[Federal Register Volume 62, Number 94 (Thursday, May 15, 1997)]
[Rules and Regulations]
[Pages 26740-26741]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12514]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 301 and 601

[TD 8719]
RIN 1545-AU41 and 1545-AV19


Requirements Respecting the Adoption or Change of Accounting 
Method; Extensions of Time To Make Elections

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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SUMMARY: This document contains temporary regulations relating to the 
procedure for requesting a change in accounting method and to the 
standards for granting an extension of time to request a change in 
accounting method. The regulations provide for a longer period of time 
for filing an application for change in accounting method with the 
Commissioner. The regulations also provide that an extension of time to 
file an application for change in accounting method will be granted 
only in unusual and compelling circumstances. The regulations affect 
taxpayers requesting a change in method of accounting for federal 
income tax purposes. The text of these temporary regulations also 
serves as the text of the proposed regulations set forth in the notice 
of proposed rulemaking on this subject in the Proposed Rules section of 
this issue of the Federal Register.

DATES: These regulations are effective May 15, 1997.
    For dates of applicability of these regulations, see Secs. 1.446-
1T(e)(3)(iii), 301.9100-1T(h) and 601.204T(e) of these regulations.

FOR FURTHER INFORMATION CONTACT: Cheryl L. Oseekey at (202) 622-4970 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains amendments to the Regulations on Income 
Taxes (26 CFR part 1), the Regulations on Procedure and Administration 
(26 CFR part 301), and the Statement of Procedural Rules (26 CFR part 
601) relating to the requirements for changes in method of accounting 
and extensions of time to make elections. Proposed and temporary 
regulations relating to extensions of time to make elections were 
published in the Federal Register for June 27, 1996 (61 FR 29714 and 61 
FR 33365). These regulations extend the time for filing an application 
for change in accounting method under Sec. 1.446-1(e)(3)(i) and amend 
Secs. 301.9100-1T and 301.9100-3T to provide that an extension of time 
to file an application for change in accounting method beyond the year 
provided in these regulations will be granted only in unusual and 
compelling circumstances.

Explanation of Provisions

    Section 446(e) requires that a taxpayer obtain the Commissioner's 
consent before changing a method of accounting. Sections 1.446-
1(e)(3)(i) and 601.204(b) require the taxpayer to file a Form 3115, 
Application for Change in Accounting Method, with the Commissioner 
within the first 180 days of the taxable year in which the taxpayer 
desires to make the change. Sections 301.9100-1T and 301.9100-3T 
provide limited relief for extending the time to file a Form 3115 (not 
to exceed 90 days from the deadline for filing the Form 3115 except in 
unusual and compelling circumstances).
    Sections 1.446-1(e)(3)(i) and 601.204(b) are amended to provide 
that a taxpayer must file a Form 3115 with the Commissioner during the 
taxable year in which the taxpayer desires to make the change in method 
of accounting. Taxpayers are encouraged to file the Form 3115 as early 
as possible during the year of change to provide the IRS adequate time 
to process the application prior to the original due date of the 
taxpayer's return.
    In addition, Secs. 301.9100-1T and 301.9100-3T are amended to 
provide that an extension of time to file a Form 3115 (i.e., beyond the 
taxable year) will only be granted in unusual and compelling 
circumstances.
    These amendments are effective for Forms 3115 filed on or after May 
15, 1997.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It also has been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
does not apply to these regulations. Sections 1.446-1(e)(3)(i) and 
601.204(b) require a taxpayer to file a Form 3115, Application for 
Change in Accounting Method, with the Commissioner within the first 180 
days of the taxable year in which the taxpayer desires to make the 
change. The temporary regulations in this document, Secs. 1.446-
1T(e)(3)(i) and 601.204T(b), merely extend the time for filing the Form 
3115 and, therefore, do not contain a new collection of information. 
Thus, because the regulations do not impose a collection of information 
on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) 
does not apply. Pursuant to section 7805(f) of the Internal Revenue 
Code, these temporary regulations will be submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on their impact on small business.

Drafting Information

    The principal author of these regulations is Cheryl L. Oseekey of 
the Office of Assistant Chief Counsel (Income Tax and Accounting). 
However, other personnel from the IRS and Treasury Department 
participated in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, ncome 
taxes, Penalties, Reporting and recordkeeping requirements.

[[Page 26741]]

26 CFR Part 601

    Administrative practice and procedure, Freedom of information, 
Reporting and recordkeeping requirements, Taxes.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 1, 301, and 601 are amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805. * * *

    Par. 2. Section 1.446-1, paragraph (e)(3)(i) is amended by adding a 
sentence at the end of the paragraph to read as follows:


Sec. 1.446-1  General rule for methods of accounting.

* * * * *
    (e)(3) * * * For any Form 3115 filed on or after May 15, 1997, see 
Sec. 1.446-1T(e)(3)(i)(B).
    Par. 3. Section 1.446-1T is added to read as follows:


Sec. 1.446-1T  General rule for methods of accounting (temporary).

    (a) through (d) [Reserved] For further guidance, see Sec. 1.446-1 
(a) through (d).
    (e) Requirement respecting the adoption or change of accounting 
method.
    (1) and (2) [Reserved] For further guidance, see Sec. 1.446-1(e) 
(1) and (2).
    (3)(i)(A) [Reserved] For further guidance, see Sec. 1.446-
1(e)(3)(i).
    (B) For any Form 3115 filed on or after May 15, 1997, permission to 
change a taxpayer's method of accounting will not be granted unless the 
taxpayer agrees to the Commissioner's prescribed terms and conditions 
for effecting the change, including the taxable year or years in which 
any adjustment necessary to prevent amounts from being duplicated or 
omitted is to be taken into account.
    (ii) and (iii) [Reserved] For further guidance, see Sec. 1.446-
1(e)(3) (ii) and (iii).

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 4. The authority citation for part 301 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805. * * *

    Par. 5. In Sec. 301.9100-1T, paragraph (h) is amended by adding a 
sentence at the end of the paragraph to read as follows:


Sec. 301.9100-1T  Extensions of time to make elections (temporary).

* * * * *
    (h) * * * In addition, Sec. 301.9100-3T(c)(2)(i) is effective for 
any Form 3115 filed on or after May 15, 1997.
    Par. 6. In Sec. 301.9100-3T, paragraph (c)(2)(i) is revised to read 
as follows:


Sec. 301.9100-3T  Other extensions (temporary).

* * * * *
    (c) * * *
    (2) * * *
    (i) Subject to the procedure described in Sec. 1.446-1T(e)(3)(i) of 
this chapter (requiring the advance written consent of the 
Commissioner);
* * * * *

PART 601--STATEMENT OF PROCEDURAL RULES

    Par. 7. The authority citation for part 601 continues to read as 
follows:

    Authority: 26 U.S.C. 301 and 552, unless otherwise noted.

    Par. 8. Section 601.204, paragraph (b) is amended by adding a 
sentence at the end of the paragraph to read as follows:


Sec. 601.204  Changes in accounting periods and in methods of 
accounting.

* * * * *
    (b) * * * For any Form 3115 filed on or after May 15, 1997, see 
Sec. 601.204T(b)(2).
    Par. 9. Section 601.204T is added to read as follows:


Sec. 601.204T  Changes in accounting periods and in methods of 
accounting (temporary).

    (a) [Reserved] For further guidance, see Sec. 601.204(a).
    (b) Methods of accounting. (1) [Reserved] For further guidance, see 
Sec. 601.204(b).
    (2) For any Form 3115 filed on or after May 15, 1997, application 
for permission to change the method of accounting employed shall be 
made on Form 3115 and filed with the Commissioner during the taxable 
year in which the taxpayer desires to make the change in method of 
accounting. Permission to change the method of accounting will not be 
granted unless the taxpayer and the Commissioner agree to the terms and 
conditions under which the change will be effected.
    (c) and (d) [Reserved] For further guidance, see Sec. 601.204 (c) 
and (d).
Margaret Milner Richardson,
Commissioner of Internal Revenue.

    Approved: May 2, 1997.
Donald C. Lubick,
Assistant Secretary of the Treasury.
[FR Doc. 97-12514 Filed 5-14-97; 8:45 am]
BILLING CODE 4830-01-U