PLR 200427026: Late request to change accounting year treated as timely

Plain-English summary

A taxpayer wanted to change its tax year from August 31 to December 31 but filed Form 1128 after the deadline for the required short-period return. The IRS found that the taxpayer acted reasonably and in good faith and that an extension would not prejudice the government. It treated the late Form 1128 as timely under the relief rules in Treasury Regulation § 301.9100-3. The IRS sent the application to the Service Center for processing and did not decide whether the requested tax year change itself was permitted.

Ruling snapshot

• Question: Could a late Form 1128 for an accounting period change be treated as timely filed?
• Outcome: Approved as to filing time only; the tax year change was left for separate processing.
• Key authorities: IRC § 442; Treas. Reg. §§ 301.9100-3, 1.442-1(b)(1); Rev. Proc. 2002-37.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200427026
Release Date: 7/2/04
Index Number: 9100.09-00

--------------------------------
Person To Contact:
----------
-----------------------, ID No. -------------
------------------------------------------------------------ Telephone Number:
----
---------------------
Refer Reply To:
----------------------------------------- CC:ITA:B04 – PLR-101558-04
--------------------------------------------------- Date:
---------------------------
March 26, 2004

-

Taxpayer = --------------------------------------------------------------------------------- Year = -------

Dear -----------:

This is in reference to a Form 1128, Application to Adopt, Change, or Retain a Tax Year, submitted on behalf of the taxpayer, requesting permission to change its accounting period, for federal income tax purposes, from a taxable year ending August 31, to a taxable year ending December 31, effective December 31, Year. The taxpayer has requested that the Form 1128 be considered timely filed under the authority contained in § 301.9100-3 of the Procedure and Administration Regulations.

Rev. Proc. 2002-37, 2002-1 C.B. 1030, provides procedures for certain corporations to obtain automatic approval to change their annual accounting period under § 442 of the Internal Revenue Code. A corporation complying with all the applicable provisions of this revenue procedure has obtained the consent of the Commissioner of the Internal Revenue Service to change its annual accounting period. Section 7.01(2) of Rev. Proc. 2002-37 provides that a Form 1128 filed pursuant to the revenue procedure will be considered timely filed for purposes of § 1.442-1(b)(1) only if it is filed on or before the time (including extensions) for filing the return for the short period required to effect such change.

The information furnished indicates that the taxpayer did not file its Form 1128 by the due date of the return for the short period required to effect such change. However, the

PLR-101558-04
2

taxpayer requested an extension of time to file its Form 1128 under § 301.9100-3 soon thereafter.

Section 301.9100-3(a) 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 the taxpayer's late filed Form 1128 requesting permission to change to December 31, effective December 31, Year, is considered timely filed. 1

Since a change in accounting periods under Rev. Proc. 2002-37 is under the jurisdiction of the Director, Internal Revenue Service Center, where the taxpayer’s returns are filed, we have forwarded the application to the Director, -------------------------------------. Any further communication regarding this matter should be directed to the Service Center.

The ruling contained in this letter is based upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. This office has not verified any of the material submitted in support of the request for a ruling. Verification of the factual information, representations, and other data may be required as part of an examination process.

This ruling addresses the granting of § 301.9100-3 relief only. No opinion is expressed regarding the tax treatment of the instant transaction under the provisions of any other sections of the Code or regulations that may be applicable thereto, or regarding the tax treatment of any conditions existing at the time of, or effects resulting from, the instant transaction. Specifically, no opinion is expressed as to whether the taxpayer is permitted under the Code and applicable regulations to change to the tax year requested in the subject Form 1128, or whether the change may be effected under Rev. Proc. 2002-37.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

1
The taxpayer’s application for a change in accounting period will be processed under Rev. Proc. 2002-37.

PLR-101558-04
3

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

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to the taxpayer.

A copy of this letter must be attached to any income tax return to which it is relevant. We enclose a copy of the letter for this purpose. Also enclosed is a copy of the letter showing the deletions proposed to be made when it is disclosed under § 6110.

The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.

Sincerely,

Robert A. Berkovsky
Branch Chief
Office of Associate Chief Counsel

(Income Tax & Accounting)

cc: ----------- -------------------------------------

----------------------------------------