SECTION 6. GENERAL — Internal Revenue Bulletin 2011-4

PROCEDURES

.01 Consent . Pursuant to § 1.446–1(e)(2)(i), the consent of the Commissioner is hereby granted to any taxpayer within the scope of this revenue procedure to change its method(s) of accounting as described in the APPENDIX to this revenue procedure for the requested year of change. Such consent is granted only for the change(s) in method

To Certain Foreign Corporations, during the adjustment period; and

(8) In the case of any disposition of stock of the foreign corporation that is owned directly or indirectly by a United States person if the disposition (i) represents ten percent or more of the total value of the stock of the foreign corporation, or (ii) results in the person no longer meeting the stock ownership requirements of § 6046(a)(2) with respect to the foreign corporation, then the foreign corporation must take into account, prior to the disposition, the remaining balance of the § 481(a) adjustment in computing its subpart F income under § 952 and earnings and profits under §§ 964 and 986(b). This condition also applies if the foreign corporation issues stock so that either of the situations applies to the United States person. This condition does not apply to any change in ownership of the foreign corporation if the stock disposed of continues to be owned, directly or indirectly, by a member of the U.S. consolidated group of which the former shareholder is a member.

.07 Foreign division of a domestic cor- poration taxpayer . If the change in method of accounting is on behalf of a foreign division of a domestic corporation, the following additional terms and conditions apply:

(1) If the functional currency of the division is not the U.S. dollar, the § 481(a) adjustment must be stated in the functional currency of the division and not in U.S. dollars;

(2) A positive § 481(a) adjustment necessary to prevent the duplication of an expense item must take the same source, separate limitation classification, and character as the foreign division’s gross income that was offset by the expense in the prior year or years. A positive § 481(a) adjustment necessary to prevent the omission of amounts of an income item must take the same source, separate limitation classification, and character as the foreign division’s income would have had in the prior year or years. A negative § 481(a) adjustment necessary to prevent the omission of amounts of an expense item is allocated to the class of gross income that has the same source, separate limitation classification, and character as the division’s income that would have been offset by the expense in the prior year or years. A negative § 481(a) adjustment necessary to prevent the duplication

of amounts of an income item offsets gross income that has the same source, separate limitation classification, and character as the foreign division’s income had in the prior year or years;

(3) For each taxable year of the adjustment period beginning with the year of change, the appropriate amount of the § 481(a) adjustment must be taken into account in computing the taxable income of the taxpayer;

(4) The taxpayer must maintain records and accounts of the foreign division, for the year of change and for subsequent taxable years, in conformity with the method of accounting granted to the taxpayer. This condition is considered satisfied if taxpayer reconciles the results obtained under the method used in keeping foreign division’s books and records and the method used for federal income tax purposes and maintains sufficient records to support such reconciliation; and

(5) Taxpayer complies with its obligation to file Form 926, Return by a U.S. Transferor of Property to a Foreign Corpo- ration, with respect to a transfer of assets of the foreign division to a foreign corporation during the adjustment period;

.08 Foreign partnerships . If the change in method of accounting is made by a foreign partnership, the following additional terms and conditions apply:

(1) If the functional currency of the foreign partnership is not the U.S. dollar, the § 481(a) adjustment must be stated in the functional currency of the foreign partnership and not in U.S. dollars;

(2) A positive § 481(a) adjustment necessary to prevent the duplication of an expense item must take the same source, separate limitation classification, and character as the foreign partnership’s gross income that was offset by the expense in the prior year or years. A positive § 481(a) adjustment necessary to prevent the omission of amounts of an income item must take the same source, separate limitation classification, and character as the foreign partnership’s income would have had in the prior year or years. A negative § 481(a) adjustment necessary to prevent the omission of amounts of an expense item is allocated to the class of gross income that has the same source, separate limitation classification, and character as the foreign partnership’s income that would have been offset

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(i) Original application . The original application must be attached to the taxpayer’s timely filed (including any extension) original federal income tax return implementing the change in method of accounting for the year of change; and

(ii) Copy of application .

(A) National office copy of appli- cation . Except as provided in section 6.02(3)(a)(ii)(B), a copy of the application (with the original signature or a photocopy of the original signature) must be filed with the national office (national office copy) no earlier than the first day of the year of change and no later than the date the taxpayer files the original with the federal income tax return for the year of change. For the national office copy of Form 3115, the taxpayer need only include the pages containing Parts I through IV, any applicable schedule(s), and required attachments. See section 6.02(7)(a) of this revenue procedure for the address for the national office copy.

(B) Ogden copy of application in lieu of the national office copy. Some sections of the APPENDIX of this revenue procedure require a copy of the application (with the original signature or a photocopy of the original signature) to be filed with the IRS in Ogden, UT (Ogden copy), instead of with the national office. In these cases, the signed copy must be filed with the Ogden office no earlier than the first day of the year of change and no later than the date the taxpayer files the original with the federal income tax return for the year of change. See, e.g., sections 6.01, 6.02, 6.04, and 9.01 of the APPENDIX of this revenue procedure. For the Ogden copy of Form 3115, the taxpayer need only include the pages containing Parts I through IV, any applicable schedule(s), and required attachments. See section 6.02(7)(b) of this revenue procedure for the address for the Odgen copy.

(b) Certain foreign corporations . In the case of a controlled foreign corporation as defined in section 953(c)(1)(B) or 957(a) (“CFC”) or a noncontrolled section 902 corporation as defined in section 904(d)(2)(E) that is not required to file a federal income tax return, the controlling domestic shareholders (as defined in § 1.964–1(c)(5)) that want to change the foreign corporation’s method of accounting pursuant to the provisions of

of accounting and the affected item(s) that are clearly and expressly identified in the taxpayer’s application. See section 6.02(1)(c) of this revenue procedure. Further, such consent is granted only to the extent that the taxpayer complies with all the applicable provisions of this revenue procedure and implements the change in method of accounting on its federal income tax return for the requested year of change to which the original application is attached pursuant to section 6.02(3) of this revenue procedure. In the case of a CFC or 10/50 corporation that does not file a federal income tax return, the CFC or 10/50 corporation implements the change in method of accounting for the requested year of change and the controlling domestic shareholder(s) reflect the change in method of accounting on their federal income tax return(s), as applicable, for the year with or within which ends the CFC’s or 10/50 corporation’s year of change.

.02 Filing requirements .

(1) Applications .

(a) Form . Ordinarily, a taxpayer applies for consent to change a method of accounting pursuant to this revenue procedure or other guidance published in the IRB by completing and filing a current Form 3115. In some cases, however, the provisions of this revenue procedure applicable to a particular change require or allow a taxpayer to file a statement in lieu of a Form 3115 as an application for consent to make such change. See, for example, section 14.10 of the APPENDIX of this revenue procedure.

(b) Separate applications .

(i) In general . Ordinarily, a taxpayer must submit a separate application for each change in method of accounting.

(ii) Single application for two or more changes . In some cases, the provisions of this revenue procedure or other guidance published in the IRB applicable to particular changes in method of accounting require or allow a taxpayer to file a single application for two or more concurrent changes. See, for example, section 14.03 of the APPENDIX of this revenue procedure.

When the taxpayer is required or allowed to file a single Form 3115 for two or more concurrent changes, the taxpayer must attach to the single Form 3115 the information required by Part II, line 12, and

Part IV, line 25 (including the amount of any § 481(a) adjustment), of Form 3115 for each change in method of accounting included on that single Form 3115. Also attach an explanation for any other line(s) on the single Form 3115 where the taxpayer’s answer is different for any of the concurrent changes to which the single Form 3115 relates.

(c) Contents . The taxpayer must submit an application that is accurate and complete as to all information required by this revenue procedure. Further, unless this revenue procedure provides that a Form 3115 is not required for the requested change in method of accounting, the taxpayer must submit a current Form 3115 that contains all information required by the applicable portions of the Form 3115 and its instructions.

For example, an application must identify the taxpayer making the change; the year of change (both the beginning and ending dates); the designated automatic accounting method change number(s) for the requested change(s) in method of accounting; and the amount of the adjustment under § 481(a), unless the change is required to be made using a cut-off basis. Also, the application must fully describe the item(s) being changed; the present method(s) of accounting from which the taxpayer is changing and the proposed method(s) of accounting to which the taxpayer is changing. Further, unless a Form 3115 is not required for the requested change in method of accounting, the taxpayer must provide all other information required by Parts I, II, and IV, and any applicable schedule(s) on the Form 3115.

(2) Waiver of taxable year filing requirement . The requirement under § 1.446–1(e)(3)(i) to file a Form 3115 within the taxable year for which the change is requested is waived for any application for a change in method of accounting filed pursuant to this revenue procedure. See § 1.446–1(e)(3)(ii).

(3) Timely duplicate filing require- ments .

(a) In general . A taxpayer changing a method of accounting pursuant to this revenue procedure must complete and file an application in duplicate, except as otherwise provided in this revenue procedure.

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at the top of the first page of the statement, directly above the taxpayer’s name and employer identification number (or social security number in the case of an individual). For example, enter the number “125” for the change in method of accounting identified in section 14.10 of the APPENDIX of this revenue procedure at the top of the first page of the statement, directly above the taxpayer’s name and employer identification number (or social security number in the case of an individual).

In general, a taxpayer may enter only one designated automatic accounting method change number on an application. However, where this revenue procedure or other guidance published in the IRB specifically permits two or more particular changes in method of accounting to be made on a single application, a taxpayer must enter the designated automatic accounting method change number for each such particular change being requested on the application.

The designated automatic accounting method change numbers are provided in the APPENDIX of this revenue procedure and in other guidance published in the IRB. See also Instructions for Form 3115.

(5) Signature requirements . The national office copy, or if applicable, the Ogden copy, of the application must be signed by, or on behalf of, the taxpayer requesting the change in method of accounting by an individual who has personal knowledge of the facts and authority to bind the taxpayer (or if section 6.02(3)(b) of this revenue procedure applies, the designated shareholder) in such matters. For example, an officer must sign on behalf of a corporation, a general partner on behalf of a state law partnership, a member-manager on behalf of a limited liability company, a trustee on behalf of a trust, or an individual taxpayer on behalf of a sole proprietorship. If the taxpayer (or the designated shareholder) is a member of a consolidated group, an application submitted on behalf of the taxpayer must be signed by a duly authorized officer of the common parent. See the signature requirements set forth in section 6.02(3)(a)(ii) of this revenue procedure and in the current Instructions for Form 3115 regarding those who are to sign.

(6) Authorized representative . If an agent is authorized to represent the tax

this revenue procedure must satisfy the requirements set forth in § 1.964–1(c)(3). The designated shareholder who retains the jointly executed consent described in § 1.964–1(c)(3)(ii) must complete and file an application in duplicate on behalf of the foreign corporation. An original application must be attached to the designated shareholder’s (or its common parent’s) timely filed (including any extension) original federal income tax return for its taxable year with or within which ends the year of change of the foreign corporation, and a copy (with the original signature or a photocopy of the original signature) of the application must be filed with the national office (or, if applicable, with the IRS in Ogden, UT) (see section 6.02(7) of this revenue procedure for the national office copy or Ogden copy address) no earlier than the first day of the year of change and no later than the date the designated shareholder (or its common parent) files the original with the designated shareholder’s (or its common parent’s) federal income tax return for its taxable year with or within which ends the year of change of the foreign corporation. Each other controlling domestic shareholder (or its common parent) must also attach a copy of the application to its federal income tax return filed for its taxable year with or within which ends such year of change.

(c) Additional copies required for a tax- payer under examination, before an ap- peals office, or before a federal court . If the taxpayer is under examination (as defined in section 3.08 of this revenue procedure), or before an appeals office or a federal court (including a taxpayer to which section 3.09(2) and (3) of this revenue procedure applies), with respect to any income tax issue, in all cases the taxpayer (or if section 6.02(3)(b) of this revenue procedure applies, the designated shareholder) must provide an additional copy of the application to the examining agent(s), appeals officer(s) and counsel to the government, as applicable, no later than the date the taxpayer files the national office copy or, if applicable, the Ogden copy, of the application.

(d) Limited relief for late application .

(i) Automatic extension . An automatic extension of 6 months from the due date of the return for the year of change (excluding any extension) is granted to file an ap

plication, provided the taxpayer (or if section 6.02(3)(b) of this revenue procedure applies, the designated shareholder):

(A) timely filed (including any extension) its federal income tax return for the year of change;

(B) files an amended return within the 6-month extension period in a manner that is consistent with the new method of accounting;

(D) files a copy of the application with the national office, or, if applicable, with the IRS in Ogden, UT, no later than when the original is filed with the amended return; and

(E) attaches a statement to the application that the application is being filed pursuant to § 301.9100–2(b) of the Procedure and Administration Regulations.

(ii) Other extensions . A taxpayer (or if section 6.02(3)(b) of this revenue procedure applies, the designated shareholder) that fails to file the application for the year of change as provided in section 6.02(3)(a), (b), or (d)(i) of this revenue procedure will not be granted an extension of time to file under § 301.9100, except in unusual and compelling circumstances. See § 301.9100–3(c)(2) and Rev. Proc. 2011–1 (or successor).

(4) Designated automatic accounting method change number . The taxpayer (or if section 6.02(3)(b) of this revenue procedure applies, the designated shareholder) must type or clearly print the designated automatic accounting method change number for the requested change in method of accounting on the application. When the requested change in method of accounting is made using Form 3115, the taxpayer must enter the designated automatic accounting method change number for the requested change on the appropriate line on the Form 3115. For example, a taxpayer requesting the change in method of accounting identified in section 1.01 of the APPENDIX of this revenue procedure for the year ending December 31, 2010, must enter the number “91” on Line 1(a) of Form 3115. When the requested change in method of accounting is made using a statement in lieu of Form 3115 the taxpayer must enter the designated automatic accounting method change number for the requested change in method of accounting

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payer before the Service, receive a copy of the correspondence concerning the application, or perform any other act(s) regarding the application filed on behalf of the taxpayer, a power of attorney reflecting such authorization(s) must be attached to the national office copy, or if applicable, the Ogden copy, of the application and to any additional required copy. It is preferred that Form 2848, Power of Attor- ney and Declaration of Representative, be used to provide the representative’s authority and qualification. A taxpayer’s representative without a power of attorney to represent the taxpayer as required in this section 6.02(6) of this revenue procedure will not be given any information regarding the application.

(7) Where to file copy . (a) National office copy of application . (i) For a taxpayer other than an exempt organization, the national office copy of the application must be addressed to the Internal Revenue Service, Attn: CC:ITA

Automatic Rulings Branch, P.O. Box 7604, Benjamin Franklin Station, Washington, D.C. 20044 (or, in the case of a designated private delivery service: Internal Revenue Service, Attn: CC:ITA Automatic Rulings Branch, 1111 Constitution Avenue, NW, Room 5336, Washington, D.C. 20224).

(ii) For an exempt organization, the national office copy of the application must be addressed to the Internal Revenue Service, Tax Exempt & Government Entities, P.O. Box 2508, Cincinnati, OH 45201 (or, in the case of a designated private delivery service: Internal Revenue Service, Tax Exempt & Government Entities, 550 Main Street, Room 4024, Cincinnati, OH 45202). (iii) For a taxpayer other than an exempt organization, the national office copy of the application may also be hand delivered between the hours of 8:00 a.m. and 4:00 p.m. to the courier’s desk at the loading dock (located behind the 12 ^th Street security station) of 1111 Constitution Avenue, NW, Washington, D.C. A receipt will be given at the courier’s desk. The copy of the application must be addressed to the Courier’s Desk, Internal Revenue Service, Attn: CC:PA:LPD:DRU, Room 5336, 1111 Constitution Avenue, NW, Washington, D.C. 20224.

(b) Ogden copy of application in lieu of the national office copy . The Ogden copy of the application, when applicable, must be addressed to: Internal Revenue Service, 1973 North Rulon White Blvd., Mail Stop 4917, Ogden, UT 84404. This Ogden copy is in lieu of the national office copy. See section 6.02(3)(a)(ii)(B) of this revenue procedure.

(8) No acknowledgement of receipt . Except as provided in section 6.02(7)(a)(iii) of this revenue procedure, the Service does not send an acknowledgement of the receipt of an application (original or copy) filed under this revenue procedure.

(9) No user fee . A user fee is not required for an application filed under this revenue procedure.

(10) Single application for certain tax- payers . Certain taxpayers (or if section 6.02(3)(b) of this revenue procedure applies, certain designated shareholders) may file a single application for an identical change in method of accounting on behalf of two or more of its separate and distinct trades or businesses, two or more members of a consolidated group, two or more controlled foreign corporations (CFCs), or two or more noncontrolled section 902 corporations (10/50 corporations). See sections 9.02 and 15.07(4) of Rev. Proc. 2011–1 (or successor).

.03 Taxpayer under examination .

(1) In general . Except as otherwise provided in the APPENDIX of this revenue procedure (see, for example, section 2.01 of the APPENDIX of this revenue procedure), a taxpayer that is under examination (as provided in section 3.08 of this revenue procedure) may file an application to change a method of accounting under this revenue procedure only if the taxpayer is within the provisions of section 6.03(2) (90-day window), 6.03(3) (120-day window), 6.03(4) (consent of director), 6.03(5) (changes lacking audit protection), 6.03(6) (issue pending), 6.04 (issue under consideration by an appeals office), or 6.05 (issue under consideration by a federal court) of this revenue procedure. A taxpayer (or if section 6.02(3)(b) of this revenue procedure applies, the designated shareholder) that files an application beyond the time periods provided in the 90-day and 120-day windows is not eligible for the automatic extension of time

and will not be granted an extension of time to file under § 301.9100, except in unusual and compelling circumstances.

(2) 90-day window period . A taxpayer (or if section 6.02(3)(b) of this revenue procedure applies, the designated shareholder) may file a copy of the application with the national office or, if applicable with the Ogden office, to change a method of accounting under this revenue procedure during the first 90-days of any taxable year (the 90-day window) if the taxpayer has (or in the case of a taxpayer that is a CFC or 10/50 corporation, all of its controlling domestic shareholders that are under examination have) been under examination for at least 12 consecutive months as of the first day of the taxable year. This 90-day window is not available if the method of accounting the taxpayer is changing is an issue under consideration at the time the taxpayer (or designated shareholder) would otherwise file the copy of the application or an issue the examining agent(s) has placed in suspense at the time the taxpayer (or designated shareholder) would otherwise file the copy of the application. See section 6.02(3)(c) of this revenue procedure for more information regarding the requirement to file a copy of the application with the examining agent.

(3) 120-day window period . Except as provided in section 3.08(1)(c) of this revenue procedure, a taxpayer (or if section 6.02(3)(b) of this revenue procedure applies, the designated shareholder) may file a copy of the application with the national office or, if applicable with the Ogden office, to change a method of accounting under this revenue procedure during the 120-day period following the date an examination of the taxpayer (or in the case of a taxpayer that is a CFC or 10/50 corporation, of each of its controlling domestic shareholders that were under examination) ends (the 120-day window), regardless of whether a subsequent examination has commenced. This 120-day window is not available if the method of accounting the taxpayer is changing is an issue under consideration at the time the taxpayer (or designated shareholder) would otherwise file a copy of the application or an issue the examining agent(s) has placed in suspense at the time the taxpayer (or designated shareholder) would otherwise file a copy of the application. See section 6.02(3)(c)

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of this revenue procedure for more information regarding the requirement to file a copy of the application with the examining agent.

(4) Consent of director . (a) A taxpayer under examination may change its method of accounting under this revenue procedure if the director consents to the filing of the application. The director will consent to the filing of the application unless, in the opinion of the director, the method of accounting to be changed would ordinarily be included as an item of adjustment in the year(s) for which the taxpayer is under examination. For example, the director will consent to the filing of an application to change from a clearly permissible method of accounting, or from an impermissible method of accounting where the impermissible method was adopted subsequent to the years under examination. The director’s consent is limited to the director’s consent to file the application and does not constitute the director’s agreement to, or approval of, the requested change in method of accounting. The question of whether the method of accounting from which the taxpayer is changing is permissible or was adopted subsequent to the years under examination may be referred to the national office as a request for technical advice under the provisions of Rev. Proc. 2011–2 (or successor).

(b) A taxpayer changing a method of accounting under this revenue procedure with the consent of the director (or if section 6.02(3)(b) of this revenue procedure applies, the designated shareholder) must attach to the copy of the application filed with the national office or, if applicable with the Ogden office, a statement from the director consenting to the filing of the application. In addition, the taxpayer (or designated shareholder) must attach to its original application attached to its federal income tax return a statement certifying that it has obtained the written consent of the director to the filing of the application and that the taxpayer (or designated shareholder) will maintain a copy of such consent available for inspection. See section 6.02(3)(c) of this revenue procedure for more information regarding the requirement to file a copy of the application with the examining agent.

(5) Changes lacking audit protection . A taxpayer under examination may change its method of accounting under this revenue procedure if the description of the change in the APPENDIX of this revenue procedure provides that the change is not subject to the audit protection provisions of section 7 of this revenue procedure. See section 6.02(3)(c) of this revenue procedure for more information regarding the requirement to file a copy of the application with the examining agent.

(6) Issue Pending . 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 of this revenue procedure do not apply to a taxpayer changing its method of accounting under this section 6.03(6). For purposes of this section 6.03(6), an issue is pending for a taxable year under examination if the Service has given the taxpayer (or if section 6.02(3)(b) of this revenue procedure applies, any controlling domestic shareholder of a CFC or 10/50 corporation) written notification indicating an adjustment is being made or will be proposed with respect to the taxpayer’s method of accounting. This notification by the Service may result from an inquiry by the Joint Committee on Taxation. This notification normally will occur after the Service or the Joint Committee on Taxation 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. See section 6.02(3)(c) of this revenue procedure for more information regarding the requirement to file a copy of the application with the examining agent.

.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 (or if section 6.02(3)(b) of this revenue procedure applies, a CFC or 10/50 corporation with a controlling domestic shareholder that is before an appeals office with respect to any income tax issue) may request a change in method of accounting. Further, a taxpayer not otherwise within the scope of this revenue

procedure by reason of section 4.02(1), (2), or (3) that is before an appeals office with respect to any income tax issue (or if section 6.02(3)(b) of this revenue procedure applies, a CFC or 10/50 corporation with a controlling domestic shareholder that is before an appeals office with respect to any income tax issue) may request a change in method of accounting if the method to be changed is an issue under consideration by the appeals office. However, the audit protection provisions of section 7 of this revenue procedure do not apply if the method of accounting to be changed is an issue under consideration by the appeals office. See section 6.02(3)(c) of this revenue procedure for more information regarding the requirement to file a copy of the application with the appeals officer.

.05 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 (or if section 6.02(3)(b) of this revenue procedure applies, a CFC or 10/50 corporation with a controlling domestic shareholder that is before a federal court with respect to any income tax issue) may request a change in method of accounting. Further, a taxpayer not otherwise within the scope of this revenue procedure by reason of section 4.02(1), (2), or (3) that is before a federal court with respect to any income tax issue (or if section 6.02(3)(b) of this revenue procedure applies, a CFC or 10/50 corporation with a controlling domestic shareholder that is before a federal court with respect to any income tax issue) may request a change in method of accounting if the method to be changed is an issue under consideration by the federal court. However, the audit protection provisions of section 7 of this revenue procedure do not apply if the method of accounting to be changed is an issue under consideration by the federal court. See section 6.02(3)(c) of this revenue procedure for more information regarding the requirement to file a copy of the application with the counsel(s) for the government.

.06 Compliance with provisions . If a taxpayer to which this revenue procedure applies changes to a method of accounting without complying with all the applicable provisions of this revenue procedure (for example, the taxpayer changes to a

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(5) the taxpayer to whom consent was granted acted in good faith in relying on the consent, and applying the change or modification retroactively would be to the taxpayer’s detriment.