In a letter sent to the Department of Treasury and the Internal Revenue Service (IRS), the American Institute of CPAs (AICPA) identified some additional items that should be changed in the updated method change procedures found in Revenue Procedure 2015-13. These additional items supplement recommendations made previously that sought to encourage voluntary compliance with proper tax accounting methods, while limiting the administrative burdens on taxpayers when complying with the method change rules.
The AICPA’s recommendations focus on adopting an “issue under consideration” standard to expand taxpayer’s ability to correct any erroneous methods of accounting while still under examination. The letter also recommends that the IRS establish procedures requiring examining agents to provide written notification when an issue is no longer under consideration during an exam, in addition to replacing the current complex window period rules.
The AICPA’s letter recommends the IRS:
- Expand a taxpayer’s opportunity to correct erroneous methods of accounting even while under examination by changing to an “issue under consideration” standard
- Delete section 3.08(4) from Rev. Proc. 2015-13, which provides a different “issue under consideration” standard for foreign corporations, and apply the definitions applicable to domestic corporations in section 3.08(1) of Rev. Proc. 2015-13 to all taxpayers, including CFCs. noted
- The IRS delete section 8.02(1)(a)(iii) from Rev. Proc. 2015-13. and allow CFCs to utilize the three-month window exception applying rules consistent with domestic corporations.
- Restore a controlled foreign corporation’s ability to use the 120-day window to file an accounting method change when an exam ends, regardless of whether the CFC continues to be under exam, if the issue is not under consideration, similar to the rule applicable to domestic corporations.
- Eliminate the 150 percent test restriction on receiving audit protection for CFCs.
- Permit automatic section 9100 relief for a taxpayer that filed the Odgen, UT copy of Form 3115 within three months of the due date (including extensions) of the federal income tax return for the year of change when the taxpayer timely filed the federal income tax return, implemented the requested change on the return, and attached the original Form 3115 to the return.
- Allow taxpayers to elect to accelerate positive section 481(a) adjustments related to accounting method changes made in prior years when an eligible acquisition transaction occurs.
“Current window periods and related exceptions create unnecessary complications and frustrate voluntary compliance,” says Reema Patel, Senior Manager, AICPA Tax Policy & Advocacy. “The recommendations in this letter – particularly replacing those rules with an ’issue under consideration’ – would simplify the process and allow the taxpayer to file a method change after 12 months under continuous examination, unless the issue is actively under consideration by the Exam, Appeals or a federal court.”
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