SECTION 1. PURPOSE

Section 13543 of “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” Pub. L. 115–97 (the Act) added § 481(d) to the Internal Revenue Code (Code). Section 481(d) provides rules relating to adjustments required by § 481(a)(2) that are attributable to certain revocations of S corporation elections under § 1362(a). This revenue procedure modifies Rev. Proc. 2018–31, 2018–22 I.R.B. 637, to reflect the statutory amendments made by the Act. Specifically, this revenue procedure requires an eligible terminated S corporation, as defined in § 481(d)(2), that is required to change from the overall cash receipts and disbursements method of accounting (cash method) to an overall accrual method of accounting (accrual method) as a result of a revocation of its S corporation election, and that makes this change in method of accounting for the C corporation’s first taxable year after such revocation, to take into account the resulting positive or negative adjustment required by § 481(a)(2) ratably during the six-year period beginning with the year of change. This revenue procedure also provides that an eligible terminated S

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corporation that is permitted to continue to use the cash method after the revocation of its S corporation election and that changes to an overall accrual method for the C corporation’s first taxable year after such revocation, may take into account the resulting positive or negative adjustment required by § 481(a)(2) ratably during the six-year period beginning with the year of change.