The 2017 tax reform reconciliation act (the Act), enacted December 22, 2017, made significant changes to Section 451. The amendments include a new Section 451(c) that allows accrual-method taxpayers to elect a limited deferral of the inclusion of income associated with certain advance payments. The rules in new Section 451(c) largely track the historical approach in Rev. Proc. 2004-34.
In Notice 2018-35 (the Notice), Treasury and the IRS recently provided that taxpayers receiving advance payments may continue to rely on the provisions of Rev. Proc. 2004-34 until future guidance is issued to address new Section 451(c).
Taxpayers receiving advance payments may continue to rely on the provisions of Rev. Proc. 2004-34 until future guidance is issued by Treasury and the IRS to address new Section 451(c). Given the significance of the Section 451 changes, many issues beyond those described above likely will arise as companies begin applying the new provisions of Section 451. The Notice therefore requests interested parties to provide comments regarding advance payments by May 14, 2018, and specifies seven issues under new Section 451(c) on which the IRS seeks comments.