Worker may reelect foreign earned income exclusion early

Plain-English summary

A worker had elected the section 911 foreign earned income and housing cost exclusions and later revoked them. Before the normal five-year waiting period ended, the worker took a position with a new employer in a different foreign country and sought permission to reelect. The regulations allow the IRS to consider circumstances such as moving between countries, differing tax rates, and changing employers. The worker represented that both the employer and applicable tax rate had changed. The IRS permitted the worker to reelect the exclusions for the requested year and later years without deciding whether all other section 911 requirements were met.

Ruling snapshot

• Question: Could a taxpayer reelect the section 911 exclusions within five years after revoking them following a change in employer and foreign tax rate?
• Outcome: Approved for the requested year and subsequent taxable years.
• Key authorities: IRC § 911(e)(2); Treas. Reg. § 1.911-7

Full text (IRS public release)

Internal Revenue Service                        Department of the Treasury
                                                Washington, DC 20224

Number: 201926010                               Third Party Communication: None
Release Date: 6/28/2019                         Date of Communication: Not Applicable
Index Number: 911.11-03
                                                Person To Contact:
--------------------------                      ----------------------, ID No. ------------------
------------------------------                  Telephone Number:
-----------------------------------------       ----------------------
                                                Refer Reply To:
                                                CC:INTL:B02
                                                PLR-134225-18
                                                Date:
                                                March 21, 2019

                  TY: -------

Legend

Taxpayer = --------------------------
TIN = ------------------

Country A = -------------
Country B = -----------------
Year 1 = -------
Year 2 = -------
Year 3 = -------

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

This is in response to a letter received in this office on November 21, 2018, in which a
ruling was requested to permit Taxpayer to reelect the foreign earned income exclusion
under section 911 of the Internal Revenue Code (the Code).

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.

Taxpayer was employed in a job based in Country A beginning in Year 1 and elected to
exclude his foreign earned income and housing cost amount under section 911(a)
beginning in Year 1. In Year 2, Taxpayer chose to revoke these exclusions. In Year 3,
Taxpayer accepted a position with a new employer, located in Country B. As a result of
this change in employer, Taxpayer requests permission to reelect the foreign earned
income and housing cost amount exclusions pursuant to section 911 for Year 3 and
subsequent taxable years.
PLR-134225-18                                2

Section 911 of the Code permits certain taxpayers to elect to exclude from gross
income their foreign earned income and housing cost amounts. Under Treas. Reg.
§ 1.911-7(a)(1), the election applies to the taxable year for which it is made and for all
subsequent taxable years, unless revoked by the taxpayer. Section 911(e)(2) provides
that once revoked, the election may not be made again by the taxpayer until the sixth
taxable year after the year in which the revocation was made.

Treas. Reg. § 1.911-7(b)(2) provides that if an individual revokes an election under
Treas. Reg. § 1.911-7(b)(1) and desires to reelect the same exclusion within the next
five years, the individual must obtain permission by requesting a ruling. The Service
may permit the taxpayer to reelect the foreign earned income and housing cost amount
exclusions before the sixth year after considering any facts and circumstances that may
be relevant to the determination. Treas. Reg. § 1.911-7(b)(2) provides that relevant
facts and circumstances may include a period of United States residence, a move from
one foreign country to another foreign country with differing tax rates, a substantial
change in tax laws of the foreign country of residence or physical presence, and a
change of employer.

Taxpayer revoked the foreign earned income and housing cost amount exclusions for
Year 2. Taxpayer desires to reelect the exclusions for Year 3, which is within five years
of Year 2. Therefore, Taxpayer is requesting permission to reelect the foreign earned
income and housing cost amount exclusions. Taxpayer has represented that he
experienced a change of employer in Year 3. Also, he has represented that his tax rate
will differ as a result of this change in employment.

Accordingly, based solely on the information and representations set forth above, it is
held that Taxpayer may reelect the section 911 exclusion and for Year 3 and
subsequent taxable years.

Except as otherwise provided herein, no opinion is expressed as to whether Taxpayer
otherwise satisfies the requirements of section 911 for excluding foreign earned income
and housing cost amounts from gross income. Except as expressly provided 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.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.
PLR-134225-18                                 3


A copy of this letter 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,



                                       Jeffery G. Mitchell
                                       Branch Chief, Branch 2
                                       (International)