SECTION 18. SPECIAL RULES FOR

LONG-TERM CONTRACTS (§ 460)

.01 Change to percentage-of-completion method (PCM) .

(1) Description of change . This change applies to a taxpayer that wants to, or is required to, change its method of accounting for its long-term contracts as defined in § 460(f) to the percentage-ofcompletion method described in § 1.460– 4(b) (the PCM). (2) Inapplicability . This change does not apply in the first taxable year a taxpayer must begin use of the PCM to account for long-term construction contracts because it does not meet the gross receipts test in § 1.460–3(b)(3) (the first taxable year). The taxpayer must generally use the PCM to account for long-term construction contracts entered into during the first taxable year and any subsequent taxable year the taxpayer does not meet the gross receipts test in § 1.460–3(b)(3). The taxpayer must continue to use its present method of accounting for long-term contracts in progress as of the beginning of the first taxable year. Use of the PCM in the first taxable year is not a change in method of accounting, and, therefore, does not require the Commissioner’s consent ( see Rev. Rul. 92–28, 1992–1 C.B. 153). A taxpayer who fails to use the PCM for the first taxable year may amend its return for that year prior to failing to use the PCM for the succeeding taxable year. A taxpayer who fails to use the PCM for the first taxable year and the succeeding

February 2, 2015 534 Bulletin No. 2015–5

taxable year is within the scope of this section 18.01.

(3) Manner of making change . This change is made on a cut-off basis and applies only to long-term contracts entered into on or after the beginning of the year of change. Accordingly, a § 481(a) adjustment is neither permitted nor required.

(4) No audit protection . A taxpayer does not receive audit protection under section 8.01 of Rev. Proc. 2015–13, 2015–5 I.R.B. 419, in connection with this change. See section 8.02(2) of Rev. Proc. 2015–13. (5) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 18.01 is “41.” (6) Contact information . For further information regarding a change under this section, contact Lore Cavanaugh at (202) 317-7006 (not a toll-free number). .02 Reserved .