Taxpayers that engaged in transactions under §381(a), including tax-free liquidations under §332 and certain tax-free reorganizations under §361, previously could not change their methods of accounting for the year of the transaction using the automatic consent procedures under Rev. Proc. 2011-14, 2011-1 C.B. 330. (See "Navigating the Accounting Method Change Landscape—The New §381 Regulations and Other Developments" for a full discussion of accounting method change issues.) Additionally, taxpayers that were under examination by the Internal Revenue Service (IRS) previously could not seek under either the automatic consent procedures or the advance consent procedures of Rev. Proc. 97-27, 1997-1 C.B. 680, to change to an accounting method other than the principal or carryover methods required under the §381 regulations. Because the methods taxpayers otherwise are required to use under §381 regulations might not be optimal or even permitted, however, such prohibitions on taxpayers create a burden for taxpayers and the IRS.
Consequently, on September 4, 2012, the U.S. Department of the Treasury and the IRS published Rev. Proc. 2012-39, 2012-41 I.R.B., which removes those limitations for taxpayers engaging in a §381(a) transaction on or after August 31, 2011. Therefore, taxpayers that otherwise qualify to use the automatic change procedures may do so now, even if they engage in a §381(a) transaction during the proposed year of change. Additionally, a taxpayer that is under examination that does not want to use the principal or carryover method required under §381 regulations may now seek to change to a different method under the automatic or advance consent procedures, as appropriate (although the "audit protection" that ordinarily would prevent the IRS from making the change in an earlier year does not apply if the IRS already has raised the issue).
Rev. Proc. 2012-39 specifically notes that it does not "modify, amend, or in any other way alter, any change to the principal method" under the §381 regulations. Thus, a taxpayer engaging in a §381(a) transaction does not need to seek or obtain under either the automatic or advance consent procedures the IRS's consent to use the principal method. Instead, the taxpayer simply needs to follow the procedures under the §381 regulations. Of course, if the principal method is not a permitted method, the taxpayer must request under either the automatic or advance consent procedure, as appropriate, the IRS's consent to change to a permitted method.
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