Section 168; MACRS

Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 202448005
Release Date: 11/29/2024
Index Number: 9100.04-00
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
---, ID No. ---
Telephone Number:
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Refer Reply To:
CC:ITA:B07
PLR-104573-24
Date:
August 29, 2024
Re: Request for Extension of Time to Make the Election Not to Deduct the Additional
First Year Depreciation
LEGEND:
P = ---
S1 = ---
S2 = ---

X = ---
Dear ---:
This letter ruling refers to a letter dated March 8, 2024, and subsequent correspondence, submitted on behalf of P, S1, and S2, by their authorized representative, requesting an extension of time to make the election not to deduct additional first year depreciation under § 168(k) of the Internal Revenue Code (Code) for certain qualified property placed in service during the Year1 and Year2 taxable years. This request is made pursuant to §§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations. Hereinafter, P, S1, and S2 are collectively PLR-104573-24 2 referred to as “Taxpayer”. This letter ruling is being issued electronically as permissible under section 7.02(5) of Rev. Proc. 2024-1, 2024-1 I.R.B. 1, 34.
Unless provided otherwise, all references in this letter ruling to § 168(k) are treated as a reference to § 168(k) as in effect after amendment by the Tax Cuts and Jobs Act, Pub. L. 115-97, 131 Stat. 2054 (December 22, 2017). Further, all references to § 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

P represents that the facts are as follows:
P is the common parent of an affiliated group that includes S1 and S2. P files a consolidated federal income tax return on a Form 1120, U.S. Corporation Income Tax Return, on a fiscal year basis. Taxpayer’s overall method of accounting is an accrual method. Taxpayer is subject to the Financial Accounting Standards Board’s Accounting Standards Codification.
During the Year1 and Year2 taxable years, Taxpayer placed in service 5-year property that is qualified property under § 168(k)(1).
On Date1, Taxpayer engaged Firm to prepare its consolidated federal income tax returns for the Year1 and Year2 taxable years (collectively, the “Tax Returns”) and other income tax returns. Firm has assisted Taxpayer with its return preparation since Date2.
Taxpayer has an internal accounting team that does not have expertise in federal income taxes. Taxpayer relied on Firm’s expertise to prepare the Tax Returns and advise Taxpayer on advantageous tax elections.
Firm prepared the Tax Returns and provided them to Taxpayer for review. Firm discussed the Tax Returns with Taxpayer and its internal accounting team. During its preparation of the Tax Returns, and its discussion of the Tax Returns with Taxpayer and its internal accounting team, Firm did not advise Taxpayer of the option to elect out of additional first year depreciation under § 168(k)(7) for qualified property placed in service during Year1 or Year2. Taxpayer was not aware of the § 168(k)(7) election not to claim the additional first year depreciation for a class of qualified property.
Taxpayer timely filed the Tax Returns, prior to the respective extended due dates. On the Tax Returns, Taxpayer represents that it deducted the additional first year depreciation for the 5-year property that is qualified property under § 168(k)(1) and placed in service during the Year1 or Year2 taxable years. Taxpayer represents that the additional first year depreciation deducted for the 5-year qualified property resulted in a significant net operating loss (NOL) in the Year1 and Year2 taxable years, and as a PLR-104573-24 3 result, Taxpayer reported a financial position that Taxpayer represents does not accurately reflect its financial position.
On Date3, Firm notified Taxpayer that Firm was no longer providing tax return preparation services for taxpayers engaged in the trade or business of X. Taxpayer sought to engage a new firm to prepare its tax returns through a request for proposal (RFP). Through the RFP process, Taxpayer learned from respondents to the RFP that Taxpayer had the option to elect out of additional first year depreciation under § 168(k)(7) for its 5-year property that is qualified property placed in service in the Year1 and Year2 taxable years, and that making such election would have permitted Taxpayer to avoid negative implications for its financial reporting.
RULING REQUESTED
Accordingly, Taxpayer requests an extension of time pursuant to §§ 301.9100-1 and 301.9100-3 to make an election under § 168(k)(7) not to deduct the additional first year depreciation under § 168(k)(1) with respect to its 5-year class of property that is qualified property and placed in service by Taxpayer during the Year1 and Year2 taxable years.

# LAW

Section 168(k)(1) allows, for the taxable year in which 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 that, in general, the applicable percentage for qualified property placed in service by the taxpayer after September 27, 2017, and before January 1, 2023 (before January 1, 2024, for qualified property described in § 168(k)(2)(B) and (C)), is 100 percent.
Section 168(k)(7) provides that a taxpayer may elect not to deduct additional first year depreciation for any class of property placed in service during the taxable year.
Section 1.168(k)-2(f)(1)(i) provides that if this election is made, the election applies to all qualified property that is in the same class of property and placed in service in the same taxable year, and no additional first year depreciation deduction is allowable for the property placed in service during the taxable year in the class of property. The term "class of property" is defined in § 1.168(k)-2(f)(1)(ii) as meaning, among other things, each class of property described in § 168(e) (for example, 5-year property).
Section 1.168(k)-2(f)(1)(iii)(A) provides that the election not to deduct additional first year depreciation must be made by the due date (including extensions) of the federal tax return for the taxable year in which the qualified property is placed in service by the taxpayer.
PLR-104573-24 4
Section 1.168(k)-2(f)(1)(iii)(B) provides that the election not to deduct additional first year depreciation must be made in the manner prescribed on Form 4562, Depreciation and Amortization, and its instructions. The instructions to Form 4562 for the Year1 and Year2 taxable years provide that the election not to deduct the additional first year depreciation is made by attaching a statement to the taxpayer's timely filed 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.
Sections 301.9100-1 through 301.9100-3 provide the standards the
Commissioner of Internal Revenue will use to determine whether to grant an extension of time to make a regulatory election. Under § 301.9100-1(a), 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 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides rules for requesting extensions of time for making regulatory elections that do not meet the requirements of § 301.9100-2.
Section 301.9100-1(b) defines a regulatory election as an election whose due date is prescribed by regulations published in the Federal Register, a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.
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 the grant of relief will not prejudice the interests of the government.

# 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, Taxpayer is granted an extension of 60 calendar days from the date of this letter ruling to make the election not to deduct the additional first year depreciation under § 168(k) for the 5-year class of property placed in service by Taxpayer during the Year1 and Year2 taxable years.
This election must be made by Taxpayer filing an amended consolidated federal income tax return for each of the Year1 and Year2 taxable years, with a statement indicating that Taxpayer is electing not to deduct the additional first year depreciation for the 5-year property placed in service by Taxpayer during the taxable year.
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 (including other subsections of § 168). Specifically, no opinion is expressed or implied on whether any item of depreciable property placed in service by PLR-104573-24 5 Taxpayer during the Year1 or Year2 taxable years is eligible for the additional first year depreciation deduction under § 168(k).
The ruling contained in this letter is 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 ruling, it is subject to verification on examination.
A copy of this letter ruling 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 their return that provides the date and control number of the letter ruling.
This letter ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that this ruling 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 Taxpayer’s authorized representatives. We are also sending a copy of this letter ruling to the appropriate operating division director.
Sincerely,
Elizabeth R. Binder
ELIZABETH R. BINDER
Senior Counsel, Branch 7
Office of the Associate Chief Counsel
(Income Tax & Accounting)
Enclosures (2): copy of this letter copy for section 6110 purposes
PLR-104573-24 6 cc: ---
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