Taxpayers received 45 days to file a duplicate Form 3115

Plain-English summary

A married couple changed the accounting methods of a wholly owned disregarded entity and filed the original Form 3115 with their timely return. Their accounting firm failed to mail the required duplicate copy on the same day because a staff member did not reach the post office before it closed. The firm mailed the copy the next day and promptly sought relief. The IRS found the Section 301.9100-3 standards satisfied and granted 45 days to file a duplicate identical to the original. The ruling did not decide whether either accounting-method change qualified for automatic consent or whether the proposed methods were otherwise correct.

Ruling snapshot

• Question: Could the taxpayers receive extra time to file the duplicate Form 3115 required for their accounting-method changes?
• Outcome: Approved, with 45 calendar days to file the duplicate.
• Key authorities: IRC § 446(e); Treas. Reg. §§ 301.9100-1 and 301.9100-3; Rev. Proc. 2015-13.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201815013 [Third Party Communication:
Release Date: 4/13/2018 Date of Communication: Month DD, YYYY]
Index Number: 9100.00-00, 9100.10-00,
9100.10-01 Person To Contact:
---------------------------, ID No. -----------
------------------------------------ Telephone Number:
------------------------------- ----------------------
---------------------------------- Refer Reply To:
CC:ITA:B06
PLR-134922-17
Date:
January 11, 2018

LEGEND

Taxpayer 1 = ------------------

Taxpayer 2 = ------------------------

Disregarded Entity = -------------------------------

CPA = -------------------------

Date A = ------------------------

Year 1 = --------

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

This ruling responds to a recent letter that was submitted by Taxpayer 1 and
Taxpayer 2’s (collectively, Taxpayers) representative, CPA. CPA has requested that
the Commissioner of Internal Revenue give Taxpayers an extension of time pursuant to
§§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to file
the duplicate copy of a Form 3115, Application for Change in Accounting Method.
Taxpayers should have filed this Form 3115, pursuant to section 6.03(1)(a)(i) of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, on or before Date A.

PLR-134922-17 2

                                      FACTS

Taxpayer 1 and Taxpayer 2 are individuals who are married and file their federal tax
returns jointly. In Year 1, Taxpayers engaged CPA to prepare and file Taxpayers’ U.S.
federal income tax return for that year.

Taxpayers decided to change the overall method of accounting, and the method of
accounting for certain advance payments received, for Disregarded Entity, which is
wholly owned by Taxpayer 1, beginning with the Year 1 taxable year. Taxpayers
wished to change the overall method of accounting from the cash receipts and
disbursements method to an accrual method, and also change to the “Deferral Method”
for those advanced payments received that qualified. Taxpayers represent that both
accounting method changes were eligible to be made using the automatic consent
procedures of Rev. Proc. 2015-13 and Rev. Proc. 2017-30, 2017-18 I.R.B. 1131.
Taxpayers also represent that they timely filed Form 7004, Application for Automatic
Extension of Time to File Certain Business Income Tax, Information, and Other Returns,
to extend the date that their Year 1 tax return was due. This provided Taxpayers an
extension until Date A to file their U.S. federal income tax return for Year 1.

In completing its duties, CPA states that it electronically filed the original Form 3115 with
the appropriate office of the Internal Revenue Service on Date A when it electronically
filed Taxpayers’ tax return. See section 6.03(1)(a)(i) of Rev. Proc. 2015-13. Taxpayers’
tax return for Year 1 used the new methods of accounting for Disregarded Entity.
However, CPA failed to file the duplicate copy of the Form 3115 on or before Date A
because a staff member of CPA was unable to reach a United States Postal Service
office before it closed on Date A. The error was known on Date A, but CPA could not
file the duplicate copy of the Form 3115 until the day after Date A. Promptly, CPA
submitted this request for an extension of time to file the duplicate copy of Taxpayers’
Form 3115.

                              RULING REQUESTED

Taxpayers request an extension of time pursuant to §§ 301.9100-1 and 301.9100-3 to
file the duplicate copy of the Form 3115 required by Rev. Proc. 2015-13 in order to
make the specified changes in method of accounting for Year 1 for Disregarded Entity.

                              LAW AND ANALYSIS

Rev. Proc. 2015-13 provides the procedures by which a taxpayer may obtain automatic
consent to change certain accounting methods. A taxpayer complying with all the
applicable provisions of this revenue procedure has obtained the consent of the
Commissioner to change its method of accounting under § 446(e) of the Internal
Revenue Code and the Income Tax Regulations thereunder.

PLR-134922-17 3

Section 6.03(1) of Rev. Proc. 2015-13 provides that a taxpayer changing an accounting
method pursuant to 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 copy (with signature) of the Form 3115 must be filed with the
appropriate office of the Service no earlier than the first day of the year of change and
no later than when the original is filed with the federal income tax return for the year of
change.

Section 301.9100(c) provides that the Commissioner has discretion to grant a
reasonable extension of time under 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 standard 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.

                                  CONCLUSION

Based solely on the representations submitted, this office concludes that the
requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied in Taxpayers’ case.
Accordingly, Taxpayers are granted 45 calendar days from the date of this letter to file
the required duplicate copy of the Form 3115 (identical to the original copy already filed
with the Service) changing the overall method of accounting to an accrual method, and
the treatment of certain revenue related to certain advance payments for Disregarded
Entity.

Except as expressly set forth above, this office neither expresses nor implies any
opinion concerning the tax consequences of the facts described above under any other
provision of the Code or regulations. Specifically, we have no opinion, either expressed
or implied, concerning (1) whether the two accounting method changes Taxpayers have
attempted to make are eligible to be made under the automatic consent procedures of
Rev. Proc. 2015-13 and Rev. Proc. 2017-30; and (2) whether Taxpayers otherwise
meet the requirements of Rev. Proc. 2015-13 to make accounting method changes
using Rev. Proc. 2015-13. Further, we express no opinion regarding Taxpayers’
accounting method for any specific items of income or expense under the proposed

PLR-134922-17 4

accrual method, or regarding the correctness of Taxpayers’ proposed method for the
treatment of certain advance payments.

The ruling contained in this letter ruling is based upon facts and representations
submitted by CPA on behalf of itself and Taxpayers, with accompanying penalties of
perjury statements executed by appropriate parties. 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 Form 3115, all material is subject to verification on examination.

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

                                   Sincerely,



                                   CHERYL L. OSEEKEY
                                   Senior Counsel, Branch 6
                                   (Income Tax & Accounting)