SECTION 4. ELECTION NOT TO

APPLY § 168(k)(4) TO EXTENSION PROPERTY

.01 In General . If a corporate taxpayer has made the § 168(k)(4) election as provided in section 3 of Rev. Proc. 2009–16 (as modified by section 8 of this revenue procedure) for its first taxable year ending after March 31, 2008, the taxpayer may make an election not to apply § 168(k)(4) to extension property placed in service by the taxpayer in its first taxable year ending after December 31, 2008, and in any subsequent taxable year. The taxpayer’s § 168(k)(4) election continues to apply to eligible qualified property that is not extension property. Even if the taxpayer does not place in service any extension property in its first taxable year ending after December 31, 2008, the taxpayer must make the election not to apply § 168(k)(4) to extension property for that taxable year if the taxpayer wishes to apply such election to extension property placed in service in a subsequent taxable year. Failure to comply with all of the requirements of section 4.02 of this revenue procedure or, if applicable, section 4.03 of this revenue procedure, will nullify a taxpayer’s attempted election not to apply § 168(k)(4) to extension property.

.02 Time and Manner for Making the Election Not to Apply § 168(k)(4) to Ex- tension Property .

(1) Time for making election . Except as provided in section 4.04 of this revenue procedure, a corporate taxpayer must make the election not to apply § 168(k)(4) to extension property by the due date (including extensions) of the federal income tax return for the taxpayer’s first taxable year ending after December 31, 2008. If the taxpayer has filed such federal income tax return and did not make the election not

to apply § 168(k)(4) to extension property but wants to do so, see section 4.04 of this revenue procedure for how to make a late election.

(2) Manner of making election . Except as provided in section 4.03 of this revenue procedure, a corporate taxpayer makes the election not to apply § 168(k)(4) to extension property by:

(a) Attaching a statement to the taxpayer’s timely-filed federal income tax return for its first taxable year ending after December 31, 2008, indicating that the taxpayer is making the election not to apply § 168(k)(4) to extension property; and

(b) Providing written notification to any partnership in which the taxpayer is a partner that the taxpayer is making the election not to apply § 168(k)(4) to extension property. This notification must be made on or before the due date (including extensions) of the taxpayer’s federal income tax return for its first taxable year ending after December 31, 2008. If the taxpayer makes a late election not to apply § 168(k)(4) to extension property in accordance with section 4.04 of this revenue procedure, the notification to the partnership must be made no later than the date the taxpayer files its federal income tax return containing the late election.

.03 Controlled Groups . (1) In general . The Act does not modify the rules under § 168(k)(4)(C)(iv) for treating members of a controlled group of corporations (as defined in § 168(k)(4)(C)(iv) and in section 2.05 of Rev. Proc. 2009–16) as one taxpayer for purposes of § 168(k)(4) (hereinafter such group of corporations is referred to as a “controlled group”). Therefore, if any member of a controlled group makes the election not to apply § 168(k)(4) to extension property, such election is binding on all other members of the controlled group. For purposes of this section 4.03, the rules provided in section 3.05(1) of Rev. Proc. 2009–16 (relating to the determination of the members of a controlled group) and section 3.05(2)(d) of Rev. Proc. 2009–16 (relating to the effect of a § 168(k)(4) election to members entering and leaving a controlled group) apply.

(2) Time and manner of making the election not to apply § 168(k)(4) to exten- sion property .

(a) All members of a controlled group constitute a single consolidated group .

July 20, 2009 152 2009–29 I.R.B.

2009–16. Each member’s proportionate share of the group extension property bonus depreciation amount is determined in accordance with the method described in section 4.02(2) or 4.02(3)(b)(iii) of Rev. Proc. 2009–16, as applicable. In lieu of the method described in section 4.02(3)(b) of Rev. Proc. 2009–16, the controlled group may allocate the group extension property bonus depreciation amount pursuant to an allocation agreement (which may differ from the allocation agreement applicable to eligible qualified property that is not extension property) described in section 4.02(3)(c) of Rev. Proc. 2009–16.

.04 Examples . (1) Example 1 . On August 1, 2008, B, a corporation with a taxable year ending on December 31st, purchases and places in service property described in both § 168(k)(2)(A) and (k)(4)(D) (Property X). In addition, on September 1, 2008, B begins production of property described in both § 168(k)(2)(B)(i) and (k)(4)(D) (Property Y). On March 15, 2009, B files its original federal income tax return for the taxable year ending December 31, 2008, and makes the § 168(k)(4) election in accordance with section 3.04 of Rev. Proc. 2009–16.

On August 1, 2009, B purchases and places in service property described in both § 168(k)(2)(A) and (k)(4)(D) (Property Z). On October 1, 2009, B completes production of Property Y and places Property Y in service. On March 15, 2010, B files its original federal income tax return for the taxable year ending December 31, 2009, and does not make the election not to apply § 168(k)(4) to extension property.

(a) For B’s taxable year ending December 31, 2008, Property X is eligible qualified property under § 168(k)(4)(D) and (k)(2)(A) and, as a result of B’s § 168(k)(4) election, is taken into account in computing the bonus depreciation amount for this taxable year.

(b) For B’s taxable year ending December 31, 2009, Property Y is eligible qualified property that is not extension property under § 168(k)(4)(D), (k)(4)(H), and (k)(2)(B) and, as a result of B’s § 168(k)(4) election, is taken into account in computing the bonus depreciation amount for this taxable year. Further, under § 168(k)(4)(H)(iii), Property Z is extension property that is taken into account in computing the separate extension property bonus depreciation amount for this taxable year.

(2) Example 2 . The facts are the same as in Ex- ample 1 . Assume that (1) Property X costs $50 million and is 5-year property under § 168(e), (2) the progress expenditures (within the meaning of section 5.02(5) of Rev. Proc. 2008–65 (as modified by section 7.02 of this revenue procedure)) as of October 1, 2009, with respect to Property Y are $100 million and that Property Y is 5-year property under § 168(e), and (3) Property Z costs $50 million and is 5-year property under § 168(e). Further assume that B depreciates its 5-year property using the optional depreciation table that corresponds to the general depreciation system, the 200-percent declining balance method, a 5-year recovery period, and the half-year convention. For each of Property X and Property Z,

taxable year ending after December 31, 2008, is granted to make the election not to apply § 168(k)(4) to extension property, provided the taxpayer timely filed the taxpayer’s federal income tax return for the taxpayer’s first taxable year ending after December 31, 2008, and the taxpayer satisfies the requirements in § 301.9100–2(c) and (d).

(2) Other extensions . A taxpayer that fails to make the election not to apply § 168(k)(4) to extension property for the taxpayer’s first taxable year ending after December 31, 2008, as provided in section 4.02, 4.03, or 4.04(1) of this revenue procedure but wants to do so must file a request for an extension of time to make the election under the rules in § 301.9100–3.