Bulletin No. 2022–41

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2022–41

October 11, 2022

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

ADMINISTRATIVE, INCOME TAX

Notice 2022-42, page 276.

This Notice announces that the Department of the Treasury and the Internal Revenue Service intend to amend

the regulations under section 901 with respect to the

application of the noncompulsory payment regulations

to certain amended Puerto Rico tax decrees.

Notice 2022-44, page 277.

Optional special per diem rates. This notice provides

the 2022-2023 special per diem rates for taxpayers

to use in substantiating the amount of ordinary and

Finding Lists begin on page ii.

necessary business expenses incurred while traveling

away from home. The notice includes (1) the special

transportation industry rate, (2) the rate for the incidental expenses only deduction, and (3) the rates and

list of high-cost localities for the high-low substantiation

method.

Rev. Proc. 2022-19, page 282.

This revenue procedure provides taxpayer assistance

procedures, including under § 1362(f) of the Internal

Revenue Code (Code), to allow S corporations and their

shareholders to resolve frequently encountered issues

with certainty and without requesting a private letter ruling (PLR) issued by the Internal Revenue Service (IRS).

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

October 11, 2022 

Bulletin No. 2022–41

Part III

Application of

Noncompulsory

Payment Regulations to

Amendments of Certain

Puerto Rico Tax Decrees;

Revocation of

Notice 2011-29

Notice 2022-42

SECTION 1. PURPOSE

This Notice announces that the Department of the Treasury (Treasury Department) and the Internal Revenue Service

(IRS) intend to amend the regulations

under section 901 with respect to the

application of the noncompulsory payment regulations to certain amended

Puerto Rico tax decrees.

SECTION 2. BACKGROUND

The Treasury Department and the IRS

are aware that certain U.S. taxpayers with

operations in Puerto Rico (including operations conducted indirectly through subsidiaries or other affiliates) have negotiated long-term tax agreements with Puerto

Rico, known as tax decrees, that provide

more favorable tax treatment than under

the generally applicable Puerto Rico tax

laws. Among other benefits, these tax

decrees provide for reduced rates of tax

levied on U.S. taxpayers and their affiliates performing certain activities in Puerto

Rico. However, the tax decrees do not

modify the application of the modified

effectively connected income rules (Modified ECI Rules) of section 1123(f)(3)(B)

of the Puerto Rico Internal Revenue Code

of 1994, as amended (1994 PR IRC) and

incorporated by reference into the Puerto

Rico Internal Revenue Code of 2011,

as amended (2011 PR IRC), by section

1035.05 of the 2011 PR IRC. The Modified ECI Rules impose a tax on income

deemed to be earned in connection with

a Puerto Rico trade or business (Modified

ECI Tax). Similarly, the tax decrees do not

modify the application of the excise tax

(Excise Tax) on the acquisition of certain

October 11, 2022

personal property manufactured or produced in Puerto Rico and amounts paid for

certain services performed in Puerto Rico

that is imposed by sections 2101 through

2106 of the 1994 PR IRC and incorporated by reference into the 2011 PR IRC

by section 1035.05 of the 2011 PR IRC.

Notice 2011-29 states that the Excise

Tax raises novel issues that require further

study and that, pending the resolution of

those issues, the IRS will not challenge a

taxpayer’s position that the Excise Tax is

a tax paid in lieu of an income tax under

section 903. Notice 2011-29 further provides that any change in the foreign tax

credit treatment of the Excise Tax will

apply to Excise Tax paid or accrued after

the date that further guidance is issued.

On December 28, 2021, final regulations were filed with the Federal Register, including regulations under Treas.

Reg. §§1.901-2(b)(5) and 1.903-1(c)(1)

(iv). These final regulations provide that

a foreign tax imposed on a nonresident is

a foreign income tax within the meaning

of Treas. Reg. §1.901-2(a)(2) for which a

credit is allowable only if the tax is based

on (1) the nonresident’s activities in the

taxing jurisdiction, (2) income properly

sourced to the taxing jurisdiction, or (3)

the sale or exchange of certain property

located in the taxing jurisdiction. T.D.

9959 (87 FR 276, 339-340, 357-358).

Under the final regulations, the Modified

ECI Tax and the Excise Tax do not constitute foreign income taxes. Therefore, a

credit would not be allowed for those taxes

under section 901. The final regulations

under Treas. Regs. §§1.901-2 and 1.903-1

apply to any Modified ECI Tax and Excise

Tax paid or accrued (depending on the taxpayer’s method of accounting for foreign

income taxes) in taxable years beginning

on or after January 1, 2023. Treas. Reg.

§§1.901-2(h) and 1.903-1(e).

On June 30, 2022, Act 52-2022 was

enacted into law in Puerto Rico. Act

52-2022 allows taxpayers to amend their

existing tax decrees to replace the existing income tax and royalty withholding

tax framework with a new income tax and

royalty withholding tax framework. If a

taxpayer elects to amend an existing tax

decree, the remaining term of the amended

276

tax decree is extended by 15 years. Taxpayers that opt to amend their existing tax

decrees pursuant to Act 52-2022 are no

longer subject to the Modified ECI Tax

and the Excise Tax. In certain cases, the

decision to amend an existing tax decree

pursuant to Act 52-2022 may result in a

U.S. taxpayer and/or one or more of its

affiliates owing a greater total amount of

tax to Puerto Rico than would be owed

absent the amendment. However, the

terms of the amended tax decrees are

expected to result in taxes imposed at

rates lower than those under the generally

applicable Puerto Rico income tax laws

absent any decree.

Treas. Reg. §1.901-2(e)(5)(i) provides

that an amount remitted to a foreign country is not a compulsory payment, and thus

is not an amount of foreign income tax

paid, to the extent that the amount remitted exceeds the amount of the taxpayer’s

liability for foreign income tax under the

foreign tax law (the “noncompulsory payment regulations”).

Treas. Reg. §1.901-2(e)(5)(iii)(A)

provides that where foreign tax law provides a taxpayer with options or elections in computing its liability for foreign

income tax whereby a taxpayer’s foreign

income tax liability may be permanently

decreased in the aggregate over time, the

taxpayer’s failure to use such options or

elections results in a foreign payment in

excess of the taxpayer’s liability for foreign income tax.

SECTION 3. APPLICATION OF

NONCOMPULSORY PAYMENT

REGULATIONS TO AMENDED

PUERTO RICO TAX DECREES

The Treasury Department and the IRS

are aware that questions have arisen as to

whether a decision to amend an existing

tax decree pursuant to Act 52-2022 will

cause any amount remitted to Puerto Rico

in excess of the amount of tax that would

have been owed but for amending the

existing tax decree to be considered a noncompulsory payment under §1.901-2(e)

(5), and therefore not an amount of foreign income tax paid or accrued for which

a credit is allowed under section 901.

Bulletin No. 2022–41

To facilitate Puerto Rico’s transition

to Act 52-2022, and given Puerto Rico’s

status as a territory of the United States,

the Treasury Department and the IRS have

determined it is necessary and appropriate

to provide guidance on the application

of Treas. Reg. §1.901-2(e)(5) to amounts

remitted to Puerto Rico under the terms

of a tax decree amended pursuant to Act

52-2022 on or before December 31, 2022.

Therefore, the Treasury Department and

the IRS intend to issue regulations under

section 901 (the “forthcoming proposed

regulations”) to provide that amending an

existing tax decree with Puerto Rico pursuant to Act 52-2022, on or before December 31, 2022, does not cause any amount

of foreign income tax paid or accrued to

Puerto Rico pursuant to the amended tax

decree to be treated as a noncompulsory

amount under Treas. Reg. §1.901-2(e)(5).

Under the forthcoming proposed regulations, amending an existing tax decree

pursuant to Act 52-2022 (as enacted on

June 30, 2022) will not, solely by reason of any difference in the amount of

income tax liability to Puerto Rico under

the existing tax decree as compared with

the amended tax decree, be considered to

increase the taxpayer’s liability for Puerto

Rico income tax over time for purposes

of Treas. Reg. §1.901-2(e)(5) if the existing tax decree is amended pursuant to Act

52-2022 on or before December 31, 2022,

and the taxpayer’s Puerto Rico income tax

liability under the amended tax decree in

each taxable year is less than the amount

of income tax the taxpayer would have

owed to Puerto Rico under Puerto Rico’s

generally applicable income tax laws in

the absence of any tax decree in the taxable year. No inference as to the application of the noncompulsory payment regulations in any other context should be

drawn from this Notice.

SECTION 4. TAXPAYER

RELIANCE

The forthcoming proposed regulations

will provide that the rules set forth in section 3 of this Notice apply to taxable years

ending on or after October 11, 2022. Until

the date of issuance of the forthcoming

proposed regulations, taxpayers may rely

on the rules set forth in section 3 of this

Notice.

Bulletin No. 2022–41

SECTION 5. REQUEST FOR

COMMENTS AND CONTACT

INFORMATION

The Treasury Department and the

IRS invite comments on the forthcoming proposed regulations. Commenters

are strongly encouraged to submit public comments electronically. Comments

should include a reference to Notice 202242. Submit electronic submissions via the

Federal eRulemaking Portal at www.regulations.gov (type IRS-2022-0015 in the

search field on the regulations.gov homepage to find this Notice and submit comments). Send paper submissions to the

Office of Associate Chief Counsel (International), Attention: Andrew Naughton,

Internal Revenue Service, IR-4549B, 1111

Constitution Avenue, NW, Washington,

DC 20224. Once submitted, comments

cannot be edited or withdrawn. For further

information regarding this Notice, contact

Andrew Naughton of the Office of Associate Chief Counsel (International) at (202)

317-5356 (not a toll-free call). Written or

electronic comments must be received by

January 9, 2023.

SECTION 6. EFFECT ON OTHER

DOCUMENTS

Notice 2011-29 is revoked, effective

for Excise Tax paid or accrued in taxable

years beginning on or after January 1,

2023.

2022-2023 Special Per

Diem Rates

Notice 2022-44

SECTION 1. PURPOSE

This annual notice provides the 20222023 special per diem rates for taxpayers to use in substantiating the amount of

ordinary and necessary business expenses

incurred while traveling away from home,

specifically (1) the special transportation

industry meal and incidental expenses

(M&IE) rates, (2) the rate for the incidental expenses only deduction, and (3) the

rates and list of high-cost localities for

277

purposes of the high-low substantiation

method.

SECTION 2. BACKGROUND

Rev. Proc. 2019-48, 2019-51 I.R.B.

1392 (or successor), provides rules for

using a per diem rate to substantiate, under

§ 274(d) of the Internal Revenue Code and

§ 1.274-5 of the Income Tax Regulations,

the amount of ordinary and necessary

business expenses paid or incurred while

traveling away from home. Taxpayers

using the rates and list of high-cost localities provided in this notice must comply

with Rev. Proc. 2019-48 (or successor).

Notice 2021-52, 2021-38 I.R.B. 381, provides the rates and list of high-cost localities for the period October 1, 2021, to

September 30, 2022.

SECTION 3. SPECIAL M&IE RATES

FOR TRANSPORTATION INDUSTRY

The special M&IE rates for taxpayers

in the transportation industry are $69 for

any locality of travel in the continental

United States (CONUS) and $74 for any

locality of travel outside the continental

United States (OCONUS). See section

4.04 of Rev. Proc. 2019-48 (or successor).

SECTION 4. RATE FOR INCIDENTAL

EXPENSES ONLY DEDUCTION

The rate for any CONUS or OCONUS locality of travel for the incidental

expenses only deduction is $5 per day.

See section 4.05 of Rev. Proc. 2019-48 (or

successor).

SECTION 5. HIGH-LOW

SUBSTANTIATION METHOD

1. Annual high-low rates. For purposes

of the high-low substantiation method, the

per diem rates in lieu of the rates described

in Notice 2021-52 (the per diem substantiation method) are $297 for travel to any

high-cost locality and $204 for travel to

any other locality within CONUS. The

amount of the $297 high rate and $204

low rate that is treated as paid for meals

for purposes of § 274(n) is $74 for travel

to any high-cost locality and $64 for travel

to any other locality within CONUS. See

section 5.02 of Rev. Proc. 2019-48 (or

October 11, 2022

successor). The per diem rates in lieu of

the rates described in Notice 2021-52 (the

meal and incidental expenses only substantiation method) are $74 for travel to

any high-cost locality and $64 for travel to

any other locality within CONUS.

2. High-cost localities. The following

localities have a federal per diem rate of

County or Other

Defined Location

Alabama

Key City

Gulf Shores

Baldwin

Phoenix/Scottsdale

Sedona

Maricopa

City limits of Sedona

$250 or more, and are high-cost localities

for the specified portion of the calendar

year:

Portion of Calendar Year

June 1 – July 31

Arizona

Los Angeles

Mill Valley/San Rafael/Novato

Monterey

Napa

Oakland

San Diego

San Francisco

San Luis Obispo

San Mateo/Foster City/Belmont

Santa Barbara

Santa Monica

Sunnyvale/Palo Alto/San Jose

Aspen

Denver/Aurora

February 1 – March 31

October 1 – September 30

California

Los Angeles, Orange, and Ventura, and

Edwards AFB, but not Santa Monica

Marin

Monterey

Napa

Alameda

San Diego

San Francisco

San Luis Obispo

San Mateo

Santa Barbara

City limits of Santa Monica

Santa Clara

Colorado

Pitkin

Durango

Grand Lake

Silverthorne/Breckenridge

Denver, Adams, Arapahoe, and

Jefferson

La Plata

Grand

Summit

Steamboat Springs

Telluride

Vail

Routt

San Miguel

Eagle

October 1 - October 31 and January 1 - September 30

October 1 – October 31 and June 1 – September 30

June 1 – August 31

October 1 –September 30

October 1 – September 30

February 1 – August 31

October 1 – September 30

June 1 – August 31

October 1 – September 30

October 1 – September 30

October 1 – September 30

October 1 – September 30

October 1 – March 31 and

June 1 – September 30

October 1 – October 31 and April 1 – September 30

June 1 – September 30

December 1 – March 31

October 1 – March 31 and

June 1 – September 30

December 1 – March 31

October 1 – September 30

October 1 – September 30

Delaware

Lewes

July 1 – August 31

District of Columbia

Washington D.C. (also the cities of Alexandria, Falls Church, and Fairfax, and the October 1 – September 30

counties of Arlington and Fairfax, in Virginia; and the counties of Montgomery

and Prince George's in Maryland) (See also Maryland and Virginia)

October 11, 2022

Sussex

278

Bulletin No. 2022–41

County or Other

Defined Location

Florida

Boca Raton/Delray Beach/Jupiter Palm Beach and Hendry

Bradenton

Manatee

Cocoa Beach

Brevard

Fort Lauderdale

Broward

Fort Myers

Lee

Fort Walton Beach/DeFuniak

Okaloosa and Walton

Springs

Gulf Breeze

Santa Rosa

Key West

Monroe

Miami

Miami-Dade

Naples

Collier

Panama City

Bay

Pensacola

Escambia

Punta Gorda

Charlotte

Sarasota

Sarasota

Sebring

Highlands

Stuart

Martin

Vero Beach

Indian River

Georgia

Jekyll Island/ Brunswick

Glynn

Idaho

Sun Valley/Ketchum

Blaine and Elmore

Key City

Portion of Calendar Year

December 1 – April 30

February 1 – March 31

February 1 – March 31

October 1 – April 30

February 1 – March 31

October 1 – October 31

March 1 – September 30

June 1 – July 31

October 1 – September 30

December 1 – March 31

December 1 – April 30

June 1 – July 31

June 1 – July 31

February 1 – March 31

February 1 – April 30

February 1 – March 31

February 1 – March 31

December 1 – April 30

March 1 – July 31

December 1 – March 31 and

June 1 – September 30

Illinois

Chicago

Cook and Lake

October 1 – November 30 and April 1 – September 30

Maine

Bar Harbor/ Rockport

Kennebunk/Kittery/Sanford

Portland

Ocean City

Washington, DC Metropolitan

Area

Boston/Cambridge

Falmouth

Hyannis

Martha's Vineyard

Nantucket

Mackinac Island

Petoskey

Traverse City

Bulletin No. 2022–41

Hancock and Knox

York

Cumberland and Sagadahoc

Maryland

Worcester

Montgomery and Prince George’s

Massachusetts

Suffolk and City of Cambridge

City limits of Falmouth

Barnstable less the city of Falmouth

Dukes

Nantucket

Michigan

Mackinac

Emmet

Grand Traverse

279

October 1 – October 31 and July 1 – September 30

July 1 – August 31

July 1 – August 31

July 1 – August 31

October 1 – September 30

October 1 – September 30

May 1 – August 31

July 1 – August 31

October 1 – September 30

October 1 –September 30

July 1 – August 31

July 1 – August 31

July 1 – August 31

October 11, 2022

County or Other

Defined Location

Minnesota

Key City

Duluth

St. Louis

Portion of Calendar Year

October 1 – October 31 and

June 1 – September 30

Montana

Big Sky/West Yellowstone/

Gardiner

Kalispell/Whitefish

Gallatin and Park

June 1 – September 30

Flathead

July 1 – August 31

New Mexico

Carlsbad

Eddy

October 1 – September 30

New Jersey

Toms River

Ocean

July 1 – August 31

New York

Glens Falls

Lake Placid

New York City

Kill Devil Hills

Lincoln City

Portland

Seaside

Hershey

Philadelphia

Warren

Essex

Bronx, Kings, New York, Queens, and

Richmond

North Carolina

Dare

Oregon

Lincoln

Multnomah

Clatsop

Pennsylvania

Hershey

Philadelphia

July 1 – August 31

July 1 – August 31

October 1 – December 31 and March 1 –

September 30

April 1 – September 30

July 1 – August 31

October 1 – October 31 and June 1 – September 30

July 1 – August 31

June 1 – August 31

October 1 – November 30, March 1 – June 30, and

September 1 – September 30

Rhode Island

Jamestown/Middletown/Newport Newport

October 1 – October 31 and

June 1 – September 30

Moab

South Carolina

Charleston, Berkeley, and Dorchester

Beaufort

Horry

Tennessee

Davidson

Utah

Grand

Park City

Summit

Charleston

Hilton Head

Myrtle Beach

Nashville

October 1 –September 30

June 1 – August 31

June 1 – August 31

October 1 – September 30

October 1 – October 31 and

March 1 – September 30

October 1 – September 30

Virginia

Virginia Beach

Wallops Island

Washington, DC Metro Area

October 11, 2022

City of Virginia Beach

Accomack

Cities of Alexandria, Falls Church,

and Fairfax; Counties of Arlington and

Fairfax

280

June 1 – August 31

July 1 – August 31

October 1 – September 30

Bulletin No. 2022–41

Key City

Manchester

Port Angeles/Port Townsend

Seattle

Vancouver

Cody

Jackson/Pinedale

County or Other

Defined Location

Vermont

Bennington

Washington

Clallam and Jefferson

King

Clark, Cowlitz, and Skamania

Wyoming

Park

Teton and Sublette

3. Changes in high-cost localities. The

list of high-cost localities in this notice

differs from the list of high-cost localities

in section 5 of Notice 2021-52.

a. The following localities have been

added to the list of high-cost localities: Gulf Shores, Alabama; Phoenix/Scottsdale, Arizona; San Luis

Obispo, California; Durango, Colorado; Steamboat Springs, Colorado;

Bradenton, Florida; Cocoa Beach,

Florida; Gulf Breeze, Florida; Panama City, Florida; Pensacola, Florida; Punta Gorda, Florida; Sarasota,

Florida; Sebring, Florida; Stuart,

Florida; Sun Valley/Ketchum, Idaho;

Portland, Maine; Mackinac Island,

Michigan; Duluth, Minnesota; Kalispell/Whitefish, Montana; Toms River,

New Jersey; Glens Falls, New York;

Kill Devil Hills, North Carolina; Lincoln City, Oregon; Myrtle Beach,

South Carolina; Moab, Utah; Manchester, Vermont; Port Angeles/Port

Townsend, Washington.

Bulletin No. 2022–41

b.

c.

Portion of Calendar Year

October 1 – September 30

July 1 – August 31

October 1 – September 30

October 1 – October 31 and June 1 – September 30

June 1 – September 30

October 1 – September 30

The following localities have changed

the portion of the year in which it is a

high-cost locality: Sedona, Arizona;

Napa, California; San Diego, California; Silverthorne/Breckenridge,

Colorado; Fort Lauderdale, Florida; Fort Walton Beach/De Funiak

Springs, Florida; Key West, Florida; Bar Harbor/Rockport, Maine;

Falmouth, Massachusetts; Martha’s

Vineyard, Massachusetts; Nantucket,

Massachusetts; Jamestown/Middleton/Newport, Rhode Island; Charleston, South Carolina; Park City, Utah;

Jackson/Pinedale, Wyoming.

The following locality has been

removed from the list of high-cost

localities: Crested Butte/Gunnison,

Colorado.

SECTION 6. EFFECTIVE DATE

This notice is effective for per diem

allowances for lodging, meal and incidental expenses, or for meal and incidental expenses only, that are paid to any

281

employee on or after October 1, 2022, for

travel away from home on or after October

1, 2022. For purposes of computing the

amount allowable as a deduction for travel

away from home, this notice is effective

for meal and incidental expenses or for

incidental expenses only paid or incurred

on or after October 1, 2022. See sections

4.06 and 5.04 of Rev. Proc. 2019-48 (or

successor) for transition rules for the last

3 months of calendar year 2022.

SECTION 7. EFFECT ON OTHER

DOCUMENTS

Notice 2021-52 is superseded.

DRAFTING INFORMATION

The principal author of this notice is

Knolan Smith of the Office of Associate

Chief Counsel (Income Tax & Accounting). For further information regarding

this notice contact Mr. Smith at (202) 3177005 (not a toll-free number).

October 11, 2022

26 CFR 601.105: Examination of returns and claims for refund, credit or abatement; determination of correct tax liability.

(Also Part I, §§ 368, 1361, 1362, 6001, 6037, 6062, 7701; 1.1361-1, 1.1361-3, 1.1361-5, 1.1362-4, 1.1362-6, 1.1378-1, 1.6001-1, 1.6037-1, 301.9100-3)

Rev. Proc. 2022-19

TABLE OF CONTENTS

SECTION 1. WHAT ARE THE PURPOSES OF THIS REVENUE PROCEDURE?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283

SECTION 2. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283

.01 Overview of S Corporations and QSubs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283

.02 Section 1362(f) Relief for Inadvertent Invalid Elections or Terminations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284

.03 Six Areas for Which Issues are Resolvable Without a PLR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284

SECTION 3. TAXPAYER ASSISTANCE PROCEDURES FOR ADDRESSING OR CORRECTING ISSUES

REGARDING S ELECTIONS AND QSUB ELECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

.01 Agreements and Arrangements with No Principal Purpose to Circumvent One Class of Stock Requirement . . . . . . . . . . . . . . 286

.02 Governing Provisions That Provide for Identical Distribution and Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

.03 Procedures for Addressing Missing Shareholder Consents, Errors with Regard to a Permitted Year,

Missing Officer’s Signature, and Other Inadvertent Errors and Omissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

.04 Procedures for Verifying S Elections or QSub Elections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287

.05 Procedures for Addressing a Federal Income Tax Return Filing Inconsistent with an S Election or a QSub Election. . . . . . . . 287

.06 Procedures for Retroactively Correcting One or More Non-Identical Governing Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . 287

SECTION 4. NO RULE AREAS TO TAKE INTO ACCOUNT THIS REVENUE PROCEDURE. . . . . . . . . . . . . . . . . . . . . 289

.01 Areas in Which PLRs Will Not Be Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289

.02 Areas in Which a PLR Will Not Ordinarily Be Issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289

SECTION 5. EFFECTIVE DATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

.01 General Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

.02 Transition Rule for Pending PLR Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

SECTION 6. EFFECT ON OTHER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

.01 Rev. Proc. 2013-30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

.02 Rev. Proc. 2022-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

.03 Rev. Proc. 2022-3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

SECTION 7. PAPERWORK REDUCTION ACT AND TAXPAYER BURDEN REDUCTION . . . . . . . . . . . . . . . . . . . . . . . 290

SECTION 8. DRAFTING INFORMATION AND PRIMARY CONTACT FOR QUESTIONS. . . . . . . . . . . . . . . . . . . . . . . 291

October 11, 2022

282

Bulletin No. 2022–41

APPENDIX A. SAMPLE CORPORATE GOVERNING PROVISION STATEMENT PURSUANT TO

REV. PROC. 2022-19, SECTION 3.06(2)(c)(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292

APPENDIX B. SAMPLE SHAREHOLDER STATEMENT PURSUANT TO REV. PROC. 2022-19,

SECTION 3.06(2)(c)(iii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295

SECTION 1. WHAT ARE THE

PURPOSES OF THIS REVENUE

PROCEDURE?

This revenue procedure provides taxpayer assistance procedures, including

under § 1362(f) of the Internal Revenue

Code (Code), to allow S corporations and

their shareholders to resolve frequently

encountered issues with certainty and

without requesting a private letter ruling (PLR) issued by the Internal Revenue Service (IRS). The issues addressed

by the taxpayer assistance procedures

set forth in sections 3.01 through 3.05

of this revenue procedure are issues that

the IRS historically has identified as not

affecting the validity or continuation of a

corporation’s election under § 1362(a) of

the Code to be treated as an S corporation

(S election); or an S corporation’s election

under § 1361(b)(3)(B)(ii) of the Code to

treat its corporate subsidiary as a qualified subchapter S subsidiary (a QSub,

and the election a QSub election). Section

3.06 of this revenue procedure provides

retroactive corrective relief procedures

under section 1362(f) in certain circumstances to allow taxpayers to retroactively

preserve S elections that are invalid or

terminated solely as the result of one or

more non-identical governing provisions

(as defined in section 2.03(6)(a) of this

revenue procedure). The Department of

the Treasury (Treasury Department) and

the IRS have provided these taxpayer

assistance procedures to (1) reduce burdens on taxpayers and the IRS, (2) facilitate increased taxpayer compliance with

S election and QSub election rules, and

(3) reduce costs and delays for completing transactions involving S corporations

and QSubs. Appendix A (Sample Corporate Governing Provision Statement) and

Appendix B (Sample Shareholder Statement) are provided to assist corporations

and their shareholders in complying with

the taxpayer assistance procedures in

section 3 of this revenue procedure. In

Bulletin No. 2022–41

connection with these taxpayer assistance

procedures, section 4 of this revenue procedure provides areas in which the IRS

will not rule, or will not ordinarily rule,

regarding the validity or continuation of

an S election or a QSub election.

SECTION 2. BACKGROUND

.01 Overview of S Corporations and

QSubs.

(1) Definition of S corporation. Section 1361(a)(1) defines an “S corporation,” with respect to any taxable year, as

a small business corporation for which an

S election, under § 1362(a), is in effect for

that year.

(2) Definition of small business corporation. Section 1361(b)(1) defines a

“small business corporation” as a domestic corporation that is not an ineligible

corporation (defined in § 1361(b)(2)) and

that does not (A) have more than 100

shareholders, (B) have as a shareholder

a person (other than an estate, a trust

described in § 1361(c)(2), or an organization described in § 1361(c)(6)) who is not

an individual, (C) have a nonresident alien

as a shareholder, and (D) have more than

1 class of stock.

(3) Definition of QSub. Section 1361(b)

(3)(B) defines a “QSub” as a domestic

corporation that is not an ineligible corporation if (i) an S corporation (parent S corporation) holds 100 percent of the stock of

the corporation, and (ii) that parent S corporation elects to treat the subsidiary as a

QSub.

(4) S election. Section 1.1362-6(a)

(2) of the Income Tax Regulations sets

forth procedural requirements pursuant to

which a small business corporation makes

an S election. Among those requirements,

the small business corporation must timely

file a completed Form 2553, Election by

a Small Business Corporation. See Rev.

Proc. 2013-30, 2013-36 I.R.B. 173 (providing a simplified method for taxpayers

to request relief for late S elections).

283

(5) QSub election. Section 1.1361-3(a)

and Notice 2000-58, 2000-2 C.B. 491, set

forth procedural requirements for a parent S corporation to elect to treat one or

more of its eligible subsidiaries as a QSub.

Among those requirements, the parent

S corporation must timely file a completed Form 8869, Qualified Subchapter S

Subsidiary Election. See Rev. Proc. 201330 (providing a simplified method for

taxpayers to request relief for late QSub

elections).

(6) Ineffective or terminated S election.

If a corporation is not eligible to elect to be

taxed under subchapter S of the Code (for

example, the corporation is not a small

business corporation under § 1361(b)(1)),

then the corporation’s S election never

becomes effective. If a corporation makes

a valid S election, generally its status as

an S corporation (i) can be terminated by

revocation of the election, and (ii) will be

terminated (A) whenever the corporation

ceases to be a small business corporation,

or (B) whenever the passive investment

income of the corporation exceeds 25

percent of gross receipts for three consecutive taxable years and the corporation

has accumulated earnings and profits at

the close of each of the three consecutive

years. See generally § 1362(d).

(7) Ineffective or terminated QSub

election. If a parent S corporation cannot

make an effective QSub election because

the subsidiary corporation is not eligible

to be taxed as a QSub (for example, the

required consent on Form 8869 is missing), then that corporation’s QSub election never becomes effective. If a parent S

corporation makes a valid QSub election

for its subsidiary, generally the subsidiary’s status as a QSub (i) can be terminated by revocation of the election, and

(ii) will be terminated if (A) the S election

of its parent S corporation is terminated,

or (B) the subsidiary ceases to qualify as

a QSub under § 1361(b)(3)(B). See generally § 1.1361‑5(a)(1). In addition, a QSub

election for a subsidiary terminates if the

October 11, 2022

parent S corporation transfers 100 percent

of the QSub stock, whether by sale or

reorganization under § 368(a)(1)(A), (C),

or (D) of the Code, to another S corporation in a transaction that does not qualify

as a reorganization under § 368(a)(1)(F).

See Rev. Rul. 2004-85, 2004-2 C.B. 189

(Situation 2).

.02 Section 1362(f) Relief for Inadvertent Invalid Elections or Terminations.

(1) Overview. Section 1362(f) provides that if an S election under § 1362(a)

or a QSub election under § 1361(b)(3)

(B)(ii) by any corporation either (A)

was not effective for the taxable year for

which made (determined without regard

to § 1362(b)(2)) by reason of a failure

to meet the requirements of § 1361(b)

or to obtain shareholder consents, or (B)

was terminated under § 1362(d)(2) or

(3) or § 1361(b)(3)(C), then, notwithstanding the circumstances resulting in

that ineffectiveness or termination, that

corporation will be treated as an S corporation or a QSub, as the case may be,

during the period specified by the Secretary (as defined in § 7701(a)(11)(B) of the

Code) if the three requirements set forth

in § 1362(f)(2) through (4) are satisfied.

First, the Secretary must determine that

the circumstances resulting in the ineffectiveness or termination were inadvertent.

See § 1362(f)(2). Second, no later than a

reasonable period of time after discovery of the circumstances resulting in that

ineffectiveness or termination, steps were

taken either (A) so that the corporation

for which the election was made or the

termination occurred is an S corporation

or a QSub, as the case may be, or (B) to

acquire the required shareholder consents.

See § 1362(f)(3). Third, the corporation

for which the election was made or the

termination occurred, and each person

who was a shareholder in that corporation

at any time during the period specified

pursuant to § 1362(f), agrees to make such

adjustments (consistent with the treatment

of that corporation as an S corporation or

a QSub, as the case may be) as may be

required by the Secretary with respect to

that period. See § 1362(f)(4).

(2) Legislative history. In enacting

§ 1362(f), Congress stated that, “[i]f the

[IRS] determines that a corporation’s subchapter S election is inadvertently terminated, the [IRS] can waive the effect of the

October 11, 2022

terminating event for any period if the corporation timely corrects the event and if

the corporation and the shareholders agree

to be treated as if the election had been

in effect for such period.” S. Rep. No.

97-640, at 12 (Sept. 29, 1982). Congress

“intend[ed] that the [IRS] be reasonable

in granting waivers, so that corporations

whose subchapter S eligibility requirements have been inadvertently violated do

not suffer the tax consequences of a termination if no tax avoidance would result

from the continued subchapter S treatment. In granting a waiver, [Congress]

hoped that taxpayers and the government

will work out agreements that protect the

revenues without undue hardship to taxpayers.” Id.

(3) Section 1362(f) regulations. Section 1.1362-4(c) provides that a corporation may request invalid election or

inadvertent termination relief by submitting a request for a PLR. See generally

Rev. Proc. 2022-1, 2022-1 I.R.B. 1 (or

any successor revenue procedure) (providing general instructions for requesting

PLRs and determination letters). Section

1.1362-4(d) provides that the Commissioner may condition the granting of a

PLR request on any adjustments that are

appropriate. Section 1.1362-4(e) requires

that the corporation and all persons who

were shareholders of the corporation at

any time during the time specified by the

Commissioner consent to any adjustments

that the Commissioner may require. Section 1.1362-4(f) provides that the status of

a corporation after the terminating event

or invalid election, and before the determination of inadvertence, is determined

by the IRS. Inadvertent termination or

inadvertent invalid election relief may be

granted by the IRS retroactively (i) for

all years for which the terminating event

or circumstance giving rise to invalidity

is effective, or (ii) only for the period in

which the corporation became eligible for

S corporation or QSub treatment.

(4) Frequent PLR requests for relief

under section 1362(f). The Associate

Chief Counsel (Passthroughs and Special

Industries) frequently receives requests

for PLRs seeking relief under § 1362(f)

to address a potential inadvertent invalid

election or termination. For example, the

Associate Chief Counsel (Passthroughs

and Special Industries) receives PLR

284

requests seeking confirmation that specific

agreements, distributions to shareholders,

minor errors in filing elections, missing or

lost confirmations, or inconsistent return

filings do not invalidate an S corporation’s

election or terminate the corporation’s status as an S corporation.

.03 Six Areas for Which Issues are

Resolvable Without a PLR. Sections

2.03(1) through 2.03(6) of this revenue

procedure describe the six areas for which

issues are resolvable without a PLR, and

for which this revenue procedure provides taxpayer assistance procedures.

With regard to the sixth area described

in 2.03(6) of this revenue procedure

(addressing potential retroactive correction of non-identical governing provisions), the validity or continuation of a

corporation’s S election is not affected in

certain circumstances only if the corporation and its applicable shareholders (as

defined in section 3.06(1)(a) of this revenue procedure) meet the requirements of

section 3.06 of this revenue procedure.

(1) One class of stock requirement and

governing provisions, including “principal purpose” conditions.

(a) Overview. Pursuant to § 1361(b)

(1)(D) and § 1.1361-1(l)(1), a corporation

that has more than one class of stock does

not qualify as a small business corporation.

Section 1.1361-1(l)(1) provides generally

that a corporation is treated as having only

one class of stock if all outstanding shares

of stock confer identical rights to distribution and liquidation proceeds.

(b) Governing provisions. Section 1.1361-1(l)(2)(i) provides that the

determination of whether all outstanding

shares of stock confer identical rights to

distribution and liquidation proceeds is

made based on the corporate charter, articles of incorporation, bylaws, applicable

State law, and binding agreements relating

to distribution and liquidation proceeds

(collectively, governing provisions). A

commercial contractual agreement is not a

binding agreement relating to distribution

and liquidation proceeds, and therefore is

not a governing provision, unless a principal purpose of the agreement is to circumvent the one class of stock requirement.

See § 1.1361-1(l)(2)(i).

(c) Other agreements and arrangements. The Income Tax Regulations identify a number of other agreements and

Bulletin No. 2022–41

arrangements between or among an S

corporation and its shareholders that may

or may not be treated as second classes of

stock depending in part on whether a principal purpose of the agreement or arrangement was to circumvent the one class of

stock requirement or otherwise alter shareholders’ rights to distribution and liquidation proceeds. See § 1.1361-1(l)(2)(iii)(A)

(buy-sell agreements among shareholders,

agreements restricting the transferability

of stock, and redemption agreements),

§ 1.1361-1(l)(4)(ii)(A) (special rules for

instruments, obligations, or arrangements

treated as equity under general principles

of Federal tax law), § 1.1361-1(l)(4)(ii)

(B)(1) (short-term unwritten advances that

fail the safe harbor described in § 1.13611(l)(4)(ii)(B)(1)), and § 1.1361-1(l)(4)(ii)

(B)(2) (obligations of the same class that

are considered equity under general principles of Federal tax law but fail the safe

harbor described in § 1.1361-1(l)(4)(ii)

(B)(2)). See section 3.01 of this revenue

procedure (providing that the IRS will not

treat taxpayers who have entered into the

agreements or arrangements described in

this section 2.03(1)(c) as violating the one

class of stock requirement of § 1361(b)(1)

(D) so long as there was no principal purpose to use the agreement or arrangement

as a means to circumvent the one class of

stock requirement).

(2) Disproportionate distributions. A

“disproportionate distribution” is any distribution (including an actual distribution,

a constructive distribution, or a deemed

distribution) of property by a corporation

with respect to shares of its stock that

differs in timing or amount from the distribution with respect to any other shares

of its stock. See § 1.1361‑1(l)(1) and (2).

Section 1.1361‑1(l)(2)(i) provides that,

“[a]lthough a corporation is not treated

as having more than one class of stock so

long as the governing provisions provide

for identical distribution and liquidation

rights, any distributions (including actual,

constructive, or deemed distributions) that

differ in timing or amount are to be given

appropriate tax effect in accordance with

the facts and circumstances.” Despite this

regulation providing that “a corporation

is not treated as having more than one

class of stock so long as the governing

provisions provide for identical distribution and liquidation rights,” taxpayers

Bulletin No. 2022–41

and practitioners have indicated concern

with the language of § 1.1361‑1(l)(2)(i).

The articulated concern is that the word

“although” in combination with the subsequent language requiring that certain

disproportionate distributions “be given

appropriate tax effect” creates uncertainty

as to whether an S corporation has created

a second class of stock – even though the

governing provisions provide identical

distribution and liquidation rights with

respect to each share. Practitioners suggest that the language in § 1.1361-1(l)(2)

(i) could be clarified by removing the word

“[a]lthough” and point to inconsistency in

PLRs in the treatment of disproportionate

distributions. See section 3.02 of this revenue procedure (providing that the IRS will

not treat any disproportionate distributions by a corporation as violating the one

class of stock requirement of § 1361(b)(1)

(D) so long as the corporation’s governing

provisions provide for identical distribution and liquidation rights).

(3) Certain inadvertent errors or omissions on Form 2553 or Form 8869. An

inadvertent error or omission on Form

2553 or Form 8869 does not invalidate

an S election or a QSub election, unless

the error or omission is with respect to a

shareholder consent, a selection of a permitted year (as defined in § 1378(b) and

§ 1.1378-1(b)), or an officer’s signature.

See generally § 1362(a)(2) (an S election

is valid “only if all persons who are shareholders in such corporation on the day on

which such election is made consent to

such election”), § 1.1378-1 (requiring that

the taxable year of an S corporation must

be a permitted year, which is defined to

include a calendar year or any other taxable

year for which the corporation establishes

a business purpose to the satisfaction of

the Commissioner), and § 1.1361-3(a)(2)

(a QSub election form must be signed by

a person authorized to sign the S corporation’s return). See section 3.03 of this revenue procedure (providing procedures for

a taxpayer to correct, without the receipt

of a PLR, an error, an omission, or a missing required consent on a Form 2553 or

Form 8869).

(4) Missing administrative acceptance

letter for S election or QSub election. Generally, within 90 days after the IRS receives

a corporation’s Form 2553, the IRS mails

a CP261 Notice as an acknowledgment to

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the corporation that the IRS has accepted

the corporation’s filing. For QSub elections filed on Form 8869, the IRS mails

a CP279 Notice to the filer and a CP279A

Notice to the subsidiary, generally within

60 days after the IRS accepts the QSub

election. A lack of written acknowledgement that the IRS has accepted the corporation’s S election or its subsidiary’s QSub

election (for example, because it was lost

or never received) creates uncertainty for

some taxpayers about the validity of the

election. However, neither subchapter S of

the Code nor the Income Tax Regulations

thereunder provide that a lack of possession of a CP261 Notice, CP279 Notice, or

CP279A Notice affects the validity of an S

election or a QSub election, respectively.

Rather, such notices are merely administrative acknowledgments of an effective

election that can be reproduced upon the

taxpayer’s request. See section 3.04 of this

revenue procedure (providing procedures

to replace a missing CP261 Notice, CP279

Notice, or CP279A Notice).

(5) A Federal income tax return filing

inconsistent with an S election or a QSub

election. Occasionally, a corporation files

a Federal income tax return that is inconsistent with the corporation’s status as

an S corporation or a QSub (for example, an S corporation files a Form 1065,

U.S. Return of Partnership Income, or

Form 1120, U.S. Corporation Income

Tax Return, instead of Form 1120-S, U.S.

Income Tax Return for an S Corporation).

Although an inconsistent Federal income

tax return filing can create several complications for the filer, nothing in the Code or

Income Tax Regulations thereunder provides that such a filing affects the validity

of a corporation’s S election or QSub election. For example, neither § 1362(d) nor

§ 1.1361-5(a) lists an inconsistent Federal

income tax return filing as an event that

gives rise to a termination of an S election or a QSub election. See section 3.05

of this revenue procedure (providing procedures for taxpayers to address, without

the receipt of a PLR, a Federal income tax

return filing inconsistent with an S election or a QSub election, as appropriate).

(6) Non-identical governing provisions.

(a) Overview. Section 1361(b)(1)(D)

requires an S corporation to have only

one class of stock. Section 1.1361-1(l)

provides that a corporation is treated as

October 11, 2022

having only one class of stock if all outstanding shares of the corporation’s stock

confer identical rights to distribution and

liquidation proceeds and if the corporation

has not issued any instrument or obligation, or entered into any arrangement, that

is treated as a second class of stock. An S

corporation in compliance with § 1.13611(l) is commonly referred to as having

“identical governing provisions.” The

term “non-identical governing provision”

means a governing provision, as defined

by § 1.1361-1(l)(2)(i), on its own or as

part of another governing provision, that

for Federal income tax purposes results

in the S corporation having more than

one class of stock under § 1.1361-1(l)(1)

(even if the S corporation never made a

non-pro rata distribution or liquidating

distribution).

(b) Consequences of non-identical

governing provisions. If an entity files an

S election when it has more than a single

class of stock, the entity does not meet

the requirements to be an S corporation

and its attempted election is invalid. See

§ 1361(a)(1). If a valid S corporation later

provides for more than a single class of

stock, its S election automatically terminates on the day the disqualifying event

occurs. See § 1362(d)(2). See section 3.06

of this revenue procedure (providing procedures for correcting, without the receipt

of a PLR, the validity or continuation of

an S election with regard to one or more

non‑identical governing provisions, as

defined in section 2.03(6)(a) of this revenue procedure).

SECTION 3. TAXPAYER ASSISTANCE

PROCEDURES FOR ADDRESSING

OR CORRECTING ISSUES

REGARDING S ELECTIONS AND

QSUB ELECTIONS

.01 Agreements and Arrangements

with No Principal Purpose to Circumvent

One Class of Stock Requirement. Certain

agreements and arrangements described in

section 2.03(1)(c) of this revenue procedure are not governing provisions and are

not treated as second classes of stock so

long as there was no principal purpose to

use the agreement as a means to circumvent the one class of stock requirement.

Accordingly, the IRS will not treat an S

corporation as violating the one class of

October 11, 2022

stock requirement of § 1361(b)(1)(D) as

a result of an agreement or arrangement

identified in section 2.03(1)(c) of this revenue procedure that does not have a principal purpose to circumvent the one class

of stock requirement. Because entering

into these specific agreements in these

circumstances will not result in termination of S corporation status, taxpayers do

not need to seek relief from the IRS. For

this reason, and because the existence of a

principal purpose is inherently factual in

nature, the IRS will not rule in these situations. See section 4.01(1) of this revenue

procedure.

.02 Governing Provisions That Provide

for Identical Distribution and Liquidation

Rights. As outlined in section 2.03(2) of

this revenue procedure, § 1.1361-1(l)(2)(i)

provides that a corporation is not treated

as having more than one class of stock so

long as the governing provisions provide

for identical distribution and liquidation

rights. Accordingly, the IRS will not treat

any disproportionate distributions made

by a corporation as violating the one class

of stock requirement of § 1361(b)(1)(D)

so long as the governing provisions of the

corporation provide for identical distribution and liquidation rights. Because disproportionate distributions made in these

circumstances will not result in the termination of S corporation status, taxpayers

do not need to seek relief from the IRS and

the IRS will not rule in these situations.

See section 4.01(2)(a) of this revenue

procedure.

.03 Procedures for Addressing Missing Shareholder Consents, Errors with

Regard to a Permitted Year, Missing Officer’s Signature, and Other Inadvertent

Errors and Omissions.

(1) Correction of a missing shareholder

consent. An S election that fails to include

the consent of a shareholder may be corrected pursuant to the following:

(a) Section 1.1362-6(b)(3)(iii) (providing an extension of time for filing a shareholder consent to an S election);

(b) Rev. Proc. 2013-30 (providing a

simplified method for taxpayers to request

relief for late S elections);

(c) Rev. Proc. 2004-35, 2004-1 C.B.

1029 (providing automatic relief for certain taxpayers requesting relief for late

shareholder consents for S elections in

community property States); or

286

(d) If the remedies listed in section

3.03(1)(a) through (c) of this revenue

procedure do not apply, a taxpayer or the

taxpayer’s authorized representative may

request relief by submitting a request for

a PLR under § 1362(f) to the Associate

Chief Counsel (Passthroughs and Special

Industries).

(2) Correction of an error with regard

to a permitted year. A Form 2553 that

contains an inadvertent error with regard

to a permitted year may be corrected pursuant to Rev. Proc. 2013-30 (providing a

simplified method for taxpayers to request

relief for late S elections). If a taxpayer

is not eligible for relief under Rev. Proc.

2013-30, a correction may be obtained

through the receipt of a PLR under §

1362(f) from the Associate Chief Counsel

(Passthroughs and Special Industries).

(3) Correction of missing officer’s signature. A Form 2553 or Form 8869 that

is missing the signature of an authorized

officer of the S corporation that affects

the validity of the S election or QSub

election may be corrected pursuant to

Rev. Proc. 2013-30 (providing a simplified method for taxpayers to request relief

for late S elections and QSub elections).

If a taxpayer is not eligible for relief

under Rev. Proc. 2013-30, a correction

may be obtained through the receipt of a

PLR under § 1362(f) from the Associate

Chief Counsel (Passthroughs and Special

Industries).

(4) Correction of other inadvertent

errors or omissions. Errors and omissions

on Form 2553 or Form 8869, other than

those addressed in section 3.03(1) through

(3) of this revenue procedure, may be corrected by explaining in writing the error(s)

or omission(s) and the necessary correction(s) and submitting the written explanation to one of the following addresses

(depending on the Internal Revenue Submission Processing Center with which the

S corporation files its Form 1120-S) or any

successor address the IRS may provide:

(a) Internal Revenue Service, MS

6055, 333 W. Pershing Rd., Kansas City,

MO 64108.

(b) Internal Revenue Service, MS

6273, 1973 N. Rulon White Blvd., Ogden,

UT 84404.

(5) Unavailability of a PLR for certain

inadvertent errors, omissions, or missing

required consents. The IRS will not issue

Bulletin No. 2022–41

a PLR under § 1362(f) regarding any error

or omission described in section 3.03(4) of

this revenue procedure. Such inadvertent

errors or omissions do not impact a corporation’s S election or QSub election. See

section 2.03(3) of this revenue procedure.

The IRS will also not issue a PLR under

§ 1362(f) for a missing required consent,

errors with regard to a permitted year, or

a missing officer’s signature where the

taxpayer qualifies for relief under any

of the means of relief identified in section 3.03(1) through (3) of this revenue

procedure. The Associate Chief Counsel

(Passthroughs and Special Industries) will

consider the issuance of a PLR only if the

error or omission concerns a shareholder

consent, the selection of a permitted year,

or a missing officer’s signature, and the

taxpayer has no other means of requesting

relief. See section 4.02(2) of this revenue

procedure.

.04 Procedures for Verifying S Elections or QSub Elections.

(1) Availability of replacement letters.

With regard to a missing administrative

acceptance letter for an S election or an

administrative acceptance letter for a

QSub election, as appropriate, a replacement letter may be requested:

(a) For an S corporation and shareholders of an S corporation, by contacting the

IRS Business and Specialty Tax Line at

800-829-4933; and

(b) For practitioners, by contacting

the IRS Practitioner Priority Service at

866‑860‑4259.

(2) Unavailability of a PLR. The IRS

will not issue a PLR under § 1362(f)

with regard to any missing administrative acceptance letter described in section

3.04(1) of this revenue procedure. See

section 4.01(2) of this revenue procedure.

A missing administrative acceptance letter

does not impact an S election or a QSub

election. See section 2.03(4) of this revenue procedure.

.05 Procedures for Addressing a Federal Income Tax Return Filing Inconsistent with an S Election or a QSub Election.

(1) Filing a corrected original return

or an amended return. An S corporation,

or a parent S corporation of a QSub, that

files a Federal income tax return for a

taxable year that is inconsistent with the

status of the corporation as an S corporation, or inconsistent with the status of a

Bulletin No. 2022–41

subsidiary of the parent S corporation as

a QSub, must file a Federal income tax

return for open taxable years consistent

with its status, as appropriate—

(a) to reflect the status of the corporation as an S corporation or parent of a

QSub; or

(b) to reflect the status of the subsidiary

as a QSub.

(2) Unavailability of a PLR. The IRS

will not issue a PLR under § 1362(f) with

regard to any inconsistent return filing

described in section 3.05(1) of this revenue procedure. See section 4.01(2) of this

revenue procedure. Such an inconsistent

return filing does not impact an S election

or a QSub election. See section 2.03(5) of

this revenue procedure.

(3) Federal income tax effect of a corporation’s prior transactions. Because a

corporation is not treated as having terminated its S election or QSub election,

as appropriate, merely due to the filing of

one or more Federal income tax returns

inconsistent with its S election or QSub

election, the corporation’s distributions

and other transactions will be treated consistent with its status as an S corporation

or a QSub, as appropriate. Thus, a QSub’s

income or deductions will be treated as

income or deductions of the parent S corporation and distributions between the

QSub and its parent will be disregarded.

.06 Procedures for Retroactively Correcting One or More Non-Identical Governing Provisions.

(1) Definitions. For purposes of this

section 3.06:

(a) Applicable shareholder. The term

“applicable shareholder” means a current

or former shareholder of a corporation

who owns or owned stock of the corporation at any time during the period:

(i) Beginning on the date on which the

non-identical governing provision was

adopted (on its own or as part of another

governing provision); and

(ii) Ending on the date on which the

non-identical governing provision was

removed or modified in a manner such

that the governing provision complies

with the one class of stock requirement.

(b) Discovered by the IRS. The term

“discovered by the IRS” has the meaning

given the term in § 301.9100-3(b)(1)(i) of

the Procedure and Administration Regulations (26 CFR part 301).

287

(c) Disproportionate distribution. The

term “disproportionate distribution” is

defined in section 2.03(2) of this revenue

procedure.

(d) Non-identical governing provision.

The term “non-identical governing provision” is defined in section 2.03(6)(a) of

this revenue procedure.

(2) Retroactive corrective relief

procedures.

(a) Retroactive continuing validity of S

election. If an S corporation and its applicable shareholders meet the requirements

of this section 3.06, an S election that is

invalid or terminated solely as the result of

one or more non-identical governing provisions will be treated for Federal income

tax purposes as continuing from the date

on which the first non-identical governing

provision that invalidated or terminated

the corporation’s S election was adopted.

(b) Eligibility. A small business corporation and each applicable shareholder of

the corporation are eligible for corrective

relief under this section 3.06 if the following requirements are satisfied:

(i) The corporation has or had one or

more non-identical governing provisions;

(ii) The corporation has not made, and

for Federal income tax purposes is not

deemed to have made, a disproportionate

distribution to an applicable shareholder;

(iii) The corporation timely filed a

return on Form 1120-S (as required under

§ 6037 of the Code and § 1.6037-1 of the

Income Tax Regulations) for each taxable

year of the corporation beginning with the

taxable year in which the first non-identical governing provision was adopted

and through the taxable year immediately

preceding the taxable year in which the

corporation made a request for corrective

relief under this section 3.06 (a corporation is treated as having timely filed a

required Form 1120-S under this section

3.06(2)(b)(iii) if the Form 1120-S is filed

within six months after its original due

date, excluding extensions); and

(iv) Before any non-identical governing provision is discovered by the IRS, all

of the requirements described in section

3.06(2)(c) of this revenue procedure are

satisfied.

(c) Corrective relief statements.

(i) Corporate governing provision and

shareholder statements. The corporation

must complete a Corporate Governing

October 11, 2022

Provision Statement in accordance with

section 3.06(2)(c)(ii) of this revenue

procedure and a Shareholder Statement

signed by each applicable shareholder in

accordance with section 3.06(2)(c)(iii) of

this revenue procedure.

(ii) Corporate Governing Provision

Statement. The Corporate Governing

Provision Statement, a sample of which

is provided in Appendix A, must be completed in accordance with this section

3.06(2)(c)(ii).

(A) Designation. The Corporate Governing Provision Statement must state at

the top of the document: “CORPORATE

GOVERNING PROVISION STATEMENT PURSUANT TO REV. PROC.

2022-19, SECTION 3.06(2)(c)(ii)”.

(B) Information. The Corporate Governing Provision Statement must provide

the following information:

(1) The date of the Corporate Governing Provision Statement, the corporation’s

name, employment identification number (EIN), address, date of formation or

incorporation, and State of formation or

incorporation;

(2) The actual or intended effective

date of the corporation’s S election filed

on Form 2553 (see Form 2553, Part I, line

E) that is the subject of the request for corrective relief under this section 3.06;

(3) The name, address, and social security number or taxpayer identification

number of each applicable shareholder;

and

(4) To establish an inadvertent termination or invalidation of the S election of the corporation, a description of

all relevant facts regarding why each

non-identical governing provision was

adopted, how each non‑identical governing provision was discovered, and each

action taken to correct or remove each

non-identical governing provision before

any non-identical governing provision is

discovered by the IRS. This description

must include each action taken by the

corporation and each applicable shareholder to establish that the corporation

and each applicable shareholder acted

reasonably and in good faith in correcting or removing each non-identical

governing provision upon discovery to

demonstrate reasonable cause for relief.

(C) Representations. Except as provided in section 3.06(2)(c)(ii)(D), the

October 11, 2022

corporation must provide the following

four representations:

(1) “The corporation’s S election was

inadvertently invalid or terminated solely

because of the adoption of one or more

non-identical governing provisions.”;

(2) “The corporation and each applicable shareholder satisfy all of the requirements set forth in section 3.06 of Rev.

Proc. 2022-19.”;

(3) “The corporation responds in the

negative to each requested statement set

forth in section 7.01(4) or (5) of Rev.

Proc. 2022-1, or any successor revenue

procedure (statements regarding whether

the same or a similar issue was previously

ruled on or whether a request involving

the same or a similar issue was submitted

or is currently pending).”; and

(4) “The corporation and each applicable shareholder acted reasonably and in

good faith in correcting or removing each

non-identical governing provision upon

discovery.”.

(D) Explanation regarding previously

ruled on, submitted, or pending PLRs. If

the corporation cannot respond in the negative to any requested statement set forth in

section 7.01(4) or (5) of Rev. Proc. 2022‑1,

or any successor revenue procedure (and

therefore cannot make the representation

described in section 3.06(2)(c)(ii)(C)(3)

of this revenue procedure), the corporation

must provide an explanation for each such

response as part of the description of all relevant facts required by section 3.06(2)(c)

(ii)(B)(4) of this revenue procedure.

(E) Statements. The corporation must

provide the statements set forth in section

3.06(2)(c)(ii)(E)(1) through (3) of this

revenue procedure:

(1) “The corporation acknowledges

that the relief provided by section 3.06

of Rev. Proc. 2022-19 is limited solely to

each non-identical governing provision

described in this Corporate Governing

Provision Statement.”;

(2) “The corporation acknowledges

that the relief provided by section 3.06 of

Rev. Proc. 2022-19 is based solely on the

information, representations, and other

statements provided by the corporation

pursuant to section 3.06 of Rev. Proc.

2022-19, each of which is subject to verification during IRS examination.”; and

(3) “During the period between the

date on which the non-identical governing

288

provision became effective and the date

on which all of the procedures described

in section 3.06 of Rev. Proc. 2022-19 are

completed, each applicable shareholder

has reported their income on all affected

returns consistent with the S corporation

election for the taxable year the non-identical governing provision became effective and for all subsequent years for which

each applicable shareholder owned shares

of the corporation.”.

(F) Signature. The Corporate Governing Provision Statement must be signed

under penalties of perjury by a person

authorized to sign the corporation’s Federal income tax return under § 6062 of

the Code. The penalties of perjury statement must be provided in the following

format: “Under penalties of perjury, I

declare that I have examined this Corporate Governing Provision Statement

for corrective relief for one or more

non-identical governing provisions, as

provided by Rev. Proc. 2022-19, section

3.06, including accompanying documents, and, to the best of my knowledge

and belief, the request contains all the

relevant facts, and such facts are true,

correct, and complete.”.

(iii) Shareholder Statement. The Shareholder Statement, a sample of which is

provided in Appendix B, must be completed in accordance with this section

3.06(2)(c)(iii).

(A) Designation. The Shareholder

Statement must state at the top of the document: “SHAREHOLDER STATEMENT

PURSUANT TO REV. PROC. 2022-19,

SECTION 3.06(2)(c)(iii)”.

(B) Information. The Shareholder

Statement must provide:

(1) The date of the Shareholder Statement, the corporation’s name, EIN,

address, date of formation or incorporation, and State of formation or

incorporation;

(2) The name and address of each

applicable shareholder;

(3) The social security number or taxpayer identification number of each applicable shareholder;

(4) The number of shares of stock or,

in the case of a limited liability company,

percentage of ownership each applicable

shareholder owns or owned and the date(s)

the stock was acquired and, if applicable,

transferred; and

Bulletin No. 2022–41

(5) The date that each applicable

shareholder provided their signature, as

required by section 3.06(2)(c)(iii)(D) of

this revenue procedure.

(C) Statement of consent. Each applicable shareholder must provide the following statement of consent: “Under

penalties of perjury, I declare that I consent to the election of [insert corporation’s name], referred to herein as “the

Corporation,” located at [insert the Corporation’s address], whose employment

identification number (EIN) is [insert

the Corporation’s EIN], to be an S corporation under § 1362(a)(1) of the Code.

I have examined this consent statement,

including accompanying documents,

and, to the best of my knowledge and

belief, the request for corrective relief

contains all the relevant facts, and such

facts are true, correct, and complete.

I understand that my consent is binding and may not be withdrawn after the

Corporation receives relief pursuant to

Rev. Proc. 2022-19, section 3.06. I also

declare under penalties of perjury that I

have reported my income on all affected

returns consistent with the Corporation’s

election to be an S corporation for the

taxable year for which the election would

have been in effect but for the non-identical governing provision(s) described

in the Corporate Governing Provision

Statement for corrective relief and for all

subsequent years I have owned shares of

the Corporation.”.

(D) Signature. The Shareholder Statement must be signed under penalties of

perjury by each applicable shareholder.

(d) Record retention requirement. The

corporation is required to retain the Corporate Governing Provision Statement,

the Shareholder Statement(s), and the

revised governing provisions in accordance with § 6001 of the Code and the

Income Tax Regulations thereunder. The

Corporate Governing Provision Statement, the Shareholder Statement(s), and

the revised governing provisions must be

retained by the corporation for inspection

by authorized Internal Revenue officers or

employees, and must be retained so long

as the contents thereof may become material in the administration of any provision

of the Code or the Income Tax Regulations. See § 1.6001-1(e).

(e) Alternative relief.

Bulletin No. 2022–41

(i) General rule. An S corporation or

applicable shareholder that does not qualify for corrective relief under this section

3.06 may seek corrective relief through a

request submitted by the S corporation,

applicable shareholder, or authorized representative (as appropriate) to the Associate Chief Counsel (Passthroughs and

Special Industries) for a PLR. The request

must provide the required explanation

described in section 3.06(2)(e)(ii) of this

revenue procedure. See generally Rev.

Proc. 2022-1 (or any successor revenue

procedure).

(ii) Required explanation. A request for

a PLR by an S corporation or applicable

shareholder, or authorized representative,

under section 3.06(2)(e)(i) of this revenue

procedure must include an explanation

regarding each reason why the requirements for corrective relief under this section 3.06 could not be satisfied.

SECTION 4. NO RULE AREAS

TO TAKE INTO ACCOUNT THIS

REVENUE PROCEDURE

.01 Areas in Which PLRs Will Not Be

Issued.

(1) Principal purpose determinations

regarding the one class of stock requirement. The IRS will not issue a PLR

under § 1362(f) addressing the validity

or continuation of an S election in situations regarding the one class of stock

requirement that require a determination

of the existence of a principal purpose

because such a determination is inherently factual in nature. See section 6.02

of Rev. Proc. 2022-1 (or any successor

revenue procedure). Accordingly, the

IRS will not issue a PLR under § 1362(f)

addressing:

(a) For purposes of determining

whether all outstanding shares of stock

confer identical rights to distribution and

liquidation proceeds under § 1.1361-1(l)

(2), whether a principal purpose of a commercial contractual agreement, buy-sell

agreement, an agreement restricting the

transferability of stock, or a redemption

agreement is to circumvent the one class

of stock requirement of § 1361(b)(1)(D)

and § 1.1361-1(l) (see § 1.1361-1(l)(2)(i)

and (iii)(A)(1)); or

(b) For purposes of determining

whether an instrument, obligation, or

289

arrangement is treated as a second class of

stock, whether:

(i) A principal purpose of issuing or

entering into an instrument, obligation, or

arrangement is to circumvent the rights to

distribution or liquidation proceeds conferred by the outstanding shares of stock

or to circumvent the limitation on eligible

shareholders contained in § 1.1361-1(b)

(1) (see § 1.1361-1(l)(4)(ii)(A)(2)); or

(ii) A principal purpose of an unwritten advance or proportionately held obligation is to circumvent the rights of the

outstanding shares of stock or the limitation on eligible shareholders under

§ 1.1361‑1(l)(4)(ii)(A)(2) (see § 1.13611(l)(4)(ii)(B)).

(2) Comfort rulings. The IRS will not

issue a PLR under § 1362(f) addressing the

validity or continuation of an S election or

a QSub election in situations addressed by

the relief procedures provided in sections

3.01 through 3.05 of this revenue procedure because such a PLR would comprise

a “Comfort Ruling” (as defined by section 6.11 of Rev. Proc. 2022-1 and section

4.02(9) of Rev. Proc. 2022-3). Accordingly, the IRS will not issue a PLR under

§ 1362(f) addressing:

(a) Disproportionate distributions.

Determinations of the validity or continuation of an S election with regard to one

or more disproportionate distributions (as

defined in section 2.03(2) of this revenue

procedure) if the governing provisions

confer identical rights to distribution and

liquidation proceeds. See § 1.1361-1(l)(1)

and (2).

(b) Missing administrative S election

acceptance letter or QSub election acceptance letter. Whether a missing administrative letter from the IRS accepting an

election for a corporation to be an S corporation or accepting an election for a corporation to be a QSub affects the validity

or continuation of the election.

(c) Filing of Federal income tax return

inconsistent with status as an S corporation or QSub. Whether the filing of a

Federal income tax return that is inconsistent with a corporation’s status as an S

corporation or a QSub affects the validity

or continuation of the S election or QSub

election (as appropriate).

.02 Areas in Which a PLR Will Not

Ordinarily Be Issued. Rev. Proc. 2022-3 is

amplified and modified by—

October 11, 2022

(1) Revising section 4.01(47) to read as

follows:

(47) Section 1362.—Election; Revocation; Invalidation; Termination.—All

situations in which the Service has provided an automatic approval procedure

or administrative procedure for an S corporation or its shareholders to obtain the

following:

(i) Relief for late S corporation elections, qualified subchapter S subsidiary

elections, qualified subchapter S trust

elections, or electing small business trust

elections. See Rev. Proc. 2013-30. (For

instructions on how to seek this relief, see

Rev. Proc. 2013-30.)

(ii) Retroactive corrective relief regarding non-identical governing provisions

for S corporations meeting the eligibility

requirements of Rev. Proc. 2022-19, section 3.06(2)(b). (For instructions on how

to seek this relief, see Rev. Proc. 2022-19,

section 3.06).

(2) Adding the following as the last

paragraph of section 4.01:

Section 1362(f).—Certain inadvertent errors, omissions, or missing signatures.—Except with regard to an inadvertent error relating to a “permitted year” (as

defined in § 1378(b) and § 1.1378‑1), the

absence of a required shareholder consent,

or an officer signature for which there is

no other relief as provided in Rev. Proc.

2022-19, section 3.03, the IRS will not

issue a PLR under § 1362(f) addressing

whether an inadvertent error or omission,

or a missing required consent or signature

(see § 1362(a)(2), § 1.1361-3(a)(2), and

§ 1.1362-6(a)(1)), on Form 2553 or Form

8869 affects the validity of the S election

or QSub election.

SECTION 5. EFFECTIVE DATES

.01 General Effective Date. Except

as provided by section 5.02 of this revenue procedure, this revenue procedure is

effective [INSERT IRB PUBLICATION

DATE], the date of publication of this revenue procedure in the Internal Revenue

Bulletin.

.02 Transition Rule for Pending PLR

Requests.

(1) Requirement to notify IRS. If a taxpayer has a request for a PLR regarding

a non-identical governing provision that

is postmarked or, if not mailed, received

October 11, 2022

by the IRS on or before [INSERT DATE

1 DAY AFTER IRB PUBLICATION

DATE], one day after the date of publication of this revenue procedure in the

Internal Revenue Bulletin (pending ruling request), within 45 calendar days after

that date, the taxpayer must notify the

Associate Chief Counsel (Passthroughs

and Special Industries) of its decision to

either:

(a) Rely on this revenue procedure,

withdraw the pending PLR request, and

receive a refund of the associated user fee;

or

(b) Continue to pursue the pending

PLR request.

(2) Failure to notify IRS. If a taxpayer

described in section 5.02(1) of this revenue procedure does not satisfy the notification requirement under that section, the

taxpayer is deemed to choose to continue

to pursue the pending PLR request.

SECTION 6. EFFECT ON OTHER

DOCUMENTS

.01 Rev. Proc. 2013-30. Rev. Proc.

2013-30 is amplified.

.02 Rev. Proc. 2022-1. Sections 6.11

and 7.01(4) and (5) of Rev. Proc. 2022-1

are amplified.

.03 Rev. Proc. 2022-3. Sections

4.01(47) and 4.02(9) of Rev. Proc. 2022-3

are amplified and modified.

SECTION 7. PAPERWORK

REDUCTION ACT AND TAXPAYER

BURDEN REDUCTION

The current burden for collection of

information is effectively contained in

§ 1362(f) and § 1.1362-4 (inadvertent terminations and inadvertently invalid elections). Under § 1.1362-4(a), the determination of whether a termination or invalid

S election or QSub election was inadvertent is made by the Commissioner. This

determination is made through the PLR

process pursuant to Rev. Proc. 2022-1 (and

any successor revenue procedure). An

entity that fails to qualify as an S corporation or a QSub may continue to qualify as

an S corporation or a QSub, respectively,

by following each requirement described

in section 3 of this revenue procedure in

lieu of requesting a PLR under § 1362(f)

and § 1.1362-4.

290

Based on consultation with industry

stakeholders, the Treasury Department

and the IRS estimate that a taxpayer’s cost

to outsource the current PLR process to

Federal income tax and other advisors is

approximately $108,000 (that is, the sum

obtained by adding a $38,000 PLR user

fee, a $20,000 average preparer PLR fee,

and $50,000 of average preparer due diligence fees). This revenue procedure is

expected to eliminate those fees.

Historically, approximately 80 S corporations per year have submitted a PLR

with regard to one or more of the areas

covered by this revenue procedure to

avoid or correct an inadvertent invalid

election or termination of their S corporation or QSub elections. The Treasury

Department and the IRS have determined

that many S corporations that do not

seek administrative relief refrain from

doing so because of the high cost associated with a PLR request. By setting

forth the procedures provided in section

3 of this revenue procedure, which will

significantly reduce the cost of relief for

S corporations, the Treasury Department

and the IRS expect that an additional

120 S corporations will use this revenue

procedure each year. Overall, the Treasury Department and the IRS expect that

approximately 200 S corporations will

use this revenue procedure on an annual

basis.

The Treasury Department and the IRS

estimate that the streamlined process for

non-identical governing provisions will

take, on average, 10 total hours for each

entity to read the instructions and complete

the Corporate Governing Provision Statement and Shareholder Statement. The previously approved Office of Management

and Budget hour estimate for a PLR is 80

total hours. Therefore, the 10-hour estimated burden of the streamlined process

would result in a 70-hour time reduction

for S corporations that would have sought

PLR relief in the absence of this revenue

procedure.

In addition, the Treasury Department and the IRS have determined that

the 80-hour time estimate represents an

average for all PLRs. However, the average number of hours spent on PLRs that

would be impacted by this revenue procedure would likely be much higher. As

a result, the Treasury Department and the

Bulletin No. 2022–41

IRS believe that a reasonable estimate for

the number of hours spent on the impacted

PLRs is 200 hours, and therefore the time

burden reduction related to this revenue

procedure is likely closer to 190 hours,

rather than 70 hours. In addition, the Treasury Department and the IRS have determined that the total monetized burden

hours is $188,120.

Based on the previously approved

PLR hour estimate, each S corporation

that would have otherwise filed a PLR

will save 70 hours of time. As a result,

there would be an overall savings of

5,600 hours per year. As previously

Bulletin No. 2022–41

stated, the 80-hour estimate is likely low

for this subset of PLRs. If the 200-hour

estimate for this subset of PLRs is used,

the overall burden reduction would equal

15,200 hours (80 requests x 190 hours)

per year.

The Treasury Department and the IRS

emphasize that the currently approved

burden estimate does not include money

burden. Assuming S corporations will

no longer need to request these PLRs,

the Treasury Department and the IRS

have determined that this same group

of businesses is expected to save, on an

annual basis, an estimated $108,000 per

291

S corporation for an overall money burden

reduction of $8,640,000.

SECTION 8. DRAFTING

INFORMATION AND PRIMARY

CONTACT FOR QUESTIONS

The principal authors of this revenue

procedure are Anthony Doxey and Kevin

Babitz of the Office of Associate Chief

Counsel (Passthroughs and Special Industries). For further information regarding

this revenue procedure, please contact Mr.

Doxey or Mr. Babitz at (202) 317-5279

(not a toll-free call).

October 11, 2022

APPENDIX A

SAMPLE CORPORATE GOVERNING PROVISION STATEMENT

(Pursuant to Rev. Proc. 2022-19, Section 3.06(2)(c)(ii))

[Date of Corporate Governing Provision Statement]

Record Retention Requirement. The Corporation (as defined in Section 1 of this Corporate Governing Provision Statement) is

required to retain the Corporate Governing Provision Statement, the Shareholder Statement, and the revised governing provisions

in accordance with § 6001 of the Internal Revenue Code (Code) and the Income Tax Regulations thereunder. See Rev. Proc. 202219, [XX] I.R.B. [XXX], section 3.06(2)(d).

Section 1. Request for Relief and Required Information of the Corporation

The corporation (insert the corporation’s name), referred to as “the Corporation,” whose employment identification number (EIN) is

(insert the Corporation’s EIN), located at (insert the Corporation’s address), and formed or incorporated on (insert date) in (insert

State), requests relief for an invalid election under § 1362(a)(1) of the Code (S election) or termination of an S election pursuant to

§ 1362(f), and Rev. Proc. 2022-19, section 3.06, for one or more non-identical governing provisions (as defined in § 1.1361-1(l)).

The Corporation’s actual or intended effective date of its S election was (insert date). If the Corporation has multiple S elections, and

requests relief for an S election that was not its most recent S election, then describe the circumstances as part of the disclosure of all

relevant facts, as required by Section 3 of this Corporate Governing Provision Statement.

Section 2. Required Information Regarding the Applicable Shareholders

Provide the information required by the table below with regard to each applicable shareholder. The term “applicable shareholder”

means a current or former shareholder of the Corporation who owns or owned stock of the Corporation at any time during the period

(i) beginning on the date on which the non-identical governing provision was adopted (on its own or as part of another governing

provision), and (ii) ending on the date on which the non-identical governing provision was removed or modified in a manner such that

the governing provision complies with the one class of stock requirement. See Rev. Proc. 2022-19, section 3.06(1)(a).

Table of Required Information for Each Applicable Shareholder

(Attach additional pages, if necessary. One page per applicable shareholder is also acceptable.)

Social Security Number or

Name

Address

Taxpayer Identification Number

1.

2.

3.

4.

5.

Section 3. Required Description of All Relevant Facts Regarding Each Non-Identical Governing Provision

To establish an inadvertent termination or invalidation of the S election of the Corporation, provide a description of all relevant facts

regarding why each non-identical governing provision was adopted, how each non-identical governing provision was discovered,

and each action taken to correct or remove each non-identical governing provision before any non-identical governing provision is

discovered by the Internal Revenue Service (IRS) (within the meaning of § 301.9100-3(b)(1)(i) of the Procedure and Administration

Regulations). To demonstrate reasonable cause for relief, this description must include each action taken by the Corporation and

each applicable shareholder to establish that the Corporation and each applicable shareholder acted reasonably and in good faith in

correcting or removing each non-identical governing provision upon discovery. See Rev. Proc. 2022-19, section 3.06(2)(c)(ii)(B)(4).

(Attach additional pages, if necessary.)

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Section 4. Required Representations or Explanation of the Corporation

1.

Except as provided by Section 5 of this Corporate Governing Provision Statement, provide the following representations required

by section 3.06(2)(c)(ii)(C) and (D) of Rev. Proc. 2022-19:

A. The Corporation’s S election was inadvertently invalid or terminated solely because of the adoption of one or more non-identical governing provisions.

B. The Corporation and each applicable shareholder satisfy all of the requirements set forth in section 3.06 of Rev. Proc.

2022-19.

C. Except as provided by section 4.2 of this Corporate Governing Provision Statement, the Corporation responds in the negative to each requested statement set forth in section 7.01(4) or (5) of Rev. Proc. 2022‑1, 2022-1 I.R.B. 1, or any successor

revenue procedure (statements regarding whether the same or a similar issue was previously ruled on or whether a request

involving the same or a similar issue was submitted or is currently pending).

D. The corporation and each applicable shareholder acted reasonably and in good faith in correcting or removing each non-identical governing provision upon discovery.

2.

Required Explanation. If the Corporation has a positive response to any requested statement set forth in section 7.01(4) or (5) of

Rev. Proc. 2022-1 (or any successor revenue procedure), the Corporation must provide an explanation for each such response as

part of the description of all relevant facts required by section 3.06(2)(c)(ii)(B)(4) of Rev. Proc. 2022-19.

Section 5. Required Statements of the Corporation

The Corporation must provide the following statements required by section 3.06(2)(c)(ii)(E)(1) through (3) of Rev. Proc. 2022-19.

1.

The Corporation acknowledges that the relief provided by section 3.06 of Rev. Proc. 2022-19 is limited solely to each non‑identical governing provision described in this Corporate Governing Provision Statement.

2.

The Corporation acknowledges that the relief provided by section 3.06 of Rev. Proc. 2022-19 is based solely on the information,

representations, and other statements provided by the Corporation pursuant to section 3.06 of Rev. Proc. 2022-19, each of which

is subject to verification during IRS examination.

3.

During the period between the date on which the non-identical governing provision became effective and the date on which all

of the procedures described in section 3.06 of Rev. Proc. 2022-19 are completed, each applicable shareholder has reported their

income on all affected returns consistent with the S corporation election for the taxable year the non-identical governing provision became effective and for all subsequent years for which each applicable shareholder owned shares of the Corporation.

Section 6. Required Penalties of Perjury Statement

Provide the following penalties of perjury statement required by section 3.06(2)(c)(ii)(F) of Rev. Proc. 2022-19.

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Under penalties of perjury, I declare that I have examined this Corporate Governing Provision Statement for corrective relief for one

or more non-identical governing provisions, as provided by Rev. Proc. 2022-19, section 3.06, including accompanying documents,

and, to the best of my knowledge and belief, the request contains all the relevant facts, and such facts are true, correct, and complete.

[Signature]

[Title]

[Date]

This signature is provided by an officer of the Corporation who is authorized to sign the Corporation’s return under § 6062 of

the Code.

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Bulletin No. 2022–41

APPENDIX B

SAMPLE SHAREHOLDER STATEMENT

[Date of Shareholder Statement]

(Pursuant to Rev. Proc. 2022-19, Section 3.06(2)(c)(iii))

Record Retention Requirement. The Corporation (as defined in Section 1 of this Shareholder Statement) is required to retain the

Corporate Governing Provision Statement, the Shareholder Statement, and the revised governing provisions in accordance with

§ 6001 of the Internal Revenue Code (Code) and the Income Tax Regulations thereunder. See Rev. Proc. 2022-19, [XX] I.R.B.

[XXX], section 3.06(2)(d).

Section 1. Request for Relief and Required Information of the Corporation

The Corporation (insert the Corporation’s name), referred to as “the Corporation,” whose employment identification number (EIN)

is (insert the Corporation’s EIN), located at (insert the Corporation’s address), and formed or incorporated on (insert date) in (insert

State), requests relief for an invalid election under § 1362(a)(1) of the Code (S election) or termination of an S election pursuant to

§ 1362(f), and Rev. Proc. 2022-19, section 3.06, for one or more non-identical governing provisions (as defined in § 1.1361-1(l)).

Section 2. Required Statement of Consent by All Applicable Shareholders

The term “applicable shareholder” means a current or former shareholder of the Corporation who owns or owned stock of the Corporation at any time during the period (i) beginning on the date on which the non-identical governing provision was adopted (on its own

or as part of another governing provision), and (ii) ending on the date on which the non-identical governing provision was removed

or modified in a manner such that the governing provision complies with the one class of stock requirement. See Rev. Proc. 2022-19,

section 3.06(1)(a).

Each applicable shareholder must provide the following statement of consent, as required by section 3.06(2)(c)(iii)(C) of Rev. Proc.

2022-19. Each applicable shareholder provides that consent by completing and signing the table provided by this Section 2 (on the

following page).

Under penalties of perjury, I declare that I consent to the election of (insert the Corporation’s name), referred to herein as “the Corporation,” located at (insert the Corporation’s address), whose employment identification number (EIN) is (insert the Corporation’s

EIN), to be an S corporation under § 1362(a)(1). I have examined this consent statement, including accompanying documents, and,

to the best of my knowledge and belief, the request for corrective relief contains all the relevant facts, and such facts are true, correct,

and complete. I understand that my consent is binding and may not be withdrawn after the Corporation receives relief pursuant to Rev.

Proc. 2022-19, section 3.06. I also declare under penalties of perjury that I have reported my income on all affected returns consistent

with the Corporation’s election to be an S corporation for the taxable year for which the election would have been in effect but for

the non-identical governing provision(s) described in the Corporate Governing Provision Statement for corrective relief and for all

subsequent years I have owned shares of the Corporation.

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October 11, 2022

Table of Required Consent and Information for Each Applicable Shareholder

(Attach additional pages, if necessary. One page per applicable shareholder is acceptable.)

Name and Address

Social Security

Number or

Taxpayer

Identification

Number

Number of Shares of Stock Owned or

Ownership Percentage (in the case of a

Limited Liability Company)

Signature

Date

Number of Date(s)

shares or acquired

percentage (month,

of

day, and

year)

ownership

If applicable, date(s)

and number of

shares (or percentage

of ownership)

transferred (month,

day, and year)

1.

2.

3.

4.

5.

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Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as “rulings”) that

have an effect on previous rulings use the

following defined terms to describe the

­effect:

Amplified describes a situation where

no change is being made in a prior published position, but the prior position is

being extended to apply to a variation of

the fact situation set forth therein. Thus,

if an earlier ruling held that a principle

applied to A, and the new ruling holds that

the same principle also applies to B, the

earlier ruling is amplified. (Compare with

modified, below).

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

has caused, or may cause, some confusion. It is not used where a position in a

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously published ruling and points out an essential

difference between them.

Modified is used where the substance

of a previously published position is being

changed. Thus, if a prior ruling held that a

principle applied to A but not to B, and the

new ruling holds that it applies to both A

and B, the prior ruling is modified because

it corrects a published position. (Compare

with amplified and clarified, above).

Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions.

This term is most commonly used in a ruling

that lists previously published rulings that

are obsoleted because of changes in laws or

regulations. A ruling may also be obsoleted

because the substance has been included in

regulations subsequently adopted.

Revoked describes situations where the

position in the previously published ruling

is not correct and the correct position is

being stated in a new ruling.

Superseded describes a situation where

the new ruling does nothing more than

restate the substance and situation of a

previously published ruling (or rulings).

Thus, the term is used to republish under

the 1986 Code and regulations the same

position published under the 1939 Code

and regulations. The term is also used

when it is desired to republish in a single

ruling a series of situations, names, etc.,

that were previously published over a

period of time in separate rulings. If the

new ruling does more than restate the substance of a prior ruling, a combination of

terms is used. For example, modified and

superseded describes a situation where the

substance of a previously published ruling

is being changed in part and is continued

without change in part and it is desired to

restate the valid portion of the previously

published ruling in a new ruling that is

self contained. In this case, the previously

published ruling is first modified and then,

as modified, is superseded.

Supplemented is used in situations in

which a list, such as a list of the names of

countries, is published in a ruling and that

list is expanded by adding further names

in subsequent rulings. After the original

ruling has been supplemented several

times, a new ruling may be published that

includes the list in the original ruling and

the additions, and supersedes all prior rulings in the series.

Suspended is used in rare situations

to show that the previous published rulings will not be applied pending some

future action such as the issuance of new

or amended regulations, the outcome of

cases in litigation, or the outcome of a

Service study.

Abbreviations

The following abbreviations in current

use and formerly used will appear in

material published in the Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

E.O.—Executive Order.

ER—Employer.

Bulletin No. 2022–41

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contributions Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

i

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statement of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

October 11, 2022

Numerical Finding List1

Bulletin 2022–41

Announcements:

Treasury Decisions:

9963, 2022-34 I.R.B. 145

9964, 2022-35 I.R.B. 172

9965, 2022-37 I.R.B. 192

2022-14, 2022-31 I.R.B. 136

2022-15, 2022-31 I.R.B. 136

2022-16, 2022-33 I.R.B. 144

2022-17, 2022-35 I.R.B. 179

2022-18, 2022-36 I.R.B. 190

2022-19, 2022-36 I.R.B. 191

2022-20, 2022-38 I.R.B. 238

Notices:

2022-29, 2022-28 I.R.B. 66

2022-30, 2022-28 I.R.B. 70

2022-31, 2022-29 I.R.B. 85

2022-32, 2022-32 I.R.B. 137

2022-33, 2022-34 I.R.B. 147

2022-34, 2022-34 I.R.B. 150

2022-35, 2022-36 I.R.B. 184

2022-36, 2022-36 I.R.B. 188

2022-37, 2022-37 I.R.B. 234

2022-38, 2022-39 I.R.B. 239

2022-39, 2022-40 I.R.B. 264

2022-40, 2022-40 I.R.B. 266

2022-42, 2022-41 I.R.B. 276

2022-44, 2022-41 I.R.B. 277

Proposed Regulations:

REG-130975-08, 2022-28 I.R.B. 71

REG 130675-17, 2022-30 I.R.B. 104

REG-125693-19, 2022-39 I.R.B. 241

Revenue Procedures:

2022-25, 2022-27 I.R.B. 3

2022-28, 2022-27 I.R.B. 65

2022-26, 2022-29 I.R.B. 90

2022-32, 2022-30 I.R.B. 101

2022-30, 2022-31 I.R.B. 112

2022-29, 2022-33 I.R.B. 141

2022-34, 2022-33 I.R.B. 143

2022-35, 2022-40 I.R.B. 270

2022-36, 2022-40 I.R.B. 274

2022-19, 2022-41 I.R.B. 282

Revenue Rulings:

2022-12, 2022-27 I.R.B. 1

2022-13, 2022-30 I.R.B. 99

2022-14, 2022-31 I.R.B. 110

2022-15, 2022-35 I.R.B. 152

2022-17, 2022-36 I.R.B. 182

2022-18, 2022-40 I.R.B. 262

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2021–27 through 2021–52 is in Internal Revenue Bulletin

2021–52, dated December 27, 2021.

1

October 11, 2022

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Bulletin No. 2022–41

Finding List of Current Actions on

Previously Published Items1

Bulletin 2022–41

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2021–27 through 2021–52 is in Internal Revenue Bulletin

2021–52, dated December 27, 2021.

1

Bulletin No. 2022–41

iii

October 11, 2022

Internal Revenue Service

Washington, DC 20224

Official Business

Penalty for Private Use, $300

INTERNAL REVENUE BULLETIN

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