Taxpayer gets 60 days to file omitted accounting-method form

Plain-English summary

A taxpayer changed its accounting for advance payments to the deferral method described in Rev. Proc. 2004-34. Its return reflected the change, and its accounting firm timely sent the duplicate Form 3115 to the IRS National Office. The firm inadvertently failed to attach the original signed Form 3115 to the electronically filed return. The IRS found that the taxpayer satisfied the good-faith and no-prejudice standards for late-election relief. It granted 60 days to file the signed original with an amended return, without deciding whether the method change itself otherwise qualified.

Ruling snapshot

• Question: Could the taxpayer late-file the original Form 3115 that its accounting firm omitted from the electronically filed return?
• Outcome: Approved, with the signed original Form 3115 and amended return due within 60 days.
• Key authorities: IRC § 446(e); Treas. Reg. § 301.9100-3; Rev. Proc. 2004-34; Rev. Proc. 2011-14.

Full text (IRS public release)

Internal Revenue Service                                     Department of the Treasury
                                                             Washington, DC 20224

Number: 201636038                                            Third Party Communication: None
Release Date: 9/2/2016                                       Date of Communication: Not Applicable
Index Number: 9100.10-01
                                                             Person To Contact:
                                                             -----------------, ID No. ----------------
-------------------------------                              Telephone Number:
---------------------------------------------                --------------------
 --------------------------------------                      Refer Reply To:
                                                             CC:ITA:B01
                                                             PLR-141328-15
                                                             Date:
                                                             May 25, 2016


Attn: -----------------------------------------------

Re: --------------------------------------------------------------------------------------------------------------
--------------------------

Taxpayer = ---------------------------------------------------------
Date1    = --------------------------


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

       This ruling responds to a letter dated December 17, 2015, submitted by
Taxpayer, requesting an extension of time pursuant to § 301.9100-3 of the Procedure
and Administration Regulations to file original Form 3115, Application for Change in
Accounting Method, to change Taxpayer’s method of accounting for advance payments
to the Deferral Method described in Rev. Proc. 2004-34, 2004-1 C.B. 99, for the taxable
year ending Date1.

FACTS

         Taxpayer represents that the facts are as follows:

       Taxpayer timely filed its federal income tax return for the taxable year ending
Date1 through an electronic filing. Taxpayer timely filed the duplicate copy of the Form
3115 to change Taxpayer’s method of accounting for advance payments to the Deferral
Method described in Rev. Proc. 2004-34 for the taxable year ending Date1 under
section 15.07 of the Appendix of Rev. Proc. 2011-14, 2011-4 I.R.B. 330, with the
Internal Revenue Service National Office. Taxpayer's federal income tax return for the
taxable year ending Date1 reflected a change in Taxpayer’s method of accounting for
advance payments to the Deferral Method described in Rev. Proc. 2004-34 for the
taxable year ending Date1 under section 15.07 of the Appendix of Rev. Proc. 2011-14,
PLR-141328-15                                 2

as reflected on the duplicate filing of the copy of the Form 3115. However, Taxpayer
inadvertently failed to attach the original Form 3115 to its electronically filed federal
income tax return for the taxable year ending Date1.

       Taxpayer engaged an accounting firm to prepare and electronically file
Taxpayer’s federal income tax return and the Form 3115 for the taxable year ending
Date1. After timely filing such federal income tax return and the signed duplicate copy
of such Form 3115, Taxpayer’s accounting firm discovered that the accounting firm had
inadvertently not attached the required original Form 3115 to the federal income tax
return when such federal income tax return was electronically filed.

RULING REQUESTED

       Taxpayer requests an extension of time pursuant to § 301.9100-3 of the
Procedure and Administration Regulations to file the original Form 3115 to change
Taxpayer’s method of accounting for advance payments to the Deferral Method
described in Rev. Proc. 2004-34 for the taxable year ending Date1.

LAW AND ANALYSIS

        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 applicable provisions of this revenue procedure has obtained the consent of the
Commissioner of Internal Revenue to change the taxpayer’s method of accounting
under § 446(e) of the Internal Revenue Code 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. Section 6.02(3)(a)(i) of Rev. Proc. 2011-14 provides that the original
must be attached to the taxpayer’s timely filed (including extensions) original federal
income tax return implementing the change in method of accounting for the year of
change.

       Under § 301.9100-(c)(1), 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 a
regulatory election.

       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.
PLR-141328-15                                  3

        Section 301.9100-3(a) provides that requests for relief under § 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.

CONCLUSIONS

       Based solely on the facts and representations submitted, we conclude that the
requirements of § 301.9100-3(a) have been satisfied. Accordingly, Taxpayer is granted
60 calendar days from the date of this letter to file the original Form 3115 (with
signature) to change Taxpayer’s method of accounting for advance payments to the
Deferral Method described in Rev. Proc. 2004-34 under section 15.07 of the Appendix
of Rev. Proc. 2011-14, 2011-4 I.R.B. 330, for the taxable year ending Date1, with an
amended federal income tax return for the taxable year ending Date1.

      Except as specifically set forth above, no opinion is expressed or implied
concerning the federal income tax consequences of the facts described above under
any other provisions of the Code. Specifically, no opinion is expressed or implied
concerning (i) whether the change in method of accounting made by Taxpayer that is
the subject of such Form 3115 qualify under section 15.07 of the Appendix of Rev. Proc.
2011-14; or (ii) whether Taxpayer otherwise meets the requirements of Rev. Proc.
2011-14 to make the change in method of accounting using Rev. Proc. 2011-14.
Further, no opinion is expressed or implied on the propriety of Taxpayer’s present and
proposed methods of accounting for advance payments.

      In accordance with the power of attorney, we are sending copies of this letter to
Taxpayer’s authorized representatives. We are also sending a copy of this letter to the
appropriate Service official.

        The ruling contained in this letter is based upon information and representations
submitted by Taxpayer and accompanied by a penalty of perjury statement. While this
office has not verified any of the material submitted in support for a ruling, it is subject to
verification on examination.
PLR-141328-15                                4



      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.

                                                 Sincerely,

                                                 Tajuana Nelson Hyde

                                                 Tajuana Nelson Hyde
                                                 Assistant Branch Chief, Branch 1
                                                 Office of Associate Chief Counsel
                                                 (Income Tax and Accounting)


Enclosures (2):
      copy of this letter
      copy for 6110 purposes