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IRS issues update to accounting method change procedures

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Tax Hot TopicsThe IRS on June 1 released guidance that modifies general procedures for changing a method of accounting.  Rev. Proc. 2015-33 changes certain provisions of Rev. Proc. 2015-13, which includes the general procedural guidance for filing automatic and nonautomatic changes in methods of accounting under Section 446. Rev. Proc. 2015-13, which was released along with Rev. Proc. 2015-14 earlier this year, provides a comprehensive update to the procedures formerly found in Rev. Procs. 2011-14 and 97-27.

Rev. Proc. 2015-33 modifies the transition rules of Rev. Proc. 2015-13 to increase the time for filing Form 3115, “Application for Change in Accounting Method,” under Rev. Proc. 2011-14.  

The transition rule in Rev. Proc. 2015-13 allowed taxpayers to use either the procedures in Rev. Proc. 2015-13 or the older procedures under Rev. Proc. 2011-14. Rev. Proc. 2015-33 modified the transition rule to include all fiscal year taxpayers with tax years ending on or after May 31, 2014, and beginning on or before Jan. 1, 2015, in the group of taxpayers allowed to file under the old procedures. Although this updated transition rule applies to all method changes, it is particularly important for taxpayers implementing the tangible property regulations, who are required to file method changes in their first taxable year beginning on or after Jan. 1, 2014.  

The tangible property regulation method changes in Rev. Proc. 2011-14 had waived all scope limitations. Additionally, the old procedures were generally more favorable to taxpayers, especially those under examination, who would typically file under the old procedures if given the choice. When automatic method changes are filed under the new transition rule using the old procedures, Rev. Proc. 2015-33 requires a duplicate of Form 3115 to be sent to the IRS Service Center in Ogden, Utah, even if Rev. Proc. 2011-14 directed the copy of that form to be sent to the IRS National Office in Washington, D.C.

The new revenue procedure also clarifies the eligibility requirement for taxpayers engaging in a Section 381 transaction during the year of change. The new rule is intended to exclude only taxpayers that are implementing the principal method as required under Treas. Reg. Secs. 1.381(c)(4)-1(d)(1) or 1.381(c)(5)-1(d)(1), and thus aren’t making a voluntary change.  

Rev. Proc. 2015-33 also clarifies the application of the new “three month rule” for taxpayers with a 52-53 week year end. Finally, Section 2 of Rev. Proc. 2015-33 provides a new address for filing changes in method of accounting that must be sent to the Ogden, Utah, service center.

Contacts
Sharon Kay
+1 202 861 4140
sharon.kay@us.gt.com

Ellen Martin
+1 202 521 1558
ellen.martin@us.gt.com

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