AICPA Recommends Changes to IRS Revenue Procedure To Help Encourage Voluntary Compliance with Tax Accounting Methods

November 15, 2016

Washington, D.C. (Nov. 15, 2016) – The American Institute of CPAs (AICPA) has submitted comments to the Internal Revenue Service (IRS) regarding Revenue Procedure 2015-13, Changes in Methods of Accounting.  The AICPA recommended changes to certain items in the revenue procedure that it believes would encourage voluntary compliance with proper tax accounting methods as well as limit administrative burdens for taxpayers complying with the rules.

Revenue Procedure 2015-13 “updates and revises the general procedures under Section  446(e) of the Internal Revenue Code and Section 1.446–1(e) of the Income Tax Regulations to obtain the consent of the IRS Commissioner to change a method of accounting for federal income tax purposes,” according to the IRS. 

The AICPA explained in its letter that Internal Revenue Code regulations require that a taxpayer that changes its method of accounting must secure consent from the Commissioner of the IRS before it can use the new method of accounting to compute taxable income.  Generally, a taxpayer must file a Form 3115, Application for Change in Accounting Method, to secure the Commissioner’s consent to change a method of accounting.  To obtain the consent of the Commissioner for “non-automatic” method changes, a taxpayer must follow the rules outlined in Rev. Proc. 2015-13.

Among the suggestions in the comment letter are:

  • Provide a single overall issue under consideration standard for taxpayers under examination
  • Restore the 90-day window
  • Allow taxpayers to elect to accelerate positive Internal Revenue Code (IRC or “Code”) section 481(a)1 adjustments related to accounting method changes made in prior years when an eligible acquisition transaction occurs
  • Eliminate the de minimis threshold limitations that allow taxpayers to elect a one-year section 481(a) adjustment period for net positive section 481(a) adjustments
  • Remove the additional conditions for the exceptions to audit protection for controlled foreign corporations
  • Allow a longer period for automatic relief for filing the Covington, Kentucky copy of the Form 3115 for automatic method changes
  • Other filing procedures to minimize administrative compliance burdens