PLR 200851019: 30 days granted to file the duplicate Form 3115 a CPA forgot to send to the national office

Plain-English summary

Changing an accounting method requires the Commissioner's consent. Revenue Procedure 2002-9 grants that consent automatically for a list of common changes, on condition the taxpayer follows its procedure exactly. Part of that procedure is a duplicate filing. Form 3115 must be completed twice: the original goes with the timely filed return for the year of change, and a signed copy goes separately to the IRS national office, no later than when the original is filed.

A consolidated group did the first half correctly. The parent timely filed its consolidated return with the original Form 3115 attached, filed on behalf of one subsidiary so that subsidiary could change its method of accounting for an inventory. The second half did not happen. The outside accountant inadvertently never sent the copy to the national office, and the deadline passed.

That omission is fixable because of how the regulations define what counts as a regulatory election. Section 301.9100-1(b) reaches not only deadlines set by regulations published in the Federal Register but also deadlines set by a revenue ruling, revenue procedure, notice or announcement in the Internal Revenue Bulletin. The duplicate copy deadline lives in a revenue procedure, so it is a regulatory election and the Commissioner has discretion under section 301.9100-1(c) to extend it. Section 301.9100-2 covers automatic extensions, and anything falling outside those runs through section 301.9100-3, which grants relief where the taxpayer establishes that it acted reasonably and in good faith and that relief will not prejudice the interests of the government.

The Service found those requirements satisfied and granted 30 days from the date of the letter to file the missing copy, with a copy of the ruling attached to it.

The relief is narrow in a way worth noticing. The Service expressly declined to say whether the parent is qualified to file the Form 3115 under Revenue Procedure 2002-9 at all, or whether it otherwise meets that procedure's requirements. The extension cures a missed filing date and nothing else. Whether the method change itself was available remains open.

Ruling snapshot

• Question: May a consolidated group get an extension of time to file the duplicate copy of a Form 3115 with the IRS national office, where the original was timely attached to the return but the accountant inadvertently failed to send the copy by its deadline?
• Outcome: Approved. The requirements of sections 301.9100-1 and 301.9100-3 were satisfied, and an extension of 30 days from the date of the ruling was granted to file the copy, with the ruling attached. No opinion was expressed on whether the parent qualifies to file the Form 3115 under Revenue Procedure 2002-9 or otherwise meets that procedure's requirements.
• Key authorities: IRC section 446(e); Treas. Reg. sections 301.9100-1(b) and (c), 301.9100-2, 301.9100-3 and 301.9100-3(a); Rev. Proc. 2002-9, 2002-1 C.B. 32, including section 6.02(3)(a).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 200851019 Third Party Communication: None
Release Date: 12/19/2008 Date of Communication: Not Applicable Person To Contact: Index Numbers: 446.04-05, 446.04-12, ---------------, ID No. ------------ Telephone Number: 446.19-00, 9100.10-01
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Refer Reply To:
------------------------ CC:ITA:6
------------------- PLR-131059-08
------------------------------- Date:
September 15, 2008

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LEGEND:

Parent = -------------------------
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Subsidiary = -------------
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CPA = --------------------------

Items = ------------------------------------
-------------------------------------------------------------

Date 1 = -------------------

Date 2 = ---------------------------

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

This ruling is in reply to the letter submitted by Parent’s authorized representative, CPA, requesting an extension of time under § 301.9100-1(c) of the Procedure and Administration Regulations for Parent to file a copy of a Form 3115, Application for Change in Accounting Method, with the Internal Revenue Service (IRS) national office. This request was made in accordance with § 301.9100-3

On Date 1, Parent timely filed its consolidated federal income tax return for the tax year ending Date 2, along with the original of the Form 3115 filed under Rev. Proc. 2002-9, 2002-1 C.B. 32. Parent filed the Form 3115 on behalf of one of its subsidiaries, Subsidiary, so that Subsidiary could change its accounting method for its inventory of Items. However, because CPA inadvertently failed to submit the copy, no copy of Parent’s Form 3115 was filed with the IRS national office by the due date of Date 1.

Rev. Proc. 2002-9 provides the procedures by which a taxpayer may obtain automatic consent to change certain accounting methods. A taxpayer complying with all the applicable provisions of this revenue procedure has obtained the consent of the Commissioner to change the taxpayer's accounting method under § 446(e) of the Internal Revenue Code and the Income Tax Regulations thereunder.

Section 6.02(3)(a) of Rev. Proc. 2002-9 provides that a taxpayer changing an accounting method pursuant to Rev. Proc. 2002-9 must complete and file a Form 3115 in duplicate. The original must be attached to the taxpayer's timely filed (including extensions) original federal income tax return for the year of change, and a copy (with signature) of the Form 3115 must be filed with the IRS national office no earlier than the first day of the year of change and no later than when the original is filed with the federal income tax return for the year of change.

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3 to make certain regulatory elections. Section 301.9100-1(b) defines a regulatory election as an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 301.9100-2.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government. Section 301.9100-3(a).

Based solely on the facts and representations submitted, we conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, an extension of time is hereby granted for Parent to file the necessary copy of the Form 3115 with the IRS national office. This extension shall be for a period of 30 days from the date of this ruling. Please attach a copy of this ruling to the Form 3115 when it is filed.

Except as specifically ruled upon above, no opinion is expressed or implied concerning the federal income tax consequences arising from Parent’s activities. Specifically, we express no opinion concerning whether Parent is qualified to file the relevant Form 3115 under Rev. Proc. 2002-9 or that it otherwise meets the requirements of that revenue procedure.

Pursuant to the power of attorney on file with this office, a copy of this letter is being sent to Parent’s authorized representative.

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

Sincerely,

Roy Hirschhorn
Acting Chief, CC:ITA:6
Associate Chief Counsel (ITA)