SECTION 7. AUDIT PROTECTION

FOR TAXABLE YEARS PRIOR TO YEAR OF CHANGE

.01 In general. Except as provided in section 7.02 or the APPENDIX of this

(3) 120-day window period.

(a) A taxpayer may file a copy of the application with the national office to change a method of accounting under this revenue procedure during the 120-day period following the date an examination ends (the “120-day window”), regardless of whether a subsequent examination has commenced. This 120-day window is not available if the method of accounting

(a) A taxpayer under examination may change its method of accounting under this revenue procedure if the district director consents to the change. The district director will consent to the change unless, in the opinion of the district director, the method of accounting to be changed would ordinarily be included as an item of adjustment in the year(s) for which the taxpayer is under examination. For example, the district director will consent to a change from a clearly permissible method of accounting. The district director will also consent to a change from an impermissible method of accounting where the impermissible method was adopted subsequent to the years under examination. The question of whether the method of accounting from which the taxpayer is changing is permissible or was adopted subsequent to the years under examination may be referred to the national office as a request for technical advice under the provisions of Rev. Proc. 97–2 (or any successor).

(b) A taxpayer changing a method of accounting under this revenue procedure with the consent of the district director must attach to the application a statement from the district director consenting to the change. The taxpayer must provide a copy of the application to the district director at the same time it files a copy of the application with the national office. The application must contain the name(s)

1997–33 I.R.B. 25 August 18, 1997

all the applicable provisions of this revenue procedure.) The district director will ascertain if:

(1) the representations on which the change was based reflect an accurate statement of the material facts;

(2) the amount of the § 481(a) adjustment was properly determined;

(3) the change in method of accounting was implemented in compliance with all the applicable provisions of this revenue procedure;

(4) there has been any change in the material facts on which the change was based during the period the method of accounting was used; and

(5) there has been any change in the applicable law during the period the method of accounting was used.

.02 National office consideration. If the district director recommends that a change in method of accounting (other than the § 481(a) adjustment) made in compliance with all the applicable provisions of this revenue procedure should be modified or revoked, the district director will forward the matter to the national office for consideration before any further action is taken. Such a referral to the national office will be treated as a request for technical advice, and the provisions of Rev. Proc. 97–2 (or any successor) will be followed.