Certain Estates Now Have Five Years to Make a Portability Election

On Friday, July 8, 2022, the IRS released Revenue Procedure 2022-32, which supersedes Revenue Procedure 2017-34 and extends the period of time certain estates have to make a “portability” election under IRC § 2010(c)(5)(A). A portability election allows for a surviving spouse to utilize the deceased spouse’s unused exclusion amount (DSUE). The portability election may only be made on a timely filed federal estate tax return (Form 706).

In Revenue Procedure 2017-34, the IRS provided a method for certain estates to obtain an extension of time to make a portability election in lieu of getting a private letter ruling (PLR). An estate that was not required to file a Form 706 under IRC § 6018(a), could make a late portability election by filing a Form 706 on or before the second anniversary of the decedent’s death. Now, under Revenue Procedure 2022-32, such estate has until the fifth anniversary of the decedent’s date of death to file a Form 706 and elect portability.

In order to obtain relief under Revenue Procedure 2022-32, an estate that is not required to file a Form 706 under IRC § 6018(a) must file a complete and properly prepared Form 706 by the fifth anniversary of the decedent’s date of death with “FILED PURSUANT TO REVENUE PROCEDURE 2022-32 TO ELECT PORTABILITY UNDER § 2010(c)(5)(a)” stated at the top of the Form 706. Additionally, the estate cannot have already filed a Form 706 within the time prescribed by Treasury Regulation § 20.2010-2(a)(1) (within nine months from decedent’s date of death, or fifteen months if an automatic extension was obtained).

If an estate that is eligible for relief under Revenue Procedure 2022-32 filed a PLR request to obtain an extension of time under Treasury Regulation § 301.9100-3 to make a portability election, and that request is pending as of July 8, 2022, then the Office of the Associate Chief Counsel will close its file on the ruling request and refund the user fee. The estate can then obtain the relief granted under Revenue Procedure 2022-32 by filing a Form 706 by the fifth anniversary of the decedent’s date of death.

Our firm had a PLR request pending on this same issue. In our case, we were outside the two years provided in Revenue Procedure 2017-34, but were still within five years of the decedent’s date of death. The IRS attorney assigned to our file confirmed that, because of the release of Revenue Procedure 2022-32, our file is closed and we should expect to receive the refunded user fee around Labor Day.

Since the IRS released Revenue Procedure 2017-34, it continued to receive several PLR requests, requesting an extension of time to elect portability. A significate percentage of requests the IRS received were from estates of decedents who died within five years of the date of the requests. Therefore, the Treasury Department and IRS determined that there is a need for continuing relief for the estates that are not required to file under § 6018(a) and extended the period to elect portability to five years.

In sum, Revenue Procedure 2022-32 gives executors of smaller estates more flexibility and the option of waiting to file a Form 706. Keep in mind, however, the IRS does not issue PLRs on hindsight. If an executor is aware of the filing requirement to elect portability and fails to file within that five-year window, the executor is likely not eligible for relief under Treasury Regulation § 301.9100-3. Therefore, if an estate chooses to wait to file a Form 706 and misses the five-year deadline, then the estate’s ability to obtain 9100 relief may be lost. There is no hindsight factor under Revenue Procedure 2022-32 for returns filed within the five-year window. 

For questions regarding this blog post or any other estate planning matter, please feel free to contact Stephanie Grissom at (214) 744-3700 or by email at sgrissom@meadowscollier.com.