Extension to file the original Form 3115 for an accounting-method change treated as timely

Plain-English summary

A corporate parent filing a consolidated return wanted to change how its group
depreciates certain qualified improvement property under § 168, an automatic
accounting-method change. Under the automatic-change rules (Rev. Proc. 2015-13),
the signed original Form 3115 must be attached to a timely filed return. Because of
an extraordinary series of events, the parent never filed its Form 7004 extension,
so its return (and the attached Form 3115) was late, breaking the "timely filed"
requirement. The parent asked the IRS for relief under Treasury Regulation
§ 301.9100-3 to treat the original Form 3115 as timely filed. The IRS granted the
extension, so the Form 3115 filed with the late consolidated return is considered
timely. The ruling is narrow: it does not decide whether the method change actually
qualifies for the automatic procedures, whether the property is qualified improvement
property, and it does not extend the deadline for the Form 7004 or Form 1120 themselves.

Ruling snapshot

• Question: May a taxpayer get a § 301.9100-3 extension to treat a late-filed original Form 3115 (accounting-method change) as timely?
• Outcome: Approved
• Key authorities: IRC § 446(e); Treas. Reg. §§ 301.9100-3, 1.446-1; Rev. Proc. 2015-13

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202214005 Third Party Communication: None
Release Date: 4/8/2022 Date of Communication: Not Applicable
Index Number: 9100.10-00
Person To Contact:
------------------, ID No. -----------------
Telephone Number:
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Refer Reply To:
CC:ITA:B07

                                                      PLR-115076-21

                                                      Date:

                                                      January 07, 2022

Re: Request for extension of time to file the original Form 3115, Application for Change
in Accounting Method

Legend

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PLR-115076-21 2

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

    This letter responds to a letter dated July 21, 2021, and subsequent

correspondence, submitted by Parent on behalf of itself and its subsidiaries, Sub1,
Sub2, Sub3, Sub4, Sub5, Sub6, Sub7, Sub8, and Sub9 (the "subsidiaries").
Hereinafter, Parent and the subsidiaries will be collectively referred to as "Taxpayer". In
that letter, Parent requests the consent of the Commissioner of Internal Revenue
(Commissioner) to grant an extension of time pursuant to §§ 301.9100-1 and 301.9100-
3 of the Procedure and Administration Regulations to file the original Form 3115,
Application for Change in Accounting Method, for Taxpayer. Parent should have filed
the original Form 3115 pursuant to section 6.03(1)(a)(i)(A) of Rev. Proc. 2015-13, 2015-
5 I.R.B. 419, 432, on behalf of Taxpayer, beginning for the taxable year beginning
Date1, and ended Date2. This letter ruling is being issued electronically as permissible
under section 7.02(5) of Rev. Proc. 2021-1, 2021-1 I.R.B. 1, 33.

                                            FACTS

    Parent represents that the facts are as follows:

  Parent, a C Corporation, files a Form 1120, U.S. Corporation Income Tax Return,

on behalf of Taxpayer on a calendar-year basis. Taxpayer's overall method of
accounting is an accrual method.

    Beginning for the taxable year beginning Date1, Parent wanted to change

Taxpayer's method of accounting for depreciation of certain qualified improvement
property under § 168 of the Internal Revenue Code. Parent believes that this change in
method 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 original, signed Form 3115, reflecting
the desired accounting method change, and attached this original to Parent's timely-
filed consolidated federal income tax return for the taxable year beginning Date1.

    Further, in accord with the automatic change procedures of Rev. Proc. 2015-13,

a copy of the original Form 3115, with an original signature or a 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, should have reflected this accounting method
change made by Taxpayer.

    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 such 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. However,
PLR-115076-21 3

due to an extraordinary series of events, Parent failed to timely 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.

    Parent was unaware that its Form 7004 had not been filed at the time it filed its

consolidated federal income tax return for the taxable year beginning Date1, and ended
Date2. Subsequently, Parent received a notice from the IRS regarding the late filing of
a Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign
Corporations, with respect to one of Parent's nonconsolidated affiliates. This notice
stated that because no Form 7004 had been filed, Parent's federal income tax return for
this nonconsolidated affiliate for the taxable year beginning Date1, was late and, as a
result, the Form 5471 that had been filed with it was also late. Parent, upon receiving
this notice, realized that the Form 7004 for its consolidated federal income tax return
had also not been processed properly. Parent then promptly filed this request to obtain
an extension of time pursuant to §§ 301.9100-1 and 301.9100-3 to file Taxpayer's
original Form 3115.

   As a result of Parent's failure to timely file Form 7004 for the taxable year

beginning Date1, and ended Date2, the original Form 3115 was not attached to a
timely-filed federal income tax return for that taxable year as required by section
6.03(1)(a)(i) of Rev. Proc. 2015-13.

  Parent filed the signed duplicate copy of the Form 3115 at issue with the Ogden,

Utah office of the IRS on Date5, which is before Date4.

    Parent filed its consolidated federal income tax return for the taxable year

beginning Date1, and ended Date2, on Date5, which is before Date4. Parent attached
to this filed return the original of the Form 3115 at issue. The filed return also fully
reflects the accounting method change made by Taxpayer, including the necessary
adjustments under § 481(a).

                                RULING REQUESTED

  Accordingly, Taxpayer requests an extension of time pursuant to §§ 301.9100-1

and 301.9100-3 to file the original Form 3115 for the taxable year ended Date2.

                                 LAW AND ANALYSIS

   Rev. Proc. 2015-13, as clarified and modified by Rev. Proc. 2015-33, and as

modified by Rev. Proc. 2021-34, by Rev. Proc. 2021-26, by Rev. Proc. 2017-59, and by
section 17.02(b) and (c) 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 this revenue procedure
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
PLR-115076-21 4

section 6.03 of Rev. Proc. 2015-13, has obtained the consent of the Commissioner 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).

                                     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 file the required original of the Form 3115
changing Taxpayer's method of accounting, beginning for the taxable year beginning
Date1, and ended Date2.

   In this regard, we will consider the filing of the original Form 3115 with Parent's

consolidated federal income tax return for the taxable year beginning Date1, and ended
Date2, that was filed on Date5, to be timely made.
PLR-115076-21 5

   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 change Taxpayer has made is eligible to be made under the
automatic change procedures of Rev. Proc. 2015-13 or under Rev. Proc. 2019-43,
2019-48 I.R.B. 1107; (2) Taxpayer otherwise meets the requirements of Rev. Proc.
2015-13 to make the accounting method changes using the automatic change
procedures of Rev. Proc. 2015-13; or (3) any item of depreciable property that is subject
to the Form 3115 at issue is qualified improvement property as defined in § 168(e)(6).

   Further, this letter ruling does not grant any extension of time for the filing of

Parent's Form 7004 or its Form 1120 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 the taxpayer requesting it. Section 6110(k)(3)

provides that it may not be used or cited as precedent.

    In accordance with the power of attorney, we are sending a copy of this letter

ruling to Parent's authorized representatives. We are also sending a copy of this letter
ruling to the appropriate IRS operating division official.

                                      Sincerely,

                                      Charles J. Magee

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

Enclosures (2):

copy of this letter
copy for section 6110 purposes

cc: