SERVICE ISSUES PROCEDURE FOR EXPEDITIOUS CONSENT TO CHANGE ACCOUNTING METHOD FOR PACKAGE DESIGN COSTS.

Rev. Proc. 89-16

SECTION 1. PURPOSE

This revenue procedure allows certain taxpayers to obtain expeditious consent from the Commissioner to change their method of accounting for package design costs (as defined in section 2 of this revenue procedure) to a capitalization method in accordance with Rev. Rul. 89-23, page 4, this Bulletin. The required method change is with respect to package design costs incurred prior to January 1, 1987 (change in method of accounting made pursuant to section 263 of the Internal Revenue Code) and package design costs incurred after December 31, 1986 (change in method of accounting made pursuant to section 263A), to the extent the amounts were previously deducted or amortized and the related package designs are still in use in the taxpayer's trade or business on the first day of the tax year of change (year of change). See Notice 88-78, 1988-28 I.R.B. 24, which provides guidance and procedural information to taxpayers that fail to change their method of accounting in order to conform to the uniform capitalization rules in accordance with the effective date provisions of section 263A.

SEC. 2. DEFINITIONS

For purposes of this revenue procedure, the term "package design" means an asset that is created by a specific graphic arrangement or design of shapes, colors, words, pictures, lettering, and so forth on a given product package, or the design of a container with respect to its shape or function.

The term "package design cost", as used in this revenue procedure, means the cost of package designs. If the taxpayer develops the package design, the term includes the cost of materials, labor, and overhead associated with the package design. If an independent contractor performs the work, the term includes all billings related to the development of the particular package design. Whether a package design is created in-house or is created by an independent contractor, the term includes all design exploration and study, refinement of the basic design selected, testing, and preparation of the final master comprehensive design. If the taxpayer purchases the package design, the term includes the purchase price. (See also section 1.263A-1T(a)(5)(ii) of the regulations that treats a taxpayer purchasing a package design as also producing such design to the extent the taxpayer incurs costs with respect to the design). The term, however, does not include costs associated with coupon inserts, refund offers, and other promotion-related changes, nor does it include costs that are unrelated to the package design itself, such as a change to the list of ingredients. Moreover, the term does not include costs that would have qualified as "trademark or trade name expenditures" under section 177 of the Internal Revenue Code of 1954 (the 1954 Code).

SEC. 3. BACKGROUND

01 Section 263(a) of the Internal Revenue Code provides that no deduction shall be allowed for any amount paid for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. Section 1.263(a)-2 of the Income Tax Regulations provides in the examples of capital expenditures the costs of acquiring property having a useful life substantially beyond the taxable year.

02 An expenditure generally must be capitalized under section 263 of the Code if the expenditure creates, enhances, or is part of the cost of acquiring a tangible or intangible asset with a useful life greater than one year. See Commissioner v. Lincoln Savings and Loan Association v. Commissioner, 403 U.S. 345 (1971), 1971-2 C.B. 116; Central Texas Savings and Loan Association v. United States, 731 F.2d 1181 (5th Cir. 1984); Ellis Banking Corp. v. Commissioner, 688 F.2d 1376 (11th Cir. 1982), cert. denied, 463 U.S. 1207 (1983); and Cleveland Electric Illuminating Company v. United States, 7 Cl. Ct. 220 (1985). Generally, taxpayers must capitalize package design costs incurred prior to January 1, 1987, under section 263 because such costs create intangible assets with useful lives in excess of one year. See Rev. Rul. 89-23.

03 Section 263A of the Code, as enacted by the Tax Reform Act of 1986, section 803(a), 1986-3 (Vol. 1) C.B. 267, provides, in part, for the non-deductibility of certain direct and indirect costs with respect to tangible property produced by the taxpayer. Section 1.263A-1T of the temporary Income Tax Regulations provides that all costs that are incurred with respect to real or tangible personal property that is produced are to be capitalized with respect to such property. Section 1.263A-1T(a)(5)(ii) of the temporary regulations provides that the term "produce" includes construct, build, install, manufacture, develop, improve, create, raise or grow. Although section 263A of the Code does not require the costs of producing intangible personal property to be capitalized, section 263A(b) defines tangible personal property to include a film, sound recording, video tape, book, or similar property. For this purpose, tangible personal property includes property embodying words, ideas, concepts, images, or sounds. See section 1.263A-1T(a)(5)(iii) of the temporary regulations; see also 2 H.R. Conf. Rep. No. 841, 99th Cong., 2d Sess. II-308 (1986), 1986-3 (Vol. 4) C.B. 308, Section 1.263A-1T(a)(5)(iii) applies to the production of tangible personal property within the meaning of paragraph (a)(5)(iii) without regard to whether such property is treated as tangible or intangible under other provisions of the Code. For example, the requirements of section 1.263A-1T(a)(5)(iii) apply to the cost of the properties enumerated therein although such costs may consist of copyrights, licenses, manuscripts, and other items which may be treated as intangible for other purposes of the Code. The above-indicated provisions of section 263A and the temporary Income Tax Regulations thereunder require that expenses incurred after December 31, 1986, in connection with the development and design of product packages must be capitalized under section 263A for tax years ending after such date. See Rev. Rul. 89-23.

04 As indicated in Rev. Rul. 89-23, package designs generally do not have an ascertainable useful life and, therefore, no depreciation or amortization is allowed under section 167 of the Code and the regulations thereunder. See section 1.167(a)-3 of the regulations. Only when such a package design is abandoned may the accumulated costs be deducted. See section 165 of the Code and section 1.165-2(a) of the regulations.

05 Taxpayers currently deducting package design costs in a manner inconsistent with Rev. Rul. 89-23 are required to change their method of accounting, under sections 446 and 481 of the Code and the regulations thereunder, to a capitalization method consistent with Rev. Rul. 89-23. The required method change, pursuant to section 263 of the Code with respect to costs incurred prior to January 1, 1987, and pursuant to section 263A with respect to costs incurred after December 31, 1986, is for all amounts previously deducted or amortized with respect to all package designs still in use in the taxpayer's trade or business on the first day of the tax year of change. See sections 6.01 and 6.02 of this revenue procedure, which discuss the section 481(a) adjustment and the section 481(a) adjustment period, respectively, with respect to this method change.

06 Section 446(e) of the Code provides that, except as otherwise provided, a taxpayer that changes the method of accounting on the basis of which it regularly computes its income in keeping its books shall, before computing its taxable income under the new method, secure the consent of the Secretary. Section 1.446-1(e)(2)(ii)(a) of the regulations provides that a change in the ;method of accounting includes a change in the overall plan of accounting for gross income or deductions or a change in the treatment of any material item used in such overall plan. Section 1.446-1(e)(ii)(a) defines a material item as any item that involves the proper time for the inclusion of the item in income or the taking of a deduction. Section 1.446- 1(e)(3)(i) provides generally that in order to obtain the consent of the Commissioner for an accounting method change, a taxpayer must file an application on Form 3115, Application for Change in Method of Accounting, within 180 days after the beginning of the tax year for which the proposed change is to be made. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions deemed necessary to permit taxpayers to obtain consent to change their method of accounting in accordance with section 446(e).

07 Section 481(a) of the Code provides that if a taxpayer's taxable income for any tax year is computed under a method of accounting different from the method used to compute taxable income in the preceding tax year, the taxpayer must take into account those adjustments necessary to prevent amounts from being duplicated or omitted by reason of such change in method. Section 481(c) and section 1.481-5 of the regulations provide that the adjustments required by section 481(a) may be taken into account in determining taxable income in the manner and subject to the conditions agreed to by the Commissioner and the taxpayer.

SEC. 4. SCOPE

01 Except as provided in section 4.02 below, this revenue procedure applies to any taxpayer that has a method of accounting of currently deducting or amortizing package design costs (as defined in section 2 of this revenue procedure) in a manner inconsistent with Rev. Rul. 89-23 and, therefore, is required to change to a capitalization method consistent with Rev. Rul. 89-23. This required change is for all package design costs that (1) were currently deducted or amortized in tax years prior to the year of change, and (2) relate to package designs that were not abandoned prior to the year of change (whether or not the package design was placed in service prior to the start of the year of change). Any taxpayer to which this revenue procedure applies may not use Rev. Proc. 84-74, 1984-2 c.B. 736, but must use this revenue procedure for changing its method of accounting to a capitalization method in accordance with Rev. Rul. 89-23 and this revenue procedure.

02 This revenue procedure does not apply to a taxpayer if, as of the date of filing Form 3115 with the National Office, as required by section 8.01, the taxpayer:

(1) Has been contacted in any manner by a representative of the Service for the purpose of scheduling an examination of the taxpayer's federal income tax return for any year and such examination has not been completed, unless the taxpayer has obtained an agreement (which must be attached to the Form 3115) from the Service's examining agent that there is no objection to the proposed change in method of accounting:

(2) Is before an appeals office of the Service with respect to an examination of the taxpayer's federal income tax return(s) for any year, unless the taxpayer has obtained an agreement (which must be attached to the Forms 3115) from the appeals officer that there is no objection to the proposed change in method of accounting;

(3) Is before any federal court with respect to an income tax issue arising in any tax year unless the taxpayer has obtained an agreement (which must be attached to the Form 3115) from counsel for the Government that there is no objection to the proposed change in method of accounting; or

(4) Is the subject of a criminal investigation or proceeding concerning, directly or indirectly, (i) the taxpayer's federal tax liability for any year, or (ii) the possibility of false or fraudulent statements made by the taxpayer with respect to any issue relating to its federal tax liability for any year.

03 If a taxpayer desires to change its method of accounting for package design costs and this revenue procedure does not apply, the taxpayer must comply with the requirements of section 1.446-1(e)(3) of the regulations and Rev. Proc. 84-74, 1984-2 C.B. 736. See, however, Notice 88-78, 1988-28 I.R.B. 24, which modifies the provisions of Rev. Proc. 84-74 with respect to certain changes in method of accounting under section 263A.

SEC. 5. APPLICATION

01 THE CAPITALIZATION METHOD. The costs of developing a package design as defined in section 2 of this revenue procedure must be capitalized if the asset created by those costs has a useful life greater than one year. These costs may be deducted only upon the subsequent disposition (including abandonment) of the package design. See Rev. Rul. 89-23.

02 METHOD OF ACCOUNTING. The treatment of the costs of developing a package design, as defined in section 2 of this revenue procedure, in accordance with the capitalization method, as defined in section 5.01 of this revenue procedure, constitutes a method of accounting.

03 CONSENT. In accordance with section 1.446-1(e)(3)(ii) of the regulations, the Commissioner hereby waives the 180-day rule, and, in accordance with section 1.446-1(e)(2)(i), hereby grants consent to a taxpayer to change its method of accounting for package design costs to the capitalization method defined in section 5.01 of this revenue procedure, provided the taxpayer complies with the provisions and conditions of this revenue procedure. See section 7 of this revenue procedure regarding compliance with the conditions of this revenue procedure. This consent is granted for the tax year (year of change) for which a taxpayer requests a change by filing a current Form 3115 in the manner described in section 8 of this revenue procedure.

04 SECTION 481(a) ADJUSTMENT. The section 481(a) adjustment shall be taken into account in the manner set forth in section 6 of this revenue procedure.

SEC. 6. SECTION 481(a) ADJUSTMENT

01 COMPUTATION OF SECTION 481(a) ADJUSTMENT. Section 481(a) of the Code prescribes the rules to be followed in computing taxable income in cases in which the taxable income of a taxpayer is computed under a method of accounting different from the method used to compute the taxable income for the preceding tax year. An adjustment is required to prevent duplication or omission of items when a taxpayer changes its method of accounting. In the present situation, the section 481(a) adjustment, which will be positive, will restore to income (1) the total amounts previously deducted or amortized with respect to all package designs still in use in the taxpayer's trade or business on the first day of the tax year of change, and (2) the total amounts previously deducted or amortized with respect to all package designs not yet placed in service on the first day of the tax year of change, and not abandoned. The section 481(a) adjustment is the difference at the beginning of the tax year of change between the basis of such property determined under the taxpayer's present method and the basis redetermined by applying the provisions of section 263 and the regulations thereunder to costs incurred before January 1, 1987, and section 263A and the regulations thereunder to costs incurred after December 31, 1986 (regardless of the taxpayer's taxable year). The section 481(a) adjustment shall be taken into account in computing taxable income in the manner provided in section 6.02 below. For purposes of determining the amount of the section 481(a) adjustment, the approved change shall be considered a change in method of accounting initiated by the taxpayer; therefore, the section 481(a) adjustment is not to be reduced in any way by a pre- 1954 amount.

02 SECTION 481(a) ADJUSTMENT PERIOD.

(1) With respect to taxpayers who have previously complied, on a timely basis, in accounting for package design costs under the provisions of section 263A of the Code or, alternatively, who comply in accounting for package design costs under the provisions of section 263A by filing an amendment return as provided in Notice 88- 78, 1988-28 I.R.B. 24, the appropriate period (adjustment period) for taking into account the positive adjustment (which will be attributable solely to costs incurred prior to January 1, 1987) referred to in section 6.01, is determined as follows:

(a) If the entire amount of the adjustment is attributable to the tax year immediately preceding the year of change (first preceding year), the total adjustment is to be taken into account in computing taxable income for the year of change. The amount attributable to the tax year immediately preceding the year of change is the amount of the adjustment determined under section 481(a) of the Code for the year of change less the amount of the adjustment that would have been required under section 481(a) if the same change in method of accounting had been made for such preceding year.

(b) If subparagraph (a) of this section 6.02(1) does not apply, the method of accounting that is being changed has been used for more than 4 tax years, and 67 percent or more of the adjustment is attributable to the 1-tax-year period, 2-tax-year period, or 3-tax-year period immediately preceding the year of change, the highest percent attributable to such 1-, 2-, or 3- tax-year period is to be taken into account ratably over a 3- tax-year period beginning with the year of change. Any remaining balance is to be taken into account ratably over an additional period equal to the remainder of the number of tax years the taxpayer has used the method of accounting that is being changed. However, the total adjustment period shall not exceed 6 tax years. The amount attributable to the 1-, 2-, or 3-tax-year period immediately preceding the year of change is the amount of the adjustment determined under section 481(a) of the Code for the year of change less the amount that would have been required under section 481(a) if the same change had been made at the beginning of such preceding 1-, 2-, or 3-tax-year period. If the method of accounting being changed has been used for 4 tax years, 75 percent shall be substituted for 67 percent.

(c) In all other situations described in this section 6.02(1) to which subparagraphs (a) and (b) of this section 6.02(1) do not apply, the adjustment is to be taken into account ratably over the lesser of (1) the number of years the taxpayer has used the method of accounting that is being changed or (2) 6 tax years.

(2) With respect to taxpayers who have not previously complied, on a timely basis, in accounting for package design costs under the provisions of section 263A of the Code, and have not complied and will not comply in accounting for package design costs under the provisions of section 263A by filing an amended return as provided in Notice 88-78, 1988-28 I.R.B. 24, the positive adjustment will be attributable to costs incurred both before January 1, 1987, and after December 31, 1986. The portion of the section 481(a) adjustment referred to in section 6.01 that is attributable to costs incurred before January 1, 1987, shall be taken into account in accordance with the provisions of section 6.02(1)(a), (b) and (c), and the portion of the section 481(a) adjustment referred to in section 6.01 that is attributable to costs incurred after December 31, 1986 shall be taken into account in full in the tax year of change. See section II of Notice 88-78, 1988-28 I.R.B. 24.

(3) In applying section 6.02(1), if a taxpayer's books and records do not contain sufficient information to compute the section 481(a) adjustment that would have been required if the same change had been made at the beginning of such preceding 1-, 2-, or 3-tax- year period, the taxpayer may reasonably estimate these amounts, attach the computations upon which the estimates are based, and also sign the following statement and attach it to the Form 3115:

Under penalties of perjury, I hereby certify that:

(a) The books and records of [name of the taxpayer] do not contain sufficient information to permit a computation of the section 481(a) adjustment attributable to the 1-tax-year-period, 2-tax-year period, or 3-tax-year period immediately preceding the year of change as required by section 6.02(1) of Rev. Proc. 89-16.

(b) Based on the information that is contained in such records, to the best of my knowledge and belief, the entire amount of the section 481(a) adjustment for the year of change [indicate either "is" or "is not," as the case may be] attributable to the tax year immediately preceding the year of change, and 67 percent [or "75 percent," in applicable cases] or more of the section 481(a) adjustment for the year of change [indicate "is" or "is not" as the case may be] attributable to the 1-tax-year period, 2-tax-year period, or 3-tax-year period immediately preceding the year of change.

(4) For examples of the application of the rules prescribed in section 6.02(1) with respect to the appropriate period for taking into account the section 481(a) adjustment, see section 5.14 of Rev. Proc. 84-74.

03 CEASING TO ENGAGE IN THE TRADE OR BUSINESS.

(1) With respect to a corporation:

If a corporation ceases to engage in the trade or business to which the adjustment described in section 6.01 relates at any time prior to the expiration of the adjustment period referred to in section 6.02, the taxpayer shall take into account in that year the balance of the adjustment not previously taken into account in computing taxable income. See Rev. Rul. 80-39, 1980-1 C.B. 112, which holds that, in the case of a corporation with a different division for each trade or business, if the corporation ceases to engage in the trade or business of a division that has been granted a change in method of accounting, the remaining portion of the section 481(a) adjustment applicable to that trade or business must be taken into account in computing income in the year the corporation ceases to engage in that trade or business. For purposes of section 6.03, the taxpayer is not considered to have ceased to engage in a trade or business if its assets have been acquired by another corporation in a transaction to which section 381 of the Code applies, but in that case the acquiring corporation shall continue to be subject to this revenue procedure as though it were the acquired corporation.

(2) With respect to a partnership:

In the event a partnership terminates (within the meaning of section 708(b) of the Code) or ceases to engage in the trade or business to which the adjustment described in section 6.01 relates at any time prior to the expiration of the adjustment period referred to in section 6.02, the balance of the adjustment not previously taken into account in computing ordinary income shall be taken into account in that year. A partnership is treated as ceasing to engage in a trade or business upon the incorporation of the trade or business in a transaction to which section 351 of the Code applies (see Rev. Rul. 85-134, 1985-2 C.B. 160).

(3) With respect to a sole proprietor:

If an individual (sole proprietor) ceases to engage in the trade or business to which the adjustment described in section 6.01 relates at any time prior to the expiration of the adjustment period referred to in section 6.02, the balance of the adjustment not previously taken into account in computing taxable income shall be taken into account in that year. A sole proprietor is treated as ceasing to engage in a trade or business upon the incorporation of the trade or business in a transaction to which section 351 of the Code applies (see Rev. Rul. 77-264, 1977-2 C.B. 187). A sole proprietorship is not treated as ceasing to engage in a trade or business upon the sale of a partial interest in the proprietorship if the individual who was the sole proprietor continues to be actively engaged in the management of the business and it is subsequently operated as a partnership. The section 481(a) adjustment remaining at the time the partnership is formed is taken into account by the sole proprietor in computing the sole proprietor's own taxable income as though there had been no change in ownership (see Rev. Rul. 66-206, 1966-2 C.B. 206).

04 PERMANENT REDUCTION IN ACCOUNT FOR PACKAGE DESIGN COSTS.

If, on the last day of any tax year of the adjustment period referred to in section 6.02, the balance of the taxpayer's account for capitalized and unamortized package design costs to which the adjustment described in section 6.01 relates is reduced by more than 33 1/3 percent of the account balance at the beginning of the first tax year of the adjustment period and is so reduced by at least such percentage at the end of the following tax year, the remaining balance of the adjustment must be taken into account in determining taxable income in the year succeeding the year of reduction. If the balance of the account for package design costs does not remain reduced for one year, the reduction is not considered permanent and the provisions of this paragraph do not apply.

05 NET OPERATING LOSS CARRYOVERS AND NET OPERATING LOSSES.

No part of any (consolidated or separate) net operating loss (NOL) carryover available at the beginning of the year of change may be used as an offset against the portion of the positive section 481(a) adjustment taken into account in the year of change. That is, the NOL carryover available at the beginning of the year of change may be offset only against income (other than the section 481(a) adjustment) generated in the year of change. This condition does not apply to years subsequent to the year of change. Any portion of the positive section 481(a) adjustment attributable to the year of change may be offset against any NOL otherwise incurred in the year of change as well as against any future NOL carryback under section 172(b) of the Code.

06 CREDIT CARRYOVER.

No part of any (consolidated or separate) credit carryover available at the beginning of the year of change may be used to reduce the federal income tax liability resulting from, or attributable to, the inclusion in income of a portion of the section 481(a) adjustment in the year of change.

SEC. 7. COMPLIANCE WITH CONDITIONS

A taxpayer making a change in method of accounting from currently deducting package design costs to capitalizing such costs without complying with all the conditions of this revenue procedure has made a change in method of accounting without obtaining the consent of the Commissioner that is required under section 446(e) of the Code.

SEC. 8. MANNER OF EFFECTING THE CHANGE

01 A taxpayer applying for a change in method of accounting pursuant to this revenue procedure must complete and file a current Form 3115 in duplicate.

(1) The original shall be attached to the taxpayer's timely filed (determined with regard to extensions) federal income tax return for the year of change.

(2) A copy of the Form 3115 shall be filed with the National Office addressed to the Commissioner of Internal Revenue, P.O. Box 7616, Benjamin Franklin Station, Washington, D.C. 20044, (a) within 270 days after the beginning of the tax year of change or (b) if later, on or before September 2, 1989, which is 180 days after the publication of this revenue procedure in the Internal Revenue Bulletin. If the taxpayer is described in section 4.02(1) through (3) of this revenue procedure (concerning taxpayers that must obtain special consent in order to use this revenue procedure), then "October 2, 1989" shall be substituted in the prior sentence in lieu of "September 2, 1989". No user fee is required for an application filed under this revenue procedure.

02 In addition to including all of the information required on the Form 3115, the taxpayer must: (1) state that it agrees to all of the conditions of Rev. Proc. 89-16 and that it proposes to take the section 481(a) adjustment into account over the appropriate period required by section 6.02(1); and (2) indicate the period over which the section 481(a) adjustment will be taken into account and the basis for such conclusion. If the Service finds that the taxpayer does not qualify for the change in method of accounting under this revenue procedure, the National Office or the district director will so advise the taxpayer.

03 In order to assist in the processing of these changes in method of accounting and to insure proper handling, reference to this revenue procedure shall be made a part of the Form 3115 by either typing or legibly printing the following statement at the top of page 1 of Form 3115: "FILED UNDER REV. PROC. 89-16."

04 The signature of the person requesting the change in method of accounting and authorized to sign the Form 3115 must appear in the space provided for it on the Form 3115. For example, an officer must sign on behalf of a corporation, a general partner on behalf of a partnership, a trustee on behalf of a trust, or the individual taxpayer on behalf of a sole proprietorship. See the signature requirements set forth in the General Instructions attached to a current Form 3115 for those who are to sign.

05 If the taxpayer is a member of an affiliated group that has elected to file a consolidated federal income tax return, a Form 3115 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.

06 If an agent is authorized to represent the taxpayer before the Service, to receive the original or copy of correspondence concerning the request, or to perform any other act(s) regarding the application on behalf of the taxpayer, a power of attorney reflecting such authorization(s) must be attached to the application. A taxpayer's representative without a power of attorney to represent the taxpayer as indicated in this subsection will not be given any information regarding the application.

07 For early applications, except as stated below, see section 5.03 of Rev. Proc. 84-74. The statement (described in section 8.02 of this revenue procedure) to be typed or legibly printed at the top of page 1 of the Form 3115 should read: "EARLY APPLICATION FILED UNDER REV. PROC. 89-16." Within the first 270 days after the beginning of the year of change, the taxpayer must file with the National Office a copy of a complete and perfected Form 3115. The original of the complete and perfected Form 3115 is to be attached to the taxpayer's timely filed (determined with regard to extensions) federal income tax return for the year of change. Unlike the early application procedure under Rev. Proc. 84-74, the taxpayer will not be notified during the 270-day period if the early application has not been perfected.

SEC 9. INQUIRIES

Inquiries regarding this revenue procedure may be addressed to the Commissioner of Internal Revenue, CC:C:4, 1111 Constitution Avenue, N.W., Washington, D.C. 20224.

SEC. 10. EFFECTIVE DATE

This revenue procedure is effective March 6, 1989, the date of its publication. Any request for change in method of accounting filed under the provisions of Rev. Proc. 84-74 that qualifies under this revenue procedure and is received in the National Office after the effective date will be returned to the taxpayer. Any taxpayer that has timely filed a Form 3115 under Rev. Proc. 84-74 with the National Office prior to the effective date of this revenue procedure and that has not filed its federal income tax return for the year of change may use the automatic provisions of this revenue procedure if such taxpayer otherwise qualifies under this revenue procedure and will be notified to this effect by the National Office.

DRAFTING INFORMATION

The principal author of this revenue procedure is Robert Testoff of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this revenue procedure contact Mr. Testoff on (202) 566-4196 (not a toll-free call).