SECTION 6. GENERAL — Internal Revenue Bulletin 1998-51

PROCEDURES

.01 Consent. Pursuant to § 1.446– 1(e)(2)(i), the consent of the Commissioner is hereby granted to any taxpayer within the scope of this revenue procedure to change a method of accounting, provided the taxpayer complies with all the applicable provisions of this revenue procedure.

(2) Timely duplicate filing require- ment.

(a) In general. A taxpayer changing a method of accounting pursuant to this revenue procedure must complete and file an application in duplicate. Except as otherwise provided in the APPENDIX of this revenue procedure (see, for example, section 12.02 of the APPENDIX of this revenue procedure), the original must be attached to the taxpayer’s timely filed (including extensions) original federal income tax return for the year of change, and a copy of the application must be filed with the national office (see section 6.02(6) of this revenue procedure for the address) no earlier than the first day of the year of change and no later than when the original is filed with the federal income tax return for the year of change.

(b) Limited relief for late applica- tion.

(i) Automatic extension. An automatic extension of 6 months from the due date of the return for the year of change (excluding extensions) is granted

ness to which the § 481(a) adjustment relates; or

(E) the assets of a trade or business to which the § 481(a) adjustment relates are contributed to a partnership.

(iii) Conversion to or from S corporation status. Except as provided in section 10.01 of the APPENDIX of this revenue procedure, no acceleration of a § 481(a) adjustment is required under section 5.04(3)(c) of this revenue procedure when a C corporation elects to be treated as an S corporation or an S corporation terminates its S election and is then treated as a C corporation.

(iv) Certain transfers to which § 381(a) applies. No acceleration of the § 481(a) adjustment is required under section 5.04(3)(c) of this revenue procedure when a taxpayer transfers substantially all the assets of the trade or business that gave rise to the § 481(a) adjustment to another taxpayer in a transfer to which § 381(a) applies and the accounting method (the change to which gave rise to the § 481(a) adjustment) is a tax attribute that is carried over and used by the acquiring corporation immediately after the transfer pursuant to § 381(c). The acquiring corporation is subject to any terms and conditions imposed on the transferor (or any predecessor of the transferor) as a result of its change in method of accounting.

(v) Certain transfers pursuant to § 351 within a consolidated group.

(A) In general. No acceleration of the § 481(a) adjustment is required under section 5.04(3)(c) of this revenue procedure when one member of an affiliated group filing a consolidated return transfers substantially all the assets of the trade or business that gave rise to the § 481(a) adjustment to another member of the same consolidated group in an exchange qualifying under § 351 and the transferee member adopts and uses the same method of accounting (the change to which gave rise to the § 481(a) adjustment) used by the transferor member. The transferor member must continue to take the § 481(a) adjustment into account pursuant to the terms and conditions set forth in this revenue procedure. The transferor member must take into account activities of the transferee member (or any successor) in determining whether acceleration of the § 481(a) adjustment is required. For example, except as pro

vided in the following sentence, the transferor member must take any remaining § 481(a) adjustment into account in computing taxable income in the taxable year in which the transferee member ceases to engage in the trade or business to which the § 481(a) adjustment relates. The § 481(a) adjustment is not accelerated when the transferee member engages in a transaction described in section 5.04(3)(c)(iv) or 5.04(3)(c)(v)(A) of this revenue procedure.

(B) Exception. The provisions of section 5.04(3)(c)(v)(A) of this revenue procedure cease to apply and the transferor member must take any remaining balance of the § 481(a) adjustment into account in the taxable year immediately preceding any of the following: (1) the taxable year the transferor member ceases to be a member of the group; (2) the taxable year any transferee member owning substantially all the assets of the trade or business which gave rise to the § 481(a) adjustment ceases to be a member of the group; or (3) a separate return year of the common parent of the group. In applying the preceding sentence, the rules of paragraphs (j)(2), (j)(5), and (j)(6) of § 1.1502–13 apply, but only if the method of accounting to which the transferor member changed and to which the § 481(a) adjustment relates is adopted, carried over, or used by any transferee member acquiring the assets of the trade or business that gave rise to the § 481(a) adjustment immediately after acquisition of such assets. For example, the transferor member is not required to accelerate the § 481(a) adjustment if a transferee member ceases to be a member of a consolidated group by reason of an acquisition to which § 381(a) applies and the acquiring corporation (1) is a member of the same group as the transferor member, and (2) continues, under § 381(c)(4) and the regulations thereunder, to use the same method of accounting as that used by the transferor member with respect to the assets of the trade or business to which the § 481(a) adjustment relates.

.05 NOL carryback limitation for tax- payer subject to criminal investigation. Generally, no portion of any net operating loss that is attributable to a negative § 481(a) adjustment may be carried back to a taxable year prior to the year of change that is the subject of any pending

.02 Filing requirements.

(1) Waiver of taxable year filing re- quirement. The requirement under § 1.446–1(e)(3)(i) to file a Form 3115 within the taxable year for which the change is requested is waived for any application for a change in method of accounting filed pursuant to this revenue procedure. See § 1.446-1(e)(3)(ii).

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to file an application, provided the taxpayer (A) timely filed (including extensions) its federal income tax return for the year of change, (B) files an amended return within the 6-month extension period in a manner that is consistent with the new method of accounting, (C) attaches the original application to the amended return, (D) files a copy of the application with the national office no later than when the original is filed with the amended return, and (E) writes at the top of the application “FILED PURSUANT TO § 301.9100–2.”

common parent. See the signature requirements set forth in the General Instructions attached to a current Form 3115 regarding those who are to sign. If an agent is authorized to represent the taxpayer before the Service, receive the original or a copy of the correspondence concerning the application, or perform any other act(s) regarding the application filed on behalf of the taxpayer, a power of attorney reflecting such authorization(s) must be attached to the application. A taxpayer’s representative without a power of attorney to represent the taxpayer as indicated in this section will not be given any information regarding the application.

(5) Additional statement required. In addition to providing all the information that is required by the application, a taxpayer must attach to the application a written statement providing as follows:

(a) the taxpayer agrees to all of the terms and conditions in this revenue procedure; and

(ii) Other extensions. A taxpayer that fails to file the application for the year of change as provided in section 6.02(2)(a) or 6.02(2)(b)(i) of this revenue procedure will not be granted an extension of time to file under § 301.9100 of the Procedure and Administration Regulations, except in unusual and compelling circumstances. See § 301.9100–3(c)(2).

(3) Label.

(a) In order to assist in processing an application under this revenue procedure, the section of the APPENDIX of this revenue procedure describing the specific change in method of accounting should be included in the application. For example, a phrase such as “Section 1.01 of the APPENDIX of Rev. Proc. 98-60” should be included on the appropriate line on the Form 3115.

(b) If a taxpayer is authorized under the APPENDIX of this revenue procedure to file a statement in lieu of a Form 3115, the taxpayer must include the taxpayer’s name and employer identification number (or social security number in the case of an individual) at the top of the first page of the statement underneath any other required label.

(4) Signature requirements. The application must be signed by, or on behalf of, the taxpayer requesting the change by an individual with authority to bind the taxpayer in such matters. For example, an officer must sign on behalf of a corporation, a general partner on behalf of a state law partnership, a member-manager on behalf of a limited liability company, a trustee on behalf of a trust, or an individual taxpayer on behalf of a sole proprietorship. If the taxpayer is a member of a consolidated group, an application submitted on behalf of the taxpayer must be signed by a duly authorized officer of the

(b) if a § 481(a) adjustment is required, the reason for claiming the § 481(a) adjustment period over which the taxpayer agrees to take the applicable § 481(a) adjustment into account.

(i) To the drop box at the 12th Street entrance of 1111 Constitution Avenue, NW, Washington, D.C. No receipt will be given at the drop box. For a taxpayer other than an exempt organization, the copy of the application must be addressed to the Commissioner of Internal Revenue, Attention: CC:DOM:IT&A (Automatic Rulings Branch), 1111 Constitution Avenue, NW, Washington, D.C. 20224. For an exempt organization, the copy of the application must be addressed to the Assistant Commissioner (Employee Plans and Exempt Organizations), Attention: E:EO, 1111 Constitution Avenue, NW, Washington, D.C. 20224; or

(ii) Between the hours of 8:15 a.m. and 5:00 p.m., to the courier’s desk at the main entrance of 1111 Constitution Avenue, NW, Washington, D.C. A receipt will be given at the courier’s desk. For a taxpayer other than an exempt organization, the copy of the application must be addressed to the Commissioner of Internal Revenue, Attention: CC:DOM:IT&A (Automatic Rulings Branch), 1111 Constitution Avenue, NW, Washington, D.C. 20224. For an exempt organization, the copy of the application must be addressed to the Assistant Commissioner (Employee Plans and Exempt Organizations), Attention: E:EO, 1111 Constitution Avenue, NW, Washington, D.C. 20224

(7) No user fee. A user fee is not required for an application filed under this revenue procedure, and, except as provided in section 6.02(6)(c)(ii) of this revenue procedure, the receipt of an application filed under this revenue procedure will not be acknowledged.

(8) Single application for certain consolidated groups. A parent corporation may file a single application to change an identical method of accounting on behalf of more than one member of a consolidated group. To qualify, the taxpayers in the consolidated group must be members of the same affiliated group under § 1504(a) that join in the filing of a consolidated tax return, and they must be changing from the identical present method of accounting to the identical proposed method of accounting. All aspects of the change in method of accounting, including the present and proposed methods, the underlying facts, and the authority for the change, must be identical, except for the § 481(a) adjustment. See

(6) Where to file copy.

(a) For a taxpayer other than an exempt organization, the copy of the application must be addressed to the Commissioner of Internal Revenue, Attention: CC:DOM:IT&A (Automatic Rulings Branch), P.O. Box 7604, Benjamin Franklin Station, Washington, D.C. 20044 (or, in the case of a designated private delivery service: Commissioner of Internal Revenue, Attention: CC:DOM:IT&A (Automatic Rulings Branch), 1111 Constitution Avenue, NW, Washington, D.C. 20224). (b) For an exempt organization, the copy of the application must be addressed to the Assistant Commissioner (Employee Plans and Exempt Organizations), Attention: E:EO, P.O. Box 120, Benjamin Franklin Station, Washington, D.C. 20044 (or, in the case of a designated private delivery service: Assistant Commissioner (Employee Plans and Exempt Organizations), Attention: E:EO, 1111 Constitution Avenue, NW, Washington, D.C. 20224).

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section 15.07(3) of Rev. Proc. 98–1, 1998–1 I.R.B. at 54 (or any successor), for the information required to be submitted with the application.

.03 Taxpayer under examination.

(1) In general. Except as otherwise provided in the APPENDIX of this revenue procedure (see, for example, sections 4.01, 5.04, 8.05, 9.02, 10A.01, 12.01, and 12.02 of the APPENDIX of this revenue procedure), a taxpayer that is under examination may file an application to change a method of accounting under section 6 of this revenue procedure only if the taxpayer is within the provisions of section 6.03(2) (90-day window), 6.03(3) (120-day window), or 6.03(4) (district director consent) of this revenue procedure. A taxpayer that files an application beyond the time periods provided in the 90day and 120-day windows is not eligible for the automatic extension of time and will not be granted an extension of time to file under § 301.9100, except in unusual and compelling circumstances.

(2) 90-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 first 90days of any taxable year (the “90-day window”) if the taxpayer has been under examination for at least 12 consecutive months as of the first day of the taxable year. This 90-day window is not available if the method of accounting the taxpayer is changing is an issue under consideration at the time the copy of the application is filed or an issue the examining agent(s) has placed in suspense at the time the copy of the application is filed.

(b) A taxpayer changing a method of accounting under this 90-day window must provide a copy of the application to the examining agent(s) at the same time it files the copy of the application with the national office. The application must contain the name(s) and telephone number(s) of the examining agent(s). The taxpayer must attach to the application a separate statement signed by the taxpayer certifying that, to the best of the taxpayer’s knowledge, the same method of accounting is not an issue under consideration or an issue placed in suspense by the examining agent(s).

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 the taxpayer is changing is an issue under consideration at the time a copy of the application is filed or an issue the examining agent(s) has placed in suspense at the time the copy of the application is filed.

(b) A taxpayer changing a method of accounting under this 120-day window must provide a copy of the application to the examining agent(s) for any examination that is in process at the same time it files the copy of the application with the national office. The application must contain the name(s) and telephone number(s) of the examining agent(s). The taxpayer must attach to the application a separate statement signed by the taxpayer certifying that, to the best of the taxpayer’s knowledge, the same method of accounting is not an issue under consideration or an issue placed in suspense by the examining agent(s).

(4) Consent of district director.

tor 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) and telephone number(s) of the examining agent(s).

.04 Taxpayer before an appeals office. Except as otherwise provided in the APPENDIX of this revenue procedure (see, for example, sections 4.01, 5.04, 8.05, 9.02, 10A.01, 12.01, and 12.02 of the APPENDIX of this revenue procedure), a taxpayer that is before an appeals office must attach to the application a separate statement signed by the taxpayer certifying that, to the best of the taxpayer’s knowledge, the same method of accounting is not an issue under consideration by the appeals office. The taxpayer must provide a copy of the application to the appeals officer at the same time it files a copy of the application with the national office. The application must contain the name and telephone number of the appeals officer.

.05 Taxpayer before a federal court. Except as otherwise provided in the APPENDIX of this revenue procedure (see, for example, sections 4.01, 5.04, 8.05, 9.02, 10A.01, 12.01, and 12.02 of the APPENDIX of this revenue procedure), a taxpayer that is before a federal court must attach to the application a separate statement signed by the taxpayer certifying that, to the best of the taxpayer’s knowledge, the same method of accounting is not an issue under consideration by the federal court. The taxpayer must provide a copy of the application to the counsel for the government at the same time it files a copy of the application with the national office. The application must contain the name and telephone number of the counsel for the government.

.06 Compliance with provisions. If a taxpayer to which this revenue procedure applies changes to a method of accounting without complying with all the applicable provisions of this revenue procedure (for example, the taxpayer changes to a method of accounting that varies from the applicable accounting method described in this revenue procedure or the taxpayer is outside the scope of this revenue procedure), the taxpayer has initiated a change

(3) 120-day window period.

(a) A taxpayer may file a copy of

(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. 98–2 (or any successor).

(b) A taxpayer changing a method of accounting under this revenue procedure with the consent of the district direc

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in method of accounting without obtaining the consent of the Commissioner as required by § 446(e). Upon examination, a taxpayer that has initiated an unauthorized change in method of accounting may be denied the change. Alternatively, such a taxpayer may be required to effect the change in an earlier or later taxable year and may be denied the benefit of spreading the § 481(a) adjustment over the number of taxable years otherwise prescribed by this revenue procedure.