Late original Form 3115 received a 45-day filing extension

Plain-English summary

A corporation joining a consolidated group needed to change from the cash method to an accrual method. Its CPA timely filed the duplicate Form 3115 with the IRS, but a software problem delayed both the consolidated return and the original Form 3115 that should have been attached to it. The IRS found that the requirements for discretionary filing relief were met and granted 45 days to file an identical original Form 3115 with an amended consolidated return. The ruling did not decide whether the accounting-method change qualified for automatic consent. It also did not extend the return's filing deadline, so any otherwise applicable late-return penalties and interest remained in place.

Ruling snapshot

• Question: Could the consolidated group receive extra time to file the original Form 3115 after its CPA timely filed only the duplicate?
• Outcome: approved, with 45 days to file the original with an amended return
• Key authorities: IRC § 446(e); Treas. Reg. §§ 301.9100-1, 301.9100-3; Rev. Proc. 2015-13; Rev. Proc. 2018-31

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201931002                                              Third Party Communication: None
Release Date: 8/2/2019                                         Date of Communication: Not Applicable
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-106399-19
                                                               Date:
                                                               May 7, 2019




Legend

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

Applicant         =         -----------------------------------------------
----------------------------------------------------

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

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

Date B            =        --------------------------

Year 1            =        -------

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

This ruling responds to a recent letter that was submitted by Taxpayer’s representative,
CPA. CPA has requested that the Commissioner of Internal Revenue give Taxpayer an
extension of time pursuant to §§ 301.9100-1 and 301.9100-3 of the Procedure and
Administration Regulations to file the original of a Form 3115, Application for Change in
Accounting Method, on behalf of Applicant. Taxpayer 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-106399-19                                2

                                           FACTS

Taxpayer represents the following facts:

Applicant is a corporation. Prior to Year 1, it used the cash receipts and disbursements
method of accounting (cash method). In Year 1, Applicant was acquired by Taxpayer,
also a corporation, and ceased to qualify as a qualified personal service corporation, as
defined in § 448 of the Internal Revenue Code. After the acquisition, Applicant became
a member of the “consolidated group” of which Taxpayer is the parent. Taxpayer
engaged CPA to prepare and file a consolidated return, as defined in § 1501, for its
consolidated group. CPA was also engaged to prepare a Form 3115 to change
Applicant’s method of accounting from the cash method to an accrual method, using the
automatic consent procedures of Rev. Proc. 2015-13, and Rev. Proc. 2018-31, 2018-22
I.R.B. 637.

Taxpayer timely filed Form 7004, Application for Automatic Extension of Time to File
Certain Business Income Tax, Information, and Other Returns, which provided
Taxpayer an extension until Date A to file its consolidated return for Year 1.

In completing its duties, CPA filed the duplicate copy of the Form 3115 with the
appropriate office of the Internal Revenue Service on Date A. See section 6.03(1)(a)(i)
of Rev. Proc. 2015-13. However, CPA failed to file both Taxpayer’s consolidated return,
and the required-to-be-attached original of Taxpayer’s Form 3115, on or before Date A
due to a problem with CPA’s return filing computer software. CPA filed the return with
the original of the Form 3115 on Date B, after the software problem was resolved. The
consolidated return was filed on a basis consistent with Applicant’s method change
having been properly implemented. CPA subsequently submitted this request for an
extension of time to file the original of Taxpayer’s Form 3115.

                                RULING REQUESTED

Taxpayer requests an extension of time pursuant to §§ 301.9100-1 and 301.9100-3 to
file the original Form 3115 required by Rev. Proc. 2015-13 in order to change
Applicant’s overall method of accounting for Year 1 from the cash method to an accrual
method.

                                 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) and the Income Tax
Regulations thereunder.
PLR-106399-19                                3

Section 6.03(1)(a)(i) of Rev. Proc. 2015-13 provides that a taxpayer changing an
accounting method pursuant to 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 Internal
Revenue 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 301.9100-1(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 this case.
Accordingly, Taxpayer is granted 45 calendar days from the date of this letter to file the
required original of the Form 3115 (identical to the duplicate copy already filed with the
Service) changing Applicant’s overall method of accounting for Year 1 with an amended
consolidated return for that year. Please attach a copy of this letter ruling to the
amended return.

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 whether the accounting method change Taxpayer has attempted
to make on behalf of Applicant is eligible to be made under the automatic consent
procedures of Rev. Proc. 2015-13 and Rev. Proc. 2018-31, or whether Taxpayer
otherwise meets the requirements of Rev. Proc. 2015-13 to make accounting method
changes using Rev. Proc. 2015-13. We express no opinion regarding Applicant’s
accounting method for any specific items of income or expense under the proposed
accrual method. Lastly, we emphasize that this letter ruling does not grant any
extension of time for the filing of Taxpayer’s consolidated return for Year 1. Taxpayer is
PLR-106399-19                                 4

subject to any appropriate penalty and interest resulting from its failure to have its tax
return timely filed.

The ruling contained in this letter ruling is based upon facts and representations
submitted by CPA on behalf of itself, Taxpayer, and Applicant, 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 Taxpayer. 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 our office, we will send a copy of
this letter to Taxpayer’s authorized representative.


                                       Sincerely,



                                       Cheryl L. Oseekey
                                       Senior Counsel, Branch 6
                                       (Income Tax & Accounting)



Enc.: Copy for § 6110 purposes


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