Extension of time for a life insurance company to file a late copy of its accounting-method-change form

Plain-English summary

A life insurance company filed an automatic accounting-method change with
its tax return, attaching the original Form 3115 (Application for Change
in Accounting Method) to the return. Through administrative oversight, it
never sent the required duplicate copy to the separate IRS office where
that copy is supposed to go. The company asked the IRS for more time
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 copy. The ruling only permits the late filing of
the copy; it does not decide whether the underlying method change (moving
reserve computations under section 807) is proper. This is a routine
result that cures a paperwork slip which could otherwise invalidate the
method change, 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 copy of its
  Form 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; 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: 202237006                                              Third Party Communication: None
 Release Date: 9/16/2022                                        Date of Communication: Not Applicable
 Index Number: 9100.10-01
                                                                Person To Contact:
 -------------------------                                      -------------------------------, ID No. -----------
 --------------------------                                     -----------------
 -----------------------------------------                      Telephone Number:
 --------------------------------------                         --------------------
 --------------------------------------                         Refer Reply To:
                                                                CC:FIP:B04
                                                                PLR-125439-21
                                                                Date:
                                                                June 17, 2022

 Taxpayer                 =   [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 to file a copy of a Form 3115, Application for Change in Accounting
Method, for Taxable Year. This letter ruling is being issued electronically in accordance
with section 7 of Rev. Proc. 2021-1, 2021-1 I.R.B. 1. A paper copy will not be mailed to
Taxpayer.

FACTS

Taxpayer makes the following representations:

Taxpayer is a life insurance company that uses an overall accrual method of accounting
for federal income tax purposes.

Taxpayer engaged Accounting Firm to prepare federal and state income tax returns for
Taxable Year. Taxpayer also engaged Accounting Firm to prepare a Form 3115 for an
accounting method change 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 of the Internal Revenue Code ("Code") provided
in section 26.04 of Rev. Proc. 2019-43, 2019-48 I.R.B. 1107, 1203.

Taxpayer timely filed its federal income tax return on Form 1120-L, US Life Insurance
Company Income Tax Return, for Taxable Year on Date A. Taxpayer attached the
original Form 3115 to its return, but due to administrative oversight, failed to file a copy
of the Form 3115 with the appropriate office at the Internal Revenue Service ("IRS").

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

RULING REQUESTED

Taxpayer requests an extension of time under §§ 301.9100-1(c) and 301.9100-3 to file
a copy of its Form 3115, which was attached to Taxpayer's federal income tax return
filed 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) provides that an election includes a
request to change an accounting method, and 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 change is a regulatory election as defined under
§ 301.9100-1(b) because the due date of the change is prescribed in § 1.446-1(e) of the
Income Tax Regulations 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.

Section 301.9100-3(c)(2) imposes special rules for accounting method regulatory
elections. This section provides that the interests of the government are deemed to be
prejudiced except in unusual and compelling circumstances if the accounting method
regulatory election for which relief is requested: (i) is subject to the procedure described
in § 1.446-1(e)(3)(i) (requiring the advance written consent of the Commissioner); (ii)
requires an adjustment under § 481(a) (or would require an adjustment under § 481(a) if
the taxpayer changed to the method of accounting for which relief is requested in a
taxable year subsequent to the taxable year the election should have been made); (iii)
would permit a change from an impermissible method of accounting that is an issue
under consideration by examination, an appeals office, or a federal court and the
change would provide a more favorable method or more favorable terms and conditions
than if the change were made as part of an examination; or (iv) provides a more
favorable method of accounting or more favorable terms and conditions if the election is
made by a certain date or taxable year.

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 a copy of the Form 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 a copy
of the Form 3115 late. We express no opinion as to whether the accounting method
change 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 copy of the Form
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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