IRS grants 60 days to file an omitted duplicate Form 3115

Plain-English summary

A taxpayer timely filed its federal return with the original Form 3115 requesting an automatic change to the cash method of accounting. The return reflected the requested method, but an administrative oversight caused the required duplicate copy of Form 3115 not to be filed with the appropriate IRS office. The accounting firm discovered the omission and promptly sought relief. The IRS concluded that the regulatory-election relief requirements were satisfied and granted 60 days to file the missing copy. The late-filed copy had to be identical to the original, and the ruling did not decide whether the accounting-method change qualified for automatic procedures or whether the proposed cash method was proper for particular items.

Ruling snapshot

• Question: Could the taxpayer receive more time to file the required duplicate copy of a timely submitted Form 3115?
• Outcome: approved (the taxpayer received 60 days to file an identical duplicate)
• Key authorities: IRC §§ 446, 6501(a), 6662; Treas. Reg. §§ 1.446-1(e), 301.9100-1, 301.9100-3; Rev. Proc. 2015-13

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

 Number: 202024011                                             Third Party Communication: None
 Release Date: 6/12/2020                                       Date of Communication: Not Applicable
 Index Number: 9100.00-00
                                                               Person To Contact:
 -------------------------------------                         ---------------, ID No. -----------------
 ---------------------                                         Telephone Number:
 -------------------------------------------                   --------------------
                                                               Refer Reply To:
 Attn: -------------------                                     CC:ITA:B6
 -------------------                                           PLR-128189-19
                                                               Date:
 --------------------                                          March 12, 2020




LEGEND:

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

Tax Year                  =        ---------------------------------------------------------

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

Date                      =        -----------------------



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

This letter is in reply to a private letter ruling request for an extension of time under
§§ 301.9100-1(c) and 301.9100-3 of the Procedure and Administration Regulations
(Regulations) to file a copy of a Form 3115, Application for Change in Accounting
Method, for Tax Year.

                                                    FACTS

Taxpayer makes the following representations:

Taxpayer states that it timely filed its Federal income tax return for Tax Year, along with
the signed, original Form 3115 requesting an accounting method change to the overall
cash receipts and disbursements accounting method (cash method) under section
PLR-128189-19
                                                2
15.18 of Rev. Proc. 2018-31, 2018-22 I.R.B. 637, as modified by Rev. Proc. 2018-40,
2018-34 I.R.B. 320. However, as a result of an administrative oversight, Taxpayer
failed to file the duplicate copy of the Form 3115, as required. See Rev. Proc. 2019-1,
2019-1 I.R.B. 1.

Taxpayer engaged Accounting Firm to prepare and file its Federal income tax return
along with the Form 3115 to change to the cash method for Tax Year. Taxpayer, with
the assistance of Accounting Firm, electronically filed Taxpayer’s Federal income tax
return and the original Form 3115 for Tax Year. The accounting method change to the
cash method was reflected on the Federal income tax return filed by Taxpayer for Tax
Year.

On or about Date, Accounting Firm discovered that the duplicate copy of the Form 3115
had not been filed for Tax Year. Upon discovery of this oversight, Accounting Firm
notified Taxpayer and immediately underwent the process to request an extension of
time under §§ 301.9100-1(c) and 301.9100-3.

                                  RULING REQUESTED

Taxpayer requests an extension of time under §§ 301.9100-1(c) and 301.9100-3 for
filing with the appropriate IRS office the Form 3115 copy, of which the original was
attached to Taxpayer’s Federal income tax return filed for Tax 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 §§ 301.9100-1(c) and 301.9100-3 to
make certain regulatory elections. Section 301.9100-1(b) 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 (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 (1) that the taxpayer acted
reasonably and in good faith, and (2) that granting relief will not prejudice the interest of
the government. See § 301.9100-3(a).
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                                                3

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 of the Internal
Revenue Code (Code) 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). Also, 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 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 § 6501(a)
before the taxpayer’s receipt of a ruling granting relief under this section.

                                      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 60 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. This copy must be identical to the signed, original Form 3115
filed with Taxpayer’s Federal income tax return for Tax Year. We have no opinion as to
PLR-128189-19
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whether the accounting method change discussed in this private letter ruling can be
implemented through the automatic change procedures in Rev. Proc. 2015-13 or
whether the change should be approved by a director in connection with the
examination of Taxpayer’s Federal income tax return. We express no opinion regarding
Taxpayer’s accounting method for any specific items of income or expense under the
proposed cash method. 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 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,



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


Enclosure:

Copy for § 6110 purposes

cc: