Homeowners association receives more time for Section 528 elections

Plain-English summary

A homeowners association inadvertently failed to file Form 1120-H elections for several taxable years. The IRS found that the association satisfied the standards for discretionary filing relief under the Section 9100 regulations. It granted 120 days from the ruling date to file the elections for the affected years. The ruling does not decide whether the association otherwise qualifies under Section 528 or excuse any interest or penalties for failing to file returns.

Ruling snapshot

• Question: May the homeowners association make late Section 528 elections for the affected taxable years?
• Outcome: Approved. The association has 120 days from the ruling date to file Forms 1120-H.
• Key authorities: IRC § 528; Treas. Reg. §§ 1.528-8 and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202112001 Third Party Communication: None
Release Date: 3/26/2021 Date of Communication: Not Applicable
Index Number: 528.00-00, 9100.34-00
Person To Contact:
------------------------- ----------------------------, ID No. --------------
--------------------------------------------------------- -----------------
--------------------------------- Telephone Number:
-------------------------------- --------------------
In Re: Refer Reply To:
----------------------------------- CC:PSI:B05
-------------------------- PLR-114349-20
Date:
December 23, 2020

LEGEND:

Taxpayer = ----------------------------------------------------------------------------------------------
-----------------------
a = -------
b = -------

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

This letter responds to Taxpayer’s letter dated June 16, 2020, and subsequent
correspondence, requesting an extension of time under § 301.9100-3 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 through b.

                                                 FACTS

The information submitted and the representations made are as follows: Taxpayer is a
homeowners association. Taxpayer inadvertently failed to file its Forms 1120-H for
taxable years a through b.

                                       LAW AND ANALYSIS

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.

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 by
regulations prescribes) to have § 528 apply for the taxable year.
PLR-114349-20 2

Section 1.528-8(a) provides, in part, 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 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 may grant a reasonable
extension of time 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. Section 301.9100-1(b)
provides that the term “regulatory election” includes an election whose due date is
prescribed by a regulation published in the Federal Register.

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 the election. Section
301.9100-2 provides the rules governing automatic extensions of time for making
certain elections. Section 301.9100-3 provides the standards the Commissioner will
use to determine whether to grant an extension of time for regulatory 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 (including affidavits described in § 301.9100-3(e)) to establish to the
satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith
and that granting relief will not prejudice the interests of the government.

                                 CONCLUSION

Based solely on the facts and representations submitted with Taxpayer’s request, we
have determined that the requirements of §§ 301.9100-1 and 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 its taxable years a through 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 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-114349-20 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.

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
                                          Branch Chief, Branch 5
                                          Office of Associate Chief Counsel
                                          (Passthroughs & Special Industries)

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

cc: