Extension granted to attach Form 3115 to amended return

Plain-English summary

A taxpayer timely mailed the duplicate copy of Form 3115 and reported all adjustments from its intended automatic accounting-method change, but its tax manager inadvertently failed to attach the original Form 3115 to the consolidated return. The taxpayer discovered the omission during a post-filing review before the IRS did. The IRS found that the taxpayer acted reasonably and in good faith and that relief would not prejudice the government. It granted 60 days to file an amended return with the original Form 3115 attached.

Ruling snapshot

• Request: Extension of time under Treas. Reg. §§ 301.9100-1 and 301.9100-3 to satisfy the Form 3115 filing requirement for an automatic accounting-method change
• Outcome: granted; the taxpayer received 60 days from the ruling date to file an amended return including the original Form 3115
• Key authorities: IRC §§ 168 and 446(e); Treas. Reg. §§ 1.446-1(e), 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: 201941024                                             Third Party Communication: None
Release Date: 10/11/2019                                      Date of Communication: Not Applicable
Index Number: 9100.00-00
                                                              Person To Contact:
------------------------------------------------              ----------------------, ID No. ------------------
----------------------------------                            Telephone Number:
------------------------                                      ----------------------
------------------------------                                Refer Reply To:
                                                              CC:ITA:B03
----------------------------                                  PLR-135799-18
------------------------------------------                    Date:
                                                              July 02, 2019
In Re: ---------------------------------------------------
--------------------------------
-----------------------------




                          TY: ----------------------------------------------------------

LEGEND:

Taxpayer                        =     -----------------------------------------------------------------------------
                                      ---------
Parent                          =     --------------------------------------------------------------------------
S1                              =     ------------------------------------------------
S2                              =     ---------------------------------------------------
S3                              =     --------------------------------------------------------
S4                              =     ------------------------------------------------------------------
S5                              =     ---------------------------------------------------------
S6                              =     ------------------------------------------------------------
S7                              =     ---------------------------------------------------
Advisor                         =     ----------------
Attorney/P.O.A.                 =     ----------------------------------------------
                                =     ------------------------------------------
Taxable Year                    =     -------
Date1                           =     ---------------------------
Date2                           =     -----------------
Date3                           =     --------------------
Date4                           =     ---------------------------
Date5                           =     ----------------------------
Date6                           =     ----------------------------
Date7                           =     ------------------------

PLR-135799-18                                2


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

This responds to a letter ruling request dated November 29, 2018, submitted on behalf
of Taxpayer. Taxpayer requests an extension of time under sections 301.9100-1 and
301.9100-3 of the Procedure and Administration Regulations to file an original Form
3115, Application for Change in Accounting Method, pursuant to section 6.03(1)(a)(i) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, with Parent’s timely filed consolidated federal
income tax return for the taxable year ending Date1.

                                         FACTS

Taxpayer represents the facts are as follows:

Parent and its subsidiaries are a consolidated group of corporations for U.S. federal
income tax purposes, with Parent as the group’s common parent. On Date2, Taxpayer
identified incorrect recovery periods being utilized for certain fixed assets. Taxpayer
engaged Advisor to assist with additional review and the filing of Form 3115. As a result
of this review, Taxpayer intended to file a Form 3115 to change its method of
accounting for depreciation under section 168 of the Internal Revenue Code (Code) for
Taxpayer and its subsidiaries, S1, S2, S3, S4, S5, S6, and S7 for the tax year ended
Date1. Taxpayer intended to file this Form 3115 under the automatic consent
procedures set forth in Rev. Proc. 2015-13.

On Date3, Taxpayer engaged Advisor to review and correct any improperly classified
and depreciated assets for tax years ended Date4 through Date1. On Date5, the final
Form 3115 was completed for Taxpayer to file with the IRS and, on Date6, Taxpayer
mailed a copy of the Form 3115 to the IRS office in Covington, KY, as required by Rev.
Proc. 2015-13. This form was submitted within the three-month window provided in
section 8.02(1)(a) of Rev. Proc. 2015-13 in order to obtain audit protection. At the time
of filing, Taxpayer was under examination for at least 12 months but the method of
accounting that Taxpayer was requesting to change was not an issue under
consideration. Taxpayer was aware that in order to make the automatic accounting
method change, Taxpayer was responsible for attaching the original Form 3115 to its
then to-be-filed U.S. federal income tax return for Taxable Year.

Taxpayer’s internal tax department prepared and filed its U.S. federal income tax return
for Taxable Year. Taxpayer’s Tax Manager was responsible for attaching Taxpayer’s
original Form 3115 to the return. On Date6, Taxpayer timely e-filed its U.S. federal
income tax return for Taxable Year. On this return, Taxpayer included all adjustments
consistent with the Form 3115. However, Taxpayer’s Tax Manager inadvertently failed
to attach Taxpayer’s original Form 3115 to its U.S. federal income tax return for Taxable
Year as required by Rev. Proc. 2015-13.

PLR-135799-18                                3


On Date7, Taxpayer completed a post-filing final review of the internal records and files
for its U.S. federal income tax return for Taxable Year and identified that Taxpayer’s
Form 3115 was not attached to the return. Taxpayer then requested Advisor
commence preparation of this request.

                                          LAW

Rev. Proc. 2015-13 provides the procedures by which a taxpayer may obtain automatic
consent to change certain accounting methods. Section 9 of Rev. Prov. 2015-13
provides that consent of the Commissioner to change its accounting method under
section 446(e) of the Code and section 1.446-1(e) of the Income Tax Regulations is
granted only if the taxpayer complies with all the applicable provisions of the revenue
procedure and implements the change in method 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.

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 Form 3115 must be attached to the taxpayer’s timely filed
(including any extension) 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
Service no earlier than when the original is filed with the federal income tax return for
the year of change.

Sections 301.9100-1 through 301.9100-3 of the Procedure and Administration
Regulations provide the standards the Commissioner uses to determine whether to
grant an extension of time to make a regulatory 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 section
301.9100-2.

Section 301.9100-1(b) defines the term "regulatory election" as an election whose due
date is prescribed by a regulation published in the Federal Register, or a revenue ruling,
procedure, notice or announcement published in the Internal Revenue Bulletin.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable
extension of time to make a regulatory election, or a statutory election (but no more than
six months except in the case of a taxpayer who is abroad) under all subtitles of the
Internal Revenue Code except subtitles E, G, H and I.

Section 301.9100-3(a) provides extensions of time to make a regulatory election under
Code sections other than those for which section 301.9100-2 expressly permits
automatic extensions. Requests for extensions of time for regulatory elections will be

PLR-135799-18                                  4


granted when the taxpayer provides evidence (including affidavits described in the
regulations) to establish to the satisfaction of the Commissioner that the taxpayer acted
reasonably and in good faith, and granting relief will not prejudice the interests of the
government.

Section 301.9100-3(b)(1) states that a taxpayer will be deemed to have acted
reasonably and in good faith if the taxpayer --

(i) requests relief before the failure to make the regulatory election is discovered by the
Service;

(ii) failed to make the election because of intervening events beyond the taxpayer's
control;

(iii) failed to make the election because, after exercising due diligence, the taxpayer was
unaware of the necessity for the election;

(iv) reasonably relied on the written advice of the Service; 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.

Under section 301.9100-3(b)(3), a taxpayer will not be considered to have acted
reasonably and in good faith if the taxpayer --

(i) seeks to alter a return position for which an accuracy related penalty has been or
could be imposed under section 6662 at the time the taxpayer requests relief (taking
into account section 1.6664-2(c)(3)) 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, but chose not to file the election; or

(iii) uses hindsight in requesting relief.

If specific facts have changed since the original deadline that make the election
advantageous to a taxpayer, the Service will not ordinarily grant relief.

Section 301.9100-3(c)(1) provides that the Commissioner will grant a reasonable
extension of time only when the interests of the Government will not be prejudiced by
the granting of relief. Section 301.9100-3(c)(1)(i) provides, in part, that the interests of
the government are prejudiced if granting relief would result in the taxpayer having a

PLR-135799-18                                 5


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). Section 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 section 6501(a) before the taxpayer’s receipt of a ruling granting
relief.

                                        ANALYSIS

Taxpayer's election is a regulatory election, as defined under section 301.9100-1(b),
because the due date of the election is prescribed in Rev. Proc. 2015-13. The
Commissioner has the authority under sections 301.9100-1 and 301.9100-3 to grant an
extension of time to file a late regulatory election.

Taxpayer in this case has represented that it requested relief before the failure to make
the regulatory election was discovered by the Service and that it reasonably relied on its
internal qualified tax professionals, and the tax professionals failed to make, or advise
Taxpayer to make, the election. Thus, under sections 301.9100-3(b)(1)(i) and (v),
Taxpayer will be deemed to have acted reasonably and in good faith. Taxpayer has
also represented that none of the circumstances listed in section 301.9100-3(b)(3)
apply.

Based on the facts of the case Taxpayer provided, granting an extension of time to file
the election will not prejudice the interests of the government under section 301.9100-
3(c)(1). Taxpayer has represented that granting relief would not result in a lower tax
liability in the aggregate for all taxable years affected by the election than Taxpayer
would have had if the election had been timely made (taking into account the time value
of money). Furthermore, Taxpayer has represented that the taxable year in which the
regulatory election should have been made and any taxable years that would have been
affected had it been timely made, are not closed by the period of assessment.

                                      CONCLUSION

In the present situation, the requirements of sections 301.9100-1 and 301.9100-3 of the
Procedure and Administration Regulations have been satisfied. The information and
representations made by Taxpayer establish that Taxpayer acted reasonably and in
good faith. Furthermore, granting an extension will not prejudice the interests of the
Government under section 301.9100-3(c)(1). Accordingly, Taxpayer is granted an
extension of time until 60 days following the date of this ruling to file an amended return
for Taxable Year that includes its original Form 3115 requesting to change its method of

PLR-135799-18                                  6


accounting for depreciation under section 168 of the Code.

The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the request for rulings, it is subject to verification on examination.

Except as expressly provided herein, no opinion is expressed or implied concerning the
federal income tax consequences of any aspect of any transaction or item discussed or
referenced in this ruling including whether Taxpayer’s Form 3115 proposes a
permissible method.

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.

A copy of this ruling must be attached to any 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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative. Enclosed is a copy of the letter ruling
showing the deletions proposed to be made in the letter when it is disclosed under
Section 6110 of the Code.

                                       Sincerely,



                                       Jamie J. Kim
                                       Senior Technician Reviewer, Branch 3
                                       (Income Tax & Accounting)



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