PLR 200712009: Late tax year change application treated as timely filed

Plain-English summary

A taxpayer sought to change from an August 31 to a December 31 tax year but missed the deadline to file Form 1128. The taxpayer attributed the late filing to an error or misunderstanding and sought discretionary relief. The IRS found that the taxpayer acted reasonably and in good faith, and treated the late application as timely filed. It directed the service center to process the form and required the taxpayer to file the short period return needed for the change within 45 days of the ruling. The IRS did not decide whether the requested tax year change itself was permitted.

Ruling snapshot

• Question: Can the late Form 1128 seeking a calendar tax year be treated as timely filed?
• Outcome: Approved as to filing timeliness; substantive permission to change tax years was left open.
• Key authorities: IRC § 442; Treas. Reg. §§ 1.442-1, 301.9100-3; Rev. Proc. 2002-37.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200712009
Release Date: 3/23/2007
Index Number: 9100.09-00
Person To Contact:
--------------
-------------------------, ID No. -------------
-------
Telephone Number:
--------------------------------------- --------------------- Refer Reply To:
-------------------------------
CC:ITA:05 – PLR-118702-06
------------------------------
Date: November 28, 2006

-

EIN: ----------------

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, 2004. The taxpayer has requested that the Form 1128 be considered timely filed under the authority contained in section 301.9100-3 of the Procedure and Administration Regulations.

Section 7.02(2) of Rev. Proc. 2002-37, 2002-1 C.B. 1030, provides that a taxpayer must file a Form 1128 on or before the due date (including extensions) of the federal income tax return for the first effective tax year. According to the information submitted, the taxpayer did not file an extension for the first effective tax year. Thus, the taxpayer's Form 1128 requesting a change in accounting period to a tax year ending December 31, effective December 31, 2004, was due on or before March 15, 2005. The taxpayer timely filed its tax return for the taxable year ending December 31, 2005, but failed to file a Form 1128. The information furnished also indicates that the application for the change in accounting period was filed late because of an error or misunderstanding. This application for section 301.9100-3 relief was filed within 90 days of the return's due date.

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.

-2-

Section 301.9100-3(a) provides that requests for extensions of time for regulatory elections that do not meet the requirements of section 301.9100-2 (automatic extensions), such as the present situation, must be made under the rules of section 301.9100-3. Requests for relief subject to section 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 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 from a taxable year ending August 31, to a taxable year ending the December 31, effective December 31, 2004, is considered timely filed.

The ruling contained in this letter is based upon facts and representations submitted by the taxpayer and accompanied by a penalties 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 section 301.9100-3 relief only. No opinion is expressed or implied concerning the tax consequences of any other matter. Specifically, no opinion is expressed as to whether the taxpayer is permitted under the Internal Revenue Code and applicable regulations to change to the tax year requested in the subject Form 1128.

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. 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. The taxpayer should attach copies of this ruling and the Form 1128 to that return.

In accordance with the provisions of a power of attorney currently on file, we are sending a copy of this letter ruling to the taxpayer’s authorized representative.

-3-

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

Sincerely yours,

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

Enclosures:
Copy of this letter
Copy for section 6110 purposes