EXPEDITED CONSENT AVAILABLE FOR CHANGE IN YEAR OF REPORTING PREPAID SUBSCRIPTION INCOME

Rev. Proc. 84-76

SECTION 1. PURPOSE

The purpose of this revenue procedure is to permit taxpayers to expeditiously obtain the consent of the Commissioner of Internal Revenue to elect to treat prepaid subscription income under the provisions of section 455 of Internal Revenue Code. Taxpayers complying with this revenue procedure will be deemed to have obtained the consent of the Commissioner to elect the provisions of section 455 for reporting prepaid subscription income.

SEC. 2. BACKGROUND

01 Section 455(a) of the Internal Revenue Code provides that prepaid subscription income to which section 455 applies shall be included in gross income for the tax years during which the liability described in section 455(d)(2) exists.

02 Section 455(d)(1) of the Code defines the term "prepaid subscription income" to mean any amount (includible in gross income) that is received in connection with, and is directly attributable to, a liability that extends beyond the close of the tax year in which such amount is received, and which is income from a subscription to a newspaper, magazine, or other periodical.

03 Section 455(d)(2) of the Code defines the term "liability" as a liability to furnish or deliver a newspaper, magazine or other periodical.

04 Section 455(c)(1) of the Code provides that the treatment of prepaid subscription income described in section 455(a) shall only apply if the taxpayer makes an election under this section with respect to the trade or business in connection with which such income is received. The election shall be made in such manner as the Secretary may by regulations prescribe. No election may be made with respect to a trade or business if the cash receipts and disbursements method of accounting is used to compute taxable income with respect to such trade or business.

05 Section 455(c)(2) of the Code and section 1.455-2(d) of the regulations provide that the election under section 455 does not apply to any prepaid subscription income received before the first tax year in which the election applies. Under the example set forth in section 1.455-2(d), prepaid subscription income received in the tax year before the tax year to which the election applies is to be reported as income in the year received and no part of such prepaid subscriptions income is to be allocated to the election year or subsequent years even though the taxpayer has a liability to deliver magazines in such years. Thus, section 481 of the Code does not apply to an election to account for prepaid subscription income under section 455.

06 Section 1.455-6(a)(1) of the regulations provides that a taxpayer may, without consent, elect to treat prepaid subscription income of a trade or business under section 455 for the first tax year (i) which begins after December 31, 1957, and (ii) in which there is received prepaid subscription income from the trade or business for which the election is made.

07 Section 1.455-6(b) of the regulations provides that a taxpayer may, with the consent of the Commissioner of Internal Revenue, elect at any time to apply the provisions of section 455 of the Code to any trade or business in which it receives prepaid subscription income. The request for such consent shall be made in writing, signed by the taxpayer or its authorized representative, and shall be addressed to the Commissioner of Internal Revenue, Washington, D.C. The request must be filed on or before 90 days after the beginning of the first tax year to which the election is to apply and must contain the information described in section 1.455-6(a)(2).

08 Section 1.455-6(a)(2) of the regulations provides that a statement filed under these provisions shall indicate the taxpayer is electing to apply the provisions of section 455 of the Code to its trade or business and shall contain the following information:

(1) The name and a description of the taxpayer's trade or business to which the election applies,

(ii) The method of accounting used in such trade or business;

(iii) The total amount of prepaid subscription income from such trade or business for the tax year;

(iv) The period of periods over which the liability of the taxpayer to furnish or deliver a newspaper, magazine, or other periodical extends;

(v) The amount of the prepaid subscription income applicable to each such period; and

(vi) A description of the method used in allocating the prepaid subscription income to each such period.

09 Section 455(c)(4) of the Code provides that an election made under this section is effective for the tax year of the election and for all subsequent tax years unless the taxpayer secures the consent of the Commissioner to revoke such election.

SEC. 3. APPLICATION

01 In accordance with section 1.455-6(b) of the regulations, consent is hereby granted to taxpayers to elect to treat prepaid subscription income in the manner described in section 455(a) of the Code. The 90 day rule of section 1.455-6(b) of the regulations, which was extended by an additional 90 days by Rev. Proc. 83-77, 1983-2 C.B. 594, is waived. Consent to elect is granted for the tax year of change in accordance with section 4 of this revenue procedure and by otherwise complying with the requirements of this revenue procedure.

02 In addition to the information required to be submitted by section 1.455-6(a), (b), or (c) of the regulations the taxpayer should include the following:

1. Social Security number or employer identification number;

2. Internal Revenue Service Center where return is filed; and

3. The following declaration and statement:

(a) DECLARATION OF CORPORATE OFFICER OR TAXPAYER (TO BE SIGNED BY AUTHORIZED CORPORATE OFFICER OF TAXPAYER):

"Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of the requested election are true, correct, and completed."

(b) ISSUE STATEMENT (TO BE SIGNED BY AUTHORIZED CORPORATE OFFICER OR TAXPAYER AND TAXPAYER'S REPRESENTATIVE IF APPROPRIATE):

"The taxpayer and the taxpayer's representative declare that to the best of their knowledge, there is no issue pending under the provisions of section 455 of the Internal Revenue Code with regard to the taxpayer." If the taxpayer is a member of an affiliated group add "or any member of the affiliated group of which the taxpayer is a member within the meaning of section 1504."

SEC. 4. MANNER EFFECTING THE ELECTION

01 Taxpayers to which this revenue procedure applies must effect the election pursuant to the provisions set forth in this revenue procedure by filing the written request in duplicate. The original written request shall be attached to the taxpayer's timely filed federal income tax return for the year of change. A copy of the written request shall be filed with the National Office addressed to Commissioner of Internal Revenue, Attn: CC:C:C:2, 1111 Constitution Avenue, N.W. Washington, D.C. 20224. The copy is to be mailed at the same time the taxpayer files its federal income tax return.

02 To assist in the processing of these elections and to insure proper handling, reference to this revenue procedure shall be made a part of the written request by typing or legibly printing the following statement at the top of page 1 of the written request: "FILED UNDER REV. PROC. 84-76."

03 The signature of the individual or person preparing the written request for the taxpayer must appear in the written request. A written request made by an agent on behalf of a taxpayer must be accompanied by a power of attorney authorizing the agent to sign for the taxpayer. If the agent is also authorized to represent the taxpayer before the Service, receive the original or a copy of correspondence concerning the request, or perform any other acts regarding the written request on behalf of the taxpayer, the power of attorney must reflect such authorizations. If the taxpayer is a member of an affiliated group that has elected to file a consolidated federal income tax return, a written request submitted on behalf of the taxpayer must be signed by a duly authorized officer of the common parent. (See Section 1.1502-77 of the regulations.)

SEC. 5. EFFECTIVE DATE

This revenue procedure shall be effective for written requests filed for tax years ending after November 13, 1984, the date this revenue procedure was published in the Internal Revenue Bulletin.

SEC. 6. INQUIRIES

Inquiries in regard to the revenue procedure should refer to its number and be addressed to the Commissioner of Internal Revenue, Attention: CC:C:C:2, 1111 Constitution Avenue, N.W., Washington, D.C. 20224.