Late tax-year change application is treated as timely

Plain-English summary

A taxpayer filed Form 1128 after the deadline to change its federal tax year from a January 31 year-end to a December 31 year-end. It sought discretionary relief soon after discovering that it did not meet the scope requirements for the automatic procedure it had expected to use. The IRS found that the taxpayer acted reasonably and in good faith and that granting relief would not prejudice the government. It therefore treated the late Form 1128 as timely filed. The ruling addressed only timeliness and did not decide whether the Code, regulations, or Rev. Proc. 2002-39 otherwise permitted the requested tax-year change.

Ruling snapshot

• Question: Could the taxpayer's late Form 1128 be treated as timely filed?
• Outcome: Approved for timeliness only
• Key authorities: IRC § 442; Treas. Reg. §§ 1.442-1(b) and 301.9100-3; Rev. Procs. 2002-39 and 2006-45

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201505014 Third Party Communication: None
Release Date: 1/30/2015 Date of Communication: Not Applicable
Index Number: 9100.00-00, 442.00-00
Person To Contact:
---------------------------- ------------------, ID No. ------------------
--------------------------------------------- Telephone Number:
--------------------------- ----------------------
Refer Reply To:
---------------------------- CC:ITA:B04
-------------------------------------------------- PLR-121164-14
Date:
------------------------------------- September 15, 2014

Legend

Taxpayer = ---------------------------
Year = -------

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

This ruling is in reference to the taxpayer’s request that its Form 1128, Application To
Adopt, Change, or Retain a Tax Year, be considered timely filed under the authority in §
301.9100-3 of the Procedures and Administration Regulations. Taxpayer filed a late
Form 1128 to change the accounting period for federal income tax purposes, from a
taxable year ending January 31 to a taxable year ending December 31, effective
December 31, Year.

Section 1.442-1(b) of the Income Tax Regulations provides that in order to secure the
Commissioner’s consent to a change in annual accounting period, the taxpayer must file
an application on Form 1128 with the Commissioner within such time and in such
manner as is provided in administrative procedures published by the Commissioner.

Section 6.02(1) of Rev. Proc. 2002-39, 2002-1 C.B. 1046, provides that a taxpayer must
file a Form 1128 no earlier than the day following the end of the first effective year and
no later than the due date (not including extensions) of the federal income tax return for
the first effective year.

Taxpayer did not file its Form 1128 by the due date of the return for the short period (not
including extensions) required to effect such change. However, taxpayer requested an
extension of time to file its Form 1128 under § 301.9100-3 soon thereafter, at the time

PLR-121164-14 2

the taxpayer determined that for the year of change it failed to meet the Scope
provisions of Rev. Proc. 2006-45, 2006-2 C.B. 851.

Section 301.9100-3(a) provides that requests for extensions of time for regulatory
elections that do not meet the requirements of § 301.9100-2 (automatic extensions),
such as the instant case, must be made under the rules of § 301.9100-3. Request for
relief subject to § 301.9100-3 will be granted when the taxpayer provides evidence to
establish that the taxpayer acted reasonably and in good faith, and that the granting of
relief will not prejudice the interest of the government.

Based on the facts and information submitted and the representations made, we
conclude that Taxpayer has acted reasonably and in good faith, and that the granting of
relief will not prejudice the interest of the government. Accordingly, Taxpayer has
satisfied the requirements of the regulations for the granting of relief, and Taxpayer’s
late filed Form 1128 requesting to change to December 31, effective December 31,
Year, is considered timely filed.

This ruling is based upon facts and representations submitted by the taxpayer and
accompanied by a penalty of perjury statement executed by an appropriate party. This
office has not verified any of the material submitted in support of the request for a ruling.
However, as part of an examination process, the Service may verify the factual
information, representations, and other data submitted.

This ruling addresses the granting of § 301.9100-3 relief only. We express no opinion
regarding the tax treatment of the instant transaction under the provisions of any other
section of the code or the regulations that may be applicable, or regarding the tax
treatment of any conditions existing at the time of, or effects resulting from, the instant
transaction. Specifically, this ruling expresses no opinion as to whether the Code and
applicable regulations or Rev. Proc. 2002-39 permits the taxpayer to change to the tax
year requested in the Form 1128.

A copy of this letter ruling must be attached to the taxpayer’s income tax return to which
it is relevant. Alternatively, taxpayers filing their returns electronically may satisfy this
requirement by attaching a statement to their return that provides the date and control
number of the letter ruling.

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. Enclosed is a copy of the letter
ruling showing the deletions proposed to be made when it is disclosed under § 6110.

PLR-121164-14 3

In accordance with the Power of Attorney on file with this office, we are sending a copy
of this letter to your authorized representatives.

                                 Sincerely,



                                 Stephen J. Toomey
                                 Senior Counsel, Branch 4
                                 (Income Tax & Accounting)