Late duplicate Forms 3115 accepted

Plain-English summary

A consolidated corporate group implemented three accounting method changes involving depreciation, advance payments, and the remodel-refresh safe harbor. Its accounting firm attached the original Forms 3115 to the timely electronic return, and the return reflected the changes, but the firm unintentionally failed to send the required duplicate copies to the designated IRS office. The taxpayer discovered the omission a few months later and promptly requested relief. The IRS granted 45 days to file the copies. It did not decide whether the changes qualified for automatic procedures or otherwise should be approved on examination.

Ruling snapshot

• Question: Could the taxpayer file required copies of three Forms 3115 after the deadline?
• Outcome: Approved, with the copies due within 45 days.
• Key authorities: Treas. Reg. §§ 1.446-1(e) and 301.9100-1 through 301.9100-3; Rev. Proc. 2015-13.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201946010 [Third Party Communication:
Release Date: 11/15/2019 Date of Communication: Month DD, YYYY]
Index Number: 9100.00-00
Person To Contact:
------------------------- ---------------------------, ID No. -----------
-------------------------------- Telephone Number:
--------------------------- --------------------
Refer Reply To:
-------------------------- CC:ITA:B06
------------------------------------------------------------ PLR-110677-19
-- Date:
August 15, 2019

LEGEND

Taxpayer = -----------------------.
----------------------

Applicant 1 = ------------------------------------

Applicant 2 = --------------------------------------------

Accounting Firm = ---------------

Tax Year = ------

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

This letter is in reply to a request for a private letter ruling made by Taxpayer on behalf
of itself and Applicants 1 and 2. Taxpayer requests an extension of time under sections
301.9100-1(c) and 301.9100-3 of the Procedure and Administration Regulations to file
Forms 3115, Application For Change in Accounting Method, for Tax Year.

                                                 FACTS

Taxpayer and its subsidiaries, Applicants 1 and 2, file Federal consolidated income tax
returns. These returns are filed on a calendar year basis.
PLR-110677-19
2
Taxpayer retained the services of Accounting Firm to assist in preparing its Federal
consolidated tax return for Tax Year. While this return was being prepared, Taxpayer
decided to implement three accounting method changes. Accounting Firm determined
that all three accounting method changes could be implemented via the automatic
change procedures set forth in Rev. Proc. 2015-13, 2013-5 I.R.B. 419. The firm
accordingly helped Taxpayer prepare the three automatic accounting method changes
requests for Tax Year. These three changes are:

To change Applicant 1 and Applicant 2’s depreciation of “certain tangible property and
computer software” from impermissible methods to permissible accounting methods
under Section 6.01 of Rev. Proc. 2018-31, 2018-22 I.R.B. 637.

To change the accounting method used by Applicant 1 to recognize income for advance
payments provided under Section 5.02(2) of Rev. Proc. 2004-34, 2004-22 I.R.B. 991
and under Section 16.07 of Rev. Proc. 2018-31.

To change the accounting method used by Applicant 2 relating to its election of the
“remodel-refresh safe harbor” provided by Section 5.02 of Rev. Proc. 2015-56, 2015-49
I.R.B. 827 under Section 11.10 of Rev. Proc. 2018-31.

With the authorization of Taxpayer, Accounting Firm timely electronically filed
Taxpayer’s Federal consolidated income tax return for Tax Year. Included in this filing,
were the three original Forms 3115. Also, the three accounting method changes were
reflected on the consolidated return filed for Tax Year. However, the required copies of
the Forms 3115 were not filed with the appropriate office at the Internal Revenue
Service (IRS) due to “an unintentional error.”

Taxpayer represents that it was a few months after Accounting Firm filed its Federal
consolidated income tax return for Tax Year that it discovered the failure to submit
copies of the three Forms 3115 to the appropriate office of the IRS. It also represents
that it engaged Accounting Firm to quickly file this request for an extension of time
under sections 301.9100-1(c) and 301.9100-3.

                            RULINGS REQUESTED

Taxpayer requests an extension of time for filing the copies of the three original Forms
3115, which were attached to Taxpayer’s Federal consolidated income tax return for
Tax Year under sections 301.9100-1(c) and 301.9100-3.

                             LAW AND ANALYSIS

Section 301.9100-1(c) provides that the Commissioner has the discretion to grant a
reasonable extension of time under the rules set forth in sections 301.9100-2 and
301.9100-3 to make certain regulatory elections. Section 301.9100-1(b) defines a
regulatory election as an election whose due date is prescribed by regulations published
PLR-110677-19
3
in the Federal Register, or in a revenue ruling, revenue procedure, notice, or
announcement published in the Internal Revenue Bulletin.

Section 301.9100-2 provides for automatic extensions of time for making certain
elections. Section 301.9100-3 provides for extensions of time for making elections that
do not meet the requirements of section 301.9100-2.

The requested accounting method changes are regulatory elections as defined under
section 301.9100-1(b) because the due date of the changes are prescribed in section
1.446-1(e) of the Income Tax Regulations and Section 6.03(3)(a) of Rev. Proc. 2015 -

13. Taxpayer’s request must be analyzed under the requirements of section 301.9100-
    3 because the automatic provisions of section 301.9100-2 are not applicable.

Requests for relief under section 301.9100-3 will be granted when a taxpayer provides
evidence to establish to the satisfaction of the Commissioner (1) that the taxpayer acted
reasonably and in good faith, and (2) that granting relief will not prejudice the interest of
the government. See section 301.9100-3(a).

Section 301.9100-3(b)(1) provides that a taxpayer is deemed to have acted reasonably
and in good faith if the taxpayer: (i) requests relief before the failure to make a
regulatory election is discovered by the IRS; (ii) failed to make the election because of
intervening events beyond the taxpayer’s control; (iii) failed to make the election
because, after exercising reasonable diligence, the taxpayer was unaware of the
necessity of the election; (iv) reasonably relied on written advice of the IRS; 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.

Section 301.9100-3(b)(3) provides that a taxpayer is deemed not 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 of the
Internal Revenue Code at the time the taxpayer requests relief 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 and chose
not to file the election; or (iii) uses hindsight in requesting relief.

Section 301.9100-3(c)(i) provides, that the interests of the government are prejudiced if
granting relief would result in the taxpayer having a 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). The
section also provides that, if the tax consequences of more than one taxpayer are
affected by the election, the government’s interests are prejudiced if extending the time
for making the election may result in the affected taxpayers, in the aggregate, having a
lower tax liability than if the election had been timely made
PLR-110677-19
4
Further, 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 be 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 under this
section.

                                   CONCLUSION

On the basis of Taxpayer’s representations, we conclude that the requirements of
sections 301.9100-1(c) and 301.9100-3 have been satisfied. Accordingly, we hereby
grant an extension of time for Taxpayer to file copies of the three Forms 3115. This
extension shall be for a period of 45 days from the date of this ruling.

Except as expressly set forth above, this office neither expresses nor implies any
opinion concerning any tax consequences of the facts described above under any other
provision of the Code or regulations. This ruling merely permits Taxpayer to file copies
of Form 3115 late. We have no opinion as to whether any of the three accounting
method changes discussed in this private letter ruling can be implemented via the
automatic change procedures set forth in Rev. Proc. 2015-13 or whether the changes
should be approved by a director in connection with the examination of Taxpayer’s
Federal consolidated income tax returns. The rulings contained in this letter are based
upon information and representations submitted by 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 this request for an extension of time
to file the required copies of the three Forms 3115, all material is subject to verification
on examination.

This ruling is directed only to Taxpayer who requested it. 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 this office, a copy of this letter is
being sent to each of Taxpayer’s authorized representatives.

                                   Sincerely,



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