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

Troy Lewis

“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,” AICPA Tax Executive Committee chair Troy Lewis wrote in a letter last week. “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 “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. A reduced user fee would also 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.

In addition, Lewis pointed out, 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, along with an analysis of the proposal.

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