PLR 200637017: Late application to change tax year is treated as timely

Plain-English summary

A taxpayer sought to change its annual tax year from a January 31 year end to a March 31 year end. Although it had hired a tax professional, its Form 1128 was filed late because of an error or misunderstanding, and it requested relief within 90 days of the deadline. The IRS found that the taxpayer acted reasonably and in good faith and that relief would not prejudice the government. It treated the late application as timely filed for processing under the applicable procedure. The letter gives conflicting years for the tax period covered by the change.

Ruling snapshot

• Question: Can the late Form 1128 for a change in accounting period be treated as timely filed?
• Outcome: Approved; the application is considered timely filed for processing.
• Key authorities: Treas. Reg. §§ 1.442-1(b), 301.9100-3; Rev. Proc. 2002-37.

Full text (IRS public release)

Number: 200637017
Release Date: 9/15/2006
Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Index Number: 9100.09-00

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Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:ITA:05 PLR-120176-06
Date:
June 12, 2006
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Dear Taxpayer:

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 change its annual accounting period, for federal income tax purposes, from a taxable year ending January 31, to a taxable year ending March 31, effective for the tax year beginning February 1, 2005, and ending March 31, 2005. 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.

The taxpayer's Form 1128 requesting a change in accounting period to a tax year ending March 31, 2005, was due on or before an extended due date of December 15, 5, but was not timely filed; however, the form was filed shortly thereafter, and the request for discretionary administrative relief was filed within 90 days of such due date. The information furnished shows that Taxpayer intended to make the change and to file Form 1128 on a timely basis, and had engaged a qualified tax professional in order to assure a proper filing. Due to an error or misunderstanding, however, the form was not timely filed. The error was not due to any lack of due diligence or prompt action on the part of Taxpayer.

Section 1.442-1(b) of the Income Tax Regulations provides that in order to secure the Commissioner's consent to a change in 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. But for a timely filing, the taxpayer’s Form 1128 would be subject to the automatic consent procedures of Rev. Proc. 2002-37, 2002-1 C.B. 1030, and due on or before the due date (including extensions) of the return of tax required for the short period (December 15, 2005).
PLR-120176-06
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 change to a tax year ending March 31, effective for the tax year beginning February 1, 2004, is considered timely filed.

The ruling contained in this letter is based upon facts and representations furnished 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.

A copy of this letter ruling and taxpayer's Form 1128 are being forwarded to the service center where the taxpayer files its federal income tax returns, with instructions that the Form 1128 be considered timely filed, and processed in accordance with established procedures under Rev. Proc. 2002-37. In accordance with the provisions of a power of attorney currently on file with this office, a copy of this letter is also being sent to the taxpayer’s designated representative.
PLR-120176-06
3

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/ George F. Wright

George F. Wright
Senior Technician Reviewer,
Branch 5
Office of Associate Chief Counsel
(Income Tax and Accounting)

Enclosures:
Copy of this letter
Copy for § 6110 purposes