"For many years, our members have experienced fluctuations and inconsistencies in the IRS’s ability to timely approve section 1033 extensions. This inconsistency leaves taxpayers with a significant level of uncertainty and needless hesitation when replacing destroyed property," the AICPA said. 

It added that an automated way of approving section 1033 extension requests due to federally declared disasters will limit the tax administrative burden on the IRS without introducing any added complexity or disrupting governmental interests. Aside from this, the AICPA said that the IRS could leverage taxpayers’ online accounts to streamline the submission and approval process.

In the letter, the AICPA suggested that the IRS establish an automated procedure to approve section 1033 extension requests submitted by taxpayers impacted by federally declared disasters and leverage the IRS’s online taxpayer accounts to streamline the extension request submissions and notifications.

Alternatively, the AICPA also suggested that the IRS consider automatic approval of extension requests that have been pending with the IRS for over a specified period of time, as long as the streamlined criteria outlined by AICPA's  letter are present.

The letter also explained that generally, section 1033(h) offers four-year and two-year replacement periods for personal residences and business or investment property damaged by a federally declared disaster, respectively.

Taxpayers might request an extension to such replacement periods if they have reasonable cause for the delay and submit this request before the expiration of the replacement period.

If this request is submitted after the expiration of the replacement period, the taxpayer should also show that “the satisfaction of the district director (i) [r]easonable cause for not having filed the application within the required period of time, and (ii) [t]he filing of such application was made within a reasonable time after the expiration of the required period of time.”