SECTION 2. BACKGROUND

.01 Change in method of accounting defined . Section 1.446–1(e)(2)(ii)(a) of the Income Tax Regulations provides that a change in method of accounting includes a change in the overall plan of accounting for gross income or deductions, or a change in the treatment of any material item. A material item is any item that involves the proper time for the inclusion of the item in income or the taking of the item as a deduction.

.02 Securing permission to make a method change . Sections 446(e) and 1.446–1(e) state that, except as otherwise provided, a taxpayer must secure the consent of the Commissioner before changing a method of accounting for federal income tax purposes. Section 1.446–1(e)(3)(i) requires that, in order to obtain the Commissioner’s consent to change a method of accounting, a taxpayer must file a Form 3115, Application for Change in Accounting Method, during the taxable year in which the taxpayer wants to make the proposed change. Rev. Proc. 99–49, 1999–2 C.B. 725 provides the procedures by which taxpayers may obtain automatic consent to change certain specified methods of accounting by the filing of a Form 3115 within the time specified for the filing of a tax return for the year of change.

.03 Terms and conditions of a method change . Section 1.446–1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions deemed necessary to permit a taxpayer to obtain consent to change a method of accounting

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not include commissions retained by the Company to recoup cash advances (or interest thereon) that were reported by the Company as earned by the agent in a prior calendar year under the Company’s former method of accounting for cash advances.

(4) a paragraph stating that the Company agrees to all the terms and conditions of this Rev. Proc. 2001–24 and Rev. Proc. 99–49.

(5) the signature by, or on behalf of, the Company making the election by an individual with the authority to bind the Company in these matters. Thus, an officer must sign on behalf of a corporation, a general partner must sign on behalf of a state law partnership, a member-manager must sign on behalf of a limited liability company, a trustee must sign on behalf of a trust, and an individual must sign on behalf of a sole proprietorship. If the Company is a member of a consolidated group, the statement submitted on behalf of the Company must be signed by a duly authorized officer of the common parent. See section 6.02(4) of Rev. Proc. 99–49.

.04 Consent . Pursuant to §1.446–1(e)(2)(i), the consent of the Commissioner is hereby granted to any Company within the scope of this revenue procedure to change its method of accounting for cash advances, provided the Company complies with all the applicable provisions of this revenue procedure and, to the extent applicable, Rev. Proc. 99–49. Further, agents of a Company changing its method of accounting pursuant to this revenue procedure are granted consent to change their method of accounting to report cash advances meeting the requirements of Section 3 in the year earned rather than in the year paid, so long as their change in method of accounting is consistent with the Company’s reporting. No separate filing is required by an agent.