SECTION 3. EFFECT ON OTHER

DOCUMENTS

Rev. Proc. 97–27 and Rev. Proc. 2002–9 are modified and amplified.

“(6) Issue Pending . (a) A taxpayer that is under examination with respect to any income tax issue may request to change a method of accounting if the method of accounting to be changed is an issue pending for any taxable year under examination. However, the audit protection provisions of section 7.01 of this revenue procedure do not apply to a taxpayer changing its method of accounting under this section 6.03(6). For this purpose, an issue is pending for taxable years under examination if the Service has given the taxpayer written notification indicating an adjustment is being made or will be proposed with respect to the taxpayer’s method of accounting. This notification normally will occur after the Service has gathered information sufficient to determine that an adjustment is appropriate and justified, although the exact amount of the adjustment may not yet be determined.

(b) A taxpayer that requests to change a method of accounting under this section 6.03(6) must provide a copy of the Form 3115 to the examining agent(s) at the same time it files the original Form 3115 with the national office. The Form 3115 must contain the name(s) and telephone number(s) of the examining agent(s). In order to assist in processing an application under this section 6.03(6), the taxpayer should type or legibly write “Issue pending” on the Form 3115.”

(2) Taxpayers before an appeals office .

(a) Section 4.02(3) of Rev. Proc. 97–27 (relating to the situations in which Rev. Proc. 97–27 does not apply) is deleted.

(b) Section 6.02 of Rev. Proc. 97–27 (relating to procedures for taxpayers before an appeals office) is modified as follows:

“.02 Taxpayer before an appeals office . A taxpayer otherwise within the scope of this revenue procedure that is before an appeals office with respect to any income tax issue may request a change in accounting method. However, the audit protection provisions of section 9.01 of this revenue procedure do not apply if the accounting method to be changed is an issue under consideration by the appeals office. A taxpayer that requests to change a method of accounting under this section 6.02 must provide a

copy of the Form 3115 to the appeals officer at the time it files the original Form 3115 with the national office. The Form 3115 must contain the name(s) and telephone number(s) of the appeals officer(s). In order to assist in processing an application under this section 6.02, the taxpayer should type or legibly write “Issue under consideration” on the Form 3115.” (c) Section 4.02(2) of Rev. Proc. 2002–9 (relating to situations to which Rev. Proc. 2002–9 does not apply) is deleted.

(d) Section 6.04 of Rev. Proc. 2002–9 (relating to procedures for taxpayers before an appeals office) is modified to read as follows:

“.04 Taxpayer before an appeals office . A taxpayer otherwise within the scope of this revenue procedure that is before an appeals office with respect to any income tax issue may request a change in accounting method. However, the audit protection provisions of section 7.01 of this revenue procedure do not apply if the accounting method to be changed is an issue under consideration by the appeals office. A taxpayer that requests to change a method of accounting under this section 6.04 must provide a copy of the Form 3115 to the appeals officer at the time it files the original Form 3115 with the national office. The Form 3115 must contain the name(s) and telephone number(s) of the appeals officer(s). In order to assist in processing an application under this section 6.04, the taxpayer should type or legibly write “Issue under consideration” on the Form 3115.” (3) Taxpayers before a federal court .

(a) Section 4.02(4) of Rev. Proc. 97–27 (relating to the situations in which Rev. Proc. 97–27 does not apply) is deleted.

(b) Section 6.03 of Rev. Proc. 97–27 (relating to procedures for taxpayers before a federal court) is modified to read as follows:

“.03 Taxpayer before a federal court . A taxpayer otherwise within the scope of this revenue procedure that is before a federal court with respect to any income tax issue may request a change in accounting method. However, the audit protection provisions of section 9.01 of this revenue procedure do not apply if the

April 1, 2002 699 2002-13 I.R.B.

national office should be labeled “Substitute Application under Rev. Proc. 2002– 19.” (d) If a taxpayer has filed an original application and/or a copy of an application to change a method of accounting under Rev. Proc. 2002–9 for a taxable year ending on or after December 31, 2001, with the national office on or before April 15, 2002, such change in method of accounting results in a net negative § 481(a) adjustment, and the taxpayer does not file revised applications under either section 4.04(1)(b) or (c) of this revenue procedure (whichever applies), then the four-year § 481(a) adjustment period of Rev. Proc. 2002–9 (prior to its modification by this revenue procedure) will apply to the change.

(2) Applications Under Rev. Proc. 97–27 . In the case of an application to change a method of accounting for a taxable year ending on or after December 31, 2001, filed under Rev. Proc. 97–27, and pending with the national office on March 14, 2002, the § 481(a) adjustment period for a net negative § 481(a) adjustment for the change will be one taxable year. In such a case, the national office will require the taxpayer to make appropriate modifications to the application or ruling request to comply with the applicable provisions of this revenue procedure. However, if such a taxpayer does not want a one-year § 481(a) adjustment period to apply, the taxpayer must notify the national office prior to the later of April 30, 2002, or the issuance of the letter ruling granting or denying consent to the change. In such a case, the § 481(a) adjustment period rules of Rev. Proc. 97–27, prior to its modification by this revenue procedure, will apply.

DRAFTING INFORMATION

The principal author of this revenue procedure is Grant D. Anderson of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information concerning this revenue procedure, please contact Mr. Anderson at (202) 622–4970 (not a toll-free call).