PLR 200648014: Late Form 1128 accepted for calendar-year change

Plain-English summary

A taxpayer wanted to change its federal tax year from a March 31 year-end to December 31, starting with a short tax year from April through December 2005. It missed the deadline for Form 1128, but filed the form and sought relief within 90 days of the deadline. The IRS found that the taxpayer had intended to file on time, acted with due diligence, and would not prejudice the government. It treated the late Form 1128 as timely filed under the discretionary extension rules. The taxpayer had to file the short-period federal return within 45 days of the ruling and attach a copy of the letter. The ruling addressed the filing deadline; it did not decide other tax consequences of the year change.

Ruling snapshot

• Question: Could the taxpayer's late Form 1128 be treated as timely for a change to a December 31 tax year?
• Outcome: Approved; the form was treated as timely, with a short-period return due within 45 days.
• Key authorities: IRC § 442; Treas. Reg. §§ 1.442-1(b), 301.9100-3; Rev. Proc. 2002-37.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200648014
Third Party Communication: None
Release Date: 12/1/2006
Date of Communication: Not Applicable
Index Number: 9100.09-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:ITA:B5
In Re:
PLR-130806-06
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Date:
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August 8, 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 March 31, to a taxable year ending December 31, effective for the tax year beginning April 1, 2005, and ending December 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 December 31, 2005, was due on or before March 15, 2006, but was not timely filed; however, the form and the request for discretionary administrative relief were filed within 90 days of such due date. The information furnished shows that the taxpayer intended to make the change and to file Form 1128 on a timely basis. 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 (March 15, 2006).
PLR-130806-06
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 December 31, effective for the tax year beginning April 1, 2005, is considered timely filed.

The taxpayer must file a federal income tax return for the short period necessary to effect the change within 45 days of the date of this ruling. A copy of this ruling should be attached to that return.

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.
PLR-130806-06
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 & Accounting)

Enclosures:
Copy of this letter
Copy for § 6110 purposes