Late Form 1128 for calendar-year change deemed timely

Plain-English summary

A new domestic corporation decided after the deadline to change its tax year from June 30 to December 31 to better match annual revenue and expenses. It filed neither Form 1128 nor the short-period return by the original due date, but requested relief within 90 days and before the IRS discovered the omission. The corporation represented that a timely application would have qualified under Revenue Procedure 2006-45's automatic-consent procedures. The IRS found that the corporation acted reasonably and in good faith and that relief would not prejudice the government. It allowed 60 days from the ruling date to file Form 1128 and have it treated as timely, without deciding whether the requested accounting-period change substantively qualified.

Ruling snapshot

• Question: Should the corporation's late Form 1128 request to change from a June 30 tax year to a calendar year be treated as timely?
• Outcome: Approved; Form 1128 would be timely if filed with the appropriate IRS office within 60 days.
• Key authorities: IRC § 442; Treas. Reg. §§ 1.442-1(b) and 301.9100-3; Rev. Proc. 2006-45

Full text (IRS public release)

Internal Revenue Service                           Department of the Treasury
                                                   Washington, DC 20224

Number: 201604012                                  Third Party Communication: None
Release Date: 1/22/2016                            Date of Communication: Not Applicable
Index Number: 9100.09-00
                                                   Person To Contact:
                                                   -----------------, ID No. -----------------
---------------------                              Telephone Number:
------------------------------------               ---------------------
--------------------------------                   Refer Reply To:
------------------------------------------------   CC:ITA:B04
--------------------------                         PLR-121255-15
                                                   Date:
-----------------------------------------          October 21, 2015
--------------------------------

Legend

Taxpayer = --------------------------------


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

This ruling is in reference to Taxpayer’s Form 1128, Application to Adopt, Change, or
Retain a Tax Year, requesting permission to change its accounting period from a
taxable year ending June 30 to a taxable year ending December 31, effective December
31, 2014. Taxpayer has requested that the Form 1128 be considered timely filed under
the authority contained in § 301.9100-3 of the Procedure and Administration
Regulations.

Taxpayer, a domestic corporation, is currently on a taxable year ending June 30,
consistent with its majority owner. Taxpayer proposes changing its taxable year to end
December 31 for a better matching of its annual revenue and expenses. However,
Taxpayer’s final decision to change its tax year end had not been made by the due date
of the short period ending December 31 Year, owing to the newness of the entity and
certain administrative details and approvals from its shareholders. Thus, Taxpayer filed
the Form 1128 after the due date of the return for the short period (including
extensions). Further, Taxpayer did not file its federal income tax return for the short
period by the due date of the return, nor did Taxpayer request an extension of time to
file its return for the short period. Accordingly, Taxpayer is requesting 9100 relief.
Taxpayer’s 9100 relief was filed within 90 days of the original return due date and
before the failure to make the regulatory election was discovered by the Service.
Taxpayer also states that if it had timely filed its Form 1128, it would have qualified to
effectuate the change in accounting period under the automatic consent procedures of
Rev. Proc. 2006-45, 2006-2 C.B. 851.
PLR-121255-15                                2


Section 1.442-1(b) of the Income Tax Regulations provides that in order to secure the
Commissioner’s consent to a change in annual accounting period, the taxpayer must file
an application on Form 1128 with the Commissioner within such time and in such
manner as is provided in administrative procedures published by the Commissioner.

Rev. Proc. 2006-45 provides the exclusive procedures for certain corporations to obtain
automatic approval to change their annual accounting period under § 442 of the Internal
Revenue Code and § 1.442-1(b) of the Regulations. Section 7.02(2)(a) of Rev. Proc.
2006-45 provides that the Form 1128 must be filed no earlier than the day following the
end of the first effective year and no later than the due date (including extensions) for
filing the federal income tax return for the first effective year.

Section 301.9100-3(a) provides that requests for extensions of time for regulatory
elections that do not meet the requirements of § 301.9100-2 (automatic extensions),
such as the instant case, must be made under the rules of § 301.9100-3. Request for
relief subject to § 301.9100-3 will be granted when the taxpayer provides evidence to
establish that the taxpayer acted reasonably and in good faith, and that the granting of
relief will not prejudice the interests of the government.

Based on the facts and information submitted and the representations made, we
conclude that Taxpayer has acted reasonably and in good faith, and that the granting of
relief will not prejudice the interests of the government. Accordingly, Taxpayer’s late
filed Form 1128 requesting permission to change from a tax year ending June 30, to a
tax year ending December 31, effective December 31, 2014, will be deemed timely filed
if it is filed with the appropriate Internal Revenue Service office within 60 days of the
date of this letter.

Because a change in accounting period under Rev. Proc. 2006-45 is under the
jurisdiction of the Director, Internal Revenue Service Center, where the taxpayer’s
returns are filed, we return your application so that you may forward it along with a copy
of this letter to the Director. Any further communication regarding this matter should be
directed to the Service Center.

This ruling is based upon the facts, representations, and affidavits that were submitted
by Taxpayer and accompanied by a penalty of perjury statement executed by an
appropriate party. This office has not verified any of the material submitted in support of
the request for a ruling. However, as part of an examination process, the Service may
verify the factual information, representations, and other data submitted.

This ruling addresses the granting of § 301.9100-3 relief only. This ruling expresses no
opinion as to whether Taxpayer is permitted under the Code and the applicable
regulations to change to the tax year it requested in its Form 1128 or whether Taxpayer
can make the change under Rev. Proc. 2006-45.
PLR-121255-15                                 3



A copy of this letter ruling must be attached to the taxpayer’s 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.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, we are sending a copy
of this letter to your authorized representatives.

                                       Sincerely,



                                       J. Peter Baumgarten
                                       Assistant to the Branch Chief, Branch 4
                                       Office of Associate Chief Counsel
                                       (Income Tax & Accounting)


Enclosure: Copy of this letter for § 6110 purposes



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