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to make indexing adjustments to cal- make an election under Sec. 59(e) to expenditures would have been included
culate the premium tax credit for 2023. deduct ratably over a 10-year period Sec. in its Sec. 59(e) elections to allow it to
The required contribution percentage 174 research or experimental (R&E) use available production tax credits. The
(now 9.12%) is updated by this rev- expenditures. In one letter ruling,12 the IRS issued a favorable ruling, permitting
enue procedure, effective for plan years taxpayer inadvertently failed to attach the taxpayer to revoke its original Sec.
beginning in calendar 2023. Rev. Proc. a Sec. 59(e) election statement to its 59(e) elections and granting an exten-
2014-37 is supplemented. timely electronically filed income tax sion of time to make new elections.
Advance premium tax credits: return, which was prepared as though
In Sek,9 married taxpayers and their the election statement had been prop- Sec. 61: Gross income
children were covered by COBRA10 erly attached. defined
after the husband left his employment. In three other letter rulings,13 the Paycheck Protection Program
When their COBRA coverage ended taxpayers intended to make an election — loan forgiveness: The IRS issued

in August 2016, they purchased medical under Sec. 59(e) to deduct ratably over a much-anticipated guidance15 on the
insurance through the New York state 10-year period their R&E expenditures, timing of tax-exempt income arising
health exchange for the remainder of but the statement required to make the from the forgiveness of Paycheck Pro-
the year. The taxpayers claimed a Sec. 35 election was not timely filed with the tection Program (PPP) loans. The Ser-
health coverage tax credit (HCTC) on income tax return. In all cases, the IRS vice advised that taxpayers may exclude
their return for 2016. They also claimed ruled favorably and granted a 120-day expenses, paid or incurred, from gross
a premium tax credit for all of 2016 on extension to make the election, not- income at the time the PPP loan for-
an amended return. The taxpayers stipu- ing that the taxpayers acted reasonably giveness application is filed or when the
lated before trial in the Tax Court that and in good faith and that granting PPP forgiveness is granted. The guid-
they were ineligible for the HCTC. The relief would not prejudice the govern- ance is effective for any tax year in which
court, however, allowed a premium tax ment’s interests. the taxpayer paid or incurred expenses,
credit for months in 2016 after August, Revocation of original Sec. PPP forgiveness was applied for, or PPP
when they were enrolled in insurance 59(e) election and extension to loan forgiveness was granted.
through the exchange. make new elections: In another let- Treatment of improperly for-
In another premium tax credit case, ter ruling,14 the IRS was asked to rule given PPP loans: The PPP loans
the taxpayers deducted a capital loss on whether to (1) permit the taxpayer to made available under the Coronavirus
exceeding $123,000 on their tax return, revoke its original Sec. 59(e) elections to Aid, Relief, and Economic Security
received an advance premium tax credit, capitalize and amortize intangible drill- (CARES) Act of 202016 provided $800
and claimed a premium tax credit for the ing and development expenditures and billion in relief to qualifying taxpayers
year.11 In Tax Court, they unsuccessfully mining exploration expenditures for the during the COVID-19 pandemic. If
disputed the IRS’s denial of a current tax year, and (2) grant an extension of taxpayers satisfied specific forgiveness
loss in excess of $3,000. As a result, the time for the taxpayer to make new elec- criteria, as outlined in 15 U.S.C. Sec-
court held, the taxpayers’ recalculated tions under Sec. 59(e) to capitalize and tions 636m and 636(a)(37)(J), then the
income exceeded eligibility limits for any amortize the expenditures. PPP loan would be forgiven in whole or
advance premium tax credit or premium At issue was the fact that, after fil- in part. The size of the PPP loan deter-
tax credit. ing its income tax return, the taxpayer mined the support necessary for lenders
discovered that it had failed to include to forgive the loan. In some instances,
Sec. 59(e): Optional certain expenditures in its timely filed the taxpayer may only be required to
10-year write-off of certain elections due to a rare natural event make representations on the forgive-
tax preferences that damaged one of its facilities and ness application. Loans qualifying for
Extension to make an election prevented the taxpayer from identify- forgiveness are treated as exempt from
under Sec. 59(e): In several letter ing all expenditures eligible for the Sec. gross income.
rulings, the IRS was asked to rule on 59(e) election. The taxpayer asserted IRS Chief Counsel Advice (CCA)
requests for a 120-day extension to that, but for the natural event, all eligible 202237010, released Sept. 16, 2022,

9. Sek, T.C. Memo. 2022-87. 12. IRS Letter Ruling 202206011.
10. Health care continuation coverage purchased through a former employer, 13. IRS Letter Rulings 202209008, 202233009, and 202237009.
as established by the Consolidated Omnibus Budget Reconciliation Act 14. IRS Letter Ruling 202224006.
of 1985, P.L. 99-272. 15. Rev. Proc. 2021-48.
11. Powell, T.C. Summ. 2022-19. 16. Coronavirus Aid, Relief, and Economic Security Act, P.L. 116-136.

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