SECTION 3. DEFINITIONS

.01 Application . The term “application” means a Form 3115 or any statement that is authorized in the APPENDIX of this revenue procedure to be filed in lieu of a Form 3115, and any attachments.

.02 Applicable provisions . The term “applicable provisions” means all provisions and requirements of this revenue procedure pertinent to the taxpayer or its requested change, including but not limited to:

(1) the scope requirements and limitations in section 4 of this revenue procedure;

(2) the terms and conditions of change in section 5 of this revenue procedure;

(3) the requirements regarding the form and content of an application in section 6 of this revenue procedure;

(4) the filing requirements in section 6 of this revenue procedure, including (but not limited to) the timely duplicate filing requirements of section 6.02(3); and

(5) the APPENDIX of this revenue procedure, including:

(a) the available changes in method of accounting;

(b) any restrictions on the availability of a requested change that is applicable to the taxpayer (including provisions that render the change inapplicable to the taxpayer); and

(c) any special terms, conditions, and requirements applicable to a change, such as the use of a cut-off basis or a § 481(a) adjustment, the spread period for any § 481(a) adjustment, the year of change, and any special filing requirement.

.03 Taxpayer .

(1) In general . The term “taxpayer” has the same meaning as the term “person” defined in § 7701(a)(1) (rather than the meaning of the term “taxpayer” defined in § 7701(a)(14)).

(2) Consolidated group . For purposes of the following sections of this revenue procedure, the term “taxpayer” includes a consolidated group: (a) sections 3.08(1), 3.09(1), and 4.02(1) (taxpayer under examination), (b) section 3.09(2) (taxpayer before an appeals office), and (c) section 3.09(3) (taxpayer before a federal court).

.04 Timely mailing as timely filing . Under the provisions of § 7502, any application, statement, or other document required to be filed under this revenue procedure is considered timely filed if it is timely postmarked and mailed, postage prepaid, to the proper address (or an address similar enough to complete delivery). If these requirements are met, the date of filing is the date of the U.S. postmark or the applicable date recorded or marked by a designated private delivery service. See Notice 2004–83, 2004–2 C.B. 1030. If the requirements of § 7502 are not met, the application, statement, or other document is considered filed on the date it is delivered to the Service.

.05 Timely performance of acts . The rules of § 7503 apply when the last day for the taxpayer’s timely performance of any act (for example, filing an application

January 24, 2011 339 2011–4 I.R.B.

.09 Issue under consideration .

(1) Under examination . A taxpayer’s method of accounting for an item is an issue under consideration for the taxable years under examination if the taxpayer receives written notification (for example, by examination plan, information document request (IDR), or notification of proposed adjustments or income tax examination changes) from the examining agent(s) specifically citing the treatment of the item as an issue under consideration. For example, a taxpayer’s method of pooling under the dollar-value, last-in, first-out (LIFO) inventory method is an issue under consideration as a result of an examination plan that identifies LIFO pooling as a matter to be examined, but it is not an issue under consideration as a result of an examination plan that merely identifies LIFO inventories as a matter to be examined. Similarly, a taxpayer’s method of determining inventoriable costs under § 263A is an issue under consideration as a result of an IDR that requests documentation supporting the costs included in inventoriable costs, but it is not an issue under consideration as a result of an IDR that requests documentation supporting the amount of costs of goods sold reported on the return. The question of whether a method of accounting is an issue under consideration may be referred to the national office as a request for technical advice under the provisions of Rev. Proc. 2011–2, 2011–1 I.R.B. 90 (or successor).

(2) Before an appeals office . A taxpayer’s method of accounting for an item is an issue under consideration for the taxable years before an appeals office if the treatment of the item is included as an item of adjustment in the examination report referred to Appeals or is specifically identified in writing to the taxpayer by Appeals. If an appeals office submits to the Joint Committee on Taxation pursuant to § 6405 a report of a refund or credit that includes a method of accounting for an item that is an issue under consideration, that method of accounting continues to be an issue under consideration by the appeals office while the refund or credit is under review by the Joint Committee on Taxation.

(3) Before a federal court . A taxpayer’s method of accounting for an item is an issue under consideration for the taxable years before a federal court if the treat

ample, Letter 987 - Agreed Income Tax Change ) sent to the taxpayer; or

(iii) in an unagreed or a partially agreed case, on the earliest of the date the taxpayer (or its representative) is notified by Appeals that the case has been referred by the examining agent(s) to Appeals, the date the taxpayer files a petition in the Tax Court, the date on which the period for filing a petition with the Tax Court expires, or the date of the notice of claim disallowance.

(b) An examination does not end as a result of the early referral of an issue to Appeals under the provisions of Rev. Proc. 99–28, 1999–2 C.B. 109. (c) An examination resumes on the date the taxpayer (or its representative) is notified by Appeals (or otherwise) that the case has been referred to the examining agent(s) for reconsideration. Further, notwithstanding sections 3.08(1)(a)(iii) and 6.03(3), if the taxpayer is within the 120-day window period provided in section 6.03(3) of this revenue procedure, that 120-day window period ends as of the date the taxpayer is notified, ordinarily by Appeals, that the case has been referred to the examining agent(s) for reconsideration. The 120-day window period in section 6.03(3) will be available to the taxpayer in its entirety when the resumed examination ends.

(2) Partnerships subject to TEFRA . Except as provided in sections 3.08(4) and (5) of this revenue procedure, for an entity (including a limited liability company) treated as a partnership for federal income tax purposes that is subject to the TEFRA unified audit and litigation provisions for partnerships, an examination begins on the date of the notice of the beginning of an administrative proceeding sent to the Tax Matters Partner (TMP), and ends:

(a) in a case in which the Service accepts the partnership return as filed, on the date of the “no adjustments” letter or the “no change” notice of final administrative adjustment sent to the TMP;

(b) in a fully agreed case, when all the partners or members execute a Form 870–P, Agreement to Assessment and Col- lection of Deficiency in Tax for Partnership Adjustments, 870–L, Agreement to Assess- ment and Collection of Deficiencies in Tax for Partnership Adjustments, Additions to Tax, and Affected Items ; or

(c) in an unagreed or a partially agreed case, on the earliest of the date the TMP (or its representative) is notified by Appeals that the case has been referred by the examining agent(s) to Appeals, the date the TMP (or a partner or member) requests judicial review, or the date on which the period for requesting judicial review expires. But see section 4.02(3) of this revenue procedure for certain rules that preclude an entity from requesting a change in accounting method.

(3) Certain foreign corporations . A foreign corporation that is not required to file a federal income tax return is under examination if any of its controlling domestic shareholders, as defined in § 6.02(3)(b) of this revenue procedure, is under examination for a taxable year(s) in which it was a United States shareholder of the foreign corporation. For purposes of this revenue procedure, a foreign corporation is no longer under examination when the controlling domestic shareholders are no longer under examination, as defined in section 3.08 of this revenue procedure.

(4) Taxpayer before Joint Committee on Taxation . If a taxpayer is under examination (including an examination that begins on the date a taxpayer is contacted in any manner for additional information as a result of a Joint Committee on Taxation inquiry pursuant to § 6405) then, notwithstanding the performance of an act described in section 3.08(1), (2), or (3), for purposes of this revenue procedure, the taxpayer continues to be under examination while the taxpayer has a refund or credit under review by the Joint Committee on Taxation. The examination ends on the later of (i) the performance of the applicable act described in section 3.08(1), (2), or (3); or (ii) the date of the Service’s written notification to the taxpayer that the Joint Committee on Taxation has completed its consideration (for example, Letter 1574 (P)), or that the case has been withdrawn from consideration by the Joint Committee on Taxation. See Rev. Proc. 2005–32, 2005–1 C.B. 1206.

(5) Taxpayer in Compliance Assurance Process . For purposes of this revenue procedure, a taxpayer participating in the Compliance Assurance Process (CAP) is considered to be under examination as of the date the taxpayer executes the Memorandum of Understanding for the CAP.

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(a) No differences in methods . An acquiring corporation may change its method of accounting pursuant to this revenue procedure if the acquiring corporation would be permitted to continue to use its prior method of accounting under the rules of §§ 1.381(c)(4)–1(b)(1) and (3)(i) (taking into account the third sentence of § 1.381(c)(4)–1(b)(4) relating to no prior method established by a party to the transaction) or §§ 1.381(c)(5)–1(b)(1) and (3)(i) (taking into account the second sentence of § 1.381(c)(5)–1(b)(4)(i) relating to no prior inventory method established by a party to the transaction) because all of the parties to the transaction used the same method of accounting on the date of distribution or transfer. The change pursuant to this revenue procedure is ignored for purposes of determining whether on the date of distribution or transfer the parties to the transaction used the same methods of accounting under § 1.381(c)(4)–1(b) or § 1.381(c)(5)–1(b), and thus §§ 1.381(c)(4)–1(b)(3)(ii) and (c) and §§ 1.381(c)(5)–1(b)(3)(ii) and (c) will not apply.

(b) Separate trades or businesses . An acquiring corporation may change pursuant to this revenue procedure a method of accounting used by a trade or business operated by such corporation if the trade or business would be permitted to continue to use its prior method of accounting under the rules of § 1.381(c)(4)–1(b)(2) or § 1.381(c)(5)–1(b)(2). The change pursuant to this revenue procedure is ignored for purposes of determining whether on the date of distribution or transfer the parties to the transaction used the same methods of accounting under § 1.381(c)(4)–1(b) or § 1.381(c)(5)–1(b), and thus §§ 1.381(c)(4)–1(b)(3) and (c) and §§ 1.381(c)(5)–1(b)(3) and (c) will not apply.

(5) Final year of trade or business . If, in the year of change, a taxpayer requesting a change in method of accounting ceases to engage in the trade or business to which the change in accounting method relates or terminates its existence, as described in section 5.04(3)(c) of this revenue procedure. For purposes of this section 4.02(5), a taxpayer is treated as ceasing to engage in the trade or business or terminating its existence without regard to whether the taxpayer’s change in method of accounting re

ment of the item is included in the statutory notice of deficiency, the notice of claim disallowance, the notice of final administrative adjustment, the pleadings (for example, the petition, complaint, or answer) or amendments thereto, or is specifically identified in writing to the taxpayer by the counsel for the government. If a settlement stipulation that includes a method of accounting for an item that is an issue under consideration is submitted to the Joint Committee on Taxation pursuant to § 6405, that method of accounting continues to be an issue under consideration by the federal court while the settlement stipulation is under review by the Joint Committee on Taxation.

(4) Certain foreign corporations . In the case of a controlled foreign corporation (CFC) as defined in § 953(c)(1)(B) or § 957 or a noncontrolled section 902 corporation as defined in § 904(d)(2)(E) (10/50 corporation), a foreign corporation’s method of accounting for an item is an issue under consideration if any of the corporation’s controlling domestic shareholders receives notification described in section 3.09(1), (2) or (3) that the treatment of a distribution or deemed distribution from the foreign corporation, or the amount of its earnings and profits or foreign taxes deemed paid, is an issue under consideration.

.10 Change within the LIFO inventory method . A change within the LIFO inventory method is a change from one LIFO inventory method or sub-method to another LIFO inventory method or sub-method. A change within the LIFO inventory method does not include a change in method of accounting that could be made by a taxpayer that does not use the LIFO inventory method (for example, a method governed by § 471 or § 263A).

.11 Director . The term “director” has the same meaning as this term has in Rev. Proc. 2011–1, 2011–1 I.R.B. 1 (or successor).