26 Cfr 301.9100-3

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Title 26: Internal Revenue
PART 301—PROCEDURE AND ADMINISTRATION
General Rules
§301.9100-3 Other extensions.
(a) In general. Requests for extensions of time for regulatory elections that do not meet the
requirements of §301.9100-2 must be made under the rules of this section. Requests for relief subject
to this section will be granted when the taxpayer provides the evidence (including affidavits described in
paragraph (e) of this section) 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.
(b) Reasonable action and good faith—(1) In general. Except as provided in paragraphs (b)(3)(i)
through (iii) of this section, a taxpayer is deemed to have acted reasonably and in good faith if the
taxpayer—
(i) Requests relief under this section before the failure to make the regulatory election is discovered
by the Internal Revenue Service (IRS);
(ii) Failed to make the election because of intervening events beyond the taxpayer's control;
(iii) Failed to make the election because, after exercising reasonable diligence (taking into account
the taxpayer's experience and the complexity of the return or issue), the taxpayer was unaware of the
necessity for the election;
(iv) Reasonably relied on the written advice of the Internal Revenue Service (IRS); or
(v) 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.
(2) Reasonable reliance on a qualified tax professional. For purposes of this paragraph (b), a
taxpayer will not be considered to have reasonably relied on a qualified tax professional if the taxpayer
knew or should have known that the professional was not—
(i) Competent to render advice on the regulatory election; or
(ii) Aware of all relevant facts.
(3) Taxpayer deemed to have not acted reasonably or in good faith. For purposes of this paragraph
(b), a taxpayer is deemed to have not acted reasonably and in good faith if the taxpayer—
(i) Seeks to alter a return position for which an accuracy-related penalty has been or could be
imposed under section 6662 at the time the taxpayer requests relief (taking into account any qualified
amended return filed within the meaning of §1.6664-2(c)(3) of this chapter) and the new position
requires or permits a regulatory election for which relief is requested;
(ii) Was informed in all material respects of the required election and related tax consequences, but
chose not to file the election; or
(iii) Uses hindsight in requesting relief. If specific facts have changed since the due date for making
the election that make the election advantageous to a taxpayer, the IRS will not ordinarily grant relief. In
such a case, the IRS will grant relief only when the taxpayer provides strong proof that the taxpayer's
decision to seek relief did not involve hindsight.
(c) Prejudice to the interests of the Government—(1) In general. The Commissioner will grant a
reasonable extension of time to make a regulatory election only when the interests of the Government

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will not be prejudiced by the granting of relief. This paragraph (c) provides the standards the
Commissioner will use to determine when the interests of the Government are prejudiced.
(i) Lower tax liability. The interests of the Government are prejudiced if granting relief would result
in a taxpayer having a lower tax liability in the aggregate for all taxable years affected by the election
than the taxpayer would have had if the election had been timely made (taking into account the time
value of money). Similarly, if the tax consequences of more than one taxpayer are affected by the
election, the Government's interests are prejudiced if extending the time for making the election may
result in the affected taxpayers, in the aggregate, having a lower tax liability than if the election had
been timely made.
(ii) Closed years. The interests of the Government are ordinarily prejudiced if the taxable year in
which the regulatory election should have been made or any taxable years that would have been
affected by the election had it been timely made are closed by the period of limitations on assessment
under section 6501(a) before the taxpayer's receipt of a ruling granting relief under this section. The IRS
may condition a grant of relief on the taxpayer providing the IRS with a statement from an independent
auditor (other than an auditor providing an affidavit pursuant to paragraph (e)(3) of this section)
certifying that the interests of the Government are not prejudiced under the standards set forth in
paragraph (c)(1)(i) of this section.
(2) Special rules for accounting method regulatory elections. The interests of the Government are
deemed to be prejudiced except in unusual and compelling circumstances if the accounting method
regulatory election for which relief is requested—
(i) Is subject to the procedure described in §1.446-1(e)(3)(i) of this chapter (requiring the advance
written consent of the Commissioner);
(ii) Requires an adjustment under section 481(a) (or would require an adjustment under section
481(a) if the taxpayer changed to the method of accounting for which relief is requested in a taxable
year subsequent to the taxable year the election should have been made);
(iii) Would permit a change from an impermissible method of accounting that is an issue under
consideration by examination, an appeals office, or a federal court and the change would provide a
more favorable method or more favorable terms and conditions than if the change were made as part of
an examination; or
(iv) Provides a more favorable method of accounting or more favorable terms and conditions if the
election is made by a certain date or taxable year.
(3) Special rules for accounting period regulatory elections. The interests of the Government are
deemed to be prejudiced except in unusual and compelling circumstances if an election is an
accounting period regulatory election (other than the election to use other than the required taxable
year under section 444) and the request for relief is filed more than 90 days after the due date for filing
the Form 1128, Application to Adopt, Change, or Retain a Tax Year (or other required statement).
(d) Effect of amended returns—(1) Second examination under section 7605(b). Taxpayers
requesting and receiving an extension of time under this section waive any objections to a second
examination under section 7605(b) for the issue(s) that is the subject of the relief request and any
correlative adjustments.
(2) Suspension of the period of limitations under section 6501(a). A request for relief under this
section does not suspend the period of limitations on assessment under section 6501(a). Thus, for relief
to be granted, the IRS may require the taxpayer to consent under section 6501(c)(4) to an extension of
the period of limitations on assessment for the taxable year in which the regulatory election should have
been made and any taxable years that would have been affected by the election had it been timely
made.
(e) Procedural requirements—(1) In general. Requests for relief under this section must provide
evidence that satisfies the requirements in paragraphs (b) and (c) of this section, and must provide
additional information as required by this paragraph (e).

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(2) Affidavit and declaration from taxpayer. The taxpayer, or the individual who acts on behalf of the
taxpayer with respect to tax matters, must submit a detailed affidavit describing the events that led to
the failure to make a valid regulatory election and to the discovery of the failure. When the taxpayer
relied on a qualified tax professional for advice, the taxpayer's affidavit must describe the engagement
and responsibilities of the professional as well as the extent to which the taxpayer relied on the
professional. The affidavit must be accompanied by a dated declaration, signed by the taxpayer, which
states: “Under penalties of perjury, I declare that I have examined this request, including accompanying
documents, and, to the best of my knowledge and belief, the request contains all the relevant facts
relating to the request, and such facts are true, correct, and complete.” The individual who signs for an
entity must have personal knowledge of the facts and circumstances at issue.
(3) Affidavits and declarations from other parties. The taxpayer must submit detailed affidavits from
the individuals having knowledge or information about the events that led to the failure to make a valid
regulatory election and to the discovery of the failure. These individuals must include the taxpayer's
return preparer, any individual (including an employee of the taxpayer) who made a substantial
contribution to the preparation of the return, and any accountant or attorney, knowledgeable in tax
matters, who advised the taxpayer with regard to the election. An affidavit must describe the
engagement and responsibilities of the individual as well as the advice that the individual provided to
the taxpayer. Each affidavit must include the name, current address, and taxpayer identification number
of the individual, and be accompanied by a dated declaration, signed by the individual, which states:
“Under penalties of perjury, I declare that I have examined this request, including accompanying
documents, and, to the best of my knowledge and belief, the request contains all the relevant facts
relating to the request, and such facts are true, correct, and complete.”
(4) Other information. The request for relief filed under this section must also contain the following
information—
(i) The taxpayer must state whether the taxpayer's return(s) for the taxable year in which the
regulatory election should have been made or any taxable years that would have been affected by the
election had it been timely made is being examined by a district director, or is being considered by an
appeals office or a federal court. The taxpayer must notify the IRS office considering the request for
relief if the IRS starts an examination of any such return while the taxpayer's request for relief is
pending;
(ii) The taxpayer must state when the applicable return, form, or statement used to make the
election was required to be filed and when it was actually filed;
(iii) The taxpayer must submit a copy of any documents that refer to the election;
(iv) When requested, the taxpayer must submit a copy of the taxpayer's return for any taxable year
for which the taxpayer requests an extension of time to make the election and any return affected by the
election; and
(v) When applicable, the taxpayer must submit a copy of the returns of other taxpayers affected by
the election.
(5) Filing instructions. A request for relief under this section is a request for a letter ruling. Requests
for relief should be submitted in accordance with the applicable procedures for requests for a letter
ruling and must be accompanied by the applicable user fee.
(f) Examples. The following examples illustrate the provisions of this section:
Example 1. Taxpayer discovers own error. Taxpayer A prepares A's 1997 income tax return. A is unaware
that a particular regulatory election is available to report a transaction in a particular manner. A files the 1997
return without making the election and reporting the transaction in a different manner. In 1999, A hires a qualified
tax professional to prepare A's 1999 return. The professional discovers that A did not make the election. A
promptly files for relief in accordance with this section. Assume paragraphs (b)(3) (i) through (iii) of this section do
not apply. Under paragraph (b)(1)(i) of this section, A is deemed to have acted reasonably and in good faith
because A requested relief before the failure to make the regulatory election was discovered by the IRS.

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Example 2. Reliance on qualified tax professional. Taxpayer B hires a qualified tax professional to advise B
on preparing B's 1997 income tax return. The professional was competent to render advice on the election and B
provided the professional with all the relevant facts. The professional fails to advise B that a regulatory election is
necessary in order for B to report income on B's 1997 return in a particular manner. Nevertheless, B reports this
income in a manner that is consistent with having made the election. In 2000, during the examination of the 1997
return by the IRS, the examining agent discovers that the election has not been filed. B promptly files for relief in
accordance with this section, including attaching an affidavit from B's professional stating that the professional
failed to advise B that the election was necessary. Assume paragraphs (b)(3) (i) through (iii) of this section do not
apply. Under paragraph (b)(1)(v) of this section, B is deemed to have acted reasonably and in good faith because
B reasonably relied on a qualified tax professional and the tax professional failed to advise B to make the election.
Example 3. Accuracy-related penalty. Taxpayer C reports income on its 1997 income tax return in a manner
that is contrary to a regulatory provision. In 2000, during the examination of the 1997 return, the IRS raises an
issue regarding the reporting of this income on C's return and asserts the accuracy-related penalty under section
6662. C requests relief under this section to elect an alternative method of reporting the income. Under paragraph
(b)(3)(i) of this section, C is deemed to have not acted reasonably and in good faith because C seeks to alter a
return position for which an accuracy-related penalty could be imposed under section 6662.
Example 4. Election not requiring adjustment under section 481(a). Taxpayer D prepares D's 1997 income tax
return. D is unaware that a particular accounting method regulatory election is available. D files D's 1997 return
without making the election and uses another permissible method of accounting. The applicable regulation
provides that the election is made on a cut-off basis (without an adjustment under section 481(a)). In 1998, D
requests relief under this section to make the election under the regulation. If D were granted an extension of time
to make the election, D would pay no less tax than if the election had been timely made. Assume that paragraphs
(c)(2) (i), (iii), and (iv) of this section do not apply. Under paragraph (c)(2)(ii) of this section, the interests of the
Government are not deemed to be prejudiced because the election does not require an adjustment under section
481(a).
Example 5. Election requiring adjustment under section 481(a). The facts are the same as in Example 4 of
this paragraph (f) except that the applicable regulation provides that the election requires an adjustment under
section 481(a). Under paragraph (c)(2)(ii) of this section, the interests of the Government are deemed to be
prejudiced except in unusual or compelling circumstances.
Example 6. Under examination by the IRS. A regulation permits an automatic change in method of accounting
for an item on a cut-off basis. Taxpayer E reports income on E's 1997 income tax return using an impermissible
method of accounting for the item. In 2000, during the examination of the 1997 return by the IRS, the examining
agent notifies E in writing that its method of accounting for the item is an issue under consideration. Any change
from the impermissible method made as part of an examination is made with an adjustment under section 481(a).
E requests relief under this section to make the change pursuant to the regulation for 1997. The change on a cutoff basis under the regulation would be more favorable than if the change were made with an adjustment under
section 481(a) as part of an examination. Under paragraph (c)(2)(iii) of this section, the interests of the
Government are deemed to be prejudiced except in unusual and compelling circumstances because E seeks to
change from an impermissible method of accounting that is an issue under consideration in the examination on a
basis that is more favorable than if the change were made as part of an examination.
[T.D. 8742, 62 FR 68171, Dec. 31, 1997]

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