Revenue Procedure 2018-60

coverage provider made reasonable efforts to prepare for reporting the required
information to the Service and furnishing
it to employees and covered individuals,
such as gathering and transmitting the
necessary data to an agent to prepare the
data for submission to the Service or testing its ability to transmit information to
the Service.
C. Future Years
Because the individual shared responsibility payment is reduced to zero for
months beginning after December 31,
2018, Treasury and the Service are studying whether and how the reporting requirements under section 6055 should
change, if at all, for future years.
CONTACT INFORMATION
The principal author of this notice is
Danielle Pierce of the Office of the Associate Chief Counsel (Procedure and Administration). For further information regarding this notice contact Danielle Pierce
at (202) 317-6845 (not a toll-free number).
26 CFR 601.204: Changes in accounting periods
and in methods of accounting.
(Also: Part I, Sections 446, 451; 1.451–1)

Rev. Proc. 2018 – 60
SECTION 1. PURPOSE
Section 13221 of the Tax Cuts and
Jobs Act, Pub. L. No. 115–97 (December
22, 2017) (TCJA) amended § 451 of the
Internal Revenue Code (Code) relating to
the timing of the recognition of income
for federal income tax purposes for taxable years beginning after December 31,
2017. This revenue procedure modifies
Rev. Proc. 2018 –31, 2018 –22 I.R.B. 637,
to provide procedures under § 446 and
§ 1.446 –1(e) of the Income Tax Regulations to obtain automatic consent of the
Commissioner of Internal Revenue (Commissioner) to change methods of accounting to comply with § 451(b), as amended
by TCJA. In addition, for the first taxable
year that begins after December 31, 2017,
certain taxpayers are permitted to make a
method change to comply with § 451(b)
without filing a Form 3115, Application
for Change in Accounting Method.

Bulletin No. 2018 –51

SECTION 2. BACKGROUND
.01 Section 13221 of TCJA made several changes to the timing of income for
accrual method taxpayers by redesignating § 451(b) through (i) as (d) through (k),
and adding new §§ 451(b) and (c). New
§§ 451(b) and (c) are generally effective
for tax years beginning after December
31, 2017. Section 451(b), as amended by
TCJA, generally provides that for an accrual method taxpayer, the all events test
with respect to any item of gross income
(or portion thereof) shall not be treated as
met any later than when such item (or
portion thereof) is taken into account as
revenue in the taxpayer’s applicable financial statement, or such other financial
statement as the Secretary may specify.
.02 Section 13221(d) of TCJA provides
rules relating to the coordination with
§ 481(a) for a qualified change in method
of accounting for the taxpayer’s first taxable year beginning after December 31,
2017. Section 13221(d)(2) of TCJA provides that a qualified change in method of
accounting is a change that: is required by
the amendments made by section 13221
of TCJA, or was prohibited under the
Code of 1986 prior to such amendments
and that is permitted under the Code after
such amendments. These method changes
are treated as initiated by the taxpayer and
as made with the consent of the Secretary.
This provision of TCJA does not set forth
the administrative procedures to make a
change in method of accounting to comply with § 451(b), and does not specify
whether a taxpayer is entitled to a section
481(a) spread period, audit protection, or
ruling protection.
.03 Section 13221(e) of TCJA provides
that in the case of income from a debt
instrument having original issue discount
(OID), the rules of § 451(b) apply to taxable years beginning after December 31,
2018, and the § 481(a) adjustment period
for any adjustment under § 481(a) for a
qualified change in method of accounting
is six taxable years.
.04 On May 28, 2014, the Financial
Accounting Standards Board (FASB) and
International Accounting Standards Board
(IASB) jointly announced new financial
accounting standards for revenue recognition, titled “Revenue from Contracts with
Customers (Topic 606)” (New Standards).

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See FASB Update No. 2014 – 09 and
IASB International Financial Reporting
Standard (IFRS) 15. Publicly-traded entities, certain not-for-profit entities, and certain employee benefit plans are required to
adopt the New Standards for annual reporting periods beginning after December
15, 2017. Other entities are required to
adopt the New Standards for annual reporting periods beginning after December
15, 2018. However, early adoption was
allowed for reporting periods beginning
after December 15, 2016. See FASB Update No. 2015–14, “Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date.”
.05 Rev. Proc. 2018 –29, 2018 –22
I.R.B. 634, as modified by Rev. Proc.
2018 – 49, 2018 – 41 I.R.B. 548, added a
new automatic method change to Rev.
Proc. 2018 –31 for taxpayers that want to
change their method of accounting for the
recognition of income to a method that
uses the New Standards (i) to identify
performance obligations, (ii) to allocate
transaction price to performance obligations, and/or (iii) to consider performance
obligations satisfied. Rev. Proc. 2018 –29,
as modified by Rev. Proc. 2018 – 49, is
effective on May 10, 2018, and applies to
taxable years ending on or before May 10,
2021.
.06 Section 1.446 –1(e)(3)(ii) provides
that the Commissioner may prescribe the
administrative procedures under which a
taxpayer will be permitted to change a
method of accounting. Except as otherwise provided in § 1.446 –1(e)(3)(ii), a
taxpayer must file a Form 3115 in order
to secure the Commissioner’s consent to
change a method of accounting. Rev.
Proc. 2015–13, 2015–5 I.R.B. 419, as
clarified and modified by Rev. Proc.
2015–33, 2015–24 I.R.B. 1067, and as
modified by Rev. Proc. 2016 –1, 2016 –1
I.R.B. 1, and Rev. Proc. 2017–59,
2017– 48 I.R.B. 543, provides the general procedures by which a taxpayer
may obtain automatic consent of the
Commissioner to change a method of
accounting described in the List of Automatic Changes. Rev. Proc. 2018 –31
contains the current List of Automatic
Changes.
.07 Section 3 of this revenue procedure
modifies Rev. Proc. 2018 –31 to provide
new automatic method changes under

December 17, 2018

§ 451, and modifications to an existing
automatic change for a taxpayer to change
its method of accounting to comply with
§§ 451(b)(1)(A) and 451(b)(4). A taxpayer that files a Form 3115 in accordance
with this revenue procedure to make a
change in method of accounting to comply with § 451(b) may receive audit protection, as provided in section 8.01 of
Rev. Proc. 2015–13.
.08 To further ease the administrative
burden faced by taxpayers to comply with
TCJA amendments to § 451 for the first
taxable year beginning after December 31,
2017, this revenue procedure permits certain taxpayers to make changes in method
of accounting to comply with § 451(b)
using streamlined method change procedures if the change results in a zero
§ 481(a) adjustment, or if the taxpayer
requesting the change is a small business
taxpayer as provided in this revenue procedure. Some taxpayers that qualify to use
the streamlined method change procedures provided in this revenue procedure
may choose to file a Form 3115 in order to
retain a clear record of a change in method
of accounting, make permissible concurrent changes on the same Form 3115, or
make a change in method of accounting
with audit protection. However, other
qualifying taxpayers may prefer the administrative convenience of being able to
comply with § 451(b) solely by the filing
of their federal income tax return. This
revenue procedure provides rules for accrual method taxpayers that qualify and
prefer to use the streamlined method
change procedures.
SECTION 3. AUTOMATIC
METHOD CHANGES
.01 Section 16 of Rev. Proc. 2018 –31
is modified to add new section 16.12 to
read as follows:
.12 Changes in the timing of income
recognition under § 451(b) for a taxpayer
with an applicable financial statement
(AFS).
(1) Description of change. This change
applies to taxable years beginning after
December 31, 2017. However, in the case
of income from a debt instrument having
original issue discount (OID), this change
applies to taxable years beginning after
December 31, 2018. This change applies
to an accrual method taxpayer with an

December 17, 2018

AFS that wants to change its method of
accounting for the recognition of income
to a method of accounting that complies
with § 451(b)(1)(A). This change also applies to an accrual method taxpayer with
an AFS that wants to change its method of
accounting to a method under § 451(b)(4).
(2) Applicability. This change applies
to a taxpayer that:
(a) wants to change to a method of
accounting that treats an item of gross
income, or portion thereof, as meeting the
all events test no later than when such
item, or portion thereof, is taken into account as revenue in its AFS under
§ 451(b)(1)(A), and/or
(b) is not adopting the New Standards
(as defined in section 16.11(1) of this revenue procedure) for the year of change, and
wants to allocate the transaction price to
performance obligations under § 451(b)(4).
(3) Inapplicability. This change does
not apply to a taxpayer that:
(a) wants to make a change for federal
income tax purposes to a method that
adopts the New Standards, as provided in
section 16.11 of this revenue procedure.
See, however, section 16.11 of this revenue procedure for a change to adopt the
New Standards;
(b) wants to make a change in method
of accounting to a method described in
§ 451(b)(2); or
(c) does not have an AFS, as defined in
§ 451(b)(1)(A)(i) or (ii).
(4) Manner of making change.
(a) Short Form 3115. A taxpayer making a change under this section 16.12 is
required to complete only the following
information on Form 3115 (Rev. December 2015):
(i) The identification section of page 1
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
16c, and 19; and
(v) Part IV, all lines. For a taxpayer
making a change under this section 16.12,
the statement required for Line 26 of
Form 3115 should list the § 481(a) adjustment(s), and a description of where the
§ 481(a) adjustment is reflected on the
federal income tax return (line number or
schedule).

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In addition, the requirement to file the
duplicate copy, under section 6.03(1)(a)
of Rev. Proc. 2015–13, is waived.
(b) Section 481(a) adjustment period
for changes relating to items of income
involving OID. In the case of income from
a debt instrument having OID, the
§ 481(a) adjustment period for any qualified change in method of accounting described in this section 16.12(4)(b) is six
taxable years (year of change and next
five taxable years). For purposes of the
preceding sentence, a qualified change in
method of accounting is a change in
method of accounting for income from a
debt instrument having OID to a method
that is required by § 451(b), as added by
section 13221 of the Tax Cuts and Jobs
Act (TCJA) Public Law 115–97, 131 Stat.
2054 (Dec. 22, 2017), for such income,
but only for the taxpayer’s first taxable
year beginning after December 31, 2018.
(c) Streamlined method change procedures for certain taxpayers.
(i) Applicability. The procedures described in this section 16.12(4)(c) may be
used by a taxpayer to make a change in
method of accounting described in section
16.12(2) of this revenue procedure in the
taxpayer’s first taxable year beginning after December 31, 2017. A taxpayer is permitted to use the streamlined method
change procedures if the taxpayer meets
one of the following requirements:
(A) the taxpayer, other than a tax shelter (as defined in § 448(d)(3)), meets the
§ 448(c) gross receipts test (a “small business taxpayer”). The taxpayer meets the
§ 448(c) gross receipts test if the taxpayer
has average annual gross receipts for the
three prior taxable years of $25,000,000
or less; or
(B) the taxpayer is making one or more
changes to comply with § 451(b)(1)(A)
and/or § 451(b)(4), and the § 481(a) adjustment required by each of the changes
is zero. A taxpayer making more than one
change in method of accounting under
section 16.12(2) of this revenue procedure
is not permitted to net the § 481(a) adjustments to determine if the taxpayer meets
the requirements to use the streamlined
method change procedures. See section
16.12(8)(a) of this revenue procedure for
more information on making a permitted
concurrent change.

Bulletin No. 2018 –51

(ii) Inapplicability. In addition to the
inapplicability rules provided in section
16.12(3) of this revenue procedure, a taxpayer may not use these streamlined
method change procedures if the taxpayer
wants to make a concurrent automatic
change described in section 16.12(8)(b) of
this revenue procedure.
(iii) No Form 3115 required. In accordance with § 1.446 –1(e)(3)(ii), the requirement of § 1.446 –1(e)(3)(i) to file a
Form 3115 is waived for a taxpayer making a change in method of accounting
under this section 16.12 using the streamlined method change procedures. Thus, a
taxpayer using the streamlined method
change procedures is not required to file a
Form 3115 and is not required to attach a
separate statement when making a change
under this section 16.12.
(5) Certain eligibility rule inapplicable.
(a) In general. Except as otherwise
provided in this section 16.12(5), the eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015–13 does not apply to a change
under this section 16.12 for a taxpayer’s
first, second, or third taxable year beginning after December 31, 2017.
(b) Changes related to debt instruments having OID. For a change related to
income from a debt instrument having OID,
the eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015–13 does not apply to this
change for a taxpayer’s first, second, or third
taxable year beginning after December 31,
2018.
(c) Changes made under the streamlined method change procedures. For a
change made using the streamlined procedures of section 16.12(4)(c) of this revenue procedure, the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015–13 does
not apply to this change for a taxpayer’s
first taxable year beginning after December 31, 2017.
(6) No audit protection. A taxpayer
making a change in method of accounting
using the streamlined method change procedures provided in section 16.12(4)(c) of
this revenue procedure does not receive
audit protection under section 8.01 of
Rev. Proc. 2015–13.
(7) No ruling on method used. The
consent granted under section 9 of Rev.
Proc. 2015–13 for a change made under
section 16.12 of this revenue procedure is
not a determination by the Commissioner

Bulletin No. 2018 –51

that the new method of accounting is a
permissible method of accounting under
§ 451 and does not create a presumption
that the allocation method used under
§ 451(b)(4) is a permissible method of
accounting. The Director may ascertain
whether the new method of accounting is
a permissible method of accounting under
§ 451 and whether the allocation method
is permissible under § 451(b)(4).
(8) Concurrent automatic changes.
(a) In general. A taxpayer that wants to
make one or more concurrent changes in
method of accounting under this section
16.12 may file a single Form 3115 that
includes all of the changes, must separately state the § 481(a) adjustment for
each change, if applicable, and may not
net the § 481(a) adjustment for a change
with § 481(a) adjustments from other
changes. A taxpayer that makes a change
under both section 16.12(2)(a) and (2)(b)
of this revenue procedure is required to
implement the change under section
16.12(2)(b) before making the change under section 16.12(2)(a). See section
6.03(1)(b) of Rev. Proc. 2015–13 for information on making concurrent changes.
(b) Concurrent change in the timing of
recognition of income due to the New
Standards. Except as provided in section
16.12(4)(c)(i) of this section, a taxpayer
that wants to make a change under section
16.12(2)(a) of this revenue procedure and
a change under section 16.11 of this revenue procedure for the same year of
change may file a single Form 3115 for
both changes and enter the designated automatic accounting method change number for both changes on the appropriate
line of Form 3115. A taxpayer that makes
both changes is required to make the
change under section 16.11 of this revenue procedure before making the change
under this section 16.12(2)(a).
(9) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.12 is “239.”
(10) Contact information. For further
information regarding a change under this
section, contact Peter E. Ford at (202)
317-7003 (not a toll-free call). For further
information regarding a change under this
section for OID, contact Charles W. Cul-

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mer at (202) 317-4528 (not a toll-free
call).
.02 Section 15.01 of Rev. Proc. 2018 –
31, as modified by Rev. Proc. 2018 – 44,
2018 –37 I.R.B. 416, is modified as follows:
(1) Section 15.01(1)(a) of Rev. Proc.
2018 –31 is modified to add a new paragraph at the end thereof to read as follows:
Lastly, a taxpayer with an applicable
financial statement (AFS) qualifies to use
this section 15.01 for a taxable year beginning after December 31, 2017, to comply with § 451(b)(1)(A), and, if applicable, § 451(b)(4). However, a taxpayer that
wants to make a change for the recognition of income for federal income tax purposes to a method under the New Standards, as defined in section 16.11(1) of
this revenue procedure, for allocating
transaction price to performance obligations for the same year of change must use
section 16.11 of this revenue procedure to
make the change for purposes of complying with § 451(b)(4).
(2) Section 15.01(1)(b) of Rev. Proc.
2018 –31 is modified to add new division
(ix) to read as follows:
(ix) a taxpayer with an AFS that wants
to make a change for the recognition of
income for federal income tax purposes to
a method under the New Standards, as
defined in section 16.11(1) of this revenue
procedure, for allocating transaction price
to performance obligations for the same
year of change that it wants to change to
an accrual method.
(3) Section 15.01(2)(b) of Rev. Proc.
2018 –31 is modified to read as follows:
(b) Accrual method of accounting is a
method identified by § 446(c)(2) and
§§ 1.446 –1(c)(1)(ii), 1.451–1(a), and
1.461–1(a)(2). For a taxable year beginning after December 31, 2017, a taxpayer
with an AFS treats the all events test with
respect to an item of income, or portion of
an item of income, as met no later than
when the item, or portion of that item, is
taken into account as revenue in its AFS.
(4) Section 15.01(3)(b) of Rev. Proc.
2018 –31 is modified to read as follows:
(b) Certain eligibility rule inapplicable.
(i) Prior change eligibility rule inapplicable. Any prior change to the overall
cash method that the taxpayer implemented using the provisions of Rev. Proc.

December 17, 2018

2001–10, as modified by Rev. Proc. 2011–
14, or Rev. Proc. 2002–28, as modified by
Rev. Proc. 2011–14, is disregarded for
purposes of section 5.01(1)(e) of Rev.
Proc. 2015–13.
(ii) Certain eligibility rule temporarily
inapplicable. For a taxpayer with an AFS
that changes to an overall accrual method
that complies with § 451(b)(1)(A), and, if
applicable, § 451(b)(4) under this section,
the eligibility rule in section 5.01(1)(e) of
Rev. Proc. 2015–13 does not apply to this
change for the taxpayer’s first, second, or
third taxable year ending beginning after
December 31, 2017.
(5) Section 15.01(3) of Rev. Proc.
2018 –31 is modified to add new subparagraphs (f) and (g) to read as follows:
(f) Concurrent automatic changes for a
taxpayer with an AFS that complies with
§ 451(b). A taxpayer with an AFS that
changes to an overall accrual method that
complies with § 451(b)(1)(A) under this
section 15.01 that also wants to make a
change under this section 15.01 to comply
with § 451(b)(4) must file a single Form
3115. The taxpayer must separately state
the § 481(a) adjustment for each change
and may not net these § 481(a) adjustments. A taxpayer must make the change
for § 451(b)(4) before making the change
for § 451(b)(1)(A). See section 6.03(1)(b)
of Rev. Proc. 2015–13 for information on
making concurrent changes.
(g) Concurrent change in the timing of
recognition of income due to the New
Standards. A taxpayer that wants to make
a change under this section 15.01 and a
change under section 16.11 of this revenue procedure for the same year of change
must file a single Form 3115 for both
changes and enter the designated automatic accounting method change number
for both changes on the appropriate line of
Form 3115. A taxpayer that makes both
changes is required to make the change
under section 16.11 of this revenue pro-

December 17, 2018

cedure before making the change under
this section 15.01.
(6) Section 15.01(4)(b) of Rev. Proc.
2018 –31 is modified to read as follows:
(b) Certain eligibility rule inapplicable.
(i) Prior change eligibility rule inapplicable. For a taxpayer making a change
from the cash method in the first § 448
year, any prior change to the overall cash
method is disregarded for purposes of section 5.01(1)(e) of Rev. Proc. 2015–13.
(ii) Certain eligibility rule temporarily
inapplicable. For a taxpayer with an AFS
that changes to an overall accrual method
that complies with § 451(b)(1)(A), and, if
applicable, § 451(b)(4) under this section,
the eligibility rule in section 5.01(1)(e) of
Rev. Proc. 2015–13 does not apply to this
change for the taxpayer’s first, second, or
third taxable year beginning after December 31, 2017.
(7) Section 15.01 of Rev. Proc.
2018 –31 is modified to renumber existing
paragraphs 15.01(5) and (6) as paragraphs
15.01(6) and (7), respectively, and add
new paragraph 15.01(5) to read as follows:
(5) No ruling on method used. The
consent granted under section 9 of Rev.
Proc. 2015–13 for a change made under
section 15.01 of this revenue procedure is
not a determination by the Commissioner
that the new method of accounting is a
permissible method of accounting under
§ 451 and does not create a presumption
that the allocation method used under
§ 451(b)(4) is a permissible method of
accounting. The Director may ascertain
whether the new method of accounting is
a permissible method of accounting under
§ 451 and whether the allocation method
is permissible under § 451(b)(4).
SECTION 4. EFFECTIVE DATE

taxable year beginning after December 31,
2017.
.02 Return of Form 3115 filed under
the non-automatic change procedures.
The National Office will return any Form
3115 requesting a change in method of
accounting that was filed with the National Office on or before November 29,
2018, under the non-automatic procedures
of Rev. Proc. 2015–13 for a taxable year
beginning after December 31, 2017, that
is pending with the National Office on
November 29, 2018, and that is described
in section 3 of this revenue procedure. The
National Office will send a letter to the
taxpayer acknowledging the return of
the Form 3115, and will return the user fee
submitted with the Form 3115. For purposes of the rules of Rev. Proc. 2015–13,
the timely resubmitted Form 3115 will be
considered filed as of the date the taxpayer
originally filed the Form 3115 under the
non-automatic change procedures in Rev.
Proc. 2015–13. This paragraph does not extend the date the taxpayer must file the original (returned) Form 3115 under section
6.03(1)(a)(i)(A) of Rev. Proc. 2015–13.
SECTION 5. EFFECT ON OTHER
DOCUMENTS
This revenue procedure modifies Rev.
Proc. 2018 –31.
SECTION 6. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Peter E. Ford of the Office of
the Associate Chief Counsel (Income Tax
& Accounting). For further information
regarding this revenue procedure, contact
Mr. Ford on (202) 317-7003 (not a toll
free number).

.01 In general. This revenue procedure
is effective on November 29, 2018, for a

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Bulletin No. 2018 –51