Requesting 9100 Relief


A taxpayer who fails to make a tax election by the due date for the election may not be out of luck. Certain extension and administrative relief options exist if the taxpayer can obtain “9100 relief” under Treas. Reg. §§ 301.9100-1 through -3. The drawback is that unless he or she qualifies under the rules for automatic 9100 relief, the taxpayer is required to get a private letter ruling from the Service, which requires payment of a user fee.


The term “election” for which 9100 relief is available is defined as “an application for relief in respect of tax; a request to adopt, change, or retain an accounting method or accounting period” (Treas. Reg. § 301.9100-1(b)). This definition is broader than most taxpayers would think. However, the term “election” does not include an application for an extension of time to file a return.



Automatic six- and 12-month extensions are available under the regulations, meaning that the taxpayer does not have to get a private letter ruling to receive an extension or pay user fees to request such a ruling. These automatic extensions are available only if the taxpayer takes corrective action during the extension period.


An automatic 12-month extension is available for certain regulatory elections (Treas. Reg. § 301.9100-2(a)). In a regulatory election, the due date is prescribed “by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin” (Treas. Reg. § 301.9100-1(b)). In other words, a regulatory election is not provided in the Internal Revenue Code itself. An election provided in the Code is a “statutory” election (Treas. Reg. § 301.9100-1(b)) and is not eligible for the automatic 12-month extension. For example, IRC § 172(b)(3), providing for an election to waive the carryback period for net operating losses, states that “[s]uch election shall be made … by the due date (including extensions of time) for filing the taxpayer’s return for the taxable year of the net operating loss for which the election is to be in effect.” This is a statutory election.


Administrative relief under the automatic 12-month extension operates exactly as it is titled. It is an automatic (that is, no private letter ruling required) extension of 12 months from the due date for making a regulatory election. For a taxpayer who has not extended the due date of the return, the due date for making an election is the due date of the return. For taxpayers who have obtained extensions of time to file the return, the due date for making an election is the due date of the return including extensions. This extension is available regardless of whether the taxpayer timely filed its return for the year the taxpayer should have made the election (Treas. Reg. § 301.9100-2(a)).


Example 1: A taxpayer files its return on March 15, 2007, its due date, and fails to make an election. The election is required to be made with the return. Assuming that the election is a type listed in the 12-month categories, the taxpayer may make the election with an amended return filed by March 15, 2008, 12 months from the March 15 due date of the return. If instead the taxpayer had obtained a six-month extension of time to file the return (so the return would be due on Sept. 15, 2007, with extensions), the taxpayer could make the election by filing an amended return by Sept. 15, 2008 (12 months from the Sept. 15, 2007, extended due date of the return).


The automatic 12-month extension applies only to regulatory elections under the following sections:

  1. Section 444 (election to use a tax year other than the required year);
  2. Section 472 (election to use the LIFO inventory method);
  3. Sections 505 and 508 (requirement that certain types of tax-exempt organizations notify the IRS of their claims for tax exemption within 15 months of their operations and file exemption applications under sections 501(c)(9), 501(c)(17), 501(c)(20), or 501(c)(3));
  4. Section 528 (election to be treated as a homeowners’ association);
  5. Section 754 (election to make adjustment of basis on partnership transfers and distributions);
  6. Section 2032A(d)(1) (election to specially value qualified real property where the Service has not yet begun an examination of the filed return); and
  7. Sections 2701(c)(3)(C)(i) and (ii) (chapter 14 gift tax elections regarding qualified payments in the case of transfers of interests in corporate stock or partnerships) (Treas. Reg. § 301.9100-2(a)(2)).

In order to take advantage of the 12-month extension, a taxpayer is required to take a “corrective action.” Corrective action means taking the necessary steps to file the election in accordance with the statute, regulation, or other published ruling. For elections required to be filed with a return, it includes filing an original or amended return for the year the election should have been made and attaching the appropriate election documentation. The IRS may invalidate the election if the taxpayer files the return in a manner inconsistent with the election or if the taxpayer has not complied with all other requirements for making the election for the year the election should have been made and all affected years (Treas. Reg. § 301.9100-2(c)).


The document filed to obtain an automatic extension must contain the statement “Filed pursuant to §301.9100-2” at the top and must be sent to the same address as the filing to make the election would have been sent if it had been timely. A ruling request is not required for an automatic extension (Treas. Reg. § 301.9100-2(d)).


An automatic six-month extension is available for certain regulatory or statutory elections. This is an automatic six-month extension granted for either regulatory or statutory elections the due dates of which are the due date of the return or the due date of the return including extensions. This six-month extension is available only if the taxpayer timely filed the return for the year the election should have been made (Treas. Reg. § 301.9100- 2(b)). (Note that the 12-month extension does not require the timely filing of a return.) The six-month extension does not apply to elections that the taxpayer must make by the due date of the return excluding extensions.


Example 2: A taxpayer files its return on March 15, 2007, its due date, and fails to make an election. The election is required to be made with the return. The taxpayer may file an amended return by Sept. 15, 2007, six months from the March 15 due date of the return.


This six-month extension is not particularly generous. It seems mainly oriented toward taxpayers who file early and fail to make an election that they were required to make when they filed their return. It basically allows those taxpayers to file an amended return, making the election, no later than the time they initially had to file the return if they had requested an extension of their return.


The same corrective actions and procedures are required for the six-month extension as are required for the 12-month extension.



The Service may make a reasonable extension of time under an election, which cannot exceed more than six months (unless the taxpayer is outside the United States, which might justify a longer election). All the requirements discussed below, including the good faith of the taxpayer and the conclusion that the extension of the election deadline will not prejudice the interests of the government, must be established before the IRS will grant this extension. Extensions may not be granted under certain subtitles of the Code (excise taxes, Joint Committee on Taxation, presidential campaigns, and trust funds). Finally, these general rules do not apply for elections that are expressly excepted for relief or where alternative relief is available from a statute, a regulation, or other published rulings (Treas. Reg. §§ 301.9100-1(c) and (d)).


A taxpayer may contest the Service’s denial of 9100 relief in court. See Vines, 126 TC 279 (2006), where a trader was denied mark-to-market accounting on account of a late election, resulting in capital losses on securities trades he had made. (Had a mark-to-market election been made, the losses would have been ordinary.) The trader was not aware of the ability to elect mark-to-market treatment and as a result failed to make the election by April 15 of the year in which the election was required to be made (as noted above). The court found that the taxpayer was entitled to 9100 relief because he acted reasonably and in good faith and the interests of the government were not prejudiced by the granting of such relief.



Taxpayers who wish to receive an extension of time for making regulatory elections that do not comply with the rules for automatic relief must apply for relief under Treas. Reg. § 301.9100-3. (Note that this provision covers only regulatory elections; it does not apply to statutory elections.) The taxpayer must provide evidence to establish that he or she acted reasonably and in good faith and that the granting of relief will not prejudice the government’s interests. The taxpayer must obtain a private letter ruling from the IRS and pay a user fee for requesting the ruling.


The reasonableness and good faith standards are met if the taxpayer:

  1. Requests relief prior to the Service’s discovery of the failure to make the regulatory election;
  2. Failed to make the election due to intervening events beyond the taxpayer’s control;
  3. Failed to make the election because, after exercising reasonable diligence (accounting for the taxpayer’s experience and complexity of the issue), the taxpayer was unaware of the need for the election;
  4. Reasonably relied on the written advice of the IRS; or
  5. Reasonably relied on a qualified tax professional who failed to make, or to advise the taxpayer to make, the election.

If the taxpayer knew or should have known that the professional was not competent to provide advice regarding the regulatory election or was unaware of all relevant information, reasonable reliance on a tax professional is unavailable (Treas. Reg. §§ 301.9100-3(b)(1) and (2)).


A taxpayer is deemed to have not acted reasonably or in good faith if the taxpayer: 

  1. Seeks to alter a return position for which a section 6662 accuracy-related penalty has been or could be imposed at the time of the relief request and the new position requires or permits a regulatory election for which relief is requested;
  2. Chose not to file the election and was informed, in all material respects, of the required election and related tax consequences; or
  3. Uses hindsight in requesting relief. Hindsight means that specific facts have changed since the due date for making the election that make the election advantageous to the taxpayer. Strong proof is required to show that the decision to seek relief did not involve hindsight (Treas. Reg. § 301.9100-3(b)(3)).


The Service will grant a reasonable extension only when the interests of the government will not be prejudiced by the relief (Treas. Reg. § 301.9100-3(c)(1)). If granting the relief will result in a lower tax liability (in the aggregate), for all years affected by the election, than if the taxpayer had made a timely election, the interests of the government are prejudiced. (Note that this does not provide that prejudice exists if the relief will reduce the taxpayers’ taxes. Instead, this applies only if the tax liability is lower than if the taxpayer had made a timely election.) The time value of money is taken into account in determining whether a lower tax liability results. In addition, if more than one taxpayer’s consequences are affected, the government’s interests are prejudiced if granting the extension may result in those taxpayers (in the aggregate) having a lower tax liability than if they had made a timely election (Treas. Reg. § 301.9100-3(c)(1)(i)).


If the year the taxpayer should have made the election (or any years affected thereby) is closed prior to receipt of a ruling granting relief, the interests of the government are prejudiced. The Service may condition relief on receiving a statement from an independent auditor certifying that the government’s interests are not prejudiced (Treas. Reg. § 301.9100-3(c)(1)(ii)).


The government’s interests are deemed to be prejudiced (except in unusual and compelling circumstances) if the accounting method regulatory election requires advance written consent or a section 481(a) adjustment (or such an adjustment would be required if the change occurred in a later tax year than the tax year it should have been made).


Example 3—election not requiring adjustment under section 481(a): T prepares its own return for 2007. T is unaware that a particular accounting method regulatory election is available and fails to make the election. Instead, T chooses another permissible accounting method. The underlying accounting method regulation provides that the particular accounting method is made on a cutoff basis, without an adjustment under section 481. In 2008, T requests 9100 relief to make the accounting method election late.


If T were granted an extension of time to make the election, T would not pay less than if it had made a timely election. Therefore, the government’s interests are deemed not to be prejudiced because the election does not require an adjustment under section 481 (Treas. Reg. § 301.9100-3(f), Example (4)).


Example 4—election requiring adjustment under section 481(a): Assume the same facts as in Example 3, except the underlying accounting method regulation provides that the particular accounting method election requires an adjustment under section 481.


The interests of the government are deemed to be prejudiced except in unusual or compelling circumstances because the election requires an adjustment under section 481 (Treas. Reg. § 301.9100-3(f), Example (5)).


Prejudice is deemed if an election would permit a change from an impermissible method of accounting that is an issue under consideration by examination, appeals, or a federal court and the change would provide a more favorable method or terms and conditions than if the change were made as part of an examination or provides a more favorable method of accounting or terms and conditions if the election is made by a certain date or tax year (Treas. Reg. § 301.9100- 3(c)(2)). The interests of the government are also deemed to be prejudiced (except in unusual and compelling circumstances) if an election is an accounting period regulatory election other than a section 444 election and the request is filed more than 90 days after the due date for filing the Form 1128, Application to Adopt, Change, or Retain a Tax Year (Treas. Reg. § 301.9100-3(c)(3)).



A taxpayer waives any objection to a second examination of the issues subject to the relief request (and any correlative adjustments) if an extension of time is granted (Treas. Reg. § 301.9100-3(d)(1)). The period of limitation for assessment is not tolled upon the filing of a relief request; thus, the IRS may require the taxpayer to consent to an extension of the period of limitation for the year in which the regulatory election should have been made (and any affected years) (Treas. Reg. § 301.9100-3(d)(2)).



A relief request is a request for a letter ruling, and the taxpayer must submit it in accordance with the letter ruling requirements, including the applicable user fee (Treas. Reg. § 301.9100-3(e)(5); see Rev. Proc. 2008-1).


A person with personal knowledge of the facts and circumstances must submit a signed, detailed affidavit describing the failure to make a timely election and the discovery of the failure. If the taxpayer relied on a qualified professional, the affidavit must describe the engagement and responsibilities of that person and the extent of the taxpayer’s reliance on him or her. The affidavit must include a penalty of perjury statement (Treas. Reg. § 301.9100-3(e)(2)).


The taxpayer must submit detailed affidavits from individuals possessing knowledge or information about the failure to make a valid regulatory election and the discovery of that failure. Included among these individuals are the taxpayer’s return preparer, any individual substantially contributing to the preparation of the return, and any accountant or attorney, knowledgeable in tax matters, who advised the taxpayer regarding the election. The engagement and responsibilities of the affiant, and any advice they provided to the taxpayer, must be included along with the individual’s name, current address, and taxpayer identification number. Again, the penalties of perjury statement must be included (Treas. Reg. § 301.9100-3(e)(3)).


The taxpayer must include additional information in the relief request, such as whether the year the taxpayer should have made the election (or any affected years) is under examination by a district director, appeals office, or federal court. If the IRS commences an examination while the relief request is pending, the taxpayer must notify the IRS office considering the request. The taxpayer must state when the applicable documentation for making the election was required to be filed and when it was actually filed. In addition, the taxpayer must provide copies of any documents referring to the election and, if requested, a copy of the taxpayer’s return for any year for which the taxpayer requests an election extension, as well as any return affected by the election. Finally, when applicable, the taxpayer must also submit a copy of any other taxpayers’ returns that the election affects (Treas. Reg. § 301.9100-3(e)(4)).



To cure what otherwise may be a missed opportunity, the 9100 relief provisions may provide an extended period to make certain tax elections. A taxpayer can obtain administrative relief for late elections using the automatic extension provisions or by way of the IRS letter ruling process. However helpful 9100 relief may be, practitioners should be mindful of their clients’ election due dates and think carefully about advising whether to make a particular tax election. This can be crucial because once a taxpayer makes an election, it is generally irrevocable without the advance consent of the commissioner.


Timothy J. Watt , CPA, is a tax manager with Bennett Thrasher PC in Atlanta, and Thomas L. Evans, Esq., CPA, is a partner with Kirkland & Ellis LLP in Chicago.   


This article originally appeared in the October 2008 issue of The Tax Adviser , the AICPA’s monthly journal of tax planning, trends and techniques. AICPA members can subscribe to The Tax Adviser for a discounted price. Call 800-513-3037 or e-mail for a subscription to the magazine or to become a member of the Tax Section.


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