AICPA Proposes Reduced User Fee for S Corporation Private Letter Ruling Requests

The American Institute of CPAs (AICPA) has proposed to the Internal Revenue Service (IRS) and the Department of the Treasury that the IRS establish a separate user fee category for private letter ruling requests for S corporations, which would result in lower fees for these requests.

In the May 19 letter, Troy Lewis, CPA, CGMA, chair of the AICPA Tax Executive Committee, wrote, “The AICPA proposes that the Service establish a separate user fee category for private letter rulings under sections 1362(b)(5) and 1362(f) because these rulings should require significantly less time by IRS personnel than most other ruling requests for which a current user fee of $28,300 is generally charged.  We believe that a reduced user fee for ruling letters in these categories will remove a significant disincentive for affected taxpayers to remedy the effects of a late election or inadvertent ineffective election or termination of S corporation or qualified subchapter S subsidiary status.”  Lewis noted that the private letter rulings by S corporations are not optional because they are required to obtain or maintain their S corporation status.

The reduced fee would also “mitigate a potential source of conflict between affected taxpayers and their tax return preparers who are precluded from signing their tax returns without an assurance that remedial action will be taken to address the underlying issue,” Lewis wrote.  And, a reduced user fee would bring the cost of such rulings in line with similar ruling requests seeking other types of late election relief under the Treas. Reg. § 301.9100-3 standards.

Additionally, Lewis wrote, the AICPA believes a reduced user fee can be justified notwithstanding the IRS’s recently announced “full cost” policy,” which was included as part of the agency’s announcement that it has completed its 2015 biennial review of its user fees in order to determine whether such fees recover the cost of providing the relevant services.

The letter includes an explanation of the background for the AICPA’s proposal, as well as an analysis of the proposal.