SECTION 2. BACKGROUND

.01 Rev. Rul. 2004–52 describes certain taxpayers that issue credit cards. Each card allows the cardholder to access a revolving line of credit to make purchases of goods and services and, if otherwise provided by the applicable cardholder agreement, to obtain cash advances. These taxpayers may charge cardholders a credit card annual fee. Rev. Rul. 2004–52 holds that credit card annual fees are not interest for federal income tax purposes and that they are includible in income when the all events test under § 451 of the Internal Revenue Code is satisfied. Under the facts of Rev. Rul. 2004–52, the all events test is satisfied when the credit card annual fee becomes due and payable under the taxpayer’s cardholder agreements.

.02 Any change in a taxpayer’s treatment of income from credit card annual fees, including a change to conform the taxpayer’s method to either Rev. Rul. 2004–52 or to the Ratable Inclusion Method for Credit Card Annual Fees, which is permitted by section 4 of this revenue procedure, is a change in method of accounting to which the provisions of §§ 446 and 481 apply.

.03 Under § 446(e) and § 1.446– 1(e)(2)(i) of the Income Tax Regulations,

a taxpayer generally must secure the consent of the Commissioner before changing a method of accounting for federal income tax purposes. Section 1.446–1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the terms and conditions necessary to obtain consent to change a method of accounting. Rev. Proc. 2002–9, 2002–1 C.B. 327 (as modified and clarified by Announcement 2002–17, 2002–1 C.B. 561, modified and amplified by Rev. Proc. 2002–19, 2002–1 C.B. 696, and amplified, clarified, and modified by Rev. Proc. 2002–54, 2002–2 C.B. 432), provides procedures by which a taxpayer may obtain automatic consent to change to the methods of accounting described in the Appendix of Rev. Proc. 2002–9. Section 5.03 of Rev. Proc. 2002–9 provides that, unless otherwise provided, a taxpayer making a change in method of accounting under the revenue procedure must take into account a § 481(a) adjustment in the manner provided in section 5.04 of Rev. Proc. 2002–9.