Taxpayer received 45 days to file a duplicate Form 3115

Plain-English summary

An S corporation timely attached an original Form 3115 to its federal return for two accounting method changes affecting its QSub subsidiary. Its accounting firm was also supposed to send the required duplicate to the IRS, but an internal miscommunication prevented that filing. The firm discovered the mistake within days, and the taxpayer promptly requested relief under Treasury Regulation section 301.9100-3. The IRS concluded that the relief standards were satisfied and granted 45 days to file the duplicate copy. The ruling did not approve the underlying accounting method changes or decide whether both changes could appear on one Form 3115.

Ruling snapshot

• Question: May the taxpayer file the required duplicate copy of Form 3115 after the deadline when the original was timely attached to its return?
• Outcome: approved (the duplicate had to be filed within 45 days)
• Key authorities: Treas. Reg. §§ 301.9100-1 through 301.9100-3; Treas. Reg. § 1.446-1(e); Rev. Proc. 2015-13

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202018001 Third Party Communication: None
Release Date: 5/1/2020 Date of Communication: Not Applicable
Index Number: 9100.00-00
Person To Contact:
---------------------------- ---------------------------, ID No. ------------
---------------------- Telephone Number:
---------------------------- --------------------
Refer Reply To:
Attn: ------------------------------------ CC:ITA:B06
PLR-100304-20
Date:
January 24, 2020

LEGEND

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

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

Accounting Firm = --------------------------

Tax Year = -------

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

This letter is in reply to a request for a private letter ruling made by Taxpayer. Taxpayer
requests an extension of time under sections 301.9100-1(c) and 301.9100-3 of the
Procedure and Administration Regulations to file Form 3115, Application For Change in
Accounting Method, for Tax Year on behalf of Applicant.

                                             FACTS

Taxpayer is a domestic S corporation which wholly owns Applicant, a qualified
subchapter S subsidiary. Taxpayer files a Form 1120-S, U.S. Income Tax Return for an
S Corporation. Taxpayer and Applicant use an accrual method of accounting and have
a 52-53-week tax year that ends on the last Saturday in December.

Taxpayer retained the services of Accounting Firm to review Applicant’s present
methods of accounting under section 263A of the Internal Revenue Code for the Tax
Year Federal tax return. Accounting Firm determined that two accounting method
changes should be made and that these could be implemented via the automatic
PLR-100304-20 2

change procedures set forth in Rev. Proc. 2015-13, 2013-5 I.R.B. 419. Accounting Firm
accordingly prepared the two automatic accounting method changes requests for Tax
Year. These two changes are:

A change in Applicant’s method of “identifying and allocating costs under Section 263A
and a change to comply with the new definition of Section 471 costs under [section]
1.263A-1(d)(2)” of the Income Tax Regulations.

A change in Applicant’s method to “recharacterize certain costs presently treated as
additional Section 263A costs as Section 471 costs as defined by [section] 1.263A-
1(d)(2)”.

Taxpayer prepared and timely filed its Federal income tax return for Tax Year. Included
in this filing, was the original Form 3115 that included both accounting method changes.
Also, the accounting method changes were reflected on the Federal income tax return
filed for Tax Year. Accounting Firm “represented to” Taxpayer that it would file the
duplicate copy of Form 3115 with the appropriate office at the Internal Revenue Service
(IRS). However, the required copy of Form 3115 was not filed due to an “internal
miscommunication” among Accounting Firm personnel.

Accounting Firm discovered the mistake within days and informed Taxpayer. Shortly
thereafter, Taxpayer engaged Accounting Firm to file this request for an extension of
time under sections 301.9100-1(c) and 301.9100-3.

                            RULINGS REQUESTED

Taxpayer requests an extension of time for filing the copy of the original Form 3115,
which was attached to Taxpayer’s Federal income tax return for Tax Year under
sections 301.9100-1(c) and 301.9100-3.

                             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 set forth in sections 301.9100-2 and
301.9100-3 to make certain regulatory elections. Section 301.9100-1(b) defines a
regulatory election as an election whose due date is 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 section 301.9100-2.

The requested accounting method changes are regulatory elections as defined under
section 301.9100-1(b) because the due date of the changes are prescribed in section
PLR-100304-20 3

1.446-1(e) and Section 6.03(3)(a) of Rev. Proc. 2015 -13, 2013-5 I.R.B. 419.
Taxpayer’s request must be analyzed under the requirements of section 301.9100-3
because the automatic provisions of section 301.9100-2 are not applicable.

Requests for relief under section 301.9100-3 will be granted when a taxpayer provides
evidence to establish to the satisfaction of the Commissioner (1) that the taxpayer acted
reasonably and in good faith, and (2) that granting relief will not prejudice the interest of
the government. See section 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 section 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). The
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, section 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 be 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 section 6501(a) before the taxpayer’s receipt of a ruling granting relief under this
section.
PLR-100304-20 4

                                   CONCLUSION

On the basis of Taxpayer’s representations, we conclude that the requirements of
sections 301.9100-1(c) and 301.9100-3 have been satisfied. Accordingly, we hereby
grant an extension of time for Taxpayer to file the copy of Form 3115. 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 Form 3115 late. We have no opinion as to whether any of the accounting method
changes discussed in this private letter ruling can be implemented via the automatic
change procedures set forth in Rev. Proc. 2015-13 or whether the changes should be
approved by a director in connection with the examination of Taxpayer’s Federal income
tax return. Furthermore, we have no opinion whether both accounting changes may be
implemented on only one Form 3115. If applicable, this relief under sections 301.9100-
1(c) and 301.9100-3, is disregarded for purposes of determining the amounts of all
section 965 elements of all United States shareholders of Taxpayer if the relief
otherwise would change the amount of any section 965 element of any such United
States shareholder. See section 1.965-4(c)(1). The rulings contained in this letter are
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 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,


                                   Cheryl L. Oseekey
                                   Senior Counsel, Branch 6
                                   Office of Associate Chief Counsel
                                   (Income Tax & Accounting)