Comments on temporary and proposed section 9100 regulations relating to untimely elections.

On June 3, 1991, the Internal Revenue Service held a public hearing on temporary and proposed section 9100 regulations (T.D. 8342 and IA-026-90), relating to extensions of time for making elections and other applications. This letter follows up on Tax Executives Institute's comments at that hearing.

The basic purpose of the proposed regulations is to expand the Commissioner's authority to provide section 9100 relief to taxes other than income taxes. (1) During the hearing, TEI did not take issue with that purpose or challenge the special transitional rules set forth in respect of elections or applications for relief required to be made prior to April 5, 1991 (which properly were questioned by other witnesses). Rather, the Institute testified that the IRS should use the occasion of the proposed regulations to rethink and revamp its basic approach under the section 9100 regulations and the implementing revenue procedure (Rev. Proc. 79-63).

Background

The section 9100 regulations were promulgated pursuant to the IRS's authority under section 7805(a) to issue all "needful rules and regulations." Under the regulations, the Commissioner has discretion to permit an out-of-time election or application where (i) the time for making the election or application is not expressly prescribed by statute; (ii) the request for the extension of time is filed with the Commissioner within a period of time that the Commissioner considers reasonable under the circumstances; and (iii) it is shown to the Commissioner's satisfaction that granting the extension will not jeopardize the government's interest. Moreover, section 9100 relief will be granted only upon a showing of good cause by the taxpayer. Treas. Reg. [section] 1.9100-1(a); [section] 2, Rev. Proc. 79-63, 1979-2 C.B. 578.

Section 4.01 of Rev. Proc. 79-63 sets forth the following factors that are to be taken into consideration in determining whether, under the facts and circumstances of the case, good cause for granting the extension has been shown and the other requirements of the regulations have been met:

* Due diligence of the taxpayer;

* Prompt action by the taxpayer;

* Intent of the taxpayer;

* Prejudice to the interests of the government; and

* Statutory and regulatory objectives.

Although TEI believes that the IRS should properly consider the five factors enumerated in Rev. Proc. 79-63 in determining whether to grant section 9100 relief, we strongly disagree with the statements of another witness at the June 3 public hearing that "Rev. Proc. 79-63 does everything we need it to do" and that it has been "administered quite well." Specifically, we believe that the section 9100 regulations and the revenue procedure have been too frequently applied in a stringent, inequitable manner.

Eliminate the Double

Standard

Perhaps most fundamentally, we believe that the section 9100 regulations have become a tax practitioner, not a taxpayer, relief mechanism: relief has been granted where the failure to make a timely election or application is attributable to an error made by an outside tax practitioner (thereby forestalling possible malpractice claims), but denied where...