rp-06-37.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.204: Changes in accounting periods and in methods of accounting.
(Also Part 1, §§ 162, 263, 446, 461, 481, 1.167(a)-3(b), 1.263(a)-4, 1.263(a)-5, 1.446-1,
1.481-1)

Rev. Proc. 2006-37

SECTION 1. PURPOSE

This revenue procedure modifies Rev. Proc. 2006-12, 2006-3 I.R.B. 310, which
provides procedures under which a taxpayer may obtain automatic consent to change
to a method of accounting provided in §§ 1.263(a)-4, 1.263(a)-5, or 1.167(a)-3(b) of the
Income Tax Regulations (the “final regulations”) for a taxable year ending on or after
December 31, 2005, and for any earlier taxable year that is after the taxpayer’s second
taxable year ending on or after December 31, 2003. The modifications provided by this
revenue procedure allow a taxpayer to utilize the advance consent procedures of 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, when
seeking a change to a method of accounting provided in the final regulations in
conjunction with a change for the same item to a method of accounting utilizing the 3 ½
month rule authorized by § 1.461-4(d)(6)(ii) or the recurring item exception authorized
by § 1.461-5.

SECTION 2. BACKGROUND
.01 Rev. Proc. 2006-12 provides procedures under which a taxpayer may obtain
automatic consent to change to a method of accounting provided in the final regulations
for a taxable year ending on or after December 31, 2005, and for any earlier taxable
year that is after the taxpayer’s second taxable year ending on or after December 31,
2003. Rev. Proc. 2006-12 modified and amplified Rev. Proc. 2002-9, 2002-1 C.B. 327,
as modified and clarified by Announcement 2002-17, 2002-1 C.B. 561, modified and
amplified by Rev. Proc. 2002-19, 2002-1 C.B. 696, and amplified, clarified and modified
by Rev. Proc. 2002-54, 2002-2 C.B. 432, to include the changes to methods of
accounting provided in the final regulations that are within the scope of Rev. Proc. 2006-
12.
.02 Section 6.02 of Rev. Proc. 2006-12 provides, in part, that if a taxpayer seeks
to change to a method of accounting utilizing the 3 ½ month rule or the recurring item
exception for the item for which the taxpayer also seeks to change to a method provided
in the final regulations, the taxpayer must file two separate applications for change in
accounting method - one for a change in method of accounting under Rev. Proc. 2006-
12 to the method of accounting provided in the final regulations and the other for a
change in method of accounting under Rev. Proc. 97-27 to a method of accounting
utilizing the 3 ½ month rule or the recurring item exception.
SECTION 3. CHANGES TO REV. PROC. 2006-12
.01 The third sentence of section 2.07 of Rev. Proc. 2006-12 is modified to read
as follows:

“Except as provided in section 3 of this revenue procedure, for any change in
method of accounting to which this revenue procedure applies, a taxpayer may not file
an application for a change in method of accounting under 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.”
.02 Section 3 of Rev. Proc. 2006-12 is modified by adding the following two
sentences to the end:
“However, a taxpayer that seeks to change its method of accounting to utilize the
3½ month rule authorized by § 1.461-4(d)(6)(ii) or to utilize the recurring item exception
authorized by § 1.461-5 for the item for which the taxpayer also seeks a change to a
method of accounting provided in the final regulations may apply for both changes for
the same item on an application for a change in method of accounting filed under Rev.
Proc. 97-27. The terms and conditions in this revenue procedure apply to a request for
a change to a method of accounting provided in the final regulations filed under Rev.
Proc. 97-27.”
.03 Section 6.02 of Rev. Proc. 2006-12 is modified by adding the following two
sentences to the end:
“However, instead of filing two separate applications for a change in method of
accounting utilizing the 3 ½ month rule or the recurring item exception in conjunction
with a change to a method provided in the final regulations, a taxpayer may apply for
both changes for the same item on an application for a change in method of accounting
filed under Rev. Proc. 97-27. The terms and conditions in this revenue procedure apply

to a request for a change to a method of accounting provided in the final regulations
filed under Rev. Proc. 97-27.”
SECTION 4. APPLICATIONS PREVIOUSLY FILED UNDER REV. PROC. 97-27
If a taxpayer has already filed a Form 3115, Application for Change in Accounting
Method, under Rev. Proc. 97-27 to utilize the 3 ½ month rule or the recurring item
exception with respect to an item under the final regulations, the taxpayer may amend
the Form 3115 filed under Rev. Proc. 97-27 to include a change to a method of
accounting provided in the final regulations for the same item.
SECTION 5. EFFECT ON OTHER DOCUMENTS
Rev. Proc. 2006-12 is modified.
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective for a taxable year ending on or after
December 31, 2005, and for any earlier taxable year that is after the taxpayer’s second
taxable year ending on or after December 31, 2003.
SECTION 7. CONTACT INFORMATION
For further information regarding this revenue procedure call Grace Matuszeski
of the Associate Chief Counsel (Income Tax and Accounting) at (202) 622-7900 (not a
toll free call).