rp-09-39.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 C.F.R. 601.204 Changes in accounting periods and in methods of accounting

(Also
Part I, §§ 118, 162, 167, 168, 263A, 446, 451; 461, 471, 472, 481, 904, 953;
1.118-2, 1.162-3, 1.162-4, 1.446-1, 1.446-5, 1.461-1, 1.471-2)

Rev. Proc. 2009-39

SECTION 1. PURPOSE

This revenue procedure amplifies, clarifies, and modifies Rev. Proc. 2008-52,
2008-2 C.B. 587, which provides procedures for taxpayers within the scope of that
revenue procedure to obtain automatic consent for the changes in method of accounting
described in its APPENDIX. This revenue procedure also modifies and clarifies Rev.
Proc. 97-27, 1997-1 C.B. 680, as amplified and modified by Rev. Proc. 2002-19, 2002-1
C.B. 696, as amplified and clarified by Rev. Proc. 2002-54, 2002-2 C.B. 432, and as
modified by Rev. Proc. 2007-67, 2007-2 C.B. 1072, which provides the general
procedures for obtaining the advance consent of the Commissioner of Internal Revenue
to change a method of accounting.
SECTION 2. CHANGES TO REV. PROC. 2008-52

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.01 Change to section 2.05, Method change with a § 481(a) adjustment. Section
2.05(1) of Rev. Proc. 2008-52 is clarified to read as follows:
(1) Need for adjustment
. Section 481(a) requires those adjustments
necessary to prevent amounts from being duplicated or omitted to be taken into account
when the taxpayer’s taxable income is computed under a method of accounting different
from the method used to compute taxable income for the preceding taxable year. When
there is a change in method of accounting to which § 481(a) is applied, income for the
taxable year preceding the year of change must be determined under the method of
accounting that was then employed, and income for the year of change and the
following taxable years must be determined under the new method of accounting as if
the new method had always been used. The § 481(a) adjustment is computed
notwithstanding that the period of limitations on assessment and collection of tax may
have closed on the years (closed years) in which the events giving rise to the need for
an adjustment occurred. See
Superior Coach of Fla., Inc. v. Commissioner, 80 T.C.
895, 912 (1983). In computing the net § 481(a) adjustment, a taxpayer must take into
account all relevant accounts. For example, the § 481(a) adjustment for a change in the
proper time for deducting salary bonuses under § 461 should reflect any necessary
adjustments for amounts of salary bonuses capitalized to inventory under § 263A.
Example
. A taxpayer that is not required to use inventories uses the overall cash
receipts and disbursements method and changes to an overall accrual method.
The taxpayer has $120,000 of income earned but not yet received (accounts
receivable) and $100,000 of expenses incurred but not yet paid (accounts
payable) as of the end of the taxable year preceding the year of change. A
positive § 481(a) adjustment of $20,000 ($120,000 accounts receivable less
$100,000 accounts payable) is required as a result of the change.

.02 Changes to section 3.08, Definition of “under examination.
”

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(1) Change to section 3.08(1)(a). Section 3.08(1)(a) of Rev. Proc. 2008-52 is
modified to read as follows:
(1) In general
.
(a) Except as provided in sections 3.08(2), (3), (4), (5) and (6) of this
revenue procedure, an examination of a taxpayer with respect to a federal income tax
return begins on the date the taxpayer is contacted in any manner by a representative
of the Internal Revenue Service (Service) for the purpose of scheduling any type of
examination of the return. An examination ends:
* * *
(2) New sections 3.08(4), 3.08(5) and 3.08(6)
. Section 3.08 of Rev. Proc.
2008-52 is modified by adding new sections 3.08(4) and 3.08(5) and is clarified by
adding a new section 3.08(6) to read as follows:
(4) Certain foreign corporations
. A foreign corporation that is not required to
file a federal income tax return is under examination if any of its controlling domestic
shareholders, as defined in § 6.02(3)(b) of this revenue procedure, is under examination
for a taxable year(s) in which it was a United States shareholder of the foreign
corporation. For purposes of this revenue procedure, a foreign corporation is no longer
under examination when the controlling domestic shareholders are no longer under
examination, as defined in section 3.08 of this revenue procedure.
(5) Taxpayer before Joint Committee on Taxation
. If an examination of a
taxpayer involves a refund or credit in excess of the statutory sum that is subject to
review by the Joint Committee on Taxation pursuant to § 6405, then, for purposes of
this revenue procedure, the taxpayer is under examination while the taxpayer has a

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refund or credit under review by the Joint Committee on Taxation and continues to be
under examination until Joint Committee on Taxation review procedures and any
necessary follow-up are complete. See
Rev. Proc. 2005-32, 2005-1 C.B. 1206.
If a taxpayer files an application while the taxpayer is before the Joint Committee
on Taxation, the taxpayer must provide a copy of the application to the Joint Committee
on Taxation at the same time it files a copy of the application with the national office and
provides a copy to the examining agent. The Joint Committee on Taxation copy of the
application is to be sent to the following address: 1111 Constitution Avenue, NW, Room
3565, Washington, D.C. 20224.
(6) Taxpayer in Compliance Assurance Process
. For purposes of this
revenue procedure, a taxpayer participating in the Compliance Assurance Process
(CAP) is considered to be under examination as of the date the taxpayer executes the
Memorandum of Understanding for the CAP.
.03 Change to section 3.09, Definition of “issue under consideration
.” Section
3.09 of Rev. Proc. 2008-52 is modified by adding a new section 3.09(4) at the end of
section 3.09 to read as follows:
(4) Certain foreign corporations
. In the case of a controlled foreign
corporation (CFC) as defined in § 953(c)(1)(B) or § 957 or a noncontrolled section 902
corporation as defined in § 904(d)(2)(E) (10/50 corporation), a foreign corporation’s
method of accounting for an item is an issue under consideration if any of the
corporation’s controlling domestic shareholders receives notification described in
section 3.09(1), (2) or (3) that the treatment of a distribution or deemed distribution from

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the foreign corporation, or the amount of its earnings and profits or foreign taxes
deemed paid, is an issue under consideration.
.04 Change to section 4.02, Scope “Inapplicability”
. Section 4.02(1) of Rev. Proc.
2008-52 is modified and section 4.02(4) of Rev. Proc. 2008-52 is clarified to read as
follows:
(1) Under examination
. If, on the date the taxpayer (or if section 6.02(3)(b) of
this revenue procedure applies, the designated shareholder) would otherwise file a copy
of the application with the national office, the taxpayer is under examination (as
provided in section 3.08 of this revenue procedure), except as provided in sections
6.03(2) (90-day window), 6.03(3) (120-day window), 6.03(4) (consent of director),
6.03(5) (changes lacking audit protection), and 6.03(6) (issue pending) of this revenue
procedure;
* * *
(4) Section 381(a) transaction
. Except as otherwise provided in this section
4.02(4) or in final regulations issued under § 381, if the taxpayer engages in a
transaction to which § 381(a) applies within the proposed taxable year of change
(determined without regard to any potential closing of the year under § 381(b)(1)):
* * *
.05 Changes to section 5, TERMS AND CONDITIONS OF CHANGE, and section
6, GENERAL APPLICATION PROCEDURES.
(1) Changes to sections 5.06(4) and 6.02(3)(b)
. Section 5.06(4) of Rev.
Proc. 2008-52 is clarified by deleting the reference to the temporary regulations under
§ 1.964-1T(c)(3) and inserting reference to the final regulations under §§ 1.964-1(c)(3).

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Section 6.02(3)(b) is clarified by deleting the references to the temporary regulations
under §§ 1.964-1T(c)(3) and 1.964-1T(c)(5) and inserting references to the final
regulations under §§ 1.964-1(c)(3) and 1.964-1(c)(5), respectively.
(2) Changes to sections 6.02(1)(b), 6.02(11), 6.03, 6.04 and 6.05 of Rev.
Proc. 2008-52. Sections 6.02(1)(b) of Rev. Proc. 2008-52 is clarified and sections
6.02(11), 6.03, 6.04 and 6.05 of Rev. Proc. 2008-52 are modified to read as follows:
.02 Filing requirements.
(1) Applications
.
* * *
(b) Separate applications.
(i) In general. Ordinarily, a taxpayer must submit a separate
application for each change in method of accounting.
(ii) Single application for two or more changes
. In some cases, the
provisions of this revenue procedure or other guidance published in the IRB applicable
to particular changes in method of accounting may require or allow a taxpayer to file a
single application for two or more concurrent changes. See, for example, section 14.03
of the APPENDIX of this revenue procedure.
When the taxpayer is required or allowed to file a single Form 3115 for two or
more concurrent changes, the taxpayer must attach to the single Form 3115 the
information required by Part II, line 12, and Part IV, line 25 (including the amount of any
§ 481(a) adjustment), of Form 3115 for each change in method of accounting included
on that single Form 3115. Also attach an explanation for any other line(s) on the single

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Form 3115 where the taxpayer’s answer is different for any of the concurrent changes
to which the single Form 3115 relates.
* * *
(11) Additional copies required
.
(a) Scope restrictions waived for taxpayer under examination. If (i) one
or more of the scope limitation provisions of section 4.02 of this revenue procedure
would otherwise preclude a taxpayer from making a change under this revenue
procedure, but (ii) the scope limitation provisions of section 4.02 of this revenue
procedure do not apply to the change sought by the taxpayer (see, for example section
2.01 of the APPENDIX of this revenue procedure), and (iii) the taxpayer is under
examination (as provided in section 3.08 of this revenue procedure) on the date it files
the copy of its application with the national office, then the taxpayer (or if section
6.02(3)(b) of this revenue procedure applies, the designated shareholder) must provide
a copy of the application to the examining agent(s) at the same time that it files a copy
of the application with the national office. The application must contain the name(s) and
telephone number(s) of the examining agent(s).
(b) Taxpayer before an appeals office or a federal court and issue not
under consideration. If a taxpayer that is otherwise within the scope of this revenue
procedure (or if section 6.02(3)(b) of this revenue procedure applies, any controlling
domestic shareholder of a CFC or 10/50 corporation) is before an appeals office or a
federal court and the present method to be changed is not an issue under consideration
by the appeals office or the federal court on the date the copy of its application is filed
with the national office, then the taxpayer (or if section 6.02(3)(b) of this revenue

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procedure applies, the designated shareholder) must provide a copy of the application
to the appeals officer(s) or counsel(s) for the government, as applicable, at the same
time that it files a copy of the application with the national office. The application must
contain the name(s) and telephone number(s) of the appeals officer(s) or counsel(s) for
the government, as applicable.
.03 Taxpayer under examination
.
(1) In general. Except as otherwise provided in the APPENDIX of this
revenue procedure (see, for example, section 2.01 of the APPENDIX of this revenue
procedure), a taxpayer that is under examination (as provided in section 3.08 of this
revenue procedure) may file an application to change a method of accounting under
section 6 of this revenue procedure only if the taxpayer is within the provisions of
section 6.03(2) (90-day window), 6.03(3) (120-day window), 6.03(4) (consent of
director), 6.03(5) (changes lacking audit protection), or 6.03(6) (issue pending) of this
revenue procedure. A taxpayer (or if section 6.02(3)(b) of this revenue procedure
applies, the designated shareholder) that files an application beyond the time periods
provided in the 90-day and 120-day windows is not eligible for the automatic extension
of time and will not be granted an extension of time to file under § 301.9100, except in
unusual and compelling circumstances.
(2) 90-day window period
.
(a) A taxpayer (or if section 6.02(3)(b) of this revenue procedure applies,
the designated shareholder) may file a copy of the application with the national office to
change a method of accounting under this revenue procedure during the first 90-days of
any taxable year (the 90-day window) if the taxpayer has (or in the case of a taxpayer

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that is a CFC or 10/50 corporation, all of its controlling domestic shareholders that are
under examination have) been under examination for at least 12 consecutive months as
of the first day of the taxable year. This 90-day window is not available if the method of
accounting the taxpayer is changing is an issue under consideration at the time the
taxpayer (or designated shareholder) would otherwise file the copy of the application or
an issue the examining agent(s) has placed in suspense at the time the taxpayer (or
designated shareholder) would otherwise file the copy of the application. The 90-day
window also is not available while the taxpayer (or any controlling domestic shareholder
of a CFC or 10/50 corporation) has a refund or credit under review by the Joint
Committee on Taxation (including any necessary follow-up).
(b) A taxpayer changing a method of accounting under this 90-day
window (or if section 6.02(3)(b) of this revenue procedure applies, the designated
shareholder) must provide a copy of the application to the examining agent(s) at the
same time it files the copy of the application with the national office. The application
must contain the name(s) and telephone number(s) of the examining agent(s).
(3) 120-day window period
.
(a) A taxpayer (or if section 6.02(3)(b) of this revenue procedure applies,
the designated shareholder) may file a copy of the application with the national office to
change a method of accounting under this revenue procedure during the 120-day period
following the date an examination of the taxpayer (or in the case of a taxpayer that is a
CFC or 10/50 corporation, of each of its controlling domestic shareholders that were
under examination) ends (the 120-day window), regardless of whether a subsequent
examination has commenced. This 120-day window is not available if the method of

9

accounting the taxpayer is changing is an issue under consideration at the time the
taxpayer (or designated shareholder) would otherwise file a copy of the application or
an issue the examining agent(s) has placed in suspense at the time the taxpayer (or
designated shareholder) would otherwise file a copy of the application. The 120-day
window also is not available while the taxpayer (or a controlling domestic shareholder of
a CFC or 10/50 corporation) has a refund or credit under review by the Joint Committee
on Taxation (including any necessary follow-up).
(b) A taxpayer changing a method of accounting under this 120-day
window (or if section 6.02(3)(b) of this revenue procedure applies, the designated
shareholder) must provide a copy of the application to the examining agent(s) for any
examination that is in process at the same time it files the copy of the application with
the national office. The application must contain the name(s) and telephone number(s)
of the examining agent(s).
(4) Consent of director
.
(a) A taxpayer under examination may change its method of accounting
under this revenue procedure if the director consents to the filing of the application. The
director will consent to the filing of the application unless, in the opinion of the director,
the method of accounting to be changed would ordinarily be included as an item of
adjustment in the year(s) for which the taxpayer is under examination. For example, the
director will consent to the filing of an application to change from a clearly permissible
method of accounting, or from an impermissible method of accounting where the
impermissible method was adopted subsequent to the years under examination. The
director’s consent is limited to the director’s consent to file the application and does not

10

constitute the director’s agreement to, or approval of, the requested change in method
of accounting. The question of whether the method of accounting from which the
taxpayer is changing is permissible or was adopted subsequent to the years under
examination may be referred to the national office as a request for technical advice
under the provisions of Rev. Proc. 2009-2 (or any successor). This section 6.03(4)
does not apply to a taxpayer while the taxpayer (or any controlling domestic shareholder
of a CFC or 10/50 corporation) has a refund or credit under review by the Joint
Committee on Taxation (including any necessary follow-up).
(b) A taxpayer changing a method of accounting under this revenue
procedure with the consent of the director (or if section 6.02(3)(b) of this revenue
procedure applies, the designated shareholder) must attach to the copy of the
application filed with the national office a statement from the director consenting to the
filing of the application. In addition, the taxpayer (or designated shareholder) must
attach to its original application attached to its timely filed original federal income tax
return a statement certifying that it has obtained the written consent of the director to the
filing of the application and that the taxpayer (or designated shareholder) will maintain a
copy of such consent available for inspection. The taxpayer (or designated
shareholder) must provide a copy of the application to the director at the same time it
files a copy of the application with the national office. The application must contain the
name(s) and telephone number(s) of the examining agent(s).
(5) Changes lacking audit protection
.
(a) A taxpayer under examination may change its method of accounting
under this revenue procedure if the description of the change in the APPENDIX of this

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revenue procedure provides that the change is not subject to the audit protection
provisions of section 7 of this revenue procedure.
(b) A taxpayer changing a method of accounting under this section
6.03(5) (or if section 6.02(3)(b) of this revenue procedure applies, the designated
shareholder) must provide a copy of the application to the examining agent(s) for any
examination that is in process and, if the taxpayer (or any controlling domestic
shareholder of a CFC or 10/50 corporation) has a refund or credit under review by the
Joint Committee on Taxation (including any follow-up), to the Joint Committee on
Taxation, at the same time it files the copy of the application with the national office.
The application must contain the name(s) and telephone number(s) of the examining
agent(s).
(6) Issue Pending
.
(a) A taxpayer that is under examination with respect to any income tax
issue may request to change a method of accounting if the method of accounting to be
changed is an issue pending for any taxable year under examination. However, the
audit protection provisions of section 7 of this revenue procedure do not apply to a
taxpayer changing its method of accounting under this section 6.03(6). For purposes of
this section 6.03(6), an issue is pending for a taxable year under examination if the
Service has given the taxpayer (or if section 6.02(3)(b) of this revenue procedure
applies, any controlling domestic shareholders of a CFC or 10/50 corporation) written
notification indicating an adjustment is being made or will be proposed with respect to
the taxpayer’s method of accounting. The notification by the Service may result from an
inquiry by the Joint Committee on Taxation. This notification normally will occur after

12

the Service or the Joint Committee on Taxation has gathered information sufficient to
determine that an adjustment is appropriate and justified, although the exact amount of
the adjustment may not yet be determined.
(b) A taxpayer that requests to change a method of accounting under this
section 6.03(6) (or if section 6.02(3)(b) of this revenue procedure applies, the
designated shareholder) must provide a copy of the application to the examining
agent(s), and if the taxpayer (or any controlling domestic shareholder of a CFC or 10/50
corporation) has a refund or credit under review by the Joint Committee on Taxation
(including any necessary follow-up), to the Joint Committee on Taxation, at the same
time it files a copy of the application with the national office. The application must
contain the name(s) and telephone number(s) of the examining agent(s).
.04 Taxpayer before an appeals office
. A taxpayer otherwise within the scope of
this revenue procedure that is before an appeals office with respect to any income tax
issue (or if section 6.02(3)(b) of this revenue procedure applies, a CFC or 10/50
corporation with a controlling domestic shareholder that is before an appeals office with
respect to any income tax issue) may request a change in method of accounting.
However, the audit protection provisions of section 7 of this revenue procedure do not
apply if the method of accounting to be changed is an issue under consideration by the
appeals office. A taxpayer that requests to change a method of accounting under this
section 6.04 (or if section 6.02(3)(b) of this revenue procedure applies, the designated
shareholder) must provide a copy of the application to the appeals officer at the time it
files a copy of the application with the national office. The application must contain the
name(s) and telephone number(s) of the appeals officer(s).

13

.05 Taxpayer before a federal court. A taxpayer otherwise within the scope of
this revenue procedure that is before a federal court with respect to any income tax
issue (or if section 6.02(3)(b) of this revenue procedure applies, a CFC or 10/50
corporation with a controlling domestic shareholder that is before a federal court with
respect to any income tax issue) may request a change in method of accounting.
However, the audit protection provisions of section 7 of this revenue procedure do not
apply if the method of accounting to be changed is an issue under consideration by the
federal court. A taxpayer (or designated shareholder) that requests to change a method
of accounting under this section 6.05 must provide a copy of the application to the
counsel(s) for the government at the time it files a copy of the original application with
the national office. The application must contain the name(s) and telephone number(s)
of the counsel(s) for the government.
.06 Change to section 13, EFFECT ON OTHER DOCUMENTS
. Rev. Proc.
2008-52 is clarified by inserting a new paragraph at the end to read as follows:
Rev. Proc. 2008-18, 2008-1 C.B. 573, is modified, and, as modified, is
superseded.
.07 New section 3.05 of the APPENDIX, Materials and supplies
. Section 3 of the
APPENDIX of Rev. Proc. 2008-52 is modified by adding a new section 3.05 to read as
follows:
.05 Materials and supplies
.
(1) Description of change
.
(a) Applicability
. This change applies to a taxpayer that wants to change
its method of accounting for materials and supplies on hand to the method of treating

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the cost of materials and supplies as a deferred expense to be taken into account in the
taxable year in which they are actually consumed and used in operation, consistent with
§ 1.162-3.
(b) Inapplicability
. This change does not apply to a taxpayer that is
required under § 263A and the regulations thereunder to capitalize the costs with
respect to which the taxpayer wants to change its method of accounting under section
3.05 of this APPENDIX if the taxpayer is not capitalizing these costs, unless the
taxpayer concurrently changes its method to capitalize these costs in conjunction with a
change to a UNICAP method under section 11.01 or 11.02 of this APPENDIX (as
applicable).
(2) Amounts taken into account
. Applicable provisions of the Code,
regulations, and other guidance published in the IRB prescribe the manner in which a
liability that has been incurred is taken into account. For example, for a taxpayer with
inventories, certain indirect material costs must be included in inventory costs and may
be recovered through the cost of goods sold. See
§ 1.263A-1(e)(3)(ii)(E). A taxpayer
may not rely on the provisions of section 3.05 of this APPENDIX to take a current
deduction.
(3) Concurrent automatic change
. A taxpayer that wants to make both this
change and a change to a UNICAP method under section 11.01 or 11.02 of this
APPENDIX (as applicable) for the same year of change should file a single Form 3115
for both changes and enter the designated automatic accounting method change
numbers for both changes on the appropriate line on that Form 3115.

15

(4) Proposed regulations. The Department of the Treasury has published
proposed regulations that address the definition and treatment of materials and supplies
under § 162. See
Guidance Regarding Deduction and Capitalization of Expenditures
Related to Tangible Property, 73 FR 12838-01 (March 10, 2008), 2008-1 C.B. 871. The
proposed regulations are not effective until publication of a Treasury decision adopting
them as final regulations in the Federal Register. Thus, taxpayers may not change a
method of accounting in reliance upon the rules contained in the proposed regulations
until the rules are published as final regulations in the Federal Register. If final
regulations are adopted with positions that are inconsistent with the method of accounting
implemented by the taxpayer under section 3.05 of this APPENDIX, that method will no
longer be regarded as proper. In such event, the taxpayer will be required to follow any
instructions in the final regulations or other guidance published in the IRB concerning
methods of accounting for materials and supplies for future taxable years.
(5) Designated automatic accounting method change number
. The
designated automatic accounting method change number for a change in method of
accounting under section 3.05 of this APPENDIX is “143.” See
section 6.02(4) of this
revenue procedure.
(6) Contact information. For further information regarding a change under
this section, contact Justin G. Meeks at 202-622-5020 (not a toll-free call).
.08 New section 3.06 of the APPENDIX, Repair and maintenance costs
. Section
3 of the APPENDIX of Rev. Proc. 2008-52 is modified by adding a new section 3.06 to
read as follows:
.06 Repair and maintenance costs
.

16

(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to
change its method of accounting from capitalizing under § 263(a) costs paid or incurred
to repair and maintain tangible property (including network assets) to treating the repair
and maintenance costs as ordinary and necessary business expenses under § 162 and
§ 1.162-4. This change also applies to a taxpayer that wants to change the unit of
property it uses to determine the deductibility of repair and maintenance costs to a unit
of property that is permissible under applicable legal authority.
(b) Inapplicability
. This change does not apply to:
(i) A taxpayer that is required under § 263A and the regulations
thereunder to capitalize the costs with respect to which the taxpayer wants to change its
method of accounting under section 3.06 of this APPENDIX if the taxpayer is not
capitalizing these costs, unless the taxpayer concurrently changes its method to
capitalize these costs in conjunction with a change to a UNICAP method under section
11.01 or 11.02 of this APPENDIX (as applicable);
(ii) A taxpayer that wants to change its method of accounting for
dispositions of depreciable property, including a change in the unit of property used for
such dispositions (but see sections 6.24 and 6.25 of this APPENDIX); or
(iii) Any property subject to the repair allowance under § 1.167(a)-
11(d)(2) (including expenditures incurred after December 31, 1980, for the repair,
maintenance, rehabilitation, or improvement of property placed in service before
January 1, 1981).

17

(2) Manner of making change. A taxpayer making this change must attach to
its Form 3115 a statement with the following:
(a) A detailed description of the types of tangible property to which this
change applies;
(b) A detailed description of the types of repair and maintenance costs to
which this change applies;
(c) If the taxpayer is changing any unit of property determination, a
detailed description of the unit(s) of property under its present method of accounting for
determining the deductibility of repair and maintenance costs and a detailed description
of the unit(s) of property it will use under its proposed method of determining the
deductibility of repair and maintenance costs, together with a description of the legal
authority supporting the taxpayer’s proposed unit(s) of property for determining the
deductibility of repair and maintenance costs;
(d) The following statements regarding the costs to which this change
applies:
(i) “The taxpayer represents that the repair and maintenance costs
are incurred to keep the taxpayer’s property in ordinarily efficient operating condition.”
(ii) ”The taxpayer represents that the repair and maintenance costs
do not materially increase the value or substantially prolong the useful life of any unit of
property compared to the value or useful life of the property before the general wear or
tear or particular event that led to the repairs or maintenance.”
(iii) “The taxpayer represents that the repair and maintenance costs do
not adapt any unit of property to a new or different use.”

18

(iv) “The taxpayer represents that the repair and maintenance costs
do not include costs to replace any unit of property or any major components or
substantial structural parts of any unit of property.”
(v) “The taxpayer represents that the repair and maintenance costs
are not incurred as part of a plan of rehabilitation, modernization, or improvement to any
unit of property.”
(vi) “The taxpayer represents that the repair and maintenance costs
do not result from any prior owner’s use of any unit of property.”
(3) Additional copy of Form 3115 required
. A taxpayer changing its method
of accounting under section 3.06 of this APPENDIX must, in addition to the timely
duplicate filing requirements in section 6.02(3) of Rev. Proc. 2008-52, send a copy of its
completed Form 3115 (including attachments) to the following address on the date the
taxpayer files a copy of the Form 3115 with the national office: Internal Revenue
Service, 1973 North Rulon White Blvd., Mail Stop 4917, Ogden, UT 84404.
(4) Amounts taken into account
. Applicable provisions of the Code,
regulations, and other guidance published in the IRB prescribe the manner in which a
liability that has been incurred is taken into account. For example, for a taxpayer with
inventories, certain repair and maintenance costs must be included in inventory costs
and may be recovered through the cost of goods sold. See
§ 1.263A-1(e)(3)(ii)(E). A
taxpayer may not rely on the provisions of section 3.06 of this APPENDIX to take a
current deduction.
(5) No ruling on unit of property. The consent granted under this revenue
procedure for this change is not a determination by the Commissioner that the taxpayer

19

is using the appropriate unit of property in determining the deductibility of repair and
maintenance costs and does not create any presumption that the proposed unit of
property is permissible. The director will ascertain whether the taxpayer’s determination
of its unit of property is correct.
(6) Concurrent automatic change
. A taxpayer that wants to make both this
change and a change to a UNICAP method under section 11.01 or 11.02 of this
APPENDIX (as applicable) for the same year of change should file a single Form 3115
for both changes and enter the designated automatic accounting method change
numbers for both changes on the appropriate line on that Form 3115.
(7) Proposed regulations
. The Department of the Treasury has published
proposed regulations that address the application of §§ 162 and 263 to expenditures paid
or incurred to repair, maintain, or improve tangible property. See
Guidance Regarding
Deduction and Capitalization of Expenditures Related to Tangible Property, 73 FR 12838-
01 (March 10, 2008), 2008-1 C.B. 871. The proposed regulations are not effective until
publication of a Treasury decision adopting them as final regulations in the Federal
Register. Thus, taxpayers may not change a method of accounting in reliance upon the
rules contained in the proposed regulations until the rules are published as final
regulations in the Federal Register. If final regulations are adopted with positions that are
inconsistent with the method of accounting implemented by the taxpayer under section
3.06 of this APPENDIX, that method will no longer be regarded as proper. In such event,
the taxpayer will be required to follow any instructions in the final regulations or other
guidance published in the IRB concerning methods of accounting for the repair,
maintenance, or improvement of tangible property for future taxable years.

20

(8) Designated automatic accounting method change number. The
designated automatic accounting method change number for a change in method of
accounting under section 3.06 of this APPENDIX is “144.” See
section 6.02(4) of this
revenue procedure.
(9) Contact information
. For further information regarding a change under
this section, contact Mon Lam at 202-622-4950 (not a toll-free call).
.09 New section 6.23 of the APPENDIX, Tenant construction allowances.
Section 6 of the APPENDIX of Rev. Proc. 2008-52 is modified by adding a new section
6.23 to read as follows:
.23 Tenant construction allowances
.
(1) Description of change and scope.
(a) Applicability
. This change applies to a taxpayer that wants to change
its method of accounting for tenant construction allowances:
(i) from improperly treating the taxpayer as having a depreciable
interest in the property subject to the tenant construction allowances for federal income
tax purposes to properly treating the taxpayer as not having a depreciable interest in
such property for federal income tax purposes; or
(ii) from improperly treating the taxpayer as not having a depreciable
interest in the property subject to the tenant construction allowances for federal income
tax purposes to properly treating the taxpayer as having a depreciable interest in such
property for federal income tax purposes.
(b) Inapplicability
. This change does not apply to:
(i) any tenant construction allowance that qualifies under § 110;

21

(ii) any portion of a tenant construction allowance that is not
expended on depreciable property; or
(iii) any amount expended for depreciable property in excess of the
tenant construction allowance.
(2) Definition
. For purposes of section 6.23 of this APPENDIX, the term
“tenant construction allowance(s)” means any amount received by a lessee from a
lessor to construct, acquire, or improve property for use by the lessee pursuant to a
lease.
(3) Manner of making the change
.
(a) The change in method of accounting under section 6.23 of this
APPENDIX is made using a cut-off method and only applies to leases entered into on or
after the beginning of the year of change. See
section 2.06 of this revenue procedure.
(b) If a taxpayer wants to change its method of accounting for tenant
construction allowances under existing leases, the taxpayer must file a Form 3115 with
the Commissioner in accordance with the requirements of § 1.446-1(e)(3)(i) and Rev.
Proc. 97-27. A change involving tenant construction allowances under existing leases
will require a § 481(a) adjustment. Consent to change a method of accounting for
tenant construction allowances under existing leases is granted only if the taxpayer’s
treatment of the property subject to the tenant construction allowances is consistent with
the treatment of such property by the counterparty for federal income tax purposes.
The following information must be submitted with a Form 3115 submitted under Rev.
Proc. 97-27:

22

(i) If a lessee is filing the Form 3115, the lessee must submit with the
Form 3115: (A) a statement that provides the amount of the tenant construction
allowance received by the lessee, the amount of such tenant construction allowance
expended by the lessee on property, and the name of the lessor that provided the
tenant construction allowance; and (B) a representation, signed under penalties of
perjury, from such lessor that provides the amount of the tenant construction allowance
provided to the lessee and an explanation as to how the lessor is treating the property
subject to such tenant construction allowance for federal income tax purposes. If the
lessor capitalized the tenant construction allowance (or any portion thereof) provided to
the lessee and depreciated the property subject to such tenant construction allowance,
the representation must also include the amount that was capitalized by the lessor, the
Internal Revenue Code section under which the property is depreciated by the lessor,
and the life over which the property is depreciated by the lessor.
(ii) If a lessor is filing the Form 3115, the lessor must submit with the
Form 3115: (A) a statement that provides the amount of the tenant construction
allowance provided to a lessee and the name of the lessee that received such tenant
construction allowance; and (B) a representation, signed under penalties of perjury,
from such lessee that provides the amount of the tenant construction allowance
received from the lessor, the amount of such tenant construction allowance recognized
as gross income by the lessee, the amount of the tenant construction allowance
expended by the lessee on property, and an explanation as to how the lessee is treating
the property subject to the tenant construction allowance for federal income tax
purposes. If the lessee capitalized the tenant construction allowance (or any portion

23

thereof) received from the lessor and depreciated the property subject to such tenant
construction allowance, the representation must also include the amount that was
capitalized by the lessee, the Internal Revenue Code section under which the property
is depreciated by the lessee, and the life over which the property is depreciated by the
lessee.
(4) No audit protection
. A taxpayer does not receive audit protection under
section 7 of this revenue procedure in connection with this change.
(5) Designated automatic accounting method change number
. The
designated automatic accounting method change number for a change under section
6.23 of this APPENDIX is “145.” See section 6.02(4) of this revenue procedure.
(6) Contact information. For further information regarding a change under
this section, contact Ruba Nasrallah at 202-622-4930 (not a toll-free call).
.10 New section 6.24 of the APPENDIX, Dispositions of structural components of
a building (section 168). Section 6 of the APPENDIX of Rev. Proc. 2008-52 is modified
by adding a new section 6.24 to read as follows:
.24 Dispositions of structural components of a building (section 168)
.
(1) Description of change
.
(a) Applicability
. This change applies to a taxpayer that wants to change
to a unit of property that is permissible under applicable legal authority for determining
when the taxpayer has disposed of a building (as defined in § 1.48-1(e)(1), except as
otherwise provided under any other applicable provision of the Code or regulations
relating to depreciation or amortization (for example, § 1400I(f)(3))) and its structural
components (as defined in § 1.48-1(e)(2)) for depreciation purposes. This change also

24

will affect the determination of gain or loss from the disposition of the building (including
its structural components).
(b) Inapplicability
. This change does not apply to:
(i) a taxpayer that is required under § 263A and the regulations
thereunder to capitalize the costs with respect to which the taxpayer wants to change its
method of accounting under section 6.24 of this APPENDIX if the taxpayer is not
capitalizing these costs, unless the taxpayer concurrently changes its method to
capitalize these costs in conjunction with a change to a UNICAP method under section
11.01 or 11.02 of this APPENDIX (as applicable);
(ii) any property that is not depreciated under § 168 under the
taxpayer’s present and proposed methods of accounting;
(iii) any section 1245 property or depreciable land improvement (but
see section 6.25 of this APPENDIX for making this change);
(iv) any leasehold improvement, whether made by the lessor or the
lessee (unless the taxpayer leased land and constructed a building on such leased land,
and such building (including its structural components) is the leasehold improvement
and is the unit of property under the taxpayer’s proposed method of accounting under
section 6.24 of this APPENDIX);
(v) 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));
(vi) any property subject to a general asset account election under §
168(i)(4) and the regulations thereunder;

25

(vii) any building with multiple condominium or cooperative units
(unless each condominium or cooperative unit is the unit of property under the
taxpayer’s proposed method of accounting under section 6.24 of this APPENDIX); or
(viii) any multiple buildings (including their structural components)
that are treated as a single building (single unit of property) under the taxpayer’s
present method of accounting or will be treated as a single building (single unit of
property) under the taxpayer’s proposed method of accounting.
(2) Manner of making change
. A taxpayer making this change must attach to
its Form 3115 a statement with the following:
(a) A detailed description of the types of property to which this change
applies;
(b) A detailed description of the unit of property under the taxpayer’s
present and proposed methods of accounting for determining when the building
(including its structural components) is disposed of by the taxpayer for depreciation
purposes (when depreciation ends);
(c) A detailed description of how the taxpayer determined the unit of
property under its present method of accounting for determining when the building
(including its structural components) is disposed of by the taxpayer for depreciation
purposes and will determine the unit of property under its proposed method of
accounting for determining when the building (including its structural components) is
disposed of by the taxpayer for depreciation purposes. If this proposed unit of property
is not each building (including its structural components) (except as provided in section
6.24(1)(b)(vii) of this APPENDIX regarding condominium or cooperative units), also

26

provide the legal authority supporting the taxpayer’s proposed unit of property for
determining when the building (including its structural components) is disposed of by the
taxpayer for depreciation purposes; and
(d) A statement as to whether the taxpayer’s proposed unit of property
for determining when the building (including its structural components) is disposed of by
the taxpayer for depreciation purposes is the same as the taxpayer’s present unit of
property for determining when the building (including its structural components) is
placed in service by the taxpayer (when depreciation begins). If not, also provide the
unit of property for determining when the building (including its structural components) is
placed in service by the taxpayer and explain why the taxpayer is using a different unit
of property for determining when the building (including its structural components) is
placed in service.
(3) Additional copy of Form 3115 required
. A taxpayer changing its method
of accounting under section 6.24 of this APPENDIX must, in addition to the timely
duplicate filing requirements in section 6.02(3) of Rev. Proc. 2008-52, send a copy of its
completed Form 3115 (including attachments) to the following address on the date the
taxpayer files a copy of the Form 3115 with the national office: Internal Revenue
Service, 1973 North Rulon White Blvd., Mail Stop 4917, Ogden, UT 84404
(4) No ruling on unit of property
. The consent granted under this revenue
procedure for this change is not a determination by the Commissioner that the taxpayer
is using the appropriate unit of property for determining when the building (including its
structural components) is placed in service or disposed of by the taxpayer for
depreciation purposes and does not create any presumption that the proposed unit of

27

property is permissible for depreciation purposes. The director will ascertain whether
the taxpayer’s determination of its unit of property for depreciation purposes is correct.
(5) Concurrent automatic change.

(a) A taxpayer that wants to make both this change and a change to a
UNICAP method under section 11.01 or 11.02 of this APPENDIX (as applicable) for the
same year of change should file a single Form 3115 for both changes and enter the
designated automatic accounting method change numbers for both changes on the
appropriate line on that Form 3115.
(b) A taxpayer that wants to make both this change and a change under
section 6.25 of this APPENDIX for the same year of change should file a single Form
3115 for both changes and enter the designated automatic accounting method change
numbers for both changes on the appropriate line on that Form 3115.
(6) Designated automatic accounting method change number
. The
designated automatic accounting method change number for a change in method of
accounting under section 6.24 of this APPENDIX is “146.” See
section 6.02(4) of this
revenue procedure.
(7) Contact information
. For further information regarding a change under
this section, contact Charles Magee at 202-622-4930 (not a toll-free call).
.11 New section 6.25 of the APPENDIX, Dispositions of tangible depreciable
assets (other than a building or its structural components) (section 168). Section 6 of
the APPENDIX of Rev. Proc. 2008-52 is modified by adding a new section 6.25 to read
as follows:

28

.25 Dispositions of tangible depreciable assets (other than a building or its
structural components) (section 168).
(1) Description of change
.
(a) Applicability
. This change applies to a taxpayer that wants to
change to a unit of property that is permissible under applicable legal authority for
determining when the taxpayer has disposed of a section 1245 property or a
depreciable land improvement for depreciation purposes. This change also will affect
the determination of gain or loss from the disposition of the section 1245 property or the
depreciable land improvement.
(b) Inapplicability
. This change does not apply to:
(i) a taxpayer that is required under § 263A and the regulations
thereunder to capitalize the costs with respect to which the taxpayer wants to change its
method of accounting under section 6.25 of this APPENDIX if the taxpayer is not
capitalizing these costs, unless the taxpayer concurrently changes its method to
capitalize these costs in conjunction with a change to a UNICAP method under section
11.01 or 11.02 of this APPENDIX (as applicable);
(ii) any property that is not depreciated under § 168 under the
taxpayer’s present and proposed methods of accounting;
(iii) any building (including its structural components) (but see section
6.24 of this APPENDIX for making this change);
(iv) any leasehold improvement, whether made by the lessor or the
lessee (unless each leasehold improvement is the unit of property under the taxpayer’s
proposed method of accounting under section 6.25 of this APPENDIX);

29

(v) 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));
(vi) any property subject to a general asset account election under
§ 168(i)(4) and the regulations thereunder;
(vii) any property subject to a mass asset account election under
former § 168(d)(2)(A); or
(viii) any property subject to the repair allowance under § 1.167(a)-
11(d)(2) (including expenditures incurred after December 31, 1980, for the repair,
maintenance, rehabilitation, or improvement of property placed in service before
January 1, 1981).
(2) Manner of making change
. A taxpayer making this change must attach to
its Form 3115 a statement with the following:
(a) A detailed description of the types of property to which this change
applies;
(b) A detailed description of the unit of property under the taxpayer’s
present and proposed methods of accounting for determining when the property is
disposed of by the taxpayer for depreciation purposes (when depreciation ends);
(c) A detailed description of how the taxpayer determined the unit of
property under its present method of accounting for determining when the property is
disposed of by the taxpayer for depreciation purposes and will determine the unit of
property under its proposed method of accounting for determining when the property is
disposed of by the taxpayer for depreciation purposes. If this proposed unit of property

30

is not determined using only the functional interdependence standard (see, e.g.,
Armstrong World Industries, Inc. v. Commissioner, T.C. Memo. 1991-326, aff’d, 974
F.2d 422 (3
rd
Cir. 1992); Hawaiian Independent Refinery, Inc. v. United States, 697 F.2d
1063, 1069 (Fed. Cir. 1983)), also provide the legal authority supporting the taxpayer’s
proposed unit of property for determining when the property is disposed of by the
taxpayer for depreciation purposes; and
(d) A statement as to whether the taxpayer’s proposed unit of property
for determining when the property is disposed of by the taxpayer for depreciation
purposes is the same as the taxpayer’s present unit of property for determining when
the property is placed in service by the taxpayer (when depreciation begins). If not, also
provide the unit of property for determining when the property is placed in service by the
taxpayer and explain why the taxpayer is using a different unit of property for
determining when the property is placed in service.
(3) Additional copy of Form 3115 required
. A taxpayer changing its method
of accounting under section 6.25 of this APPENDIX must, in addition to the timely
duplicate filing requirements in section 6.02(3) of Rev. Proc. 2008-52, send a copy of its
completed Form 3115 (including attachments) to the following address on the date the
taxpayer files a copy of the Form 3115 with the national office: Internal Revenue
Service, 1973 North Rulon White Blvd., Mail Stop 4917, Ogden, UT 84404.
(4) No ruling on unit of property
. The consent granted under this revenue
procedure for this change is not a determination by the Commissioner that the taxpayer
is using the appropriate unit of property for determining when the property is placed in
service or disposed of by the taxpayer for depreciation purposes and does not create

31

any presumption that the proposed unit of property is permissible for depreciation
purposes. The director will ascertain whether the taxpayer’s determination of its unit of
property for depreciation purposes is correct.
(5) Concurrent automatic change
.
(a) A taxpayer that wants to make both this change and a change to a
UNICAP method under section 11.01 or 11.02 of this APPENDIX (as applicable) for the
same year of change should file a single Form 3115 for both changes and enter the
designated automatic accounting method change numbers for both changes on the
appropriate line on that Form 3115.
(b) A taxpayer that wants to make both this change and a change under
section 6.24 of this APPENDIX for the same year of change should file a single Form
3115 for both changes and enter the designated automatic accounting method change
numbers for both changes on the appropriate line on that Form 3115.
(6) Designated automatic accounting method change number
. The
designated automatic accounting method change number for a change in method of
accounting under section 6.25 of this APPENDIX is “147.” See
section 6.02(4) of this
revenue procedure.
(7) Contact information. For further information regarding a change under
this section, contact Charles Magee at 202-622-4930 (not a toll-free call).
.12 Changes to section 11.01 of the APPENDIX, Certain uniform capitalization
(UNICAP) methods used by resellers and reseller-producers.
(1) Section 11.01(1)(a) of the APPENDIX, Applicability
.

32

(a) Section 11.01(1)(a)(vi) of the APPENDIX. Section 11.01(1)(a)(vi) of
the APPENDIX is modified to apply to a reseller-producer and is also clarified to read as
follows:
(vi) a reseller or reseller-producer that wants to change to a UNICAP
method (or methods) specifically described in the regulations and includes any
necessary changes in the identification of costs subject to § 263A that will be accounted
for using the new method in any taxable year, other than the first taxable year, that it
does not qualify as a small reseller. However, this does not include a change for
purposes of recharacterizing “section 471 costs” as “additional § 263A costs” (or vice
versa) under the simplified resale method; or
(b) New section 11.01(1)(a)(vii) of the APPENIDX. Section 11.01(1)(a)
of the APPENDIX is modified by adding a new section 11.01(1)(a)(vii) to read as
follows:
(vii) a reseller or reseller-producer that wants to change from not
capitalizing a cost subject to § 263A to capitalizing that cost, if the reseller or reseller-
producer is otherwise already using a UNICAP method (or methods) specifically
described in the regulations.
(2) Section 11.01(1)(b)(ii) of the APPENDIX
. Section 11.01(1)(b)(ii) of the
APPENDIX is clarified to read as follows:
(ii) Historic absorption ratio
. This change does not apply to a
taxpayer that wants to make an historic absorption ratio election under §§ 1.263A-
2(b)(4) or 1.263A-3(d)(4), or to a taxpayer that wants to revoke an election to use the
historic absorption ratio with the simplified resale method (see § 1.263A-3(d)(4)(iii)(B)),

33

including a taxpayer using the simplified resale method with an historic absorption ratio
that wants to change to a UNICAP method specifically described in the regulations that
does not include the historic absorption ratio. However, this change applies to a small
reseller that wants to change from the historic absorption ratio with the simplified resale
method to a permissible non-UNICAP inventory capitalization method under section
11.01(1)(a)(i) of this APPENDIX.
(3) Section 11.01(1)(c) of the APPENDIX
. Section 11.01(1)(c) of the
APPENDIX of Rev. Proc. 2008-52 is modified to read as follows:
(c) Scope limitation inapplicable
. The scope limitation of § 4.02(7) of this
revenue procedure does not apply to the changes described in §§ 11.01(1)(a)(i) and (ii)
of the APPENDIX of this revenue procedure.
(4) Section 11.01(2), Definitions
. Section 11.01(2)(g) of the APPENDIX of
Rev. Proc. 2008-52 is clarified to read as follows:
(g) “A UNICAP method specifically described in the regulations” includes
the 90-10 de minimis
rule to allocate a mixed service department’s costs to resale
activities (§ 1.263A-1(g)(4)(ii)), the 1/3-2/3 rule to allocate labor costs of personnel to
purchasing activities (§ 1.263A-3(c)(3)(ii)(A)), the 90-10 de minimis
rule to allocate a
dual-function storage facility’s costs to property acquired for resale (§ 1.263A-
3(c)(5)(iii)(C)), the specific identification method (§ 1.263A-1(f)(2)), the burden rate
method (§ 1.263A-1(f)(3)), the standard cost method (§ 1.263A-1(f)(3)), the direct
reallocation method (§ 1.263A-1(g)(4)(iii)(A)), the step-allocation method (§ 1.263A-
1(g)(4)(iii)(B)), the simplified service cost method (§ 1.263A-1(h)) (with a labor-based
allocation ratio), and the simplified resale method without the historic absorption ratio

34

election (§ 1.263A-3(d)), but does not include any other reasonable allocation method
within the meaning of § 1.263A-1(f)(4).
.13 Changes to section 11.02 of the APPENDIX, Certain uniform capitalization
(UNICAP) methods used by producers and reseller-producers.
(1) Section 11.02(1)(a) of the APPENDIX. Section 11.02(1)(a) of the
APPENDIX is modified by adding a new second sentence and is also clarified to read
as follows:
(a) Applicability
. This change applies to a producer (as defined in
section 11.01(2)(d) of this APPENDIX) or a reseller-producer (as defined in section
11.01(2)(e) of this APPENDIX) that wants to change to a UNICAP method (or methods)
specifically described in the regulations, including any necessary changes in the
identification of costs subject to § 263A that will be accounted for using the new method.
This change also includes a change from not capitalizing a cost subject to § 263A to
capitalizing that cost for a producer or a reseller-producer that is otherwise already
using a UNICAP method (or methods) specifically described in the regulations.
However, this change does not include a change for purposes of recharacterizing
“section 471 costs” as “additional § 263A costs” (or vice versa
) under the simplified
production method.
(2) Section 11.02(1)(b) of the APPENDIX
. Section 11.02(1)(b) of the
APPENDIX is clarified to read as follows:
(b) Inapplicability
. This change does not apply to a producer or reseller-
producer that wants to revoke an election to use the historic absorption ratio with the
simplified production method (see
§ 1.263A-2(b)(4)(iii)(B)), including a taxpayer using

35

the simplified production method with an historic absorption ratio changing to a UNICAP
method specifically described in the regulations that does not include the historic
absorption ratio. This change also does not apply to a taxpayer that wants to use either
the simplified service cost method or the simplified production method for self-
constructed assets under §§ 1.263A-1(h)(2)(i)(D) and 1.263A-2(b)(2)(i)(D). Also, this
change does not apply to a producer or reseller-producer that wants to change its
method of accounting for interest capitalization.
.14 Change to section 14.01 of the APPENDIX, Change in overall method from
the cash method to an accrual method.
(1) Change to section 14.01(1)(a) of the APPENDIX. The second paragraph
of section 14.01(1)(a) of the APPENDIX is clarified to read as follows:
* * *
If the year of change is the first taxable year the taxpayer is required by § 448 to
change from the cash method (the first § 448 year) and the taxpayer qualifies to make
this change under the automatic consent procedures of § 1.448-1(g) and (h)(2) as well
as this revenue procedure, the taxpayer may make the change under this revenue
procedure provided the taxpayer complies with the provisions of § 1.448-1(h)(2) and the
requirements of this revenue procedure. For a hospital, defined in § 1.448-1(g)(2)(ii)(B),
that makes the change for the first § 448 year under the provisions of this revenue
procedure, see § 1.448-1(g)(2)(ii) for the applicable § 481(a) adjustment period. If a
taxpayer does not change from the cash method for the first § 448 year under the
provisions of this revenue procedure, the taxpayer must make the change under the
provisions of § 1.448-1(g) and (h)(2).

36

(2) Change to section 14.01(1)(b) of the APPENDIX, Inapplicability. Section
14.01(1)(b) is clarified by inserting a new section 14.01(1)(b)(viii) to read as follows:
(viii) a taxpayer making a change from a hybrid method of
accounting to an overall accrual method of accounting. For purposes of section 14.01
of this APPENDIX, a hybrid method of accounting is a combination of the cash and
accrual methods under which one or more items of income or expense are reported on
the cash method and one or more items of income or expense are reported on an
accrual method.
(3) Change to section 14.01(2) of the APPENDIX, Scope limitations
inapplicable. Section 14.01(2) of the APPENDIX is modified to read as follows:
(2) Scope limitation inapplicable. If the year of change is the first taxable
year the taxpayer is required by § 448 to change from the cash method (first § 448
year), the scope limitation in section 4.02(6) of this revenue procedure does not apply to
a change in method of accounting request made under section 14.01 of this
APPENDIX. For all other changes in method of accounting requests made under
section 14.01 of this APPENDIX, any prior change to the overall cash method under the
provisions of Rev. Proc. 2001-10, 2001-1 C.B. 272, or Rev. Proc. 2002-28, 2002-1 C.B.
815, is disregarded for purposes of section 4.02(6) of this revenue procedure.
.15 Change to section 14.14 of the APPENDIX, Nonshareholder contributions to
capital under § 118. Section 14.14 of the APPENDIX of Rev. Proc. 2008-52 is modified
to read as follows:
.14 Nonshareholder contributions to capital under § 118.
(1) Description of change
.

37

(a) Water and sewerage disposal utilities.
(i) This change applies to a regulated public utility described in
§ 118(c) that wants to change its method of accounting for payments received from
customers as customer connection fees, which are not contributions to the capital of the
regulated public utility within the meaning of § 118(c), from excluding the payments from
gross income as nontaxable contributions to capital under § 118 to including the
payments in gross income under § 61. See
Rev. Rul. 2008-30, 2008-1 C.B. 1156.
(ii) This change applies to a regulated public utility described in
§ 118(c) that wants to change its method of accounting for payments or property
received that are contributions in aid of construction under § 118(c) and § 1.118-2 and
that meet the requirements of §§ 118(c)(1)(B) and 118(c)(1)(C) from including the
payments or the fair market value of the property in gross income under § 61 to
excluding the payments or the fair market value of the property from income as
nontaxable contributions to capital under § 118(a).
(b) Other payments or property received
. This change applies to a
taxpayer that wants to change its method of accounting for payments or property
received (other than the payments received by a public utility described in § 118(c) that
are addressed in section 14.14(1)(a)(i) of this APPENDIX) that do not constitute
contributions to the capital of the taxpayer within the meaning of § 118 and the
regulations thereunder, from excluding the payments or the fair market value of the
property from gross income as nontaxable contributions to capital under § 118 to
including the payments or the fair market value of the property in gross income under
§ 61.

38

(2) Additional requirement. In addition to the other filing requirements of this
revenue procedure, a taxpayer that is making a change described in § 14.14(1)(a)(i) or
(1)(b) must complete Schedule E of Form 3115 for the depreciable property to which the
change relates.
(3) Designated automatic accounting method change number
. The
designated automatic accounting method change number for a change under section
14.14 of this APPENDIX is “129.” See section 6.02(4) of this revenue procedure.
(4) Contact information
. For further information regarding a change under
this section, contact David H. McDonnell at 202-622-3040 (not a toll-free call).
.16 New section 14.15 of the APPENDIX, Debt issuance costs. Section 14 of the
APPENDIX of Rev. Proc. 2008-52 is modified by adding a new section 14.15 to read as
follows:
.15 Debt issuance costs
.
(1) Description of change
. This change applies to a taxpayer that wants to
change its method of accounting for capitalized debt issuance costs to comply with
§ 1.446-5, which provides rules for allocating the costs over the term of the debt.
(2) Designated automatic accounting method change number
. The
designated automatic accounting method change number for a change under section
14.15 of this APPENDIX is “148.” See section 6.02(4) of this revenue procedure.
(3) Contact information
. For further information regarding a change under
this section, contact Sonja Kotlica at 202-622-3950 (not a toll-free number).

39

.17 Change to section 15.07 of the APPENDIX, Advance payments. Sections
15.07(1) and (3) of the APPENDIX of Rev. Proc. 2008-52 are modified and section
15.07(2) of the APPENDIX of Rev. Proc. 2008-52 is clarified to read as follows:
(1) Description of change
. This change applies to a taxpayer using or
changing to an overall accrual method of accounting that receives advance payments,
as defined in Rev. Proc. 2004-34, 2004-1 C.B. 991, and wants to use either the full
inclusion or deferral method, as described in Rev. Proc. 2004-34. See also
Announcement 2004-48, 2004-1 C.B. 998. This change includes a change by a
taxpayer that changes the way it recognizes advance payments in revenues in its
applicable financial statement (AFS) and wants to change its method of accounting to
use its new AFS in determining the extent to which advance payments are included in
gross income under Rev. Proc. 2004-34. For example, a taxpayer that changes its AFS
from one deferral method to a different deferral method must change its method of
accounting under this revenue procedure (if otherwise eligible) to use that different
deferral method for tax purposes under Rev. Proc. 2004-34.
(2) Manner of making change
. In lieu of providing the information and
documentation required by line 1 of Schedule B of the Dec. 2003 version of Form 3115,
a taxpayer changing to the deferral method must: (i) state whether the taxpayer uses
an applicable financial statement and, if so, identify the type; (ii) describe the basis used
for deferral (that is, the method the taxpayer uses in its applicable financial statement or
how the taxpayer determines amounts earned, as applicable); and (iii) if the taxpayer
makes an allocation to which section 5.02(4)(c) of Rev. Proc. 2004-34 applies, include a
statement that the allocation method is based on payments the taxpayer regularly

40

receives for an item or items it regularly provides separately. See Rev. Proc. 2004-34
and Announcement 2004-48.
(3) Concurrent automatic change to an overall accrual method
. A taxpayer
that wants to make both a change to the deferral method under section 15.07 of this
APPENDIX and a change to an overall accrual method under section 14.01 of this
APPENDIX for the same year of change must file a single Form 3115 for both changes
and enter the designated automatic accounting method change numbers for both
changes on the appropriate line on that Form 3115.
.18 Change to section 15.10 of the APPENDIX, Retainages
. Section 15.10(1)(a)
of the APPENDIX of Rev. Proc. 2008-52 is modified to read as follows:
(a) Applicability. This change applies to an accrual method taxpayer that
wants to change its method of accounting for treating retainages to a method consistent
with the holding in Rev. Rul. 69-314, 1969-1 C.B. 139. A taxpayer changing its method
of accounting for retainages under section 15.10 of this APPENDIX must treat all
retainages (receivables and payables) in the same manner.
.19 Change to section 19.01(1) of the APPENDIX, Self-insured employee
medical benefits. Section 19.01(1)(a)(i) of the APPENDIX of Rev. Proc. 2008-52 is
amplified and clarified to read as follows:
(i) Applicability
. This change applies to an accrual method taxpayer that
wants to change its method of accounting for self-insured liabilities (including any
amounts not covered by insurance, such as a “deductible” amount under an insurance
policy) relating to employee medical expenses (including liabilities resulting from
medical services provided to retirees and to employees who have filed claims under a

41

workers’ compensation act) that are not paid from a welfare benefit fund within the
meaning of § 419(e) to a method as follows:
* * *
.20 Change to section 19.01(2) of the APPENDIX, Bonuses
. Section 19.01(2)(a)
of the APPENDIX of Rev. Proc. 2008-52 is amplified and clarified to read as follows:
(a) Description of change.
(i) Applicability. This change applies to an accrual method taxpayer
that wants to change its method of accounting to treat bonuses as incurred in the
taxable year in which all events have occurred that establish the fact of the liability to
pay a bonus and the amount of the liability can be determined with reasonable accuracy
(see
§ 1.446-1(c)(1)(ii)). Specifically, a taxpayer may change its method of accounting
under section 19.01(2) of this APPENDIX to one of the following methods:
(A) If all the events that establish the fact of the liability to pay a
bonus have occurred by the end of the taxable year in which the related services are
provided, the taxpayer will treat the bonus liability as incurred in that taxable year. See

Rev. Rul. 55-446, 1955-2 C.B. 531, as modified by Rev. Rul. 61-127, 1961-2 C.B. 36.
(B) If all the events that establish the fact of the liability to pay a
bonus occur in the taxable year subsequent to the taxable year in which the related
services are provided, the taxpayer will treat the bonus liability as incurred in such
subsequent taxable year.
(ii) Inapplicability
. This change does not apply:

42

(A) if the bonus is not received by the employee by the 15
th
day
of the 3
rd
calendar month after the end of the taxable year in which the related services
are provided; or
(B) to a taxpayer that is required under § 263A and the
regulations thereunder to capitalize the costs with respect to which the taxpayer wants
to change its method of accounting under section 19.01(2) of this APPENDIX if the
taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its
method to capitalize these costs in conjunction with a change to a UNICAP method
under section 11.01 or 11.02 of this APPENDIX (as applicable).
.21 Change to section 19.01(3) of the APPENDIX, Vacation pay
. Section
19.01(3)(a) of the APPENDIX of Rev. Proc. 2008-52 is amplified and clarified to read as
follows:
(a) Description of change
.
(i) Applicability
. This change applies to an accrual method taxpayer
that wants to change its method of accounting to treat vacation pay as incurred in the
taxable year in which all events have occurred that establish the fact of the liability to
pay vacation pay and the amount of the liability can be determined with reasonable
accuracy (see
§ 1.446-1(c)(1)(ii)). Specifically, a taxpayer may change its method of
accounting under section 19.01(3) of this APPENDIX to one of the following methods:
(A) If all the events that establish the fact of the liability to pay
vacation pay have occurred by the end of the taxable year in which the related services
are provided, the taxpayer will treat the vacation pay liability as incurred in that taxable

43

year. A taxpayer may change to this method of accounting only if the vacation pay
vests in that taxable year.
(B) If all the events that establish the fact of the liability to pay
vacation pay occur in the taxable year subsequent to the taxable year in which the
related services are provided, the taxpayer will treat the vacation pay liability as incurred
in such subsequent taxable year.
(ii) Inapplicability
. This change does not apply:
(A) if the vacation pay is not received by the employee by the
15
th
day of the 3
rd
calendar month after the end of the table year in which the related
services are provided.
(B) to a taxpayer that is required under § 263A and the
regulations thereunder to capitalize the costs with respect to which the taxpayer wants
to change its method of accounting under section 19.01(3) of this APPENDIX if the
taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its
method to capitalize these costs in conjunction with a change to a UNICAP method
under section 11.01 or 11.02 of this APPENDIX (as applicable).
.22 Changes to section 19.03 of the APPENDIX, Timing of incurring liabilities
under a workers’ compensation act, tort, breach of contract, or violation of law.
(1) Section 19.03(1)(a) of the APPENDIX
. Section 19.03(1)(a) of the
APPENDIX of Rev. Proc. 2008-52 is amplified and clarified to read as follows:
(a) Applicability
. This change applies to an accrual method taxpayer that
wants to change its method of accounting for self-insured liabilities (including any
amounts not covered by insurance, such as a “deductible” amount under an insurance

44

policy) arising under any workers’ compensation act or out of any tort, breach of
contract, or violation of law, to treating the liability for the workers’ compensation, tort,
breach of contract, or violation of law as being incurred in the taxable year in which all
the events have occurred that establish the fact of the liability, the amount of the liability
can be determined with reasonable accuracy, and payment is made to the person to
which the liability is owed. See
§ 461 and § 1.461-4(g)(1) and (2). If the taxpayer has
self-insured liabilities resulting from medical services provided to employees who have
filed claims under a workers compensation act, the taxpayer may change its method of
accounting for those liabilities under section 19.01(1) of this APPENDIX.
(2) Section 19.03(3) of the APPENDIX
. Section 19.03(3) of the APPENDIX
of Rev. Proc. 2008-52 is amplified and clarified to read as follows:
(3) Concurrent automatic changes
. A taxpayer that wants to make both this
change and change to either a method provided in section 19.01(1) of this APPENDIX
for self-insured employee medical expenses or a UNICAP method under section 11.01
or 11.02 of this APPENDIX (as applicable) for the same year of change should file a
single Form 3115 and enter the designated automatic accounting method change
number for each change on the appropriate line on that Form 3115.
.23 New section 19.08 of the APPENDIX, Ratable accrual of real property taxes
.
Section 19 of the APPENDIX of Rev. Proc. 2008-52 is modified by adding a new section
19.08 to read as follows:
.08 Ratable accrual of real property taxes.
(1) Description of change
. This change applies to an accrual method
taxpayer that wants to change its method of accounting for real property taxes to the

45

method described in § 461(c) and § 1.461-1(c)(1) (ratable accrual election). This
change applies to real property taxes that relate to a definite period of time. This
change does not apply to a taxpayer’s first taxable year in which the taxpayer incurs
real property taxes, in which case the change is made using the provisions of § 1.461-
1(c)(3)(i).
(2) Manner of making change and designated automatic accounting method
change number.
(a) This change is made on a cut-off basis and applies only to real
property taxes accrued on or after the beginning of the year of change. Any real
property taxes accrued prior to the year of change are accounted for under the
taxpayer’s former method of accounting. See
§ 1.461-1(c)(6), Examples (2) – (5). See
also section 2.06 of this revenue procedure for more information regarding a cut-off
basis. Accordingly, a § 481(a) adjustment is neither permitted nor required.
(b) In accordance with § 1.446-1(e)(3)(ii), the requirement of § 1.446-
1(e)(3)(i) to file an application on Form 3115 is waived and a statement in lieu of the
Form 3115 is authorized for this change. The taxpayer’s request (Form 3115 or
statement) to make the change under this section of the APPENDIX must include all of
the following:
(i) the designated automatic accounting method change number for
this change, which is “149”;
(ii) the taxpayer’s name and employer identification (or social
security number in the case of an individual);
(iii) the year of change (both the beginning and ending dates); and

46

(iv) the information described in § 1.461-1(c)(3)(ii)(a) through (f).
(c) The consent granted under this revenue procedure satisfies the
consent required under § 461(c)(2)(B) and § 1.461-1(c)(3)(ii).
(3) Contact information
. For further information regarding a change under
this section, contact Daniel Cassano at 202-622-7900 (not a toll-free call).
.24 Change to section 20 of the APPENDIX, Rent.
(1) Heading of section 20.01 of the APPENDIX. The heading of section
20.01 of the APPENDIX of Rev. Proc. 2008-52 is modified to read as follows:
.01 Change from an improper method of inclusion of rental income or expense to
inclusion in accordance with the rent allocation.
(2) Section 20.01(1)(a) of the APPENDIX. Section 20.01(1)(a) of the
APPENDIX of Rev. Proc. 2008-52 is modified by deleting section 20.01(1)(a)(ii), and
renumbering section 20.01(1)(a)(iii) as section 20.01(1)(a)(ii).
(3) Section 20.01(3) of the APPENDIX
. Section 20.01(3) of the APPENDIX
of Rev. Proc. 2008-52 is clarified to read as follows:
(3) Audit protection limited
. Audit protection under section 7 of this revenue
procedure does not apply to this change for any § 467 rental agreement determined by
the Commissioner to be a disqualified leaseback or long-term agreement described in
§ 1.467-3(b).
.25 Change to section 21.01 of the APPENDIX, Cash discounts
. Section
21.01(3) of the APPENDIX of Rev. Proc. 2008-52 is clarified to read as follows:
(3) Computation of § 481(a) adjustment for changes to gross invoice method. In
the case of a taxpayer changing from the net invoice method to the gross invoice

47

method, a positive adjustment is required to prevent omissions arising from the fact that
the net invoice method did not report income upon timely payment for some or all of the
goods that remain in inventory, and a negative adjustment is required to prevent
duplications arising from the fact that the net invoice method included the invoice price,
adjusted for the cash discounts, of some or all goods in cost of goods sold and the
discount will be earned by payment in a subsequent taxable year. The net § 481(a)
adjustment can be computed by deducting the “Available Discount” at the beginning of
the year of change from the “Applicable Discount” at the beginning of the year of
change. The Available Discount is equal to the difference between the accounts
payable balance under the gross invoice method and the net invoice method. The
Applicable Discount is equal to the difference between the beginning inventory value
under the gross invoice method and the net invoice method.
Example
. Taxpayer’s accounts payable balance at the beginning of the
year of change was $980 under the net invoice method and $1,000 under the gross
invoice method. Taxpayer’s inventory value was $2,955 under the net invoice method
and $3,000 under the gross invoice method. The Applicable Discount is $45 ($3,000 -
$2,955) and the Available Discount is $20 ($1,000 - $980). Thus, Taxpayer’s net
§ 481(a) adjustment is a positive $25 ($45 - $20).

.26 Change to section 21.05 of the APPENDIX, Impermissible methods of
identification and valuation. Section 21.05(1) of the APPENDIX of Rev. Proc. 2008-52
is modified to add a new section 21.05(1)(c) to read as follows:
(c) changing from a method that is not in accordance with § 1.471-2(c)
for determining the value of “subnormal” goods.
.27 Change to section 21.11 of the APPENDIX, Permissible methods of
identification and valuation. Section 21.11(1) of the APPENDIX of Rev. Proc. 2008-52
is clarified to read as follows:

48

(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to change
from one permissible method of identifying and valuing inventories to another
permissible method of identifying and valuing inventories. For example, a taxpayer
using first-in, first out (FIFO) as its inventory-identification method may change its
inventory-valuation method from cost to cost or market, whichever is lower (LCM).
(Note, however, a real estate developer may not value land at LCM because land is not
inventoriable property under § 1.471-1. Also, a taxpayer who meets the definition of a
“dealer in securities” under both § 1.471-5 and § 475 is required to account for
securities, as defined in § 475, under § 475 and may not use the rules described in
§ 1.471-5 for those securities.) Furthermore, a taxpayer may change to a permissible
method of valuing “subnormal” goods under § 1.471-2(c).
However, this change does not apply to any change described in another section
of the APPENDIX of this revenue procedure or in other guidance published in the IRB,
or to any changes within the last-in, first-out (LIFO) inventory method. For example, this
change does not apply to a taxpayer that wants to change to a rolling-average method
(see
section 21.14 of this APPENDIX).
(b) Permissible method defined
. For purposes of this change, a
permissible method is an inventory method (identification or valuation, or both)
specifically permitted by the Code, the regulations, a decision of the United States
Supreme Court, a revenue ruling, a revenue procedure, or other guidance published in
the IRB for inventories. However, an otherwise permissible inventory method is not
permissible under this section of the APPENDIX of this revenue procedure for a specific

49

taxpayer if that taxpayer is prohibited from using that method or if that taxpayer is
required to use a different method.
.28 New section 22.01(6) of the APPENDIX, Change from the LIFO inventory
method. Sections 22.01(6) and 22.01(7) of the APPENDIX of Rev. Proc. 2008-52 are
renumbered 22.01(7) and 22.01(8), respectively. Section 22.01 of the APPENDIX is
clarified by adding a new section 22.01(6) to read as follows:
(6) Pool split and partial termination. If a taxpayer must remove goods from
a pool because those goods are not within the scope of that pool (for example
,
removing resale goods from a manufacturing pool), and if the taxpayer wants to change
from the LIFO inventory method for those removed goods, the taxpayer may split the
pool pursuant to section 22.10 of this APPENDIX and then may change from the LIFO
method pursuant to section 22.01 of this APPENDIX. See
section 22.10(2) of this
APPENDIX. The taxpayer must file a separate Form 3115 for each such change.
.29 Changes to section 22.07 of the APPENDIX, Changes within the inventory
price index computation (IPIC) method.
(1) Changes to section 22.07(1)
.
(a) Change to section 22.07(1)(f)
. Section 22.07(1)(f) of the APPENDIX
is modified to read as follows:
(f) change the assignment of one or more inventory items to BLS
categories under either Table 3 (Consumer Price Index for All Urban Consumers (CPI-
U): U.S. City average, detailed expenditure categories) of the monthly CPI Detailed
Report or Table 6 (Producer price indexes and percent changes for commodity
groupings and individual items, not seasonally adjusted) of the monthly PPI Detailed

50

Report. See § 1.472-8(e)(3)(iii)(C) for principles concerning the assignment of inventory
items to BLS categories under the IPIC method. As part of this change, a taxpayer may
separate a reassigned item from an inappropriate pool and combine the reassigned
item with items in an appropriate pool. See
§ 1.472-8(g)(2) for principles concerning the
manner of combining and separating dollar-value pools;
(b) New section 22.07(1)(h). Section 22.07(1) of the APPENDIX of Rev.
Proc. 2008-52 is modified by adding a new section 22.07(1)(h) at the end of section
22.07(1) to read as follows:
(h) change from using preliminary BLS price indexes to using final BLS
price indexes to compute an inventory price index, or vice versa
. See § 1.472-
8(e)(3)(iii)(D)(2) for principles concerning the selection of BLS price indexes under the
IPIC method.
(2) New section 22.07(2)
. Sections 22.07(2), 22.07(3) and 22.07(4) of the
APPENDIX of Rev. Proc. 2008-52 are renumbered 22.07(3), 22.07(4) and 22.07(5),
respectively. Section 22.07 of the APPENDIX is modified by adding a new section
22.07(2) to read as follows:
(2) Certain scope limitation inapplicable
. The scope limitation in section
4.02(7) of this revenue procedure does not apply to the changes described in sections
22.07(1)(d) and (g) of this APPENDIX.
.30 Changes to section 22.10 of the APPENDIX, Changes to dollar-value pools
of manufacturers.
(1) Change to section 22.10(1)(b)
. Section 22.10(1)(b) of the APPENDIX of
Rev. Proc. 2008-52 is clarified to read as follows:

51

(b) wants to change from using multiple pools described in § 1.472-8(b)(3) to
using natural business unit (NBU) pools described in § 1.472-8(b)(1), or vice versa; or
(2) Change to section 22.10(2)
. Section 22.10(2) of the APPENDIX of Rev.
Proc. 2008-52 is clarified to read as follows:
(2) Manner of making change
. This change is made on a cut-off basis and
applies only to the computation of ending inventories after the beginning of the year of
change. See section 2.06 of this revenue procedure for more information regarding a
cut-off basis. Accordingly, a § 481(a) adjustment is neither permitted nor required. A
taxpayer that changes its method of pooling pursuant to section 22.10 of this
APPENDIX must combine or separate pools as required by § 1.472-8(g). If a taxpayer
splits a pool into two or more permissible pools pursuant to section 22.10 of this
APPENDIX, which must be implemented on a cut-off basis, the taxpayer then may file a
separate Form 3115 to change from the LIFO inventory method for one or more of the
resulting pools pursuant to section 22.01 of this APPENDIX, which must be
implemented with a § 481(a) adjustment.
.31 Change to section 28.01 of the APPENDIX, Transactions involving computer
programs. Section 28.01 of the APPENDIX of Rev. Proc. 2008-52 is modified to delete
the current text as obsolete, and to substitute the following:
.01 Reserved
.
.32 Change in contact name information.
(1) Section 11.01 of the APPENDIX, Certain uniform capitalization (UNICAP)
methods used by resellers and reseller-producers. Section 11.01(7) of the APPENDIX
of Rev. Proc. 2008-52 is modified to read as follows:

52

(7) Contact information. For further information regarding a change under
this section, contact Kari Fisher or W. Thomas McElroy, Jr. at 202-622-4970 (not a toll-
free call).
(2) Section 11.02 of the APPENDIX, Certain uniform capitalization (UNICAP)
methods used by producers and reseller-producers. Section 11.02(5) of the APPENDIX
of Rev. Proc. 2008-52 is modified to read as follows:
(5) Contact information. For further information regarding a change under
this section, contact Kari Fisher or W. Thomas McElroy, Jr. at 202-622-4970 (not a toll-
free call).
(3) Section 11.03 of the APPENDIX, Change to no longer capitalize research
and experimental expenditures under § 263A. Section 11.03(5) of the APPENDIX of
Rev. Proc. 2008-52 is modified to read as follows:
(5) Contact information
. For further information regarding a change under
this section, contact Kari Fisher or W. Thomas McElroy, Jr. at 202-622-4970 (not a toll-
free call).
(4) Section 14.01 of the APPENDIX, Change in overall method from the cash
method to an accrual method. Section 14.01(8) of the APPENDIX of Rev. Proc. 2008-
52 is modified to read as follows:
(8) Contact information
. For further information regarding a change under
this section, contact Kari Fisher at 202-622-4970 (not a toll-free call).
(5) Section 14.03 of the APPENDIX, Taxpayers changing to overall cash
method. Section 14.03(7) of the APPENDIX of Rev. Proc. 2008-52 is modified to read
as follows:

53

(7) Contact information. For further information regarding a change under
this section, contact W. Thomas McElroy, Jr. at 202-622-4970 (not a toll-free call).
(6) Section14.07 of the APPENDIX, Deduction of incentive payments to
health care providers. Section 14.07(4) of the APPENDIX of Rev. Proc. 2008-52 is
modified to read as follows:
(4) Contact information. For further information regarding a change under
this section, contact Kay Hossofsky at 202-622-3970 (not a toll-free call).
(7) Section 14.12 of the APPENDIX, Change to overall cash/hybrid method
for certain banks. Section 14.12(7) of the APPENDIX of Rev. Proc. 2008-52 is modified
to read as follows:
(7) Contact information. For further information regarding a change under
this section, contact David B. Silber at 202-622-3930 (not a toll-free call).
(8) Section 15.05 of the APPENDIX, Credit card annual fees
. Section
15.05(4) of the APPENDIX of Rev. Proc. 2008-52 is modified to read as follows:
(4) Contact information
. For further information regarding a change under
this section, contact Jon Silver at 202-622-3930 (not a toll-free call).
(9) Section 15.06 of the APPENDIX, Credit card late fees
. Section 15.06(5)
of the APPENDIX of Rev. Proc. 2008-52 is modified to read as follows:
(5) Contact information
. For further information regarding a change under
this section, contact Jon Silver at 202-622-3930 (not a toll-free call).
(10) Section 15.08, Credit card cash advance fees
. Section 15.08(5) of the
APPENDIX of Rev. Proc. 2008-52 is modified to read as follows:

54

(5) Contact information. For further information regarding a change under
this section, contact Jon Silver at 202-622-3930 (not a toll-free call).
(11) Change to section 24.01, Changing from the § 585 reserve method to
the § 166 specific charge-off method. Section 24.01(6) of the APPENDIX of Rev. Proc.
2008-52 is modified to read as follows:
(6) Contact information. For further information regarding a change under
this section, contact David B. Silber at 202-622-3930 or Laura Fields at 202-622-3050
(not a toll-free call).
(12) Section 25.01, Safe harbor method of accounting for premium
acquisition expenses. Section 25.01(4) of the APPENDIX of Rev. Proc. 2008-52 is
modified to read as follows:
(4) Contact information
. For further information regarding a change under
this section, contact Kay Hossofsky at 202-622-3970 (not a toll-free call).
(13) Change to section 26.01 of the APPENDIX, Composite method for
discounting unpaid losses. Section 26.01(3) of the APPENDIX of Rev. Proc. 2008-52 is
modified to read as follows:
(3) Contact information
. For further information regarding a change under
this section, contact Kay Hossofsky at 202-622-3970 (not a toll-free call).
(14) Change to section 27.01 of the APPENDIX, REMIC inducement fees
.
Section 27.01(4) of the APPENDIX of Rev. Proc. 2008-52 is modified to read as follows:
(4) Contact information
. For further information regarding a change under
this section, contact John W. Rogers III at 202-622-4695 (not a toll-free call).

55

(15) Section 29.01 of the APPENDIX, Change in functional currency.
Section 29.01(4). Section 29.01(4) of the APPENDIX of Rev. Proc. 2008-52 is modified
to read as follows:
(4) Contact information
. For further information regarding a change under
this section, contact Sheila Ramaswamy at 202-622-3870 (not a toll-free call).
(16) APPENDIX Contact List. The APPENDIX Contact List is modified for
the following sections to read as follows:
APPENDIX
Section
Number
Designated
Automatic
Accounting
Change NumberContact Name
Telephone
Number Office
3.05 143 Justin G. Meeks 202-622-5020 IT&A
3.06 144 Mon Lam 202-622-4950 IT&A
6.23 145 Ruba Nasrallah 202-622-4930 IT&A
6.24 146 Charles Magee 202-622-4930 IT&A
6.25 147 Charles Magee 202-622-4930 IT&A
11.01 22 Kari Fisher 202-622-4970 IT&A
W. Thomas McElroy, Jr.202-622-4970 IT&A
11.02 23 Kari Fisher 202-622-4970 IT&A
W. Thomas McElroy, Jr.202-622-4970 IT&A
11.03 24 Kari Fisher 202-622-4970 IT&A
W. Thomas McElroy, Jr.202-622-4970 IT&A
14.01 122, 123 Kari Fisher 202-622-4970 IT&A
14.03 32, 33 W. Thomas McElroy, Jr.202-622-4970 IT&A
14.07 90 Kay Hossofsky 202-622-3970 FI&P
14.12 127 David B. Silber 202-622-3930 FI&P
14.14 129 David H. McDonnell 202-622-3040 P&SI
14.15 148 Sonja Kotlica 202-622-3950 FI&P
15.05 80, 81 Jon Silver 202-622-3930 FI&P
15.06 82 Jon Silver 202-622-3930 FI&P

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15.08 94 Jon Silver 202-622-3930 FI&P
19.08 149 Daniel Cassano 202-622-7900 IT&A
24.01 66 David B. Silber 202-622-3930 FI&P
Laura Fields 202-622-3050 P&SI
25.01 67 Kay Hossofsky 202-622-3970 FI&P
26.01 68 Kay Hossofsky 202-622-3970 FI&P
27.01 79 John W. Rogers, III 202-622-4695 FI&P
29.01 70 Sheila Ramaswamy 202-622-3870 INTL

The APPENDIX Contact List is also modified to delete APPENDIX Section
Number 28.01.
SECTION 3. CHANGES TO REV. PROC. 97-27
.01 Section 3.07 of Rev. Proc. 97-27 is modified by adding new section 3.07(3)
and is clarified by adding a new section 3.07(4) to read as follows:
(3) Taxpayer before Joint Committee on Taxation
. If an examination of a
taxpayer involves a refund or credit in excess of the statutory sum that is subject to
review by the Joint Committee on Taxation pursuant to § 6405, then, for purposes of
this revenue procedure, the taxpayer is under examination while the taxpayer has a
refund or credit under review by the Joint Committee on Taxation and continues to be
under examination until Joint Committee on Taxation review procedures and any
necessary follow-up are complete. See
Rev. Proc. 2005-32, 2005-1 C.B. 1206.
Sections 6.01(2), (3) and (4) of this revenue procedure (90-day window, 120-day
window, consent of the director) do not apply to a taxpayer while the taxpayer has a
refund or credit under review by the Joint Committee on Taxation (including any follow-
up).

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Further, for purposes of section 6.01(5) (issue pending), an issue is pending for a
taxable year under examination if the Service has given the taxpayer written notification
indicating an adjustment is being made or will be proposed with respect to the
taxpayer’s method of accounting. The notification by the Service may result from an
inquiry by the Joint Committee on Taxation. This notification normally will occur after
the Service or the Joint Committee on Taxation has gathered information sufficient to
determine that an adjustment is appropriate and justified, although the exact amount of
the adjustment may not yet be determined. If a taxpayer files a Form 3115 while the
taxpayer is before the Joint Committee on Taxation, the taxpayer must provide a copy
of the Form 3115 to the Joint Committee on Taxation at the same time it files the
original Form 3115 with the national office. The Joint Committee on Taxation copy of
the Form 3115 is to be sent to the following address: 1111 Constitution Avenue, NW,
Room 3565, Washington, D.C. 20224.
(4) Taxpayer in Compliance Assurance Process
. For purposes of this
revenue procedure, a taxpayer participating in the Compliance Assurance Process
(CAP) is considered to be under examination as of the date the taxpayer executes the
Memorandum of Understanding for the CAP.
.02 Certain Foreign Corporations
. With respect to a foreign corporation that is
not required to file a federal income tax return, sections 3.07 (definition of under
examination), 3.08 (definition of issue under consideration), 4.02(2) (scope,
inapplicability when under examination), 6 (under examination, or before an appeals
office a federal court), 7 (section 481(a) adjustment period), and 8.08 (signature
requirements) of Rev. Proc. 97-27, as amplified and modified by Rev. Proc. 2002-19,

58

are clarified and modified in the same manner as the comparable provisions of sections
3.08, 3.09, 4.02(1), 5.06, 6.02(3)(b) (applies to the Form 3115 filed under Rev. Proc. 97-
27), 6.02(3)(c)(ii), 6.02(5), 6.02(10), 6.02(11), 6.03, 6.04 and 6.05 of Rev. Proc. 2008-
52, as modified by sections, 2.02(2) (relating to certain foreign corporations), 2.03, 2.04
and 2.05(2) of this revenue procedure
.03 Change “district director” to “director.”

(1) Section 3 of Rev. Proc. 97-27 is modified by adding a new section 3.10 to
read as follows:
.10 Director
. The term “director” has the same meaning as this term has in Rev.
Proc. 2009-1, 2009-1 I.R.B. 1 (or any successor).
(2) Rev. Proc. 97-27 is clarified by replacing the term “district director”
wherever it appears with the term “director.”
SECTION 4. EFFECT ON OTHER DOCUMENTS
.01 Rev. Proc. 2008-52 is amplified, clarified, and modified.
.02 Rev. Proc. 97-27 is clarified and modified.
.03 Rev. Proc. 2005-63, 2005-2 C.B. 491, is modified to provide that taxpayers
within the scope of Rev. Proc. 2008-52, that desire to make the change in method of
accounting described in § 1.461-1(c) must follow the procedures in Rev. Proc. 2008-52
instead of the procedures in the regulations and Rev. Proc. 2005-63.
SECTION 5. EFFECTIVE DATE
.01 In general
.
(a) Rev. Proc. 2008-52
. Except as provided in section 5.02 of this revenue
procedure, this revenue procedure is effective for applications filed under Rev. Proc.

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2008-52 on or after August 27, 2009, for a year of change ending on or after December
31, 2008.
(b) Rev. Proc. 97-27
. This revenue procedure is effective for Forms 3115
filed under Rev. Proc. 97-27, as amplified and modified by Rev. Proc. 2002-19, as
amplified and clarified by Rev. Proc. 2002-54, and as modified by Rev. Proc. 2007-67,
filed on or after August 27, 2009, for a year of change ending on or after August 27,
2009.
.02 Transition rules
.
(1) No application filed by August 27, 2009. For a year of change ending on
or after December 31, 2008, and on or before July 31, 2009, a taxpayer may choose not
to apply the following sections of this revenue procedure: 2.07; 2.08; 2.09; 2.10; 2.11;
2.12(1)(a); 2.12(1)(b); 2.12(3); 2.12(4); 2.13(1); 2.14(3); 2.16; 2.17 (section 15.07(1) of
the APPENDIX of Rev. Proc. 2008-52, without regard to section 15.07(3) of the
APPENDIX, as modified by this revenue procedure); 2.18; 2.19; 2.20; 2.21; 2.22; 2.23;
2.24; 2.26; 2.29(1)(a); 2.29(1)(b); 2.29(2).
For a taxpayer filing an application under Rev. Proc. 2008-52, as amplified,
clarified, and modified by this revenue procedure, and choosing not to apply sections
2.12(3), 2.17 (section 15.07(1) of the APPENDIX of Rev. Proc. 2008-52, without
applying section 15.07(3) of the APPENDIX, as modified by this revenue procedure),
and 2.18 of this revenue procedure (transition application), the timely duplicate filing
requirement of section 6.02(3)(a) of Rev. Proc. 2008-52 is modified to require the copy
of the application to be submitted to the national office on or before September 15,
2009. A taxpayer filing such a transition application under this section 5.02(1) must

60

otherwise be eligible to make the change under Rev. Proc. 2008-52, as amplified,
clarified, and modified by this revenue procedure, and should write on the top of page 1
of the national office copy of the application “FILED UNDER SECTION 5.02(1) OF REV.
PROC. 2009-39.”
(2) Form 3115 filed under Rev. Proc. 97-27
. If before August 27, 2009, a
taxpayer within the scope of Rev. Proc. 97-27 timely filed a Form 3115 under Rev. Proc.
97-27 for a year of change ending on or after December 31, 2008, requesting consent
for a change in method of accounting described in the APPENDIX of Rev. Proc. 2008-
52, as amplified, clarified, and modified by this revenue procedure, and the Form 3115
is pending with the national office on August 27, 2009, the taxpayer may choose to
convert the Form 3115 to make the change under Rev. Proc. 2008-52, as amplified,
clarified, and modified by this revenue procedure, but without regard to the
modifications to the non-APPENDIX sections of Rev. Proc. 2008-52 in sections 2.02
(adding new sections 3.08(4) and 3.08(5) of Rev. Proc. 2008-52), 2.03 (adding new
section 3.09 of Rev. Proc. 2008-52), 2.04 (modifying section 4.02(1) of Rev. Proc. 2008-
52), and 2.05(2) (modifying sections 6.02(11), 6.03, 6.04 and 6.05 of Rev. Proc. 2008-
52) of this revenue procedure (these modifications apply to certain foreign corporations
and taxpayers before the Joint Committee on Taxation), if the taxpayer is otherwise
eligible under the APPENDIX of Rev. Proc. 2008-52, as amplified, clarified, and
modified by this revenue procedure. The taxpayer must notify the national office of its
intent to convert the Form 3115 under this section 5.02(2) prior to the later of October
26, 2009, or the issuance of a letter ruling granting or denying consent for the change
filed under Rev. Proc. 97-27. If the taxpayer timely notifies the national office that it will

61

convert the Form 3115 under this section 5.02(2), the national office will return the Form
3115 to the taxpayer to make the necessary modifications to comply with the applicable
provisions of Rev. Proc. 2008-52, as amplified, clarified, and modified by this revenue
procedure, and will refund the user fee submitted with the Form 3115.
A taxpayer may convert a Form 3115 that is returned to the taxpayer under this
section 5.02(2) to an application under Rev. Proc. 2008-52, as amplified, clarified, and
modified by this revenue procedure, if the taxpayer resubmits the Form 3115 with the
necessary modifications, along with a copy of the national office letter sent with the
returned Form 3115, to the national office within 30 calendar days after the date of the
Service’s letter returning the Form 3115 to the taxpayer. For purposes of the timely
duplicate filing requirement in section 6.02(3) of Rev. Proc. 2008-52, the national office
copy of the Form 3115 will be considered filed as of the date the taxpayer originally filed
the Form 3115 under Rev. Proc. 97-27.
A Form 3115 filed under Rev. Proc. 97-27 that is pending with the national office
on August 27, 2009, will be disregarded for purposes of the prior 5 year change rules in
sections 4.02(6) and (7) of Rev. Proc. 2008-52, in the following circumstances:
(a) the taxpayer converts the Form 3115 under this section 5.02(2); or
(b) the taxpayer withdraws the Form 3115 and files an application under
Rev. Proc. 2008-52, as amplified, clarified, and modified by this revenue procedure, for
the same change in method of accounting for a year of change ending on or before
December 31, 2009.
(3) Option to amend an application filed under Rev. Proc. 2008-52 before
August 27, 2009. If before August 27, 2009, a taxpayer properly filed an application

62

under Rev. Proc. 2008-52 for a year of change that is the taxpayer’s first taxable year
ending on or after December 31, 2008, the taxpayer may choose to file an amended
application for that year of change under Rev. Proc. 2008-52, as amplified, clarified, and
modified by this revenue procedure (amended application) if, within 6 months from the
due date of the federal income tax return for the year of change (excluding any
extension), the taxpayer (i) files an original or amended return using the new method of
accounting pursuant to Rev. Proc. 2008-52, as amplified, clarified, and modified by this
revenue procedure; (ii) attaches the original amended application filed under this
revenue procedure to its original or amended return for the year of change; (iii) writes on
the top of page 1 of the national office copy of the amended application “FILED UNDER
SECTION 5.02(3) OF REV. PROC. 2009-39”; and (iv) sends the national office copy of
the amended application to the following address no later than the date the original
amended application is filed with the original or amended return: Internal Revenue
Service, P.O. Box 14095, Benjamin Franklin Station, Washington, DC 20044, Attention:
CC:ITA:B8.
A Form 3115 filed under Rev. Proc 2008-52 prior to August 27, 2009 for a
taxable year ending on or after December 31, 2008, that is amended under this section
5.02(3) will be disregarded for purposes of the prior 5 year change rules in sections
4.02(6) and (7) of Rev. Proc. 2008-52.
SECTION 6. PAPERWORK REDUCTION ACT
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 (44 U.S.C. 3507) under control numbers 1545-1551 and

63

1545-1541. Responses to this collection of information are necessary and will be used
to determine whether the taxpayer properly changed to a permitted method of
accounting. The estimated annual frequency of responses is on occasion. An agency
may not conduct or sponsor, and a person is not required to respond to, a collection of
information unless the collection of information displays a valid OMB control number.
The collections of information in this revenue procedure are in sections 2.02, 2.05,
2.08, 2.09, 2.10, 2.11, 2.23, 3.01, and 3.02. The likely respondents are the following:
individuals, farms, business or other for-profit institutions, nonprofit institutions, and
small businesses or organizations.
Section 2.02, 2.05, 2.08, 2.09, 2.10, 2.11 and 2.23 will increase the estimated
number of responses and burden hours for the control number 1545-1551. The
estimated annual burden per respondent/recordkeeper for control number 1545-1551
varies from 1/6 hour to 8 1/2 hours, depending on individual circumstances, with an
estimated average of 1 1/4 hours. The estimated number of respondents is 14,065.
The estimated total annual reporting and/or recordkeeping burden for control number
1545-1551 is 15,191.85 hours.
Section 2.09, 3.01 and 3.02 will increase the estimated number of responses and
burden hours for the control number 1545-1541. The estimated annual burden for
control number 1545-1541 per respondent/recordkeeper varies from 1/6 hour to 5
hours, depending on individual circumstances, with an estimated average of 3 1/4
hours. The estimated number of respondents is 3,075. The estimated total annual
reporting and/or recordkeeping burden for control number 1545-1541 is 9,745.5 hours.
DRAFTING INFORMATION

64

65
The principal author of this revenue procedure is Karla M. Meola of the Office of
Chief Counsel (Income Tax & Accounting). For further information concerning this
revenue procedure, please contact Ms. Meola at (202) 622-4930.