Rev. Proc. 70-27

Section 1. Purpose.

The purpose of this Revenue Procedure is to implement the provisions of section 1.446-1(e) of the Income Tax Regulations which authorize the Commissioner to prescribe administrative procedures for obtaining his consent to requests for changes to accounting practices or methods which are consistent with the regulations.

Sec. 2. Background.

The regulations under section 446 of the Internal Revenue Code of 1954 require that, in order to obtain permission to change a method of accounting for Federal income tax purposes, it is necessary to apply for permission to change such method within the first 180 days of the year of proposed change. Experience with the application of Revenue Procedure 64-16, C.B. 1964-1 (Part 1), 677, indicates that under appropriate circumstances, it is administratively feasible to accept and process applications for permission to make such changes which may be received later.

Sec. 3. Scope and Objective.

.01 A taxpayer's request to change his accounting practice or method for Federal income tax purposes to an acceptable practice or method consistent with the regulations will ordinarily receive favorable consideration, provided he proposes and agrees as a condition to the change to take the necessary resulting adjustment into account ratably over an appropriate period, prescribed by the Commissioner, generally 10 years.

.02 Ordinarily the taxable year for which the change is requested shall be referred to as the "year of transition". The period to be used for allocating the resulting adjustment shall begin with the year of transition.

Sec. 4. Application.

.01 A taxpayer wishing to take advantage of this procedure should file Form 3115 (Application for Change in Accounting Method) with the Commissioner of Internal Revenue, Attention T:I:C, 1111 Constitution Avenue, N.W., Washington, D.C. 20224, and request the application of Revenue Procedure 70-27. Form 3115 should be filed within 180 days from the beginning of the taxable year for which the change is requested [year of transition]. In addition to the information required on Form 3115, the taxpayer should state that he proposes to take the adjustment into account over a 10-year period, or other appropriate period. Upon consideration of the application, additional information may be required. .02 A request which is filed after the 180-day period but within 9 months after the beginning of the taxable year for which the change is requested may nevertheless be considered as timely filed upon a showing of good cause by the taxpayer.

.03 If the taxpayer's return is being examined by the Service and there is an issue involving a change in accounting practice or method the taxpayer may request application of this Revenue Procedure. In such a case, this Revenue Procedure will generally be applicable to the most recent taxable year (year of transition) for which a Federal income tax return has been filed. The request for application of the Revenue Procedure shall be made in a letter to the Commissioner of Internal Revenue, Attention T:I:C. This request should be sent to the District Director for the District in which the return is being examined who will forward it with his comments to the National Office. The letter shall be accompanied by a completed Form 3115 (Application for Change in Accounting Method). Pending completion of action by the National Office on the request for application of this Revenue Procedure, the District Director will suspend audit action on this particular issue.

Sec. 5. Conferences in the National Office.

After requesting application of this Revenue Procedure, if the taxpayer desires to discuss the matter in the National Office, a conference will be arranged upon request.

Sec. 6. Areas Not Covered by This Revenue Procedure.

This Revenue Procedure will not apply to cases under examination by the Service in which the year or years under examination encompass the taxable year in which the erroneous practice or method was initiated by taxpayer.

Sec. 7. Inquiries.

Inquiries in regard to this Revenue Procedure should refer to its number and be addressed to the Commissioner of Internal Revenue, Attention T:I:C, 1111 Constitution Avenue, N.W., Washington, D.C. 20224.

Sec. 8. Effect on Other Documents.

.01 Revenue Procedure 64-16, C.B. 1964-1 (Part 1), 677, is superseded on the effective date set forth in section 9.

.02 In any Revenue Procedure or Revenue Ruling in which Revenue Procedure 64-16 is cited or referred to, the reference to this Revenue Procedure should be appropriately substituted therefor.

Sec. 9. Effective Date.

This Revenue Procedure shall be effective for applications filed 30 days or more after November 18, 1970, the date of publication in the Federal Register of amendments to the regulations under section 446 of the Code. With respect to requests filed before December 1, 1970, for application of this Revenue Procedure to taxable years beginning not earlier than January 1, 1970, the Commissioner may, for good cause shown, permit application of this Revenue Procedure to such taxable year.

¹ Also released as Technical Information Release 1055, dated Nov. 18, 1970.