SECTION 5. PROCEDURE

.01 A taxpayer with a separate and distinct trade or business that meets the applicability requirements of section 4.01 of this revenue procedure (“taxpayer”) may change a method of accounting for that trade or business to an accounting method described in section 6.37(3)(a)(iv), (a)(v), (a)(vii), (a)(viii), 6.38, 6.39, or 10.11(3)(a) of Rev. Proc. 2015–14, as modified by this revenue procedure, with an adjustment under section § 481(a) that takes into account only amounts paid or incurred, and dispositions, by that trade or business in taxable years beginning on or after January 1, 2014. If the taxpayer calculates the § 481(a) adjustment in such manner for that applicable trade or business, the requirement in section 6.03(1) of Rev. Proc. 2015–13 (or any successor) to complete and file a Form 3115 for the applicable trade or business is waived for the taxpayer’s first taxable year beginning on or after January 1, 2014, for a change in method of accounting made under section 6.37(3)(a)(iv), (a)(v), (a)(vii), (a)(viii), 6.38, 6.39, or 10.11(3)(a) of Rev. Proc. 2015–14, as modified by this revenue procedure. Accordingly, the taxpayer is permitted to make these changes on its federal tax return for such taxable year without including a separate Form 3115 or separate statement for its applicable trades or businesses.

.02 Section 10.11 of Rev. Proc. 2015–14 is modified by adding a new paragraph (6)(b)(iii) to read as follows:

(iii) Small business exception . A taxpayer meeting the scope requirements of Rev. Proc. 2015–20, 2015–09 I.R.B. 694, and changing its method of accounting under this section 10.11(3)(a) may calculate a § 481(a) adjustment as of the first day of the taxpayer’s year of change that takes into account only amounts paid or incurred in taxable years beginning on or after January 1, 2014. However, a taxpayer using this option must also calculate the § 481(a) adjustment as of the first day of the taxpayer’s year of change that takes into account only dispositions in taxable years beginning on or after January 1, 2014, for any change made under section 6.37(3)(a)(iv), (a)(v), (a)(vii), or (a)(viii), section 6.38, or section 6.39 of this revenue procedure. In addition, a taxpayer calculating a § 481(a) adjustment under this paragraph (6)(b)(iii) that takes into account only amounts paid or incurred in

taxable years beginning on or after January 1, 2014, does not receive audit protection under section 8.01 of Rev. Proc. 2015–13 for amounts subject to a change under this section 10.11(3)(a) that are paid or incurred in taxable years beginning before January 1, 2014. The requirement in section 6.03(1) of Rev. Proc. 2015–13 to complete and file a Form 3115 is waived for a taxpayer’s first taxable year that begins on or after January 1, 2014, for a change in method of accounting made under this section 10.11(3)(a) if the taxpayer calculates a § 481(a) adjustment under this paragraph (6)(b)(iii) that takes into account only amounts paid or incurred in taxable years beginning on or after January 1, 2014.

.03 Section 6.37 of Rev. Proc. 2015–14 is modified by adding a new paragraph (4)(f):

(f) A taxpayer meeting the scope requirements of Rev. Proc. 2015–20, 2015–09 I.R.B. 694, and changing its method of accounting under this section 6.37(3)(a)(iv), (a)(v), (a)(vii), or (a)(viii) may calculate a § 481(a) adjustment as of the first day of the taxpayer’s year of change that takes into account only dispositions in taxable years beginning on or after January 1, 2014. However, a taxpayer using this option must also use sections 6.38(7)(b) and 6.39(6)(b) of this revenue procedure to calculate a § 481(a) adjustment for any change made under section 6.38 or 6.39 of this revenue procedure and must use section 10.11(6)(b)(iii) of this revenue procedure to calculate a § 481(a) adjustment for any change made under section 10.11(3)(a) of this revenue procedure. In addition, a taxpayer calculating a § 481(a) adjustment under this paragraph (4)(f) that takes into account only dispositions in taxable years beginning on or after January 1, 2014, does not receive audit protection under section 8.01 of Rev. Proc. 2015–13 (or any successor) for dispositions subject to a change under this section 6.37(3)(a)(iv), (a)(v), (a)(vii), or (a)(viii) in taxable years beginning before January 1, 2014. The requirement in section 6.03(1) of Rev. Proc. 2015–13 (or any successor) to complete and file a Form 3115 is waived for a taxpayer’s first taxable year that begins on or after January 1, 2014, for a change in method of accounting made under this section 6.37(3)(a)(iv), (a)(v), (a)(vii), or (a)(viii) if the taxpayer calculates a § 481(a) ad

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justment pursuant to this paragraph (4)(f) that takes into account only dispositions in taxable years beginning on or after January 1, 2014.

.04 Section 6.38 of Rev. Proc. 2015–14 is modified by replacing paragraph 7 (Section 481(a) adjustment) with the following:

(7) Section 481(a) adjustment . (a) A taxpayer changing its method of accounting under this section 6.38 may use statistical sampling in determining the § 481(a) adjustment by following the guidance provided in Rev. Proc. 2011–42, 2011–37 I.R.B. 318. (b) A taxpayer meeting the scope requirements of Rev. Proc. 2015–20, 2015–09 I.R.B. 694, and changing its method of accounting under this section 6.38 may calculate a § 481(a) adjustment as of the first day of the taxpayer’s year of change that takes into account only dispositions in taxable years beginning on or after January 1, 2014. However, a taxpayer using this option must also use sections 6.37(4)(f) and 6.39(6)(b) of this revenue procedure to calculate a § 481(a) adjustment for any change made under section 6.37(3)(a)(iv), (a)(v), (a)(vii), or (a)(viii) or section 6.39 of this revenue procedure and must use section 10.11(6)(b)(iii) of this revenue procedure to calculate a § 481(a) adjustment for any change made under section 10.11(3)(a) of this revenue procedure. In addition, a taxpayer calculating a § 481(a) adjustment under this paragraph (7)(b) that takes into account only dispositions in taxable years beginning on or after January 1, 2014, does not receive audit protection under section 8.01 of Rev. Proc. 2015–13 for dispositions subject to a change under this section 6.38 in taxable years beginning before January 1, 2014. The requirement in section 6.03(1) of Rev. Proc. 2015–13 to complete and file a Form 3115 is waived for a taxpayer’s first taxable year that begins on or after January 1, 2014, for a change in method of accounting made under this section 6.38 if the taxpayer calculates a § 481(a) adjustment pursuant to this paragraph (7)(b) that takes into account only dispositions in taxable years beginning on or after January 1, 2014.

.05 Section 6.39 of Rev. Proc. 2015–14 is modified by replacing paragraph 6 (Section 481(a) adjustment) with the following:

(6) Section 481(a) adjustment .

(a) A taxpayer changing its method of accounting under this section 6.39 may use statistical sampling in determining the § 481(a) adjustment by following the guidance provided in Rev. Proc. 2011–42, 2011–37 I.R.B. 318. (b) A taxpayer meeting the scope requirements of Rev. Proc. 2015–20, 2015–09 I.R.B. 694, and changing its method of accounting under this section 6.39 may calculate a § 481(a) adjustment as of the first day of the taxpayer’s year of change that takes into account only dispositions in taxable years beginning on or after January 1, 2014. However, a taxpayer using this option also must use sections 6.37(4)(f) and 6.38(7)(b) of this revenue procedure to calculate a § 481(a) adjustment for any change made under section 6.37(3)(a)(iv), (a)(v), (a)(vii), or (a)(viii) or section 6.38 of this revenue procedure and must use section 10.11(6)(b)(iii) of this revenue procedure to calculate a § 481(a) adjustment for any change made under section 10.11(3)(a) of this revenue procedure. In addition, a taxpayer calculating a § 481(a) adjustment pursuant to this paragraph (6)(b) that takes into account only dispositions in taxable years beginning on or after January 1, 2014, does not receive audit protection under section 8.01 of Rev. Proc. 2015–13 for dispositions subject to a change under this section 6.39 in taxable years beginning prior to January 1, 2014. The requirement in section 6.03(1) of Rev. Proc. 2015–13 to complete and file a Form 3115 is waived for a taxpayer’s first taxable year that begins on or after January 1, 2014, for a change in method of accounting made under this section 6.39 if the taxpayer calculates a § 481(a) adjustment pursuant to this paragraph (6)(b) that takes into account only dispositions in taxable years beginning on or after January 1, 2014.

.06 Section 6.33(1)(b) of Rev. Proc. 2015–14 is modified by deleting “or” at the end of paragraph (iii), replacing “.” with “;or” at the end of paragraph (iv), and adding new paragraphs (v) and (vi):

(v) A taxpayer within the scope requirements of Rev. Proc. 2015–20, 2015–09 I.R.B. 694, and that calculated a § 481(a) adjustment as of the first day of the taxpayer’s year of change that took into account only dispositions in taxable years beginning on or after January 1, 2014, for any change in method of accounting provided in section 6.37(3)(a)(iv), (a)(v), (a)(vii), or (a)(viii),

section 6.38, or section 6.39 of this revenue procedure; or

(vi) A taxpayer within the scope requirements of Rev. Proc. 2015–20, 2015–09 I.R.B. 694, and that calculated a § 481(a) adjustment as of the first day of the taxpayer’s year of change that took into account only amounts paid or incurred in taxable years beginning on or after January 1, 2014, for any change of method of accounting provided in section 10.11(3)(a) of this revenue procedure.