PLR 201303002: IRS grants more time to file accounting-method change forms

Plain-English summary

An affiliated group of corporations asked for more time to file Form 3115 and make accounting-method changes for accrual accounting and deferred reporting of advance payments. The group had filed its consolidated return and the required forms late after an unusual series of events. The IRS found that the taxpayers acted reasonably and in good faith and that granting relief would not prejudice the government. It granted 60 days from the ruling date to file the original and duplicate Form 3115. The ruling did not decide whether the taxpayers were otherwise eligible for the accounting-method changes or whether the proposed methods were permissible.

Ruling snapshot

• Question: May the taxpayers receive more time under section 9100 to file Form 3115 and make the requested accounting-method elections?
• Outcome: Approved, 60-day extension
• Key authorities: IRC §§ 446 and 6110; Treas. Reg. §§ 301.9100-1 and 301.9100-3; Rev. Proc. 2011-14

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201303002
Third Party Communication: None
Release Date: 1/18/2013
Date of Communication: Not Applicable
Index Number: 9100.10-00, 9100.10-01
Person To Contact:
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Telephone Number:
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----------------------------------------------------- Refer Reply To:
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CC:ITA:B02
PLR-117427-12
Date:
October 19, 2012

Parent = ----------------------------------------------------
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S1 = ---------------------------------------------
Date1 = ----------------------
Date2 = --------------------------

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

This ruling is in response to a letter dated April 20, 2012, submitted by Parent on behalf of itself and S1 (hereinafter, Parent and S1 will be collectively referred to as Taxpayers). Taxpayers requested an extension of time to make a late election to automatically change their method of accounting to the overall accrual method and to the deferral method of reporting advance payments pursuant to the provisions of Rev. Proc. 2011-14, 2011-4 I.R.B. 330, for the taxable year beginning Date1, and ending Date2 (year of change). The request to make the late election is based on §§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations.

FACTS

Taxpayers represent the facts are as follows:

Taxpayers are members of an affiliated group of corporations that is headed by Parent and that files consolidated federal income tax returns on a calendar year basis. Taxpayers are presently on the overall cash method of accounting and the inclusion method for advance payments.

Due to an unusual series of events, Parent failed to file timely Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, for the taxable year ending on Date2. As a result, Parent filed untimely its consolidated federal income tax return, along with an original
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Form 3115 filed under section 6.01 of Rev. Proc. 2011-14, 2011-4 I.R.B. 330, changing Taxpayers’ overall method of accounting to the accrual method and changing their method of accounting for advance payments to deferral, for the taxable year ending on Date2. For the same reason, Parent also filed untimely the signed duplicate copy of the Form 3115 with the Internal Revenue Service (IRS) national office as required by section 6.02(7) of Rev. Proc. 2011-14 for the taxable year ending on Date2.

RULING REQUESTED

Parent requests an extension of time pursuant to §§ 301.9100-1 and 301.9100-3 to file the original and duplicate copy (with signature) of Form 3115, changing Taxpayers’ overall method of accounting to the accrual method and changing their method of accounting for advance payments to deferral, for the taxable year ending on Date2 .

LAW AND ANALYSIS

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 has obtained the consent of the Commissioner to change the taxpayer’s method of accounting under § 446(e) of the Internal Revenue Code 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 Rev. Proc. 2011-14 must complete and file a Form 3115 in duplicate. The original must be attached to the taxpayer’s timely filed (including any 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.

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 subject to § 301.9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of
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the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the Government.

Section 301.9100-3(c)(2) imposes special rules for accounting method regulatory elections. This section provides, in relevant part, that the interests of the Government are deemed to be prejudiced except in unusual and compelling circumstances, if the accounting method regulatory election for which relief is requested requires an adjustment under § 481(a) (or would require an adjustment under § 481(a) if the taxpayer changed to the method of accounting for which relief is requested in a taxable year subsequent to the taxable the election should have been made).

CONCLUSIONS

Based solely on the facts and representations submitted, we conclude that the requirements of § 301.9100-3 have been satisfied. Accordingly, Parent is granted 60 calendar days from the date of this letter (1) to file the original of Form 3115 changing Taxpayers’ overall method of accounting to the accrual method and changing their method of accounting for advance payments to deferral under Rev. Proc. 2011-14, with an amended consolidated federal income tax return for the taxable year ending on Date2 and (2) to file the duplicate copy (with signature) of Form 3115 with the IRS national office. Please attach a copy of this letter ruling to the amended return and the duplicate copy of Form 3115 to be flied with the IRS national office.

Except as expressly set forth above, we express no opinion concerning the tax consequences of the facts described above under any other provision of the Code. Specifically, no opinion is expressed or implied concerning whether: (1) Taxpayers are eligible to file the Form 3115 at issue under Rev. Proc. 2011-14; (2) Taxpayers otherwise meet the requirements of Rev. Proc. 2011-14, including those in sections 14.01 and 15.07 of the Appendix of Rev. Proc. 2011-14; or (3) Taxpayers’ proposed methods of accounting described in Form 3115 are permissible methods of accounting. Further, this letter ruling does not grant an extension of time for filing the Parent group consolidated federal income tax return for the taxable year ending Date2.

The rulings contained in this letter are based upon information and representations submitted by Parent 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, it is subject to verification on examination.

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

Sincerely,

Thomas D. Moffitt
Branch Chief, Branch 2
Office of Associate Chief Counsel
(Income Tax & Accounting)

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