Late Form 1128 filing treated as timely for a tax-year change

Plain-English summary

The IRS considered a taxpayer's request to change its annual accounting period after Form 1128 was filed late. The taxpayer represented that it intended to file on time, that the late filing resulted from an error or misunderstanding rather than a lack of diligence, and that the request was submitted within 90 days of the due date. The IRS granted relief under Treas. Reg. § 301.9100-3 and treated the late Form 1128 as timely filed. The ruling was limited to the Form 1128 filing and did not address other tax consequences.

Ruling snapshot

• Question: Can a late Form 1128 requesting a change in annual accounting period be treated as timely?
• Outcome: approved
• Key authorities: IRC § 442; Treas. Reg. §§ 1.442-1 and 301.9100-3; Rev. Proc. 2006-45

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201010024
Third Party Communication: None
Release Date: 3/12/2010
Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.09-00
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Telephone Number:
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Refer Reply To:
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CC:ITA:B5
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Date:
In Re: November 17, 2009
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Dear -----------------:

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 ------------------, to a taxable year ending ----------------, effective for the tax year beginning ---------------------- and ending -------------------------. 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
-------------------------, was due on or before ------------------, 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. The taxpayer represents that, but for a timely filing, its Form 1128 would be subject to the automatic consent procedures of Rev. Proc. 2006-45, 2006-45 I.R.B. 851, and due on or before the due date (including extensions) of the return of tax required for the short period (------------------).

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
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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 ----------------, effective for the tax year beginning ---------------------- and ending -------------------------, 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. 2006-45.

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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representatives.

Sincerely yours,

/s/ William A. Jackson

William A. Jackson
Branch Chief, Branch 5
Office of Associate Chief Counsel
(Income Tax & Accounting)

Enclosures:
Copy of this letter
Copy for § 6110 purposes