New IRS guidance: accounting method changes & research credit eligibility.

• Author: Josephs, Stuart R.
• Position: FedTax

Rev. Proc. 2015-13 updates and revises general procedures under IRC Sec. 446(e) and Regs. Sec. 1.446-1(e) to obtain IRS advance (non-automatic) consent to change an accounting method for income tax purposes. It also provides procedures to obtain the IRS' automatic consent to change an accounting method described in Rev. Proc. 2015-14 (or successor), which contains a list of 31 automatic changes.

Both revenue procedures were published in IRB 2015-5, Feb. 2, 2015.

Effective Dates

These revenue procedures are effective, generally, for Forms 3115, "Application for Change in Accounting Method," filed after Jan. 15, 2015, for a year of change ending after May 30, 2014--subject to various transition rules.

Effect on Other Documents

Rev. Proc. 2015-13, in conjunction with Rev. Proc. 2015-14, generally supersedes Rev. Proc. 2015-14, relating to automatic changes (but certain parts of Section 14 thereof remain in effect).

Rev. Proc. 97-27, pertaining to non-automatic changes is superseded.

Sec. 481(a) Adjustments

The Sec. 481(a) adjustment period, generally, is one tax year (year of change) for a negative Sec. 481(a) adjustment and four tax years (year of change and next three tax years) for a positive adjustment. Generally, a positive adjustment must be taken into account ratably over the Sec. 481(a) adjustment period.

However, this adjustment period is two tax years (year of change and next tax year) for a positive Sec. 481(a) adjustment for an accounting method change requested when a taxpayer is under examination unless:

* The change is filed in a three-month or 120-day window;

* The present method is not before the "director" [defined in Rev. Proc. 2015-1, Section 1.01(3)]; or

* The applicant is a new member of a consolidated group participating in the Compliance Assurance Process.

But, if the director corrects a Sec. 481(a) adjustment, the director may take the entire amount necessary to correct the adjustment into account for the earliest tax year in the Sec. 481(a) adjustment period that is under examination, regardless of whether the statute of limitations has expired for one or more tax years in the adjustment period.

Other Changes

Rev. Proc. 2015-13, Sections 8.02(1)(c), 8.02(1) (e) and 8.02(1)(f) modify the rules for when a taxpayer, under examination, tiling a Form 3115 may receive audit protection outside of a window period replacing the previous requirement that the taxpayer acquire the director's statement consenting to the Form 3115...