Simplified Procedures for S corporations Seeking to Resolve Common Tax Issues and Avoid the Need to Request a Private Letter Ruling (“PLR”) from the Internal Revenue Service

Recently issued Revenue Procedure 2022-19 provides simplified procedures for S corporations seeking to resolve common tax issues and avoid the need to request a private letter ruling (“PLR”) from the Internal Revenue Service.

An S Corporation is defined as a “small business corporation” for which an election, made under Internal Revenue Code Section 1362(a), is in effect. Once an S election is filed, it remains in effect throughout a corporation’s existence. However, S status may terminate in certain situations, including when certain eligibility rules under Section 1361 are not met.

The six issues for which more efficient and inexpensive solutions have been provided in Rev. Proc. 2022-19 are as follows:

*One class of stock requirement and governing provisions
*Disproportionate distributions
*Inadvertent errors or omissions on election Forms 2553 or 8869
*Missing administrative acceptance letters for S elections
*Federal income tax filings that are inconsistent with an S election
*Non-identical governing provisions that cause an S corporation to have more than one class of stock

For taxpayers who have pending PLR requests that were postmarked or received by the IRS on or before October 12, 2022, the taxpayer must notify the Associate Chief Counsel whether the taxpayer wants to rely on the new revenue procedure and withdraw the pending PLR request or continue to pursue the pending PLR request. If a taxpayer fails to notify the IRS of its decision, the taxpayer will be deemed to have chosen to continue with the pending request.

In sum, Revenue Procedure 2022-19 reduces burdens on both the IRS and taxpayers, facilitates increased compliance with S election rules by taxpayers, and reduces costs and delays. The procedure also allows S corporations to resolve these frequently encountered issues without the need for the lengthy and expensive PLR process.

The IRS bulletin including Revenue Procedure 2022-19 can be found at the following link: IRB 2022-41 (Rev. 10-11-2022) (irs.gov)

Thank you to Michelle E. Espey for this week’s Tax Tracker post.