IRS gives a trust 120 more days to elect to deduct its charitable payments in the earlier tax year

Plain-English summary

Under section 642(c)(1), a trust or estate can deduct amounts of its gross income that it pays to charity under its governing instrument. A special timing rule lets the trustee elect to treat a charitable payment made early in one year as if it had been paid in the prior year, which can be useful for matching the deduction to income. Here a trust made charitable contributions in "Year 2" and intended to elect to have them treated as paid in "Year 1," but the election was not filed on time due to inadvertence. The trust asked the IRS for an extension under Treas. Reg. § 301.9100-3, the general relief provision for late regulatory elections. The IRS granted the trust 120 days from the date of the letter to file the section 642(c)(1) election and claim the deduction in Year 1, conditioned on filing the necessary returns or amended returns consistently. The IRS expressed no opinion on whether the trust actually qualifies for the deduction; granting more time to elect is not a ruling that the election itself is proper. This is routine 9100 relief for a missed election.

Ruling snapshot

• Question: May a trust get an extension under Treas. Reg. § 301.9100-3 to make a late section 642(c)(1) election to treat charitable payments made in one year as paid in the prior year?
• Outcome: Approved (120-day extension granted)
• Key authorities: IRC § 642(c)(1); IRC § 170(c); Treas. Reg. § 1.642(c)-1; Treas. Reg. §§ 301.9100-1 and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

 Number: 202332004                                             Third Party Communication: None
 Release Date: 8/11/2023                                       Date of Communication: Not Applicable

 Index Number: 9100.26-00                                      Person To Contact:
                                                               --------------------------, ID No. ---------------
 --------------------------------------                        Telephone Number:
 --------------------------------                              --------------------
 ----------------------------                                  Refer Reply To:
 --------------------------------                              CC:PSI:B01
 -----------------------------------                           PLR-110205-23
                                                               Date:
                                                               May 16, 2023




                                                   LEGEND


 Trust          =        -----------------------------------------------------------------------------------------
                         --------------------------------

 Year 1         =        -------

 Year 2         =        -------




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

       This letter responds to a letter dated November 7, 2022, and subsequent
correspondence, submitted on behalf of Trust by its authorized representatives,
requesting that the Service grant Trust an extension of time pursuant to § 301.9100-3 of
the Procedure and Administration Regulations to make an election to treat distributions
of gross income made by Trust to one or more charitable organizations during the
taxable year as if made in the preceding taxable year.

                                                    FACTS

       According to the information submitted, Trust files its federal income tax return on
a calendar year basis. Trust made distributions to one or more charitable organizations
(the “Contributions”) during its Year 2 taxable year. Trust intended to have the
Contributions treated as though paid in Year 1 as permitted under § 642(c)(1) of the
Internal Revenue Code (“Code”). However, due to inadvertence, Trust’s § 642(c)(1)
election was not timely filed.
PLR-110205-23                                 2


                                   LAW AND ANALYSIS

        Section 642(c)(1) provides that in the case of an estate or trust (other than a trust
meeting the specifications of subpart B of part I of subchapter J of Chapter 1 of the
Code), there shall be allowed as a deduction in computing its taxable income (in lieu of
the deduction allowed by § 170(a), relating to the deduction for charitable, etc.,
contributions and gifts) any amount of the gross income, without limitation, which
pursuant to the terms of the governing instrument is, during the taxable year, paid for a
purpose specified in § 170(c) (determined without regard to § 170(c)(2)(A)). If a
charitable contribution is paid after the close of such taxable year and on or before the
last day of the year following the close of such taxable year, then the trustee may elect
to treat such contribution as paid during such taxable year. The election shall be made
at such time and in such manner as the Secretary prescribes by regulation.

       Section 1.642(c)-1(a)(1) of the Income Tax Regulations provides that any part of
the gross income of an estate or trust which, pursuant to the terms of the governing
instrument is paid (or treated under paragraph (b) of § 1.642-1 as paid) during the
taxable year for a purpose specified in § 170(c) shall be allowed as a deduction to such
estate or trust in lieu of the limited charitable contributions deduction authorized by
§ 170(a).

       Section 1.642(c)-1(b)(1) provides that for purposes of determining the deduction
allowed under § 1.642(c)-1(a), the fiduciary (as defined in § 7701(a)(6)) of an estate or
trust may elect under § 642(c)(1) to treat as paid during the taxable year (whether or not
such year begins before January 1, 1970) any amount of gross income received during
such taxable year or any preceding taxable year which is otherwise deductible under
such taxable year or any preceding taxable year and which is paid after the close of
such taxable year but on or before the last day of the next succeeding taxable year of
the estate or trust. The preceding sentence applies only in the case of payments
actually made in a taxable year which is a taxable year beginning after December 31,
1969. No election shall be made, however, in respect of any amount which was
deducted for any previous taxable year or which is deducted for the taxable year in
which such amount is paid.

       Section 1.642(c)-1(b)(2) provides that the election under § 1.642(c)-1(b)(1) shall
be made not later than the time, including extensions thereof, prescribed by law for filing
the income tax return for the succeeding taxable year.

        Section 1.642(c)-1(b)(3) provides that the election shall be made by filing with the
income tax return (or amended return) for the taxable year in which the contribution is
treated as paid a statement which (1) states the name and address of the fiduciary, (ii)
identifies the estate or trust for which the fiduciary is acting, (iii) indicates that the
fiduciary is making an election under § 642(c)(1) in respect of contributions treated as
paid during such taxable year, (iv) gives the name and address of each organization to
PLR-110205-23                                3

which any contribution is paid, and (v) states the amount of each contribution and date
of actual payment, or if applicable, the total amount of contributions paid to each
organization during the succeeding taxable year, to be treated as paid
in the preceding taxable year.

       Section 301.9100-1(c) provides that the Commissioner 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 6 months except in the
case of a taxpayer who is abroad), under all subtitles of the Code except subtitles E, G,
H, and I. Section 301.9100-1(b) defines the term “regulatory election” as including an
election whose due date is prescribed by a regulation published in the Federal Register.

        Section 301.9100-3(a) provides that requests for relief subject to § 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 the grant of relief will not prejudice the
interests of the Government.

                                     CONCLUSION

       Based solely on the facts submitted and representations made, we conclude that
Trust has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a result,
Trust is granted an extension of time of 120 days from the date of this letter to file an
election under § 642(c)(1) to claim a deduction in Trust’s Year 1 taxable year for the
Contributions made in Year 2. This ruling is conditioned on Trust filing an income tax
return (or amended return) for its Year 1 taxable year on which Trust must: (1) make the
election under § 642(c)(1) to claim a deduction in Year 1 for the Contributions made by
the close of Year 2, and (2) claim a deduction for such Contributions under § 642(c)(1).
If necessary, Trust must file an income tax return (or amended return) for Trust’s Year 2
taxable year to properly report the tax consequences of the Contribution in a manner
consistent with the election having been made. These income tax returns (or amended
returns) must be filed within the 120-day period following the date of this letter with the
service center where the Trust files its returns. A copy of this letter should be attached
to each income tax return (or amended return).

        Except as specifically set forth above, we express or imply no opinion concerning
the federal tax consequences of the facts described above under any other provision of
the Code. Specifically, we express or imply no opinion concerning whether the Trust is
entitled to a deduction under § 642(c). In addition, § 301.9100-1(a) provides that the
granting of an extension of time for making an election is not a determination that the
taxpayer is otherwise eligible to make the election.

      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
PLR-110205-23                                  4

material submitted in support of the ruling request, it is subject to verification on
examination.

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

       Pursuant to a power of attorney on file with this office, a copy of this letter is
being sent to Trust’s authorized representatives.


                                        Sincerely,

                                        Holly Porter
                                        Associate Chief Counsel
                                        (Passthroughs & Special Industries)



                                    By: _/s/__________________________
                                        Jennifer N. Keeney
                                        Senior Counsel, Branch 1
                                        Office of the Associate Chief Counsel
                                        (Passthroughs & Special Industries)




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