Source: https://www.federalregister.gov/documents/2018/10/15/2018-22025/removal-of-regulations-on-advance-payments-for-goods-and-long-term-contracts
Timestamp: 2018-12-17 03:10:08
Document Index: 52467819

Matched Legal Cases: ['§\u20091', 'art 1', '§\u20091', '§\u20091', '§\u20091', '§\u20091', '§\u20091', '§\u20091', '§\u20091', '§\u2009601', '§\u20091', '§\u20091', '§\u20091', '§\u20091', '§\u20091', '§\u20091', '§\u20091']

Federal Register :: Removal of Regulations on Advance Payments for Goods and Long-Term Contracts
A Proposed Rule by the Internal Revenue Service on 10/15/2018
This document has a comment period that ends in 29 days. (01/14/2019) Submit a formal comment
83 FR 51904
1545-BO66
https://www.federalregister.gov/d/2018-22025 https://www.federalregister.gov/d/2018-22025
Send submissions to: CC:PA: LPD:PR (REG-104872-18), Room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-104872-18), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, or sent electronically, via the Federal eRulemaking Portal at www.regulations.gov (IRS REG-104872-18).
This document proposes to remove § 1.451-5 of the Income Tax Regulations (26 CFR part 1), and its cross-references, relating to the treatment of advance payments for goods and long-term contracts under section 451 of the Internal Revenue Code (Code).
In general, section 451 provides that the amount of any item of gross income is included in gross income for the Start Printed Page 51905taxable year in which it is received by the taxpayer, unless, under the method of accounting used in computing taxable income, the amount is to be properly accounted for as of a different period.
Under § 1.451-1, accrual method taxpayers generally include items of income in the taxable year when all the events have occurred that fix the right to receive the income and the amount of the income can be determined with reasonable accuracy (the “all events” test).
Section 1.451-5 generally allows accrual method taxpayers to defer the inclusion of income for advance payments for goods until the taxable year in which they are properly included in income under the taxpayer's method of accounting for federal income tax purposes if that method results in the advance payments being included in gross income no later than when the advance payments are recognized in gross receipts under the taxpayer's method of accounting for financial reporting purposes.
Section 13221 of “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” Public Law 115-97 (the “Act”), amended section 451 by redesignating section 451(b) through (i) as (d) through (k) and adding new subsections (b) and (c).
New section 451(b) generally requires that for accrual method taxpayers the all events test with respect to a particular item of gross income must not be treated as met any later than when the item is taken into account as revenue in a taxpayer's applicable financial statement, or such other financial statement as the Secretary may prescribe.
New section 451(c) generally requires an accrual method taxpayer that receives any advance payment described in section 451(c)(4) during the taxable year to include the advance payment in income in the taxable year of receipt or make an election to: (1) Include any portion of the advance payment in income in the taxable year of receipt to the extent required under new section 451(b); and (2) include the remaining portion of the advance payment in income in the following taxable year. The election to defer advance payments of goods and services under new section 451(c) is similar to the rules regarding the treatment of advance payments for goods, services, and other specified items provided in Revenue Procedure 2004-34, 2004-1 CB 991. See H.R. Rep. No. 115-466, at 429 (2017) (Conf. Rep.).
New section 451(c) and its election to defer advance payments override the deferral method provided by § 1.451-5. See H.R. Rep. No. 115-466, at 429 n.880 (2017) (Conf. Rep.). Accordingly, the Treasury Department and the IRS propose to remove § 1.451-5 and its cross references. Removing § 1.451-5 also will ensure that the new deferral rules of section 451(c) apply uniformly and consistently to all taxpayers as well as simplify tax administration.
The rules of section 446 regarding changes in methods of accounting will apply to taxpayers changing a method of accounting for advance payments from a method described in § 1.451-5 to another method. The Treasury Department and the IRS request comments on whether any changes to existing procedural rules under section 446 for changes in methods of accounting are necessary or desirable as a result of removing § 1.451-5.
Before these proposed regulations are adopted as final regulations, consideration will be given to any comments that are timely submitted to the IRS in the preamble under the ADDRESSES section. All comments submitted will be made available at www.regulations.gov for public inspection and copying.
Par. 2. Section 1.381(c)(4)-1 is amended by revising the second sentence of paragraph (b)(2) to read as follows:
(2) * * * The installment method under section 453, the mark-to-market method under section 475, the amortization of bond premium under section 171, the percentage of completion method under section 460, the recurring item exception of § 1.461-5, and the income deferral method under section 455 are examples of special methods of accounting. * * *
Par. 3. Section 1.382-7 is amended by revising the third sentence of paragraph (a) to read as follows:
Built in gains and losses.
(a) * * * Examples to which this paragraph (a) will apply include, but are not limited to, income received prior to the change date that is deferred under section 455 or Rev. Proc. 2004-34 (2004-1 CB 991 (June 1, 2004)) (or any successor revenue procedure) (see § 601.601(d)(2)(ii)(b)).
Par. 4. Section 1.451-5 is removed.
§ 1.861-18
Par. 5. Section 1.861-18 is amended in paragraph (i)(4) by:Start Printed Page 51906
§ 1.6655-0
Par. 6. Section 1.6655-0 is amended by removing the entries for § 1.6655-2(f)(3)(i) and (f)(3)(i)(A) and redesignating the entry for § 1.6655-2(f)(3)(i)(B) as § 1.6655-2(f)(3)(i).
Par. 7. Section 1.6655-2 is amended by removing paragraphs (f)(3)(i) heading and (f)(3)(i)(A) and redesignating (f)(3)(i)(B) as (f)(3)(i).
Par. 8. Section 1.6655-6 is amended in paragraph (c) by:
§ 1.6655-6
Par. 10. Section 602.101 is amended by removing the entry for § 1.451-5 and the parenthetical authority citation at the end of the section.
[FR Doc. 2018-22025 Filed 10-12-18; 8:45 am]