Rev. Rul. 79-139

ISSUE

Is the reporting of certain financial data to the Council on Wage and Price Stability on a basis other than the last-in, first-out (LIFO) method of inventory valuation by a taxpayer that uses the LIFO method for federal income tax purposes, a violation of the conformity requirements of section 472(c) and (e)(2) of the Internal Revenue Code of 1954?

FACTS The taxpayer, a corporation, files its federal income tax return on a calendar year basis using an accrual method of accounting. The taxpayer elected to use the LIFO method of valuing its inventories for federal income tax purposes for taxable year 1974 and has used the LIFO method in each subsequent taxable year, including the current year. For taxable year 1978, the taxpayer provided certain data to the Council on Wage and Price Stability (the Council), concerning price changes, profit margins, and gross margins. This data was submitted in accordance with Part 706 of the Council's procedural rules (6 CFR 706, 44 FR 1346, January 4, 1979).

In providing data to the Council, the taxpayer elected to use a method of inventory valuation other than LIFO. The Council does not require the use of the LIFO method with respect to data submitted to the Council even if the LIFO method is used for federal income tax purposes.

The taxpayer did not use the data submitted to the Council to report to its shareholders, for credit purposes, or for any other purpose. In addition, under section 4 of the Council on Wage and Price Stability Act, 12 U.S.C. section 1904 note (Supp. IV 1974), it has been determined that financial data submitted to the Council is considered confidential and therefore the use of and access to such data are limited to officers, members, and employees of the Council in the discharge of their official duties.

LAW AND ANALYSIS

Section 472(c) of the Code provides that the LIFO method may only be used if the taxpayer establishes to the satisfaction of the Secretary that it has used no method other than the LIFO method in valuing inventory to determine income, profit, or loss of the first taxable year for which the method is used, in reports or statements for such year to shareholders, proprietors, partners, or for credit purposes. Section 472(e)(2) imposes similar restrictions for subsequent taxable years.

The provisions of section 472(c) and (e)(2) of the Code are not intended to restrict the furnishing of financial information to state or federal governmental agencies for official purposes, provided that this information is not directly or indirectly available to shareholders, partners, proprietors, or beneficiaries of the taxpayer, or used for credit purposes. Under the Council on Wage and Price Stability Act, the information submitted to the Council is available only to Council personnel in the performance of their official duties.

HOLDING

The reporting of certain financial data to the Council on Wage and Price Stability on a basis other than the LIFO method of inventory valuation by a taxpayer that uses the LIFO method for federal income tax purposes is not a violation of the conformity requirements of section 472(c) and (e)(2) of the Code.

Rev. Proc. 75-30, 1975-1 C.B. 756, Rev. Proc. 75-36, 1975-2 C.B. 565, and Rev. Proc. 76-36, 1976-2 C.B. 659, provide that the furnishing of certain information to the Federal Trade Commission, the Bureau of the Census, or the Bureau of Economic Affairs under circumstances described in those Revenue Procedures, would not result in the termination of the taxpayer's LIFO election. Rev. Procs. 75-30, 75-36, and 76-36 were not intended to imply that the furnishing of this information would be a violation of the conformity requirements of section 472(c) and (e)(2) of the Code.