1.

PLR-104782-15                                  3

                                   LAW AND ANALYSIS

       Section 168(k)(1) allows a 50-percent additional first year depreciation deduction
in the placed-in-service year for qualified property acquired by a taxpayer after
December 31, 2007, and before September 9, 2010, or acquired by a taxpayer
generally after December 31, 2011, and placed in service by the taxpayer generally
before January 1, 2014.

        Section 168(k)(2)(D)(iii) provides that a taxpayer may elect not to deduct the
additional first year depreciation for any class of property placed in service during the
taxable year. The term "class of property" is defined in § 1.168(k)-1(e)(2) of the Income
Tax Regulations as meaning, in general, each class of property described in § 168(e)
(for example, 5-year property). See section 5.01 of Rev. Proc. 2008-54, 2008-2 C.B.
722, and section 3.01 of Rev. Proc. 2011-26, 2011-16 I.R.B. at 665 (rules similar to the
rules in § 1.168(k)-1 for "qualified property" or for "30-percent additional first year
depreciation deduction" apply for purposes of § 168(k) as currently in effect).

       Section 1.168(k)-1(e)(3)(i) provides that the election not to deduct additional first
year depreciation must be made by the due date (including extensions) of the federal
tax return for the taxable year in which the property is placed in service by the taxpayer.

        Section 1.168(k)-1(e)(3)(ii) provides that the election not to deduct additional first
year depreciation must be made in the manner prescribed on Form 4562, Depreciation
and Amortization, and its instructions. The instructions to Form 4562 for the taxable
year ended Date1, provided that the election not to deduct the additional first year
depreciation is made by attaching a statement to the taxpayer's timely filed tax return
indicating that the taxpayer is electing not to deduct the additional first year depreciation
and the class of property for which the taxpayer is making the election.

       Under § 301.9100-1, the Commissioner has discretion to grant a reasonable
extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make a
regulatory election.

       Sections 301.9100-1 through 301.9100-3 provide the standards the
Commissioner will use to determine whether to grant an extension of time to make an
election. Section 301.9100-2 provides automatic extensions of time for making certain
elections. Section 301.9100-3 provides extensions of time for making elections that do
not meet the requirements of § 301.9100-2.

        Section 301.9100-3(a) provides that requests for relief under § 301.9100-3 will be
granted when the taxpayer provides evidence to establish to the satisfaction of the
Commissioner that the taxpayer acted reasonably and in good faith, and the grant of
relief will not prejudice the interests of the government.

PLR-104782-15                                 4

                                      CONCLUSION

        Based solely on the facts and representations submitted, we conclude that the
requirements of § 301.9100-3 have been satisfied. Accordingly, Taxpayer is granted 60
calendar days from the date of this letter to make the election not to deduct the
additional first year depreciation under § 168(k)(1) for all classes of property placed in
service by Taxpayer during the taxable year ended Date1, that qualify for the additional
first year depreciation deduction. This election must be made by Taxpayer filing an
amended federal tax income tax return for such taxable year, with a statement
indicating that Taxpayer is electing not to deduct the additional first year depreciation for
all classes of property placed in service during that taxable year.

       Except as specifically set forth above, we express no opinion concerning the
federal tax consequences of the facts described above under any other provisions of
the Code (including other subsections of § 168). Specifically, no opinion is expressed
or implied on whether any item of depreciable property placed in service by Taxpayer
during the taxable year ended Date1, is eligible for the additional first year depreciation
deduction.

      This letter ruling is directed only to the taxpayer requesting it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.

     In accordance with the power of attorney, we are sending a copy of this letter to
Taxpayer’s authorized representative.


                                                  Sincerely,

                                                  Kathleen Reed

                                                  KATHLEEN REED
                                                  Branch Chief, Branch 7
                                                  Office of Associate Chief Counsel
                                                  (Income Tax and Accounting)
Enclosures (2):
      Copy of this letter
      Copy for § 6110 purposes