PLR 1237003: IRS grants extra time to file a duplicate accounting-method application

Plain-English summary

The IRS granted a corporation an extension of time to file a signed duplicate copy of Form 3115, Application for Change in Accounting Method, with the IRS Ogden office. The corporation's accounting firm had mailed the duplicate after the corporation filed its federal income tax return, which made the filing late under the applicable revenue procedure. The IRS found that the taxpayer acted reasonably and in good faith, and that the extension would not prejudice the government. The extension lasts 30 days from the date of the ruling.

Ruling snapshot

• Question: Could the taxpayer receive more time to file the duplicate Form 3115 required for its accounting-method change?
• Outcome: Approved
• Key authorities: IRC § 446; Treas. Reg. §§ 301.9100-1 and 301.9100-3; IRC §§ 6501 and 6662

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201237003 Third Party Communication: None
Release Date: 9/14/2012 Date of Communication: Not Applicable
Index Number: 9100.00-00
Person To Contact:
--------------------------------------------------------- --------------------, ID No. -------------
------------------------------------------------- Telephone Number:
---------------------------------------- ---------------------
------------------------------- Refer Reply To:
CC:ITA:B03
PLR-102519-12
Date: June 6, 2012

              TY: -------

Legend

Taxpayer = ---------------------------------------------------

Year 1 = -------

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

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

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

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

Date 5 = ---------------------------

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

This is in response to the letter dated December 7, 2011, submitted on your behalf by
your authorized representative. In the letter you request an extension of time to file a
duplicate Form 3115, Application for Change in Accounting Method, with the Internal
Revenue Service (IRS) Ogden office. This request is made in accordance with §§
301.9100-1 and 301.9100-3 of the Procedure and Administration Regulation.

                                                 FACTS

In Year 1, Taxpayer engaged accounting firm to prepare a Form 3115, Application for
Change in Method of Accounting, to change its method of accounting for asset
retirements, to be filed under Rev. Proc. 2011-14 for the taxable year ending Date 1.

On Date 2, Taxpayer provided a copy of the Form 3115 to the LB&I Division Director to
obtain consent to file the method changes as required by section 6.03(4)(b) of Rev.
Proc. 2011-14.

On Date 3, Taxpayer filed its Form 1120, U.S. Corporation Income Tax Return. In
accordance with section 6.02(3)(a)(i) of Rev. Proc. 2011-14, the Form 3115 was
included with the filing.

Under section 3.09(4) of the Appendix to Rev. Proc. 2011-14, as modified by section
7.03 of Rev. Proc. 2011-43, 2011-37 I.R.B. 326, a copy of the Form 3115 was required
to be filed with the Internal Revenue Service (IRS) Ogden office no earlier than the first
day of the year of change and no later than the date that Taxpayer filed the original
Form 3115 with its federal income tax return. Accounting firm assumed responsibility
for filing the copy of the Form 3115 with the IRS Ogden office. Due to a
miscommunication between Taxpayer’s Tax Department and accounting firm and the
lack of confirmation regarding the filing dates of the Form 1120 and the Form 3115, the
copy of the Form 3115 was mailed on Date 4.

On Date 5, accounting firm learned that the Form 1120 for Taxpayer had been filed on
Date 3, and determined that this filing caused the Form 3115 to not be timely filed.
Accounting firm advised Taxpayer of this fact and began evaluating options to correct
the late filing of the Form 3115. After evaluating various options, Taxpayer engaged
accounting firm to prepare this request for ruling.

                               APPLICABLE LAW

Rev. Proc. 2011-14 provides the procedures by which a taxpayer may obtain automatic
consent to change certain methods of accounting. A taxpayer complying with all the
applicable provisions of this revenue procedure obtains the consent of the Commissioner
to change the taxpayer’s method of accounting under § 446(e) and the regulations
thereunder.

Section 6.02(3)(a) of Rev. Proc. 2011-14 provides that a taxpayer changing a method of
accounting pursuant to the revenue procedure must complete and file the application in
duplicate. Section 6.02(3)(a)(i) provides that the original application must be attached
to the taxpayer’s timely filed (including any extension) original federal income tax return
implementing the change in method of accounting for the year of change. Section
6.02(3)(a)(ii)(B) provides that for certain applications, a copy of the application must be
filed with the IRS in Ogden, Utah. In these cases, the signed copy must be filed with the
Ogden office no earlier than the first day of the year of change and no later than the
date the taxpayer files the original application 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) provides that an election
includes a request to adopt, change, or retain an accounting method, and 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.

Request 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).

Section 301.9100-3(b)(1) provides that a taxpayer will be deemed to have acted
reasonably and in good faith if the taxpayer —

(i) requests relief before the failure to make the regulatory election is discovered by the
Service;

(ii) failed to make the election because of intervening events beyond the taxpayer’s
control;

(iii) failed to make the election because, after exercising due diligence (taking into
account the taxpayer’s experience and the complexity of the return or issue), the
taxpayer was unaware of the necessity for the election;

(iv) reasonably relied on the written advice of the Service; or

(v) reasonably relied on a qualified tax professional, including a tax professional
employed by the taxpayer, and the tax professional failed to make or advise the
taxpayer to make the election.

Section 301.9100-3(b)(3) provides that a taxpayer will not be considered to have acted
reasonably and in good faith if the taxpayer —

(i) seeks to alter a return position for which an accuracy-related penalty had been or
could be imposed under § 6662 when the taxpayer requests relief and the new position
requires a regulatory election for which relief is requested;

(ii) was informed in all material respects of the required election and related tax
consequences, but chose not to file the election; or

(iii) uses hindsight in requesting relief. If specific facts have changed since the original
deadline that make the election advantageous to a taxpayer, the Service will not
ordinarily grant relief.

Section 301.9100-3(c)(1) provides that the Commissioner will grant a reasonable
extension of time only when the interests of the Government will not be prejudiced by
granting the relief. Under paragraph (c)(1)(i), the interests of the Government are
prejudiced if granting relief would result in a taxpayer having a lower tax liability in the
aggregate for all taxable years affected by the election than the taxpayer would have
had if the election had been timely made. Under paragraph (c)(1)(ii), the interests of the
Government are ordinarily prejudiced if the taxable year in which the regulatory election
should have been made is closed by the period of limitations on assessment under §
6501(a) before the taxpayer’s receipt of a ruling granting relief under this section.

                                   CONCLUSION

Based solely on the facts and representations submitted, including affidavits, we
conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied.

The information provided and representations made by Taxpayer establish that
Taxpayer acted reasonably and in good faith with this request. Taxpayer is not seeking
to alter a return position for which an accuracy-related penalty has been or could be
imposed under § 6662 when relief was requested. Taxpayer represented that granting
an extension of time to file the signed duplicate copy of the Form 3115 with the Ogden
office will not result in a lower tax liability for all taxable years affected by the election
than Taxpayer would have had if the duplicate copy of the Form 3115 had been timely
filed. The taxable years in which the regulatory election should have been made and
any taxable years that would have been affected by the election had it been timely
made are not closed by the period of assessment. Finally, granting an extension will
not prejudice the interests of the Government.

Accordingly, an extension of time is hereby granted for Taxpayer to file the necessary
signed copy of the Form 3115 with the Ogden 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 filed.

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 your authorized representative.

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 had not verified any of the material submitted
in support of the request for rulings, it is subject to verification on examination.

                                 Sincerely,



                                 Robert M. Casey
                                 Senior Technical Reviewer, Branch 3
                                 (Income Tax & Accounting)