IRS has consolidated the provisions of previous revenue procedures for requesting relief for late S elections under Sec. 1362, late qualified subchapter S trust (QSST) elections, late electing small business trust (ESBT) elections, late qualified subchapter S subsidiary (QSub) elections, and late corporate classification elections (Rev. Proc. 2013-30). The new procedure is now the exclusive simplified method for taxpayers to apply for relief for these late elections.
Under the new procedure, S corporations that meet the following requirements are not subject to the three-year, 75-day deadline, but instead have no time limit on requesting relief:
• The corporation is not seeking a late corporate entity classification election;
• The corporation fails to qualify as an S corporation solely because Form 2553 was not timely filed;
• The corporation and all of its shareholders reported their income consistent with S corporation status for the year the election should have been made and all later years;
• At least six months have passed since the corporation filed its first S corporation year tax return;
• The IRS did not notify the corporation and the shareholders of any problem with the S corporation status within six months after the return was filed; and
• The completed election form includes statements from all shareholders from the date the election was to have been effective to the date of the filing stating that they have reported their income consistent with S corporation status.
The new rules are effective Sept. 3, the date they will be published in the Internal Revenue Bulletin, but they apply to requests pending on that date as well as requests received afterward.