Late Forms 3115 received accounting-method filing relief

Plain-English summary

A consolidated group intended to make two automatic accounting-method changes for ten subsidiaries but missed the required filing deadlines after the parent inadvertently failed to submit Form 7004. The original Forms 3115 were later attached to the consolidated return, and signed duplicate copies were filed with the IRS office in Ogden. The IRS treated both sets of Forms 3115 as timely because the regulatory-extension requirements were satisfied. The ruling did not extend the deadline for Form 7004 or the consolidated return, and it did not decide whether the subsidiaries qualified for the automatic changes under Revenue Procedure 2015-13.

Ruling snapshot

• Question: May the parent receive an extension to file the original and duplicate Forms 3115 for two accounting-method changes by its subsidiaries?
• Outcome: approved, the Forms 3115 filed with the return and the Ogden office were treated as timely
• Key authorities: IRC §§ 167(f)(1), 168(g), 446(e), and 481(a); Treas. Reg. §§ 301.9100-1 and 301.9100-3; Rev. Proc. 2015-13

Full text (IRS public release)

Internal Revenue Service                                          Department of the Treasury
                                                                  Washington, DC 20224

Number: 201937014                                                 Third Party Communication: None
Release Date: 9/13/2019                                           Date of Communication: Not Applicable
Index Number: 9100.10-01
                                                                  Person To Contact:
----------------------------                                      -----------------------------, ID # ----------------
------------------------------------                              ----------------
-----------------------                                           Telephone Number:
------------------------------                                    ---------------------
------------------------------                                    Refer Reply To:
                                                                  CC:ITA:B07
                                                                  PLR-133743-18
                                                                  Date:
                                                                  June 14, 2019

         Legend

Parent:            -----------------------
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S1:               ---------------------------------------------

S2:               -------------------------------------------

S3:               --------------------------------------------------

S4:               -------------------------------

S5:               ---------------------------------------

S6:               -------------------------------------------------------

S7:               -----------------------------------------

S8:               ---------------------------------

S9:               -------------------------------

S10:              ---------------------------------------------

Date1:            ----------------------

Date2:            ---------------------------

Date3:            -------------------

Date4:            ------------------------

PLR-133743-18                                 2



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

       This letter ruling responds to a letter dated November 6, 2018, and supplemental
correspondence submitted, by Parent on behalf of its subsidiaries S1 through S10
(collectively, the “Subsidiaries”). Parent is requesting an extension of time pursuant to
§§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to file
the originals and the signed duplicate copies of two Forms 3115, Application for Change
in Accounting Method, on behalf of the Subsidiaries. Parent should have filed the
originals and copies of these originals pursuant to section 6.03(1)(a)(i) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, 432, for the taxable year beginning Date1, and ended
Date2.

FACTS

        Parent represents the facts are as follows:

       Parent is the common parent of a consolidated group that includes the
Subsidiaries. Parent files a consolidated federal income tax return on a calendar year
basis. Parent’s overall method of accounting is the accrual method.

       Beginning for the taxable year beginning Date1, and ended Date2, the
Subsidiaries wanted to change their methods of accounting for depreciation for
leasehold improvements, data center facilities equipment, computer equipment,
communication equipment, leased equipment, capitalized leased property, and furniture
and fixtures for purposes of determining the earnings and profits of a foreign corporation
from using U.S. Generally Accepted Accounting Principles (“GAAP”) to determining the
depreciation under § 168(g) of the Internal Revenue Code. Additionally, beginning for
the taxable year beginning Date1, and ended Date2, S1 through S8 wanted to change
their method of determining amortization for developed and acquired computer software
for purposes of determining the earnings and profits of a foreign corporation from
amortizing the deduction over 60 months pursuant to GAAP to depreciating the software
using the straight-line method over 36 months beginning with the month the software
was placed in service pursuant to Rev. Proc. 2000-50, 2000-2 C.B. 601, and § 167(f)(1).
Parent believes that these changes in methods of accounting could be implemented
under the automatic change procedures of Rev. Proc. 2015-13. Thus, in accord with
the automatic change procedures of Rev. Proc. 2015-13, Parent should have completed
the required originals of the Forms 3115, reflecting the desired accounting method
changes, and attached these originals to Parent’s timely filed, consolidated federal
income tax return for the taxable year beginning Date1, and ended Date2.

      Further, in accord with the automatic change procedures of Rev. Proc. 2015-13,
a copy of the originals of the Forms 3115, each with an original signature or a

PLR-133743-18                                3

photocopy of the original signature, should have been timely filed with the appropriate
office of the Internal Revenue Service (IRS). Lastly, Parent’s consolidated federal
income tax return for the taxable year beginning Date1, and ended Date2, should have
reflected these accounting method changes made by the Subsidiaries.

         Parent’s consolidated federal income tax return for the taxable year beginning
Date1, and ended Date2, was due on Date3, without extensions. Parent was unable to
file its consolidated federal income tax return by Date3, so it intended to request an
extension of time to file its consolidated federal income tax return to Date4. Parent
prepared all of the relevant information necessary to correctly and timely file Parent’s
federal application for extension for the taxable year beginning Date1, and ended
Date2. On Date3, Parent timely paid the tax it owed on extension for its federal income
tax returns for the taxable year beginning Date1, and ended Date2. However, due to an
extraordinary series of events, Parent inadvertently failed to timely e-file Form 7004,
Application for Automatic Extension of Time to File Certain Business Income Tax,
Information, and Other Returns, for the taxable year beginning Date1, and ended Date2,
to extend the due date for its federal tax return. Several months after Date3, Parent
discovered that Parent’s Form 7004 had not been filed.

       As a result of Parent’s failure to timely file Form 7004 for the taxable year
beginning Date1, and ended Date2, the original Forms 3115 were not attached to a
timely filed federal income tax return for that taxable year, and the signed duplicate
copies of Parents’ Forms 3115 were not timely filed with the appropriate IRS office as
required by section 6.03(1)(a)(i) of Rev. Proc. 2015-13.

     Parent filed the signed duplicate copies of the two Forms 3115 at issue with the
Ogden, Utah office of the IRS on Date4.

       Parent filed its consolidated federal income tax return for the taxable year
beginning Date1, and ended Date2, on Date4. Parent attached to this filed return the
originals of the two Forms 3115 at issue. The filed return also fully reflects the
accounting method changes made by the Subsidiaries, including the necessary
adjustments under § 481(a).

RULING REQUESTED

         Parent requests an extension of time pursuant to §§ 301.9100-1 and 301.9100-
3 to file the original Forms 3115 and the signed duplicate copies of the originals of the
Forms 3115 described above for the Subsidiaries for the taxable year beginning Date1,
and ended Date2.

LAW AND ANALYSIS

PLR-133743-18                                4

       Rev. Proc. 2015-13, as clarified and modified by Rev. Proc. 2015-33, and as
modified by Rev. Proc. 2017-59, and by section 17.02 of Rev. Proc. 2016-1, provides
the automatic change procedures and the non-automatic change procedures by which a
taxpayer may obtain consent to change its methods of accounting. Pursuant to section
9 of Rev. Proc. 2015-13, a taxpayer that complies with all the applicable provisions of
Rev. Proc. 2015-13 and implements the change in method of accounting on its federal
income tax return for the requested year of change to which the original Form 3115 is
attached pursuant to section 6.03 of Rev. Proc. 2015-13, has obtained the consent of
the Commissioner of Internal Revenue to change its method of accounting under
§ 446(e) and the regulations thereunder.

        Section 6.03(1)(a)(i) of Rev. Proc. 2015-13 provides that a taxpayer changing a
method of accounting under the automatic change procedures of 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 signed copy of the original Form 3115 must be filed with the
appropriate office of the IRS no earlier than the first day of the requested year of change
and no later than when the original Form 3115 is filed with the federal income tax return
for the requested year of change.

      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 that the
granting 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 when the
accounting method regulatory election for which relief is requested is subject to the
procedure described in § 1.446-1(e)(3)(i) or the relief requires an adjustment under
§ 481(a) (or would require an adjustment under § 481(a) if the taxpayer changed to the
accounting method for which relief is requested in a taxable year subsequent to the
taxable year the election should have been made).

PLR-133743-18                                5

CONCLUSION

       Based solely on the facts and representations submitted, we conclude that the
requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly,
Parent is granted an extension of time to:

       (1) file the two originals of the Forms 3115 changing the Subsidiaries’ methods of
       accounting, beginning for the taxable year beginning Date1, and ended Date2,
       and

       (2) file the signed duplicate copies of these original Forms 3115 with the
       appropriate office of the IRS.

        In this regard, we will consider the filing of the two original Forms 3115 with
Parent’s consolidated federal income tax return for the taxable year beginning Date1,
and ended Date2, that was filed on Date4, to be timely made. We also will consider the
filing of the signed duplicate copies of the original Forms 3115 with the IRS office in
Ogden, Utah, on Date4, to be timely made.

       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 or
regulations. Specifically, no opinion is expressed or implied concerning whether (1) the
accounting method changes the Subsidiaries have made are eligible to be made under
the automatic change procedures of Rev. Proc. 2015-13 or (2) the Subsidiaries
otherwise meet the requirements of Rev. Proc. 2015-13 to make the accounting method
changes using the automatic change procedures of Rev. Proc. 2015-13. Lastly, we
emphasize that this letter ruling does not grant any extension of time for the filing of
Parent’s Form 7004 or its consolidated federal income tax return for the taxable year
beginning Date1, and ended Date2.

      The ruling contained in this letter ruling is based upon facts and representations
submitted by Parent with an accompanying penalty of perjury statement executed by
the appropriate party. 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 Forms 3115, all
material is subject to verification on examination.

      This letter ruling is directed only to Parent, who requested it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.

PLR-133743-18                                6

        In accordance with the power of attorney, we are sending copies of this letter
ruling to Parent’s authorized representatives.

                                      Sincerely,

                                      Charles J. Magee

                                      CHARLES J. MAGEE
                                      Senior Counsel, Branch 7
                                      Office of the Associate Chief Counsel
                                      (Income Tax & Accounting)




Enclosures (2):
      Copy of this letter
      Copy for section 6110 purposes