- 33 -
concluded erroneously interpreted the statute, he was entitled to
alter his interpretation of the statute on further reflection.
Rust v. Sullivan, 500 U.S. 173, 186 (1991); Chevron U.S.A., Inc.
v. Natural Res. Def. Council, Inc., supra at 862; Peoples Fed.
Sav. & Loan Association v. Commissioner, supra at 302.
The Secretary's rationale for the amendment to the
nonaccrual-experience formula is revealed in the preamble to the
Secretary's Decision announcing the modification:
Under the nonaccrual-experience method of accounting,
the portion of a receivable that is considered uncollectible
and not required to be accrued is the product of the
receivable and a fraction representing the taxpayer's bad
debt experience. The numerator of the fraction is the
taxpayer's bad debts for the taxpayer's current and five
preceding taxable years, and the denominator of the fraction
is the taxpayer's accounts receivable for the same six-year
period. The Internal Revenue Service has received questions
from taxpayers as to whether the denominator of the fraction
is determined on the basis of (i) total accounts receivable
earned throughout the six-year period (i.e., the total
amount of sales resulting in accounts receivable throughout
the period) or (ii) yearend balances of the accounts
receivable over the six-year period. These regulations
provide that the denominator is based on total accounts
receivable earned throughout the period ending at the close
of the six-year period. This interpretation is consistent
with the legislative history of the Act which provides that
"[t]he amount of billings that, on the basis of experience,
will not be collected is equal to the total amount billed,
multiplied by a fraction whose numerator is the total amount
of such receivables which were billed and determined not to
be collectible within the most recent five taxable years of
the taxpayer, and whose denominator is the total of such
amounts billed within the same five year period." H.R. Rep.
No. 99-426, 99th Cong., 1st Sess. 606 (1985). [T.D. 8194,
1988-1 C.B. 186.15]
15 Additionally, as stated above, petitioners agree that the
relevant legislative history is ambiguous.
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