PLR 1311012: IRS grants extra time to attach an accounting method change form

Plain-English summary

The IRS granted a taxpayer 30 days to attach an original Form 3115 to an amended federal income tax return for a subsidiary's accounting method change involving tort liabilities. The taxpayer's advisor had timely filed a duplicate Form 3115 with the IRS and provided another copy to an examining agent, but accidentally omitted the original from the taxpayer's electronically filed return. The IRS concluded that the requirements for relief under the regulations governing late regulatory elections were satisfied. The ruling does not decide whether the taxpayers were otherwise eligible for the accounting method change or whether the proposed method was permissible.

Ruling snapshot

• Question: May the taxpayer file a late original Form 3115 for a tort-liability accounting method change?
• Outcome: approved.
• Key authorities: IRC §§ 446, 481, and 6110; Rev. Proc. 2011-14; Treas. Reg. §§ 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201311012 Third Party Communication: None
Release Date: 3/15/2013 Date of Communication: Not Applicable
Index Number: 9100.10-00, 9100.10-01
Person To Contact:
----------------------------------------------- --------------------------, ID No. --------------
---------------------------------------- Telephone Number:
------------------------------ ----------------------
Refer Reply To:
---------------------------- CC:ITA:B02
--------------------------------------- PLR-133187-12
Date:
---------------------------- December 14, 2012

TY: -------

Legend

P = -----------------------------------------------
C = ------------------------------------------------------
Advisor = -----------------------------------------
Date1 = -------------------
Date2 = ----------------------
Date3 = ---------------------------
Date4 = --------------------
Date5 = ----------------------------
Taxable Year 1 = -------

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

     This ruling is in response to a letter dated Date1, submitted on your behalf by

your authorized representative. The letter requested an extension of time for P to file on
behalf of C a late election to automatically change C’s method of accounting for tort
liabilities pursuant to the provisions of Rev. Proc. 2011-14, 2011-4 I.R.B. 330, for the
taxable year beginning 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

   For the Taxable Year1, P engaged Advisor to prepare and file its federal income

tax return and a Form 3115, Application for Change in Accounting Method, for C. The
advisor represented that on Date4, P timely filed a duplicate copy of a Form 3115 on
2
PLR-133187-12

behalf of C with the IRS National office to change the method of accounting for tort
liabilities, in accordance with section 6.02(3)(a) of Rev. Proc. 2011-14. Because C was
under exam, an additional copy of the Form 3115 was timely provided to the examining
agent. On or about Date5, P timely filed its federal income tax return electronically for
the taxable year ended Date3, reflecting the change in C’s method of accounting for tort
liabilities. However, due to an oversight by Advisor, Advisor inadvertently failed to
attach the original Form 3115 for C’s change in method of accounting for tort liabilities to
P’s federal income tax return as required by section 6.02(3)(a) of Rev. Proc. 2011-14.

APPLICABLE LAW

  Rev. Proc. 2011-14 provides the procedures by which a taxpayer may obtain

automatic consent to change a method of accounting described in its APPENDIX. 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
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.

   Sections 301.9100-1 through 301.9100-3 provide the standards the

Commissioner uses to determine whether to grant an extension of time to make a
regulatory 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 -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 the
term "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 301.9100-3(a) provides that requests for extensions of time for regulatory

elections (other than automatic changes covered under § 301.9100-2) will be granted
when the taxpayer provides evidence to establish to the satisfaction of the
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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(c)(2) imposes special rules for accounting method regulatory

elections. The 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 year the election should have been made).

CONCLUSION

    Based solely on the facts and representations submitted, including affidavits, we

conclude that the requirements of §§ 301.9100-1 through 301.9100-3 have been
satisfied. Accordingly, an extension of time is hereby granted for P to file an original
Form 3115 on behalf of C, requesting permission to change its method of accounting for
tort liabilities, with an amended federal income tax return for the taxable year beginning
Date2. The extension shall be a period of 30 days from the date of this ruling. Please
attach a copy of this ruling to the Form 3115 when it is filed.

   Except as expressly provided herein, no opinion is expressed or implied

concerning the federal income tax consequences of any aspect of any transaction or
item discussed or referenced in this ruling, including whether P and C are eligible to file
the Form 3115, whether P and C meet the requirements of Rev. Proc. 2011-14, and
whether the proposed method of accounting is a permissible method of accounting.

  This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of

the Code provides that it may not be used or cited as precedent.

  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, it is subject to verification on
examination.
PLR-133187-12 4

In accordance with the provisions of a power of attorney on file with this office, we are
sending a copy of this letter to the taxpayer’s authorized representatives.

                                  Sincerely,


                                  R. MATTHEW KELLEY
                                  Assistant to the Branch Chief, Branch 2
                                  Office of Associate Chief Counsel
                                  (Income Tax & Accounting)