Rp 2007-67

Interim Guidance Under
Section 6404(g)
Notice 2007–93
PURPOSE
This notice describes how the amendment to section 6404(g) made by the Small
Business and Work Opportunity Tax Act of
2007, Pub. L. No. 110–028, § 8242, 121
Stat. 190, 200 (May 25, 2007), applies to
notices under section 6404(g)(1) that are
provided on or after November 26, 2007.
SCOPE
This notice applies to notices under section 6404(g)(1) that are provided on or after November 26, 2007, with respect to individual Federal income tax returns that
were timely filed before that date. This notice provides interim guidance and will remain in effect until further guidance or regulations are issued.
BACKGROUND
Effective for taxable years ended after
July 22, 1998, if an individual taxpayer
files a Federal income tax return on or before the due date for that return (including extensions), and if the Service does
not timely provide a notice to that taxpayer
specifically stating the taxpayer’s liability
and the basis for that liability, then the Service shall generally suspend the imposition
of any interest, penalty, addition to tax,
or additional amount with respect to any
failure relating to the return that is computed by reference to the period of time
the failure continues and that is properly
allocable to the suspension period. Prior
to amendment by the Small Business and
Work Opportunity Tax Act of 2007 (the
Act), a notice is timely if provided before
the close of the eighteen-month period beginning on the later of the date on which
the return is filed or the due date of the
return without regard to extensions. The
suspension period begins on the day after the close of the eighteen-month period
and ends twenty-one days after the Service provides the notice. This suspension
rule applies separately with respect to each
item or adjustment.
The Act amended section 6404(g) by
striking “18-month period” in paragraphs

November 26, 2007

(1)(A) and (3)(A) and inserting “36-month
period.” The Act states that the amendment “shall apply to notices provided by
the Secretary of the Treasury or his delegate after the date that is six months after
the date of enactment” of the Act — that is,
on or after November 26, 2007. In a recent
Notice of Proposed Rulemaking and Notice of Public Hearing on the Application
of Section 6404(g) of the Internal Revenue
Code Suspension Provisions, the Treasury
Department and the Service acknowledged
that questions have been raised regarding
the effective date of the changes made by
the Act, specifically how the amendment
is intended to apply to notices provided on
or after November 26, 2007, and stated that
further guidance was under consideration.
See Prop. Treas. Reg. § 301.6404–4, 72
Fed. Reg. 34199, 34200 (June 21, 2007).
This notice provides that guidance.
DISCUSSION
The Act extends to thirty-six months
the period within which the Service may
issue a notice to an individual taxpayer
specifically stating the taxpayer’s liability and the basis for that liability before
the accrual of interest and certain penalties are suspended under section 6404(g).
The Service will apply the following rules
to notices issued on or after November 26,
2007, that relate to a return that was timely
filed before that date.
1. If, as of November 25, 2007, the
eighteen-month period has closed and the
Service has not provided notice to the
taxpayer, interest and applicable penalties
will be suspended beginning on the day after the close of the eighteen-month period
and ending on the date that is twenty-one
days after the notice is provided.
2. In all other cases, interest and applicable penalties will be suspended beginning on the day after the close of the
thirty-six month period and ending on the
date that is twenty-one days after the notice is provided.
The following examples illustrate these
rules. The examples assume that none of
the exceptions in section 6404(g)(2) to the
general rule for suspension applies. The
dates in the examples are used to illustrate
the effective date changes made by the Act
and do not provide guidance as to the computation of interest generally.

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Example 1: An individual files a federal income
tax return for 2006 by April 17, 2007 (the last day to
timely file pursuant to section 7503). On January 2,
2009 (less than thirty-six months after the due date of
the return), the Service provides a notice to the taxpayer specifically stating the taxpayer’s liability and
the basis for the liability. Because the eighteen-month
period has not closed as of November 25, 2007, interest and applicable penalties will not be suspended
with respect to the taxpayer’s return.
Example 2: An individual files a federal income
tax return for 2005 by April 17, 2006 (the last day to
timely file pursuant to section 7503). On December
26, 2007, the Service provides a notice to the taxpayer
specifically stating the taxpayer’s liability and the basis for the liability. Because the eighteen-month period has closed as of November 25, 2007, interest and
applicable penalties will be suspended with respect to
the taxpayer’s return beginning on October 17, 2007
(the day after the close of the eighteen-month period), and ending on January 16, 2008 (the date that
is twenty-one days after the notice is provided).
Example 3: An individual files a federal income
tax return for 2006 by April 17, 2007 (the last day
to timely file pursuant to section 7503). The individual consents to extend the time within which the Service may assess any tax due on the return until June
30, 2011. On December 20, 2010, the Service provides a notice to the taxpayer specifically stating the
taxpayer’s liability and the basis for the liability. Because the eighteen-month period has not closed as of
November 25, 2007, interest and applicable penalties will be suspended beginning on April 17, 2010
(the day after the close of the thirty-six month period), and ending on January 10, 2011 (the date that
is twenty-one days after the notice is provided).

DRAFTING INFORMATION
The principal author of this notice is
Stuart Spielman of the Office of Associate
Chief Counsel (Procedure and Administration). For further information regarding this notice, contact Stuart Spielman at
(202) 622–3620 (not a toll-free call).
26 CFR 601.204: Changes in accounting periods and
in methods of accounting.
(Also Part 1, §§ 446, 481.)

Rev. Proc. 2007–67
SECTION 1. PURPOSE
This revenue procedure modifies Rev.
Proc. 97–27, 1997–1 C.B. 680, as modified and amplified by Rev. Proc. 2002–19,
2002–1 C.B. 696, as amplified and clarified by Rev. Proc. 2002–54, 2002–2
C.B. 432, which provides the general procedures for obtaining the advance consent
of the Commissioner of Internal Revenue

2007–48 I.R.B.

to change a method of accounting. This
revenue procedure allows taxpayers, under certain conditions, to request to revise
the year of change for a Form 3115, Application for Change in Accounting Method,
that is pending in the national office, and
modifies the period for taking into account
a net positive adjustment under § 481(a) of
the Internal Revenue Code when the Commissioner approves the taxpayer’s request
to revise the year of change.
SECTION 2. BACKGROUND
.01 Section 446(e) states that, except
as otherwise provided, a taxpayer must
secure the consent of the Secretary before changing a method of accounting
for federal income tax purposes. Section
1.446–1(e)(3)(i) of the Income Tax Regulations requires that, in general, in order
to obtain the Commissioner’s consent to a
change in accounting method, a taxpayer
must file a Form 3115 during the taxable
year in which the taxpayer desires to make
the proposed change.
.02 Rev. Proc. 97–27 provides the general procedures for obtaining the advance
consent of the Commissioner to change a
method of accounting. See also Rev. Proc.
2007–1, 2007–1 I.R.B. 1 (or successor).
.03 Section 3.05 of Rev. Proc. 97–27
defines the year of change as the taxable
year for which a change in method of accounting is effective, that is, the first taxable year the new accounting method is to
be used. The year of change is also the first
taxable year for complying with the terms
and conditions of the Commissioner’s consent to change a method of accounting.
.04 Section 5.02(3)(a) of Rev. Proc.
97–27 provides, in general, that the
§ 481(a) adjustment period is four taxable years for a net positive adjustment
for an accounting method change, and one
taxable year for a net negative adjustment
for an accounting method change.
.05 In some instances a taxpayer’s Form
3115 filed under Rev. Proc. 97–27 may be
pending in the national office when the taxpayer prepares and files its federal income
tax return for the requested year of change.
Therefore, the Service has determined that
it is appropriate, under certain conditions,
to allow a taxpayer to request to revise the
year of change for a pending Form 3115.

2007–48 I.R.B.

SECTION 3. CHANGES TO REV.
PROC. 97–27
.01 Section 5.02(3)(a) of Rev. Proc.
97–27 is modified to read as follows:
(a) In general. Except as otherwise
provided in sections 5.02(3)(b), 7.03, and
12.01(3) of this revenue procedure, the
§ 481(a) adjustment period is four taxable
years for a net positive adjustment for an
accounting method change, and one taxable year for a net negative adjustment for
an accounting method change.
.02 Rev. Proc. 97–27 is modified to
renumber sections 12 through 15 as sections 13 through 16.
.03 Rev. Proc. 97–27 is modified by
inserting new section 12 to read as follows:
SECTION 12. REQUEST TO REVISE
THE YEAR OF CHANGE
.01 In general. The taxpayer may request, and the Service ordinarily will allow, the taxpayer to revise the year of
change for a Form 3115 that is pending in
the national office to a subsequent taxable
year, but no later than the taxpayer’s current taxable year (with no additional user
fee), in lieu of submitting a new Form 3115
for the subsequent taxable year, under the
following conditions:
(1) The taxpayer must submit a written request pursuant to section 12.04 of
this revenue procedure to revise the year
of change on or after, but not before, the
first day of the fourth month following the
month in which the taxpayer’s federal income tax return is due (without regard to
extension) for the original year of change
requested on the Form 3115 (for example,
a calendar year C corporation must submit
a written request on or after, but not before, July 1 following the year of change
requested on the Form 3115);
(2) The Form 3115 is pending in the
national office on the date of the request;
and
(3) Unless the Commissioner has determined that the requested change in accounting method will be made using a cutoff method or a modified cut-off method
—
(a) The taxpayer must agree, in writing, to accelerate into the revised year of
change the percentage of any net positive
§ 481(a) adjustment the taxpayer would
have taken into account for each prior tax-

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able year under section 5.02(3)(a) of this
revenue procedure had the taxpayer not revised the year of change (for example, if
the year of change is revised to the first
succeeding taxable year, the taxpayer must
agree to take into account one-half of any
net positive § 481(a) adjustment in the revised year of change and one-fourth in
each of its next two taxable years); and
(b) The taxpayer must agree to provide
the § 481(a) adjustment (positive or negative) for the revised year of change within
21 calendar days (or a longer period if
agreed to by the national office) after the
Service first notifies the taxpayer that its
request to revise the year of change is approved.
.02 Multiple applicants on one Form
3115. If the Form 3115 is for an identical change in accounting method for more
than one applicant, the taxpayer must request to revise the year of change for all
applicants to which the Form 3115 relates.
.03 Compelling circumstances.
(1) In general. In the case of a taxpayer
that does not meet the condition in section
12.01(1) of this revenue procedure, a taxpayer with compelling circumstances may
request to revise the year of change for the
Form 3115, in lieu of submitting a new
Form 3115 for the proposed revised year
of change. The taxpayer must demonstrate
those compelling circumstances. An example of compelling circumstances would
include the following.
(2) Example. A calendar year partnership with
50 individual partners timely files a Form 3115 under Rev. Proc. 97–27 for a change in method of
accounting for its 2007 taxable year. The partnership’s Form 1065, U.S. Return of Partnership Income,
and Schedules K–1, Partner’s Share of Income, Deductions, Credits, etc., and the partners’ Forms 1040,
U.S. Individual Income Tax Return, for the requested
year of change are all due April 15, 2008. On March
17, 2008, the partnership submits a request to revise the year of change for its pending Form 3115 to
its 2008 taxable year because the partnership’s Form
3115 is pending in the national office. Because the
Form 3115 is pending in the national office 30 days
prior to the due date of the partners’ Forms 1040, the
partnership will be unable to provide timely Schedules K–1 that take into account the proposed accounting method change before the partners prepare and
file their 2007 Forms 1040. Therefore, to avoid the
potential for the 50 partners to be required to file
amended 2007 Forms 1040 to take into account the
partnership’s requested change in method of accounting for the 2007 taxable year, once approved, the Service will ordinarily allow the partnership to revise the
year of change for its Form 3115 to its 2008 taxable
year. If the accounting method change is approved
for the partnership’s 2008 taxable year, in lieu of tak-

November 26, 2007

ing into account any net positive § 481(a) adjustment
over four taxable years, the partnership must take into
account one-half of any net positive § 481(a) adjustment in its 2008 taxable year and one-fourth in each
of its next two taxable years.

.04 Submitting a request for a revised
year of change. A request to revise the
year of change for a Form 3115 pending in the national office should include
the name of the filer (and each applicant,
if applicable) on the Form 3115, the national office reference number (for example, CAM–123456–07), the name of the
national office contact person for the Form
3115 (if known), the due date (without extension) for the filer’s federal income tax
return for the year of change, and a statement agreeing to the applicable requirements in section 12.01(3) of this revenue
procedure. The request must be accompanied by the penalties of perjury statement
in section 9.08(3) of Rev. Proc. 2007–1
(or successor) and should be submitted to
the applicable address in section 9.08(6) of
Rev. Proc. 2007–1 (or successor). Alternatively, the request may be faxed to a
fax number provided by the national office contact person for the Form 3115. If
faxed, a copy of the request and an original
signed penalties of perjury statement must
also be mailed or delivered to the applica-

November 26, 2007

ble address in section 9.08(6) of Rev. Proc.
2007–1 (or successor).
.05 Notification of approval or denial.
The national office will notify the taxpayer, orally and later in writing, of the approval or denial of the taxpayer’s request
to revise the year of change for a pending
Form 3115.
.06 Service’s discretion to deny a request. The Service reserves the right to
deny a taxpayer’s request for a revised year
of change for a pending Form 3115 in any
situation in which the Service determines it
would not be in the best interest of sound
tax administration to allow the taxpayer to
revise the year of change. A taxpayer is not
entitled to a conference with the Service if
the request to revise the year of change for
a pending Form 3115 is denied.
SECTION 4. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 97–27 is modified.
SECTION 5. EFFECTIVE DATE
.01 In general. This revenue procedure
is effective for Forms 3115 filed on or after, or pending in the national office on,
November 6, 2007.

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.02 Transition rule for pending consent
agreements. If on or before November
26, 2007, a taxpayer has received a letter ruling approving a change in accounting method for which the taxpayer has not
signed and returned the consent agreement
and the period of time for signing and returning the consent agreement (see section
8.11 of Rev. Proc. 97–27) has not expired, the taxpayer may request to revise
the year of change for the change in accounting method under the provisions of
this revenue procedure. The taxpayer must
submit any such request to revise the year
of change prior to, and within the period of
time for, signing and returning the consent
agreement.
SECTION 6. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Brenda D. Wilson of the Office of Associate Chief Counsel (Income
Tax and Accounting). For further information regarding this revenue procedure,
contact Ms. Wilson at (202) 622–4800
(not a toll-free call).

2007–48 I.R.B.