Corporation received 45 days to file its original accounting-method change form

Plain-English summary

A corporation changed from S corporation to C corporation status and determined that it could no longer use the cash method as its overall accounting method. Its CPA prepared an automatic change to the accrual method, timely filed the corporate return, and mailed the duplicate Form 3115 to the IRS. The CPA inadvertently failed to attach the original Form 3115 to the electronically filed return, even though the return was prepared consistently with the intended method change. The IRS found that the discretionary relief requirements were satisfied and granted 45 days to file the original Form 3115 with an amended return. It did not decide whether the method change otherwise qualified for the automatic-consent procedures.

Ruling snapshot

• Question: Could the corporation file the original Form 3115 late after its CPA timely mailed the duplicate but omitted the original from the electronic return?
• Outcome: approved
• Key authorities: IRC §§ 446(e), 448(a); Treas. Reg. §§ 301.9100-1, 301.9100-3; Rev. Procs. 2015-13, 2022-14

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202420027                                              Third Party Communication: None
 Release Date: 5/17/2024                                        Date of Communication: Not Applicable
 Index Number: 9100.00-00, 9100.10-00
                                                                Person To Contact:
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                                                                PLR-121573-23
 ------------------------------------------------------------   Date:
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LEGEND

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

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

Year              =        -------

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

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



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

This ruling responds to a recent letter that was submitted by Taxpayer’s representative,
CPA. CPA has requested that the Commissioner of the Internal Revenue Service 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 Form 3115, Application for
Change in Accounting Method. 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-121573-23                                2

                                           FACTS

Taxpayer represents the following facts:

Taxpayer is a corporation. Prior to Year, Taxpayer was an S Corporation and used the
cash receipts and disbursements method (cash method) of accounting as its overall
method of accounting. In Year, Taxpayer revoked its S corporation election and
converted to C corporation status effective on the first day of Year. As a C corporation,
Taxpayer determined that it was ineligible under § 448(a) of the Internal Revenue Code
to use the cash method for its overall method of accounting.

Taxpayer engaged CPA to prepare and file its Form 1120, U.S. Corporation Income Tax
Return, for taxable year Year and to prepare and file its Form 3115, Application for
Change in Accounting Method, for taxable year Year to change Taxpayer’s overall
method of accounting to an accrual method using the automatic consent procedures of
Rev. Proc. 2015-13 and Rev. Proc. 2022-14, 2022-7 I.R.B. 502. 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 federal income tax return for Year.

In completing its duties, CPA electronically filed Taxpayer’s Form 1120 and mailed the
duplicate copy of Form 3115 to the appropriate location in Ogden, UT on Date A. See
section 6.03(1)(a)(i) of Rev. Proc. 2015-13. The return was filed on a basis consistent
with Taxpayer’s method change having been properly implemented. However, on or
around Date B, CPA discovered that, through inadvertence, it had failed to upload the
original Form 3115 to Taxpayer’s timely electronically filed Form 1120. See section
6.03(1)(a)(i)(A) of Rev. Proc. 2015-13. CPA subsequently submitted this request for an
extension of time to file Taxpayer’s original 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 to change its overall method
of accounting under § 446(e).


                                 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-121573-23                                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
original Form 3115 (identical to the duplicate copy already filed with the Internal
Revenue Service) changing Taxpayer’s overall method of accounting to an accrual
method for 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 is eligible to be made under the automatic consent procedures of Rev. Proc.
2015-13 and Rev. Proc. 2022-14, 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 Taxpayer’s accounting method for
any specific items of income or expense under the proposed accrual method.

The ruling contained in this letter ruling is based upon facts and representations
submitted by CPA on behalf of itself and Taxpayer, with accompanying penalties of
perjury statements executed by appropriate parties. While this office has not verified
PLR-121573-23                                          4

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 each of Taxpayer’s authorized representatives.


                                               Sincerely,



                                               ANNA W. GLEYSTEEN
                                               Senior Counsel, Branch 6
                                               (Income Tax & Accounting)


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