Taxpayer received 45 days to file a duplicate Form 3115

Plain-English summary

A corporate taxpayer changed a subsidiary's accounting method for capitalizing certain indirect and mixed service costs under section 263A. It timely attached the original Form 3115 to its consolidated return but failed to send the required duplicate copy to the appropriate IRS office because of a staff error. The error was discovered the next day, and the taxpayer requested regulatory relief. The IRS found that the taxpayer satisfied the good-faith and government-prejudice standards and granted 45 days to file an identical duplicate. The ruling did not decide whether the change qualified for automatic consent or whether the proposed accounting method was correct.

Ruling snapshot

• Question: Could the taxpayer receive extra time to file the required duplicate Form 3115 after timely filing the original with its return?
• Outcome: approved
• Key authorities: IRC §§ 263A, 446(e); Treas. Reg. § 301.9100-3; Rev. Proc. 2015-13; Rev. Proc. 2016-29

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201736016                                              Third Party Communication: None
Release Date: 9/8/2017                                         Date of Communication: Not Applicable
Index Numbers: 9100.00-00, 9100.10-00,
              9100.10-01                                       Person To Contact:
                                                               -----------------------------, ID No. 219519
------------------------------------------------------------   Telephone Number:

-                                                              ----------------------
-------------------------------                                Refer Reply To:
-------------------------                                      CC:ITA:B06
                                                               PLR-138738-16
-------------------------------                                Date:
----------------------------------------                       June 09, 2017




LEGEND

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

Subsidiary                          =        ---------------------------------
                                             -------------------------

CPA                                 =        ------------------------------------

Date A                              =        ----------------------------

Year 1                              =        -------

Product and Services                =         -----------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
----
-----------------------------------------------------------------------------------------------------------------
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Dear --------------------

This ruling responds to a recent letter that was submitted by Taxpayer’s representative,
CPA. CPA has requested that the Commissioner of Internal Revenue give Taxpayer an
extension of time pursuant to §§ 301.9100-1 and 301.9100-3 of the Procedure and
Administration Regulations to file the duplicate copy of a completed Form 3115,
PLR-138738-16                                2

Application for Change in Accounting Method. Taxpayer should have filed a duplicate
of this Form 3115, pursuant to section 6.03(1)(a)(i)(B) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, on or before Date A.

                                           FACTS

Taxpayer represents the following facts:

Taxpayer is a domestic C corporation and a non-operating company serving as a
holding company. Taxpayer files a consolidated federal income tax return with its
wholly owned subsidiary, Subsidiary. Subsidiary is engaged in the trade or business of
producing and providing Product and Services. Taxpayer files its consolidated return on
the basis of a calendar year and uses an overall accrual method of accounting for
federal income tax purposes.

Taxpayer changed Subsidiary’s method of accounting for capitalizing certain indirect
and mixed service costs under § 263A of the Internal Revenue Code on the advice of
CPA. The accounting method changes were made for the Year 1 tax year pursuant to
the automatic consent procedures of Rev. Proc. 2015-13 and Rev. Proc. 2016-29,
2016-21 I.R.B. 880.

Pursuant to section 6.03(1)((a)(i)(A), Taxpayer timely filed the original, completed Form
3115 for Subsidiary with its timely filed original consolidated federal income tax return
implementing the requested change for Year 1. However, Taxpayer failed to file the
duplicate copy of the Form 3115 with the appropriate office of the Internal Revenue
Service no later than the date Taxpayer filed the original Form 3115 due to an error
committed by a staff member of Taxpayer. See section 6.03(1)(a)((i)(B) of Rev. Proc.
2015-13. The error was discovered the day after Date A. Subsequently, CPA
submitted this request for an extension of time to file the duplicate of Taxpayer’s Form
3115.

                                 RULING REQUESTED

Taxpayer requests an extension of time pursuant to §§ 301.9100-1 and 301.9100-3 to
file the duplicate Form 3115 required by Rev. Proc. 2015-13 in order to make a change
in method of accounting for Year 1 for capitalizing certain costs under § 263A.

                                 LAW AND ANALYSIS

Rev. Proc. 2015-13 provides the procedures by which a taxpayer may obtain automatic
consent to change certain accounting methods. A taxpayer complying with all the
applicable provisions of this revenue procedure has obtained the consent of the
Commissioner to change its method of accounting under § 446(e) and the Income Tax
Regulations thereunder.
PLR-138738-16                                3


Section 6.03(1)(a)(i) of Rev. Proc. 2015-13 provides that a taxpayer changing an
accounting method pursuant to Rev. Proc. 2015-13 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 appropriate office of the Internal
Revenue Service 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(c) provides that the Commissioner has discretion to grant a
reasonable extension of time under 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 standard 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 that the
granting of relief will not prejudice the interests of the Government.

                                     CONCLUSION

Based solely on the representations submitted, this office concludes that the
requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied in Taxpayer’s case.
Accordingly, Taxpayer is granted 45 calendar days from the date of this letter to file the
required duplicate of the Form 3115 (identical to the original already filed with the
Internal Revenue Service) changing Subsidiary’s method of accounting for capitalizing
certain costs under § 263A.

Except as expressly set forth above, this office neither expresses nor implies any
opinion concerning the tax consequences of the facts described above under any other
provision of the Code or regulations. Specifically, we have no opinion, either expressed
or implied, concerning (1) whether the accounting method change Taxpayer has
attempted to make on Subsidiary’s behalf is eligible to be made under the automatic
consent procedures of Rev. Proc. 2015-13 and Rev. Proc. 2016-29; and (2) whether
Taxpayer otherwise meets the requirements of Rev. Proc. 2015-13 to make an
accounting method change for Subsidiary using Rev. Proc. 2015-13. Further, no
opinion is expressed regarding the correctness of Subsidiary’s proposed method for
capitalizing certain indirect and mixed service costs under § 263A.
PLR-138738-16                                 4

The ruling contained in this letter ruling is based upon facts and representations
submitted by CPA on behalf of itself, Taxpayer and Subsidiary with accompanying
penalties of perjury statements executed by appropriate parties. While this office has
not verified any of the material submitted in support of this request for an extension of
time to file the required Form 3115, all material is subject to verification on examination.

This ruling is directed only to Taxpayer. 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 our office, we are sending copies
of this letter to Taxpayer’s authorized representatives.

                                       Sincerely,



                                       CHERYL L. OSEEKEY
                                       Senior Counsel, Branch 6
                                       Office of Associate Chief Counsel
                                       (Income Tax & Accounting)

Enc.: Copy for § 6110 purposes