IRS written determination 201510036

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 201510036
Release Date: 3/6/2015
Index Number: 9100.02-04
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In Re: Request for extension of time under
§§ 301.9100-1 and 301.9100-3 of the
Procedure and Administration Regulations to
file an election pursuant to § 59(e) of the
Internal Revenue Code
LEGEND:
Taxpayer=---------------------------------
----------------------
Date A=------------------
Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
--------------------------, ID No. -----------
Telephone Number:
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Refer Reply To:
CC:PSI:B06
PLR-127218-14
Date:
November 17, 2014
Dear ------------------:
This letter responds to a letter dated July 9, 2014, submitted on behalf of
Taxpayer requesting an extension of time pursuant to §§301.9100-1 through 301.9100-
3 of the Procedure and Administration Regulations to make an election under §59(e) of
the Internal Revenue Code and §1.59-1(b) of the Income Tax Regulations to deduct
ratably over a 60-month period its intangible drilling and development costs (IDC)
described in §263(c) for its taxable year ended Date A.
FACTS
Taxpayer represents that the facts are as follows:
Taxpayer is a U.S. onshore oil and gas company focused on the acquisition and
development of oil and gas resource plays. Taxpayer’s annual accounting period is the
calendar year, and its overall method of accounting is the accrual method. However,
during its taxable year ended Date A, Taxpayer was a fiscal year taxpayer.
Taxpayer intended to make an election under §59(e) and §1.59-1(b) for its
taxable year ended Date A to amortize ratably over a 60-month period its IDC described
in § 263(c). Taxpayer has made representations explaining why the election under
§ 59(e) was not timely filed.

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Taxpayerrepresents that granting the relief requested will not result in Taxpayer
having a lower tax liability in the aggregate for the tax years affected by the election
than Taxpayerwould have had if the electionhad been timely made(taking into account
the time value of money). Taxpayeralso represents that it acted in good faithand that
granting relief will not prejudice the interests of the Government.
LAW AND ANALYSIS
Section 59(e)(1) allows a taxpayer to deduct ratably over a specified period any
qualified expenditure to which an election under §59(e)(1) applies.
Section 59(e)(2) includes in the definition of “qualified expenditure” any amount
which, but for an election under §59(e), would have been allowable as a deduction
(determined without regard to §291) for the taxable year in which paid or incurred under
§ 263(c) (relating to intangible drilling and development expenditures).
Section 59(e)(1) allows a taxpayer to deduct intangible drilling and development
expenditures ratably over the 60-month period beginning with the month in which such
expenditure was paid or incurred.
Section 59(e)(3) specifically prohibits the deduction of the qualified expenditures
under any other section of the Code if this option is elected. Section 59(e)(4)(A) allows
a taxpayer to make an election under §59(e)(1) for any portion of any qualified
expenditure.
Section 1.59-1(b)(1) prescribes the time and manner of making the election
under §59(e). According to §1.59-1(b)(1), an election under §59(e) shall only be
made by attaching a statement to the taxpayer’s income tax return (or amended return)
for the taxable year in which the amortization of the qualified expenditures subject to the
§ 59(e) election begins. The taxpayer must file the statement no later than the date
prescribed by law for filing the taxpayer’s original income tax return (including any
extensions of time) for the taxable year in which the amortization of the qualified
expenditures subject to the §59(e) election begins.
Under §301.9100-1(c), the Commissioner in exercising the Commissioner’s
discretion may grant a reasonable extension of time under the rules set forth in
§§ 301.9100-1 through 301.9100-3 to make a regulatory election, or a statutory election
(but no more than six months except in the case of a taxpayer who is abroad), under all
subtitles of the Code, except subtitles E, G, H, and I.
Sections 301.9100-1, 301.9100-2, and 301.9100-3 provide the standards the
Commissioner will use to determine whether to grantan extension of time to make a
regulatory election. Section 301.9100-1(a).
Section 301.9100-2 allows automatic extensions of time for making certain
elections. Section 301.9100-3 allows extensions of time for making elections that do
not meet the requirements of §301.9100-2.

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The Commissioner will grant requests for relief under §301.9100-3 when the
taxpayer provides the evidence (including affidavits described in §301.9100-3(e)) 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. Section 301.9100-3(a).
Section 301.9100-3(b)(1) provides, in part, that a taxpayer is deemed to have
acted reasonably and in good faith if thetaxpayer requests relief under §301.9100-3
before the failure to make the regulatory election is discovered by the Internal Revenue
Service or the taxpayer 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.
Section 301.9100-3(b)(3) provides, in part, that a taxpayer is deemed to have not
acted reasonably or in good faith if the taxpayer seeks to alter a return position for
which an accuracy-related penalty has been or could be imposed under §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; the taxpayer was informed in
all material respects of the required election and related tax consequences, but chose
not to file the election; or the taxpayer uses hindsight in requesting relief.
Section 301.9100-3(c)(1)(i) provides, in part, that the Government’s interests are
considered 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). Additionally, §301.9100-3(c)(1)(ii) provides, in part, that the Government’s
interests ordinarily are 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 §6501(a) before the taxpayer’s receipt of a ruling granting relief under
§ 301.9100-3.
CONCLUSION
Based solely on the facts and representations submitted, we conclude that the
requirements of §§301.9100-1 through 301.9100-3 have been satisfied. Accordingly,
the Commissioner grants Taxpayer an extension of time of 60 calendar days from the
date of this letter to make the election under §59(e) and §1.59-1(b) to deduct ratably
over a 60-month period its IDC described in §263(c) for its taxable year ended Date A.
The §59(e) election must comply with the manner-of-election requirements of
§ 1.59-1(b). Section 1.59-1(b) requires, in part, that an election under §59(e) be made
by attaching a statement to the taxpayer’s income tax return (or amended return) for the
taxable year in which the amortization of the qualified expenditures subject to the
§ 59(e) election begins. The statement must include the taxpayer’s name, address, and
taxpayer identification number, and the type and amount of qualified expenditures

PLR-127218-14
4
identified in §59(e)(2) that the taxpayerelects to deduct ratably over the applicable
period described in §59(e)(1). Taxpayer should attach a copy of this letter to the tax
return. We have enclosed a copy for that purpose.
The rulings contained in this letter are based upon information and
representations submitted by Taxpayer and Taxpayer’s representative and
accompanied by a penalties 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 a ruling, it is subject to verification on examination.
Except as specifically set forth above, we express no opinion concerning the
federal tax consequences of the facts described above under any other provisions of
the Code and the regulations thereunder. Specifically, we express or imply no opinion
on whether Taxpayer satisfies the requirements of §263(c) or §59(e).
This letter ruling is directed only to the taxpayer requesting it. Section 6110(k)(3)
provides that it 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 to Taxpayer’s authorized representative. We also are sending a copy
of this letter to the appropriate Industry Director, LB&I. A copy of this ruling must be
attached to any income tax return to which it is relevant. Alternatively, taxpayers filing
their returns electronically may satisfy this requirement by attaching a statement to their
return that provides the date and control number of the letter ruling.
Sincerely,
Associate Chief Counsel
(Passthroughs & Special Industries)
By:_______________________________
Brenda M. Stewart
Senior Counsel, Branch 6
Office of Associate Chief Counsel
Passthroughs & Special Industries
Enclosures (2):
Copy of this letter
Copy for § 6110 purpose
cc: