Washington, D.C. (December 13, 2023) - The American Institute of CPAs (AICPA) submitted a comment letter to the Internal Revenue Service (IRS) this week related to Section 1033 extension requests filed by victims of major disasters. Section 1033 of the Internal Revenue Code allows taxpayers who lose a home or business in a major disaster a certain amount of time to replace their property with no taxable gain being recognized. The AICPA letter concerns extensions of that time for the window during which this replacement can be made.
The AICPA’s recommendations will help the IRS establish a more streamlined and rapid procedure for processing requests to extend the section 1033 replacement period as well as an increase in transparency relating to section 1033 extension requests.
The increasing number of natural disasters each year has led to an increase in the number of taxpayers making section 1033 extension requests. This increase has led to delays in obtaining the section 1033 extension approvals, likely due to IRS staffing challenges in dealing with increased demand for the section 1033 extensions. Slower approvals, emotional trauma and shortage of building materials, skilled labor, utilities and the other services for rebuilding add to the difficulty some taxpayers experience.
The AICPA recommends the IRS extend the section 1033 replacement period using these steps:
Acknowledge receipt of replacement period extension requests within 30 days.
Render decisions on replacement period extension requests within 90 days of receipt by the IRS.
Provide blanket automatic extensions for certain disasters that cause tremendous damage to most taxpayers in a particular area, such as caused by wildfires, category 3-5 hurricanes and tornadoes.
Eliminate the requirement for taxpayers to provide a reason or justification for section 1033 extension requests, saving time and costs to taxpayers and the IRS in the IRS review and approval of the extensions.
Increased transparency was also addressed in the letter, citing specific action steps:
Provide tax practitioners and taxpayers with an online tool to submit and monitor the status of section 1033 extension requests, contact IRS personnel to determine the status of such requests, and receive email notifications when decisions have been made.
Publicize the number of section 1033 extension requests received and approved each year.
Increase education and website information regarding the availability and process for section 1033 extensions.
“If adopted, these recommendations will benefit taxpayers and tax practitioners by providing more rapid responses from the IRS to section 1033 replacement period requests,” says Peter Mills, Senior Manager for Tax Policy & Advocacy with the American Institute of CPAs. “In some cases, these extensions would be given automatically. These recommendations would also provide more transparency into the process by allowing taxpayers and tax practitioners to track the status of their requests online.”
About the American Institute of CPAs
The American Institute of CPAs® (AICPA®) is the world’s largest member association representing the CPA profession, with more than 421,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education, and consulting. AICPA sets ethical standards for its members and U.S. auditing standards for private companies, not-for-profit organizations, and federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives continuing education to advance the vitality, relevance and quality of the profession.
Contact: Veronica L. Vera
202-434-9215
Veronica.Vera@aicpa-cima.com
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