Corporation receives extra time to file two duplicate Forms 3115

Plain-English summary

A corporation prepared two Forms 3115 to change its accounting methods for software development costs and for specified prepaid expenses. It timely attached copies to its electronic return but did not send signed duplicate copies to the separate IRS offices required by Rev. Proc. 2011-14. Its tax adviser had requested signed forms but did not follow up before the return was filed, and the corporation sought relief immediately after discovering the oversight. The IRS found that the requirements of Treas. Reg. § 301.9100-3 were satisfied. It granted 60 days to file the software-development form with the Ogden office and the prepaid-expense form with the National Office. The ruling does not decide whether the corporation qualified for the automatic changes or whether the proposed methods were permissible.

Ruling snapshot

• Question: Could the corporation receive extra time to file signed duplicate copies of two Forms 3115 with the appropriate IRS offices?
• Outcome: Approved, with a 60-day extension
• Key authorities: IRC §§ 446(e) and 481(a); 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: 201451008 Third Party Communication: None
Release Date: 12/19/2014 Date of Communication: Not Applicable
Index Number: 9100.00-00
Person To Contact:
-------------------------------------- -----------------, ID No. --------------
--------------------- Telephone Number:
------------------------------ ----------------------
------------------------------ Refer Reply To:
CC:ITA:B03
PLR-110026-14
Date:
August 20, 2014

              TY: -------

Legend

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

Tax Advisor = -----------------------

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

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

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

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

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

Date 6 = -----------------------------

Year A = -------

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

This is in response to a letter dated Date 1, submitted on your behalf by your authorized
representative requesting an extension of time to file duplicate copies of the Forms
3115, Application for Change in Accounting Method, with the IRS Ogden, UT office and
the IRS national office, as appropriate, for the taxable year ending Date 2. This request
is made in accordance with §§ 301.9100-1 and 301.9100-3 of the Procedure and
Administration Regulations.
PLR-110026-14 2

                                     FACTS

On Date 3, Taxpayer met with Tax Advisor to discuss the filing of two Forms 3115,
Application for Change in Accounting Method, to change its method of accounting for
software development costs, to be filed under section 9.01 of the Appendix of Rev.
Proc. 2011-14, 2011-1 C.B. 330, and prepaid insurance and prepaid hardware and
software maintenance contracts, to be filed under section 10.05 of the Appendix of Rev.
Proc. 2011-14, 2011-1 C.B. 330 for the taxable year ending Date 2.

On Date 4, Tax Advisor sent an email to Taxpayer, which included completed Forms
3115 and asked Taxpayer to provide signed copies of the Forms 3115. Taxpayer did
not provide Tax Advisor with the copies of the Forms 3115 prior to the filing of its Year A
federal income tax return. Tax Advisor did not make inquiries of Taxpayer to confirm
that the Forms 3115 were filed prior to Taxpayer filing its Year A federal income tax
return.

On Date 5, Taxpayer timely and electronically filed its Form 1120, U.S. Corporation
Income Tax Return, for the taxable year ending Date 2. Taxpayer attached copies of
the Forms 3115 to its consolidated federal income tax return as required by section
6.02(3)(a)(i) of Rev. Proc. 2011-14. However, Taxpayer failed to file a signed duplicate
copy of the Form 3115 for software development costs with the IRS Ogden, Utah office
and a signed duplicate copy of the Form 3115 for prepaid expenses with the IRS
national office as required by section 6.02(3)(a)(ii).

On Date 6, Taxpayer discovered through Tax Advisor, that the duplicate copies of the
Forms 3115 were not filed. Upon discovery of this oversight, Taxpayer immediately
contacted Tax Advisor who instructed Taxpayer to request an extension of time under
section 301.9100.

                               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
application 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
PLR-110026-14 3

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. For Forms 3115 filed under section 9.01 of
the Appendix to Rev. Proc. 2011-14, a copy must be filed with the IRS Ogden, Utah
office in lieu of filing the national office copy.

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 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 year 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, Taxpayer is granted 60
calendar days from the date of this letter to (1) file a signed duplicate copy of the Form
3115 for software development costs with the IRS Ogden, Utah office and (2) file a
signed duplicate copy of the Form 3115 for prepaid insurance and prepaid hardware
and software maintenance contracts with the IRS national office. Please attach a copy
of this letter ruling to the duplicate copies of Form 3115 to be filed with the IRS Ogden,
Utah office and the IRS national office.
PLR-110026-14 4

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 Forms 3115 at issue under Rev. Proc. 2011-14; (2) Taxpayer
otherwise meets the requirements of Rev. Proc. 2011-14; or (3) Taxpayer’s proposed
methods of accounting described in Forms 3115 are permissible methods of
accounting.

The ruling contained in this letter is 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.

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.

                                   Sincerely,



                                   Christopher F. Kane
                                   Branch Chief, Branch 3
                                   (Income Tax & Accounting)