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IRS Extends Time to File Forms 3115 for Some Fiscal Year Taxpayers and Tweaks Earlier Guidance.
(Parker Tax Publishing June 12, 2015)
The IRS has granted certain fiscal year taxpayers extended time to file Forms 3115 in consideration of the timing of the release of the final tangible property regulations. In addition, the IRS has made clarifying updates to earlier guidance on procedures for obtaining automatic consent for changes in accounting methods. Rev. Proc. 2015-33.
Background
In January of 2015, the IRS issued new revenue procedures, Rev. Procs. 2015-13 and 2015-14, that amplified, clarified, modified and partly superseded the former procedures under Rev. Proc. 2011-14 for changing a method of accounting. The two revenue procedures effectively split former Rev. Proc. 2011-14 into two parts: Rev. Proc. 2015-13 contains the general procedures for changing methods of accounting, either with IRS consent or automatically, and Rev. Proc. 2015-14 lists the automatic changes originally contained in the appendix to Rev. Proc. 2011-14.
Rev. Proc. 2015-33 clarifies several items in Rev. Proc. 2015-13 regarding certain procedures for changing a method of accounting. Specifically, the revenue procedure:
(1) modifies the transition rules of Rev. Proc. 2015-13 to provide additional time to file Forms 3115;
(2) clarifies when the automatic change procedures do not apply if the taxpayer engages, within the requested year of change, in a transaction to which Code Sec. 381(a) applies;
(3) clarifies the meaning of "three-month window" under Rev. Proc. 2015-13 for a taxpayer with a 52-53 week tax year; and
(4) discusses a clarification to the applicable Ogden, UT, address to which taxpayers must mail their Forms 3115.
Additional Time to File Form 3115
The IRS issued final tangible property regulations in T.D. 9636 and T.D. 9689 in August 2013 and September 2014, respectively. The regulations, which generally apply to tax years beginning on or after January 1, 2014, are expected to necessitate changes in accounting methods by many taxpayers.
Section 15.02(1)(a)(ii) of Rev. Proc. 2015-13 provides that a taxpayer may file a Form 3115 for an automatic change under the procedures of either former Rev. Proc. 2011-14 or current Rev. Proc. 2015-13, to request the IRS' consent to change a method of accounting for a tax year ending between May 31, 2014 and January 31, 2015, until the due date (including extensions) of the taxpayer's original federal income tax return for the requested year of change.
The current provision does not allow taxpayers with tax years ending after January 31, 2015, to request an automatic change under the procedures of Rev. Proc. 2011-14. Rev. Proc. 2015-33 extends the transition procedures of section 15.02(1)(a)(ii) of Rev. Proc. 2015-13 to all taxpayers for their first tax year in which the final tangible property regulations apply.
Specifically, the revenue procedure modifies section 15.02(1) of Rev. Proc. 2015-13 to allow a taxpayer to request an automatic change under the procedures of either former Rev. Proc. 2011-14 or current Rev. Proc. 2015-13 for a tax year ending on or after May 31, 2014, and beginning before January 1, 2015.
OBSERVATION: The transition relief provided in Rev. Proc. 2015-33 applies to all automatic method changes, not just changes pursuant to the final tangible property regulations.
Clarification of When Automatic Change Procedures Don't Apply
Sections 5.01(1)(c) and 5.02 of Rev. Proc. 2015-13 provide that a taxpayer engaging in a liquidation or reorganization transaction to which Code Sec. 381(a) applies may not use the automatic change procedures to request a change to a principal method, as prescribed by Reg. Sec. 1.381(c)(4)-1(d)(1) and 1.381(c)(5)-1(d)(1), because, in general, an acquiring corporation does not need to secure the IRS's consent to use a principal method. Those regulations provide guidance regarding the method of accounting or the inventory method an acquiring corporation must use following a distribution or transfer to which Code Sec. 381(a) applies.
The rules inadvertently excluded from the automatic change procedures certain changes other than a change to a principal method. Accordingly, Rev. Proc. 2015-33 modifies Sections 5.01(1)(c) and 5.02 of Rev. Proc. 2015-13 to exclude from the automatic change procedures only a change to the principle method, as described in Reg. Sec. 1.381(c)(4)-1(c)(1) and 1.381(c)(5)-1(c)(1).
Clarification of the "Three-Month Window"
Section 8.02(1)(a)(ii) of Rev. Proc. 2015-13 provides that a "three-month window" is the period beginning on the fifteenth day of the seventh month of the taxpayer's tax year and ending on the fifteenth day of the tenth month of the taxpayer's tax year. Because the rule is not expressed with reference to the first or last day of a specified calendar month, it is unclear how this provision applies to a taxpayer using a 52-53 week tax year. Accordingly, Rev. Proc. 2015-33 modifies Rev. Proc. 2015-13 to provide that, for determining the "three-month window," the tax year begins on the first day of the calendar month nearest to the first day of the 52-53 week tax year.
Updated Ogden, UT Address
Several provisions of Rev. Proc. 2015-13 provide that a signed copy of the original Form 3115 must be filed with the IRS in Ogden, UT, at the applicable address in section 9.05 of Rev. Proc. 2015-1 (or successor). The U.S. Post Office no longer accepts the Ogden, UT, zip code provided in Rev. Proc. 2015-1 for certified mail. To send certified mail through the U.S. Post Office to the IRS processing facility in Ogden, UT, taxpayers should use the following mailing address:
Internal Revenue Service
1973 Rulon White Blvd.
Mail Stop 4917
Ogden, UT 84201-1000
For a discussion of accounting method change procedures, including the updated procedures in Rev. Procs. 2015-13 and 2015-14, see Parker Tax ¶ 241,590. (Staff Editor Parker Tax Publishing)
Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.
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