IRS Issues Rev. Proc. 2009-41

[kcjenkins]

IRS Issues Rev. Proc. 2009-41

The IRS issued new rules for eligible entities that do not timely file classification elections under I.R.C. section 7701. The new rules extend late entity classification relief to both initial classification elections and changes in classification elections, and extend the time for filing late entity classification elections to within 3 years and 75 days of the requested effective date of the eligible entity's classification. An entity that does not satisfy the requirements for relief under this revenue procedure may request relief by applying for a letter ruling.

Eligibility for Relief

An entity is eligible for relief under the revenue procedure if the following requirements are met:

(1)(a) the entity failed to obtain its requested classification as of the date of its formation solely because Form 8832 was not filed timely; or

( the entity failed to obtain its requested change in classification solely because Form 8832 was not filed timely); and

(2)(a) the eligible entity seeking an extension of time to make an entity classification election has not filed a federal tax or information return for the first year in which the election was intended because the due date has not passed for that year's federal tax or information return; or

( the eligible entity seeking an extension of time to make an entity classification election timely filed all required federal tax returns and information returns consistent with its requested classification for all of the years the entity intended the requested election to be effective and no inconsistent tax or information returns have been filed by or with respect to the entity during any of the taxable years; and

(3) the eligible entity has reasonable cause for its failure to timely make the entity classification election; and

(4) 3 years and 75 days from the requested effective date of the eligible entity's classification election have not passed.

Effective Date

The effective date of the new revenue procedure is September 28, 2009; however it applies to requests pending with the IRS on September 28, 2009. If an entity has filed a request for a letter ruling seeking relief for a late entity classification election and that letter ruling request is pending in the national office on September 28, 2009, the entity may rely on this revenue procedure, withdraw that letter ruling request and receive a refund of its user fee. However, the national office will process letter ruling requests pending on September 28, 2009, unless, prior to the earlier of November 12, 2009, or the issuance of the letter ruling, the entity notifies the national office that it will rely on this revenue procedure and withdraw its letter ruling request.