SECTION 6. CHANGE IN METHOD

OF ACCOUNTING

.01 In General. A change in a taxpayer’s treatment of track structure ex

penditures to the track maintenance allowance method is a change in method of accounting to which §§ 446 and 481 apply.

.02 Issue Not Under Consideration. If a taxpayer within the scope of this revenue procedure wants to change to the track maintenance allowance method for either its first or second taxable year ending on or after December 31, 2000, (“year

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of change”) and the treatment of its track structure expenditures is not an issue under consideration in examination, before an area appeals office, or before a federal court (within the meaning of section 3.08 of Rev. Proc. 97–27 (1997–1 C.B. 680)) on August 21, 2001, the taxpayer must follow the automatic change in method of accounting provisions in Rev. Proc. 99–49 (1999–52 I.R.B. 725) (or its successor) with the following modifications:

(1) The scope limitations in section 4.02 of Rev. Proc. 99–49 do not apply. If the taxpayer is under examination, before an area appeals office, or before a federal court regarding any income tax issue other than its treatment of track structure expenditures, the taxpayer must provide a copy of the Form 3115, Application for Change in Accounting Method, to the examining officer, appeals officer, or government counsel (whichever is applicable) at the time that it files the copy of the Form 3115 with the national office. The Form 3115 must contain the name(s) and telephone number(s) of the examining officer, appeals officer or government counsel (whichever is applicable).

(2) A taxpayer that wants to change to the track maintenance allowance method for its first taxable year ending on or after December 31, 2000, and that, on or before October 22, 2001, files its original federal income tax return for its first taxable year ending on or after December 31, 2000, is not subject to the filing requirements in section 6.02(2)(a) of Rev. Proc. 99–49, provided that it complies with the following filing requirements. The taxpayer must complete and file a Form 3115 in duplicate. The original must be attached to the taxpayer’s amended federal income tax return for its first taxable year ending on or after December 31, 2000. This amended return must be filed no later than January 28, 2002. A copy of the Form 3115 must be filed with the national office (see section 6.02(5)(a) of Rev. Proc. 99–49 for the address) no later than when the taxpayer’s amended return is filed.

(3) To assist the Service in processing changes in method of accounting under this section of the revenue procedure, and to ensure proper handling, section 6.02(3) of Rev. Proc. 99–49 is modified to require that a Form 3115 filed

under this revenue procedure include the statement: “Automatic Change Filed Under Rev. Proc. 2001–46.” This statement should be legibly printed or typed at the top of any Form 3115 filed under this revenue procedure.

(4) If a taxpayer did not file Form R-1 for one or more of the taxable years to which the § 481(a) adjustment relates, the taxpayer must compute the § 481(a) adjustment based on information equivalent to that required by Form R-1.

.03 Issue Under Consideration. If a taxpayer within the scope of this revenue procedure wants to change to the track maintenance allowance method for either its first or second taxable year ending on or after December 31, 2000, (“year of change”) and the treatment of its track structure expenditures is an issue under consideration in examination, before an area appeals office, or before a federal court (within the meaning of section 3.08 of Rev. Proc. 97–27) on August 21, 2001, the taxpayer must follow the automatic change in method of accounting provisions in Rev. Proc. 99–49 with the following modifications:

(1) The scope limitations in section 4.02 of Rev. Proc. 99–49 do not apply. The taxpayer must provide a copy of the Form 3115 to the examining officer, appeals officer, or government counsel (whichever is applicable) at the time that it files the copy of the Form 3115 with the national office. The Form 3115 must contain the name(s) and telephone number(s) of the examining officer, appeals officer, or government counsel (whichever is applicable).

(2) A taxpayer that wants to change to the track maintenance allowance method for its first taxable year ending on or after December 31, 2000, and that, on or before October 22, 2001, files its original federal income tax return for its first taxable year ending on or after December 31, 2000, is not subject to the filing requirements in section 6.02(2)(a) of Rev. Proc. 99–49, provided that it complies with the following filing requirements. The taxpayer must complete and file a Form 3115 in duplicate. The original must be attached to the taxpayer’s amended federal income tax return for its first taxable year ending on or after December 31, 2000. This amended return must be filed no later than January 28,

2002. A copy of the Form 3115 must be filed with the national office (see section 6.02(5)(a) of Rev. Proc. 99–49 for the address) no later than when the taxpayer’s amended return is filed.

(3) To assist the Service in processing changes in method of accounting under this section of the revenue procedure, and to ensure proper handling, section 6.02(3) of Rev. Proc. 99–49 is modified to require that a Form 3115 filed under this revenue procedure include the statement: “Automatic Change Filed Under Rev. Proc. 2001–46.” This statement should be legibly printed or typed at the top of any Form 3115 filed under this revenue procedure.

(4) The change to the track maintenance allowance method will be made using a “cut-off method.” Under a cut-off method, only the items arising on or after the beginning of the year of change are accounted for under the track maintenance allowance method. Any items arising before the year of change continue to be accounted for under the taxpayer’s former method of accounting. Because no items are duplicated or omitted from income when a cut-off method is used to effect a change in accounting method, no § 481(a) adjustment is necessary.

(5) Section 7 of Rev. Proc. 99–49 does not apply. The taxpayer does not receive audit protection in connection with a change to the track maintenance allowance method.

.04 Special Rule for Certain Taxpayers with Issue Under Consideration. If a taxpayer is within the scope of this revenue procedure, and the treatment of its track structure expenditures is an issue under consideration (within the meaning of section 3.08 of Rev. Proc. 97–27) in examination, before an area appeals office, or before the Tax Court on August 21, 2001, the taxpayer may change to the track maintenance allowance method for its first or second taxable year ending on or after December 31, 2000, under section 6.03 of this revenue procedure or, alternatively, for an earlier taxable year under section 8 of this revenue procedure.

.05 Effect of Consent. For purposes of section 8.01 of Rev. Proc. 99–49 (Effect of Consent), a change in the material facts on which the consent was based includes a material change in how a taxpayer reports amounts on the Form R-1 or a

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change in the taxpayer’s obligation to file a Form R-1.

.06 Changes Not Made Under this Rev- enue Procedure. A taxpayer that wants to change to the track maintenance allowance method described in section 5 of this revenue procedure that does not change its method of accounting under section 6 or 8 of this revenue procedure must follow the change in method of accounting provisions in Rev. Proc. 97–27 (1997–1 C.B. 680) (or any successor).