SECTION 11. REVIEW BY

NATIONAL OFFICE

.01 Incomplete Form 3115 . (1) Requests for additional informa- tion . If the national office determines that a Form 3115 filed under this revenue procedure is not properly completed ( see SECTION 6.02), or if supplemental information is needed, the national office will notify the taxpayer. The notification will specify the information that the taxpayer needs to provide and permit the taxpayer 21 calendar days (in the case of a nonautomatic change) or 30 calendar days (in the case of an automatic change) from the date of the notification to furnish the information. The national office may impose shorter reply periods for any subsequent requests for additional information. See also section 9.08 of Rev. Proc. 2015–1 (or successor). (2) Extension of time to provide addi- tional information . The national office may grant a taxpayer an extension of the 21-day or 30-day reply period to furnish information, not to exceed 15 calendar days (in the case of a non-automatic change) or 30 calendar days (in the case of an automatic change). A taxpayer must request any extension of the reply period in writing and submit it to the national office person who requested the additional information within the initial reply period. If the national office denies an extension request, there is no right of appeal. See

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section 9.08(2) of Rev. Proc. 2015–1 (or successor).

(3) Failure to provide additional infor- mation . If the national office determines that the taxpayer failed to provide additional information on a timely basis, the national office will notify the taxpayer that the Form 3115 will no longer be considered (in the case of a non-automatic change) or consent to make the change in method of accounting is not granted (in the case of an automatic change).

.02 National office discretion to deny a request . The national office will deny any Form 3115 requesting consent to make a change in method of accounting in any situation in which the national office determines that permitting the requested change in method of accounting would not clearly reflect income or would otherwise not be in the interest of sound tax administration. As part of this determination, the national office will consider whether the change in method of accounting would clearly and directly frustrate compliance efforts of the IRS in administering the income tax laws. The national office will consider all the facts and circumstances and exercise discretion under §§ 446(e) and 481(c) in a manner that generally minimizes distortions of income across taxable years, as well as on an annual basis.

(1) Final year of a trade or business . The national office will not grant consent to a taxpayer to change its method of accounting or the method of accounting for a trade or business under the nonautomatic change procedures for the taxable year the taxpayer ceases to engage in that trade or business unless the taxpayer demonstrates compelling circumstances for the need to change its method of accounting or that the change in method of accounting is in the interest of sound tax administration. A change in method of accounting to facilitate a planned or pending business acquisition or other change in ownership in the year of change where the acquiring taxpayer or new owner(s) is not required to use the taxpayer’s method of accounting, other than as described in SECTION 3.04(3), 3.04(4), or 3.04(5), is an example of circumstances that the national office ordinarily will not consider compelling.

(2) National office consideration of prior (requested) changes for the same item .

(a) Prior change in method of account- ing implemented .

(i) In general . If within the five taxable years ending with the requested year of change, the taxpayer changed its method of accounting for the same item, the national office will consider the taxpayer’s explanation for requesting consent to again change its method of accounting for that same item in determining whether to grant consent for the current request to change the taxpayer’s method of accounting.

(ii) Limitation on LIFO inventory method of accounting change . If within the five taxable years ending with the requested year of change, the taxpayer previously changed from the LIFO inventory method of accounting, the national office will not consent to the taxpayer readopting the LIFO inventory method of accounting unless the taxpayer demonstrates unusual and compelling circumstances as part of its Form 3115 requesting a change to the LIFO inventory method of accounting.

(b) Prior method of accounting re- quests . If within the five taxable years ending with the requested year of change, the taxpayer withdrew or failed to perfect, or the Commissioner denied, a prior request for consent for a change in method of accounting, the taxpayer did not return a signed Consent Agreement copy of a letter ruling, or the taxpayer did not implement a change in method of accounting for which the Commissioner granted consent, and the taxpayer files a Form 3115 under the non-automatic change procedures requesting consent to change the same item, the national office will consider the taxpayer’s explanation for withdrawing or not perfecting the previous request(s), not returning the Consent Agreement, or not implementing the approved change in determining whether to grant consent for the current request for consent to change the taxpayer’s method of accounting.

.03 National office determination . (1) Conference in the national office . If the national office tentatively determines that the taxpayer’s request for change in method of accounting filed under the au

tomatic change procedure does not comply with all the applicable provisions for an automatic change (for example, the taxpayer changed to a method of accounting that varies from the applicable accounting method described in the List of Automatic Changes or the taxpayer is not eligible to use the automatic change procedures for the requested change) or that a request to change a method of accounting filed under the non-automatic change procedures may be denied, the national office will notify the taxpayer of its tentative adverse determination and will offer the taxpayer a conference if the taxpayer requested one. For conference procedures for a taxpayer other than an exempt organization, see section 10 of Rev. Proc. 2015–1 (or successor). For conference procedures for an exempt organization, see section 12 of Rev. Proc. 2015–4, 2015–1 I.R.B. 144 (or successor). (2) Letter ruling and Consent Agree- ment .

(a) In general . Unless otherwise specifically provided, for a Form 3115 filed under the non-automatic change procedures, the national office will set forth the Commissioner’s grant or denial of the taxpayer’s request for the Commissioner’s consent in a letter ruling. If the letter ruling grants the Commissioner’s consent, it will identify the item or items being changed, the terms and conditions under which the taxpayer must implement the change, and the § 481(a) adjustment (if any). See §§ 1.446–1(e)(3) and 1.481–4. If the taxpayer agrees to the terms and conditions in the letter ruling, the taxpayer must sign and date a copy of the letter ruling (Consent Agreement copy). The signed Consent Agreement copy is an agreement (Consent Agreement) within the meaning of § 1.481–4(b). The taxpayer must return the Consent Agreement to the address provided in the letter ruling within 45 calendar days of the date of the letter ruling. In addition, the taxpayer must attach a copy of the Consent Agreement to the taxpayer’s federal income tax return for the year of change, unless SECTION 11.03(2)(e) (letter ruling received after implementing change) applies. If SECTION 11.03(2)(e) applies, the taxpayer must comply with section 7.04(2) of Rev. Proc. 2015–1 (or successor) and attach a copy of the pending Form 3115 or

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permitted statement to the taxpayer’s federal income tax return for the year of change. See also, SECTIONS 6.03(3)(b) and 6.03(3)(c) for certain foreign corporations and foreign partnerships. See gen- erally section 9.17 of Rev. Proc. 2015–1 (or successor).

(b) Signature requirements . The Consent Agreement must be signed by, or on behalf of, the taxpayer making the request. The individual(s) signing the Consent Agreement must have the authority to bind the taxpayer in such matters and the Consent Agreement may not be signed by the taxpayer’s representative.

(c) Consent Agreement copy not signed or change not timely or properly imple- mented . The letter ruling granting consent to the taxpayer for a change in method of accounting is null and void without IRS notification to the taxpayer, except where notification is specifically provided in this SECTION 11.03(2)(c), if:

(i) The taxpayer does not sign and return the Consent Agreement copy within 45 calendar days of the date of the letter ruling (or other date as extended in SECTION 11.03(2)(d) or by the national office). In this situation, the national office will notify the taxpayer that the letter ruling granting consent to the taxpayer to change its method of accounting is null and void; or

(ii) The taxpayer timely returns the Consent Agreement but does not implement the change in method of accounting for which consent is granted in the letter ruling for the year of change specified in the letter ruling on the taxpayer’s timely filed (including any extension) original federal income tax return for the year of change specified in the letter ruling, or on the taxpayer’s amended federal income tax return for the year of change specified in the letter ruling by the later of:

(A) the due date of the taxpayer’s timely filed (including any extension) original federal income tax return for the taxable year succeeding the year of change specified in the letter ruling; or

(B) one year from the date of the letter ruling granting consent for the change. However, when the period of limitations on the assessment of tax under § 6501 (statute of limitations under § 6501) for the year of change specified in the letter ruling will expire within one year of the

date of issuance of the letter ruling, the applicable date for this SECTION 11.03(2)(c)(ii)(B) is the date that the statute of limitations under § 6501 for the specified year of change expires.

The national office will grant additional time to implement the change in method of accounting for the year of change only if, and to the extent, the taxpayer demonstrates, in writing, that additional time is necessary, as long as the national office does not determine that granting additional time would be contrary to the interest of sound tax administration.

(d) Disagreement with terms and con- ditions . If the taxpayer disagrees with the terms and conditions in the letter ruling, within 45 calendar days from the date of the letter ruling, the taxpayer must notify the national office, in writing to the address in the letter ruling, of the disagreement and include an explanation of the reason(s). The national office will consider the reason(s) for the disagreement and notify the taxpayer whether the original letter ruling will be modified. If the national office does not modify the letter ruling, it will so notify the taxpayer and give the taxpayer 15 calendar days from the date of the notification to accept the original letter ruling by signing and returning the Consent Agreement copy. In applying the preceding sentence, the provisions of SECTIONS 11.03(2)(a) through (c) apply, except 15 calendar days is substituted for 45 calendar days in SECTIONS 11.03(2)(a) and 11.03(2)(c)(i).

(e) Letter ruling received after imple- menting change . A taxpayer that timely files a Form 3115 under the non-automatic change procedures and takes the requested change in method of accounting into account in its federal income tax return for the year of change (and any subsequent taxable year) prior to receiving a letter ruling granting consent for that change has made a change in method of accounting without obtaining the consent of the Commissioner as required by § 446(e) (an “unauthorized change”). As provided in SECTION 12.02, the Director may determine when a change is not made in compliance with all the applicable provisions and may deny the unauthorized change. However, the Commissioner’s consent, issued subsequent to the requested year of

change, applies back to the year of change (and any subsequent taxable year) as of the date of a letter ruling granting consent for that change if the taxpayer timely signs and returns the Consent Agreement copy and implements the change in accordance with all the applicable provisions and section 11 of Rev. Proc. 2015–1 (or successor). If the Commissioner does not grant consent under this revenue procedure for the change in method of accounting taken into account by the taxpayer, the taxpayer is subject to any interest, penalties, or other adjustments resulting from improper implementation of the change. See § 446(f).

(3) Consent not granted for an auto- matic change .

(a) In general . Except as provided in SECTIONS 11.03(1) and 11.03(3)(b), if the national office determines that a taxpayer filed a Form 3115 requesting consent to make an automatic change without complying with all the applicable provisions for an automatic change, the national office will notify the taxpayer that consent to make the change in method of accounting is not granted. In no event will a Form 3115 filed under the automatic change procedures be treated as a Form 3115 filed under the non-automatic change procedures.

(b) Exception . If the national office determines that a taxpayer filed a Form 3115 requesting consent to make an automatic change without complying with all the applicable provisions for an automatic change, the national office, in its discretion, may allow the taxpayer to (a) make appropriate adjustments to conform its Form 3115 to comply with all the applicable provisions, and (b) make conforming amendments to any federal income tax returns filed for the year of change and subsequent taxable years. Any Form 3115 changed under this SECTION 11.03(3)(b) is subject to review by the director as provided in SECTION 12.