[Federal Register Volume 69, Number 115 (Wednesday, June 16, 2004)]
[Rules and Regulations]
[Pages 33571-33572]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13585]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9131]
RIN 1545-BB47
Administrative Simplification of Section 481(a) Adjustment
Periods in Various Regulations
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains amendments to regulations under
sections 263A and 448 of the Internal Revenue Code. The amendments
apply to taxpayers changing a method of accounting under the
regulations and are necessary to conform the rules governing those
changes to the rules provided in general guidance issued by the IRS for
changing a method of accounting. Specifically, the amendments will
allow taxpayers changing their method of accounting under the
regulations to take any adjustment under section 481(a) resulting from
the change into account over the same number of taxable years that is
provided in the general guidance.
DATES: Effective Date: These regulations are effective on or after June
16, 2004.
FOR FURTHER INFORMATION CONTACT: Christian Wood, 202-622-4930 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On May 12, 2003, the IRS and Treasury published in the Federal
Register (68 FR 25310) proposed amendments to the regulations (REG-
142605-02) under sections 263A and 448 of the Internal Revenue Code
(Code). These amendments pertain to the period for taking into account
the adjustment required under section 481 to prevent duplications or
omissions of amounts resulting from a change in method of accounting
under section 263A or 448. Neither public comments in response to the
proposed regulations nor any request to speak at a public hearing were
received. The proposed regulations under sections 263A and 448 are
adopted as revised by this Treasury decision.
The proposed regulations provided that they are applicable to
taxable years ending on or after the date those regulations are
published as final regulations. However, the proposed regulations
allowed taxpayers to rely on them for taxable years ending on or after
May 12, 2003, by filing a Form 3115, ``Application for Change in
Accounting Method,'' in the time and manner provided in the regulations
(in the case of a change in method of accounting under section 448) or
applicable administrative procedure (in the case of a change in method
of accounting under section 263A) for such a taxable year that reflects
a section 481 adjustment period that is consistent with the proposed
regulations. Taxpayers may continue to rely on the proposed regulations
for taxable years ending on or after May 12, 2003, but ending before
June 16, 2004.
[[Page 33572]]
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 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, and because
these 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, the
notice of proposed rulemaking preceding these regulations was submitted
to the Chief Counsel for Advocacy of the Small Business Administration
for comment on its impact on small business.
Drafting Information
The principal authors of these regulations are Christian Wood and
Grant Anderson of the Office of Associate Chief Counsel (Income Tax and
Accounting). However, other personnel from the IRS and Treasury
Department participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
0
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. In Sec. 1.263A-7, paragraph (b)(2)(ii) is revised to read as
follows:
Sec. 1.263A-7 Changing a method of accounting under section 263A.
* * * * *
(b) * * *
(2) * * *
(ii) Adjustment required by section 481(a). In the case of any
taxpayer required or permitted to change its method of accounting for
any taxable year under section 263A and the regulations thereunder, the
change will be treated as initiated by the taxpayer for purposes of the
adjustment required by section 481(a). The taxpayer must take the net
section 481(a) adjustment into account over the section 481(a)
adjustment period as determined under the applicable administrative
procedures issued under Sec. 1.446-1(e)(3)(ii) for obtaining the
Commissioner's consent to a change in accounting method (for example,
see Rev. Proc. 2002-9 (2002-1 C.B. 327) and Rev. Proc. 97-27 (1997-1
C.B. 680) (also see Sec. 601.601(d)(2) of this chapter)). This
paragraph applies to taxable years ending on or after June 16, 2004.
* * * * *
0
Par. 3. Section 1.448-1 is amended as follows:
0
1. Paragraphs (g)(2)(i) and (g)(3)(i) are revised.
0
2. Paragraphs (g)(3)(ii) and (g)(3)(iii) are removed.
0
3. Paragraph (g)(3)(iv) is redesignated as paragraph (g)(3)(ii) and the
introductory language is revised.
0
4. Paragraph (g)(6) is removed.
0
5. Paragraph (i)(1) is amended by removing the language ``and (4)'' and
adding ``(4), and (5)'' in its place.
0
6. Paragraph (i)(5) is added.
The revisions and addition read as follows:
Sec. 1.448-1 Limitation on the use of the cash receipts and
disbursements method of accounting.
* * * * *
(g) * * *
(2) * * *
(i) In general. Except as otherwise provided in paragraphs
(g)(2)(ii) and (g)(3) of this section, a taxpayer required by this
section to change from the cash method must take the net section 481(a)
adjustment into account over the section 481(a) adjustment period as
determined under the applicable administrative procedures issued under
Sec. 1.446-1(e)(3)(ii) for obtaining the Commissioner's consent to a
change in accounting method (for example, see Rev. Proc. 2002-9 (2002-1
C.B. 327) and Rev. Proc. 97-27 (1997-1 C.B. 680) (also see Sec.
601.601(d)(2) of this chapter)), provided the taxpayer complies with
the provisions of paragraph (h)(2) or (3) of this section for its first
section 448 year.
* * * * *
(3) * * *
(i) Cessation of trade or business. If the taxpayer ceases to
engage in the trade or business to which the section 481(a) adjustment
relates, or if the taxpayer operating the trade or business terminates
existence, and such cessation or termination occurs prior to the
expiration of the adjustment period described in paragraph (g)(2)(i) or
(ii) of this section, the taxpayer must take into account, in the
taxable year of such cessation or termination, the balance of the
adjustment not previously taken into account in computing taxable
income. For purposes of this paragraph (g)(3)(i), the determination as
to whether a taxpayer has ceased to engage in the trade or business to
which the section 481(a) adjustment relates, or has terminated its
existence, is to be made under the principles of Sec. 1.446-
1(e)(3)(ii) and its underlying administrative procedures.
(ii) De minimis rule for a taxpayer other than a cooperative.
Notwithstanding paragraph (g)(2)(i) and (ii) of this section, a
taxpayer other than a cooperative (within the meaning of section
1381(a)) that is required to change from the cash method by this
section may elect to use, in lieu of the adjustment period described in
paragraph (g)(2)(i) and (ii) of this section, the adjustment period for
de minimis section 481(a) adjustments provided in the applicable
administrative procedure issued under Sec. 1.446-1(e)(3)(ii) for
obtaining the Commissioner's consent to a change in accounting method.
A taxpayer may make an election under this paragraph (g)(3)(ii) only if
--
* * * * *
(i) * * *
(5) Effective date of paragraph (g)(2)(i). Paragraph (g)(2)(i) of
this section applies to taxable years ending on or after June 16, 2004.
Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
Approved: June 1, 2004.
Gregory F. Jenner,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 04-13585 Filed 6-15-04; 8:45 am]
BILLING CODE 4830-01-P