Executory contract liabilities. This ruling provides guidance on when a taxpayer using an accrual method of accounting incurs a liability for services or insurance under section 461 of the Code.
Section 1274A - Inflation adjusted numbers for 2007. This ruling provides the dollar amounts, increased by the 2007 inflation adjustment, for section 1274A of the Code. Rev. Rul. 2005-76 supplemented and superseded.
This notice announces that the IRS and Treasury will amend regulations section 30l.7701-2(b)(8) to include a Bulgarian entity on the list of entities always treated as corporations under section 7701 of the Code.
This procedure supersedes Rev. Proc. 98-20, 1998-1 C.B. 549, and sets forth the acceptable form of the written assurances (certification) that a real estate reporting person must obtain from the seller of a principal residence to except the sale or exchange of such principal residence from the information reporting requirements for real estate transactions under section 6045(e)(5) of the Code. Rev. Proc. 98-20 superseded.
This document provides procedures by which a taxpayer may obtain automatic consent to change its method of accounting for services or insurance to comply with Rev. Rul. 2007-3, page , in this Bulletin. Rev. Proc. 2002-9 modified and amplified.
The IRS has revoked its determination that Corporate Responsibility Capital Partners, Inc., of Washington, DC; HR-57 Center for the Advancement and Preservation of Jazz and Blues of Washington, DC; National Association of Credit Counseling, Inc., of Ft. Myers, FL; and Personal Credit Assistance, Inc., of Sacramento, CA, qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Code.
This document provides an automatic consent procedure allowing a taxpayer to make a change in method of accounting for certain depreciable or amortizable property after its disposition, waives the two-year rule in Rev. Rul. 90-38 with respect to certain changes in depreciation or amortization, and modifies other revenue procedures to conform with regulations section 1.446-1(e)(2)(ii)(d). Rev. Procs. 2000-38, 2000-50, and 2002-9 modified. Rev. Proc. 2004-11 superseded.
This procedure, which supersedes Rev. Proc. 2005-12, 2005-1 C.B. 311, provides guidance that continues the existing Pre-Filing Agreement (PFA) program with only minor changes related to the processing of PFAs. Rev. Proc. 2005-12 superseded.
This document changes the location of the public hearing on proposed regulations (REG-127819-06, 2006-48 I.R.B. 1013) concerning the amendments made by the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) to section 199.
This document changes the location of the public hearing on proposed regulations (REG-136806-06, 2006-47 I.R.B. 950) relating to the standards for treating payments in lieu of taxes as generally applicable taxes for purposes of the private security or payment test.
This document changes the location of the public hearing on proposed regulations (REG-141901-05, 2006-47 I.R.B. 947) that provide guidance on taxation of the exchange of property for an annuity contract.
(1) Under § 461 of the Internal Revenue Code, when does a taxpayer using an accrual method of accounting incur a liability for services?
(2) Under § 461, when does a taxpayer using an accrual method of accounting incur a liability for insurance?
X is a corporation that uses an accrual method of accounting and files its federal income tax returns on a calendar year basis.
Situation 1. On December 15, 2006, X executes a contract with Y for the provision of services. The contract provides for services to begin on January 15, 2007, and end on January 31, 2007. Under the terms of the contract, payment for the services is due to Y on January 15, 2007, and X pays Y for the services on January 15, 2007. X uses the recurring item exception under § 1.461-5.
Situation 2. On December 15, 2006, X executes a contract with W, an insurance company regulated under state law, for the provision of insurance. The insurance contract covers the period from January 15, 2007, through December 31, 2007. Under the terms of the contract, payment of the insurance premium is due to W on January 15, 2007, and X pays the premium to W on January 15, 2007. X uses the recurring item exception under § 1.461-5.
Section 461(a) provides that the amount of any deduction or credit must be taken for the taxable year that is the proper taxable year under the method of accounting used by the taxpayer in computing taxable income.
Section 1.461-1(a)(2)(i) of the Income Tax Regulations provides that, under an accrual method of accounting, a liability is incurred, and is generally taken into account for federal income tax purposes, in the taxable year in which (1) all the events have occurred that establish the fact of the liability, (2) the amount of the liability can be determined with reasonable accuracy, and (3) economic performance has occurred with respect to the liability (the “all events test”). See also § 1.446-1(c)(1)(ii)(A).
The first prong of the all events test requires that all the events have occurred that establish the fact of the liability. Therefore, it is fundamental to the all events test that although expenses may be deductible before they become due and payable, liability first must be firmly established. United States v. General Dynamics Corp., 481 U.S. 239, 243-4 (1987).
Generally, under § 1.461-1(a)(2), all the events have occurred that establish the fact of the liability when (1) the event fixing the liability, whether that be the required performance or other event, occurs, or (2) payment therefore is due, whichever happens earliest. Rev. Rul. 80-230, 1980-2 C.B. 169; Rev. Rul. 79-410, 1979-2 C.B. 213, amplified by Rev Rul. 2003-90, 2003-2 C.B. 353. The terms of a contract are relevant in determining the events that establish the fact of a taxpayer’s liability. See, e.g., Decision, Inc. v. Commissioner, 47 T.C. 58 (1966), acq., 1967-2 C.B. 2.
Section 461(h) and § 1.461-4 provide that, for purposes of determining whether an accrual basis taxpayer can treat the amount of any liability as incurred, the all events test is not treated as met any earlier than the taxable year in which economic performance occurs with respect to the liability.
Section 1.461-4(d)(2) provides that if a liability of a taxpayer arises out of the providing of services or property to the taxpayer by another person, economic performance occurs as the services or property is provided.
Section 1.461-4(g)(5) provides that if a liability of a taxpayer arises out of the provision to the taxpayer of insurance, economic performance occurs as payment is made to the person to which the liability is owed.
Section 1.461-5(b)(1) provides a recurring item exception to the general rule of economic performance. Under the recurring item exception, a liability is treated as incurred for a taxable year if: (i) at the end of the taxable year, all events have occurred that establish the fact of the liability and the amount can be determined with reasonable accuracy; (ii) economic performance occurs on or before the earlier of (a) the date that the taxpayer files a return (including extensions) for the taxable year, or (b) the 15th day of the ninth calendar month after the close of the taxable year; (iii) the liability is recurring in nature; and (iv) either the amount of the liability is not material or accrual of the liability in the taxable year results in better matching of the liability against the income to which it relates than would result from accrual of the liability in the taxable year in which economic performance occurs.
Situation 1. In Situation 1, the first event that occurs to establish the fact of X’s liability for services is that payment is due under the contract on January 15, 2007. See Rev. Rul. 80-230; Rev. Rul. 79-410. Thus, for purposes of § 461, the fact of the liability is established on January 15, 2007. At that time, the amount can be determined with reasonable accuracy. Economic performance with respect to the liability occurs as the services are provided, from January 15, 2007, through January 31, 2007. See § 1.461-4(d)(2). Therefore, X incurs a liability for services in 2007.
The fact of the liability is not established in 2006, even though X executed the service contract on December 15, 2006. It is well established that an accrual basis obligor is not permitted to deduct an expense stemming from a bilateral contractual arrangement, that is, mutual promises, prior to the performance of the contracted for services by the obligee. Rev. Rul. 80-182, 1980-2 C.B. 167, citing Levin v. Commissioner, 21 T.C. 996 (1954), aff’d, 219 F.2d 588 (3d Cir. 1955) (an agreement for services to be performed in the next year did not establish the fact of the taxpayer’s liability but was simply an agreement under which a liability would be incurred in the future) and Amalgamated Housing Corp. v. Commissioner, 37 B.T.A. 817 (1938), aff’d per curium, 108 F.2d 1010 (2d Cir. 1940) (an agreement to renovate property in the future did not establish the fact of the taxpayer’s liability; the accrual was for services in renovating, not the duty to renovate). Thus, the mere execution of the contract by X in 2006 is not sufficient, by itself, to establish the fact of the liability. Further, the recurring item exception does not apply because the fact of the liability is not established in 2006.
Situation 2. In Situation 2, the first event that occurs to establish the fact of X’s liability for insurance is that the premium is due under the contract. See Rev. Rul. 80-230; Rev. Rul. 79-410. Thus, for purposes of § 461, the fact of the liability is established on January 15, 2007. At that time, the amount can be determined with reasonable accuracy. Economic performance with respect to the liability occurs as payment is made, on January 15, 2007. See § 1.461-4(g)(5). Therefore, X incurs a liability for insurance in 2007.
The fact of the liability is not established in 2006, even though X executed the insurance contract on December 15, 2006. See Rev. Rul. 80-182. Although federal or state regulations may impose certain legal obligations on taxpayers, those obligations, without more, do not necessarily establish the fact of a taxpayer’s liability under § 461. See Chrysler Corp. v. Commissioner, 436 F.3d 644 (6th Cir. 2006) (statutory obligation related to warranty obligation was not sufficient to establish the fact of the taxpayer’s liability to provide warranty services). Further, the recurring item exception does not apply because the fact of the liability is not established in 2006.
(1) Under § 461, all the events have occurred that establish the fact of the liability for services provided to the taxpayer when (1) the event fixing the liability, whether that be the required performance or other event, occurs, or (2) payment is due, whichever happens earliest. The mere execution of a contract, without more, does not establish the fact of a taxpayer’s liability for services.
(2) Under § 461, all the events have occurred that establish the fact of the liability for insurance when (1) the event fixing the liability, whether that be the required performance or other event, occurs, or (2) payment is due, whichever happens earliest. The mere execution of a contract, without more, does not establish the fact of a taxpayer’s liability for insurance.
A change in the treatment of liabilities for services or insurance to comply with this revenue ruling is a change in method of accounting within the meaning of §§ 446 and 481 and the regulations issued thereunder. Accordingly, a taxpayer that wants to change its treatment of liabilities for services or insurance to comply with this revenue ruling must obtain the consent of the Commissioner under § 446(e) and § 1.446-1(e)(2)(i) by following the procedures in Rev. Proc. 2007-14, page , this Bulletin.
The principal author of this revenue ruling is Leta A. Ayres of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue ruling, contact Ms. Ayres at (202) 622-5020 (not a toll-free call).
This revenue ruling provides the dollar amounts, increased by the 2007 inflation adjustment, for § 1274A of the Internal Revenue Code. This ruling also provides that the Internal Revenue Service will no longer publish the inflation adjustment under § 7872(g)(2) because of amendments made to § 7872 by the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), Pub. L. No. 109-222, 120 Stat. 345, and the Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, 120 Stat. 2922.
The Service will no longer publish the inflation adjustment under § 7872(g)(2), regarding the amount that a taxpayer may lend to a qualifying continuing care facility without incurring imputed interest, because of amendments made to § 7872 by TIPRA and the Tax Relief and Health Care Act of 2006.
Section 7872(g)(2) provides an exception for certain below-market loans to qualified continuing care facilities only to the extent that the aggregate outstanding amount of any loan to which § 7872(g)(1) applies (determined without regard to § 7872(g)(2)), when added to the aggregate outstanding amount of all other previous loans between the lender (or the lender’s spouse) and any qualified continuing care facility to which § 7872(g)(1) applies, does not exceed $90,000. Section 7872(g)(5) generally provides that, for loans made during any calendar year after 1986 to which § 7872(g)(1) applies, the $90,000 limit specified in § 7872(g)(2) is increased by an inflation adjustment.
Section 7872(g)(6) generally suspends the application of § 7872(g) for any calendar year to which § 7872(h), as amended by TIPRA, applies. Section 7872(h) generally provides that § 7872 shall not apply for any calendar year to any below-market loan owed by a facility which on the last day of such year is a qualified continuing care facility, if such loan was made pursuant to a continuing care contract and if the lender (or the lender’s spouse) attains age 62 before the close of such year. Section 7872(h)(4) provided that paragraph (h) shall not apply for any calendar year after 2010. Section 425 of the Tax Relief and Health Care Act of 2006 amended § 7872(h) by striking subsection (4), making the § 7872(h) exception for loans to qualified continuing care facilities permanent.
Rev. Rul. 2005-76, 2005-2 C.B. 1072, is supplemented and superseded.
The author of this revenue ruling is Richard C. LaFalce of the Office of the Associate Chief Counsel (Financial Institutions and Products). For further information regarding this revenue ruling, please contact Mr. LaFalce at (202) 622-3930 (not a toll-free call).
This notice announces that Treasury and the Internal Revenue Service (IRS) will amend § 301.7701-2(b)(8) of the Procedure and Administration Regulations to add the Bulgarian aktsionerno druzhestvo entity to the list of entities that are always treated as corporations under section 7701 of the Internal Revenue Code (Code).
The IRS and Treasury issued final regulations concerning the classification of business entities under section 7701 of the Code on December 18, 1996 (check-the-box regulations). See generally, T.D. 8697, 1997-1 C.B. 215 [61 FR 66584] and §§ 301.7701-1 through 3. Under the check-the-box regulations, a business entity generally can elect its classification for federal tax purposes. However, § 301.7701-2(b)(8) provides a list of certain foreign business entities that are always classified as corporations for federal tax purposes (the per se corporation list).
On December 16, 2005, the IRS and Treasury published regulations (T.D. 9235, 2006-4 I.R.B. 338 [70 FR 74658]) under section 7701 of the Code adding certain foreign business entities to the per se list of corporations. These regulations were in response to the adoption by the Council of the European Union of a Council Regulation (2157/2001 2001 O.J. (L 294)) (the EU Regulation) that recognized a new business entity, the European public limited liability company (Societas Europaea or SE).
The SE is a public limited liability company. The EU Regulation provides general rules that govern the formation and operation of an SE, and supplements those rules for specified issues and issues it does not otherwise address by reference to the laws with respect to public limited liability companies for the country in which the SE has its registered office. An SE must have a registered office in one of the Member States of the European Economic Area (which includes all Member States of the European Union plus Norway, Iceland, and Liechtenstein). For further background see T.D. 9197, 2005-1 C.B. 985 [70 FR 19697] and Notice 2004-68, 2004-2 C.B. 706.
As of January 1, 2007, Bulgaria will become a member of the European Union. Accordingly, an SE will be eligible to have its registered office in Bulgaria and those SEs with a registered office in Bulgaria will, to a certain extent, be subject to the laws of the public limited liability company in Bulgaria. As a result, and consistent with T.D. 9235, it is appropriate for the IRS and Treasury to add the public limited liability company for Bulgaria to the per se list.
The IRS and Treasury will issue temporary and proposed regulations that will modify § 301.7701-2 to include the Bulgarian aktsionerno druzhestvo on the per se corporation list. This entity has been identified as the public limited liability company in Bulgaria.
The temporary and proposed regulations to be issued adding the Bulgarian aktsionerno druzhestvo to § 301.7701-2(b)(8) generally will apply to such entities formed on or after January 1, 2007. However, they shall also apply to an entity formed before such date upon a 50 percent or greater change of ownership subsequent to such date.
The principal author of this notice is Ronald M. Gootzeit of the Office of Associate Chief Counsel (International). For further information regarding this notice, contact Ronald M. Gootzeit at (202) 622-3860 (not a toll-free call).
This revenue procedure supersedes Rev. Proc. 98-20, 98-1 C.B. 549, and sets forth the acceptable form of the written assurances (certification) that a real estate reporting person must obtain from the seller of a principal residence to except the sale or exchange of such principal residence from the information reporting requirements for real estate transactions under § 6045(e)(5) of the Internal Revenue Code (Code). This revenue procedure incorporates amendments to section 121 of the Code made by section 840 of the American Jobs Creation Act of 2004, Pub. L. No. 108-357, 118 Stat. 1418 (October 22, 2004) (AJCA), as amended by section 403(ee) of the Gulf Opportunity Zone Act of 2005, Pub. L. No. 109-135, 119 Stat. 2631 (December 21, 2005) (the GO Zone Act).
.01 Section 6045(e) and § 1.6045-4 of the Income Tax Regulations generally require a real estate reporting person (as defined in § 6045(e)(2) and § 1.6045-4(e)) to file an information return regarding a real estate transaction and to furnish a payee statement to the seller regarding that transaction. The information return and statement must include the name, address, and taxpayer identification number (TIN) of the seller, and the gross proceeds of the real estate transaction. This information is reported on Form 1099-S, Proceeds From Real Estate Transactions.
.02 Section 312 of the Taxpayer Relief Act of 1997 (TRA 1997), Pub. L. No. 105-34, 111 Stat. 788 (August 5, 1997), as amended by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, 112 Stat. 805 (July 22, 1998), effective for sales or exchanges after May 6, 1997, amended § 6045(e) by adding a new paragraph (5), which excepts a sale or exchange of a principal residence from the § 6045(e) information reporting requirements if the seller provides the real estate reporting person with a certification setting forth certain written assurances, including an assurance that the residence is the seller’s principal residence (within the meaning of § 121) and an assurance that the full amount of the gain on the sale or exchange of the principal residence is excludable from gross income under § 121.
.03 Section 312 of TRA 1997 also amended § 121 to provide new rules for the exclusion of gain on certain sales or exchanges of a principal residence. Section 121, as amended, provides that a taxpayer may exclude from gross income up to $250,000 of gain on the sale or exchange of a principal residence if certain conditions are met. In certain circumstances, a married individual filing a joint return for the taxable year of the sale or exchange may exclude from gross income up to $500,000 of gain. This exclusion also applies to the sale or exchange of stock held by a tenant-stockholder in a cooperative housing corporation (as defined in § 216) and may apply to the sale or exchange of a remainder interest in a principal residence if the taxpayer so elects. See Code §§ 121(d)(4) and (d)(8).
.04 Section 840 of the AJCA, as amended by the GO Zone Act, amended § 121 to provide that the exclusion for gain on the sale or exchange of a principal residence does not apply if the principal residence was acquired by the taxpayer in a like-kind exchange in which any gain was not recognized under § 1031(a) or (b) within the prior five years.
This revenue procedure applies to the information reporting requirements under § 6045(e) for a sale or exchange of a principal residence.
.01 To be excepted from the information reporting requirements in § 6045(e) on the sale or exchange of a principal residence (including stock in a cooperative housing corporation), the real estate reporting person must obtain from the seller a written certification, signed by the seller under penalties of perjury, that assurances (1) through (6) set forth in section 4.02 of this revenue procedure are true (or, in the case of assurance (6), not applicable). For purposes of this certification, the term “seller” includes each owner of the residence that is sold or exchanged. Thus, if a residence has more than one owner, a real estate reporting person must either obtain a certification from each owner (whether married or not) or file an information return and furnish a payee statement for any owner that does not make the certification.
(1) The seller owned and used the residence as the seller’s principal residence for periods aggregating 2 years or more during the 5-year period ending on the date of the sale or exchange of the residence.
(2) The seller has not sold or exchanged another principal residence during the 2-year period ending on the date of the sale or exchange of the residence.
(3) No portion of the residence has been used for business or rental purposes after May 6, 1997, by the seller (or by the seller’s spouse or former spouse, if the seller was married at any time after May 6, 1997).
The sale or exchange is of the entire residence for $250,000 or less.
The seller is married, the sale or exchange is of the entire residence for $500,000 or less, and the gain on the sale or exchange of the entire residence is $250,000 or less.
The seller is married, the sale or exchange is of the entire residence for $500,000 or less, and (a) the seller intends to file a joint return for the year of the sale or exchange, (b) the seller’s spouse also used the residence as his or her principal residence for periods aggregating 2 years or more during the 5-year period ending on the date of the sale or exchange of the residence, and (c) the seller’s spouse also has not sold or exchanged another principal residence during the 2-year period ending on the date of the sale or exchange of the residence.
(5) During the 5-year period ending on the date of the sale or exchange of the residence, the seller did not acquire the residence in an exchange to which section 1031 applied.
(6) In cases where the seller’s basis in the residence is determined by reference to the basis in the hands of a person who acquired the residence in an exchange to which section 1031 applied, the exchange to which section 1031 applied occurred more than 5 years prior to the date of the seller’s sale or exchange of the residence.
A sample certification form that may be used by a real estate reporting person to obtain the applicable assurances from the seller is provided in the Appendix of this revenue procedure. Use of this sample certification form is not required. The requirements of the certification under § 6045(e)(5) will be met if the content and wording of a written certification provide the same information as required by section 4 of this revenue procedure.
The real estate reporting person may obtain a certification at any time on or before January 31 of the year following the year of the sale or exchange of the residence. The certification must be retained by the real estate reporting person for 4 years after the year of the sale or exchange of the residence to which the certification applies.
A real estate reporting person who relies on a certification made in compliance with this revenue procedure will not be liable for the penalties under § 6721 for failure to file an information return, or under § 6722 for failure to furnish a payee statement to the seller, unless the real estate reporting person has actual knowledge that any assurance is incorrect.
Rev. Proc. 98-20 is superseded.
This revenue procedure is effective for sales or exchanges of a principal residence occurring after January 22, 2007.
The collections of information contained in this revenue procedure have been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-1592.
The collection of information in this revenue procedure is in section 4 and 5 of this revenue procedure. This information is required to exempt a real estate reporting person from the requirement to file an information return and furnish a payee statement reporting the sale or exchange of a principal residence. The likely respondents are individual taxpayers who sell or exchange a principal residence and real estate businesses.
The estimated total annual reporting burden for respondents is 383,000 hours.
The estimated burden per respondent is 10 minutes. The estimated number of respondents is 2,300,000. The frequency of responses is on occasion.
The estimated total annual burden for recordkeepers is 37,500 hours.
The estimated annual burden per recordkeeper is 25 minutes. The estimated number of recordkeepers is 90,000.
Books or records relating to a collection of information must be retained as long as their content may become material in the administration of any internal revenue law. Generally, tax returns and return information are confidential, as required by 26 U.S.C. 6103.
The principal author of this revenue procedure is Timothy S. Sheppard of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this revenue procedure, contact Mr. Sheppard at (202) 622-4910 (not a toll-free call).
This form may be completed by the seller of a principal residence. This information is necessary to determine whether the sale or exchange should be reported to the seller, and to the Internal Revenue Service on Form 1099-S, Proceeds From Real Estate Transactions. If the seller properly completes Parts I and III, and makes a “true” response to assurances (1) through (6) in Part II (or a “not applicable” response to assurance (6)), no information reporting to the seller or to the Service will be required for that seller. The term “seller” includes each owner of the residence that is sold or exchanged. Thus, if a residence has more than one owner, a real estate reporting person must either obtain a certification from each owner (whether married or not) or file an information return and furnish a payee statement for any owner that does not make the certification.
Check “true” or “false” for assurances (1) through (5), and “true”, “false”, or “not applicable” for assurance (6).
[ ] [ ] (1) I owned and used the residence as my principal residence for periods aggregating 2 years or more during the 5-year period ending on the date of the sale or exchange of the residence.
[ ] [ ] (2) I have not sold or exchanged another principal residence during the 2-year period ending on the date of the sale or exchange of the residence.
[ ] [ ] (3) I (or my spouse or former spouse, if I was married at any time during the period beginning after May 6, 1997, and ending today) have not used any portion of the residence for business or rental purposes after May 6, 1997.
I am married, the sale or exchange is of the entire residence for $500,000 or less, and the gain on the sale or exchange of the entire residence is $250,000 or less.
I am married, the sale or exchange is of the entire residence for $500,000 or less, and (a) I intend to file a joint return for the year of the sale or exchange, (b) my spouse also used the residence as his or her principal residence for periods aggregating 2 years or more during the 5-year period ending on the date of the sale or exchange of the residence, and (c) my spouse also has not sold or exchanged another principal residence during the 2-year period ending on the date of the sale or exchange of the principal residence.
[ ] [ ] (5) During the 5-year period ending on the date of the sale or exchange of the residence, I did not acquire the residence in an exchange to which section 1031 of the Internal Revenue Code applied.
[ ] [ ] [ ] (6) If my basis in the residence is determined by reference to the basis in the hands of a person who acquired the residence in an exchange to which section 1031 of the Internal Revenue Code applied, the exchange to which section 1031 applied occurred more than 5 years prior to the date I sold or exchanged the residence.
Under penalties of perjury, I certify that all the above information is true as of the end of the day of the sale or exchange.
This revenue procedure provides procedures by which a taxpayer may obtain the automatic consent of the Commissioner under § 446(e) of the Internal Revenue Code to change its method of accounting for liabilities for services or insurance to comply with Rev. Rul. 2007-3, page , this Bulletin.
.01 In Rev. Rul. 2007-3, the Internal Revenue Service addressed the issue of when a taxpayer using an accrual method of accounting incurs a liability for services or insurance under § 461. The ruling holds that a liability for services or insurance is not fixed by the mere execution of a contract for the future provision of services or insurance. Instead, all the events have occurred that establish the fact of the liability when (1) the event fixing the liability, whether that be the required performance or other event, occurs, or (2) payment is due, whichever happens earliest.
.02 Under § 446(e) and § 1.446-1(e)(2)(i) of the Income Tax Regulations, a taxpayer generally must secure the consent of the Commissioner before changing a method of accounting for federal income tax purposes. To obtain the Commissioner’s consent to a change in method, § 1.446-1(e)(3)(i) generally requires a taxpayer to file Form 3115, Application for Change in Accounting Method, during the taxable year in which the taxpayer wants to make the proposed change. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures that provide the terms and conditions necessary for a taxpayer to obtain consent to change a method of accounting. The terms and conditions the Commissioner may prescribe include whether the change is to be made with a § 481(a) adjustment, and if so, the § 481(a) adjustment period, or on a cut-off basis.
.03 Rev. Proc. 2002-9, 2002-1 C.B. 327 (as modified and clarified by Announcement 2002-17, 2002-1 C.B. 561, modified and amplified by Rev. Proc. 2002-19, 2002-1 C.B. 696, and amplified, clarified and modified by Rev. Proc. 2002-54, 2002-2 C.B. 432), provides procedures under § 446(e) and § 1.446-1(e) for obtaining the automatic consent of the Commissioner to change certain methods of accounting for federal income tax purposes. Specifically, Rev. Proc. 2002-9 applies to a taxpayer requesting the Commissioner’s consent to change to a method of accounting described in the APPENDIX of that revenue procedure. Rev. Proc. 2002-9 is the exclusive procedure for a taxpayer within its scope to obtain the Commissioner’s consent. See Rev. Proc. 2002-9, sections 1 and 4.01.
This revenue procedure applies to any taxpayer that is currently treating the mere execution of a contract for services or insurance as establishing the fact of the liability under § 461 and wants to change its method of accounting for liabilities for services or insurance to comply with Rev. Rul. 2007-3.
.01 In General. A change in the treatment of liabilities for services or insurance to comply with Rev. Rul. 2007-3 is a change in method of accounting within the meaning of §§ 446 and 481 and the regulations issued thereunder. Accordingly, a taxpayer within the scope of this revenue procedure that wants to change its treatment of liabilities for services or insurance to comply with Rev. Rul. 2007-3 must obtain the consent of the Commissioner under § 446(e) and § 1.446-1(e)(3).
.02 Automatic Change. A taxpayer within the scope of this revenue procedure that wants to change its method of accounting for liabilities for services or insurance must obtain the consent of the Commissioner by following the automatic consent procedures in Rev. Proc. 2002-9 (or its successor). For purposes of section 6.02(4)(a) of Rev. Proc. 2002-9, the taxpayer must include on line 1a of the Form 3115 the designated automatic accounting method change number 106.
Rev. Proc. 2002-9 is modified and amplified to include in the APPENDIX the automatic change provided in this revenue procedure.
This revenue procedure is effective for taxable years ending on or after December 31, 2006.
The principal author of this revenue procedure is Leta A. Ayres of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Ms. Ayres at (202) 622-5020 (not a toll-free call).
This revenue procedure provides an automatic consent procedure allowing a taxpayer to make a change in method of accounting under § 446(e) of the Internal Revenue Code for depreciable or amortizable property (hereinafter referred to collectively as “depreciable property”) after its disposition. This revenue procedure also waives the application of the two-year rule set forth in Rev. Rul. 90-38, 1990-1 C.B. 57, for certain changes in depreciation or amortization (hereinafter referred to collectively as “depreciation”). This revenue procedure clarifies, modifies, amplifies, and supersedes Rev. Proc. 2004-11, 2004-1 C.B. 311. This revenue procedure also modifies Rev. Proc. 2002-9, 2002-1 C.B. 327 (as modified and clarified by Announcement 2002-17, 2002-1 C.B. 561, modified and amplified by Rev. Proc. 2002-19, 2002-1 C.B. 696, and amplified, clarified, and modified by Rev. Proc. 2002-54, 2002-2 C.B. 432), and other revenue procedures to conform with § 1.446-1(e)(2)(ii)(d) of the Income Tax Regulations.
.01 Section 446(e) and § 1.446-1(e) provide that, except as otherwise provided, a taxpayer must secure the consent of the Commissioner of Internal Revenue before changing a method of accounting for federal income tax purposes. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions deemed necessary to permit a taxpayer to obtain consent to change a method of accounting.
.02 On January 20, 2004, the Internal Revenue Service published Rev. Proc. 2004-11, which provided an automatic consent procedure allowing a taxpayer to make a change in method of accounting under § 446(e) for depreciable property after its disposition. Rev. Proc. 2004-11 also waived the application of the two-year rule set forth in Rev. Rul. 90-38 for certain changes in depreciation. In addition, Rev. Proc. 2004-11 modified Rev. Proc. 2002-9 and other revenue procedures to conform with § 1.446-1T(e)(2)(ii)(d) of the temporary Income Tax Regulations.
.03 Concurrent with the issuance of this revenue procedure, §§ 1.446-1(e)(2)(ii)(d) and 1.1016-3(h) have been promulgated. Section 1.446-1(e)(2)(ii)(d) identifies the changes in depreciation that are (and are not) considered a change in method of accounting. Section 1.1016-3(h) provides that for purposes of determining whether a change in depreciation is a change in method of accounting under § 446(e), the “allowed or allowable” rule under § 1016(a)(2) will not be considered to permanently affect a taxpayer’s lifetime income.
.04 In general, if a taxpayer uses an impermissible method of accounting in two or more consecutively filed federal tax returns the taxpayer has adopted a method of accounting. See Rev. Rul. 90-38. The Service and Treasury Department recognize that with respect to changes in depreciation this two-year rule may increase administrative and compliance costs because many taxpayers changing from an impermissible to permissible method of accounting for depreciation used the impermissible method for depreciable properties placed in service in the taxable year immediately preceding the year of change. Accordingly, in the interest of sound tax administration, the Service and Treasury have decided to waive the two-year rule in Rev. Rul. 90-38 for a change in depreciation to which § 1.446-1(e)(2)(ii)(d) applies.
.05 If depreciable property is transferred in a transaction in which the transferee is treated as the transferor for purposes of computing the depreciation allowance for the property with respect to so much of the basis in the hands of the transferee as does not exceed the adjusted depreciable basis in the hands of the transferor (for example, in transactions subject to § 168(i)(7) or § 381(c)(6)), the transferee may file a Form 3115, Application for Change in Accounting Method, to change from an impermissible method of accounting adopted by the transferor for that portion of the basis of the property to a permissible method of accounting for depreciation for the same portion of the basis of the property, provided the impermissible method of accounting for that portion of the basis of the property has not been changed by the transferor (through filing, for example, a Form 3115 or an amended return) or by the Service upon examination of the transferor’s tax returns. In this case, the § 481 adjustment will include any necessary adjustments since the property’s placed-in-service date by the transferor.
The application of section 3 is extended to allow a taxpayer to file a Form 3115 with an original federal tax return for the taxable year in which the depreciable property is disposed of by the taxpayer that claimed less than the depreciation allowable for that property.
A new section 4.01 is added, clarifying that a change from an impermissible method of determining depreciation for depreciable property in two or more consecutively filed federal tax returns is a change in method of accounting under § 446(e) and § 1.446-1(e).
A new section 6.03 is added, extending the application of section 3 of this revenue procedure to dispositions of depreciable property occurring in taxable years ending before December 30, 2003.
Section 2.01 of the APPENDIX of Rev. Proc. 2002-9 is changed to clarify that section 2.01 of this APPENDIX does not apply to any property for which a taxpayer is revoking a timely valid election or making a late election under § 179, or to any change in method of accounting involving a change from capitalizing and depreciation the cost or other basis of any property to deducting the cost or other basis as an expense.
Section 2B of the APPENDIX of Rev. Proc. 2002-9 is changed to remove section 2B.03, which provided that the change under section 2B does not apply to a change in useful life under the method described in section 5.01(2) or 6.01(2) of Rev. Proc. 2000-50.
for which the taxpayer did not take into account any depreciation allowance, or did take into account some depreciation but less than the depreciation allowable (hereinafter, both are referred to as “claimed less than the depreciation allowable”), in the year of change (as defined in section 3.02(3)(b) of this revenue procedure) or any prior taxable year.
any property disposed of by the taxpayer in a transaction to which a nonrecognition section of the Code applies (for example, § 1031, transactions subject to § 168(i)(7)(B)(i)). However, this section 3.01(2)(d) does not apply to property disposed of by the taxpayer in a § 1031 or § 1033 transaction if the taxpayer elects under § 1.168(i)-6T(i) and (j) to treat the entire basis (that is, both the exchanged and excess basis (as defined in § 1.168(i)-6T(b)(7) and (8), respectively)) of the replacement MACRS property (as defined in § 1.168(i)-6T(b)(1)) as property placed in service by the taxpayer at the time of replacement and treat the adjusted depreciable basis of the relinquished MACRS property (as defined in § 1.168(i)-6T(b)(2)) as being disposed of by the taxpayer at the time of disposition.
Change made on original return for year of change. On its timely filed (including extensions) original federal tax return for the year of change (as defined in section 3.02(3)(b) of this revenue procedure), a taxpayer within the scope of section 3 of this revenue procedure may change from an impermissible method of accounting for depreciation to a permissible method of accounting for depreciation for any item of depreciable property within the scope of section 3 of this revenue procedure, provided the taxpayer files the original Form 3115 in accordance with section 6.02(3) of Rev. Proc. 2002-9 (or its successor).
the taxpayer files an amended federal tax return for the year of change (as defined in section 3.02(3)(b) of this revenue procedure) that includes the adjustments to taxable income and any collateral adjustments to taxable income or tax liability (for example, adjustments to the amount or character of the gain or loss of the disposed depreciable or amortizable property) resulting from the change in method of accounting for depreciation made by the taxpayer under this section 3.
The scope limitations in section 4.02 of Rev. Proc. 2002-9 do not apply. If the taxpayer is under examination, before an appeals office, or before a federal court at the time that a copy of the Form 3115 is filed with the national office, the taxpayer must provide a copy of the Form 3115 to the examining agent, appeals officer, or counsel for the government, as appropriate, at the time the copy of the Form 3115 is filed with the national office. The Form 3115 must contain the name(s) and telephone number(s) of the examining agent, appeals officer, or counsel for the government, as appropriate.
The year of change is the taxable year in which the item of depreciable property was disposed of by the taxpayer.
If section 3.02(2) of this revenue procedure applies to the taxpayer, section 6.02(3)(a) of Rev. Proc. 2002-9 is modified to require the original of the Form 3115 to be attached to the taxpayer’s timely filed amended federal tax return for the year of change and a copy (with signature) of the Form 3115 to be filed with the national office no later than when the original Form 3115 is filed with the amended federal tax return for the year of change.
For purposes of section 6.02(4)(a) of Rev. Proc. 2002-9, the taxpayer should include on line 1a of the Form 3115 (revised December 2003) the designated automatic accounting method change number for the change in method of accounting for depreciation made under this section 3. This number for this method change is 107.
.03 Taxpayer or property outside scope. If a taxpayer is precluded from using section 3 of this revenue procedure because the taxpayer or the item of depreciable property is outside the scope of section 3 of this revenue procedure (for example, the item of depreciable property was not disposed of by the taxpayer), any change in method of accounting for depreciation must be made in accordance with the requirements of Rev. Proc. 97-27, 1997-1 C.B. 680 (or its successor), or Rev. Proc. 2002-9 (or its successor), as applicable.
.01 In general. If a taxpayer uses an impermissible method of determining depreciation for a depreciable property, the taxpayer adopts that method of accounting for the property when the taxpayer treats the property in the same way in determining gross income or deductions in two or more consecutively filed federal tax returns. Accordingly, the taxpayer changing from that impermissible method of accounting must file a Form 3115 in accordance with the requirements of § 1.446-1(e)(3)(i) and, as applicable, Rev. Proc. 97-27 or Rev. Proc. 2002-9. See Rev. Rul. 90-38.
.02 Waiver of two-year rule. Notwithstanding Rev. Rul. 90-38, a taxpayer may file a Form 3115 under Rev. Proc. 97-27 or Rev. Proc. 2002-9, as applicable, to change from an impermissible method of accounting for depreciation to a permissible method of accounting for depreciation under § 1.446-1(e)(2)(ii)(d) for any depreciable property subject to § 1.446-1(e)(2)(ii)(d) and placed in service by the taxpayer in the taxable year immediately preceding the year of change (as defined in section 5.02(2) of Rev. Proc. 97-27 or section 5.02 of Rev. Proc. 2002-9, as applicable) (hereinafter, this property is referred to as “1-year depreciable property”), provided the additional term and condition in section 4.03 of this revenue procedure is satisfied. Alternatively, the taxpayer may make the change from the impermissible depreciation method to the permissible depreciation method for the 1-year depreciable property by filing an amended federal tax return for the placed-in-service year prior to the date the taxpayer files its federal tax return for the taxable year succeeding the placed-in-service year.
.03 Additional term and condition for filing a Form 3115. In addition to the terms and conditions provided in Rev. Proc. 97-27 or Rev. Proc. 2002-9, as applicable, the § 481 adjustment reported on a Form 3115 that is filed by a taxpayer in accordance with section 4.02 of this revenue procedure to make a change in method of accounting for depreciation under § 1.446-1(e)(2)(ii)(d) for any 1-year depreciable property, must include the amount of any adjustment attributable to all property (including the 1-year depreciable property) subject to the Form 3115.
.01 Rev. Proc. 2004-11 is clarified, modified, amplified, and superseded.
.02 The heading for section 2 of the APPENDIX of Rev. Proc. 2002-9 is modified to read as follows: “SECTION 2. DEPRECIATION OR AMORTIZATION (§ 56(a)(1), 56(g)(4)(A), 167, 168, 197, 1400I, 1400L, OR 1400N(d), OR FORMER § 168)”.
.03 Rev. Proc. 2002-9 (as modified by Rev. Proc. 2004-11) is modified by deleting sections 2.01, 2.02, 2B, and 2.05 of the APPENDIX and replacing them with the text in, respectively, sections 1, 2, 3, and 4 of the APPENDIX of this revenue procedure.
.05 Section 8.01 of Rev. Proc. 2000-50, 2000-2 C.B. 601, is modified to read as follows: “A change in a taxpayer’s treatment of costs paid or incurred to develop, purchase, lease, or license computer software to a method described in section 5, 6, or 7 of this revenue procedure is a change in method of accounting to which §§ 446 and 481 apply. Further, a change in useful life under the method described in section 6.01(2) of this revenue procedure is a change in method of accounting to which §§ 446 and 481 apply. Additionally, if a taxpayer is currently treating costs paid or incurred to develop computer software under section 5.01(2) of this revenue procedure in accordance with the rules provided in § 167(f)(1) and the regulations thereunder but is not currently using a useful life of 36 months, a change in useful life to 36 months is a change in method of accounting to which §§ 446 and 481 apply. See § 1.446-1(e)(2)(ii)(d)(3)(i).
.01 In general. Except as provided in sections 6.02, 6.03, and 6.04 of this revenue procedure, this revenue procedure is effective for a Form 3115 filed for taxable years ending on or after December 26, 2006.
the taxpayer makes that change in method of accounting in compliance with all the applicable provisions of Rev. Proc. 2002-9 for the requested year of change (as defined in section 5.02 of Rev. Proc. 2002-9) on that Form 3115.
If a taxpayer filed a Form 3115 with the national office to make a change in method of accounting previously authorized in section 2.01, 2.02, or 2B of the APPENDIX of Rev. Proc. 2002-9 in effect on the date on which the Form 3115 was filed with the national office by the taxpayer for a year of change for which this revenue procedure is effective (see section 6.01 of this revenue procedure) and the taxpayer’s original federal tax return for that year of change was not filed before December 26, 2006, the taxpayer may make the change in method of accounting authorized under section 2.01, 2.02, or 2B, as applicable, of the APPENDIX of Rev. Proc. 2002-9 as revised by this revenue procedure. However, the Service will process the Form 3115 in accordance with the section of the APPENDIX of Rev. Proc. 2002-9 in effect on the date on which the Form 3115 was filed with the national office by the taxpayer unless on or before the due date (including extensions) of the taxpayer’s federal tax return for the requested year of change (as defined in section 5.02 of Rev. Proc. 2002-9) on that Form 3115, the taxpayer completes a new Form 3115 to make the change under section 2.01, 2.02, or 2B, as applicable, of the APPENDIX of Rev. Proc. 2002-9 as revised by this revenue procedure and files this newly completed Form 3115 in duplicate in accordance with section 6.02(3)(a) of Rev. Proc. 2002-9. Additionally, the newly completed Form 3115 must include the statement: “Section [insert, as appropriate: 2.01, 2.02, or 2B] of the APPENDIX of Rev. Proc. 2002-9 as revised by Rev. Proc. 2007-16.” This statement must be legibly printed or typed on the appropriate line on, or at the top of page 1 of, the Form 3115.
.03 Application of section 3. Section 3 of this revenue procedure is effective for a Form 3115 filed on or after December 26, 2006.
the change made to section 8.01 of Rev. Proc. 2000-50 providing that a change in useful life to 36 months made by a taxpayer that is currently treating costs paid or incurred to develop computer software under section 5.01(2) of Rev. Proc. 2000-50 in accordance with the rules provided in § 167(f)(1) and the regulations thereunder but is not currently using a useful life of 36 months is a change in method of accounting is effective for property placed in service by the taxpayer in a taxable year ending on or after December 30, 2003.
The principal author of this revenue procedure is Douglas H. Kim of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this revenue procedure, contact Mr. Kim at (202) 622-3110 (not a toll-free call).
Description of change and scope.
that is owned by the taxpayer at the beginning of the year of change (but see section 2.05 of this APPENDIX for property disposed of before the year of change).
Taxpayer has not adopted a method of accounting for the item of property. If a taxpayer does not satisfy section 2.01(1)(a)(i) of this APPENDIX for an item of depreciable or amortizable property because this item of property is placed in service by the taxpayer in the taxable year immediately preceding the year of change (“1-year depreciable property”), the taxpayer may change from the impermissible method of determining depreciation to the permissible method of determining depreciation for the 1-year depreciable property by filing a Form 3115 for this change, provided the § 481 adjustment reported on the Form 3115 includes the amount of any adjustment that is attributable to all property (including the 1-year depreciable property) subject to the Form 3115. Alternatively, the taxpayer may change from the impermissible method of determining depreciation to the permissible method of determining depreciation for a 1-year depreciable property by filing an amended federal tax return for the property’s placed-in-service year prior to the date the taxpayer files its federal tax return for the taxable year succeeding the placed-in-service year.
Certain scope limitations inapplicable. The scope limitations in sections 4.02(7) and 4.02(8) of this revenue procedure are not applicable to this change.
any property for which the rehabilitation credit under § 47 was claimed and that a taxpayer is reclassifying to 3-year property, 5-year property, 7-year property, 10-year property, 15-year property, 20-year property, or water utility property (other than real property with a class life of more than 12.5 years).
Permissible method of accounting for depreciation. A taxpayer must change to a permissible method of accounting for depreciation for the item of depreciable or amortizable property. The permissible method of accounting is the same method that determines the depreciation allowable for the item of property (as provided in section 2.01(5) of this APPENDIX).
Section 481(a) adjustment. Because the adjusted basis of the property is changed as a result of a method change made under section 2.01 of this APPENDIX (see section 2.01(4) of this APPENDIX), items are duplicated or omitted. Accordingly, this change is made with a § 481(a) adjustment. This adjustment may result in either a negative § 481(a) adjustment (a decrease in taxable income) or a positive § 481(a) adjustment (an increase in taxable income) and may be a different amount for regular tax, alternative minimum tax, and adjusted current earnings purposes. This § 481(a) adjustment equals the difference between the total amount of depreciation taken into account in computing taxable income for the property under the taxpayer’s former method of accounting (including the amount attributable to any property described in section 2.01(1)(b) of this APPENDIX that is included in the taxpayer’s Form 3115), and the total amount of depreciation allowable for the property under the taxpayer’s new method of accounting (as determined under section 2.01(5) of this APPENDIX, and including the amount attributable to any property described in section 2.01(1)(b) of this APPENDIX that is included in the taxpayer’s Form 3115), for open and closed years prior to the year of change. However, the amount of the § 481(a) adjustment must be adjusted to account for the proper amount of the depreciation allowable that is required to be capitalized under any provision of the Code (for example, § 263A) at the beginning of the year of change.
Basis adjustment. As of the beginning of the year of change, the basis of depreciable property to which section 2.01 of this APPENDIX applies must reflect the reductions required by § 1016(a)(2) for the depreciation allowable for the property (as determined under section 2.01(5) of this APPENDIX).
In general. Section 2.01(5) of this APPENDIX provides the amount of the depreciation allowable determined under § 56(a)(1), § 56(g)(4)(A), § 167, § 168, § 197, § 1400I, or § 1400L(c), or former § 168. This amount, however, may be limited by other provisions of the Code (for example, § 280F).
Section 56(a)(1) property. The depreciation allowable for any taxable year for property for which depreciation is determined under § 56(a)(1) is determined by using the depreciation method, recovery period, and convention provided for under § 56(a)(1) that applies for the property’s placed-in-service date.
Section 56(g)(4)(A) property. The depreciation allowable for any taxable year for property for which depreciation is determined under § 56(g)(4)(A) is determined by using the depreciation method, recovery period or useful life, as applicable, and convention provided for under § 56(g)(4)(A) that applies for the property’s placed-in-service date.
if that depreciation method does not result in a reasonable allowance for depreciation or a taxpayer has not adopted a depreciation method for the property, under the straight-line depreciation method.
The depreciation allowable for any taxable year for property subject to § 167(f) (regarding certain property excluded from § 197) is determined by using the depreciation method and useful life prescribed in § 167(f). If computer software is depreciated under § 167(f)(1) and is qualified property (as defined in § 168(k)(2) and § 1.168(k)-1 of the Income Tax Regulations), 50-percent bonus depreciation property (as defined in § 168(k)(4) and § 1.168(k)-1), qualified New York Liberty Zone (Liberty Zone) property (as defined in § 1400L(b)(2) and § 1.1400L(b)-1), or qualified Gulf Opportunity Zone (GO Zone) property (as defined in sections 2.02 and 2.03 of Notice 2006-77, 2006-40 I.R.B. 590), the depreciation allowable for that computer software under § 167(f)(1) is also determined by taking into account the additional first year depreciation deduction provided by § 168(k), § 1400L(b), or § 1400N(d), as applicable, unless the taxpayer made a timely valid election not to deduct any additional first year depreciation for the computer software.
if the property is qualified property, 50-percent bonus depreciation property, Liberty Zone property, or GO Zone property, by taking into account the additional first year depreciation deduction provided by § 168(k), § 1400L(b), or § 1400N(d), as applicable, unless the taxpayer made a timely valid election not to deduct the additional first year depreciation (or made a deemed election not to deduct the additional first year depreciation; for further guidance, see Rev. Proc. 2002-33, 2002-1 C.B. 963, Rev. Proc. 2003-50, 2003-2 C.B. 119, or Notice 2006-77) for the class of property (as defined in § 1.168(k)-1(e)(2), § 1.1400L(b)-1(e)(2), or section 4.02 of Notice 2006-77, as applicable) in which that property is included.
Section 197 property. The depreciation allowable for any taxable year for an amortizable § 197 intangible (including any property for which a timely election under § 13261(g)(2) of the 1993 Act was made) is determined in accordance with § 1.197-2(f).
the straight-line method applicable to the property if the property is required to be depreciated under the straight-line method (for example, property described in former § 168(f)(12) or former § 280F(b)(2)) or if the taxpayer elected to determine the depreciation allowance under the optional straight-line percentage (for example, the straight-line method in former § 168(b)(3)).
if the taxpayer elected to amortize all of the qualified revitalization expenditures chargeable to a capital account with respect to the qualified revitalization building ratably over the 120-month period beginning with the month in which the building is placed in service, the depreciation allowable is determined in accordance with this election.
Description of change. This change applies to a taxpayer that wants to change from a permissible method of accounting for depreciation under § 56(g)(4)(A)(iv) or § 167 to another permissible method of accounting for depreciation under § 56(g)(4)(A)(iv) or § 167. Pursuant to § 1.167(a)-7(a) and (c), a taxpayer may account for depreciable property either by treating each individual asset as an account or by combining two or more assets in a single account and, for each account, depreciation allowances are computed separately.
that is owned by the taxpayer at the beginning of the year of change.
any distributor commissions (as defined by section 2 of Rev. Proc. 2000-38, 2000-2 C.B. 310) for which the taxpayer is changing the useful life under the distribution fee period method or the useful life method (both described in Rev. Proc. 2000-38). A change in this useful life is corrected by adjustments in the applicable taxable year provided under § 1.446-1(e)(2)(ii)(d)(5)(iv).
a change from pooling to a single asset, or vice versa, for distributor commissions (as defined by section 2 of Rev. Proc. 2000-38, 2000-2 C.B. 310) for which the taxpayer is using the distribution fee period method or the useful life method (both described in Rev. Proc. 2000-38).
Basis for depreciation. At the beginning of the year of change, the basis for depreciation of property to which this change applies is the adjusted basis of the property as provided in § 1011 at the end of the taxable year immediately preceding the year of change (determined under the taxpayer’s present method of accounting for depreciation). If applicable under the taxpayer’s proposed method of accounting for depreciation, this adjusted basis is reduced by the estimated salvage value of the property (for example, a change to the straight-line method).
the declining-balance method of depreciation must be based on the useful life of the property measured from the placed-in-service date, and not the expected remaining life from the date the change becomes effective.
Regulatory requirements. For changes in method of depreciation to the sum-of-the-years-digits or declining-balance method, the property must meet the requirements of § 1.167(b)-0 or 1.167(c)-1, as appropriate.
within 30 calendar days of filing the federal income tax return for the year of change, the taxpayer will provide a copy of the completed application to any regulatory body having jurisdiction over the public utility property subject to the application.
.01 Description of change. This change applies to a taxpayer that wants to change its method of accounting for the costs of computer software to a method described in Rev. Proc. 2000-50, 2000-2 C.B. 601, as modified by Rev. Proc. 2007-16, 2007-4 I.R.B. . Section 5 of Rev. Proc. 2000-50 describes the methods applicable to the costs of developing computer software. Section 6 of Rev. Proc. 2000-50 describes the method applicable to the costs of acquired computer software. Section 7 of Rev. Proc. 2000-50 describes the method applicable to leased or licensed computer software. If a taxpayer treats the costs of computer software in accordance with the applicable method described in Rev. Proc. 2000-50, the Service will not disturb the taxpayer’s treatment of its costs of computer software.
.03 Statement required. If a taxpayer is changing to the method described in section 5.01(2) of Rev. Proc. 2000-50, the taxpayer must attach to the application a statement providing the information required in section 8.02(2) of Rev. Proc. 2000-50.
Description of change. This change applies to a taxpayer that wants to make the change in method of accounting for depreciation or amortization (depreciation) provided under section 3 of Rev. Proc. 2007-16, 2007-4 I.R.B. , for an item of depreciable or amortizable property that has been disposed of by the taxpayer. Section 3 of Rev. Proc. 2007-16 allows a taxpayer to make a change in method of accounting for depreciation for the disposed property if the taxpayer used an impermissible method of accounting for depreciation for the property under which the taxpayer did not take into account any depreciation allowance, or did take into account some depreciation but less than the depreciation allowable, in the year of change (as defined in section 2.05(4) of this APPENDIX) or any prior taxable year.
for which the taxpayer did not take into account any depreciation allowance, or did take into account some depreciation but less than the depreciation allowable (hereinafter, both are referred to as “claimed less than the depreciation allowable”), in the year of change (as defined in section 2.05(4) of this APPENDIX) or any prior taxable year.
any property disposed of by the taxpayer in a transaction to which a nonrecognition section of the Code applies (for example, § 1031, transactions subject to § 168(i)(7)(B)(i)). However, this section 2.05(2)(b)(iv) does not apply to property disposed of by the taxpayer in a § 1031 or § 1033 transaction if the taxpayer elects under § 1.168(i)-6T(i) and (j) to treat the entire basis (that is, both the exchanged and excess basis (as defined in § 1.168(i)-6T(b)(7) and (8), respectively)) of the replacement MACRS property (as defined in § 1.168(i)-6T(b)(1)) as property placed in service by the taxpayer at the time of replacement and treat the adjusted depreciable basis of the relinquished MACRS property (as defined in § 1.168(i)-6T(b)(2)) as being disposed of by the taxpayer at the time of disposition.
Manner of making the change.
Change made on an original return for year of change. This change may be made on a taxpayer’s timely filed (including extensions) original federal tax return for the year of change (as defined in section 2.05(4) of this APPENDIX), provided the taxpayer files the original Form 3115 in accordance with section 6.02(3) of this revenue procedure.
the taxpayer’s amended federal tax return for the year of change (as defined in section 2.05(4) of this APPENDIX) includes the adjustments to taxable income and any collateral adjustments to taxable income or tax liability (for example, adjustments to the amount or character of the gain or loss of the disposed depreciable or amortizable property) resulting from the change in method of accounting for depreciation made by the taxpayer under section 2.05 of this APPENDIX.
Year of change. The year of change for this change is the taxable year in which the item of depreciable or amortizable property was disposed of by the taxpayer.
Scope limitations inapplicable. The scope limitations in section 4.02 of this revenue procedure do not apply. If the taxpayer is under examination, before an appeals office, or before a federal court at the time that a copy of the Form 3115 is filed with the national office, the taxpayer must provide a copy of the Form 3115 to the examining agent, appeals officer, or counsel for the government, as appropriate, at the time the copy of the Form 3115 is filed with the national office. The Form 3115 must contain the name(s) and telephone number(s) of the examining agent, appeals officer, or counsel for the government, as appropriate.
Filing requirements. Notwithstanding section 6.02(3)(a) of this revenue procedure, a taxpayer making this change in accordance with section 2.05(3)(b) of this APPENDIX must attach the original Form 3115 to the taxpayer’s timely filed amended federal tax return for the year of change and must file the required copy (with signature) of the Form 3115 with the national office no later than when the original Form 3115 is filed with the amended federal tax return for the year of change. If a taxpayer is making this change in accordance with section 2.05(3)(a) of this APPENDIX, the filing requirements in section 6.02(3)(a) of this revenue procedure apply.
.01 This revenue procedure permits a taxpayer under the jurisdiction of the Large and Mid-Size Business Division to request that the Service examine specific issues relating to tax returns before those returns are filed. This revenue procedure supersedes Rev. Proc. 2005-12, 2005-1 C.B. 311. This revenue procedure provides the framework within which a taxpayer and the Service may work together in a cooperative environment to resolve, after examination, issues accepted into the program. If the taxpayer and the Service are able to resolve the examined issues before the returns that they affect are filed, this revenue procedure authorizes the taxpayer and the Service to memorialize their agreement by executing an LMSB Pre-Filing Agreement (PFA).
.02 This revenue procedure outlines the procedures for resolving issues through pre-filing examinations. Taxpayers and the Service often resolve issues more effectively and efficiently through a pre-filing examination than a post-filing examination, because the taxpayer and the Service have more timely access to the records and personnel that are relevant to the issues. A pre-filing examination also provides the taxpayer with certainty regarding the examined issue at an earlier point in time than a post-filing examination. These procedures benefit both taxpayers and the Service by improving the quality of tax compliance while reducing costs, burdens, and delays. Unlike letter rulings and other forms of written advice provided by the Offices of the Associates Chief Counsel (see Rev. Proc. 2006-1, 2006-1 I.R.B. 1), a PFA does not determine the tax treatment of prospective or future transactions or events, but only of completed transactions or events whose tax treatment has not yet been reported on a return.
.01 In Rev. Proc. 2001-22, 2001-1 C.B. 745, the Service provided procedures for LMSB taxpayers to request an examination and resolve specific issues relating to returns that were neither due (taking into account any extensions of time to file) nor filed.
.02 Because Rev. Proc. 2001-22 limited the eligible years for the PFA program to current or prior taxable years for which returns were neither due nor filed, taxpayers and the Service could not resolve issues for multiple future taxable years or issues regarding appropriate methodologies for determining tax consequences that would affect future taxable years.
.03 In Rev. Proc. 2005-12, the Service expanded the scope of the PFA program by allowing taxpayers and the Service to address certain issues over a limited number of future taxable years. In addition, the Service revised the domestic and international issues eligible for the PFA program. Section 12 of Rev. Proc. 2005-12 provided that that revenue procedure would remain in effect until December 31, 2006, unless sooner revoked, modified, or superseded.
.04 The Service has determined to renew the PFA program as described in Rev. Proc. 2005-12 with minimal changes. This revenue procedure largely continues the existing PFA program, clarifying procedures for processing a PFA request and updating the user fee requirements for a PFA. The objective of the PFA program remains to resolve, before returns are filed, issues that are likely to be disputed in post-filing audits.
.01 Eligible taxpayers. This revenue procedure applies to taxpayers under the jurisdiction of LMSB that desire to resolve through a PFA issues that otherwise may be the subject of a post-filing examination.
(1) Current, past, and future taxable years. An eligible taxpayer may request a PFA for the current taxable year, any prior taxable year for which the original return is not yet due (taking into account any extensions of time to file) and is not yet filed and, except in the case of a PFA provided under section 3.09(2), for a limited number of future taxable years.
(2) Agreements for future taxable years. Agreements for future taxable years are limited to four taxable years beyond the current taxable year.
(1) Factual issues and well-established law. The Service will consider entering into a PFA on any issue that requires either a determination of facts or the application of well-established legal principles to known facts.
(2) Issues that involve a methodology. The Service also will, in general, consider entering into a PFA regarding a methodology used by a taxpayer to determine the appropriate amount of an item of income, allowance, deduction, or credit.
(3) Issues under the jurisdiction of other Service divisions. The Service will consider entering into a PFA on an issue under the jurisdiction of an operating division of the Service other than LMSB, but only with the concurrence of that operating division.
.04 Relationship of eligible issues to eligible taxable years. An issue also must relate to an eligible taxable year or years in order to be an eligible issue.
.05 Eligible domestic and eligible international issues require coordination and consultation with Associate Chief Counsel. There is no list of eligible domestic and international issues. Any domestic or international issue that requires either a determination of facts or application of well-established legal principles to known facts and that is not excluded under section 3.08 or section 3.09 of this revenue procedure is likely suitable for a PFA.
The Service may, in its sole discretion, refuse to address an issue in a PFA based on considerations of sound tax administration. Before any decision is made to proceed with the taxpayer’s request for a PFA, the Service must coordinate and consult with the Associate Chief Counsel having subject matter jurisdiction over any issue proposed to be determined by a PFA. As part of this coordination and consultation, the Associate Chief Counsel may consider whether the issue is more appropriately resolved by a letter ruling or other form of written advice from the Offices of the Associates Chief Counsel, as described in Rev. Proc. 2006-1, 2006-1 I.R.B. 1, or its successors, and whether the issue is currently one with respect to which the Service will never, or will not ordinarily, issue a letter ruling. See Rev. Proc. 2006-3, 2006-1 I.R.B. 122, Rev. Proc. 2006-7, 2006-1 I.R.B. 242, and their successors.
(5) whether the taxpayer has a permanent establishment in the United States for purposes of a bilateral income tax convention to which the United States is a party and, if so, what profits are attributable to that permanent establishment.
.07 Special provisions for requests on international issues. The provisions of this section apply, in addition to the generally applicable provisions of this revenue procedure, to any request for a PFA on an issue having international implications.
(1) A PFA and any factual information contained in the background files is subject to exchange of information under income tax treaties or tax information exchange agreements in accordance with the terms of such treaties and agreements (including terms regarding relevancy, confidentiality, and the protection of trade secrets). In cases where the exchange of information would be discretionary, information may be exchanged to the extent consistent with sound tax administration and the practices of the relevant foreign competent authority.
(2) To minimize taxpayer and governmental uncertainty and administrative cost, taxpayers who seek a PFA on an international issue are encouraged to seek competent authority consideration under the mutual agreement procedure of any applicable United States income tax convention. This consideration will be given after the PFA is concluded, and the PFA may be modified to reflect the outcome of the mutual agreement procedure.
(3) A taxpayer may request a PFA for an international issue that is the subject of a previously submitted request for competent authority assistance. The consideration of this competent authority request will not be suspended during the PFA process. If the taxpayer requests a PFA and the previously submitted request for competent authority assistance is ongoing, if appropriate, the taxpayer also should make a request for the Accelerated Competent Authority Procedure of Rev. Proc. 2002-52, 2002-2 C.B. 242.
(13) Issues relating to transactions that have not yet occurred, regardless of whether the issue otherwise would qualify as one on which the Service will issue letter rulings or other forms of written guidance as described in Rev. Proc. 2006-1, 2006-1 I.R.B. 1, and successor revenue procedures.
(1) Except as provided in section 3.09(2) of this revenue procedure, the Service will not enter into a PFA for issues relating to a change in method of accounting. In applying the law to the facts, or establishing the facts, a change in the overall plan of accounting for gross income or deductions from the treatment of such items in prior taxable years, or a change in the treatment of any item that involves the proper time for the inclusion of an item or the taking of an item as a deduction from the treatment of such item in prior taxable years generally may be a change in method of accounting. A PFA may not be used to change a taxpayer’s method of accounting.
(2) If the Service has issued a letter ruling granting consent to a change in method of accounting under Rev. Proc. 97-27, or its successor, a taxpayer may request and the Service may enter into a PFA with respect to the approved change in method of accounting. In such case, a PFA may include determinations described in section 11 of Rev. Proc. 97-27 or a similar provision of its successor. Thus, for example, a taxpayer may request and the Service may enter into a PFA with respect to the amount of the section 481(a) adjustment and the implementation of the change in method of accounting in accordance with the terms and conditions of the consent agreement and Rev. Proc. 97-27. A PFA under this provision may only apply to the taxable year of change and may not apply to any other taxable years, except that a determination of the amount of the section 481(a) adjustment under section 11.01(2) of Rev. Proc. 97-27, or a successor, shall apply to any other taxable year for which such amount is taken into account (i.e., any spread period). A PFA under this provision may not be entered into with respect to a change in method of accounting requested pursuant to automatic consent procedures, such as Rev. Proc. 2002-9.
.10 Definition of taxpayer. For purposes of section 3 of this revenue procedure, any reference to the taxpayer also includes a related taxpayer and any predecessor of the taxpayer or a related taxpayer. A related taxpayer is one related within the meaning of section 267 or a member of an affiliated group within the meaning of section 1504 that includes the taxpayer. A predecessor is an entity for whose tax liability the taxpayer or a related taxpayer is or was primarily or secondarily liable.
(7) The dollar amount of assets reflected on the most recently filed return.
(11) Describes the availability, organization, and location of the records and other information that substantiate the taxpayer’s proposed position on the issue.
Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of the request for the Pre-Filing Agreement are true, correct, and complete.
The taxpayer agrees that the review of records and information under the PFA procedures does not constitute an inspection within the meaning of section 7605(b) and will not preclude or impede (under section 7605(b) or any administrative provisions adopted by the Service) the Service from later examining any return or inspecting any records. The taxpayer further agrees that procedural restrictions, such as providing notice under section 7605(b), do not apply to actions taken under the PFA procedures.
.05 Signature. The request for a PFA must be signed by the taxpayer or a representative properly authorized by the taxpayer in an accompanying Form 2848, Power of Attorney and Declaration of Representative.
(c) electronic transmission to pfa.info@irs.gov.
.01 Jurisdiction of LMSB Industry Director and coordination and consultation with the Associate Chief Counsel. The LMSB Industry Director having jurisdiction over the taxpayer, after coordination and consultation with the Associate Chief Counsel having subject matter jurisdiction over any issue proposed to be determined by a PFA, will decide whether to accept the taxpayer’s request for a PFA. (For purposes of this revenue procedure, the term “LMSB Industry Director” includes a duly authorized designee of an LMSB Industry Director.) The decision regarding the acceptance of any PFA involving an international issue also will require the concurrence of the Deputy Commissioner, International (LMSB). In general, the Associate Chief Counsel will respond within 10 business days to a request for coordination and consultation to proceed with the PFA.
(7) The overall probability of completing the process and entering into a PFA by the proposed date for filing the earliest return to which the PFA relates.
Early submission of a request will facilitate completion of a PFA before any associated returns become due. As a result, early requests are more likely to be selected for the PFA program and the Service urges taxpayers to submit PFA requests as early as possible.
.03 Notification. A representative of LMSB will contact the taxpayer within 15 business days of actual receipt of the taxpayer’s request for a PFA to acknowledge that the Service has received the request. After a PFA request is received, a representative of LMSB will inform the taxpayer in writing whether the request has been selected for the PFA program and the issues the Service will consider.
.04 Requests not accepted. A taxpayer may not appeal the Service’s decision not to accept a request for a PFA. A taxpayer not selected for the PFA program remains eligible for other early issue resolution procedures, including the Accelerated Issue Resolution (AIR) program (see Rev. Proc. 94-67, 1994-2 C.B. 800).
.01 Planning. If the Service accepts the taxpayer’s request for a PFA, a representative of LMSB will contact the taxpayer and schedule an orientation meeting with the taxpayer and examination personnel to discuss the PFA process and explain the roles and responsibilities of each participant. Immediately after the orientation meeting, the taxpayer and the Service should meet to formulate a plan and timeline that will result in a thorough development of the facts and a successful resolution of the issues before any associated returns are due. During the planning phase and throughout the PFA process, the taxpayer must provide information requested by the Service and assist the Service in the timely and efficient resolution of the examined issues. If, at any time after a request for a PFA has been accepted, the facts that are relevant and material to the request for a PFA significantly change or, in the case of proposed agreements for future taxable years, any factual assumptions that may be appropriate significantly change, the taxpayer must promptly inform the Service through the examination team assigned to the PFA.
.02 Continuing coordination. After a request for a PFA has been accepted, the LMSB Industry Director having jurisdiction over the PFA request will, through the examination team and local counsel assigned to the PFA, coordinate and consult with the Associate Chief Counsel having subject matter jurisdiction over the issue proposed to be determined by the PFA to ensure that that issue remains suitable for a PFA. The LMSB Industry Director will, through the examination team and local counsel assigned to the PFA, inform the Associate Chief Counsel if, at any time after a request for a PFA has been accepted, the facts that are relevant and material to the issue significantly change or, in the case of agreements for future taxable years, any factual assumptions that may be appropriate significantly change.
.03 Drafting. After the development of the facts and issues, the Team Manager will meet informally with the taxpayer to determine whether the parties agree on a PFA. If the parties reach agreement, the taxpayer will work with the Service to prepare the initial draft of the PFA. The PFA will be prepared by the taxpayer and the audit team with assistance, as necessary, from the PFA Program Manager, the Office of Chief Counsel, or other Service personnel. Except as provided in section 3.06, the Associate Chief Counsel having subject matter jurisdiction over the issue in the PFA need not execute or give final approval to the proposed PFA; however, upon execution of the PFA, the PFA Program Manager will immediately forward a copy of the PFA to the office of that Associate Chief Counsel.
.04 Return filing requirements. The Service’s acceptance of a taxpayer’s request for a PFA does not suspend or waive the normal filing requirements for any tax returns that may be affected by the proposed PFA.
.05 TEFRA taxpayers. If the procedures set forth in sections 6221 through 6233 apply to the taxpayer requesting the PFA and the issue determined by the PFA is a partnership item as defined in section 6231, the PFA process will be terminated for that issue if no agreement is reached with all partners by the date that is 30 business days before the due date for the partnership return (taking into account any extensions of time to file that may be in effect).
.06 Execution prior to filing. If a PFA is executed before a return is filed, the taxpayer must report the issues determined by the PFA according to the terms and conditions of the PFA. A copy of the PFA must be attached to the return.
.07 Execution after filing. If the Service and the taxpayer do not reach agreement on an issue before the taxpayer files an associated return, the Service and the taxpayer may still attempt to resolve the issue and enter into a PFA. If the filed return is inconsistent with the terms and conditions of the contemplated PFA, the taxpayer must agree to file an amended return consistent with those terms and conditions. A post-filing PFA should state whether the taxpayer is required to file an amended return. It should further state that the Service may assess additional tax due, if any, if an amended return is not filed. The taxpayer must attach a copy of the PFA to any amended return.
(5) There is an advantage in having the issues permanently and conclusively resolved for the taxable years covered by the PFA, or the taxpayer shows good and sufficient reasons for desiring a PFA and the United States will suffer no disadvantage if the agreement is executed.
(1) A PFA that makes determinations for the current taxable year (and any prior taxable year for which a return is not yet due) is a closing agreement under section 7121. The form and content of this type of PFA must comply with Rev. Proc. 68-16, 1968-1 C.B. 770.
(2) A PFA that makes a determination for one or more future taxable years as well as for the current taxable year (and any prior taxable year for which a return is not yet due) is a non-statutory agreement. Although not a closing agreement under section 7121, this type of PFA is a binding contract between the Service and a taxpayer. It is subject to any legislative enactment that is applicable to the taxable years to which the PFA relates. There is no prescribed format for such an agreement. The parties to a non-statutory agreement may, by mutual consent (and, if applicable, the further mutual agreement between the United States and any treaty partner that has entered into a mutual agreement that is a basis for the PFA), modify or terminate the agreement. A taxpayer who wants to modify or terminate a non-statutory agreement should submit a request to the office that originally processed the taxpayer’s request for a PFA. The parties to a non-statutory agreement also may condition its determinations on the continuing validity of certain stated assumptions. A “stated assumption” is any fact (whether or not within the control of the taxpayer) related to the taxpayer, a third party, an industry, or business and economic conditions whose continued existence is material to the determinations of the PFA. A stated assumption might include, for example, a particular mode of conducting business operations. If a stated assumption is no longer valid, a non-statutory agreement conditioned on such stated assumption will terminate as of the first day of the taxable year in which the stated assumption is no longer valid.
(3) A PFA concerning international issues will not be subject to the special limitation of section 7.05, Effect of Agreements or Judicial Determinations on Competent Authority Proceedings, of Rev. Proc. 2002-52, 2002-2 C.B. 242, which sets forth the effect of a closing agreement on the procedure for competent authority consideration under the mutual agreement procedure of United States income tax conventions.
.03 Methods and periods of accounting.
(1) A PFA does not constitute the consent of the Commissioner under section 446(e) to any change in method of accounting or the approval under section 442 of any adoption, change, or retention of an annual accounting period by the taxpayer.
(3) A PFA does not constitute a final determination regarding the methods of accounting of the taxpayer for any taxable year, except to the extent authorized by section 3.09(2).
Nothing in this agreement precludes the taxpayer from requesting, or the Service from requiring, a change in the taxpayer’s method of accounting for years after the year of change.
.01 At any time prior to the execution of the PFA, either the taxpayer or the Service may withdraw from consideration all or part of the request for a PFA. The withdrawal must be in writing and signed by the party initiating the withdrawal, i.e., the taxpayer or his authorized representative or the Industry Director, Director Field Operations, or the Director Field Specialists.
.02 Notwithstanding the withdrawal by either the taxpayer or the Service of any or all the issues that are the subject of the request for a PFA, the taxpayer’s agreement under section 4.04 of this revenue procedure will remain in effect.
.01 Post-filing procedures. If the Service and the taxpayer do not agree upon and execute a PFA that resolves an issue, either before or after the filing of the return to which the PFA relates, and the Service subsequently disagrees with the taxpayer’s treatment of the issue on the return, the taxpayer and the Service may continue their efforts to reach an agreement using post-filing procedures, such as the Accelerated Issue Resolution (AIR) procedures under Rev. Proc. 94-67, 1994-2 C.B. 800. This continuation of the process does not require a new application.
.02 Administrative appeals. If the Service and the taxpayer are unable to resolve an issue by a PFA or an AIR agreement, the taxpayer may pursue an administrative appeal either by requesting an early referral to Appeals under the procedures set forth in Rev. Proc. 99-28, 1999-2 C.B. 109, or by protesting any proposed deficiency related to the issue.
.01 Taxpayers subject to fees. Taxpayers are subject to a user fee only if they are selected to participate in the PFA program.
.02 Amount of fee. The user fee for taxpayers selected to participate in the PFA program is $50,000. A fee will be assessed for each separate and distinct issue. The orientation meeting or the first substantive meeting with the taxpayer to discuss the PFA issues will not take place until after the fee is received.
.03 Time and method of payment. Payment of the user fee must be made within 15 business days of notification that the issues have been selected for the PFA program. Payment must be made by check or money order payable to the Internal Revenue Service and submitted to the address indicated in section 4.06 of this revenue procedure.
.04 Withdrawal. Notwithstanding the withdrawal by either the taxpayer or the Service of any or all of the issues in the request for a PFA after acceptance of the request, the user fee paid by the taxpayer generally will not be refundable. A refund or waiver of the user fee will not be entertained unless a hardship has occurred (for example, a disaster loss) or if other circumstances beyond the control of the taxpayer exist. The Industry Director has discretion in granting a request for a refund of a user fee based on considerations of sound tax administration.
PFAs are agreements described in section 6103(b)(2)(D). A PFA and the information generated or received by the Service during the PFA process constitute confidential return information. As required by the Conference Report to H.R. 4577, The Community Renewal Tax Relief Act of 2000 (Pub. L. 106-554), H.R. Conf. Rep. No. 1033, 106th Cong., 2d Sess. 1033 (2000), the Service will, consistent with the restrictions of section 6103, continue to publish annual reports summarizing the operation of the PFA program. PFAs are not written determinations under section 6110 and, accordingly, are exempt from disclosure to the public under the Freedom of Information Act.
This revenue procedure is effective on December 26, 2006. This revenue procedure will remain in effect until December 31, 2008, unless sooner revoked, modified, or superseded. A request for a PFA that has been accepted into the program under section 5 of this revenue procedure will remain subject to the provisions of this revenue procedure, notwithstanding the preceding sentence.
Rev. Proc. 2005-12, 2005-1 C.B. 311, is superseded.
.01 No aspect of the PFA process will affect the record-keeping requirements imposed by any section of the Internal Revenue Code.
.02 The taxpayer must maintain a copy of the PFA supporting documents and books of account and records to enable the Service to ensure the taxpayer’s compliance with the PFA. These records may be specified in the PFA itself or in separate agreements.
The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) under the control number 1545-1684.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number. The collections of information in this revenue procedure are in sections 4, 6, and 14. The information collected under section 4 is required to provide the Service with the information necessary to determine which taxpayers should be included in the PFA program. The information collected under section 6 will be used to resolve the taxpayer’s issue and to support any PFA entered into between the taxpayer and the Service. The record-keeping requirements under section 14 will be used for tax administration. The collections of information under sections 4 and 6 are voluntary. Once a PFA is entered into, the record-keeping requirements under section 14 are mandatory. The likely respondents are businesses or other for-profit institutions.
The estimated total annual reporting and/or record-keeping burden is 13,134 hours.
The estimated annual burden per respondent varies from 5 hours to 1,092 hours, depending on whether a taxpayer applying to the PFA program is accepted into the program. The estimated annual burden per respondent for taxpayers who apply to the PFA program and are accepted is 1,092 hours. The estimated annual burden per respondent for taxpayers who apply to the PFA program and are not accepted is 5 hours. The estimated number of taxpayers who apply to the PFA program and are accepted is 12. The estimated number of taxpayers who apply to the PFA program and are not accepted is 6. The estimated total number of applicants and/or recordkeepers is 18.
Books or records relating to a collection of information must be retained so long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
The principal author of this revenue procedure is Stuart Spielman of the Office of Associate Chief Counsel (Procedure & Administration). For further information about this revenue procedure, contact Melanie Perrin, Senior Program Analyst, LMSB Office of Pre-Filing and Technical Guidance, at (202) 283-8408 (voice) (not a toll-free call), (202) 283-8406 (fax) (not a toll-free call).
If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on January 22, 2007, and would end on the date the court first determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation.
Change of location of public hearing.
On October 19, 2006, on page 61692 of the Federal Register (71 FR 61692), a notice of proposed rulemaking by cross-reference to temporary regulations and notice of public hearing (REG-127819-06, 2006-48 I.R.B. 1013) announced that a public hearing concerning the application of section 199, which provides a deduction for income attributable to domestic production activities will be held February 5, 2007 in the auditorium of the New Carrollton Federal Building, 5000 Ellin Road, Lanham, MD 20706. The location of the public hearing has changed.
The public hearing will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.
Concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Kelly Banks, (202) 622-0392 (not a toll-free number).
On October 19, 2006, on page 61693 of the Federal Register (71 FR 61693), a notice of proposed rulemaking and notice of public hearing (REG-136806-06, 2006-47 I.R.B. 950) announced that a public hearing concerning applying the private security or payment test for State and local governmental issuers of tax-exempt bonds will be held February 13, 2007 in the auditorium of the New Carrollton Federal Building, 5000 Ellin Road, Lanham, MD 20706. The location of the public hearing has changed.
On October 18, 2006, on page 61693 of the Federal Register (71 FR 61441), a notice of proposed rulemaking and notice of public hearing (REG-141901-05, 2006-47 I.R.B. 947) announced that a public hearing concerning guidance on the taxation of the exchange of property for an annuity contract will be held February 16, 2007 in the auditorium of the New Carrollton Federal Building, 5000 Ellin Road, Lanham, MD 20706. The location of the public hearing has changed.


text:
But soon our fancies change.
F. M. / . vs.
«nnnvior,. | ran 15 yards. The next down V.
around left end and Doyle one.
two downs, kicked on the third.
lost it again on being tackled.
Maclean hit the line for three.
I'orter, Davant R. H. B.
Pi'omptly at 2.45 the game be-gan.
with a 10 yard gain.
three years behind the line.
latter being unable to continue.
yards in the next two downs.
four yards, but here V. M. I.
around right end for 19 more.
I yards, on the next down V. M. I.
^ «'Diicluili'il on iDiii ih iian."
about 1,500 people when V. M. I.
for their time and trouble.
year. Davidson defeated V. P.
I. by the score of 12 to 5, and V.
P. I. in turn defeated V. M. I.
on an attempt at a forward pass.

matches: V. V. V. V. V. V. V.