The American Institute of Certified Public Accountants (AICPA) is renewing its call for the IRS and Treasury Department to establish a lower, separate user fee category for private letter rulings (PLRs) that involve straightforward S corporation election errors.
In a letter sent December 15, 2025, the AICPA argued that the current user fee structure creates a significant financial hardship for small businesses and is disproportionate to the complexity and workload associated with these routine requests.
The request targets situations where taxpayers must seek a PLR simply because they fall outside the strict time limits of existing, no-fee relief procedures, even when the underlying facts of their case are simple.
S Corp Election Errors For a small business, maintaining a valid S corporation election is critical for tax purposes. Errors in making or maintaining the election — such as failing to file the initial election on time or errors related to trusts holding S corp stock — can lead to the election being deemed invalid or terminated, often with severe tax consequences.
The IRS provides two main pathways for taxpayers to correct these mistakes:
- Streamlined, No-Fee Procedures: For many common and inadvertent errors, the IRS offers simplified procedures that do not require a formal ruling or a user fee. Rev. Proc. 2022-19 provides relief for issues like non-identical governing provisions, while Rev. Proc. 2013-30 covers late S corp elections, Electing Small Business Trust (ESBT) elections, and Qualified Subchapter S Trust (QSST) elections, among others.
- Private Letter Rulings (PLRs): If a taxpayer’s situation does not fit within the specific circumstances covered by the streamlined revenue procedures, their only option is to request a PLR from the IRS. This formal process requires the payment of a substantial user fee.
A key limitation highlighted by the AICPA is the strict deadline in Rev. Proc. 2013-30, which requires that relief be requested within three years and 75 days of the election’s intended effective date. A taxpayer who misses this deadline, even by one day, is automatically ineligible for the streamlined process and must pay for a PLR, regardless of how simple the error was.
Current PLR User Fees According to the most recent annual IRS guidance on user fees (Rev. Proc. 2025-1), the cost of a PLR can be substantial. A ruling request under IRC § 1362(f) (for inadvertent terminations or invalid elections) generally costs $43,700, while a request under IRC § 1362(b)(5) (for late elections) is $14,500.
While there are reduced fees for smaller taxpayers, the AICPA letter argues that the income thresholds are themselves problematic. The fee is reduced to $9,775 for taxpayers with gross income of less than $10 million and $400,000 or more, and to $3,450 for those with gross income below $400,000. However, the letter notes that the definition of “gross income” for this purpose is closer to gross receipts, as it does not allow for the deduction of cost of goods sold.
This, the AICPA contends, can easily push a small, low-margin business into the highest fee tier. The letter contrasts this with the small business definition under IRC § 448(c), which allows average annual gross receipts of up to $31 million (for 2025) for certain accounting method purposes.
AICPA’s Recommendation The AICPA’s central recommendation is for Treasury and the IRS to create a new, reduced user fee category for PLR requests under IRC § 1362(b)(5) and IRC § 1362(f). Specifically, this would apply to requests necessary only because the taxpayer falls outside the three-year and 75-day deadline for streamlined relief in Rev. Proc. 2013-30.
The organization justifies this by arguing that such rulings are not complex. “[These] requests are often factually straightforward and closely resemble the types of late election relief otherwise eligible for simplified procedures,” the letter states. Since the IRS workload is significantly lower than for more complex rulings, the AICPA believes the fee should align with the IRS’ own principles of accounting for the average time and difficulty of requests in a category.
This is not a new position for the organization. The letter renews a recommendation first made in a 2016 comment letter. The AICPA emphasizes that these are not optional “comfort rulings” but are essential for preserving S corporation status. The high cost, the letter argues, creates an incentive for noncompliance and can cause conflict between taxpayers and their preparers, who may feel they cannot sign a tax return if the entity’s S corp status is not secure.
“Creating a distinct category for these narrowly defined cases would better reflect the actual time and resources needed to process them,” said AICPA Senior Manager for Tax Policy and Advocacy Michelle Zou. “Our letter’s recommendations would also align with the IRS’ guiding principles for determining user fees.”
For more on the user fee program for IRS letter rulings, see Checkpoint’s Federal Tax Coordinator ¶ 12,302.
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