Significant Changes in Requesting Letter Rulings and Form 3115 Filings for 2023

By Janet C. Hagy, CPA-Austin

 

Letter Rulings

Rev. Proc. 2023-1, Section 5.01, clarifies that, in general, the ruling request for a completed transaction must be made before a tax return is filed that contains a tax position on the completed transaction. It does not prohibit a return from having been previously filed for the year of the completed transaction.

The Fast-Track pilot program for some letter rulings that targets an IRS response time of 12 weeks, as announced in Rev. Proc. 2022-10, has proven effective per an agency official at the AICPA National Tax conference in November 2022. The program is set to expire in July 2023 if not adopted or extended.

User fees for letter ruling requests remain the same as shown in Rev. Proc. 2022-1.

Form 3115

Rev. Proc. 2023-1, Section 9.05(1), is amended to require that the user fee must be paid through www.pay.com for non-automatic Form 3115 prior to submitting the paper form. And, a copy of the payment receipt must be included with the paper filing.

Rev. Proc. 2023-8 (Jan. 9, 2023) provides that no Form 3115 is required for years beginning after Dec. 31, 2021 (first taxable year) to comply with the new Section 174 capitalization of specified research or experimental expenditures. The change is reported by filing a statement with the taxpayer’s original federal tax return for the first taxable year. For any applicable returns filed prior to publication of this procedure, the taxpayer will be deemed to have complied if the taxpayer properly reported the expenditures on Form 4562 in accordance with the required Section 174 method. If the change is not reported in the return for the first taxable year, Form 3115 will be required to report the change in accounting method.