Part III. — Internal Revenue Bulletin 2017-15

PROPOSED REVENUE PROCEDURE FOR REQUESTING CONSENT TO CHANGE A METHOD OF ACCOUNTING WHERE THE CHANGE IS MADE AS A RESULT OF, OR DIRECTLY RELATED TO, THE ADOPTION OF NEW FINANCIAL ACCOUNTING STANDARDS, “REVENUE FROM CONTRACTS WITH CUSTOMERS.”

Notice 2017–17

PURPOSE

This notice invites comments on a proposed revenue procedure that, if finalized, will provide procedures by which a taxpayer may request consent to change a method of accounting for recognizing income when the change is made for the same taxable year for which the taxpayer adopts the new financial accounting revenue recognition standards and the change is made as a result of, or directly related to, the adoption of the new revenue recognition standards (a qualifying same-year method change).

BACKGROUND

On May 28, 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) jointly announced new financial accounting standards for recognizing revenue (new standards), titled “Revenue from Contracts with Customers.” See FASB Update No. 2014–09 and IASB International Financial Reporting Standard (IFRS) 15.

The new standards are effective for publicly-traded entities, certain not-forprofit entities, and certain employee benefit plans for annual reporting periods beginning after December 15, 2017. For all other entities, the new standards are effective for annual reporting periods beginning after December 15, 2018. Early adoption is allowed for reporting

periods beginning after December 15, 2016. See FASB Update No. 2015–14, “Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date.”

Since the joint announcement, FASB and IASB have revised the new standards and provided guidance on how to implement the new standards in certain situations. See, e.g., FASB Update No. 2015–14; FASB Update No. 2016–10, “Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing.”

On June 15, 2015, the Department of Treasury (Treasury Department) and the Internal Revenue Service (IRS) published Notice 2015–40, 2015–24 I.R.B. 1057, which requested comments on federal tax accounting issues related to the adoption of the new standards, including, whether the new standards are permissible methods of accounting for federal income tax purposes, the types of accounting method change requests that might result from adopting the new standards, and whether the current procedures for obtaining IRS consent to change a method of accounting are adequate to accommodate those requests. Very few comments were received. Some commenters requested additional time to respond and others reported that, as a result of adopting the new standards, taxpayers might request multiple changes in accounting method. This notice addresses only the procedures for obtaining IRS consent to a qualifying same-year method change. The Treasury Department and the IRS continue to invite comments on issues of conformity between the new standards and the Internal Revenue Code (Code) and the Treasury Regulations (Regulations), and are considering addressing these issues in separate guidance.

Qualifying same-year method changes may include automatic changes for which existing guidance, including Revenue Procedure 2015–13, 2015–1 I.R.B. 419, and Revenue Procedure 2016–29, 2016–21 I.R.B. 880, already provides automatic change procedures. Taxpayers requesting consent for automatic changes for which existing guidance already provides automatic change procedures must use the exist

ing automatic change procedures to make a request. For qualifying same-year method changes for which existing guidance does not provide automatic change procedures but which comply with § 451 of the Code or other guidance regarding the taxable year of inclusion of income, the taxpayer must make the change under the proposed revenue procedure.

REQUEST FOR COMMENTS ON ISSUES OF CONFORMITY BETWEEN THE NEW STANDARDS AND THE CODE AND REGULATIONS

Adoption of the new standards may create or increase differences between financial accounting and tax accounting rules. The Treasury Department and the IRS recognize that there is interest in clarifying whether the new standards are permissible methods of accounting that may be used for federal income tax purposes. Accordingly, the Treasury Department and the IRS continue to seek comments on the specific issues identified in Notice 2015–40 regarding conformity between the new standards and the Code and the Regulations. Comments are specifically requested on the following issues:

To what extent would using the new standards for federal income tax purposes result in acceleration or deferral of income under § 451 or other income provisions of the Code?
What industry and/or transactionspecific issues might arise as a result of the new standards that may need to be addressed in future guidance?
To what extent do the new standards deviate from the requirements of § 451? In what situations should the IRS allow taxpayers who adopt the new standards to follow their book method of accounting for tax purposes (for example, where income is always accelerated)?
To what extent do the rules regarding allocation of standalone sales price and transaction price in the new standards affect taxpayers’ ability to satisfy their tax obligations?

Bulletin No. 2017–15 1073 April 10, 2017

REQUEST FOR COMMENTS ON PROCEDURES FOR METHOD CHANGES

This notice sets forth proposed procedures for obtaining IRS consent to a qualifying same-year method change. In connection with this notice, the Treasury Department and the IRS request comments on all aspects of the proposed procedures and on the specific method change issues identified in Notice 2015– 40. Comments are specifically requested on the following issues:

Is the exception for small businesses in paragraph 5.02(2) of the proposed revenue procedure appropriate?
What types of changes in methods of accounting do taxpayers anticipate requesting?
Do taxpayers anticipate requesting changes in methods of accounting prior to the effective dates of the new standards?
Which procedures should taxpayers be required to use to request permission for a qualifying same-year method change, the automatic accounting method change procedures or the advance consent procedures?
What changes, other than those described in Section 5 of the proposed revenue procedure, do taxpayers expect will be requested in the year the taxpayer adopts the new financial standards, and should they be allowed as automatic changes?
What related accounting method changes do taxpayers anticipate requesting that may appropriately be made on a single Form 3115?
If multiple changes are requested on a single Form 3115, should the taxpayer report a separate § 481 adjustment for each change and should those adjustments be netted and a single spread period applied?
What alternatives to filing a Form 3115 would reduce the burden of compliance?
What transition procedures may be helpful?
What additional procedural changes would be appropriate and helpful?

WHERE TO SEND COMMENTS

Comments must be submitted by July 26, 2017. Comments, identified by Notice 2017–17, may be submitted using one of the following methods:

By Mail: Internal Revenue Service Attn: CC:PA:LPD:PR (Notice 2017–17) Room 5203 P.O. Box 7602 Ben Franklin Station Washington, D.C. 20044
By Hand or Courier Delivery: Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: Courier’s Desk Internal Revenue Service Attn: CC:PA:LPD:PR (Notice 2017–17) 1111 Constitution Avenue, N.W. Washington, D.C. 20224
Electronic: Alternatively, persons may submit comments electronically to Notice.Comments@irscounsel.treas.gov. Please include “Notice 2017–17” in the subject line of any electronic communications. All submissions will be available for public inspection and copying in room 1621, 1111 Constitution Avenue, N.W., Washington, D.C., from 9 a.m. to 4 p.m.

PROPOSED REV. PROC. [2017–XX]