PLR 1318002: IRS grants extra time to file Form 3115 after taxpayer relied on a tax professional

Plain-English summary

The IRS granted a taxpayer a 60-day extension to file the original Form 3115 needed to change its accounting method. The taxpayer had filed the form but failed to attach a copy to its consolidated tax return on time. The IRS found that the taxpayer acted reasonably and in good faith because it requested relief before the Service discovered the failure and had reasonably relied on a tax professional who failed to make or advise it to make the election. The IRS also found that granting relief would not prejudice the government. The ruling did not decide whether the taxpayer was otherwise eligible for the accounting-method change or whether the proposed method was permissible.

Ruling snapshot

• Question: Whether the taxpayer should receive additional time to file Form 3115 for an accounting-method election.
• Outcome: Approved, with a 60-day filing extension.
• Key authorities: IRC §§ 446(e), 481(a), 6501(a), 6662; Treas. Reg. §§ 301.9100-1, 301.9100-2, 301.9100-3; Rev. Proc. 2008-52.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201318002 Third Party Communication: None
Release Date: 5/3/2013 Date of Communication: Not Applicable
Index Number: 9100.00-00
Person To Contact:
-----------------------, ID No. -------------------
------------------------------------------------------------ ---------------------------------------------------
------------------------------- Telephone Number:
-------------- ----------------------
---------------------------------- Refer Reply To:
CC:ITA:B02
Attn: ----------------------- PLR-131980-12
Date:
January 22, 2013

              TY: -------

Legend

Taxpayer = ------------------------------------------------------------------------
-------------
A= -----------------------------------------------
B= ------------------------
Date 1 = -------
Date 2 = ---------------------------
Date 3 = ---------------------------
c= -----------------
d= ----------------------------

Dear ------:

    This is in response to the letter dated July 20, 2012, submitted on your behalf by

your authorized representative. In the letter, you request relief for the failure to timely
file Form 3115 with the tax return for Date 1. The request is made in accordance with
sections 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations.
FACTS
Taxpayer is primarily a A. Taxpayer files a consolidated tax return on a calendar
year basis. It is presently on an overall accrual method of accounting.
Due to an unusual series of events, Taxpayer failed to attach a copy of a Form 3115
which it had filed to change its method of accounting for B to its tax return for Date 1
which was filed on Date 2.
LAW AND ANALYSIS
Rev. Proc. 2008-52 provides the procedures by which a taxpayer may obtain
automatic consent to change certain methods of accounting. A taxpayer complying with
PLR-131980-12 2

all the applicable provisions of this revenue procedure has obtained the consent of the
Commissioner to change to 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. 2008-52 provides that a taxpayer changing a
method of accounting pursuant to Rev. Proc. 2008-52 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 of Internal Revenue, in
exercising his discretion, may grant a reasonable extension of time under the rules set
forth in § 301.9100-3 to make a regulatory election. The term "regulatory election" is
defined in § 301.9100-1(b) 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.
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 section 301.9100-2.
Section 301.9100-3(a) provides that requests for relief will be granted when the
taxpayer provides the 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.
Under section 301.9100-3(b)(1)(i) and (v), except as provided in paragraphs (b)(3)(i)
through (iii), a taxpayer is deemed to have acted reasonably and in good faith if the
taxpayer requests relief before the failure to make the regulatory election is discovered
by the Internal Revenue Service, or if the taxpayer reasonably relied on a qualified tax
professional who failed to make, or failed to advise the taxpayer to make, the election.
Paragraphs (b)(3)(i) through (iii) of § 301.9100-3 provide that a taxpayer is deemed
not to have acted reasonably and in good faith if the taxpayer:
(i) seeks to alter a return position for which an accuracy-related penalty could be
imposed under § 6662 at the time the taxpayer requests relief and the new position
requires or permits 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 due
date for making the election that make the election advantageous to a taxpayer, the
Service will not ordinarily grant relief. In such a case, the Service will grant relief only
PLR-131980-12 3

when the taxpayer provides strong proof that the taxpayer’s decision to seek relief did
not involve hindsight.
Section 301.9100-3(c)(1) provides that the interests of the government are
prejudiced if granting relief would result in the 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. The interests of the government are ordinarily
prejudiced if the taxable year in which the regulatory election should have been made,
or any taxable years that would have been affected by the election had it been timely
made, are closed by the period of limitations on assessment under section 6501(a)
before the taxpayer’s receipt of a ruling granting relief under this section.
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).
CONCLUSION
The Taxpayer’s election is a regulatory election, as defined under section 301.9100-
1(b), because the due date of the election is prescribed in a revenue procedure. In the
present situation, the requirements of sections 301.9100-1 and 301.9100-3 of the
regulations have been satisfied. The information and representations made by
Taxpayer establish that it acted reasonably and in good faith with this request. The
affidavits presented show that it requested relief before the failure to make the election
was discovered by the Service and it reasonably relied on a tax professional for the
filing of its federal income tax return, however, the tax professional failed to make, or
advise Taxpayer to make the election. The affidavits presented show that Taxpayer,
upon discovery of the error, promptly requested relief.
Taxpayer is not seeking to alter a return position for which an accuracy-related
penalty had been or could be imposed under section 6662 at the time relief was
requested. Taxpayer reasonably relied on a tax professional for the filing of the return
and the tax professional failed to make or advise Taxpayer to make the election.
Taxpayer is not using hindsight in requesting relief. Finally, granting an extension will
not prejudice the interests of the Government. The taxable year 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 limitation on
assessment.
Accordingly, Taxpayer is granted an extension of time of 60 days from the date of
this letter to file the original of Form 3115 changing Taxpayer’s method of accounting for
B under Rev. Proc. 2008-52, with an amended consolidated federal income tax return
for the taxable year ending Date 3. A copy of this letter must be attached to any income
tax return to which it is relevant. Alternatively, a taxpayer filing returns electronically may
PLR-131980-12 4

satisfy this requirement by attaching a statement to the return that provides the date and
control number of the letter ruling.
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) Taxpayer is
eligible to file the Form 3115 at issue under Rev. Proc. 2008-52; (2) Taxpayer otherwise
meets the requirements of Rev. Proc. 2008-52; or (3) Taxpayer's proposed method of
accounting described in Form 3115 is a permissible method of accounting. Further, this
letter ruling does not grant an extension of time for filing the consolidated federal
income tax return for the taxable year ending Date 3.
The rulings contained in this letter are based upon information and representations
submitted by Taxpayer and accompanied by a penalty of perjury statement executed by
appropriate parties. 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.
In accordance with the power of attorney, we are sending copies of this letter to
Taxpayer’s 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 the Associate Chief Counsel
                                  (Income Tax & Accounting)

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