SECTION 3. TAXPAYER — Internal Revenue Bulletin 2022-41

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

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 Miss- ing Shareholder Consents, Errors with Regard to a Permitted Year, Missing Offi- cer’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

(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 sig- nature . 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

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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 Elec- tions 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 Fed- eral Income Tax Return Filing Inconsis- tent 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

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 cor- poration’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 Cor- recting One or More Non-Identical Gov- erning 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).

(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

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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.

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

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

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( 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 .

(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.