Rev. Proc. 99-17 Mark to Market Election for Commodities Dealers and Securities and Commodities Traders

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Page 52

Other Liability — Occurrence
Tax Year

Discount
Factors
(%)

AY+ 0
AY+ 1
AY+ 2
AY+ 3
AY+ 4
AY+ 5
AY+ 6
AY+ 7
AY+ 8
AY+ 9
AY+10

78.2359
78.9690
81.3835
83.3811
84.6518
82.1857
86.3353
88.3258
92.5005
95.1170
96.9869

Private Passenger Auto
Liability/Medical
Tax Year

Discount
Factors
(%)

AY+ 0
AY+ 1
AY+ 2
AY+ 3
AY+ 4
AY+ 5
AY+ 6
AY+ 7
AY+ 8
AY+ 9
AY+10
AY+11

91.4498
90.8941
89.9496
89.5590
89.0875
89.5493
88.3238
89.0595
89.7588
92.3809
95.0019
96.9869

Products Liability — Claims-Made
Tax Year
AY+ 0
AY+ 1
AY+ 2
AY+ 3
AY+ 4
AY+ 5
AY+ 6
AY+ 7
AY+ 8
AY+ 9

Discount
Factors
(%)
78.6781
80.7444
85.2984
85.2066
80.7335
87.8419
80.4105
87.9957
96.7091
96.9869

Products Liability — Occurrence
Tax Year

Discount
Factors
(%)

AY+ 0
AY+ 1
AY+ 2
AY+ 3
AY+ 4
AY+ 5
AY+ 6
AY+ 7
AY+ 8
AY+ 9
AY+10
AY+11
AY+12
AY+13
AY+14

75.1746
77.8160
76.1658
77.4849
79.2679
78.6033
79.9964
71.9945
77.5374
80.0152
82.6784
85.5776
88.7971
92.4919
96.9869

Reinsurance A (Nonproportional
Property)
Discount
Factors
(%)

Tax Year
AY+ 0
AY+ 1
AY+ 2
AY+ 3
AY+ 4
AY+ 5
AY+ 6
AY+ 7
AY+ 8

86.3003
89.5400
92.3143
91.6614
78.5610
94.6950
93.2835
95.9451
96.9869

Reinsurance B (Nonproportional
Liability)
Tax Year

Discount
Factors
(%)

AY+ 0
AY+ 1
AY+ 2
AY+ 3
AY+ 4
AY+ 5
AY+ 6
AY+ 7
AY+ 8
AY+ 9
AY+10
AY+11
AY+12

74.2486
76.5505
77.2843
76.6711
79.2080
74.1857
75.9657
83.5910
86.0435
88.5976
91.2603
94.0436
96.9869

Reinsurance C (Financial Lines)
Tax Year

Discount
Factors
(%)

AY+ 0
AY+ 1
AY+ 2
AY+ 3
AY+ 4
AY+ 5
AY+ 6
AY+ 7
AY+ 8

80.7281
83.1505
86.4803
92.4729
91.0172
92.9369
89.3800
96.8709
96.9869

Special Property (Fire, Allied Lines,
Inland Marine, Earthquake, Glass,
Burglary and Theft)
Tax Year

Discount
Factors
(%)

AY+ 0
AY+ 1
AY+ 2

92.0841
94.1086
96.9869

Workers’ Compensation
Tax Year

Discount
Factors
(%)

AY+ 0
AY+ 1
AY+ 2
AY+ 3
AY+ 4
AY+ 5
AY+ 6
AY+ 7
AY+ 8
AY+ 9
AY+10
AY+11

78.0767
80.5418
82.4774
84.0695
84.1826
84.3480
85.5457
86.3059
88.7588
91.4094
94.1598
96.9869

DRAFTING INFORMATION
The principal author of this revenue
procedure is Katherine A. Hossofsky of
the Office of the Assistant Chief Counsel
(Financial Institutions and Products). For
further information regarding this revenue
procedure, contact Ms. Hossofsky on
(202) 622-3477 (not a toll-free number).
26 CFR 601.204: Changes in accounting periods
and in methods of accounting.
(Also Part I, sections 446, 475; 1.446–1.)

Rev. Proc. 99–17

February 16, 1999

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SECTION 1. PURPOSE
This revenue procedure provides the exclusive procedure for dealers in commodities and traders in securities or commodities to make an election to use the
mark-to-market method of accounting
under § 475(e) or (f) of the Internal Revenue Code.
SECTION 2. BACKGROUND
.01 Section 475(e) allows a dealer in
commodities to elect mark-to-market accounting for commodities. Mark-to-market accounting under the election, however, does not apply to commodities that
meet certain criteria and are identified
under § 475(b)(2) and (e). Such an identification is ineffective unless it is made before the close of the day on which the commodity was acquired, originated, or
entered into. Section 475(f) grants similar
treatment to traders in securities and commodities.
.02 The legislative history to § 475(e)
and (f) states that the mark-to-market election will be made in the time and manner
prescribed by the Secretary and will be effective for the taxable year for which it is
made and all subsequent taxable years, unless revoked with the consent of the Secretary. H.R. Rep. No. 148, 105th Cong., 1st
Sess. 446 (1997).
.03 Use of mark-to-market accounting
under § 475(e) or (f) is a method of accounting. Generally, a taxpayer must obtain the consent of the Commissioner to
change a method of accounting for federal
income tax purposes. To obtain this consent, a Form 3115, Application for
Change in Accounting Method, generally
must be filed during the taxable year in
which the taxpayer desires to make the
change in method of accounting. The
Commissioner, however, is authorized to
prescribe administrative procedures setting forth the limitations, terms, and conditions the Commissioner deems necessary to obtain consent. See § 446(e) and
the regulations thereunder.
.04 In computing taxable income,
§ 481(a) requires a taxpayer to take into account those adjustments necessary to prevent amounts from being duplicated or
omitted when the taxpayer’s taxable income is computed under a method of accounting different from the method used to
compute taxable income for the preceding
taxable year.

1999–7 I.R.B.

.05 For a taxpayer who elects under
§ 475(e) or (f) to change its method of accounting for the taxable year that includes
August 5, 1997, § 1001(d)(4) of the Taxpayer Relief Act of 1997 (the Act), Pub. L.
No. 105–34, 111 Stat. 788 (August 5,
1997), provides: (1) that any identification
required with respect to securities and
commodities held on August 5, 1997, is
treated as timely made if made on or before September 4, 1997; and (2) that the
net amount of the adjustments required to
be taken into account by the taxpayer
under § 481 is taken into account ratably
over the 4-taxable-year period beginning
with the taxable year that includes August
5, 1997. The Conference Report to the Act
states that any elections made for a year
after the taxable year that includes August
5, 1997, will be governed by rules and procedures established by the Secretary. H.R.
Conf. Rep. No. 220, 105th Cong., 1st Sess.
516 (1997).
SECTION 3. SCOPE
This revenue procedure applies to commodities dealers, securities traders, and
commodities traders that want to make an
election to use the mark-to-market method
of accounting under § 475(e) or (f).
SECTION 4. EFFECT OF ELECTION
An election under § 475(e) or (f) determines the method of accounting that an
electing taxpayer is required to use for federal income tax purposes for securities or
commodities subject to the election. Thus,
beginning with the first taxable year for
which the election is effective (the election
year) and continuing for all subsequent
taxable years (unless the election is revoked with the consent of the Commissioner), a method of accounting for securities or commodities subject to the election
is impermissible for an electing taxpayer
unless the method is in accordance with §
475 and the regulations thereunder. If a
taxpayer described in section 3 of this revenue procedure makes an election under
section 5 of this revenue procedure, and
the taxpayer’s method of accounting for its
taxable year immediately preceding the
election year is inconsistent with § 475, the
taxpayer is required to change its method
of accounting to comply with its election.
Section 6 of this revenue procedure contains procedures for effecting this change.
A taxpayer that makes a § 475(e) or (f)

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election but fails to change its method of
accounting to comply with that election is
using an impermissible method.
SECTION 5. PROCEDURES FOR
MAKING THE MARK-TO-MARKET
ELECTIONS
.01 Elections effective for taxable years
for which the original federal income tax
return was filed before March 18, 1999.
For a taxpayer to make a § 475(e) or (f)
election that is effective for a taxable year
for which the original federal income tax
return was filed before March 18, 1999,
the taxpayer must either:
(1) have properly reflected the application of § 475 (including any required
§ 481(a) adjustment) in the calculation of
the taxpayer’s tax liability on its original
federal income tax return for the election
year; or
(2) have failed to properly reflect the application of § 475 (including any required
§ 481(a) adjustment) in the calculation of
the taxpayer’s tax liability on its original
federal income tax return for the election
year, but clearly demonstrated on that return its intent to make the election for that
year (for example, by a statement on, or attachment to, the return), and file an
amended return for the election year on or
before June 16, 1999, that properly reflects
the application of § 475 (including any required § 481(a) adjustment).
.02 Elections effective for other taxable
years beginning before January 1, 1999.
For a taxpayer to make a § 475(e) or (f)
election that is effective for a taxable year
which begins before January 1, 1999, and
for which the original federal income tax
return is filed on or after March 18, 1999,
the taxpayer must make the election by attaching a statement that satisfies the requirements in section 5.04 of this revenue
procedure to an original federal income tax
return for the election year that is timely
filed (including extensions).
.03 Elections effective for a taxable year
beginning on or after January 1, 1999.
(1) General procedure. Except as provided in section 5.03(2) of this revenue
procedure, for a taxpayer to make a §
475(e) or (f) election that is effective for a
taxable year beginning on or after January
1, 1999, the taxpayer must file a statement
that satisfies the requirements in section
5.04 of this revenue procedure. The statement must be filed not later than the due

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date (without regard to extensions) of the
original federal income tax return for the
taxable year immediately preceding the
election year and must be attached either to
that return or, if applicable, to a request for
an extension of time to file that return.
(2) New taxpayers. A new taxpayer is a
taxpayer for which no federal income tax
return was required to be filed for the taxable year immediately preceding the election year. A new taxpayer makes the election by placing in its books and records no
later than 2 months and 15 days after the
first day of the election year a statement
that satisfies the requirements in section
5.04 of this revenue procedure. To notify
the Service that the election was made, the
new taxpayer must attach a copy of the
statement to its original federal income tax
return for the election year.
.04 Required statement. The statement
must describe the election being made, the
first taxable year for which the election is
effective, and, in the case of an election
under § 475(f), the trade or business for
which the election is made.
SECTION 6. CHANGE IN METHOD OF
ACCOUNTING
.01 Consent. A change in a taxpayer’s
method of accounting to mark-to-market
accounting is a change in method of accounting to which the provisions of §§ 446
and 481 and the regulations thereunder
apply. The Commissioner hereby grants
consent for a taxpayer to change its
method of accounting for securities or
commodities, as appropriate, if the following conditions are satisfied:
(1) the taxpayer is described in section 3
of this revenue procedure;
(2) the taxpayer complies with the election requirements set forth in section 5 of
this revenue procedure;
(3) the method of accounting to which
the taxpayer is changing is in accordance
with its election under § 475;
(4) the year of change is the election
year; and
(5) the taxpayer complies with the applicable requirements of this section 6.
.02 Filing requirements.
(1) Taxpayers electing under section
5.01. A taxpayer described in sections 3
and 5.01(1) of this revenue procedure that
changed its method of accounting to properly reflect the application of § 475 on its
original federal income tax return for the
election year has satisfied the filing re-

February 16, 1999

quirements of this section 6.02. A taxpayer
described in section 3 that is required to
change its method of accounting to comply
with its election under section 5.01(2) must
comply with the requirements of section
6.02(2) of this revenue procedure (substituting the amended return required by section 5.01(2) for the original return referred
to in section 6.02(2)).
(2) Taxpayers electing under section
5.02 or 5.03(1). A taxpayer described in
section 3 of this revenue procedure that
makes an election under section 5.02 or
5.03(1) of this revenue procedure and is required to change its method of accounting
must complete and file a Form 3115 for the
year of change pursuant to the filing requirements in section 6.02 of Rev. Proc.
98–60, 1998–51 I.R.B. 16. Thus, the original Form 3115 must be attached to the taxpayer’s timely filed (including extensions)
original federal income tax return for the
year of change, and a copy of the Form
3115 must be filed with the national office
no later than when the original Form 3115
is filed with the federal income tax return
for the year of change. The label described
in section 6.02(3) of Rev. Proc. 98–60,
however, should refer to this revenue procedure rather than to the APPENDIX of
Rev. Proc. 98–60. Further, in the additional statement described in section
6.02(5) of Rev. Proc. 98–60, the taxpayer
must agree to all the terms and conditions
in this revenue procedure rather than those
in Rev. Proc. 98–60.
.03 Section 481(a) adjustment. If a taxpayer changes its method of accounting
under section 6.01 of this revenue procedure, the taxpayer must take into account
the net amount of the § 481(a) adjustment
in the manner provided in section 5.04 of
Rev. Proc. 98–60.
Thus, the
§ 481(a) adjustment generally is taken into
account ratably over four taxable years beginning with the year of change. For purposes of § 481, a change in method of accounting made under this revenue
procedure is a change in method of accounting initiated by the taxpayer.

tained in this revenue procedure have
been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number
1545-1641.
The collections of information in this
revenue procedure are in sections 5 and 6
of this revenue procedure. This information is required by the IRS to facilitate
monitoring taxpayers that make the elections under § 475(e) or (f). This information will be used if a taxpayer making the
election is audited. The likely recordkeepers and respondents are businesses or
other for-profit institutions.
The reporting burden for the collection
of information in section 6.02 of this revenue procedure is reflected in the burden
of Form 3115. The burden of the requirement to file amended returns in section
5.01 of this revenue procedure is reflected
in the burden of Forms 1120X and 1040X.
The estimated total annual reporting and/or
recordkeeping burden for the collection of
information described in section 5.01–5.04
of this revenue procedure is 500 hours.
The estimated annual burden per respondent/recordkeeper varies from 15
minutes to 1 hour, depending on individual circumstances, with an estimated average of 30 minutes. The estimated number
of respondents and/or recordkeepers is
1,000.
The estimated annual frequency of responses is once in the existence of each respondent.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless it displays a valid control number assigned by
the Office of Management and Budget.
Books or records relating to a collection
of information must be retained as long as
their contents may become material in the
administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.

SECTION 7. EFFECTIVE DATE

DRAFTING INFORMATION

This revenue procedure is effective February 8, 1999, the date this revenue procedure was made available to the public.

The principal author of this revenue procedure is Jo Lynn Ricks of the Office of the
Assistant Chief Counsel (Financial Institutions and Products). For further information regarding this revenue procedure,
contact Ms. Ricks on (202) 622–3920
(not a toll-free call).

SECTION 8. PAPERWORK
REDUCTION ACT
The collections of information con-

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1999–7 I.R.B.