CCA 200851089: The replacement automatic change procedure deliberately narrows the route to accrual

Plain-English summary

An internal note explaining why a familiar route for changing to the accrual method got narrower, written in the shorthand of people who work with the automatic change procedures daily.

Changing a method of accounting requires the Service's consent. Rather than rule on each request individually, the Service publishes a procedure granting automatic consent for a long list of specific changes, each with its own section in an appendix, so a taxpayer meeting the conditions files a form with its return instead of seeking a letter ruling. The procedure is periodically replaced, and each replacement is an occasion to tighten or drop items the prior version allowed too freely.

The email describes exactly that. The old procedure, referred to only as "-9," contained a section for changes from a hybrid method to accrual. The new procedure, referred to as "-52," does not carry all of that forward. In the writer's words, -52 is a pull back of -9, and the pull back is the office's reaction to the mess it was getting under -9. So the conclusion is deliberate rather than accidental: not all of the changes that came in under the old hybrid-to-accrual section can be shipped in under the new procedure.

What remains available is laid out plainly. Taxpayers can file for an overall change to accrual under section 14.01 of the new procedure, and for item changes under section 14.09. To use either section, the taxpayer must determine that it is using the cash method, either overall or for the specific item at issue. That condition is the whole of the narrowing. A taxpayer on a genuine hybrid method, neither wholly cash nor cash for the particular item, no longer has an automatic route, and would have to seek consent the slower way.

The closing observation is that the less interesting cases coming in under the old section can still come in under section 14.09. The automatic procedure still handles the straightforward item change. What it no longer absorbs is the harder case, which is the one that generated the problems the pull back responds to.

The release identifies the two procedures only by their trailing numbers, never spelling out a full citation, so which documents are meant has to be inferred from the context of a September 2008 discussion about a just-replaced automatic change procedure and from the appendix section numbers. That inference is not something the release itself supplies.

This is a clean digital release rather than a scan, so no OCR correction was needed. The informal register is kept as released: "Not all of the stuff that came in using the old -9"; "can be shipped in under -52"; "the mess we were getting under -9"; and "the less interesting cases."

Ruling snapshot

• Question: Can changes previously filed under the old procedure's hybrid-to-accrual section still be made automatically under the replacement procedure?
• Outcome: Advice given. Not all of them. The new procedure is a deliberate pull back of the old one. An overall change to accrual goes under its section 14.01 and item changes under section 14.09, but either requires that the taxpayer be using the cash method, overall or for the specific item. Straightforward item changes remain available under section 14.09.
• Key authorities: IRC section 446; the automatic accounting method change procedures, referred to in the release only as "-9" and "-52," and their appendix sections 14.01 and 14.09.

Full text (IRS public release)

ID: CCA-922143-08 Number: 200851089
Office: ---------------- Release Date: 12/19/2008

UILC: 446.00-00

From: -----------------------
Sent: Monday, September 22, 2008 2:36 PM
To: --------------------
Cc: ----------------------------------------------------------------------------------- Subject: RE: Need input

Not all of the stuff that came in using the old -9, hybrid to accrual change section, can be shipped in under -52. -52 is a pull back of -9. The pull back is our reaction to the mess we were getting under -9.

Taxpayers can file for an overall change to accrual using -52/section 14.01 and for item changes using -52/section 14.09. To use either section, the taxpayer must determine that it is using the cash method (either overall or for the specific item). Thus, the less interesting cases that were coming in under -9 can still come in under -52/section 14.09.

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