[Code of Federal Regulations]
[Title 26, Volume 20]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR601.204]

[Page 91-92]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 601_STATEMENT OF PROCEDURAL RULES--Table of Contents
 
              Subpart B_Rulings and Other Specific Matters
 
Sec. 601.204  Changes in accounting periods and in methods of accounting.

    (a) Accounting periods. A taxpayer who changes his accounting period 
shall, before using the new period for income tax purposes, comply with 
the provisions of the income tax regulations relating to changes in 
accounting periods. In cases where the regulations require the taxpayer 
to secure the consent of the Commissioner to the change, the application 
for permission to change the accounting period shall be made on Form 
1128 and shall be submitted to the Commissioner of Internal Revenue, 
Washington, DC 20224, within the period of time prescribed in such 
regulations. See section 442 of the Code and regulations thereunder. If 
the change is approved by the Commissioner, the taxpayer shall 
thereafter make his returns and compute his net income upon the basis of 
the new accounting period. A request for permission to change the 
accounting period will be considered by the Corporation Tax Division. 
However, in certain instances, Form 1128 may be filed with the Director 
of the Internal Revenue Service Center in which the taxpayer files its 
return. See, for example, Rev. Proc. 66-13, 1966-1 C.B. 626; Rev. Proc. 
66-50, 1966-2 C.B. 1260, and Rev. Proc. 68-41, 1968-2 C.B. 943. With 
respect to partnership adoptions, see Sec. 1.706-1(b) of the Income Tax 
Regulations.
    (b) Methods of accounting. A taxpayer who changes the method of 
accounting employed in keeping his books shall, before computing his 
income upon such method for purposes of income taxation, comply with the 
provisions of the income tax regulations relating to changes in 
accounting methods. The regulations require that, in the ordinary case, 
the taxpayer secure the consent of the Commissioner to the change. See 
section 446 of the Code and the regulations thereunder. Application for 
permission to change the method of accounting employed shall be made on 
Form 3115 and shall be submitted to the Commissioner of Internal 
Revenue, Washington, DC, 20224, during the taxable year in which it is 
desired to make the change. Permission to change the method of 
accounting will not be granted unless the taxpayer and the Commissioner 
agree to the terms and conditions under which the change will be 
effected. The request will be considered by the Corporation Tax 
Division. However, in certain instances, Form 3115 may be filed with the 
Director of the Internal Revenue Service Center. See, for example, Rev. 
Proc. 74-11, 1974-1 C.B. 420.

[[Page 92]]

    (c) Verification of changes. Written permission to a taxpayer by the 
National Office consenting to a change in his annual accounting period 
or to a change in his accounting method is a ``ruling''. Therefore, in 
the examination of returns involving changes of annual accounting 
periods and methods of accounting, district directors must determine 
whether the representations upon which the permission was granted 
reflect an accurate statement of the material facts, and whether the 
agreed terms, conditions, and adjustments have been substantially 
carried out as proposed. An application, Form 3115, filed with the 
Director of the Internal Revenue Service Center is also subject to 
similar verification.
    (d) Instructions to taxpayers. The person seeking to secure the 
consent of the Commissioner with respect to a change of accounting 
periods or methods pursuant to section 442 or 446(e) of the Code need 
not submit the statement of proposed deletions described in Sec. 
601.201(e)(5) at the time the request is made. If, however, the person 
seeking the consent of the Commissioner receives from the National 
Office a notice that proposed deletions should be submitted because the 
resulting ruling will be open to public inspection under section 6110, 
the statement of proposed deletions must be submitted within 20 days 
after such notice is mailed.

[41 FR 20882, May 21, 1976, as amended at 41 FR 48742, Nov. 5, 1976; 42 
FR 34280, July 5, 1977; T.D. 8742, 62 FR 68173, Dec. 31, 1997]