PLR 201226007: IRS grants more time to file Form 3115 for abandoned lease improvements

Plain-English summary

An affiliated group asked for more time to file Form 3115 to change its accounting method for lessee improvements abandoned when leases terminated. The group had instructed a courier to send the form by certified mail, but the courier failed to mail it on the instructed date. The IRS concluded that the requirements for relief under Treas. Reg. § 301.9100-3 were satisfied and granted 30 calendar days from the ruling date to file Form 3115. The ruling did not express an opinion on whether the Commissioner would ultimately consent to the accounting-method change.

Ruling snapshot

• Question: May an affiliated group receive more time to file Form 3115 for a change involving abandoned lease improvements?
• Outcome: Approved
• Key authorities: IRC § 446(e); Treas. Reg. §§ 301.9100-1 through 301.9100-3; Rev. Proc. 97-27

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201226007
Third Party Communication: None
Release Date: 6/29/2012
Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.10-01
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Telephone Number:
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Refer Reply To:
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CC:ITA:B06
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Date:
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March 23, 2012
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In re: Request for Extension of Time to File Form 3115, Application for Change in Method of Accounting.

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

This letter responds to a letter dated January 20, 2012, requesting an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations for Parent and Subsidiary 1 through 21 (hereinafter, collectively referred to as “Taxpayer”) to file a Form 3115, Application for Change in Method of Accounting, to change their method of accounting for lessee improvements abandoned at the termination of a lease, beginning with the taxable year beginning Date 1, and ending Date 2 (year of change).

FACTS

Parent represents that the facts are as follows:

Parent and Subsidiary 1 through 21 are members of an affiliated group of corporations that file a consolidated federal income tax return headed by Parent. Taxpayer did not timely file the Form 3115 under the provisions of Rev. Proc. 97-27, 1997-1 C.B. 680, for the year of change. On Date 2, Courier picked up the Form 3115 at Parent’s office. Parent instructed Courier to mail the Form 3115, by certified mail, on Date 2. Courier failed to mail the Form 3115 on Date 2.

RULING REQUESTED

Taxpayer requests an extension of time pursuant to § 301.9100-3 to file the Form 3115 to change their method of accounting for lessee improvements abandoned at the termination of a lease, beginning with the year of change.

LAW AND ANALYSIS

Rev. Proc. 97-27, 1997-1 C.B. 680, provides the general procedures under § 446(e) of the Internal Revenue Code and § 1.446-1(e) of the Income Tax Regulations for obtaining the consent of the Commissioner of Internal Revenue to change a method of accounting for federal income tax purposes.
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Section 5.01(1)(a) of Rev. Proc. 97-27 provides that a taxpayer changing a method of accounting pursuant to Rev. Proc. 97-27 must file its Form 3115 during the year of change.

Under § 301.9100-1, 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 a regulatory election.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election. 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.

Section 301.9100-3(a) provides that 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 the grant of relief will not prejudice the interests of the government.

CONCLUSIONS

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, Taxpayer is granted 30 calendar days from the date of this letter to file the Form 3115 to change their method of accounting for lessee improvements abandoned at the termination of a lease, beginning with the year of change.

The ruling contained in this letter is based upon information and representations submitted by Taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the materials submitted in support of the letter ruling request, such material is subject to verification on examination.

Except as specifically set forth above, no opinion is expressed or implied concerning the federal tax consequences of any aspect of the facts described above under any other provisions of the Code. Specifically, no opinion is expressed or implied as to whether the Commissioner will grant consent to Taxpayer to make its change in accounting method.

In accordance with the power of attorney, we are sending a copy of this letter to Taxpayer’s authorized representatives. We are also sending a copy of this letter to the appropriate operating division director.
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This letter ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

Sincerely yours,

Kathleen Reed

Kathleen Reed
Chief, Branch 7
Office of Associate Chief Counsel
(Income Tax & Accounting)

Enclosures (2): copy of this letter copy for section 6110 purposes

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