United States

New guidance extends transition period for filing automatic Forms 3115

ARTICLE  | 

The IRS recently released Rev. Proc. 2015-33, modifying and clarifying portions of Rev. Proc. 2015-13. Significantly, Rev. Proc. 2015-33 extends the transition period for which taxpayers may continue filing automatic accounting method changes under the procedures of Rev. Proc. 2011-14. This will favorably impact many fiscal year taxpayers that still need to file one or more Forms 3115 to adopt the tangible property regulations for their first tax year beginning in 2014.

In January 2015, the IRS issued Rev. Proc. 2015-13, providing updated and modified procedural guidance under section 446 for taxpayers requesting IRS consent to change one or more methods of accounting (see our prior alert, IRS releases updated procedures for changes in accounting methods). Rev. Proc. 2015-13 modifies and supersedes Rev. Procs. 2011-14 and 97-27 by providing combined procedures for taxpayers requesting automatic and advance consent (non-automatic) accounting method changes. Although Rev. Proc. 2015-13 favorably modifies the rules regarding when a taxpayer under exam may file a Form 3115, the revenue procedure limits the ability of such taxpayers to gain audit protection for prior year treatment of the item being changed. Thus, many taxpayers that are under exam but need to file one or more Forms 3115 to adopt the tangible property regulations may be better positioned by filing under the procedures of Rev. Proc. 2011-14 since such taxpayers will receive audit protection even if under exam.

Transition guidance under Rev. Proc. 2015-13 initially allowed taxpayers with a taxable year of change ending on or after May 31, 2014, and on or before Jan. 31, 2015, to continue filing automatic method changes (including changes to adopt the tangible property regulations) under the procedures of Rev. Proc. 2011-14. While this was advantageous for calendar year taxpayers, many fiscal year taxpayers with tax years ending after Jan. 31, 2015, were still required to file under the new procedures of Rev. Proc. 2015-13.

Rev. Proc. 2015-33 modifies the existing transition procedures in Rev. Proc. 2015-13 by extending the period for which taxpayers may file automatic method changes under Rev. Proc. 2011-14. Under Rev. Proc. 2015-33, a taxpayer may file an automatic Form 3115 under the procedures of Rev. Proc. 2011-14 for a taxable year ending on or after May 31, 2014, and beginning before Jan. 1, 2015, until the due date of the taxpayer’s timely filed (including extensions) original federal income tax return for the requested year of change. Additionally, all automatic Forms 3115 filed under this transition guidance must be filed with the IRS in Ogden, Utah (in addition to being attached to the taxpayer’s timely filed return). Rev. Proc. 2015-33 is effective for Forms 3115 filed on or after Jan. 16, 2015, for a year of change ending on or after May 31, 2014.

Although this extended transition period applies to all automatic method changes, Rev. Proc. 2015-33 provides welcome news for fiscal year taxpayers that still need to file one or more Forms 3115 to adopt the tangible property regulations for their first tax year beginning on or after Jan. 1, 2014. All taxpayers should continue to work with their tax advisors to ensure that the appropriate and most optimal procedures are followed when filing any Form 3115.


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