60-day extension to make a late election not to be treated as a tax-exempt entity

Plain-English summary

An LLC wholly owned by a § 501(c)(3) charity was the managing member of a
partnership that put a project into service. Because a tax-exempt owner sits at
the top, property tied to the venture can be labeled "tax-exempt use property,"
which forces slower depreciation under § 168. To avoid that, the LLC intended
to elect to be taxed as a C corporation and then to elect under
§ 168(h)(6)(F)(ii) not to be treated as a tax-exempt entity. Its accounting
firm filed returns as if both elections had been made, but the required
election statements were never attached. When the LLC discovered the gap, it
asked the IRS for 9100 relief (Treas. Reg. §§ 301.9100-1 and 301.9100-3) to
make the § 168(h)(6)(F)(ii) election late. The IRS found the taxpayer acted
reasonably and in good faith and that relief would not prejudice the
government, and granted 60 days to file the election statement. This matters to
charity-owned businesses using depreciable assets: the election preserves
normal depreciation, but only if the paperwork is filed.

Ruling snapshot

• Question: May the taxpayer get an extension of time to make a late § 168(h)(6)(F)(ii) election not to be treated as a tax-exempt entity?
• Outcome: Approved (60-day extension granted)
• Key authorities: IRC § 168(h)(6)(F); Treas. Reg. §§ 301.9100-7T(a), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202617005
Release Date: 4/24/2026
Index Number: 9100.04-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact: --------------------, ID No. -----------------
Telephone Number: --------------------
Refer Reply To: CC:ITA:B07
PLR-114680-25
Date: January 29, 2025

Re: Request for Extension of Time to Make an Election Not to be Treated as a Tax-Exempt Entity

Legend

Taxpayer = --------------------
Partnership = --------------------
Tax-Exempt Entity = --------------------
Firm = --------------------
State = --------------------
X = ------
Y = --------------------
Project or Project Property = --------------------
Section = --------------------
Taxable Year 1 = --------------------
Taxable Year 2 = --------------------
Date 1 = --------------------
Date 2 = --------------------
Date 3 = --------------------
Date 4 = --------------------

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

This letter responds to Taxpayer's letter dated Date 1, submitted on behalf of Taxpayer by Taxpayer's authorized representatives, requesting an extension of time pursuant to §§ 301.9100 and 301.9100-3 of the Procedure and Administration Regulations to elect not to be treated as a tax-exempt entity beginning with Taxable Year 1.

This letter ruling is being issued electronically in accordance with section 7.02(5) of Rev. Proc. 2025-1, 2025-1 I.R.B. 1, 34.

FACTS

Taxpayer represents the facts are as follows:

Taxpayer is a State domestic limited liability company formed on Date 2. Taxpayer uses the cash method as its overall accounting method and the calendar year as its annual accounting period.

Taxpayer's sole member is Tax-Exempt Entity, a tax-exempt organization under § 501(c)(3) of the Internal Revenue Code. Taxpayer owns X% of Partnership and serves as its managing member. Partnership is engaged in the business of Y.

Section of Partnership's amended and restated operating agreement dated Date 3, requires that no portion of the Project Property "is or will be treated as 'tax exempt use property' as defined in Section 168(h)."

Taxpayer engaged Firm to prepare Taxpayer's federal income tax return for Taxable Year 2, which ends two taxable years before Taxable Year 1, and succeeding taxable years. Firm was aware that Taxpayer intended to make an election to be treated as a C corporation and also an election to not be treated as a tax-exempt entity pursuant to § 168(h)(6)(F)(ii) for Taxable Year 2. Despite this, Firm failed to confirm Taxpayer made these elections on the Form 1120, U.S. Corporation Income Tax Return, for Taxable Year 2. For subsequent tax years, Firm prepared Taxpayer's federal income tax returns on the Forms 1120 as if the elections had been made in Taxable Year 2 to not treat Taxpayer as a tax-exempt entity.

Partnership placed Project in service in Taxable Year 1.

Believing Taxpayer had elected to be a C corporation and that Taxpayer had elected to not be treated as a tax-exempt entity on the Form 1120 for Taxable Year 2, Firm prepared and Taxpayer timely filed Form 1120 for Taxable Year 1 as though Taxpayer was a C corporation not treated as a tax-exempt entity. Accordingly, Firm advised Taxpayer to sign the Form 1120 for Taxable Year 1 even though the Form 1120 did not contain the required elections to be treated as a C Corporation and to not be treated as a tax-exempt entity under § 168(h)(6)(F)(ii).

Subsequently, Taxpayer discovered that it had not elected to be treated as a C corporation for Taxable Year 2 and its election under § 168(h)(6)(F)(ii) was therefore not effective for Taxable Year 2 and the following tax years, including Taxable Year 1. Later, on Date 4, Taxpayer elected to be treated as a C corporation effective the first day of Taxable Year 1 following the procedures in Rev. Proc. 2009-41, 2009-39 I.R.B. 439, which Taxpayer confirmed by telephone to have been accepted.

Because Taxpayer is treated as a C corporation and is wholly owned by Tax-Exempt Entity, Taxpayer is a tax-exempt controlled entity within the meaning of § 168(h)(6)(F)(iii).

RULING REQUESTED

Taxpayer requests an extension of time under §§ 301.9100-1 and 301.9100-3 to make an election under § 168(h)(6)(F)(ii) to not be treated as a tax-exempt entity beginning with Taxable Year 1.

LAW

Section 167(a) generally provides for a depreciation deduction for property used in a trade or business. The depreciation deduction provided by § 167(a) for tangible property placed in service after 1986 is generally determined under § 168. Under § 168(g), the alternative depreciation system must be used for any tax-exempt use property as defined in § 168(h).

Section 168(h)(6)(A) provides that, for purposes of § 168(h), if any property not tax-exempt property is owned by a partnership having both a tax-exempt entity and non-tax-exempt entity as partners and any allocation to the tax-exempt entity is not a qualified allocation, then an amount equal to such tax-exempt entity's proportionate share of such property is treated as tax-exempt use property.

Section 168(h)(6)(F)(i) provides generally that any tax-exempt controlled entity is treated as a tax-exempt entity for purposes of § 168(h)(5) and (6). Under § 168(h)(6)(F)(iii)(I), a corporation (without regard to that subparagraph and § 168(h)(2)(E)) constitutes a "tax-exempt controlled entity" if 50-percent or more (in value) of the corporation's stock is held by one or more tax-exempt entities (other than a foreign person or entity).

Under § 168(h)(6)(F)(ii), a tax-exempt controlled entity can elect not to be treated as a tax-exempt entity. Once made, the election is irrevocable and will bind all tax-exempt entities holding an interest in the tax-exempt controlled entity.

Under § 301.9100-7T(a)(2)(i), a § 168(h)(6)(F)(ii) election must be made by the due date of the tax return for the first taxable year for which the election is to be effective. Section 301.9100-7T(a)(3)(i) provides that the § 168(h)(6)(F)(ii) election must be made by attaching a statement to the tax return for the taxable year in which the election is to be effective.

Section 301.9100-1(c) provides that the Commissioner has the 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.

Section 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 a regulatory 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 301.9100-1(b) defines a regulatory election as one whose due date is prescribed by regulations in the Federal Register, a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin. Because the due date of the election is prescribed by § 301.9100-7T(a)(2)(i), the requested § 168(h)(6)(F)(ii) election is a regulatory election.

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

CONCLUSION

Based solely on the facts as represented and the applicable law, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, Taxpayer is granted an extension of 60 calendar days from the date of this letter ruling to file the election statement with the appropriate service center containing the information required by § 301.9100-7T(a)(3) for the election to be effective for Taxable Year 1.

Taxpayer must attach a copy of this letter ruling to the election statement. Further, this letter ruling should be attached to all subsequent returns (and amended returns) for all taxable years to which this letter ruling is relevant. If Taxpayer files its amended return electronically, it may satisfy this requirement by attaching a statement to its amended return that provides the date and control number of this letter ruling. Pursuant to § 301.9100-7T(a)(3)(ii), a copy of this letter ruling and the § 168(h)(6)(F)(ii) election statement also should be attached to the Federal income tax return of the tax-exempt member of Taxpayer.

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 a ruling, it is subject to verification on examination.

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.

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. We express no opinion regarding the tax treatment of the instant transaction under the provisions of any other sections of the Code or regulations that may be applicable, or regarding the tax treatment of any conditions existing at the time of, or effects resulting from, the instant transaction.

Pursuant to the Form 2848, Power of Attorney and Declaration of Representative, on file, we are sending a copy of this letter to Taxpayer's authorized representatives. We are also sending a copy of this letter ruling to the appropriate Service operating division official.

Sincerely,

Amy S. Wei
Senior Technician Reviewer, Branch 7
Office of Associate Chief Counsel
(Income Tax & Accounting)

Enclosure: Copy of this letter for § 6110 purposes

cc: --------------------