Thursday, May 20, 2010

Updated Form 3115

IRS Updates Change of Accounting Form 3115.

A newly issued revenue procedure on accounting method changes has increased the number of methods of accounting eligible for which the IRS considers automatically granted, while also providing additional guidance on the process and scope of method changes.

The number of automatic changes now total 149.

Rev. Proc. 2009-39 added several accounting methods to the appendix of Rev. Proc. 2008-52 for obtaining the IRS's automatic consent of method changes. Among the additions were:
• materials and supplies (consistent with reg. section 1.162-3);
• repair and maintenance costs; and
• tenant construction allowances.

In the guidance, the IRS also clarified that certain actions constitute being under examination. The additions to section 3.08 of Rev. Proc. 2008-52 include a taxpayer exam before the Joint Committee on Taxation and a taxpayer exam in the compliance assurance process. Also, notification to a controlled foreign corporation's controlling domestic shareholders is now deemed an "issue under consideration."
Other portions of the guidance made clear when a taxpayer must file separate changes on separate forms (reg. section 6.02(1)(b)) and narrowed the automatic extension of time in reg. section 1.301-9100 for filing outside the window to "unusual and compelling circumstances."

Given that the guidance comes shortly before the September 15 extended tax return filing deadline for corporations, section 5 of the guidance notes that the effective date covers method change requests filed under Rev. Proc. 2008-52 made on or after August 27, 2009. The transition rule also gives some benefit to taxpayers that have already filed with the IRS a Form 3115, "Application for Change in Accounting Method," by allowing them to convert the filing to take advantage of the newly added automatic methods if filed by the later of October 26 or issuance of a letter ruling. Taxpayers can also amend previously filed change requests for the tax year ending December 31, 2008, or later tax years.