Extension of time for an insurance company to file late copies of its accounting-method-change forms

Plain-English summary

An insurance company filed automatic accounting-method changes with its
consolidated tax return, attaching the original Forms 3115 (Application
for Change in Accounting Method) to the return. Through administrative
oversight, it never sent the required duplicate copies to the separate
IRS office where those copies are supposed to go. The company asked the
IRS for more time to file the missing copies under the section 9100
relief rules, which let the IRS forgive a missed regulatory deadline
when the taxpayer acted reasonably and in good faith and the government
is not harmed. The IRS agreed, granting a 45-day extension to file the
copies. The ruling only permits the late filing of the copies; it does
not decide whether the underlying method changes (moving reserve
computations under section 807(c) and switching from life to non-life
insurance company status) are proper. This is a routine but useful
result: a paperwork slip that could otherwise invalidate the method
changes gets cured without penalty.

Ruling snapshot

• Question: May the taxpayer receive an extension of time under
  Treas. Reg. §§ 301.9100-1(c) and 301.9100-3 to file the duplicate
  copies of its Forms 3115 that it failed to submit?
• Outcome: Approved (45-day extension granted)
• Key authorities: Treas. Reg. §§ 301.9100-1(c), 301.9100-2,
  301.9100-3; IRC § 807(c); Treas. Reg. § 1.446-1(e); Rev. Proc. 2015-13;
  Rev. Proc. 2019-43

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202236008                                              Third Party Communication: None
 Release Date: 9/9/2022                                         Date of Communication: Not Applicable
 Index Number: 9100.10-01
                                                                Person To Contact:
 -------------------------                                      -------------------------------, ID No.
 --------------------------                                     -----------------------
 --------------------------------------------------------       Telephone Number:
 -------------------------------------                          --------------------
 --------------------------------------                         Refer Reply To:
                                                                CC:FIP:B04
                                                                PLR-125416-21
                                                                PLR-125417-21
                                                                Date:
                                                                June 14, 2022

 Taxpayer                 =   [redacted]
 Parent                   =   [redacted]
 Taxable Year             =   -------
 Accounting Firm          =   ----------------------
 Date A                   =   ----------------------
 Date B                   =   -----------------------

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

This letter is in reply to a private letter ruling request made by Taxpayer for an extension
of time under §§ 301.9100-1(c) and 301.9100-3 of the Procedure and Administration
Regulations ("Regulations") to file copies of its Forms 3115, Application for Change in
Accounting Method, for Taxable Year.

FACTS

Taxpayer makes the following representations:

Taxpayer is an insurance company that uses an overall accrual method of accounting
for federal income tax purposes. Taxpayer is a member of Parent's consolidated group
beginning with Taxable Year.

Taxpayer engaged Accounting Firm to prepare Taxable Year federal and state income
tax returns. Taxpayer also engaged Accounting Firm to prepare certain Forms 3115 for
accounting method changes that could be implemented via the automatic procedures
set forth in Rev. Proc. 2015-13, 2015-5 I.R.B. 419. Specifically, Taxpayer requested
consent to change its method of accounting for computing unearned premiums and
unpaid loss reserves pursuant to § 807(c) of the Internal Revenue Code ("Code")
provided by section 26.04 of Rev. Proc. 2019-43, 2019-48 I.R.B. 1107, 1203.
Additionally, Taxpayer requested consent to change its status from being taxed as a life
insurance company to a non-life insurance company pursuant to section 26.03 of Rev.
Proc. 2019-43.

Taxpayer, as part of Parent's consolidated group, timely filed its federal income tax
return on Form 1120-PC, US Property and Casualty Insurance Company Income Tax
Return, for Taxable Year on Date A. Taxpayer attached the original Forms 3115 to its
return, but due to administrative oversight, failed to file copies of the Forms 3115 with
the appropriate office at the IRS.

On Date B, Accounting Firm advised Taxpayer to file this request for an extension of
time to file copies of the Forms 3115.

RULING REQUESTED

Taxpayer requests an extension of time under §§ 301.9100-1(c) and 301.9100-3 to file
copies of its Forms 3115, which were attached to Taxpayer's federal income tax return
for Taxable Year.

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 in §§ 301.9100-2 and 301.9100-3 to make
certain regulatory elections. Section 301.9100-1(b) defines a regulatory election as an
election with a due date prescribed by regulations published 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 § 301.9100-2.

The requested accounting method changes are regulatory elections as defined under
§ 301.9100-1(b) because the due dates of the changes are prescribed in § 1.446-1(e)
and section 6.03(1)(a)(i) of Rev. Proc. 2015-13. Taxpayer's request must be analyzed
under the requirements of § 301.9100-3 because the automatic provisions of
§ 301.9100-2 are not applicable.

Requests for relief under § 301.9100-3 will be granted when a taxpayer provides
evidence to establish to the satisfaction of the Commissioner (i) that the taxpayer acted
reasonably and in good faith, and (ii) that granting relief will not prejudice the interest of
the government. See § 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 § 6662 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). This
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.

Further, § 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
§ 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
§§ 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 Forms 3115 with the appropriate IRS
office. 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 the Forms 3115 late. We express no opinion as to whether the accounting method
changes discussed in this private letter ruling should be approved by a director in
connection with the examination of Taxpayer's federal income tax return.
The ruling contained in this letter is 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 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,

                                        Rebecca L. Baxter
                                        Senior Technician Reviewer, Branch 4
                                        Office of the Associate Chief Counsel
                                        (Financial Institutions & Products)

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