PLR 200852026: Extension to file the national office copy of a Form 3115

Plain-English summary

Changing a method of accounting normally requires the Commissioner's consent under section 446(e). Rev. Proc. 2002-9 offers a shortcut: satisfy its requirements and consent is deemed granted, with no ruling needed. One of those requirements is a filing detail that is easy to overlook. Under section 6.02(3)(a), the Form 3115 has to go to two places. The original is attached to the timely filed return for the year of change, and a signed copy goes separately to the national office, no earlier than the first day of the year of change and no later than the day the original is filed.

This taxpayer did the first half and not the second. It timely filed its return for the year at issue with the original Form 3115 attached, changing from the cash receipts and disbursements method to an overall accrual method. No copy ever reached the national office. The reason was that the taxpayer's accountant never mentioned the requirement, in writing or otherwise. The gap surfaced by accident, when outside counsel working on an unrelated matter could find no proof that a copy had been sent.

Because the deadline for that copy comes from a published revenue procedure, it counts as a regulatory election under section 301.9100-1(b), which brings it inside the Commissioner's discretion to extend under section 301.9100-1(c). The automatic extension in section 301.9100-2 did not fit, so the request proceeded under section 301.9100-3 and its two-part test: the taxpayer must show it acted reasonably and in good faith, and that relief will not prejudice the interests of the government.

Based solely on the facts and representations submitted, the Service found both satisfied and granted the extension. The taxpayer has 30 days from the date of the ruling to file the copy of the Form 3115 with the national office, with a copy of the ruling attached. That is a notably short window compared with the 60 days given in many of the other extensions released the same day.

The letter rules on nothing else, and the material behind it remains subject to verification on examination.

This is a clean digital release rather than a scan, so no OCR correction was needed. One thing to note about the metadata: the subject line above comes from the IRS index and reads "Accrual to Cash (Overall)", but the letter describes a change in the other direction, from the cash method to an overall accrual method. The index label is reproduced as the IRS assigned it.

Ruling snapshot

• Question: May a taxpayer who attached Form 3115 to its return but never sent the required copy to the national office get an extension of time to file that copy?
• Outcome: approved. The requirements of sections 301.9100-1 and 301.9100-3 were met, and the taxpayer has 30 days from the date of the ruling to file the copy with the national office.
• Key authorities: Code section 446(e); Treas. Reg. sections 301.9100-1(b), 301.9100-1(c), 301.9100-2, 301.9100-3(a); Rev. Proc. 2002-9, 2002-1 C.B. 327, section 6.02(3)(a).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 200852026 Third Party Communication: None
Release Date: 12/26/2008 Date of Communication: Not Applicable Index Number: 9100.10-01, 446.14-00, 448.07-01 Person To Contact:
-------------------------, ID No. ------------
-------------------------------------------------- Telephone Number:

------------------------------------------------- Refer Reply To:
------------------------------ CC:ITA:B06
PLR-131126-08
Date:
September 22, 2008

Legend

Taxpayer = ---------------------------------------------------
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Preparer = -------------------------------
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Date 1 = ---------------------

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

Date 3 = ----------------------

Date 4 = ----------------

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

This letter relates to a private letter ruling request filed on behalf of Taxpayer, requesting an extension of time under § 301.9100-1(c) of the Procedure and Administration Regulations to file a copy of a Form 3115, Application for Change in Accounting Method, for the year beginning Date 1 and ending on Date 2, with the national office as required by § 6.02 of Rev. Proc. 2002-9, 2002-1 C.B. 327. This request was made in accordance with § 301.9100-3.

On Date 3, Taxpayer timely filed its federal income tax return for the taxable year ending Date 2, along with the original of the Form 3115 filed under Rev. Proc. 2002-9, to change Taxpayer’s method of accounting from the cash receipts and disbursements method to an overall accrual method. However, Taxpayer did not file a copy of Form 3115 with the national office as required by Rev. Proc. 2002-9, because Preparer (Taxpayer’s accountant) did not inform Taxpayer, either orally or in writing, of the requirement to do so. Taxpayer was unaware of this requirement until Date 4, when Taxpayer’s outside counsel engaged in an unrelated matter notified Taxpayer that it could find no proof of Taxpayer’s having sent a copy to the national office.

Rev. Proc. 2002-9 provides the procedures by which a taxpayer may obtain automatic consent to change certain methods of accounting. A taxpayer satisfying all applicable requirements of this revenue procedure is deemed to have obtained the consent of the Commissioner to change its method of accounting 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 a method of accounting pursuant to Rev. Proc. 2002-9 must complete and file Form 3115 to two separate locations. 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 signed copy must be filed with the national office no earlier than the first day of the year of change, and no later than the date the original is filed with the federal income tax return.

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 a taxpayer provides evidence to establish to the satisfaction of the Commissioner (1) that the taxpayer acted reasonably and in good faith, and (2) 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, we hereby grant an extension of time for Taxpayer to file the necessary copy of the Form 3115 with the 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.

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, such material is subject to verification on examination.

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.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) 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 Taxpayer’s authorized representative.

A copy of this letter must be attached to any income tax return to which it is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this requirement by attaching to their returns a statement providing the date and control number of the letter ruling.

Sincerely,

ROY HIRSCHHORN
Senior Technician Reviewer, Branch 6
Office of Associate Chief Counsel
(Income Tax & Accounting)