Distributor receives extra time to file duplicate Form 3115

Plain-English summary

A wholesale distributor timely attached Form 3115 to its tax return to change an impermissible depreciation method under § 168. Its tax adviser did not explain that a signed copy also had to be filed with the IRS office in Ogden, Utah. The adviser discovered the omission after the return was filed, and the distributor promptly requested relief. The IRS concluded that the regulatory-election relief requirements of Treas. Reg. § 301.9100-3 were satisfied and granted 60 days to file the duplicate form. The ruling does not decide whether the distributor qualified for the automatic accounting method change or whether its proposed method was permissible.

Ruling snapshot

• Question: Could the distributor receive extra time to file the required duplicate copy of Form 3115 after its adviser failed to explain that filing requirement?
• Outcome: Approved, with a 60-day extension
• Key authorities: IRC §§ 168 and 446(e); 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: 201451024 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:B06
PLR-121483-14
Date:
September 11, 2014

Legend

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

Date1 = ---------------------------

Date2 = --------------------

Supplies = -----------------------------------------------------------------------------

X = -----------

B = ----------------------------

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

This letter is in response to a private letter ruling request dated May 28, 2014, filed on
behalf of Taxpayer, requesting an extension of time under §301.9100-1 of the
Procedure and Administration Regulations to file a copy of the Form 3115, Application
for Change in Accounting Method, with the Internal Revenue Service (IRS) office in
Ogden, Utah for the taxable year ending Date1.

Taxpayer is a merchant wholesale distributor of Supplies. The taxpayer represented
that its principal activity code is X.

On Date2, Taxpayer engaged B to assist in the preparation of its federal tax filings for
the taxable year ending Date1. As part of its engagement, B reviewed a study
Taxpayer had undertaken that indicated that it was incorrectly depreciating certain
assets. B advised Taxpayer that an accounting method change was necessary to
PLR-121483-14 2

change under § 168 of the Internal Revenue Code from this impermissible depreciation
method for assets placed in service and owned by Taxpayer as of the first day of the
year ending Date1. As a result, with the federal tax return filing for taxable year ending
Date1, Taxpayer timely filed an original Form 3115 requesting an accounting method
change for depreciation under §168 and reflected this accounting method change on
this tax return. B did not advise Taxpayer at the time of this filing that a copy of the
Form 3115 was required to be filed with the IRS service center in Ogden, Utah.

After filing the federal tax return for the taxable year ending Date1, B discovered that
Taxpayer had not filed the required copy of the Form 3115 with the IRS office in Ogden,
Utah, and advised Taxpayer. As a result, Taxpayer took immediate steps to file this
private letter ruling request for an extension of time to file the required copy of the Form
3115 with the IRS office in Ogden, Utah.

Rev. Proc. 2011-14, 2011-4 I.R.B. 330, 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 its method of accounting under § 446(e) and
the Income Tax 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. For a Form 3115 filed under section 6.01 of
the Appendix to Rev. Proc. 2011-14 (impermissible to permissible method of accounting
for depreciation or amortization), a copy must be filed with the IRS office in Ogden, Utah
in lieu of filing with the IRS national office. See section 6.02(3)(a)(ii)(B) and section
6.01(8) of the Appendix, Rev. Proc. 2011-14.

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 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.
PLR-121483-14 3

Requests for relief under § 301.9100-3 will be granted when a taxpayer provides
evidence to establish to the satisfaction of the Commissioner (1) that the taxpayer acted
reasonably and in good faith, and (2) that granting relief will not prejudice the interests
of the government. See § 301.9100-3(a).

Section 301.9100-3(b)(1) provides that a taxpayer is deemed to have acted reasonably
and in good faith if the taxpayer: (i) requested relief before the failure to make the
regulatory election is discovered by the IRS; (ii) failed to make the election because of
intervening events beyond the taxpayer’s control; (iii) failed to make the election
because, after exercising reasonable diligence, the taxpayer was unaware of the
necessity for the election; (iv) reasonably relied on the written advice of the IRS; 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 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 was or 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 and chose not to file the election; or (iii) uses
hindsight in requesting relief.

Section 301.9100-3(c)(1)(i) 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 (taking into account the time value of money). The
section also provides that, if the tax consequences of more than one taxpayer are
affected by the election, the government’s interests are prejudiced if extending the time
for making the election may result in the affected taxpayers, in the aggregate, having a
lower tax liability than if the election had been timely made.

Further, § 301.9100-3(c)(1)(ii) provides, in part, that 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
§ 6501(a) before the taxpayer’s receipt of a ruling granting relief under this section.

The requested election is a regulatory election as defined under § 301.9100-1(b)
because the due date of the election is prescribed in a revenue procedure, Rev. Proc.
2011-14. Taxpayer’s request is analyzed under the requirements of § 301.9100-3
because the automatic provisions of § 301.9100-2 are not applicable.
PLR-121483-14 4

On the basis of the facts, representations, and affidavits submitted, we conclude that
the requirements of § 301.9100-3 are satisfied. Accordingly, Taxpayer is granted 60
calendar days from the date of this letter to file a signed copy of the Form 3115 at issue
with the IRS office in Ogden, Utah. Please attach a copy of this letter ruling to the copy
of the Form 3115 that is filed with the IRS office in Ogden, Utah.

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 in this private letter ruling request under Rev.
Proc. 2011-14; (2) Taxpayer otherwise meets the requirements of Rev. Proc. 2011-14;
or (3) Taxpayer’s proposed method of accounting described in the Form 3115 is a
permissible method of accounting.

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

This ruling is directed only to Taxpayer who requested 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,



                                   Cheryl L. Oseekey
                                   Senior Counsel, Branch 6
                                   (Income Tax & Accounting)