SECTION 2. BACKGROUND

.01 Section 13221 of the Tax Cuts and Jobs Act, Public Law 115-97, 131 Stat. 2054, 2113 (Dec. 22, 2017) (TCJA) made several changes to the timing of income for accrual method taxpayers by redesignating § 451(b) through (i) as § 451(d) through (k), and adding new § 451(b) and (c). New § 451(b) and (c) are generally effective for taxable years beginning after December 31, 2017. Section 451(b), as amended by the TCJA, generally provides that for an accrual method taxpayer the all events test with respect to any item of gross income (or portion thereof) shall not be treated as met any later than when such item (or portion thereof) is taken into account as revenue in an applicable financial statement (AFS) of the taxpayer, or such other financial statement as the Secretary may specify. Section 451(c), as amended by the TCJA, provides an elective deferral method of accounting for an accrual method taxpayer that receives an advance payment during the taxable year.

.02 Concurrently with the release of this revenue procedure, the Department of Treasury and the Internal Revenue Service are issuing proposed regulations under § 1.451-3 (REG-104870-18) and § 1.451-8 (REG-104554-18). The proposed regulations under § 1.451-3 provide rules relating to the taxable year of inclusion in gross income under § 451(b) for taxpayers with an AFS. The proposed regulations under § 1.451-8 provide rules relating to the use of the deferral method for advance payments within the meaning of § 451(c) for taxpayers with or without an AFS. These proposed regulations generally apply to taxable years beginning on or after the date the final regulations are published in the Federal Register. However, until the date the Treasury decision adopting

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proposed § 1.451-3 is published in the Federal Register, a taxpayer may rely on proposed § 1.451-3 for taxable years beginning after December 31, 2017 (or in the case of the specified credit card fees defined in proposed § 1.451-3(i)(2), for taxable years beginning after December 31, 2018). However, a taxpayer relying on proposed § 1.451-3 is neither required to, nor permitted to, apply proposed § 1.4513 to specified fees (as defined in proposed § 1.451-3(i)(2)) other than specified credit card fees. See proposed § 1.451-3(n). In addition, until the date the Treasury decision adopting proposed § 1.451-8 is published in the Federal Register, a taxpayer may rely on proposed § 1.451-8 for taxable years beginning after December 31, 2017. See proposed § 1.451-8(f). .03 Except as otherwise provided by the Code or the regulations, § 446(e) and § 1.446-1(e)(2) require a taxpayer to secure the consent of the Commissioner before changing a method of accounting for federal income tax purposes. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures that provide the terms and conditions necessary for a taxpayer to obtain consent to a change in method of accounting. Rev. Proc. 2015-13, 2015-5 I.R.B. 419, as clarified and modified by Rev. Proc. 201533, 2015-24 I.R.B. 1067, as modified by Rev. Proc. 2016-1, 2016-1 I.R.B. 1, and as modified by Rev. Proc. 2017-59, 201748 I.R.B. 543, provides the general procedures by which a taxpayer may obtain automatic consent of the Commissioner to a change in method of accounting described in the List of Automatic Changes. Rev. Proc. 2018-31 contains the current List of Automatic Changes.

.04 Rev. Proc. 2018-60, 2018-51 I.R.B. 1045, added section 16.12 to Rev. Proc. 2018-31 for taxpayers that want to change their method of accounting for the timing of the recognition of income for federal income tax purposes to comply with § 451(b) as amended by the TCJA. In general, Rev. Proc. 2018-60 provides procedures for taxable years beginning after December 31, 2017. Rev. Proc. 2018-60 permits certain taxpayers to make changes in method of accounting to comply with § 451(b) using streamlined method change procedures if the change results in a zero § 481(a) adjustment or if the taxpayer re

questing the change is a small business taxpayer, as defined in the guidance.

.05 Section 3 of this revenue procedure modifies Rev. Proc. 2018-31 to provide additional automatic changes in method of accounting for a taxpayer to change its method of accounting under § 451 to apply the proposed regulations under § 1.451-3 and/or § 1.451-8. Section 3 of this revenue procedure also modifies Rev. Proc. 2018-31 to provide an additional automatic change for a taxpayer that changes the manner in which it recognizes amounts in revenue in an AFS and that wants to change its method of accounting for federal income tax purposes.