SECTION 7. PROCESSING OF

APPLICATION

.01 Service discretion . Notwithstanding any other provision of this revenue procedure, the Service reserves the right to decline to process any application filed under this revenue procedure in situations in which it would not be in the best interest of sound tax administration to permit the requested adoption, change, or retention. In this regard, the Service will consider whether the adoption, change, or retention in annual accounting period would clearly and directly frustrate compliance efforts of the Service in administering the income tax laws.

.02 Applicability of Rev. Proc. 2001–1, Rev. Proc. 2001–4, and any successor revenue procedures . Rev. Proc. 2001–1 or, for tax-exempt organizations, Rev. Proc. 2001–4, 2001–1 I.R.B. 121, (or any successors) will apply to any annual accounting period adoption, change, or retention request made under the provisions of this revenue procedure.

.03 Incomplete application - 21 day rule . If the Service receives an application that is not completed properly in accordance with the instructions on the Form 1128 (or Form 2553) and the provisions of this revenue procedure, or if supplemental information is needed, the Service will notify the taxpayer. The notification will specify the information that needs to be provided, and the taxpayer will be permitted 21 days from the date of the notification to furnish the necessary information. The Service reserves the right to impose shorter reply periods if subsequent requests for additional information are made. If the required information is not submitted to the Service within the reply period, the application will not be processed. A reasonable additional period to furnish information may be granted to a taxpayer. Any request for an extension of time to furnish necessary information must be made in writing and submitted within the 21-day period. If the extension request is denied, there is no right of appeal.

.04 Conference in the national office . The taxpayer must complete the appropriate line on the Form 1128 or attach a statement to the Form 2553, to request a conference of right if an adverse response is contemplated by the Service. If the taxpayer does not complete the appropriate

June 4, 2001 1312 2001–23 I.R.B.

period issue by agreeing to terms, conditions, and adjustments that differ from those that might be provided under this revenue procedure when it is in the best interest of the government to do so.