IRS Publishes Revised Procedure for Automatic Consent of Accounting Method ChangesSeptember 23, 2008 — 1,901 views
The IRS has published sweeping guidance (Rev. Proc. 2008-52) providing new procedures by which a taxpayer may obtain automatic consent to change to a different method of accounting. The revenue procedure clarifies, modifies, amplifies and supersedes Rev. Proc. 2002-9. However, under transition relief offered in Announcement 2008-84, taxpayers can generally use Rev. Proc. 2002-9 through Sept. 15, 2008.
The revenue procedure updates the rules for obtaining automatic consent. It updates what constitutes a “complete application,” makes modifications to scope limitations and revises how to implement a change on a cut-off basis. In addition to consolidating automatic method change procedures that were published after the publication of Rev. Proc. 2002-9, the revenue procedure provides several additional changes in accounting method for which a taxpayer may obtain automatic consent.
Examples of accounting method changes made automatic by Rev. Proc. 2008-52 include the following:
- Changes to certain UNICAP and inventory methods;
- Changes for lessor improvements abandoned at termination of a lease;
- Changes for accounting for disposed, depreciable repairable and reusable spare parts;
- Changes from the cash method to the accrual method for specific items;
- Changes to the overall cash method for “specified transportation industry taxpayers”;
- Treatment of “retainages” under Section 451;
- Certain changes relating to the treatment of Section 467 rent;
- Changes relating to deductions for rebates and allowances under Section 461;
- Changes relating to deductions for self-insured medical benefits; and
- Changes relating to employee bonuses and vacation pay.
Rev. Proc. 2008-52 is effective for applications filed on or after Aug. 18, 2008, for a year of change ending on or after Dec. 31, 2007. If a taxpayer filed a nonautomatic accounting method change, which is now automatic under Rev. Proc. 2008-52, and if that method change request is still pending with the IRS National Office, the taxpayer has the option to request that the IRS National Office treat the request as an automatic method change request. This request must be made prior to the earlier of Sept. 18, 2008, or the date the consent agreement is issued by the IRS.
Taxpayers should familiarize themselves with the new rules to properly identify opportunities to file automatic accounting method changes. Specifically, taxpayers who planned to file nonautomatic accounting method changes for the current tax year should consider whether such a change can now be made for an earlier year under the automatic consent provisions. Additionally, those taxpayers with pending nonautomatic accounting method changes should consider the advantages of converting a pending nonautomatic change to an automatic method change.
The information contained herein is general in nature and based on authorities that are subject to change. It is not intended and should not be construed as legal, accounting or tax advice or opinion provided by Grant Thornton LLP to the reader. This material may not be applicable to or suitable for specific circumstances or needs and may require consideration of nontax and other tax factors. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Grant Thornton LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, re-keying or using any information storage and retrieval system without written permission from Grant Thornton LLP.
Tax professional standards statement
This document supports the marketing of professional services by Grant Thornton LLP. It is not written tax advice directed at the particular facts and circumstances of any person. Persons interested in the subject of this document should contact Grant Thornton or their tax advisor to discuss the potential application of this subject matter to their particular facts and circumstances. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed. To the extent this document may be considered written tax advice, in accordance with applicable professional regulations, unless expressly stated otherwise, any written advice contained in, forwarded with, or attached to this document is not intended or written by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code.
David Auclair Principal
National Tax Office
E [email protected]
Grant Thornton LLP