Requirements Respecting the Adoption or Change of Accounting Method; Extensions of Time To Make Elections

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 301, and 601

[REG-209837-96 and REG-105299-97]

RIN 1545-AU42 and 1545-AV20

Requirements Respecting the Adoption or Change of Accounting

Method; Extensions of Time To Make Elections

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary

regulations.

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SUMMARY: In the Rules and Regulations section of this issue of the

Federal Register, the IRS is issuing temporary regulations relating to

the procedure for requesting a change in accounting method and to the

standards for granting an extension of time to request a change in

accounting method. The regulations provide for a longer period of time

for filing an application for change in accounting method with the

Commissioner. The regulations also provide that an extension of time to

file an application for change in accounting method will be granted

only in unusual and compelling circumstances. The

[[Page 26756]]

regulations affect taxpayers requesting a change in method of

accounting for federal income tax purposes. The text of those temporary

regulations also serves as the text of these proposed regulations.

DATES: Written comments must be received by August 13, 1997.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-209837-96 and REG-

105299-97), room 5228, Internal Revenue Service, POB 7604, Ben Franklin

Station, Washington, DC 20044. Submissions may be hand delivered

between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-209837-96

and REG-105299-97), Courier's Desk, Internal Revenue Service, 1111

Constitution Avenue NW, Washington, DC. Taxpayers may also submit

comments electronically via the internet by selecting the ``Tax Regs''

option on the IRS Home Page, or by submitting comments directly to the

IRS internet site at http://www.irs.ustreas.gov/prod/tax____regs/

comments.html.

FOR FURTHER INFORMATION CONTACT: Cheryl L. Oseekey, (202) 622-4970 (not

a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations in the Rules and Regulations section of this

issue of the Federal Register amend Regulations on Income Taxes (26 CFR

part 1), the Regulations on Procedure and Administration (26 CFR part

301), and the Statement of Procedural Rules (26 CFR part 601) relating

to the requirements for changes in method of accounting and extensions

of time to make elections. Proposed and temporary regulations relating

to extensions of time to make elections were published in the Federal

Register for June 27, 1996 (61 FR 29714 and 61 FR 33365). These

regulations extend the time for filing an application for change in

accounting method under Sec. 1.446-1(e)(3)(i) and amend Secs. 301.9100-

1T and 301.9100-3T to provide that an extension of time to file an

application for change in accounting method will be granted only in

unusual and compelling circumstances.

The text of those temporary regulations also serves as the text of

these proposed regulations. The preamble to the temporary regulations

explains the rules provided by the regulations.

Special Analyses

It has been determined that this notice of proposed rulemaking is

not a significant regulatory action as defined in EO 12866. Therefore,

a regulatory assessment is not required. It also has been determined

that section 553(b) of the Administrative Procedure Act (5 U.S.C.

chapter 5) does not apply to these regulations. Sections 1.446-

1(e)(3)(i) and 601.204(b) require a taxpayer to file a Form 3115,

Application for Change in Accounting Method, with the Commissioner

within the first 180 days of the taxable year in which the taxpayer

desires to make the change. The proposed regulations in this document

merely extend the time for filing the Form 3115 and, therefore, do not

contain a new collection of information. Thus, because the regulations

do not impose a collection of information on small entities, the

Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply.

Pursuant to section 7805(f) of the Internal Revenue Code, this notice

of proposed rulemaking will be submitted to the Chief Counsel for

Advocacy of the Small Business Administration for comment on its impact

on small business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations,

consideration will be given to any comments that are submitted timely

to the IRS (a signed original and eight (8) copies if the comments are

written). All comments will be available for public inspection and

copy. A public hearing may be scheduled if requested in writing by a

person that timely submits comments. If a public hearing is scheduled,

notice of the date, time, and place for the hearing will be published

in the Federal Register.

Drafting Information

The principal author of these regulations is Cheryl L. Oseekey of

the Office of Assistant Chief Counsel (Income Tax and Accounting).

However, other personnel from the IRS and Treasury Department

participated in their development.

List of Subjects

26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income

taxes, Penalties, Reporting and recordkeeping requirements.

26 CFR Part 601

Administrative practice and procedure, Freedom of information,

Reporting and recordkeeping requirements, Taxes.

Proposed Amendments to the Regulations

Accordingly, 26 CFR parts 1, 301, and 601 are proposed to be

amended as follows:

PART 1--INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in

part as follows:

Authority: 26 U.S.C. 7805. * * *

Par. 2. Section 1.446-1 is amended by revising paragraph (e)(3)(i)

to read as follows:

Sec. 1.446-1 General rule for methods of accounting.

[The text of proposed paragraph (e)(3)(i) is the same as the text

in Sec. 1.446-1T(e)(3)(i) published elsewhere in this issue of the

Federal Register].

PART 301--PROCEDURE AND ADMINISTRATION

Par. 3. The authority citation for part 301 continues to read in

part as follows:

Authority: 26 U.S.C. 7805. * * *

Par. 4. In Sec. 301.9100-1, paragraph (h) is added to read as

follows:

Sec. 301.9100-1 Extensions of time to make elections.

[The text of proposed paragraph (h) is the same as the text of

Sec. 301.9100-1T(h) published June 27, 1996, at 61 FR 33368, and

amended elsewhere in this issue of the Federal Register].

Par. 5. In proposed Sec. 301.9100-3, published June 27, 1996, at 61

FR 33409, paragraph (c)(2)(i) is revised to reads as follows:

Sec. 301.9100-3 Other extensions.

[The text of proposed paragraph (c)(2)(i) is the same as the text

in Sec. 301.9100-3T(c)(2)(i) published elsewhere in this issue of the

Federal Register.]

PART 601--STATEMENT OF PROCEDURAL RULES

Par. 6. The authority citation for part 601 continues to read as

follows:

Authority: 26 U.S.C. 301 and 552. * * *

Par. 7. In Sec. 601.204, paragraph (b) is revised to read as

follows:

Sec. 601.204 Changes in accounting periods and in methods of

accounting.

[The text of proposed paragraph (b) is the same as the text in

Sec. 601.204T(b)

[[Page 26757]]

published elsewhere in this issue of the Federal Register].

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 97-12513 Filed 5-14-97; 8:45 am]

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