IRS written determination 202626005

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: 202626005
Release Date: 6/26/2026
Index Number: 9100.04-00

-------------------------------
-----------------------
--------------
----------------------------

In Re: Request for Extension of Time to Make
the Election Not to be Treated as a Tax-
Exempt Controlled Entity

[Third Party Communication:
Date of Communication: Month DD, YYYY]
Person To Contact:
------------------------, ID No. ------------
Telephone Number:
---------------------
Refer Reply To:
CC:ITA:B06
PLR-120019-25
Date:
March 26, 2026

LEGEND

Date 1 = -------------------------
Taxpayer = -------------------------------------------------------------------------------------
-----------------------
Taxable Year 1 = ---------------------------------------------------
State Z = -------------
Date 2 = ----------------------
X = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
----------
Tax-exempt Entity = -------------------------------------------------------------------------------------
-----------------------
LLC = -----------------------------------------------
Partnership = ------------------------------------------
Advisor = ------------------------------------------------
Date 3 = --------------------------

Dear ----------:

This letter ruling responds to a letter dated Date 1, and subsequent correspondence,
submitted by Taxpayer. Taxpayer requests an extension of time pursuant to
§§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to
make the election under § 168(h)(6)(F)(ii) of the Internal Revenue Code (Code) for
Taxable Year 1.

PLR-120019-25 2

This letter ruling is being issued electronically in accordance with section 7.02(5) of Rev.
Proc. 2025-1, 2025-1 I.R.B. 1, 34.

FACTS

Taxpayer represents the facts are as follows:

Taxpayer is a limited liability company formed under the laws of State Z. Effective Date
2, Taxpayer is treated as a corporation for Federal income tax purposes. Prior to
Taxable Year 1, Taxpayer was treated as a partnership for Federal tax purposes.
Taxpayer uses an accrual method of accounting as its overall method of accounting and
the calendar year as its annual accounting period. Tax-exempt Entity wholly owns
Taxpayer.

Taxpayer owns 50-percent of LLC, which owns 90-percent and is a managing member
of Partnership. Partnership is in the business of X. Partnership placed property into
service in Taxable Year 1. The master lease agreement between LLC and Partnership
stated:

No portion of the [Partnership property] is, or will be, tax-exempt use property
(within the meaning of Code Section 168(h)).

Taxpayer engaged Advisor to prepare its Federal income tax return for Taxable Year 1.
Due to a miscommunication with the previous tax preparer, Advisor was unaware that
Taxpayer required a § 168(h)(6) election for its Federal income tax return for Taxable
Year 1. Accordingly, Advisor prepared a Form 1065, U.S. Return of Partnership
Income, for Taxable Year 1 on behalf of Taxpayer, which was timely filed. Following
this filing, Advisor learned through communications with Taxpayer and Taxpayer’s
previous tax preparer that the § 168(h)(6) election was required for Taxpayer.

Advisor communicated the error to Taxpayer. As a result, Taxpayer filed Form 8832,
Entity Classification Election, requesting relief for a late change of entity classification
election on Date 3. Advisor confirmed by telephone that the entity classification for
Taxpayer to be taxed as a C Corporation was approved and effective as of Date 2.
Subsequently, Taxpayer submitted its letter dated Date 1, requesting this letter ruling.

Because Taxpayer is treated as a C corporation as of Date 2 and is wholly owned by
Tax Exempt Entity, Taxpayer is a tax-exempt controlled entity within the meaning of
§ 168(h)(6)(F)(iii).

Finally, Taxpayer represents that, in requesting this letter ruling, it acted reasonably and
in good faith because Taxpayer reasonably relied on the expertise of Advisor, and that
granting an extension of time to make the election under § 168(h)(6)(F)(ii) will not
prejudice the interests of the Government.

PLR-120019-25 3

RULING REQUESTED

Taxpayer requests that the Internal Revenue Service grant it an extension of time under
§§ 301.9100-1 and 301.9100-3 to file the election under § 168(h)(6)(F)(ii) to not be
treated as a tax-exempt entity beginning with Taxable Year 1.

LAW

Section 167(a) provides that there shall be allowed as a depreciation deduction a
reasonable allowance for the exhaustion, wear and tear, and obsolescence of property
used in the trade or business, or in the production of income. The depreciation
deduction provided by § 167(a) for tangible property placed in service after 1986 is
generally determined under § 168. Under § 168(g)(1)(B), the alternative depreciation
system must be used for any tax-exempt use property as defined in § 168(h).

Section 168(h)(6)(A) provides that, for purposes of § 168(h), if any property which is not
tax-exempt use property is owned by a partnership having both a tax-exempt entity and
a non-tax-exempt entity as partners and any allocation to the tax-exempt entity is not a
qualified allocation, then an amount equal to such tax-exempt entity’s proportionate
share of such property is treated as tax-exempt use property.

Section 168(h)(6)(F)(i) provides that, in general, any tax-exempt controlled entity is
treated as a tax-exempt entity for purposes of §§ 168(h)(5) and (6). Under
§ 168(h)(6)(F)(iii)(I), a corporation (without regard to that subparagraph and
§ 168(h)(2)(E)) constitutes a “tax-exempt controlled entity” if 50-percent or more (in
value) of the corporation’s stock is held by one or more tax-exempt entities (other than a
foreign person or entity).

Under § 168(h)(6)(F)(ii), a tax-exempt controlled entity can elect not to be treated as a
tax-exempt entity. Once made, the election is irrevocable and will bind all tax-exempt
entities holding an interest in the tax-exempt controlled entity. Under § 301.9100-
7T(a)(1), a § 168(h)(6)(F)(ii) election must be made in accordance with the rules
provided in §§ 301.9100-7T(a)(2) and (3).

Under § 301.9100-7T(a)(2)(i), a § 168(h)(6)(F)(ii) election must be made by the due
date of the tax return for the first taxable year in which the election is to be effective.
Section 301.9100-7T(a)(3)(i) provides that the § 168(h)(6)(F)(ii) election must be made
by attaching a statement to the tax return for the taxable year in which the election is to
be effective.

Section 301.9100-1(c) provides that the Commissioner of Internal Revenue (the
Commissioner) has the 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.

PLR-120019-25 4

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will
use to determine whether to grant an extension of time to make a regulatory election.
Section 301.9100-2 provides automatic extensions of time for making certain elections.
Section 301.9100-3 provides extensions of time for making elections that do not meet
the requirements of § 301.9100-2.

Section 301.9100-1(b) defines a regulatory election as one whose due date is
prescribed by regulations in the Federal Register, a revenue ruling, revenue procedure,
notice, or announcement published in the Internal Revenue Bulletin. Because the due
date of the election is prescribed by § 301.9100-7T(a)(2)(i), the requested
§ 168(h)(6)(F)(ii) election is a regulatory election.

Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 will be
granted when a taxpayer provides evidence to establish to the satisfaction of the
Commissioner that the taxpayer acted reasonably and in good faith, and that the
granting of relief will not prejudice the interests of the Government.

CONCLUSION

Based solely on the facts as represented and the applicable law, we conclude that the
requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Taxpayer is
granted an extension of 60 calendar days from the date of this letter ruling to file the
election statement with its amended return containing the information required by
§ 301.9100-7T(a)(3) for the election to be effective in Taxable Year 1.

Taxpayer must attach a copy of this letter ruling to the election statement. Further, this
letter ruling should be attached to all subsequent returns (and amended returns) for all
taxable years to which this letter ruling is relevant. If Taxpayer files its amended return
electronically, it may satisfy this requirement by attaching a statement to its amended
return that provides the date and control number of this letter ruling. Pursuant to
§ 301.9100-7T(a)(3)(ii), a copy of this letter ruling and the § 168(h)(6)(F)(ii) election
statement also should be attached to the Federal income tax returns of each of the tax-
exempt shareholders or beneficiaries of Taxpayer.

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 a ruling, it is subject to verification on examination.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides
that it may not be used or cited as precedent.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter. We express no opinion regarding the tax treatment of the instant transaction

PLR-120019-25 5

under the provisions of any other sections of the Code or regulations that may be
applicable, or regarding the tax treatment of any conditions existing at the time of, or
effects resulting from, the instant transaction.

Pursuant to the Form 2848, Power of Attorney and Declaration of Representative, on
file, we are sending a copy of this letter to Taxpayer’s authorized representative. We
are also sending a copy of this letter ruling to the appropriate Service operating division
official.

Sincerely,

Amy S. Wei
Senior Technician Reviewer, Branch 7
Office of Associate Chief Counsel
(Income Tax & Accounting)

cc: ----------------------------------------------------------------------

-----------------------------------------------------------------------------------------