PLR 200423004: Late tax-year retention application deemed timely

Plain-English summary

A taxpayer filed Form 1128 shortly after the deadline to ask permission to retain a March 31 tax year. The IRS found that the delay arose from an error or misunderstanding and that the taxpayer acted reasonably and in good faith. Under Treasury Regulation § 301.9100-3, it treated the application as timely filed and said it would begin processing it. The ruling covers only the filing deadline; the IRS expressly did not decide whether the taxpayer could retain the requested tax year.

Ruling snapshot

• Question: Could the late Form 1128 be treated as timely filed?
• Outcome: Approved for filing timeliness; the tax-year request remained to be processed.
• Key authorities: Treas. Reg. §§ 1.442-1(b), 301.9100-3; Rev. Proc. 2002-39.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200423004
Release Date: 6/4/04
Index Number: 9100.00-00

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Person To Contact:
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---------------, ID No. -------------
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Telephone Number:
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Refer Reply To:
CC:ITA:05 – PLR-106845-04
Date:
In Re---------------------------------------- February 26, 2004
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Dear -------------:

This is in reference to a Form 1128, Application to Adopt, Change, or Retain a Tax Year, submitted on behalf of the above-named taxpayer, requesting permission to retain, for federal income tax purposes, a taxable year ending March 31, effective for the taxpayer’s taxable year beginning April 1, -------, and ending March 31, ------. The taxpayer has requested that the Form 1128 be considered timely filed under authority contained in § 301.9100-3 of the Procedure and Administration Regulations.

The taxpayer's Form 1128 requesting to retain an annual accounting period ending March 31, -------, was due on or before July 15, -------, but was not timely filed. However, the form was filed shortly thereafter. Information furnished indicates that the late filing was due to an error or misunderstanding, and not to any lack of due diligence or prompt action on the part of the taxpayer.

Section 1.442-1(b) of the Income Tax Regulations provides that in order to secure the Commissioner's consent to adopt, change, or retain an annual accounting period, the taxpayer must file an application on Form 1128 with the Commissioner within such time and in such manner as is provided in administrative procedures published by the Commissioner. The general procedures for taxpayers to establish a business purpose and obtain the Commissioner's approval to adopt, change, or retain an annual accounting period, for federal income tax purposes, are set forth in Rev. Proc. 2002-39, 2002-22 I.R.B. 1046. Pass-through entities that are within the scope of Rev. Proc. 2002-38, 2002-22 I.R.B. 1037, may obtain automatic approval to adopt, change to, or retain certain annual accounting periods under procedures set forth in that revenue procedure. The applicable administrative procedure in the instant case is Rev. Proc. 2002-39.
PLR-106845-04
2

Section 301.9100-3(a) of the regulations provides that requests for extensions of time for regulatory elections that do not meet the requirements of § 301.9100-2 (automatic extensions), such as the instant case, must be made under the rules of § 301.9100-3. Requests for relief subject to § 301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that the granting of relief will not prejudice the interests of the government.

Based on the facts and information submitted and the representations made, it is held that the taxpayer has acted reasonably and in good faith, and that the granting of relief will not prejudice the interests of the government. Accordingly, the requirements of the regulations for the granting of relief have been satisfied in this case, and taxpayer's late-filed Form 1128 requesting permission to retain a tax year ending March 31, effective for the tax year ending March 31, -------, is considered timely filed.

Since the separate “user fee” required to process the taxpayer’s Form 1128 has been paid, we will begin processing the taxpayer’s application immediately.

The ruling contained in this letter is based upon facts and representations submitted by the taxpayer, and is limited to the filing of Form 1128. Except as specifically addressed herein, no opinion is expressed regarding the tax treatment of the subject transaction under the provisions of any other sections of the Code or regulations that may be applicable thereto. This office has not verified any of the material submitted in support of the requested ruling; verification of factual information, representations, and other data is within the examination jurisdiction of the taxpayer's IRS Industry Director. Specifically, no opinion is expressed as to whether the taxpayer is permitted under the Code and applicable regulations to retain the tax year requested in the subject Form 1128.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the Internal Revenue Code provides that it may not be used or cited as precedent.

Sincerely yours,
/s/ William A. Jackson
WILLIAM A. JACKSON
Chief, Branch 5
Associate Chief Counsel
(Income Tax and Accounting)

Enclosures:
Copy of this letter
Copy for § 6110 purposes