60-day extension to make a late § 168(k)(7) election out of bonus depreciation

Plain-English summary

The parent of a consolidated corporate group asked the IRS for extra time to make
a tax election it meant to make but its preparer left off the returns, and the IRS
granted it. For property placed in service across three years, the group wanted to
elect under § 168(k)(7) not to claim the extra first-year "bonus" depreciation
that § 168(k) otherwise allows. Its outside preparer actually prepared the returns
consistent with that choice (it claimed no bonus depreciation), but inadvertently
failed to attach the required election statement, and the group's internal review
did not catch the omission. A later preparer discovered it. Under Treas. Reg.
§§ 301.9100-1 and 301.9100-3, the IRS can grant a reasonable extension to make a
late regulatory election when the taxpayer acted reasonably and in good faith and
relief will not prejudice the government, and a taxpayer is treated as having acted
reasonably when it reasonably relied on a qualified tax professional who then
failed to make the election. Finding those conditions met, the IRS gave the parent
60 days to file the election statements. Because the years are now closed under the
§ 6501 assessment limitations period, the election is made by filing statements
(plus a copy of the ruling) with the relevant IRS service centers, and only if the
property's basis already reflects the depreciation that would have applied had the
election been timely.

Ruling snapshot

• Question: Should a consolidated group get an extension to make a late § 168(k)(7) election out of bonus depreciation that its preparer inadvertently omitted?
• Outcome: Approved (60-day extension granted under § 301.9100-3)
• Key authorities: Treas. Reg. §§ 301.9100-1, 301.9100-3, 301.9100-3(b)(1)(v); IRC § 168(k)(7); Treas. Reg. § 1.168(k)-2(f); IRC § 167; IRC § 6501(a)

Full text (IRS public release)

 Internal Revenue Service                                        Department of the Treasury
                                                                 Washington, DC 20224

 Number: 202629013                                               Third Party Communication: None
 Release Date: 7/17/2026                                         Date of Communication: Not Applicable
 Index Number: 9100.04-00
                                                                 Person To Contact:
                                                                 -------------------, ID No. -----------------
 ------------------------------------------------------------    Telephone Number:
 --------------                                                  --------------------
 ------------------------------------                            Refer Reply To:
 ---------------------------------------------------             CC:ITA:B07
 -------------------------------                                 PLR-119791-25
                                                                 Date:
                                                                April 21, 2026


Re:     Request for Extension of Time to Make the § 168(k)(7) Election
        --------------------------------------------------------


Legend

 Parent      =   --------------------------------------------------------------
 X           =   -----------------------------------------------------------
 Year1       =   -----------------------------------------------------
 Year2       =   -----------------------------------------------------
 Year3       =   -----------------------------------------------------
 Firm1       =   ----------------
 Year4       =   -----------------------------------------------------
 Firm2       =   ------------------------

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

       This letter responds to a letter received on November 5, 2025, and supplemental
correspondence, submitted by Parent’s authorized representative on behalf of Parent
and certain members of Parent’s consolidated group (collectively referred to as
“Taxpayer”). In that letter, Parent requests an extension of time pursuant to
§§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to
make an election under § 168(k)(7) not to deduct the additional first year depreciation
under § 168(k) of the Internal Revenue Code (Code) for qualified property placed in
service by Taxpayer during Year1, Year2, and Year3 (collectively, the “Taxable Years”).
This letter ruling is being issued electronically, as permissible under section 7.02(5) of
Rev. Proc. 2025-5, 2025-1 I.R.B. 1, 34.
PLR-119791-25                                  2

       All references in this letter ruling to § 168(k) are treated as a reference to
§ 168(k) as in effect after amendment by Public Law 115-97, 131 Stat. 2054 (Dec. 22,
2017), commonly known as the Tax Cuts and Jobs Act (TCJA), and prior to amendment
by Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big,
Beautiful Bill Act (OBBBA). Further, all references to section 1.168(k)-2 of the Income
Tax Regulations are treated as a reference to the final regulations under § 1.168(k)-2
published in the Federal Register on November 10, 2020 (85 FR 71734).

                                           FACTS

       Parent represents that the facts are as follows:

       Parent, the common parent of an affiliated group of corporations that includes
Taxpayer, files a consolidated federal income tax return on a Form 1120, U.S.
Corporation Income Tax Return (Form 1120), on a calendar-year basis. Parent’s
overall method of accounting is an accrual method. Taxpayer is in the business of X.

        During Year1, Taxpayer placed in service 5-year and 7-year property. During
Year2 and Year3, Taxpayer placed in service 5-year property. All of this property is
qualified property described in § 168(k)(2) and identified as a class of property in
§ 1.168(k)-2(f)(1)(ii) for purposes of the § 168(k)(7) election (collectively, the classes of
property).

        For each of the Taxable Years, Parent engaged Firm1, an external tax return
preparer, to assist with its U.S. income tax compliance obligations, including preparing
and filing its consolidated federal income tax returns (the Taxable Years’ returns).
During the preparation of each of the returns, Parent informed Firm1 of its desire to
make an election under § 168(k)(7) not to deduct the additional first year depreciation
for the classes of property placed in service for each of the Taxable Years, as
applicable.

       Consistent with Parent’s intent, Firm1 prepared Parent’s consolidated returns
without deducting any § 168(k) depreciation for the classes of property placed in service
during each of the Taxable Years. Additionally, Firm1 prepared the Form 4562,
Depreciation and Amortization, consistent with Parent not claiming § 168(k)
depreciation for the classes of property placed in service during each of the Taxable
Years. However, Firm1 personnel inadvertently failed to make the § 168(k)(7) election
because the required § 168(k)(7) election statement was not included in any of the
consolidated Taxable Years’ returns. The Taxable Years’ returns were timely filed on
extension.

      Prior to filing the Forms 1120 for each of the Taxable Years, Parent’s internal tax
personnel reviewed the Forms 1120, but did not identify the omitted § 168(k)(7) election
statement. Parent reasonably relied on Firm1, a professional tax return preparer, to
make the § 168(k)(7) election for the classes of property, as applicable, on all of the
consolidated Taxable Years’ returns.
PLR-119791-25                                  3

      After Year3, Parent changed its external tax preparer and engaged Firm2 to
prepare its consolidated federal income tax return for Year4. Upon reviewing the
Taxable Years’ returns, Firm2 discovered that the required § 168(k)(7) election
statement was not attached to any of the Taxable Years’ returns and notified Parent.

                                  RULING REQUESTED

       Accordingly, Parent requests an extension of time pursuant to §§ 301.9100-1 and
301.9100-3 of the Procedure and Administration Regulations to make the election under
§ 168(k)(7) not to deduct the additional first year depreciation for the classes of property
that were placed in service by Taxpayer during the Taxable Years.

                                   LAW AND ANALYSIS

       Section 167(a) allows a taxpayer to deduct as depreciation a reasonable
allowance for the exhaustion, wear and tear of property used in a trade or business, or
property held in the production of income. For tangible depreciable property placed in
service after 1986, the depreciation deduction allowable under § 167 is generally
determined under § 168.

       Section 168(k)(1) allows, for the taxable year that qualified property is placed in
service, an additional first year depreciation deduction equal to the applicable
percentage of the adjusted basis of that qualified property.

       Section 168(k)(6) provides the applicable percentages for qualified property
acquired by a taxpayer after September 27, 2017, and placed in service before January
1, 2028. Each applicable percentage depends on the date that such qualified property
is placed in service by the taxpayer.

      Section 168(k)(7) provides that a taxpayer may make an election not to deduct
the additional first year depreciation for any class of property that is qualified property
placed in service during the taxable year (the § 168(k)(7) election).

       Section 1.168(k)-2(f)(1)(i) provides that the § 168(k)(7) election not to deduct
additional first year deduction applies to all qualified property that is in the same class of
property and placed in service in the same taxable year. Section 1.168(k)-2(f)(1)(ii)
defines "class of property" for purposes of the § 168(k)(7) election as meaning each
class of property described in § 1.168(k)-2(f)(1)(ii)(A)-(G).

       Section 1.168(k)-2(f)(1)(iii)(A) provides that the § 168(k)(7) election 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)-2(f)(1)(iii)(B) provides that the § 168(k)(7) election must be
made in the manner prescribed on Form 4562, Depreciation and Amortization, and its
instructions. The instructions to Form 4562 for each of the Taxable Years provide that
the § 168(k)(7) election is made by attaching a statement to the taxpayer's timely filed
PLR-119791-25                                  4

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.

      Section 301.9100-1 provides that 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.

       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 an
election. Section 301.9100-2 provides automatic extensions of time for making certain
elections. Section 301.9100-3 provides an extension 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 that granting
relief will not prejudice the interests of the Government.

       Section 301.9100-3(b)(1)(v) provides generally that a taxpayer is deemed to
have acted reasonably and in good faith if the taxpayer reasonably relied on a qualified
tax professional, including a tax professional employed by the taxpayer, and the tax
professional failed to make, or advise the taxpayer to make, the election.

                                       CONCLUSION

       Based solely on the facts and representations submitted, we conclude that the
requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly,
Parent is granted an extension of 60 calendar days from the date of this letter ruling to
make the § 168(k)(7) election for the classes of property, as applicable, for the Taxable
Years.

        Because the Taxable Years are closed by the period of limitations on
assessment under § 6501(a), this election must be made by Parent filing a statement
indicating that Taxpayer is electing not to deduct the § 168(k) additional first year
depreciation for the 5-year or 7-year classes of property, as applicable, that were placed
in service by Taxpayer during each of the Taxable Years, along with a copy of this letter
ruling, with the IRS Service Center(s) where Parent filed its original consolidated Form
1120 for each taxable year. However, this relief can be implemented by Parent only if,
as of the beginning of Parent’s first open year, the adjusted basis of all of the property
for which Parent has requested an extension of time to make the late § 168(k)(7)
election reflects the reduction in basis for the greater of the depreciation allowed or
allowable for the property in the closed years, had the election been made timely.
PLR-119791-25                                           5

       Except as specifically set forth above, no opinion is expressed or implied
concerning the federal tax consequences of the facts described above under any other
provisions of the Code or regulations. Specifically, no opinion is expressed or implied
concerning whether any item of depreciable property placed in service by Taxpayer
during the Taxable Years is eligible for the additional first year depreciation under
§ 168(k).

       The ruling contained in this letter is based upon facts and representations
submitted by Taxpayer with an accompanying penalty of perjury statement executed by
the appropriate party. While this office has not verified any of the material submitted in
support of this request for an extension of time to make the election under § 168(k)(7)
not to deduct the additional first year depreciation for the Taxable Years, all material is
subject to verification on examination.

      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 on file with this office, we are sending a
copy of this letter ruling to your authorized representatives. We are also sending a copy
of this letter ruling to the appropriate IRS operating division official.

        A copy of this letter must be attached to any federal income tax return to which it
is relevant. Alternatively, a taxpayer filing its federal return electronically may satisfy
this requirement by attaching a statement to the return that provides the date and
control number of the letter ruling.

                                               Sincerely,

                                                Elizabeth R. Binder

                                               Elizabeth R. Binder
                                               Senior Counsel, Branch 7
                                               Office of Associate Chief Counsel
                                               (Income Tax & Accounting)

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