Updated procedures for changing accounting methods and new automatic method changes.

• Author: Salza, John

On January 10, 2011, the IRS released Rev. Proc. 2011-14, which provides the exclusive procedures for taxpayers to obtain automatic consent for a change in method of accounting. Generally effective immediately, Rev. Proc. 2011-14 amplifies, clarifies, modifies, and supersedes Rev. Proc. 2008-52, the previous exclusive revenue procedure for all automatic consent accounting method changes, and Rev. Proc. 2009-39, which updated Rev. Proc. 2008-52. The most significant aspects of Rev. Proc. 2011-14 are the addition of three new automatic method changes and numerous changes to existing procedural rules for filing changes in methods of accounting.

Background

Sec. 446(e) provides that a taxpayer must secure IRS consent before changing a method of accounting for federal income tax purposes. To obtain consent, a taxpayer must file a Form 3115, Application for Change in Accounting Method, under either the automatic or nonautomatic consent procedures. In general, a taxpayer that qualifies to use the automatic consent procedures must file a Form 3115 under the timely duplicate filing requirements; that is, the original Form 3115 must be attached to the taxpayer's timely filed (including extensions) federal income tax return for the year of change, and a copy of the Form 3115 must be filed with the IRS National Office no earlier than the first day of the year of change and no later than the filing date of that return. If a method change is not specifically identified as an automatic consent change, the taxpayer is required to file a Form 3115 under Rev. Proc. 97-27. A nonautomatic Form 3115 must be filed with the IRS National Office on or before the last day of the year of change.

New Automatic Method Changes

Rev. Proc. 2011-14 introduces the following three new automatic method changes:

* Deduction for energy-efficient commercial buildings under Sec. 179D: This change permits a taxpayer to change its method of accounting to deduct under Sec. 179D amounts paid or incurred for the installation of energy-efficient commercial building property.

* Change in applicable financial statements for advance payments: This change applies to a taxpayer that uses the one-year deferral method of Rev. Proc. 2004-34 to include advance payments in gross income in accordance with its applicable financial statements and that changes the manner in which advance payments are recognized in revenue for financial reporting purposes. If the taxpayer wants to change its tax...