Internal Revenue Bulletin 2022-7 (PDF rendition): IRS Revenue Procedures

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Bulletin No. 2022–7
February 14, 2022
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
Rev. Proc. 2022-12, page 494.
This revenue procedure provides simplified electronic
and paper filing procedures for individuals not other-
wise required to file 2021 Federal income tax returns to
facilitate their ability to claim the child tax credit, 2021
recovery rebate credit, and earned income credit. In ad-
dition, this revenue procedure provides a special elec-
tronic filing procedure for individuals with zero adjusted
gross income that permits them to file complete 2021
Federal income tax returns electronically.
EMPLOYEE PLANS
Notice 2022-8, page 491.
The notice sets forth the 2022 Cumulative List of
Changes in Section 403(b) Requirements for Sec-
tion 403(b) Pre-approved Plans (2022 Cumulative
List). The 2022 Cumulative List will assist providers
of section 403(b) pre-approved plans applying to
the IRS for opinion letters for the second remedial
amendment cycle (Cycle 2) under the IRS’s section
403(b) pre-approved plan program. The 2022 Cumu-
lative List identifies changes in the requirements of
section 403(b) that will be taken into account by the
IRS with respect to a plan document submitted to the
IRS for Cycle 2 and that were not taken into account
during the first remedial amendment cycle.
INCOME TAX
REG-118250-20, page 753.
This document contains proposed regulations re-
garding the treatment of domestic partnerships and
S corporations that own stock of passive foreign
investment companies and their domestic partners
and shareholders. These proposed regulations also
provide guidance regarding the determination of the
controlling domestic shareholders of foreign corpo-
rations, the owner of a controlled foreign corporation
or qualified electing fund that makes an election un-
der section 1411, the treatment of S corporations
with accumulated earnings and profits under sub-
part F of part III of subchapter N of chapter 1 of the
Internal Revenue Code, and the determination and
inclusion of related person insurance income under
section 953(c). These proposed regulations affect
United States persons that own, directly or indirectly,
stock in certain foreign corporations.
Rev. Proc. 2022-14, page 502.
This revenue procedure provides the List of Automat-
ic Changes to which the automatic change proce-
dures in Rev. Proc. 2015-13, 2015-5 I.R.B. 419, as
clarified and modified, apply.
T.D. 9960, page 481.
This document contains final regulations under sec-
tion 958 regarding the treatment of domestic part-
nerships for purposes of determining amounts includ-
ed in the gross income of their partners with respect
to foreign corporations. The final regulations affect
United States persons that own stock of foreign cor-
porations through domestic partnerships and domes-
tic partnerships that are United States shareholders
of foreign corporations.
Finding Lists begin on page ii.

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Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing of-
ficial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
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procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
February 14, 2022 Bulletin No. 2022–7

Part I
26 CFR 1.958-1: Direct and indirect ownership
of stock
T.D. 9960
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Guidance under Section
958 on Determining Stock
Ownership
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations regarding the treatment of
domestic partnerships for purposes of de-
termining amounts included in the gross
income of their partners with respect to
foreign corporations. The final regulations
affect United States persons that own
stock of foreign corporations through do-
mestic partnerships and domestic partner-
ships that are United States shareholders
of foreign corporations.
DATES: Effective date: These regulations
are effective on January 25, 2022.
Applicability dates: For dates of applica-
bility, see §§1.956-1(g)(4) and 1.958-1(d)
(4).
FOR FURTHER INFORMATION
CONTACT: Edward J. Tracy at (202)
317-6934 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On October 10, 2018, the Department
of the Treasury (“Treasury Department”)
and the IRS published proposed regula-
tions (REG-104390-18) under sections
951, 951A, 1502, and 6038 in the Feder-
al Register (83 FR 51072) that included
guidance with respect to the treatment of
domestic partnerships that own stock in
controlled foreign corporations, as defined
in section 957 (“CFCs”), for purposes of
section 951A (the “2018 proposed regu-
lations”). The 2018 proposed regulations
set forth a “hybrid approach” that gener-
ally treated a domestic partnership that is
a United States shareholder, as defined in
section 951(b) (“U.S. shareholder”), with
respect to a CFC (“U.S. shareholder part-
nership”) as an entity with respect to its
partners that are not U.S. shareholders
(“non-U.S. shareholder partners”) but as
an aggregate of its partners with respect
to its partners that are U.S. shareholders
(“U.S. shareholder partners”).
On June 21, 2019, the Treasury De-
partment and the IRS published final reg-
ulations (TD 9866) in the Federal Regis-
ter (84 FR 29288, as corrected at 84 FR
44223, 84 FR 44693, and 84 FR 53052)
under sections 951, 951A, 1502, and 6038
that include guidance with respect to the
treatment of domestic partnerships that
own stock in CFCs for purposes of sec-
tion 951A (the “final section 951A regula-
tions”). Instead of the “hybrid approach”
described in the 2018 proposed regula-
tions, the final section 951A regulations
generally treat a domestic partnership
as an aggregate of all of its partners for
purposes of computing income inclusions
under section 951A (and other provisions
that apply by reference to section 951A).
§1.951A-1(e)(1). That is, under the final
section 951A regulations, partners do not
take into account a distributive share of
the partnership’s section 951A inclusion
with respect to the partnership-owned
CFCs but instead are treated as propor-
tionately owning the stock of the part-
nership-owned CFCs. See id. Thus, as in
the case of foreign partnerships, income
inclusions under section 951A are deter-
mined directly by U.S. shareholder part-
ners of a domestic partnership that owns
CFCs. The final section 951A regulations
apply to taxable years of foreign corpora-
tions beginning after December 31, 2017,
and to taxable years of U.S. shareholders
in which or with which those taxable years
of foreign corporations end. §1.951A-7.
Concurrent with the issuance of the
final section 951A regulations, the Trea-
sury Department and the IRS published
proposed regulations (REG-101828-19)
under sections 951, 951A, 954, 956, 958,
and 1502 in the Federal Register (84
FR 29114, as corrected at 84 FR 37807)
(the “2019 proposed regulations”). Con-
sistent with the approach adopted in the
final section 951A regulations, the 2019
proposed regulations generally extended
the treatment of domestic partnerships as
aggregates of their partners for purposes
of determining income inclusions under
section 951 and for purposes of provisions
that apply by reference to section 951.
Proposed §1.958-1(d).
On August 22, 2019, the Treasury De-
partment and the IRS published Notice
2019-46, 2019-37 I.R.B. 695, which an-
nounced the intent to issue regulations
that would permit, in certain cases, the
“hybrid approach” described in the 2018
proposed regulations to be applied to do-
mestic partnerships or S corporations for
taxable years ending before June 22, 2019.
On July 23, 2020, the Treasury Depart-
ment and the IRS published final regu-
lations (TD 9902) in the Federal Regis-
ter (85 FR 44620, as corrected at 85 FR
64040 and 85 FR 79853) related to the
portion of the 2019 proposed regulations
under sections 951A and 954 addressing
the treatment of income subject to a high
rate of foreign tax.
A notice of proposed rulemaking pub-
lished in the Proposed Rules section of
this issue of the Federal Register (REG-
118250-20) provides guidance on the
treatment of domestic partnerships and S
corporations that own passive foreign in-
vestment companies (as defined in section
1297(a)) (“PFICs”) and their domestic
partners and shareholders, as well as on
other PFIC and CFC-related issues (the
“2022 proposed PFIC regulations”).
This rulemaking finalizes the portion
of the 2019 proposed regulations that
generally treat domestic partnerships as
aggregates of their partners for purposes
of determining income inclusions under
section 951 and for purposes of provisions
that apply specifically by reference to sec-
tion 951 (the “final regulations”).
In the 2019 proposed regulations, the
Treasury Department and the IRS request-
ed comments on the other provisions in
Bulletin No. 2022–7 481 February 14, 2022

the Internal Revenue Code (“Code”) that
apply by reference to ownership within
the meaning of section 958(a) for which
aggregate treatment for domestic part-
nerships would be appropriate. The 2019
proposed regulations also requested
comments on the aggregate treatment of
domestic partnerships in specific areas,
including for purposes of determining
the controlling domestic shareholders of
a CFC and for purposes of applying the
PFIC regime. The Treasury Department
and the IRS received three comments in
response to the 2019 proposed regula-
tions, each of which were considered in
these final regulations. No public hearing
on the 2019 proposed regulations was held
because there were no requests to speak.
Summary of Comments and
Explanation of Revisions
Comments outside the scope of this
rulemaking are generally not addressed
but may be considered in connection with
future guidance projects. All written com-
ments received in response to the pro-
posed regulations that are being finalized
in this rulemaking are available at www.
regulations.gov or upon request.
I. Application of Section 956
Subject to certain exceptions, the 2019
proposed regulations treated domestic
partnerships as aggregates of their part-
ners for purposes of sections 951 and 951A
and for purposes of any other provision
that applies by reference to section 951
or section 951A. Proposed §1.958-1(d)
(1) and (2). Although section 951(a)(1)
(B) requires a U.S. shareholder of a CFC
to include in gross income the amount de-
termined under section 956 with respect
to the U.S. shareholder (to the extent not
excluded from gross income under section
959(a)(2)), section 956 itself does not spe-
cifically apply by reference to section 951
(or section 951A). Accordingly, the final
regulations clarify that aggregate treat-
ment of domestic partnerships applies for
purposes of section 956(a) and any provi-
sions that specifically apply by reference
to section 956(a) (such as §1.956-1(a)(2))
to ensure that a U.S shareholder partner
determines a section 956 amount with re-
spect to CFCs owned through a domestic
partnership as part of the U.S. shareholder
partner’s section 951(a) inclusion. §1.958-
1(d)(1) and (d)(3)(iii). Aggregate treat-
ment does not apply, however, for purpos-
es of section 956(c) or (d) (or provisions
that apply by reference to these sections)
because treating a domestic partnership
as an entity separate from its partners is
more appropriate to carry out the purposes
of these provisions. See, e.g., §1.956-4(e)
(providing rules concerning the applica-
tion of section 956 to, for example, obli-
gations of partnerships). As discussed in
the preamble to the 2019 proposed regu-
lations, the treatment of a partnership as
an entity or an aggregate is determined
in part based on the policies underlying
the specific provision at issue. See 84 FR
29115-29116.
To avoid similar confusion regarding
the scope of §1.958-1(d), the final regu-
lations replace the language “any other
provision that applies by reference” to
section 951 or section 951A in proposed
§1.958-1(d)(1) with “any provision that
specifically applies by reference” to
section 951, section 951A, or section
956(a). The addition of the word “specif-
ically” is intended to clarify that the rule
in §1.958-1(d) applies only to the par-
ticular provision within a Code section
or regulation that applies specifically by
reference to section 951, section 951A,
or section 956(a) rather than the section
or regulation in its entirety. Additionally,
the final regulations clarify that the rule
in §1.958-1(d)(1) applies for purposes
of any provision that specifically applies
by reference to regulations issued un-
der or relating to the sections identified
in §1.958-1(d)(1). Corresponding revi-
sions are made to the cross references to
§1.958-1(d) provided in §§1.951-1(a)(4)
and 1.951A-1(e).
Certain existing final regulations treat
domestic partnerships as entities separate
from their partners for purposes of section
956. §1.956-1(a)(2)(i) and (iii) and (a)
(3)(iv). Because this treatment is incon-
sistent with the aggregate approach, the
2019 proposed regulations modified the
applicability date of these provisions so
they would cease to apply once the 2019
proposed regulations were finalized. Pro-
posed §1.956-1(g)(4). Rather than modi-
fying the applicability dates as was done
in the 2019 proposed regulations, how-
ever, the final regulations simply remove
these provisions. Accordingly, because
those provisions are being removed as
part of the final regulations, the proposed
applicability date provisions under section
956 are no longer relevant and are not be-
ing finalized.
II. Passive Foreign Investment
Companies
The preamble to the 2019 proposed
regulations requested comments with
respect to the application of the PFIC
regime to domestic partnerships that di-
rectly or indirectly own PFIC stock, par-
ticularly with respect to whether elections
and income inclusions are more appropri-
ate at the level of the domestic partnership
or at the level of its partners. 84 FR 29120.
Comments were received regarding PFIC
elections and inclusions, the CFC over-
lap rule in section 1297(d), and other PF-
IC-related issues involving domestic part-
nerships. These comments are addressed
in the 2022 proposed PFIC regulations in
order to provide taxpayers additional op-
portunity to comment.
III. Related Person Insurance Income
Section 952(a) provides that subpart F
income includes insurance income, as de-
fined in section 953. Under section 953(c)
(2), related person insurance income
(“RPII”) is any insurance income (as de-
fined in section 953(a)) attributable to a
policy of insurance or reinsurance that di-
rectly or indirectly insures a United States
shareholder (as defined in section 953(c)
(1)(A)) of the controlled foreign corpora-
tion (as defined in section 953(c)(1)(B)),
or a person related to the United States
shareholder.
A comment requested that aggregate
treatment be applied for purposes of de-
termining RPII such that there would only
be RPII to the extent of the domestic part-
nership’s domestic partners, which is the
same result as for foreign partnerships.
The Treasury Department and the IRS
agree that aggregate principles should ap-
ply for purposes of section 953(c). How-
ever, in order to provide taxpayers an
additional opportunity to comment, this
comment is addressed in the 2022 pro-
posed PFIC regulations.
February 14, 2022 482 Bulletin No. 2022–7

Bulletin No. 2022–7 483 February 14, 2022
IV. Controlling Domestic Shareholders
The “controlling domestic sharehold-
ers” of a CFC make certain elections with
respect to the CFC, such as electing the
method of calculating the CFC’s earn-
ings and profits under section 964(a) and
electing to exclude tentative gross tested
income items from gross tested income
under section 951A(c)(2)(A)(i)(III). See
§§1.964-1(c)(3) and 1.951A-2(c)(7)(viii).
Under §1.964-1(c)(5)(i), the controlling
domestic shareholders of a CFC are the
U.S. shareholders that, in the aggre-
gate, own (within the meaning of section
958(a)) more than 50 percent of the total
combined voting power of all classes of
stock of the CFC entitled to vote and that
undertake to act on the CFC’s behalf. If
the ownership requirement is not satisfied,
the controlling domestic shareholders of
the CFC are all of the U.S. shareholders
that own (within the meaning of section
958(a)) stock of the CFC. Id.
With respect to U.S. shareholder part-
nerships, the 2019 proposed regulations
did not apply aggregate treatment for pur-
poses of determining a CFC’s controlling
domestic shareholders, and a domestic
partnership could qualify as a controlling
domestic shareholder of the CFC. Pro-
posed §1.958-1(d)(2). The preamble to
the 2019 proposed regulations requested
comments on whether aggregate treat-
ment should apply in this context so that
some or all of the U.S. shareholder part-
ners, rather than the partnership, would
make elections applicable to the CFC for
purposes of sections 951 and 951A. 84 FR
29119. One comment was received that
recommended, on balance, that aggregate
treatment should not apply for purposes
of determining the controlling domestic
shareholders of CFCs under §1.964-1(c)
(5)(i).
The final regulations do not extend
aggregate treatment for determining the
controlling domestic shareholders of a
CFC under §1.964-1(c)(5)(i). However,
the Treasury Department and the IRS be-
lieve that aggregate treatment should ap-
ply to domestic partnerships for purposes
of determining the controlling domestic
shareholders of a CFC under §1.964-1(c)
(5). Thus, the 2022 proposed PFIC regula-
tions revise §1.958-1(d)(2) to provide that
aggregate treatment applies for purposes
of determining the controlling domestic
shareholders of a CFC. This change is
included in the 2022 proposed PFIC reg-
ulations to give taxpayers an additional
opportunity to comment.
V. Previously Taxed Earnings and Profits
and Basis Adjustments
The preamble to the 2019 proposed
regulations noted that, historically, domes-
tic partnerships had been treated as own-
ing stock within the meaning of section
958(a) for purposes of determining their
section 951 inclusions, and, thus, previ-
ously taxed earnings and profits (“PTEP”)
accounts under section 959 were main-
tained, and related basis adjustments un-
der section 961 were made, at the part-
nership level. 84 FR 29119. As a result,
comments were requested on appropriate
rules, such as necessary adjustments to
PTEP and related basis amounts, for the
transition to the aggregate approach to
domestic partnerships described in the
2019 proposed regulations once those reg-
ulations were finalized. 84 FR 29119-20.
These issues, and the comments received,
are beyond the scope of this rulemaking
and therefore are not addressed herein;
however, the Treasury Department and
the IRS intend to address these comments
in a separate guidance project involving
PTEP (the “proposed PTEP regulations”).
The proposed PTEP regulations will pro-
vide guidance on a broad range of issues,
such as the maintenance of PTEP accounts
under section 959, the treatment of PTEP
distributions, and basis adjustments un-
der section 961, including with respect to
CFCs held by partnerships.
VI. Application of Section 1248
The preamble to the 2019 proposed
regulations stated that, subject to certain
exceptions, aggregate treatment of domes-
tic partnerships applied only with respect
to sections 951 and 951A, and any provi-
sion that applies by reference to sections
951 and 951A, and, therefore, did not
apply for any other purpose of the Code,
including section 1248. 84 FR 29119.
Comments were received regarding sec-
tion 1248, including with respect to dispo-
sitions by domestic partnerships of CFC
stock, dispositions of interests in domestic
partnerships that own CFC stock, and the
interaction between section 1248 and sec-
tion 751.
The final regulations do not address
these comments, which are beyond the
scope of this rulemaking. The Treasury
Department and the IRS recognize, how-
ever, that section 1248 applies in part by
reference to section 951 and section 951A
(in the latter case, as a result of section
951A(f)(1)(A)). See section 1248(b)(1)
(A) and (d)(1). Therefore, the final regu-
lations clarify that the aggregate approach
set forth in §1.958-1(d)(1) does not apply
for purposes of section 1248, which is
consistent with the intended scope of the
rules as described in the preamble to the
2019 proposed regulations. §1.958-1(d)
(2)(iv). The final regulations do not affect
the application of §1.1248-1(a)(4). Future
guidance, including the proposed PTEP
regulations, may address the application
of section 1248(b)(1)(A) and (d)(1) to
transactions involving a domestic partner-
ship’s sale of a CFC, such as the transac-
tion described in Rev. Rul. 69-124, 1969-1
C.B. 203.
VII. Non-Grantor Trusts and Estates
The preamble to the 2019 proposed
regulations requested comments on
whether aggregate treatment should be ex-
tended to other pass-through entities such
as certain trusts or estates. In response to
this request, one comment recommended
that aggregate treatment not be extended
to domestic non-grantor trusts and domes-
tic estates, noting that there is no corollary
authority to section 7701(a)(4) (autho-
rizing the treatment of domestic partner-
ships as not domestic when the context re-
quires) which would permit the Treasury
Department and the IRS to treat domestic
non-grantor trusts and domestic estates as
not domestic. The comment further noted
that if the domestic non-grantor trust or
domestic estate had a section 951(a) or
section 951A inclusion but did not dis-
tribute the income to its beneficiaries, the
trust or estate itself would be liable for
tax on that income (unlike a partnership);
thus, two separate taxing regimes could be
necessary if an aggregate approach were
limited to distributed income. Finally, the
comment suggested that identifying U.S.
shareholders of a CFC the stock of which

February 14, 2022 484 Bulletin No. 2022–7
is owned by a domestic non-grantor trust
or a domestic estate would be complex if
the trust or estate had discretionary bene-
ficiaries.
Although aggregate treatment of do-
mestic partnerships for purposes of sec-
tions 951 and 951A (and provisions that
specifically apply by reference to those
sections) is not based on the grant of au-
thority under section 7701(a)(4), the Trea-
sury Department and the IRS nevertheless
agree, for the other reasons stated in the
comment, that aggregate treatment should
not be extended to domestic non-grantor
trusts and domestic estates.
VIII. Other Changes
The final section 951A regulations
generally adopted aggregate treatment of
domestic partnerships for purposes of sec-
tion 951A. §1.951A-1(e). The preamble
to the 2019 proposed regulations noted
that once those regulations were final-
ized, §1.951A-1(e) would be unnecessary
because that rule would be subsumed by
§1.958-1(d). 84 FR 29119. The preamble
to the 2019 proposed regulations further
noted that §1.951-1(h), which treated
certain controlled domestic partnerships
as foreign partnerships for purposes of
determining the stock of a CFC owned
(within the meaning of section 958(a))
by a U.S. person, would similarly be un-
necessary. Id. No comments addressed
those proposed regulations. As a result,
§1.951A-1(e) is amended to remove para-
graphs (e)(1) through (3) and include a
general cross-reference to §1.958-1(d) in
§1.951A-1(e) for the treatment of domes-
tic partnerships for purposes of section
951A. The final regulations also remove
paragraph (h) of §1.951-1.
IX. Applicability Dates
A. Application before finalization date
Proposed §1.958-1(d)(4) provided that
the regulations under section 958 would
apply to taxable years of foreign corpo-
rations beginning on or after the date the
final regulations are published in the Fed-
eral Register (the “finalization date”) and
to taxable years of U.S. persons in which
or with which such taxable years of the
foreign corporations end (the “general
applicability rule”). However, domestic
partnerships could apply the regulations,
when finalized, to taxable years of a for-
eign corporation beginning after Decem-
ber 31, 2017, and to taxable years of the
domestic partnership in which or with
which such taxable years of the foreign
corporation end, subject to the require-
ment that the partnership, its U.S. share-
holder partners, and other related domes-
tic partnerships and their U.S. shareholder
partners consistently apply the regulations
with respect to all foreign corporations
the partnerships own (within the mean-
ing of section 958(a), determined without
regard to proposed §1.958-1(d)(1)) (the
“pre-finalization applicability option”).
Proposed §1.958-1(d)(4). The 2019 pro-
posed regulations also permitted domestic
partnerships, their U.S. shareholder part-
ners, and related domestic partnerships
and their U.S. shareholder partners to rely
on proposed §1.958-1(d)(4), subject to the
same consistency requirement (the “reli-
ance option”). See 84 FR 29119.
One comment made several recom-
mendations with respect to the applicabil-
ity date of proposed §1.958-1(d). First, the
comment suggested that the reference to a
“domestic partnership” in the pre-finaliza-
tion applicability option was inconsistent
with the reference to “U.S. persons” in the
general applicability rule and recommend-
ed that the final regulations be revised to
reference “U.S. person” in both places.
With respect to the consistency require-
ments (including consistency between
years), the comment suggested that U.S.
persons owning stock of a foreign corpo-
ration through a domestic partnership be
allowed to take individual positions as to
whether to apply the pre-finalization ap-
plicability option, subject to all related
partners taking the same position. The
comment noted that an individualized ap
-
proach would allow non-U.S. shareholder
partners to decide whether to be subject to
section 951 inclusions or potentially to be
subject to the PFIC regime during the pe-
riod before the finalization date and would
not materially impact U.S. shareholder
partners.
The reference to “domestic partner-
ships” and their U.S. shareholder partners
in the pre-finalization applicability option
was intentional. Although the general ap-
plicability rule applies to all affected U.S.
persons, certain persons may choose to ap-
ply the regulations before the finalization
date. By limiting this group of persons
to domestic partnerships and their U.S.
shareholder partners (and related domes-
tic partnerships), the rule aims to strike a
balance between identifying a small group
of persons who may be able to coordinate
with respect to the decision to apply the
pre-finalization applicability option ver-
sus all persons that may be affected by
that decision. Accordingly, the suggested
revision to reference “U.S. persons” in the
pre-finalization applicability option is not
adopted.
In addition, the suggested revision
would allow partners to take individual-
ized positions with respect to the pre-fi-
nalization applicability option and could
cause significant administrative, partner-
ship accounting, and reporting difficulties.
For example, if each partner were allowed
to take an individual position on the ap-
plicability date of the regulations, partners
following the general applicability rule
(regardless of the extent of their owner-
ship) might receive a distributive share of
the partnership’s section 951 inclusions
while U.S. shareholder partners applying
the pre-finalization applicability option
have direct section 951 inclusions. The
Treasury Department and the IRS believe
that consistency among all affected parties
in applying the pre-finalization applicabil-
ity option is important for proper adminis-
tration of the regulations. As a result, the
Treasury Department and the IRS have
determined that the difficulty posed by
an individualized approach outweighs the
potential benefit the approach would pro-
vide to a partner, and this comment is not
adopted. The Treasury Department and
the IRS are aware that, given the poten-
tial scope of the consistency requirement,
it may be difficult to meet in more widely
held partnership structures, and thus ap-
plication of the pre-finalization applicabil-
ity option may be limited.
The comment recommended that if
the individualized approach is not adopt-
ed, the final regulations should require
a formal election in order to apply the
pre-finalization applicability option in-
stead of the consistency requirement. The
election would be made only by a domes-
tic partnership and all related domestic
partnerships and would be binding on all

Bulletin No. 2022–7 485 February 14, 2022
domestic partners. The comment asserted
that this approach would clarify the appli-
cation of the pre-finalization applicability
option by avoiding potential uncertainty
as to whether all U.S. shareholder partners
took a consistent position. The comment
further suggested that a partnership-on-
ly election to apply the pre-finalization
applicability option would prevent U.S.
shareholder partners from refusing, with-
out justification, to act in accordance with
the partnership’s election.
The Treasury Department and the
IRS have determined that, although the
consistency requirement among all relat-
ed domestic partnerships and their U.S.
shareholder partners may be difficult to
meet in certain cases, requiring consis-
tency among all persons required to apply
the pre-finalization applicability option is
important for proper administration of the
rules. Absent this requirement, U.S. share-
holder partners could choose not to amend
their returns, and therefore continue to
report under the entity approach, even
though the partnership and other partners
amended their returns and reported under
the aggregate approach pursuant to the
pre-finalization applicability option.
1
In
addition, maintaining the U.S. sharehold-
er consistency requirement minimizes ad-
ministrative, partnership accounting, and
reporting difficulties (for example, in con-
nection with PTEP accounts) that could
arise if a partnership-only election were
adopted and one or more U.S. shareholder
partners chose not to amend their returns
in accordance with the partnership’s elec-
tion. The consistency requirement is also
expected to enhance compliance and ad-
ministration at the U.S. shareholder part-
ner-level with respect to amended returns
(or administrative adjustment requests)
because it requires more coordination be-
tween the partnership and its partners than
a partnership-only election would require.
Under either approach, if a partnership
chooses the pre-finalization applicability
option on an amended return (or by initiat-
ing an administrative adjustment request),
any U.S. shareholder partner would re-
ceive updated information that it no lon-
ger has a distributive share of the partner-
ship’s section 951 inclusions but would
still need to take into account section 951
inclusions directly under the aggregate ap-
proach. Further, the Treasury Department
and the IRS are concerned that the lack of
coordination involved in a partnership-on-
ly election, as opposed to the consistency
requirement, may create uncertainty at the
U.S. shareholder partner level as to wheth-
er the partner merely accounts for the re-
duction in the distributive share from the
partnership or must also directly take into
account income inclusions. Accordingly,
this comment is not adopted.
The comment also requested that the
final regulations clarify whether the pre-
finalization applicability option is avail-
able if all required parties file amended
returns. The Treasury Department and the
IRS confirm that, subject to the consisten-
cy requirement, a domestic partnership
may apply the regulations on an amended
return or through initiating an adminis-
trative adjustment request under section
6227. In instances where a domestic part-
nership files an amended return (that is,
in the case of partnerships not subject to
sections 6221 through 6241), its partners
(both U.S. shareholder partners and non-
U.S. shareholder partners) will likely need
to also file amended returns in order to sat-
isfy the consistency requirement.
Finally, the comment expressed con-
cern for cases in which a domestic part-
nership filed its income tax return for
calendar year 2018 before the issuance of
the 2019 proposed regulations reporting
section 951 inclusions by the partnership
in accordance with then current law (in-
cluding issuing Schedules K-1 to its part-
ners) but subsequently filed a superseding
original or amended return for such tax-
able year relying on the 2019 proposed
regulations. In that case, the comment rec-
ommended that the ability to rely on the
2019 proposed regulations should not be
contingent upon all U.S. shareholder part-
ners filing superseding or amended returns
on the same basis and that all partners
should be permitted to decide separately
whether to file a superseding or amended
return to rely on the proposed regulations.
The comment further recommended that,
if a non-U.S. shareholder partner decides
to rely on the proposed regulations and
the foreign corporation is also a PFIC, the
mechanism for the non-U.S. shareholder
partner to make a QEF or mark-to- market
election under section 1295 or section
1296, respectively, should be simplified
and that purging elections should not be
required solely due to the status of the
CFC/PFIC during the period before the
general applicability rule applies. The
comment analogized these recommenda-
tions to relief provided in Notice 2019-46,
which permitted domestic partnerships
and partners to file returns for 2018 apply-
ing the hybrid approach in the 2018 pro-
posed regulations rather than the aggre-
gate approach adopted by the final section
951A regulations.
The Treasury Department and the IRS
believe that, in all cases, proper adminis-
tration of the regulations before the gen-
eral applicability rule requires the satis-
faction of the consistency requirement in
§1.958-1(d)(4)(i) and precludes the ability
of non-U.S. shareholder partners to uni-
laterally apply the regulations. There-
fore, the final regulations do not adopt
more permissive rules because a domestic
partnership filed a tax return and issued
Schedule K-1s to its partners before the is-
suance of the 2019 proposed regulations.
Furthermore, the Treasury Department
and the IRS find this situation sufficiently
different from the relief provided in No-
tice 2019-46 for domestic partnerships
that had already reported a different posi-
tion on a Schedule K-1 based on the 2018
proposed regulations. Although the final
section 951A regulations applied retroac-
tively and superseded the 2018 proposed
regulations, the notice provided flexibili-
ty to apply the 2018 proposed regulations
due to the compliance burdens associated
with the change from the hybrid approach
in the 2018 proposed regulations to the
aggregate approach in the final section
951A regulations and the relatively short
period until the extended filing deadline
for calendar-year partnerships. This same
concern does not exist here because, be-
fore the prospective application of the
regulations under the general applicability
rule, taxpayers were permitted to rely on
the 2019 proposed regulations (in accor-
dance with proposed §1.958-1(d)(4)) or to
1
A U.S. shareholder partner’s liability could differ under an aggregate or entity approach if, for example, the partner is a U.S. shareholder partner with respect to some, but not all, of the CFCs
that are owned by the domestic partnership.

February 14, 2022 486 Bulletin No. 2022–7
continue to apply prior law. Accordingly,
the final regulations do not adopt these
comments.
B. Different taxable years of the
partnership, partners, and CFC
Proposed §1.958-1(d)(4) provided that
§1.958-1(d), when finalized, would apply
to taxable years of foreign corporations
beginning on or after the finalization date
and to taxable years of U.S. persons in
which or with which the taxable years of
the foreign corporations end. A comment
noted that, under this rule, in certain cir-
cumstances where a fiscal year U.S. share-
holder partnership with U.S. shareholder
partners has a different taxable year than
its CFC and U.S. shareholder partners,
the applicability date could cause the U.S.
shareholder partners to have two years of
section 951 inclusions in the same taxable
year with respect to the same CFC – that
is, a distributive share of the partnership’s
section 951 inclusion from the CFC’s last
taxable year before the application of the
final regulations, and a direct section 951
inclusion with respect to the first taxable
tax year of the CFC subject to the final
regulations. For example, if a U.S. share-
holder partnership has a June 30 taxable
year and both the CFC it owns and its
U.S. shareholder partners have a calendar
taxable year, the final regulations would,
under the general applicability rule, first
apply to the CFC’s taxable year ending
December 31, 2023. Accordingly, for their
taxable year ending December 31, 2023,
the U.S. shareholder partners would have
a distributive share of the partnership’s
section 951 inclusion for the CFC’s tax-
able year ending December 31, 2022 (for
the U.S. shareholder partnership’s taxable
year ending June 30, 2023) and would
also have a direct section 951 inclusion for
the CFC’s taxable year ending December
31, 2023. The comment suggested that if
the result in the example is intended, the
Treasury Department and the IRS should
consider treating the transition to aggre-
gate treatment as a change in method of
accounting with an accompanying spread
in reporting the second inclusion under
section 481.
The result described by the comment
(the possibility of a U.S. shareholder part-
ner having, in one of its taxable years, a
distributive share of a partnership’s sec-
tion 951(a) inclusion with respect to a CFC
for one taxable year of the CFC as well as
the U.S. shareholder partner’s own section
951(a) inclusion with respect to the CFC
for the CFC’s subsequent taxable year) is
intended. In situations where a partnership
and a partner have different taxable years,
the partner can generally achieve deferral
on its share of the partnership’s income
to the extent of the difference between its
taxable year and the partnership’s required
taxable year. However, under the final reg-
ulations, because a domestic partnership
is not treated as owning stock of a CFC
within the meaning of section 958(a) for
purposes of computing income inclusions
with respect to a CFC under section 951
and section 951A, the applicable taxable
year for income inclusions arising as a re-
sult of a domestic partnership’s ownership
of the CFC is the U.S. shareholder part-
ner’s taxable year, not the partnership’s
taxable year. As a result, the final regu-
lations eliminate any deferral of income
inclusions under section 951 and section
951A for a U.S. shareholder partner with
respect to any CFC owned by the U.S.
shareholder partnership. This elimination
of a U.S. shareholder partner’s deferral
with respect to income of any CFC owned
by the U.S. shareholder partnership, com-
bined with the partner’s existing deferral
of section 951 income inclusions before
the application of the final regulations,
causes the U.S. shareholder partner to rec-
ognize two years of section 951 income
inclusions with respect to any CFC owned
by the U.S. shareholder partnership in this
transition taxable year.
The Treasury Department and the IRS
considered whether the adoption of the
aggregate approach should be viewed as
a change in method of accounting under
section 446 and, if so, whether an adjust-
ment should be imposed under section
481. The Treasury Department and the
IRS determined that the adoption of the
aggregate approach is not a change in
method of accounting. Accordingly, no
adjustment under section 481 should be
imposed.
Further, even if the adoption of the
aggregate approach were considered to
be a change in accounting method, the
Treasury Department and the IRS do not
believe imposing an adjustment under
section 481 would be appropriate as part
of such change. Section 481(a) adjust-
ments are intended to prevent the perma-
nent duplication or omission of income
or expense that would otherwise arise as
a result of a change in accounting meth-
od. However, the change to the aggregate
approach under section 958 does not give
rise to an omission or duplication of any
item of income or expense. Under the
prior entity approach, the domestic part-
nership would be treated as the foreign
corporation’s owner under section 958(a)
and would take into account its applica-
ble section 951 inclusion in its taxable
year in which or with which such foreign
corporation’s taxable year ends. The part-
nership’s section 951 inclusion would, in
turn, be included in each partner’s distrib-
utive share and would be recognized by
each partner in the partner’s taxable year
in which or with which the partnership’s
taxable year ends.
By contrast, under the new aggregate
approach, each U.S. shareholder partner of
the partnership will be treated as an own-
er of the foreign corporation under section
958(a). As a result, each partner will have
its own section 951 inclusion for the foreign
corporation’s taxable years beginning on or
after January 25, 2022 and will recognize
the section 951 inclusion in its taxable year
in which or with which the foreign corpo-
ration’s taxable year ends.
2
Therefore, the
partners would not have a permanent du-
plication or omission of income or expense
that would otherwise arise as a result of a
change in accounting method and require a
section 481(a) adjustment.
2
In the first taxable year to which the aggregate approach applies, the U.S. shareholder partner could in certain cases have two section 951 inclusions: (1) its distributive share of the partner-
ship’s section 951 inclusion for the CFC’s last taxable year that begins before January 25, 2022, and (2) its own section 951 inclusion for the CFC’s first taxable year beginning on or after
January 25, 2022. However, these inclusions represent subpart F income with respect to two different taxable years of the CFC. Therefore, there is no duplication or omission of the CFC’s
subpart F income to the U.S. shareholder partner.

Bulletin No. 2022–7 487 February 14, 2022
Special Analyses
I. Regulatory Planning and Review –
Economic Analysis
These regulations are not subject to re-
view under section 6(b) of Executive Or-
der 12866 pursuant to the Memorandum
of Agreement (April 11, 2018) between
the Treasury Department and the Office
of Management and Budget regarding re-
view of tax regulations.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) (‘‘PRA’’) gener-
ally requires that a federal agency obtain
the approval of the OMB before collecting
information from the public, whether such
collection of information is mandatory,
voluntary, or required to obtain or retain
a benefit.
There are no information collection
requirements associated with these final
regulations.
III. Regulatory Flexibility Act
It is hereby certified that these final
regulations will not have a significant eco-
nomic impact on a substantial number of
small entities within the meaning of sec-
tion 601(6) of the Regulatory Flexibility
Act (5 U.S.C. chapter 6).
The final regulations may affect a sub-
stantial number of small entities, but the
economic impact is not likely to be sig-
nificant. These regulations treat domestic
partnerships as an aggregate of their part-
ners for purposes of section 951, which re-
duces the burden on taxpayer partners that
are not U.S. shareholders of a CFC owned
by a partnership because these partners
are no longer subject to section 951 in-
clusions with respect to CFCs held by the
partnership. The regulations may also re-
duce burden on domestic partnerships that
hold CFCs because these partnerships are
no longer required to calculate their part-
ners’ distributive share of the partnerships’
section 951 inclusions, which will likely
lower their compliance costs. In addition,
the regulations do not impose a collection
of information burden on any person, in-
cluding small entities.
The Treasury Department and the IRS
estimate that approximately 7,500 U.S.
partnerships that own CFCs e-filed at least
one Form 5471 as Category 4 or 5 filers
in 2018.
3
These partnerships had approxi-
mately 1.75 million domestic and foreign
partners. To estimate the impact of the
final regulations related to domestic part-
nerships on small entities, the Treasury
Department and the IRS reviewed the per-
centage of filers that own CFCs by class
size based on gross receipts. For 2018, the
smaller size classes constituted a relative-
ly small fraction of filers that own CFCs,
suggesting that many domestic small busi-
ness entities would be unaffected by these
regulations. Further, domestic partner-
ships should only constitute a portion of
the smaller size classes of filers that own
CFCs.
Consequently, the Treasury Depart-
ment and the IRS have determined that the
final regulations will not have a significant
economic impact on a substantial number
of small entities. Accordingly, it is here-
by certified that these regulations will not
have a significant economic impact on a
substantial number of small entities.
IV. Section 7805(f)
Pursuant to section 7805(f), the pro-
posed regulations preceding the final reg-
ulations (the 2019 proposed regulations)
were submitted to the Chief Counsel for
Advocacy of the Small Business Admin-
istration for comment on their impact on
small business. No comments were re-
ceived.
V. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal man-
date that may result in expenditures in any
one year by a state, local, or tribal govern-
ment, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, up-
dated annually for inflation. These regula-
tions do not include any Federal mandate
that may result in expenditures by state,
local, or tribal governments, or by the pri-
vate sector in excess of that threshold.
VI. Executive Order 13132: Federalism
Executive Order 13132 (entitled
“Federalism”) prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes
substantial, direct compliance costs on
state and local governments, and is not
required by statute, or preempts state law,
unless the agency meets the consultation
and funding requirements of section 6 of
the Executive order. These regulations do
not have federalism implications and do
not impose substantial direct compliance
costs on state and local governments or
preempt state law within the meaning of
the Executive order.
Drafting Information
The principal author of these regula-
tions is Edward J. Tracy of the Office of
Associate Chief Counsel (International).
However, other personnel from the Trea-
sury Department and the IRS participated
in their development.
Statement of Availability of IRS
Documents
IRS Revenue Procedures, Revenue
Rulings, Notices, and other guidance cited
in this document are published in the In-
ternal Revenue Bulletin and are available
from the Superintendent of Documents,
U.S. Government Publishing Office,
Washington, DC 20402, or by visiting the
IRS website at https://www.irs.gov.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
3
Data are from IRS's Research, Applied Analytics, and Statistics division based on data available in the Compliance Data Warehouse. Category 4 filer includes a U.S. person who had control
of a foreign corporation during the annual accounting period of the foreign corporation. Category 5 includes a U.S. shareholder who owns stock in a foreign corporation that is a CFC and who
owned that stock on the last day in the tax year of the foreign corporation in that year in which it was a CFC. For full definitions, see https://www.irs.gov/ pub/ irs-pdf/ i5471.pdf.

February 14, 2022 488 Bulletin No. 2022–7
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amend-
ed as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805.
* * * * *
Par. 2. Section 1.951-1 is amended by:
1. Adding paragraph (a)(4);
2. Removing paragraph (h);
3. Redesignating paragraph (i) as para-
graph (h); and
4. Removing the last sentence of newly
redesignated paragraph (h).
The addition reads as follows:
§1.951-1 Amounts included in gross
income of United States shareholders.
(a) * * *
(4) See §1.958-1(d) for rules regard-
ing the ownership of stock of a foreign
corporation through a domestic partner-
ship for purposes of section 951 and for
purposes of any provision that specifical-
ly applies by reference to section 951 or
the regulations in this part under section
951.
* * * * *
Par. 3. Section 1.951A-1 is amended by
revising paragraph (e) to read as follows:
§1.951A-1 General provisions.
* * * * *
(e) Stock owned through domestic
partnerships. See §1.958-1(d) for rules
regarding the ownership of stock of a for-
eign corporation through a domestic part-
nership for purposes of section 951A and
for purposes of any provision that specifi-
cally applies by reference to section 951A
or the section 951A regulations.
* * * * *
Par. 4. Section 1.956-1 is amended by:
1. Adding a sentence at the end of para-
graph (a)(1);
2. Removing the last sentence of para-
graph (a)(2)(i);
3. Removing paragraphs (a)(2)(iii) and
(a)(3)(iv);
4. Redesignating paragraph (a)(3)(v) as
paragraph (a)(3)(iv);
5. Revising the newly redesignated
paragraph (a)(3)(iv) heading; and
6. Adding a sentence at the end of para-
graph (g)(4).
The additions and revision read as fol-
lows:
§1.956-1 Shareholder’s pro rata share
of the average of the amounts of United
States property held by a controlled
foreign corporation.
(a) * * * (1) * * * See §1.958-1(d) for
rules regarding the ownership of stock of
a foreign corporation through a domes-
tic partnership for purposes of section
956(a) and for purposes of any provision
that specifically applies by reference to
section 956(a) or the regulations in this
part under section 956 that relate to sec-
tion 956(a).
* * * * *
(3) * * *
(iv) Example 4. * * *
* * * * *
(g) * * *
(4) * * * For taxable years of con-
trolled foreign corporations beginning be-
fore January 25, 2022, and taxable years
of United States shareholders in which or
with which such taxable years of foreign
corporations end, see §1.956-1(a)(2)(i)
and (iii) and (a)(3)(iv) as in effect and con-
tained in 26 CFR part 1, as revised April
1, 2021.
* * * * *
Par. 5. Section 1.958-1 is amended by:
1. Redesignating paragraph (d) as para-
graph (f); and
2. Adding a new paragraph (d) and re-
served paragraph (e).
The additions read as follows:
§1.958-1 Direct and indirect ownership
of stock.
* * * * *
(d) Stock of foreign corporations
owned through domestic partnerships—
(1) In general. Except as otherwise pro-
vided in paragraph (d)(2) of this section,
for purposes of sections 951, 951A, and
956(a), and for purposes of any provision
that specifically applies by reference to
any of such sections or the regulations
in this part under section 951, 951A, or
956 (but only as the regulations in this
part under section 956 relate to section
956(a)), a domestic partnership is not
treated as owning stock of a foreign cor-
poration within the meaning of section
958(a). For purposes of determining
the persons that own stock of the for-
eign corporation within the meaning of
section 958(a) when the preceding sen-
tence applies, stock of a foreign corpora-
tion owned by a domestic partnership is
treated in the same manner as stock of a
foreign corporation owned by a foreign
partnership under section 958(a)(2) and
paragraph (b) of this section.
(2) Non-application for certain pur-
poses. Paragraph (d)(1) of this section
does not apply for purposes of—
(i) Determining whether any United
States person is a United States sharehold-
er (as defined in section 951(b));
(ii) Determining whether any foreign
corporation is a controlled foreign cor-
poration (CFC) (as defined in section
957(a));
(iii) Applying section 956(c) and (d);
(iv) Applying section 1248; or
(v) Determining whether any United
States shareholder is a controlling domes-
tic shareholder (as defined in §1.964-1(c)
(5)).
(3) Examples. The following exam-
ples illustrate the application of this para-
graph (d).
(i) Example 1—(A) Facts. USP, a domestic cor-
poration, and Individual A, a United States citizen
unrelated to USP, own 95% and 5%, respectively, of
PRS, a domestic partnership. PRS owns 100% of the
single class of stock of FC, a foreign corporation.
(B) Analysis—(1) United States shareholder
and CFC determinations. Under paragraphs (d)
(2)(i) and (ii) of this section, respectively, the de-
termination of whether PRS, USP, and Individual
A (each a United States person) are United States
shareholders of FC, and whether FC is a controlled
foreign corporation, is made without regard to para-
graph (d)(1) of this section. PRS, a United States
person, owns 100% of the total combined voting
power or value of the FC stock within the mean-
ing of section 958(a). Accordingly, PRS is a United
States shareholder under section 951(b), and FC
is a controlled foreign corporation under section
957(a). USP is also a United States shareholder of
FC because it owns 95% of the total combined vot-
ing power or value of the FC stock under sections
958(b) and 318(a)(2)(A). Individual A, however, is
not a United States shareholder of FC because Indi-
vidual A owns only 5% of the total combined vot-

Bulletin No. 2022–7 489 February 14, 2022
ing power or value of the FC stock under sections
958(b) and 318(a)(2)(A).
(2) Application of sections 951 and 951A. Un-
der paragraph (d)(1) of this section, for purposes of
sections 951 and 951A, PRS is not treated as own-
ing (within the meaning of section 958(a)) the FC
stock; instead, for purposes of determining the per-
sons that own the FC stock within the meaning of
section 958(a), the FC stock is treated as if it were
owned by a foreign partnership under paragraph (b)
of this section. Therefore, for purposes of sections
951 and 951A, USP is treated as owning 95% of
the FC stock under section 958(a), and Individual
A is treated as owning 5% of the FC stock under
section 958(a). USP is a United States shareholder
of FC, and therefore USP determines its income in-
clusions under sections 951 and 951A directly with
respect to FC based on its ownership of FC stock
under section 958(a). However, because Individual
A is not a United States shareholder of FC, Indi-
vidual A does not have an income inclusion under
section 951 with respect to FC or a pro rata share
of any amount of FC for purposes of section 951A.
This is the case even though PRS is a United States
shareholder of FC.
(ii) Example 2—(A) Facts. USP, a domestic cor-
poration, and Individual A, a United States citizen,
own 90% and 10%, respectively, of PRS1, a domes-
tic partnership. PRS1 and Individual B, a nonresident
alien individual, own 90% and 10%, respectively, of
PRS2, a domestic partnership. PRS2 owns 100% of
the single class of stock of FC, a foreign corporation.
USP, Individual A, and Individual B are unrelated to
each other.
(B) Analysis—(1) United States shareholder
and CFC determinations. Under paragraphs (d)
(2)(i) and (ii) of this section, the determination of
whether PRS1, PRS2, USP, and Individual A (each
a United States person) are United States sharehold-
ers of FC, and whether FC is a controlled foreign
corporation, is made without regard to paragraph
(d)(1) of this section. PRS2 owns 100% of the total
combined voting power or value of the FC stock
within the meaning of section 958(a). Accordingly,
PRS2 is a United States shareholder under section
951(b), and FC is a controlled foreign corporation
under section 957(a). Under sections 958(b) and
318(a)(2)(A), PRS1 is treated as owning 90% of
the FC stock owned by PRS2. Accordingly, PRS1
is also a United States shareholder under section
951(b). Further, under section 958(b)(2), PRS1 is
treated as owning 100% of the FC stock for pur-
poses of determining the FC stock treated as owned
by USP and Individual A under section 318(a)(2)
(A). Therefore, USP is treated as owning 90% of
the FC stock under section 958(b) (100% x 100% x
90%), and Individual A is treated as owning 10% of
the FC stock under section 958(b) (100% x 100% x
10%). Accordingly, both USP and Individual A are
also United States shareholders of FC under section
951(b).
(2) Application of sections 951 and 951A.
Under paragraph (d)(1) of this section, for pur-
poses of sections 951 and 951A, PRS1 and PRS2
are not treated as owning (within the meaning of
section 958(a)) the FC stock; instead, for pur-
poses of determining the persons that own the
FC stock within the meaning of section 958(a),
as the FC stock is treated as if it were owned by
foreign partnerships under paragraph (b) of this
section. Therefore, for purposes of determining
the amount included in gross income under sec-
tions 951 and 951A, under section 958(a) USP is
treated as owning 81% (100% x 90% x 90%) of
the FC stock, and Individual A is treated as own-
ing 9% (100% x 90% x 10%) of the FC stock.
Because USP and Individual A are both United
States shareholders of FC, USP and Individual A
determine their respective inclusions under sec-
tions 951 and 951A directly with respect to FC
based on their ownership of FC stock under sec-
tion 958(a). This is the case even though PRS2 is
a United States shareholder of FC.
(iii) Example 3—(A) Facts. Individual A, a
United States citizen, Individual B, a United States
citizen unrelated to Individual A, and Individual
C, a foreign person unrelated to both Individuals
A and B, own 10%, 5%, and 85%, respectively, of
PRS, a domestic partnership. PRS owns 100% of
the single class of stock of FC, a foreign corpora-
tion. FC holds an account receivable from PRS that
constitutes an obligation of a United States person
within the meaning of section 956(c)(1)(C) and
§1.956-2(a)(1)(iii).
(B) Analysis—(1) United States shareholder
and CFC determinations. Under paragraphs (d)(2)
(i) and (ii) of this section, respectively, the deter-
mination of whether PRS, Individual A, and Indi-
vidual B (each a United States person) are United
States shareholders of FC, and whether FC is a con-
trolled foreign corporation, is made without regard
to paragraph (d)(1) of this section. PRS, a United
States person, owns 100% of the total combined
voting power or value of the FC stock within the
meaning of section 958(a). Accordingly, PRS is a
United States shareholder under section 951(b),
and FC is a controlled foreign corporation under
section 957(a). Individual A is also a United States
shareholder of FC because it owns 10% of the total
combined voting power or value of the FC stock
under sections 958(b) and 318(a)(2)(A). Individual
B, however, is not a United States shareholder of
FC because Individual B owns only 5% of the total
combined voting power or value of the FC stock
under sections 958(b) and 318(a)(2)(A).
(2) Application of section 956(a). Under para-
graph (d)(1) of this section, for purposes of section
956(a), PRS is not treated as owning (within the
meaning of section 958(a)) the FC stock; instead,
for purposes of determining the persons that own
the FC stock within the meaning of section 958(a),
as the FC stock is treated as if it were owned by
a foreign partnership under paragraph (b) of this
section. Therefore, for purposes of section 956(a),
under section 958(a) Individual A is treated as own-
ing 10% of the FC stock, and Individual B is treated
as owning 5% of the FC stock. Individual A is a
United States shareholder of FC, and therefore In-
dividual A determines the amount it must include in
gross income under section 951(a)(1)(B) by reason
of the PRS obligation held by FC based on its own-
ership of FC stock under section 958(a) as deter-
mined under paragraph (d)(1) of this section. How-
ever, because Individual B is not a United States
shareholder of FC, Individual B does not have an
amount to include in income under sections 956(a)
and 951(a)(1)(B).
(3) Application of section 956(c) and
(d). Under paragraph (d)(2)(iii) of this
section, for purposes of section 956(c)
and (d), the determination of whether
FC holds United States property is made
without regard to paragraph (d)(1) of this
section. Therefore, PRS is treated as own-
ing stock of FC within the meaning of sec-
tion 958(a) for purposes of determining
the amount of United States property held
by FC arising from its account receivable
from PRS.
(4) Applicability dates—(i) Para-
graphs (d)(1) through (3) of this sec-
tion. Paragraphs (d)(1) through (3) of
this section apply to taxable years of
foreign corporations beginning on or
after January 25, 2022, and to taxable
years of United States persons in which
or with which such taxable years of for-
eign corporations end. For taxable years
of a foreign corporation that precede the
taxable years described in the preceding
sentence, a domestic partnership may ap-
ply paragraphs (d)(1) through (3) of this
section in their entirety to taxable years
of a foreign corporation beginning after
December 31, 2017, and to taxable years
of the domestic partnership in which or
with which such taxable years of the for-
eign corporation end, provided that the
partnership, its partners that are United
States shareholders of the foreign corpo-
ration, and other domestic partnerships
that bear relationships described in sec-
tion 267(b) or 707(b) to the partnership
(and their United States shareholder
partners) consistently apply paragraphs
(d)(1) through (3) of this section with
respect to all foreign corporations whose
stock the domestic partnerships own
within the meaning of section 958(a) (de-
termined without regard to paragraph (d)
(1) of this section).
(ii) Rules applicable before January
25, 2022. For taxable years of foreign
corporations beginning before January
25, 2022, and to taxable years of United
States persons in which or with which
such taxable years of foreign corporations
end, see §§1.951-1(h) and 1.951A-1(e) as
in effect and contained in 26 CFR part 1,
as revised April 1, 2021.

February 14, 2022 490 Bulletin No. 2022–7
(e) [Reserved]
* * * * *
Par. 6. Section 1.1502-51 is amended
by revising the last sentence in paragraph
(b) to read as follows:
§1.1502-51 Consolidated section 951A.
* * * * *
(b) * * * In addition, see §1.951A-1(e)
(cross-referencing §1.958-1(d)).
* * * * *
Douglas W. O’Donnell,
Deputy Commissioner for Services
and Enforcement.
Approved: December 8, 2021.
Lily Batchelder,
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register on Jan-
uary 24, 2021, 8:45 a.m., and published in the issue
of the Federal Register for January 25, 2022, 87 F.R.
3648)

Bulletin No. 2022–7 491 February 14, 2022
Part III
2022 Cumulative List of
Changes in Section 403(b)
Requirements for Section
403(b) Pre-approved Plans
Notice 2022-8
I. PURPOSE
This notice sets forth the 2022 Cumu-
lative List of Changes in Section 403(b)
Requirements for Section 403(b) Pre-ap-
proved Plans (2022 Cumulative List). The
2022 Cumulative List will assist provid-
ers of section 403(b) pre-approved plans
applying to the Internal Revenue Service
(IRS) for opinion letters for the second
remedial amendment cycle (Cycle 2) un-
der the IRS’s section 403(b) pre-approved
plan program. Cycle 2 began on July 1,
2020. The 2022 Cumulative List identi-
fies changes in the requirements of sec-
tion 403(b) of the Internal Revenue Code
(Code) that will be taken into account by
the IRS with respect to a plan document
submitted to the IRS for Cycle 2 and that
were not taken into account during the
first remedial amendment cycle (Cycle 1).
Section 403(b) plans may be submitted
for approval during the Cycle 2 on-cycle
submission period, which begins May 2,
2022, and ends May 1, 2023.
The list of changes in section IV of
this notice does not extend the deadline
by which a section 403(b) pre-approved
plan must be amended to comply with
any change in the section 403(b) require-
ments (which are requirements of section
403(b), including requirements provided
in the Code, regulations, and other guid-
ance published in the Internal Revenue
Bulletin). The general deadline for time-
ly adoption of an interim or discretionary
amendment is provided in section 12 of
Rev. Proc. 2019-39, 2019-42 IRB 945, as
modified by section 4 of Rev. Proc. 2020-
40, 2020-38 IRB 575, and section 22 of
Rev. Proc. 2021-37, 2021-38 IRB 385.
II. BACKGROUND
Rev. Proc. 2021-37 sets forth proce-
dures for issuing opinion letters for sec-
tion 403(b) pre-approved plans for Cycle
2. In section 13.02 of Rev. Proc. 2021-37,
the IRS announced its intention to publish
a cumulative list for each remedial amend-
ment cycle to identify changes in the
section 403(b) requirements that will be
taken into account with respect to a plan
document submitted to the IRS for that
remedial amendment cycle and that were
not taken into account by the IRS in its
review during any prior remedial amend-
ment cycle. A change in the section 403(b)
requirements includes a statutory change
or a change in the requirements provided
in regulations or other guidance published
in the Internal Revenue Bulletin.
To assist eligible employers in achiev-
ing operational compliance, the IRS in-
tends to provide an Operational Compli-
ance List periodically to identify changes
in section 403(b) requirements that are
effective during a calendar year. For the
current Operational Compliance List, see
https://www.irs.gov/retirement-plans/op-
erational-compliance-list.
III. APPLICATION OF THE 2022
CUMULATIVE LIST
The 2022 Cumulative List set forth in
section IV of this notice lists specific items
the IRS has identified for review in deter-
mining whether the plan document for a
section 403(b) pre-approved plan that has
been submitted to the IRS for a Cycle 2
opinion letter has been properly updated.
1
Except as provided in section IV of this
notice, the IRS will not consider any of the
following items in its review of any opin-
ion letter application for Cycle 2:
1. Guidance (regulations and other
guidance published in the Internal Rev-
enue Bulletin) issued after November 1,
2021.
2. Statutes enacted after November 1,
2021.
3. Statutes, regardless of when they are
enacted, that are first effective in 2022 or
later for which there is no guidance identi-
fied in this notice.
4. Section 403(b) requirements that are
first effective in 2023 or later, regardless
of when the section 403(b) requirements
are enacted or issued.
The 2022 Cumulative List sets forth
only changes in section 403(b) require-
ments that were not taken into account
during Cycle 1. However, in order to satis-
fy section 403(b) of the Code, a plan must
comply with all relevant section 403(b)
requirements, not only those on the 2022
Cumulative List.
IV. 2022 CUMULATIVE LIST OF
CHANGES IN SECTION 403(b)
REQUIREMENTS FOR SECTION
403(b) PRE-APPROVED PLANS
The 2022 Cumulative List sets forth
items that were enacted or issued after
October 1, 2012. However, if a plan was
not reviewed during Cycle 1, the IRS will
review the plan taking into account items
on the 2022 Cumulative List, as well
as the section 403(b) requirements that
were reviewed during Cycle 1. The sec-
tion 403(b) requirements reviewed during
Cycle 1 included the final regulations
under section 403(b) and any applicable
requirements of the 2012 Cumulative
List of Changes in Plan Qualification Re-
quirements set forth in Notice 2012-76,
2012-52 IRB 775.
1. Section 401(m):
a. Safe Harbor Plans
• Final regulations under section 401(k)
and (m) that were published on Novem-
ber 15, 2013 (TD 9641, 78 FR 68735), (1)
provide guidance on permitted mid-year
reductions or suspensions of safe harbor
nonelective contributions in certain cir-
cumstances for amendments adopted after
May 18, 2009 and (2) revise the require-
1
The 2022 Cumulative List includes items that are specific to section 403(b) plans, as well as items that, although not specific to section 403(b) plans, are applicable to section 403(b)
plans. For example, because § 1.403(b)-6(d)(2) provides that a hardship distribution has the same meaning as a distribution on account of hardship under § 1.401(k)-1(d)(3) and is subject to
the rules and restrictions set forth in § 1.401(k)-1(d)(3), the 2022 Cumulative List includes items that changed hardship distribution requirements under § 1.401(k)-1(d)(3).

February 14, 2022 492 Bulletin No. 2022–7
ments for permitted mid-year reductions
or suspensions of safe harbor matching
contributions for plan years beginning on
or after January 1, 2015.
• Notice 2016-16, 2016-7 IRB 318, per-
mits mid-year changes to a section 401(k)
safe harbor plan or section 401(m) safe
harbor plan under certain circumstances
and if certain conditions are satisfied.
• Notice 2020-52, 2020-29 IRB 79,
clarifies the requirements that apply to
a mid-year amendment to a safe harbor
section 401(k) or 401(m) plan that reduc-
es only contributions made on behalf of
highly compensated employees. It also
provides, in connec tion with the ongo-
ing Coronavirus Dis ease 2019 pandemic,
temporary relief (which requires plan lan-
guage as a condition of obtaining the re-
lief) from certain requirements that would
otherwise apply to a mid-year amendment
to a safe harbor section 401(k) or 401(m)
plan adopted between March 13, 2020,
and August 31, 2020, that reduces or sus-
pends safe harbor contributions.
• Section 102 of the Setting Every
Community Up for Retirement En-
hancement Act of 2019 (SECURE Act),
Pub. L. 116-94, 133 Stat. 2534, amends
section 401(k)(13)(C)(iii) of the Code to
increase the 10-percent cap for automatic
enrollment safe harbor plans (including
certain section 401(m) safe harbor plans).
• Section 103 of the SECURE Act
amends section 401(k) of the Code to
(1) eliminate certain safe harbor notice
requirements for plans (including certain
section 401(m) safe harbor plans) that
provide for safe harbor nonelective contri-
butions and (2) add new provisions for the
retroactive adoption of safe harbor status
for those plans.
• Notice 2020-86, 2020-53 IRB 1786,
provides guidance with re spect to sections
102 and 103 of the SECURE Act.
b. Definition of Qualified Matching
Contributions
• Proposed regulations under section
401(k) and (m) of the Code that were
published on January 18, 2017 (82 FR
5477), amend the definitions of quali-
fied matching contributions (QMACs)
and qualified nonelective contributions
(QNECs) to provide that QMACs and
QNECs must satisfy applicable nonfor-
feitability and distribution requirements
at the time they are allocated to partici-
pants’ accounts, but need not meet these
requirements when they are contributed
to the plan. The proposed regulations ap-
ply only to taxable years beginning on or
after the publication of final regulations,
but taxpayers may choose to rely on the
proposed regulations upon publication
and for prior periods.
• Final regulations under section 401(k)
and (m) that were published on July 20,
2018 (TD 9835, 83 FR 34469), amend
the definitions of QMACs and QNECs to
provide that QMACs and QNECs must
satisfy applicable nonforfeitability and
distribution requirements at the time they
are allocated to participants’ accounts, but
need not meet these requirements when
they are contributed to the plan.
2. Section 403(b)(7) and (11):
a. In-Plan Roth Rollovers
• Section 902 of the American Tax-
payer Relief Act of 2012, Pub. L. 112-
240, 126 Stat. 2313 (2013), adds sec-
tion 402A(c)(4)(E) of the Code, which
provides that rollovers from a plan account
to the plan’s designated Roth account may
include a rollover of an otherwise nondis-
tributable amount.
• Notice 2013-74, 2013-52 IRB 819,
provides guidance regarding amounts
transferred to a designated Roth account
as described in section 402A(c)(4)(E)
and also provides guidance that applies
to all in-plan Roth rollovers under sec-
tion 402A(c)(4).
b. Hardship Distributions
• Section 41113 of the Bipartisan
Budget Act of 2018 (BBA), Pub. L.
115-123, 132 Stat. 64, in part, directs
the Secretary of the Treasury to modify
Treas. Reg. § 1.401(k)-1(d)(3)(iv)(E) to
delete the 6-month prohibition on contri-
butions after a hardship distribution and to
make any other modifications necessary to
carry out the purposes of section 401(k)
(2)(B)(i)(IV) of the Code.
• Section 41114 of the BBA amends
section 401(k) of the Code to modify
the hardship distribution rules to expand
the sources of hardship distributions to
include elective contributions, quali-
fied nonelective contributions, qualified
matching contributions, and earnings
on those contributions. The rules relat-
ing to hardship distributions of elective
contributions from a section 401(k) plan
generally apply to section 403(b) plans.
However, because section 403(b)(11) of
the Code was not amended by section
41114 of the BBA, earnings attributable
to section 403(b) elective deferrals con-
tinue to be ineligible for hardship distri-
bution.
• Proposed regulations under section
401(k) of the Code that were published
on November 14, 2018 (83 FR 56763),
amend the rules relating to hardship dis-
tributions from section 401(k) plans to
reflect statutory changes affecting section
401(k) plans, including changes made by
the BBA. Under the proposed regulations,
the changes to the hardship distribution
rules made by the BBA generally apply
to distributions made in plan years begin-
ning after December 31, 2018. However,
the prohibition on suspending an employ-
ee’s elective contributions and employee
contributions as a condition of obtaining
a hardship distribution may be applied as
of the first day of the first plan year be-
ginning after December 31, 2018, even
if the distribution was made in the prior
plan year. In addition, the revised list of
safe harbor expenses for which distribu-
tions are deemed to be made on account
of an immediate and heavy financial need
may be applied to distributions made on
or after a date that is as early as January 1,
2018.
• Final regulations under section
401(k) that were published on September
23, 2019 (TD 9875, 84 FR 49651), amend
the rules relating to hardship distributions
from section 401(k) plans to reflect stat-
utory changes affecting section 401(k)
plans, including recent changes made by
the BBA.
c. Lifetime Income Investment Options
• Section 109 of the SECURE Act pro-
vides that section 403(b) plans may permit
certain transfers and distributions of life-
time income investment options in cases
in which the investment options are no
longer authorized to be held as investment
options under the plan.

Bulletin No. 2022–7 493 February 14, 2022
d. Distribution of Individual Custodial
Accounts Upon Plan Termination
• Section 110 of the SECURE Act pro-
vides that the Secretary of the Treasury
shall issue guidance providing that, if an
employer terminates a plan under which
amounts are contributed to a custodial
account un der section 403(b)(7) of the
Code, the plan administrator or custodi-
an may distribute an individual custodial
account (ICA) in kind to a participant or
beneficiary of the plan. It also provides
that the distributed custodial account
will be maintained by the custodi an on a
tax-deferred basis as a section 403(b)(7)
custodial account, similar to the treatment
of fully paid individual annuity contracts
under Rev. Rul. 2011-7, until amounts are
actually paid to the participant or benefi-
ciary.
• Rev. Rul. 2020-23, 2020-47 IRB 1028,
pursuant to section 110 of the SECURE
Act, provides that, under the situations
described in the revenue ruling, a section
403(b) plan may be ter minated in accor-
dance with the rules of § 1.403(b)-10(a)
using a distribution of an ICA in kind to a
participant or beneficiary, and such a dis-
tribution is not includible in gross income
until amounts are actually paid to the par-
ticipant or beneficia ry out of the ICA, so
long as the ICA maintains its status as a
section 403(b)(7) custodial account.
e. Qualified Birth or Adoption
Distributions
• Section 113 of the SECURE Act
amends section 72(t)(2) of the Code to add
a new exception to the 10-percent additional
tax for any qualified birth or adoption distri-
bution. An individual generally may recon-
tribute a qualified birth or adoption distribu-
tion (not to exceed the aggregate amount of
all qualified birth and adoption distributions
made to the individual from the plan) to an
applicable eligible retirement plan in which
the individual is a beneficiary and to which
a rollover may be made.
• Notice 2020-68, 2020-38 IRB 567,
provides guidance with respect to the SE-
CURE Act, including section 113 of the
SECURE Act.
3. Section 403(b)(8):
• Section 306 of the Protecting Amer-
icans from Tax Hikes Act of 2015 (PATH
Act), Pub. L. 114-113, 129 Stat. 2242,
amends section 408(p)(1)(B) of the Code
to permit rollovers from a section 403(b)
plan to a SIMPLE IRA.
• Section 41104 of the BBA adds sec-
tion 6343(f) of the Code to hold an indi-
vidual harmless in the case of a wrongful
levy upon an eligible retirement plan. The
eligible retirement plan may permit the
contribution of any property or money re-
turned to the individual as a result of the
wrongful levy, and such contribution will
be treated as a rollover.
4. Section 403(b)(9):
• Section 111 of the SECURE Act
amends section 403(b)(9) of the Code to
clarify that an employee described in sec-
tion 414(e)(3)(B) may be included in a sec-
tion 403(b)(9) retirement income account.
5. Section 403(b)(10):
• Final regulations under section 401(a)
(9) that were published on July 2, 2014
(TD 9673, 79 FR 37633), provide a limited
modification of the required minimum dis-
tribution rules for section 403(b) plans hold-
ing qualifying longevity annuity contracts.
• Section 114 of the SECURE Act
amends section 401(a)(9)(C)(i)(I) of the
Code to increase the age with respect to
which the required beginning date for
required minimum distributions is deter-
mined from age 70 ½ to age 72.
• Section 401 of the SECURE Act
amends section 401(a)(9) of the Code to
provide new required minimum distribu-
tion rules for designated beneficiaries.
6. Section 403(b)(12):
• Notice 2018-95, 2018-52 IRB 1058,
provides transition relief from the “once-
in-always-in” condition for excluding part-
time employees under § 1.403(b)-5(b)(4)
(iii)(B), including relief regarding plan
language for section 403(b) pre-approved
plans.
7. Section 415:
• Section 116 of the SECURE Act
amends section 415(c) of the Code to
treat difficulty of care payments that are
excluded from gross income as compensa-
tion for determining retirement contribu-
tion limitations.
• Notice 2020-68 provides guidance
with respect to the SECURE Act, includ-
ing section 116 of the SECURE Act.
8. Definition of Spouse:
• United States v. Windsor, 570 U.S.
744 (2013). The Supreme Court found
that section 3 of the Defense of Marriage
Act (DOMA), which provides that, in
determining the meaning of any Act of
Congress or of any ruling, regulation, or
interpretation of the various administra-
tive bureaus and agencies of the United
States, the word “marriage” means only
a legal union between one man and one
woman as husband and wife, and the word
“spouse” refers only to a person of the
opposite sex who is a husband or a wife,
is unconstitutional because it violates the
principles of equal protection.
• Rev. Rul. 2013-17, 2013-38 IRB 201,
provides that for Federal tax purposes,
the terms “spouse,” “husband and wife,”
“husband,” and “wife” include an individ-
ual married to a person of the same sex
if the individuals are lawfully married
under state law, and the term “marriage”
includes such a marriage between individ-
uals of the same sex, and the IRS adopts
a general rule recognizing a marriage of
same-sex individuals that was validly en-
tered into in a state whose laws authorize
the marriage of two individuals of the
same sex even if the married couple is do-
miciled in a state that does not recognize
the validity of same-sex marriages.
• Notice 2014-19, 2014-17 IRB 979,
provides guidance on the application
(including the retroactive application) of
the decision in United States v. Windsor,
and the holdings of Rev. Rul. 2013-17, to
retirement plans qualified under section
401(a) of the Code.
2
• Notice 2014-37, 2014-24 IRB 1100,
provides guidance on a mid-year amend-
2
For the application of Notice 2014-19 to section 403(b) plans, see Frequently Asked Question 5 https://www.irs.gov/retirement-plans/application-of-the-windsor-decision-and-post-windsor-
published-guidance-to-qualified-retirement-plans-faqs.

February 14, 2022 494 Bulletin No. 2022–7
ment to a section 401(k) safe harbor plan
or section 401(m) safe harbor plan to re-
flect the outcome of United States v. Wind-
sor, pursuant to Notice 2014-19.
• Final regulations under section 7701
that were published on September 2, 2016
(TD 9785, 81 FR 60609), define terms de-
scribing the marital status of taxpayers for
federal tax purposes.
9. Disaster-related Rules:
• Section 502 of the Disaster Tax Relief
and Airport and Airway Extension Act of
2017, Pub. L. 115-63, 131 Stat. 1168, as
amended by section 20201 of the BBA,
provides special disaster-related rules for
use of retirement funds.
• Section 11028 of the Tax Cuts and
Jobs Act of 2017 (TCJA), Pub. L. 115-
97, 131 Stat. 2054, provides special di-
saster-related rules for use of retirement
funds.
• Section 20101 of the BBA provides
special disaster-related rules for use of re-
tirement funds.
• Section 202 of the Taxpayer Certain-
ty and Disaster Tax Relief Act of 2019,
Pub. L. 116-94, 133 Stat. 2534, provides
special disaster-related rules for use of re-
tirement funds.
• Section 2202 of the Coronavi-
rus Aid, Relief, and Economic Securi-
ty Act (CARES Act), Pub. L. 116-136,
134 Stat. 281 (2020), provides special
rules for coronavirus-related distributions
and plan loans made to qualified individ-
uals.
• Notice 2020-50, 2020-28 IRB 35,
provides guidance relating to the applica-
tion of section 2202 of the CARES Act for
qualified individuals and eligible retire-
ment plans.
• Section 302 of the Taxpayer Certain-
ty and Disaster Tax Relief Act of 2020,
Pub. L. 116-260, 134 Stat. 1182, provides
special disaster-related rules for use of re-
tirement funds.
10. Church Plan Clarification:
• Section 336 of the PATH Act amends
section 414(c) of the Code to provide spe-
cial rules for church plans for purposes of
determining controlled groups, automat-
ic enrollment arrangements, certain plan
transfers and mergers, and investments in
collective trusts.
• Notice 2018-81, 2018-43 IRB 666,
which provides guidance under section
336(a) of the PATH Act, describes the
manner in which taxpayers notify the IRS
of revocation of an election to aggregate
or disaggregate certain church-related
organizations from treatment as a single
employer under section 414(c)(2)(C) and
(D).
V. DRAFTING INFORMATION
The principal author of this notice is
Patrick Gutierrez of the Office of Asso-
ciate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). For further information regard-
ing this notice, contact Employee Plans at
(513) 975-6319 (not a toll-free number).

26 CFR 1.6012-1: Individuals required to make re-
turns of income.
Rev. Proc. 2022-12
SECTION 1. PURPOSE
.01 This revenue procedure provides
procedures for individuals who are not
otherwise required to file Federal income
tax returns for taxable year 2021 to claim
the child tax credit under § 24, to claim
the 2021 recovery rebate credit under
§ 6428B, and to claim the earned income
credit under § 32.
1
Section 2 of this reve-
nue procedure describes these Federal in-
come tax benefits in further detail. Section
3 of this revenue procedure describes the
scope of the procedures provided in this
revenue procedure.
.02 Section 4 of this revenue procedure
provides an electronic filing procedure
for individuals who (i) are not required to
file a Federal income tax return for tax-
able year 2021 and (ii) had zero adjusted
gross income (AGI) for taxable year 2021.
These individuals generally are not able to
file Federal income tax returns electroni-
cally due to certain tax return preparation
software and return processing parame-
ters. Because Federal income tax returns
filed on paper do not pose this processing
issue, section 4 of this revenue procedure
does not apply to a Federal income tax
return filed on paper, although the proce-
dures provided by section 5 and section 6
of this revenue procedure do apply to pa-
per-filed returns.
.03 Section 5 of this revenue procedure
provides a simplified Federal income tax
return filing procedure for individuals
who (i) are not required to file a Feder-
al income tax return for taxable year
2021, (ii) had gross income that was less
than their applicable standard deduction
amount for taxable year 2021, and (iii) are
not eligible for the earned income credit
for taxable year 2021 (for example, be-
cause they did not have earned income
during taxable year 2021 for purposes of
the earned income credit) or do not want
to claim the credit.
.04 Section 6 of this revenue procedure
provides a simplified Federal income tax
return filing procedure for individuals who
(i) are not required to file a Federal in-
come tax return for taxable year 2021, (ii)
had gross income that was less than their
applicable standard deduction amount for
taxable year 2021, and (iii) had earned
income during taxable year 2021 for pur-
poses of the earned income credit.
SECTION 2. BACKGROUND
.01 Child Tax Credit for Taxable Year
2021.
(1) Overview. Section 9611(a), (b)(1),
and (b)(2) of the American Rescue Plan
Act of 2021 (American Rescue Plan),
Public Law 117-2, 135 Stat. 4, 144-149
(March 11, 2021), added §§ 24(i), 24(j),
and 7527A to the Code. Section 24(i)
modifies the child tax credit rules set forth
in § 24 for any taxable year beginning af-
ter December 31, 2020, and before Janu-
ary 1, 2022 (taxable year 2021).
(2) Credit allowed. Under § 24(a),
a taxpayer may claim a child tax credit
against the taxpayer’s Federal income tax
(as imposed by chapter 1 of subtitle A of
the Code) for the taxable year with respect
to each CTC qualifying child (as defined
1
Unless otherwise specified, all “section” or “§” references are to sections of the Internal Revenue Code (Code).

Bulletin No. 2022–7 495 February 14, 2022
in section 2.01(5) of this revenue proce-
dure) of the taxpayer.
(3) Credit fully refundable. The child
tax credit for taxable year 2021 is fully
refundable for a taxpayer if the taxpay-
er (or spouse, if filing a joint return) has
a principal place of abode in the United
States (determined as provided in § 32) for
more than one-half of taxable year 2021.
See § 24(i)(1). Full refundability means
that taxpayers can benefit from the maxi-
mum amount of the credit even if they do
not have earned income or do not owe any
Federal income tax for taxable year 2021.
(4) Credit amounts. Taxpayers claim-
ing the child tax credit for taxable year
2021 may receive up to $3,000 for each
CTC qualifying child who is between the
ages of 6 and 17 as of the end of taxable
year 2021 and $3,600 for each CTC quali-
fying child who is under the age of 6 as of
the end of taxable year 2021. See § 24(i)
(2) and (3).
(5) CTC qualifying child. A “CTC
qualifying child” is a qualifying child of
the taxpayer (as defined in § 152(c)) who
has not attained age of 18 at the close of
taxable year 2021. See § 24(i)(2)(A). No
child tax credit is allowed for a qualify-
ing child unless the social security number
(SSN) of the child, which must be valid for
employment and be issued by the Social
Security Administration before the due
date of the taxpayer’s taxable year Federal
income tax return (including extensions),
is provided on the return. See § 24(h)(7).
If the taxpayer’s child was a U.S. citizen
when the child received the SSN, the SSN
is valid for employment.
(6) Nonresident aliens. Only certain
nonresident aliens who are U.S. nation-
als; residents of Canada, Mexico, or South
Korea; or students and business apprentic-
es from India who qualify for benefits un-
der Article 21(2) of the income tax treaty
with India may claim the child tax credit
or credit for other dependents (described
in section 2.03 of this revenue procedure).
(7) Reconciliation requirement regard-
ing credit and advance payments.
(a) Overview of reconciliation require-
ment. Taxpayers who received advance
child tax credit payments (described in
section 2.02(1) of this revenue procedure)
during calendar year 2021 must reduce
(but not below zero) the amount of the
child tax credit claimed for taxable year
2021 by the total amount of those advance
child tax credit payments. See § 24(j)(1).
If the amount of a taxpayer’s advance
child tax credit payments received in cal-
endar year 2021 exceeds the taxpayer’s
allowable child tax credit for taxable year
2021, the taxpayer’s Federal income tax
imposed for taxable year 2021 will be in-
creased by the excess. See § 24(j)(2)(A).
(b) Safe harbor based on modified AGI.
The amount by which a taxpayer’s Feder-
al income tax for taxable year 2021 is in-
creased by operation of § 24(j)(2)(A) may
be reduced or eliminated if the taxpayer
qualifies for the statutory safe harbor set
forth in § 24(j)(2)(B). Under § 24(j)(2)
(B), a taxpayer’s increase in tax is reduced
by the “safe harbor amount.” The safe
harbor amount is equal to a maximum of
$2,000 multiplied by the difference in the
number of CTC qualifying children the
Internal Revenue Service (IRS) included
when estimating the taxpayer’s advance
child tax credit payments disbursed in
calendar year 2021 and the number of
CTC qualifying children properly taken
into account in determining the allowed
child tax credit amount (excess qualifying
child). See § 24(j)(2)(B)(iv). The safe har-
bor amount reduces to zero as a taxpay-
er’s modified AGI exceeds certain income
thresholds. See § 24(j)(2)(B)(ii). Because
the income thresholds of this revenue pro-
cedure are lower than those of the safe
harbor, an individual within the scope of
this revenue procedure will qualify for the
full safe harbor and will not have to repay
any increase in tax if the increase in tax
is attributable to the individual’s excess
qualifying children. The increase in tax
will be attributable to the individual’s ex-
cess qualifying children if the individual’s
main home was in the United States for
more than half of taxable year 2021.
.02 Advance Child Tax Credit Pay-
ments for Calendar Year 2021.
(1) In general. Section 7527A(a) re-
quires the Secretary of the Treasury or
her delegate (Secretary) to establish a pro-
gram for making periodic advance child
tax credit payments to taxpayers the total
of which, during any calendar year, equals
the “annual advance amount” (as defined
in § 7527A(b)(1)) determined with respect
to that taxpayer for that calendar year.
These advance child tax credit payments
were required to be made between July 1,
2021, and December 31, 2021, and gener-
ally were disbursed in equal amounts. See
§§ 7527A(a), (b)(3), and (f).
(2) Definition of annual advance
amount. Section 7527A(b)(1) defines the
term “annual advance amount” to mean,
with respect to any taxpayer for any cal-
endar year, the amount (if any) that the
Secretary estimates as being equal to 50
percent of the refundable child tax credit
amount that would be treated as allowed
by reason of § 24(i)(1) for the taxpayer’s
taxable year beginning in that calendar
year if:
(a) The U.S. principal place of abode
status is determined with respect to the
“reference taxable year,” as defined in
§ 7527A(b)(2);
(b) The taxpayer’s modified AGI for
that taxable year is equal to the taxpayer’s
modified AGI for the reference taxable
year;
(c) The only children of the taxpayer
for that taxable year are qualifying chil-
dren properly claimed on the taxpayer’s
return of tax for the reference taxable
year; and
(d) The ages of those children (and the
status of those children as CTC qualifying
children) are determined for that taxable
year by taking into account the passage of
time since the reference taxable year.
.03 Credit for Other Dependents. For
a taxable year beginning after December
31, 2017, and before January 1, 2026, a
$500 credit may be available for a depen-
dent of the taxpayer (within the meaning
of § 152) who is not a CTC qualifying
child or who is a CTC qualifying child but
does not have an SSN valid for employ-
ment. See § 24(h)(4). The credit for other
dependents is not addressed by this rev-
enue procedure because the credit cannot
be claimed unless income tax is owed and
therefore is not applicable to individuals
within the scope of this revenue proce-
dure.
.04 Earned Income Credit.
(1) Overview. The earned income
credit is a refundable credit that low- to
moderate-income individuals and families
may claim. Section 32(a) provides that, in
the case of an eligible individual, there is
allowed as a credit against the tax imposed
by subtitle A of the Code for the taxable
year an amount equal to the credit percent-
age of so much of the taxpayer’s earned

February 14, 2022 496 Bulletin No. 2022–7
income for the taxable year as does not
exceed the earned income amount.
(2) Amount of credit.
(a) Maximum amounts. For taxable
year 2021, the four maximum amounts of
the earned income credit are the follow-
ing:
(i) $1,502, if the eligible individual
does not have a “qualifying child,” as de-
fined in § 32(c)(3) (EIC qualifying child),
or if none of the eligible individual’s EIC
qualifying children has a valid SSN;
(ii) $3,618, if the eligible individual
has one EIC qualifying child who has a
valid SSN;
(iii) $5,980, if the eligible individual
has two EIC qualifying children who have
valid SSNs; and
(iv) $6,728, if the eligible individual
has three or more EIC qualifying children
who have valid SSNs.
(b) Factors for determining credit
amount. The amount of the earned income
credit that can be claimed by an eligible
individual depends on the following fac-
tors:
(i) The individual’s “earned income
amount,” which is the amount of earned
income at or above which the maximum
amount of the earned income credit is al-
lowed.
(ii) The individual’s “applicable per-
centage,” which depends on the number
of the individual’s EIC qualifying chil-
dren, if any.
(iii) The individual’s applicable phase-
out amount. With regard to that amount,
each individual has a “threshold phase-
out amount” and a “completed phaseout
amount,” both of which depend on the
individual’s income and filing status. The
“threshold phaseout amount” is the amount
of AGI (or, if greater, earned income)
above which the maximum amount of the
credit begins to phase out. The “complet-
ed phaseout amount” is the amount of AGI
(or, if greater, earned income) at or above
which no credit is allowed. See generally
§ 32(a), (b), and (n). See also Rev. Proc.
2021-23, 2021-19 I.R.B. 1153.
(3) SSN requirement. To claim the
earned income credit for taxable year
2021, the eligible individual (and spouse,
if filing a joint return) must have a valid
SSN issued by the Social Security Admin-
istration by the due date of the individu-
al’s Federal income tax return (including
extensions). The individual is not permit-
ted to claim the earned income credit if
the individual’s SSN is not valid for em-
ployment and was issued for purposes of
receiving a federally funded benefit. See
generally § 32(c)(1)(E) and (m).
(4) Eligibility.
(a) In general. Individuals who are
eligible to claim the earned income cred-
it include individuals who have an EIC
qualifying child for taxable year 2021, as
well as individuals who do not have an
EIC qualifying child but satisfy the three
following eligibility conditions for taxable
year 2021. See § 32(c)(1)(A). First, the
individual has a principal place of abode
in the United States (determined as pro-
vided in § 32) for more than one-half of
taxable year 2021. See § 32(c)(1)(A)(ii)
(I). Second, the individual (or spouse, if
filing a joint return) has attained age 19
(except for specified students who are
eligible to claim the earned income cred-
it if they have attained age 24, and qual-
ified homeless youth or qualified former
foster youth who are eligible to claim the
earned income credit if they have attained
age 18). See § 32(c)(1)(A)(ii)(II) and (n).
Third, the individual is not a dependent
for whom a deduction is allowable under
§ 151 to another taxpayer for taxable year
2021. See § 32(c)(1)(A)(ii)(III).
(b) Eligibility restrictions. An indi-
vidual who elects for the taxable year to
exclude foreign earned income and hous-
ing cost amount under § 911 is not an
eligible individual for that taxable year.
See § 32(c)(1)(C). In addition, an individ-
ual is not eligible for the earned income
credit if he or she is a nonresident alien
individual for any portion of taxable year
2021, unless the individual is treated as a
resident of the United States for taxable
year 2021 by reason of having made the
election under § 6013(g) or § 6013(h). See
§ 32(c)(1)(D). Lastly, an individual who is
the EIC qualifying child of a taxpayer for
taxable year 2021 is not eligible to claim
the earned income credit for taxable year
2021. See § 32(c)(1)(B).
.05 2021 Recovery Rebate Credit and
Third-Round Economic Impact Payments.
(1) 2021 recovery rebate credit. Sec-
tion 9601(a) of the American Rescue
Plan added § 6428B to the Code. Sec-
tion 6428B(a) provides an eligible indi-
vidual a refundable tax credit against the
eligible individual’s Federal income tax
liability (as imposed by subtitle A of the
Code) for the eligible individual’s taxable
year 2021 (2021 recovery rebate credit).
(a) Definition of eligible individual.
Section 6428B(c) defines the term “eligi-
ble individual” for purposes of § 6428B to
mean any individual other than (i) a non-
resident alien individual, (ii) an individual
who is a dependent of another taxpayer (as
defined in § 152) for the taxable year, or
(iii) an estate or trust.
(b) Amount of 2021 recovery rebate
credit.
(i) In general. Section 6428B(a) pro-
vides that the amount of the 2021 recovery
rebate credit equals the sum of (i) $1,400
per eligible individual ($2,800 in the case
of a joint return) and (ii) an amount equal
to the product of $1,400 multiplied by the
number of the eligible individual’s depen-
dents (within the meaning of § 152).
(ii) Reductions in amount due to lack
of SSN. If an eligible individual does not
have an SSN, or if two eligible individ-
uals who do not have an SSN file a joint
return, § 6428B(e)(2) does not allow the
$1,400 amount for the eligible individual
or the $2,800 amount for the joint return,
but will allow an amount for dependents
(as defined in § 152) with certain taxpayer
identification numbers. Section 6428B(e)
(2) reduces the $2,800 amount for a joint
return to $1,400 if one spouse has an SSN,
one spouse does not have an SSN, and nei-
ther spouse was a member of the Armed
Forces of the United States at any time
during the taxable year. Only a dependent
with an SSN or an IRS adoption taxpayer
identification number (ATIN) is counted
for purposes of determining the amount
of the 2021 recovery rebate credit. See
§ 6428B(e)(2)(C) and (D). For purposes
of qualifying for the 2021 recovery rebate
credit, any type of SSN is sufficient if it
was issued by the Social Security Admin-
istration by the due date of the eligible in-
dividual’s 2021 Federal income tax return
(including extensions). See § 6428B(e)(2)
(D)(i).
(iii) Reduction in amount due to AGI.
Section 6428B(d) provides phaseouts of
the credit amount based on an eligible in-
dividual’s AGI.
(iv) Reduction in amount due to receipt
of advance payments. Section 6428B(f)
reduces the 2021 recovery rebate credit

Bulletin No. 2022–7 497 February 14, 2022
amount that an eligible individual may
claim by the aggregate refunds allowed
to the eligible individual as an advance
refund in calendar year 2021 (that is,
through the receipt of one or more third-
round economic impact payments).
(2) Economic impact payments. Sec-
tion 6428B(g) addresses the payment
of advanced refunds and credits during
calendar year 2021. It authorized a third
round of economic impact payments
which followed two earlier rounds of ad-
vance refunds and credits for taxable year
2020. See §§ 6428(f) (regarding the first
round of economic impact payments),
6428A(f) (regarding the second round of
economic impact payments). All third-
round economic impact payments under
§ 6428B(g) have been disbursed.
.06 Revenue Procedure 2021-24. Rev.
Proc. 2021-24, 2021-29 I.R.B. 19, pro-
vided two procedures for individuals not
otherwise required to file 2020 Federal in-
come tax returns to file returns to receive
certain tax benefits. The first procedure,
set forth in section 4 of Rev. Proc. 2021-
24, permitted these individuals to file sim-
plified returns to (i) receive advance child
tax credit payments during calendar year
2021, (ii) claim the 2020 recovery rebate
credit, (iii) claim the additional 2020 re-
covery rebate credit, and (iv) receive the
third-round economic impact payment.
The second procedure, set forth in section
5 of Rev. Proc. 2021-24, enabled these in-
dividuals who have zero AGI to file com-
plete returns electronically to receive (i)
advance child tax credit payments during
calendar year 2021 and (ii) the third-round
economic impact payment.
SECTION 3. SCOPE
.01 Overview. This revenue procedure
allows individuals who are not required
to file a Federal income tax return for
taxable year 2021 to provide information
to the IRS to claim the child tax credit,
the 2021 recovery rebate credit, and the
earned income credit, as well as for other
purposes. Section 4 of this revenue pro-
cedure allows individuals described in
that section to provide this information
through an electronically filed return. The
procedures set forth in section 5 and sec-
tion 6 of this revenue procedure allow the
individuals described in those sections to
provide this information in the form of a
simplified return, whether filed on paper
or electronically.
.02 Purposes of Zero AGI Filing Pro-
cedure under Section 4. The Department
of the Treasury and the IRS are aware
that individuals otherwise not required
to file Federal income tax returns for tax-
able year 2021 may want to file Federal
income tax returns electronically. These
individuals may use tax return prepara-
tion software that does not permit them
to file pursuant to a simplified procedure
provided by section 5 or section 6 of this
revenue procedure, or the individuals
may need to file complete Federal income
tax returns to receive certain State or lo-
cal benefits. Many Federal income tax re-
turns, however, cannot be filed electron-
ically if the filer reports an AGI of zero
(as opposed to an AGI of $1 or more) and
does not claim the 2021 recovery rebate
credit, the child tax credit, or any amount
as a refund. To facilitate the processing
of electronic returns filed by individuals
with zero AGI who are not otherwise re-
quired to file Federal income tax returns,
section 4 of this revenue procedure pro-
vides a procedure for these individuals to
file complete electronic Federal income
tax returns.
.03 Purpose of Simplified Filing Pro-
cedure under Section 5. Section 5 of this
revenue procedure provides a simplified
filing procedure that permits individuals
who are not required to file a Federal in-
come tax return for taxable year 2021 to
receive certain Federal income tax ben-
efits. Specifically, individuals who file a
Federal income tax return for taxable year
2021 in accordance with section 5 of this
revenue procedure may provide necessary
information to claim (i) the child tax cred-
it for taxable year 2021 and (ii) the 2021
recovery rebate credit.
.04 Purpose of Simplified Filing Pro-
cedure under Section 6. Section 6 of this
revenue procedure provides a simplified
filing procedure that permits individuals
who are not required to file a Federal in-
come tax return for taxable year 2021,
but who earned income during 2021 and
are eligible to claim the earned income
credit, to receive certain Federal income
tax benefits. Specifically, eligible indi-
viduals who file a Federal income tax re-
turn for taxable year 2021 in accordance
with section 6 of this revenue procedure
may provide necessary information to
claim (i) the earned income credit for tax-
able year 2021, (ii) the child tax credit for
taxable year 2021, and (iii) the 2021 re-
covery rebate credit. This procedure also
permits individuals to claim a refund of
withheld Federal income tax for taxable
year 2021.
.05 U.S. Territory Residents Not Eligi-
ble. The procedures provided by this rev-
enue procedure do not apply to a resident
of American Samoa, Guam, the Common-
wealth of the Northern Mariana Islands,
the Commonwealth of Puerto Rico (Puer-
to Rico), or the U.S. Virgin Islands (each,
a U.S. territory). A resident of a U.S. terri-
tory should contact their local territory tax
agency for additional information about
the earned income credit, the child tax
credit, and the 2021 recovery rebate credit.
However, a resident of Puerto Rico should
refer to Form 1040-PR, Planilla para la
Declaración de la Contribución Federal
sobre el Trabajo por Cuenta Propia, or
Form 1040-SS, U.S. Self-Employment Tax
Return, and their instructions, to claim the
child tax credit for taxable year 2021.
.06 Individuals Who Are Required to
File a 2021 Federal Income Tax Return
Not Eligible. The procedures provided by
this revenue procedure do not apply to in-
dividuals who are required to file Federal
income tax returns for taxable year 2021
(for example, individuals reconciling ad-
vance payment of the premium tax credit
under § 36B).
.07 Individuals Who Previously Filed
a 2021 Federal Income Tax Return Not
Eligible. The procedures provided by
this revenue procedure do not apply to
individuals who already filed a paper or
electronic Federal income tax return for
taxable year 2021. Such individuals do
not need to file any additional forms or
otherwise contact the IRS to claim (i) the
earned income credit for themselves and
each EIC qualifying child, (ii) the child
tax credit for each CTC qualifying child,
or (iii) a 2021 recovery rebate credit for
themselves and each eligible dependent
(as defined in § 152), if those credits were
claimed on the previously filed return for
taxable year 2021.

February 14, 2022 498 Bulletin No. 2022–7
SECTION 4. SPECIAL PROCEDURE
FOR ZERO AGI FILERS
.01 Federal Income Tax Return Filed
Electronically.
(1) Electronic filing procedure. Subject
to section 4.01(2) of this revenue proce-
dure, under the requirements in this sec-
tion 4, a zero AGI filer may file electron-
ically Form 1040, U.S. Individual Income
Tax Return, Form 1040-SR, U.S. Tax Re-
turn for Seniors, or Form 1040-NR, U.S.
Nonresident Alien Income Tax Return, for
taxable year 2021.
(2) Procedure does not apply to pa-
per returns. The special procedure in this
section 4 applies only to an electronically
filed return for a zero AGI filer and does
not apply to a return filed on paper.
.02 Definition of Zero AGI Filer. For
purposes of this section 4, a “zero AGI
filer” is an individual--
(1) Who is not required to file a Federal
income tax return for taxable year 2021;
(2) Who has gross income for taxable
year 2021 that is less than their applicable
standard deduction amount;
(3) Who has zero AGI for taxable year
2021 (that is, the individual has zero AGI
for taxable year 2021 reportable on line 11
of Form 1040, Form 1040-SR, or Form
1040-NR);
(4) Who has not already filed a Federal
income tax return for taxable year 2021;
(5) Who—
(a) has a principal place of abode in the
United States (determined as provided in
§ 32) for more than one-half of taxable
year 2021, or
(b) files a joint return with an individu-
al who satisfies the requirement described
in section 4.02(5)(a) of this revenue pro-
cedure; and
(6) Who is not a resident of a U.S. ter-
ritory.
.03 Required Information. In addition
to all other information required to be en-
tered on Form 1040, Form 1040-SR, or
Form 1040-NR, a zero AGI filer must en-
ter the following:
(1) $1 as taxable interest on line 2b of
the form;
(2) $1 as total income on line 9 of the
form; and
(3) $1 as AGI on line 11 of the form.
.04 Signature. A zero AGI filer must
sign the return under penalties of perju-
ry, including the filer’s identity protection
personal identification number (that is,
the filer’s IP PIN), if applicable, as part
of the filer’s signature. In addition, a zero
AGI filer may enter the identifying infor-
mation of any third-party designee, if ap-
plicable, at the bottom of page 2 of Form
1040, Form 1040-SR, or Form 1040-NR.
A zero AGI filer who has been assigned an
IP PIN, but has misplaced it, may retrieve
the IP PIN at https://www.irs.gov/identity-
theft-fraud-scams/retrieve-your-ip-pin.
.05 Accuracy of Return. Individuals
who report incorrect information regard-
ing qualifying children or other depen-
dents or otherwise provide incorrect infor-
mation on their returns may be liable for
civil or criminal penalties. However, the
IRS will not challenge the accuracy of the
items of income reported on a return that
an individual files in accordance with this
section 4 if the individual is eligible to use
the procedure in this section 4 and the in-
structions in this section 4 direct that the
items be so reported.
SECTION 5. SPECIAL PROCEDURE
FOR CTC/RRC FILERS
.01 Federal Income Tax Return Filed
on Paper or Electronically. Under the
simplified procedure set forth in this sec-
tion 5, a simplified return may be filed, on
paper or electronically, for taxable year
2021 on a Form 1040, Form 1040-SR, or
Form 1040-NR. A Federal income tax re-
turn for taxable year 2021 filed under the
simplified procedure in this section 5 will
result in the following:
(1) The CTC/RRC filer may claim the
child tax credit for taxable year 2021.
(2) The CTC/RRC filer may claim the
2021 recovery rebate credit for taxable
year 2021. A nonresident alien is not eligi-
ble under § 6428B(c)(1) to claim the 2021
recovery rebate credit.
.02 Definition of CTC/RRC Filer. For
purposes of this section 5, a “CTC/RRC
filer” is an individual—
(1) Who is not required to file a Federal
income tax return for taxable year 2021;
(2) Who has gross income for taxable
year 2021 that is less than their applicable
standard deduction amount;
(3) Who has not already filed a paper
or electronic Federal income tax return for
taxable year 2021;
(4) Who has an SSN or IRS individual
taxpayer identification number (ITIN);
(5) Who--
(a) has a principal place of abode in the
United States (determined as provided in
§ 32) for more than one-half of taxable
year 2021, or
(b) files a joint return with an individu-
al who satisfies the requirement described
in section 5.02(5)(a) of this revenue pro-
cedure; and
(6) Who is not a resident of a U.S. ter-
ritory.
.03 Simplified Filing Method.
(1) Overview. In the case of a CTC/
RRC filer, the IRS will process the filer’s
Form 1040, Form 1040-SR, or Form 1040-
NR for taxable year 2021 to calculate the
Federal income tax benefits described in
section 5.01 of this revenue procedure
if the form is prepared in the manner re-
quired by this section 5.03. The Form
1040, Form 1040-SR, or Form 1040-NR
must include the information described in
this section 5.03.
(2) Write Rev. Proc. 2022-12 on form.
A CTC/RRC filer who files the Form
1040, Form 1040-SR, or Form 1040-NR
on paper must indicate “Rev. Proc. 2022-
12” above the printed material at the top
of page 1.
(3) Required general information.
(a) Filing status. A CTC/RRC filer
must select their filing status for taxable
year 2021 at the top of Form 1040, Form
1040-SR, or Form 1040-NR.
(b) Personal information. A CTC/RRC
filer must enter their name, mailing ad-
dress, and SSN or ITIN, and the name and
SSN or ITIN of their spouse if filing a joint
return, on the appropriate lines of Form
1040, Form 1040-SR, or Form 1040-NR.
(4) Individuals who could be claimed
as dependents by other individuals. A
CTC/RRC filer must check the applicable
boxes in the top line of the “Standard De-
duction” section of the Form 1040, Form
1040-SR, or Form 1040-NR for each indi-
vidual who can be claimed as a dependent
by any other individual for taxable year
2021.
(5) General information regarding de-
pendents.
(a) In general. A CTC/RRC filer should
complete the appropriate lines in the “De-
pendents” section of Form 1040, Form
1040-SR, or Form 1040-NR regarding

Bulletin No. 2022–7 499 February 14, 2022
each dependent for taxable year 2021 who
has an SSN or an ATIN. For each individ-
ual claimed as a dependent, a CTC/RRC
filer must provide the name, SSN or ATIN,
and relationship to the individual.
(b) CTC qualifying children. A CTC/
RRC filer should check the child tax cred-
it box in Column (4) of the “Dependents”
section for each dependent who is a CTC
qualifying child for taxable year 2021 who
has an SSN that is valid for employment.
(6) Limited information to provide in
lines 1 through 38. A CTC/RRC filer must
leave blank lines 1 through 38 of Form
1040, Form 1040-SR, or Form 1040-NR
even if the values for these lines are in fact
not zero, except as provided in this section
5.03(6):
(a) Line 12 (standard deduction or
itemized deductions). A CTC/RRC filer
must enter the applicable standard deduc-
tion amount for their filing status on line
12a (standard deduction or itemized de-
ductions) and line 12c (sum of lines 12a
and 12b). The filer must leave line 12b
blank.
(b) Line 14 (sum of lines 12c and 13).
A CTC/RRC filer must enter the amount
entered on line 12c.
(c) Line 15 (taxable income). A CTC/
RRC filer must enter $0 on line 15.
(d) Line 28 (2021 child tax credit entry).
A CTC/RRC filer may enter the amount of
the filer’s child tax credit for taxable year
2021 on line 28. The credit amount may
be computed using Schedule 8812 (Form
1040), available at https://www.irs.gov/
Schedule8812, and information from the
filer’s Letter 6419 or the filer’s IRS online
account at https://www.irs.gov/account.
must attach the Schedule 8812 to the fil-
er’s Form 1040, Form 1040-SR, or Form
1040-NR. Providing the correct amount of
the filer’s child tax credit for taxable year
2021 will allow for faster processing of
the return and issuance of any tax refund.
The IRS will correct any incorrect amount
claimed on line 28, but the correction will
delay processing of the return and the is-
suance of any tax refund.
(e) Line 30 (2021 recovery rebate cred-
it entry). A CTC/RRC filer may enter the
amount of the filer’s 2021 recovery rebate
credit on line 30. The credit amount may
be computed using the Recovery Rebate
Credit Worksheet for line 30 in the 2021
Instructions for Form 1040 and Form
1040-SR, available at https://www.irs.
gov/Form1040, and information from the
filer’s Letter 6475 or the filer’s IRS online
account at https://www.irs.gov/account.
Providing the correct amount of the fil-
er’s 2021 recovery rebate credit will al-
low for faster processing of the return and
issuance of any tax refund. The IRS will
correct any incorrect amount (other than
$0) claimed on line 30, but the correction
will delay processing of the return and the
issuance of any tax refund.
(f) Lines 32 through 35a. A CTC/RRC
filer must enter the sum of lines 28 and 30
on lines 32 through 35a.
(g) Line 35a checkbox (split direct de-
posit indicator). A CTC/RRC filer may
not check the box on line 35a.
(h) Lines 35b through 35d (direct de-
posit information). A CTC/RRC filer may
request the direct deposit of their taxable
year 2021 tax refund into an account at
a bank or other financial institution by
entering the information on lines 35b
through 35d. The CTC/RRC filer must not
request their taxable year 2021 tax refund
be deposited into an account that is not in
the name of that filer (for example, a CTC/
RRC filer must not request a direct deposit
of their taxable year 2021 tax refund into
their tax return preparer’s account).
.04 Signature. A CTC/RRC filer must
sign the return under penalties of perjury,
including the filer’s identity protection
personal identification number (that is,
the filer’s IP PIN), if applicable, as part of
the filer’s signature. In addition, the CTC/
RRC filer may enter the identifying infor-
mation of any third-party designee, if ap-
plicable, at the bottom of page 2 of Form
1040, Form 1040-SR, or Form 1040-NR.
A CTC/RRC filer who has been assigned
an IP PIN, but has misplaced it, may re-
trieve the IP PIN at https://www.irs.gov/
identity-theft-fraud-scams/retrieve-your-
ip-pin.
.05 Simplified Return Is a Federal In-
come Tax Return. A simplified return com-
pleted in accordance with the procedure
described in section 5.03 of this revenue
procedure is a taxable year 2021 Federal
income tax return for all purposes, wheth-
er filed on paper or electronically.
.06 Accuracy of Return. Individuals
who report incorrect information regard-
ing qualifying children or other depen-
dents or otherwise provide incorrect infor-
mation on simplified returns may be liable
for civil or criminal penalties. However,
the IRS will not challenge the omission of
the items of income on a simplified return
that an individual files in accordance with
this section 5 if the individual is eligible to
use the procedure in this section 5 and the
instructions in this section 5 direct that the
items be omitted.
SECTION 6. SPECIAL PROCEDURE
FOR EIC/CTC/RRC FILERS
.01 Federal Income Tax Return Filed
on Paper or Electronically. Under the
simplified procedure set forth in this sec-
tion 6, a simplified return may be filed, on
paper or electronically, on a Form 1040 or
Form 1040-SR. A Federal income tax re-
turn for taxable year 2021 filed under the
simplified procedure in this section 6 will
result in the following:
(1) The EIC/CTC/RRC filer may claim
the earned income credit for taxable year
2021.
(2) The EIC/CTC/RRC filer may claim
the child tax credit for taxable year 2021.
(3) The EIC/CTC/RRC filer may claim
the 2021 recovery rebate credit for taxable
year 2021.
.02 Definition of EIC/CTC/RRC Filer.
For purposes of this section 6, an “EIC/
CTC/RRC filer” is an individual--
(1) Who is not required to file a Federal
income tax return for taxable year 2021;
(2) Who has gross income for taxable
year 2021 that is less than their applicable
standard deduction amount;
(3) Who has earned income (as defined
in § 32(c)(2)) for taxable year 2021, and
has--
(a) no income other than such earned
income required to be reported on line 1
of the Form 1040 or Form 1040-SR (Form
W-2 earned income), or
(b) income in addition to Form W-2
earned income, but has gross income for
taxable year 2021 that is less than their ap-
plicable earned income credit “threshold
phaseout amount” (as provided in section
2.04(2)(b)(iii) of this revenue procedure);
(4) Who does not have an aggregate
amount of disqualified income (as defined
in § 32(i)(2)) in excess of $10,000;
(5) Who has not already filed a paper
or electronic Federal income tax return for
taxable year 2021;

February 14, 2022 500 Bulletin No. 2022–7
(6) Who has an SSN that is valid for
the earned income credit, as described in
section 2.04(3) of this revenue procedure;
(7) Who is a United States citizen or
resident alien (or is treated as a United
States resident alien in accordance with an
election under § 6013(g) or (h));
(8) Who--
(a) has a principal place of abode in the
United States (determined as provided in
§ 32) for more than one-half of taxable
year 2021, or
(b) files a joint return with an individu-
al who satisfies the requirement described
in section 6.02(8)(a) of this revenue pro-
cedure; and
(9) Who is not a resident of a U.S. ter-
ritory.
.03 Simplified Filing Method.
(1) Overview. In the case of an EIC/
CTC/RRC filer, the IRS will process the
filer’s Form 1040 or Form 1040-SR for
taxable year 2021 to calculate the Federal
income tax benefits described in section
6.01 of this revenue procedure if the form
is prepared in the manner required by this
section 6.03. The Form 1040 or Form
1040-SR must include the information de-
scribed in this section 6.03.
(2) Write Rev. Proc. 2022-12 on form.
An EIC/CTC/RRC filer who files the
Form 1040 or Form 1040-SR on paper
must indicate “Rev. Proc. 2022-12” above
the printed material at the top of page 1.
(3) Required general information.
(a) Filing status. An EIC/CTC/RRC fil-
er must select their filing status for taxable
year 2021 at the top of Form 1040 or Form
1040-SR.
(b) Personal information. An EIC/
CTC/RRC filer must enter their name,
mailing address, and SSN, and the name
and SSN of their spouse if filing a joint
return, on the appropriate lines of Form
1040 or Form 1040-SR.
(4) Individuals who could be claimed
as dependents by other individuals. An
EIC/CTC/RRC filer must check the appli-
cable boxes in the top line of the “Stan-
dard Deduction” section of the Form 1040
or Form 1040-SR for each individual who
can be claimed as a dependent by any oth-
er individual for taxable year 2021.
(5) General information regarding de-
pendents.
(a) In general. An EIC/CTC/RRC filer
should complete the appropriate lines in
the “Dependents” section of Form 1040
or Form 1040-SR regarding each depen-
dent for taxable year 2021 who has an
SSN, ITIN, or an ATIN. For each individ-
ual claimed as a dependent, an EIC/CTC/
RRC filer must provide the name, SSN,
ITIN, or ATIN, and relationship to the in-
dividual.
(b) CTC qualifying children. An EIC/
CTC/RRC filer should check the child tax
credit box in Column (4) for each depen-
dent who is a CTC qualifying child for
taxable year 2021 who has an SSN that is
valid for employment.
(6) Limited information to provide in
lines 1 through 38. An EIC/CTC/RRC
filer must complete lines 1 through 38 of
Form 1040 or Form 1040-SR in accor-
dance with this section 6.03(6). In each
instance in which this section 6.03(6) re-
quires the EIC/CTC/RRC filer to leave a
line blank on Form 1040 or Form 1040-
SR, such line must be left blank even if
the value for such line is in fact not zero.
(a) Line 1 (wages, salaries, tips, etc.).
An EIC/CTC/RRC filer must enter the
total of the filer’s total Form W-2 earned
income for taxable year 2021.
(b) Lines 2 through 8. An EIC/CTC/
RRC filer must leave lines 2a through 8
blank.
(c) Line 9 (total income). An EIC/CTC/
RRC filer must enter the amount provided
on line 1.
(d) Line 10. An EIC/CTC/RRC filer
must leave line 10 blank.
(e) Line 11 (adjusted gross income).
An EIC/CTC/RRC filer must enter the
amount provided on line 1.
(f) Line 12 (standard deduction or
itemized deductions). An EIC/CTC/RRC
filer must enter the applicable standard
deduction amount for their filing status on
line 12a (standard deduction or itemized
deductions) and line 12c (sum of lines 12a
and 12b). The filer must leave line 12b
blank.
(g) Line 13. An EIC/CTC/RRC filer
must leave line 13 blank.
(h) Line 14 (sum of lines 12c and 13).
An EIC/CTC/RRC filer must enter the
amount entered on line 12c.
(i) Line 15 (taxable income). An EIC/
CTC/RRC filer must enter $0.
(j) Lines 16 through 24. An EIC/CTC/
RRC filer must leave lines 16 through 24
blank.
(k) Line 25 (federal tax withheld). An
EIC/CTC/RRC filer may—but is not re-
quired to— enter the total of the amounts
shown as Federal income tax withheld on
each Form W-2 of the EIC/CTC/RRC fil-
er on lines 25a and 25d. If the EIC/CTC/
RRC filer does not enter the total amounts
withheld, the filer must leave lines 25a
and 25d blank. The EIC/CTC/RRC filer
must leave lines 25b and 25c blank.
(l) Line 26. An EIC/CTC/RRC filer
must leave line 26 blank.
(m) Line 27 (2021 earned income cred-
it entries).
(i) Line 27a (2021 earned income cred-
it entry). An EIC/CTC/RRC filer may en-
ter the amount of the filer’s earned income
credit for taxable year 2021 on line 27a.
A filer claiming the earned income credit
who has one or more EIC qualifying chil-
dren must complete and attach Schedule
EIC, available at https://www.irs.gov/
ScheduleEIC. A filer who was born after
January 1, 1998, and before January 2,
2004, must check the box on line 27a if
the filer satisfies all the additional require-
ments for taxpayers who are at least age
18 to claim the earned income credit. The
credit amount should be computed using
the earned income credit instructions for
line 27a in the 2021 Instructions for Form
1040 and 1040-SR, available at https://
www.irs.gov/Form1040.
(ii) Line 27b (nontaxable combat pay
election). An EIC/CTC/RRC filer must
enter all of the filer’s nontaxable combat
pay if the filer elects to include that pay in
the filer’s earned income for purposes of
the earned income credit.
(iii) Line 27c (prior year (2019) earned
income). An EIC/CTC/RRC filer must
leave line 27c blank because an EIT/
CTC/RRC filer may not elect to use 2019
earned income to figure the 2021 earned
income credit.
(n) Line 28 (2021 child tax credit en-
try). An EIC/CTC/RRC filer may enter
the amount of the filer’s child tax cred-
it for taxable year 2021 on line 28. The
credit amount may be computed using
Schedule 8812 (Form 1040), available
at https://www.irs.gov/Schedule8812,
and information from the filer’s Letter
6419 or the filer’s IRS online account at
https://www.irs.gov/account. The EIC/
CTC/RRC filer claiming the child tax
credit must attach the Schedule 8812 to

Bulletin No. 2022–7 501 February 14, 2022
the filer’s Form 1040 or Form 1040-SR.
Providing the correct amount of the fil-
er’s child tax credit for taxable year 2021
will allow for faster processing of the re-
turn and issuance of any tax refund. The
IRS will correct any incorrect amount
claimed on line 28, but the correction
will delay processing of the return and
the issuance of any tax refund.
(o) Line 29. An EIC/CTC/RRC filer
must leave line 29 blank.
(p) Line 30 (2021 recovery rebate cred-
it entry). An EIC/CTC/RRC filer may en-
ter the amount of the filer’s 2021 recovery
rebate credit on line 30. The credit amount
may be computed using the Recovery
Rebate Credit Worksheet for line 30 in
the 2021 Instructions for Form 1040 and
1040-SR, available at https://www.irs.
gov/Form1040, and information from the
filer’s Letter 6475 or the filer’s IRS online
account at https://www.irs.gov/account.
Providing the correct amount of the filer’s
2021 recovery rebate credit will allow for
faster processing of the return and issu-
ance of any tax refund. The IRS will cor-
rect any incorrect amount (other than $0)
claimed on line 30, but the correction will
delay processing of the return.
(q) Line 31. An EIC/CTC/RRC filer
must leave line 31 blank.
(r) Line 32 (total other payments and
refundable credits). An EIC/CTC/RRC
filer must enter the sum of lines 27a, 28,
and 30 on line 32.
(s) Lines 33 through 35a. An EIC/CTC/
RRC filer must enter the sum of lines 25d
and 32 on lines 33 through 35a.
(t) Line 35a checkbox (split direct de-
posit indicator). An EIC/CTC/RRC filer
may not check the box on line 35.
(u) Lines 35b through 35d (direct de-
posit information). An EIC/CTC/RRC fil-
er may request the direct deposit of their
taxable year 2021 tax refund into an ac-
count at a bank or other financial institu-
tion by entering the information on lines
35b through 35d. The EIC/CTC/RRC filer
must not request their taxable year 2021
tax refund be deposited into an account
that is not in the name of that filer (for
example, an EIC/CTC/RRC filer must not
request a direct deposit of their taxable
year 2021 tax refund into their tax return
preparer’s account).
(v) Lines 36 through 38. An EIC/CTC/
RRC filer must leave lines 36 through 38
blank.
.04 Signature. An EIC/CTC/RRC fil-
er must sign the return under penalties
of perjury, including the filer’s identity
protection personal identification number
(that is, the filer’s IP PIN), if applicable,
as part of the filer’s signature. In addition,
the EIC/CTC/RRC filer may enter the
identifying information of any third-party
designee, if applicable, at the bottom of
page 2 of Form 1040 or Form 1040-SR.
An EIC/CTC/RRC filer who has been
assigned an IP PIN, but has misplaced it,
may retrieve the IP PIN at https://www.irs.
gov/identity-theft-fraud-scams/retrieve-
your-ip-pin.
.05 Simplified Return Is a Federal In-
come Tax Return. A simplified return com-
pleted in accordance with the procedure
described in section 6.03 of this revenue
procedure is a taxable year 2021 Federal
income tax return for all purposes, wheth-
er filed on paper or electronically.
.06 Assembly of Simplified Return.
An EIC/CTC/RRC filer must attach all
Forms W-2 to the filer’s Form 1040 or
Form 1040-SR (for a paper return) or
input all the information listed on each
Form W-2 in the appropriate manner (for
an electronically filed return). If the EIC/
CTC/RRC filer received a Form W-2c (a
corrected Form W-2), the filer must attach
all original Forms W-2 and any Forms
W-2c.
.07 Accuracy of Return. Individuals
who report incorrect information regard-
ing qualifying children or other depen-
dents or otherwise provide incorrect infor-
mation on simplified returns may be liable
for civil or criminal penalties. However,
the IRS will not challenge the omission
of the items of income on a simplified re-
turn that an individual files in accordance
with this section 6 if the individual is eli-
gible to use the procedure in this section 6
and the instructions in this section 6 direct
that the items be omitted.
SECTION 7. APPLICABILITY
DATES
.01 Special Procedure for Zero AGI
Filers. Section 4 of this revenue procedure
applies to Federal income tax returns filed
on or after [INSERT DATE RELEASED
BY MEDIA RELATIONS].
.02 Special Procedures for CTC/RRC
Filers and EIC/CTC/RRC Filers. Sections
5 and 6 of this revenue procedure apply
to Federal income tax returns filed after
April 18, 2022.
SECTION 8. ADDITIONAL
INFORMATION
.01 2021 Recovery Rebate Credit;
Third-Round Economic Impact Payments.
Individuals can obtain additional infor-
mation regarding third-round economic
impact payments and the 2021 recovery
rebate credit through the IRS recovery
rebate credit webpage at https://www.irs.
gov/rrc.
.02 Child Tax Credit; Advance Child
Tax Credit Payments. Individuals can
obtain additional information regarding
advance child tax credit payments and
the child tax credit for taxable year 2021
through the IRS child tax credit and ad-
vance child tax credit payment webpage at
https://www.irs.gov/childtaxcredit2021.
.03 Earned Income Credit. Individu-
als can obtain additional information re-
garding the earned income credit through
the IRS earned income credit webpage at
https://www.irs.gov/eitc.
.04 Completing a Federal Income Tax
Return. Individuals can obtain additional
information regarding how to complete
their individual tax returns at https://www.
irs.gov/Form1040.
SECTION 9. DRAFTING
INFORMATION
The principal author of this revenue
procedure is the Office of the Associate
Chief Counsel (Procedure and Adminis-
tration).

February 14, 2022 502 Bulletin No. 2022–7
26 CFR 601.204: Changes in accounting periods and in methods of accounting.
(Also Part I, §§ 56, 61, 77, 118, 162, 163, 166, 167, 168, 171, 174, 179D, 194, 195, 197, 248, 263, 263A, 267, 280F, 404, 446, 447, 448, 451, 454, 455, 460, 461, 467,
471, 472, 475, 481, 585, 709, 807, 816, 832, 833, 846, 860A-860G, 861, 904, 953, 985, 1272, 1273, 1278, 1281, 1363, 1400I, 1400L, 1400N; 1.61-1, 1.61-4, 1.61-
8, 1.77-1, 1.77-2, 1.118-2, 1.162-1, 1.162-3, 1.162-4, 1.162-11, 1.162-12, 1.166-1, 1.166-2, 1.166-4, 1.167(a)-2, 1.167(a)-3(b), 1.167(a)-4, 1.167(a)-7, 1.167(a)-8,
1.167(a)-11, 1.167(a)-14, 1.167(e)-1, 1.168(d)-1, 1.168(i)-1, 1.168(i)-4, 1.168(i)-6, 1.168(i)-7, 1.168(i)-8, 1.168(k)-1, 1.168(k)-2, 1.171-4, 1.174-1, 1.174-3, 1.174-4,
1.179-5, 1.194-1, 1.195-1, 1.197-2, 1.248-1, 1.263(a)-1, 1.263(a)-2, 1.263(a)-3, 1.263(a)-4, 1.263(a)-5, 1.263A-1, 1.263A-2, 1.263A-3, 1.263A-4, 1.263A-7, 1.267(a)-
1, 1.280F-6, 1.404(b)-1T, 1.446-1, 1.446-1T, 1.446-2, 1.446-5, 1.446-6, 1.446-7, 1.448-1, 1.448-2, 1.451-1, 1.451-3, 1.451-8, 1.454-1, 1.455-6, 1.460-3, 1.460-4,
1.461-1, 1.461-4, 1.461-5, 1.467-1, 1.471-1, 1.471-2, 1.471-3, 1.471-4, 1.471-5, 1.471-8, 1.472-1, 1.472-2, 1.472-6, 1.472-8, 1.481-1, 1.481-4, 1.709-1, 1.709-2,
1.832-4, 1.832-5, 1.860A-6, 1.861-18, 1.985-5, 1.985-8, 1.1016-3, 1.1245-3, 1.1272-1, 1.1273-1, 1.1273-2, 1.1275-2, 1.1363-2, 1.1374-4, 1.1400L(b)-1, 1.1502-68.)
Rev. Proc. 2022-14
LIST OF AUTOMATIC CHANGES .........................................................................507
SECTION 1. GROSS INCOME (§ 61) .......................................................................507
.01 Up-front Payments for Network Upgrades received by Utilities ...........................................507
SECTION 2. COMMODITY CREDIT LOANS (§ 77) ...........................................................507
.01 Treating amounts received as loans .................................................................507
SECTION 3. TRADE OR BUSINESS EXPENSES (§ 162) .......................................................508
.01 Advances made by a lawyer on behalf of clients .......................................................508
.02 ISO 9000 Costs .................................................................................508
.03 Restaurant or tavern smallwares packages ............................................................508
.04 Timber grower fertilization costs ...................................................................509
.05 Materials and supplies ...........................................................................509
.06 Repair and maintenance costs .....................................................................509
.07 Wireline network asset maintenance allowance and units of property methods of accounting under
Rev. Proc. 2011-27 ..............................................................................509
.08 Wireless network asset maintenance allowance and units of property methods of accounting under
Rev. Proc. 2011-28 ..............................................................................509
.09 Method of accounting under Rev. Proc. 2011-43 for taxpayers in the business of transporting, delivering,
or selling electricity .............................................................................510
.10 Method of accounting under Rev. Proc. 2013-24 for taxpayers in the business of generating steam or
electric power. ..................................................................................510
.11 Cable network asset capitalization methods of accounting under Rev. Proc. 2015-12 ..........................511
SECTION 4. BAD DEBTS (§ 166) ..........................................................................512
.01 Change from reserve method to specific charge-off method ..............................................512
.02 Conformity election by bank after previous election automatically revoked ..................................512
SECTION 5. INTEREST EXPENSE (§
163) AND AMORTIZABLE BOND PREMIUM (§ 171) .........................513
.01 Revocation of § 171(c) election ....................................................................513
.02 Change to comply with § 163(e)(3) .................................................................514
SECTION 6. DEPRECIATION OR AMORTIZATION (§ 56(a)(1), 167, 168, 197, 280F(a), or 1502, OR
FORMER § 56(g)(4)(A), 168, 1400I, 1400L, or 1400N(d)) ............................................515
.01 Impermissible to permissible method of accounting for depreciation or amortization ..........................515
.02 Permissible to permissible method of accounting for depreciation .........................................524
.03 Sale, lease, or financing transactions ................................................................528
.04 Change in general asset account treatment due to a change in the use of MACRS property. . . . . . . . . . . . . . . . . . . . . .529
.05 Change in method of accounting for depreciation due to a change in the use of MACRS property ................531
.06 Depreciation of qualified non-personal use vans and light trucks ..........................................533
.07 Impermissible to permissible method of accounting for depreciation or amortization for disposed depreciable
or amortizable property ..........................................................................534
.08 Tenant construction allowances ....................................................................537
.09 Safe harbor method of accounting for determining the depreciation of certain tangible assets used by wireless
telecommunications carriers under Rev. Proc. 2011-22 ..................................................538

Bulletin No. 2022–7 503 February 14, 2022
.10 Partial dispositions of tangible depreciable assets to which the IRS’s adjustment pertains (§ 168; § 1.168(i)-8) ......539
.11 Depreciation of leasehold improvements (§§ 167, 168, and 197; § 1.167(a)-4) ...............................541
.12 Permissible to permissible method of accounting for depreciation of MACRS property (§ 168; §§ 1.168(i)-1,
1.168(i)-7, and 1.168(i)-8) ........................................................................543
.13 Disposition of a building or structural component (§ 168; § 1.168(i)-8) .....................................548
.14 Dispositions of tangible depreciable assets (other than a building or its structural components)
(§ 168; § 1.168(i)-8) .............................................................................555
.15 Dispositions of tangible depreciable assets in a general asset account (§ 168(i)(4); § 1.168(i)-1) .................560
.16 Summary of certain changes in methods of accounting related to dispositions of MACRS property ...............564
.17 Depreciation of fiber optic transfer node and fiber optic cable used by a cable system operator (§§ 167 and 168) ....566
.18 Late elections or revocation of elections under § 168(k)(5), (7), and (10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .567
.19 Qualified improvement property placed in service after December 31, 2017 (§ 168) ...........................568
.20 Certain late elections under §§ 168 and 1502 or revocation of certain elections under § 168 (§ 168(g)(7),
(k)(5), (k)(7), and (k)(10); §§ 1.168(k)-2 and 1.1502-68) ................................................570
.21 Change in depreciation as a result of applying the additional first year depreciation regulations (§ 168(k);
§§ 1.168(k)-2 and 1.1502-68) ......................................................................572
.22 Depreciation of tangible property under § 168(g) by controlled foreign corporations. ..........................575
SECTION 7. RESEARCH AND EXPERIMENTAL EXPENDITURES (§ 174) .......................................578
.01 Changes to a different method or different amortization period ...........................................578
SECTION 8. ELECTIVE EXPENSING PROVISIONS (§ 179D) ..................................................580
.01 Deduction for Energy Efficient Commercial Buildings (§ 179D) ..........................................580
SECTION 9. COMPUTER SOFTWARE EXPENDITURES (§§ 162, 167, and 197). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .581
.01 Computer software expenditures ...................................................................581
SECTION 10. START-UP EXPENDITURES AND ORGANIZATIONAL FEES (§§ 195, 248 AND 709) ...................582
.01 Start-up expenditures ............................................................................582
.02 Organizational expenditures under § 248 .............................................................583
.03 Organization fees under § 709 .....................................................................584
SECTION 11. CAPITAL EXPENDITURES (§ 263) .............................................................585
.01 Package design costs ............................................................................585
.02 Line pack gas or cushion gas ......................................................................586
.03 Removal costs ..................................................................................586
.04 Distributor commissions ..........................................................................587
.05 Intangibles ....................................................................................588
.06 Rotable spare parts safe harbor method. ..............................................................588
.07 Repairable and reusable spare parts .................................................................589
.08 Tangible property ...............................................................................591
.09 Railroad track structure expenditures ................................................................596
.10 Remodel-refresh safe harbor method ................................................................596
SECTION 12. UNIFORM CAPITALIZATION (UNICAP) METHODS (§ 263A) .....................................600
.01 Certain uniform capitalization (UNICAP) methods used by resellers and reseller-producers .....................600
.02 Certain uniform capitalization (UNICAP) methods used by producers and reseller-producers ...................606
.03 Impact fees ....................................................................................610
.04 Change to capitalizing environmental remediation costs under § 263A .....................................610
.05 Change in allocating environmental remediation costs under § 263A .......................................610
.06 Safe harbor methods under § 263A for certain dealerships of motor vehicles .................................611
.07 Change to not apply § 263A to one or more plants removed from the list of plants that have a preproductive
period in excess of 2 years. ........................................................................612
.08 Change to a reasonable allocation method described in § 1.263A-1(f)(4) for self-constructed assets ..............612
.09 Real property acquired through foreclosure ...........................................................613
.10 Sales-Based Royalties ...........................................................................614
.11 Treatment of Sales-Based Vendor Chargebacks under a Simplified Method ..................................615

February 14, 2022 504 Bulletin No. 2022–7
.12 U.S. ratio method ...............................................................................615
.13 Depletion .....................................................................................618
.14 Interest capitalization ............................................................................619
.15 Change to not apply § 263A to replanting costs for lost or damaged citrus plants pursuant to § 263A(d)(2)(C) ......620
.16 Small business taxpayer exception from requirement to capitalize costs under § 263A .........................621
.17 Recharacterizing costs under the simplified resale method, simplified production method, or the modified
simplified production method ......................................................................622
.18 Revocation of a historic absorption ratio election ......................................................624
.19 Late revocation of elections under § 263A(d)(3) .......................................................625
SECTION 13. LOSSES, EXPENSES AND INTEREST WITH RESPECT TO TRANSACTIONS BETWEEN
RELATED TAXPAYERS (§ 267) ................................................................626
.01 Change to comply with § 267 ......................................................................626
SECTION 14. DEFERRED COMPENSATION (§ 404) ..........................................................626
.01 Deferred compensation ...........................................................................626
.02 Grace period contributions ........................................................................627
SECTION 15. METHODS OF ACCOUNTING (§ 446) ..........................................................628
.01 Change in overall method from the cash method to an accrual method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .628
.02 Multi-year insurance policies for multi-year service warranty contracts .....................................634
.03 Nonaccrual-experience method ....................................................................635
.04 Interest accruals on short-term consumer loans—Rule of 78’s method ......................................636
.05 Film producer’s treatment of certain creative property costs ..............................................637
.06 Deduction of incentive payments to health care providers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .637
.07 Change by bank for uncollected interest. .............................................................638
.08 Change from the cash method to an accrual method for specific items ......................................639
.09 Multi-year service warranty contracts ...............................................................640
.10 Overall cash method for specified transportation industry taxpayers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .641
.11 Change to overall cash/hybrid method for certain banks .................................................643
.12 Change to overall cash method for farmers ...........................................................645
.13 Nonshareholder contributions to capital under § 118 ....................................................646
.14 Debt issuance costs ..............................................................................647
.15 Transfers of interties under the safe harbor described in Notice 2016-36 (§ 118). .............................647
.16 Change to or from the net asset value (NAV) method. ...................................................648
.17 Small business taxpayer changing to overall cash method, or to a method of accounting in which a small
business taxpayer uses an accrual method for purchases and sales of inventories and uses the cash method
for computing all other items of income and expense ...................................................650
SECTION 16. TAXABLE YEAR OF INCLUSION (§ 451) .......................................................652
.01 Accrual of interest on nonperforming loans ...........................................................652
.02 Advance rentals ................................................................................653
.03 State or local income or franchise tax refunds .........................................................653
.04 Capital Cost Reduction Payments ..................................................................654
.05 Credit card annual fees ...........................................................................654
.06 Advance payments ..............................................................................654
.07 Retainages .....................................................................................655
.08 Change in applicable financial statements (AFS) for purposes of applying certain revenue recognition
methods of accounting. ...........................................................................656
.09 Changes in the timing of recognition of income due to the New Standards ..................................661
.10 Changes in the timing of income recognition under § 451(b) and (c) .......................................663
SECTION 17. OBLIGATIONS ISSUED AT DISCOUNT (§
454) ..................................................677
.01 Series E, EE or I U.S. savings bonds ................................................................677

Bulletin No. 2022–7 505 February 14, 2022
SECTION 18. PREPAID SUBSCRIPTION INCOME (§ 455) .....................................................678
.01 Prepaid subscription income .......................................................................678
SECTION 19. SPECIAL RULES FOR LONG-TERM CONTRACTS (§ 460) ........................................679
.01 Small business taxpayer exceptions from requirement to account for certain long-term contracts under § 460
or to capitalize costs under § 263A for certain home construction contracts ..................................679
SECTION 20. TAXABLE YEAR INCURRED (§ 461). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .681
.01 Timing of incurring liabilities for employee compensation ...............................................681
(1) Self-insured employee medical benefits ...........................................................681
(2) Bonuses ....................................................................................682
(3) Vacation pay, sick pay, and severance pay .........................................................682
(4) Commissions ................................................................................683
.02 Timing of incurring liabilities for real property taxes, personal property taxes, state income taxes, and
state franchise taxes .............................................................................684
.03 Timing of incurring liabilities under a workers’ compensation act, tort, breach of contract, or violation of law ......685
.04 Timing of incurring certain liabilities for payroll taxes ..................................................686
.05 Cooperative advertising ..........................................................................687
.06 Timing of incurring certain liabilities for services or insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .688
.07 Rebates and allowances ..........................................................................688
.08 Ratable accrual of real property taxes ...............................................................688
.09 California Franchise Taxes ........................................................................689
.10 Gift cards issued as a refund for returned goods .......................................................689
.11 Timing of incurring liabilities under the recurring item exception to the economic performance rules .............690
.12 Economic performance safe harbor for ratable service contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .690
.13 Timing of incurring inventory costs .................................................................691
SECTION 21. RENT (§ 467) ...............................................................................692
.01 Change from an improper method of inclusion of rental income or expense to inclusion in accordance with
the rent allocation ...............................................................................692
SECTION 22. INVENTORIES (§ 471) .......................................................................693
.01 Cash discounts .................................................................................693
.02 Estimating inventory “shrinkage” ..................................................................694
.03 Qualifying volume-related trade discounts ...........................................................695
.04 Impermissible methods of identification and valuation of inventories. ......................................695
.05 Core Alternative Valuation Method .................................................................697
.06 Replacement cost for automobile dealers’ parts inventory ................................................698
.07 Replacement cost for heavy equipment dealers’ parts inventory ...........................................698
.08 Rotable spare parts ..............................................................................699
.09 Advance Trade Discount Method ...................................................................699
.10 Permissible methods of identification and valuation of inventories. ........................................700
.11 Change in the official used vehicle guide utilized in valuing used vehicles ..................................701
.12 Invoiced advertising association costs for new vehicle retail dealerships ....................................702
.13 Rolling-average method of accounting for inventories ..................................................702
.14 Sales-Based Vendor Chargebacks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .703
.15 Certain changes to the cost complement of the retail inventory method .....................................703
.16 Certain changes within the retail inventory method .....................................................704
.17 Change from currently deducting inventories to permissible methods of identification and valuation
of inventories. ..................................................................................705
.18 Small business taxpayer § 471(c) inventory methods. ...................................................706
.19 Changes within a § 471(c) inventory method. .........................................................709
.20 Change from a small business taxpayer § 471(c) inventory method to an inventory method under § 471(a). ........711
SECTION 23. LAST-IN, FIRST-OUT (LIFO) INVENTORIES (§ 472) ..............................................712
.01 Change from the LIFO inventory method ............................................................712
.02 Determining current-year cost under the LIFO inventory method ..........................................714

February 14, 2022 506 Bulletin No. 2022–7
.03 Alternative LIFO inventory method for retail automobile dealers ..........................................715
.04 Used vehicle alternative LIFO method ...............................................................716
.05 Determining the cost of used vehicles purchased or taken as a trade-in .....................................718
.06 Change to the inventory price index computation (IPIC) method ..........................................718
.07 Changes within the inventory price index computation (IPIC) method ......................................720
.08 Changes to the Vehicle-Pool Method ................................................................721
.09 Changes within the used vehicle alternative LIFO method ...............................................722
.10 Changes to dollar-value pools of manufacturers .......................................................722
SECTION 24. MARK-TO-MARKET ACCOUNTING METHOD (Including § 475) ...................................723
.01 Commodities dealers, securities traders, and commodities traders electing to use the mark-to-market
method of accounting under § 475(e) or (f) ...........................................................723
.02 Taxpayers requesting to change their method of accounting from the mark-to-market method of accounting
described in § 475 to a realization method ............................................................724
SECTION 25. BANK RESERVES FOR BAD DEBTS (§ 585) ....................................................726
.01 Changing from the § 585 reserve method to the § 166 specific charge-off method .............................726
SECTION 26. INSURANCE COMPANIES (§§ 807, 816, 832, 833) ................................................728
.01 Safe harbor method of accounting for premium acquisition expenses .......................................728
.02 Certain changes in method of accounting for organizations to which § 833 applies ............................729
.03 Change in qualification as life/nonlife insurance company under § 816 .....................................730
.04 Changes in basis of computing reserves under § 807(f) ..................................................730
SECTION 27. DISCOUNTED UNPAID LOSSES (§ 846) ........................................................734
.01 Composite method for discounting unpaid losses ......................................................734
SECTION 28. REAL ESTATE MORTGAGE INVESTMENT CONDUIT (REMIC) (§§ 860A-860G) .....................734
.01 REMIC Inducement Fees .........................................................................734
SECTION 29. FUNCTIONAL CURRENCY (§ 985) ............................................................735
.01 Change in functional currency .....................................................................735
SECTION 30. ORIGINAL ISSUE DISCOUNT (§§ 1272, 1273) ...................................................735
.01 De minimis original issue discount (OID) ............................................................735
.02 Proportional method of accounting for OID on a pool of credit card receivables ..............................736
SECTION 31. MARKET DISCOUNT BONDS (§ 1278) .........................................................737
.01 Revocation of § 1278(b) election ...................................................................737
SECTION 32. SHORT-TERM OBLIGATIONS (§ 1281) .........................................................738
.01 Interest income on short-term obligations ............................................................738
.02 Stated interest on short-term loans of cash method banks ................................................739
EFFECTIVE DATE ......................................................................................739
EFFECT ON OTHER DOCUMENTS ........................................................................742
PAPERWORK REDUCTION ACT ..........................................................................743
SIGNIFICANT CHANGES ................................................................................744
DRAFTING INFORMATION
..............................................................................747
LIST OF AUTOMATIC CHANGES CONTACT LIST ...........................................................748

Bulletin No. 2022–7 507 February 14, 2022
This revenue procedure provides the List of Automatic Changes to which the automatic change
procedures in Rev. Proc. 2015-13, 2015-5 I.R.B. 419, as clarified and modified by Rev. Proc.
2015-33, 2015-24 I.R.B. 1067, and as modified by Rev. Proc. 2021-34, 2021-35 I.R.B. 337, by
Rev. Proc. 2021-26, 2021-22 I.R.B. 1163, by Rev. Proc. 2017-59, 2017-48 I.R.B. 543, and by
section 17.02(b) and (c) of Rev. Proc. 2016-1, 2016-1 I.R.B. 1, apply. The definitions in section 3
of Rev. Proc. 2015-13 apply to this revenue procedure.
LIST OF AUTOMATIC CHANGES
SECTION 1. GROSS INCOME (§ 61)
.01 Up-front Payments for Network Upgrades received by Utilities.
(1) Description of change. This change applies to a Utility that wants to change its method of
accounting for Up-front Payments to the safe harbor method described in Rev. Proc. 2005-35,
2005-2 C.B. 76. In general, this change applies to a Utility that receives an Up-front Payment
from a Generator to finance Network Upgrades to the Utility’s Transmission System. For federal
income tax purposes, if an Up-front Payment is made pursuant to an Interconnection Agreement
that satisfies all of the conditions of section 5.02 of Rev. Proc. 2005-35, a Utility may treat
that Up-front Payment as not being taxable income under § 61 when received (the safe harbor
method). In addition, a Utility that uses the safe harbor method is not entitled to any deduction
for its reimbursements of the Up-front Payment. To the extent that Federal Energy Regulatory
Commission (FERC) interest is deductible, it must be properly allocated to the periods in which it
accrues. A Utility using the safe harbor method must comply with all other applicable provisions
of Rev. Proc. 2005-35. See Rev. Proc. 2005-35 for the definitions of certain terms for purposes of
this change.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 1.01 is “91.”
(3) Contact information. For further information regarding a change under this section, contact
William E. Blanchard at (202) 317-3900 (not a toll-free number).
SECTION 2. COMMODITY CREDIT LOANS (§ 77)
.01 Treating amounts received as loans.
(1) Description of change. This change applies to a taxpayer that wants to change its method
of accounting for loans received from the Commodity Credit Corporation from including the loan
amount in gross income for the taxable year in which each loan is received to treating each loan
amount as a loan.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to this change.

February 14, 2022 508 Bulletin No. 2022–7
(3) Manner of making change. This change is made on a cut-off basis and applies only to loans
received from the Commodity Credit Corporation on or after the beginning of the year of change.
Accordingly, a § 481(a) adjustment is neither permitted nor required.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 2.01 is “1.”
(5) Contact information. For further information regarding a change under this section, contact
William Ruane at (202) 317-4718 (not a toll-free number).
SECTION 3. TRADE OR BUSINESS EXPENSES (§ 162)
.01 Advances made by a lawyer on behalf of clients.
(1) Description of change. This change applies to a lawyer who advances money to pay for
costs of litigation or for other expenses on behalf of clients, and who wants to change the method
of accounting for such advances from treating them as deductible business expenses to treating
them as loans to clients. This change applies to cases handled either on a non-contingent or a
contingent fee basis. See Pelton & Gunther, P.C. v. Commissioner, T.C. Memo. 1999-339 (non-
contingent fee); Canelo v. Commissioner, 53 T.C. 217 (1969), aff ’d per curiam, 447 F.2d 484 (9
th

Cir. 1971) (contingent fee).
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 3.01 is “2.”
(3) Contact information. For further information regarding a change under this section, contact
Alicia Lee-Won at (202) 317-7003 (not a toll-free number).
.02 ISO 9000 costs.
(1) Description of change. This change applies to a taxpayer that wants to change its method
of accounting for costs incurred to obtain, maintain, and renew ISO 9000 certification to conform
with Rev. Rul. 2000-4, 2000-1 C.B. 331, as modified by this revenue procedure.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 3.02 is “3.”
(3) Contact information. For further information regarding a change under this section, contact
Justin Grill at (202) 317-7003 (not a toll-free number).
.03 Restaurant or tavern smallwares packages.
(1) Description of change. This change applies to a taxpayer engaged in the trade or business
of operating a restaurant or tavern (within the meaning of section 4.01 of Rev. Proc. 2002-12,
2002-1 C.B. 374) that wants to change its method of accounting for the costs of smallwares to
the smallwares method described in Rev. Proc. 2002-12, as modified by this revenue procedure.

Bulletin No. 2022–7 509 February 14, 2022
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 3.03 is “4.”
(3) Contact information. For further information regarding a change under this section, contact
Renay France at (202) 317-7003 (not a toll-free number).
.04 Timber grower fertilization costs.
(1) Description of change. This change applies to a timber grower that wants to change its
method of accounting to treat post-establishment fertilization costs of an established timber stand
as ordinary and necessary business expenses deductible under § 162. See Rev. Rul. 2004-62,
2004-1 C.B. 1072, as modified by this revenue procedure.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 3.04 is “86.”
(3) Contact information. For further information regarding a change under this section, contact
Alexa Dubert at (202) 317-7003 (not a toll-free number).
.05 Materials and supplies. See section 11.08 of this revenue procedure.
.06 Repair and maintenance costs. See section 11.08 of this revenue procedure.
.07 Wireline network asset maintenance allowance and units of property methods of accounting
under Rev. Proc. 2011-27.
(1) Description of change. This change applies to a wireline telecommunications carrier that
is within the scope of Rev. Proc. 2011-27, 2011-18 I.R.B. 740, and wants to change its treatment
of wireline network asset expenditures to use either (a) the wireline network asset maintenance
allowance method of accounting, or (b) all or some of the units of property described in Rev. Proc.
2011-27.
(2) Section 481(a) adjustment. In general, a change to the wireline network asset maintenance
allowance method of accounting or to use all or some of the units of property specified in Rev.
Proc. 2011-27 requires an adjustment under § 481(a). The § 481(a) adjustment shall not include
any amount attributable to property for which the taxpayer elected to apply the repair allowance
under § 1.167(a)-11(d)(2).
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 3.07 is “158.”
(4) Contact information. For further information regarding a change under this section, contact
Ian Heminsley at (202) 317-5100 (not a toll-free number).
.08 Wireless network asset maintenance allowance and units of property methods of accounting
under Rev. Proc. 2011-28.

February 14, 2022 510 Bulletin No. 2022–7
(1) Description of change. This change applies to a wireless telecommunications carrier that
is within the scope of Rev. Proc. 2011-28, 2011-18 I.R.B. 743, and wants to change its treatment
of wireless network asset expenditures to use either (a) the wireless network asset maintenance
allowance method of accounting, or (b) all or some of the units of property described in Rev. Proc.
2011-28.
(2) Section 481(a) adjustment. In general, a change to the wireless network asset maintenance
allowance method of accounting or to use all or some of the units of property specified in Rev.
Proc. 2011-28 requires an adjustment under § 481(a). The § 481(a) adjustment does not include
any amount attributable to property for which the taxpayer elected to apply the repair allowance
under § 1.167(a)-11(d)(2).
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 3.08 is “159.”
(4) Contact information. For further information regarding a change under this section, contact
Sophia Wang at (202) 317-5100 (not a toll-free number).
.09 Method of accounting under Rev. Proc. 2011-43 for taxpayers in the business of transporting,
delivering, or selling electricity.
(1) Description of change. This change applies to a taxpayer that is within the scope of Rev. Proc.
2011-43, 2011-37 I.R.B. 326, and wants to change its treatment of transmission and distribution
property expenditures to use the method of accounting described in Rev. Proc. 2011-43.
(2) Section 481(a) adjustment. A taxpayer must take the entire net § 481(a) adjustment into
account (whether positive or negative) in computing taxable income for the year of change. The
§ 481(a) adjustment does not include any amount attributable to property for which the taxpayer
elected to apply the repair allowance under § 1.167(a)-11(d)(2) for any taxable year in which the
election was made. For guidance regarding permissible § 481(a) calculation methodologies, see
section 7.02 and Appendix A of Rev. Proc. 2011-43.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 3.09 is “160.”
(4) Contact information. For further information regarding a change under this section, contact
Natasha Mulleneaux at (202) 317-5100 (not a toll-free number).
.10 Method of accounting under Rev. Proc. 2013-24 for taxpayers in the business of generating
steam or electric power.
(1) Description of change. This change applies to a taxpayer that is within the scope of Rev.
Proc. 2013-24, 2013-22 I.R.B. 1142, and wants to change its treatment of generation property
expenditures to use all or some of the unit of property definitions and the corresponding major
component definitions described in Rev. Proc. 2013-24.
(2) Section 481(a) adjustment.

Bulletin No. 2022–7 511 February 14, 2022
(a) A taxpayer must take the entire net § 481(a) adjustment into account (whether positive or
negative) in computing taxable income for the year of change. For guidance regarding the use of
extrapolation in computing a § 481(a) adjustment, see sections 6.02 and Appendix B of Rev. Proc.
2013-24.
(b) A taxpayer changing to this method of accounting must not include in the § 481(a) adjustment
any amount attributable to property for which the taxpayer elected to apply the repair allowance
under § 1.167(a)–11(d)(2) for any taxable year in which the repair allowance election was made.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 3.10 is “182.”
(4) Contact information. For further information regarding a change under this section, contact
Morgan Lawrence at (202) 317-7011 (not a toll-free number).
.11 Cable network asset capitalization methods of accounting under Rev. Proc. 2015-12.
(1) Description of change. This change applies to a cable system operator that is within the
scope of Rev. Proc. 2015-12, 2015-2 I.R.B. 266, and wants to make one or more of the following
changes in method of accounting:
(a) Change its treatment of cable network asset expenditures to the cable network asset
maintenance allowance method of accounting provided in section 5 of Rev. Proc. 2015-12;
(b) Change to use any of the unit of property definitions provided in section 6 of Rev. Proc.
2015-12;
(c) Change to use the specific identification method for installations and customer drop costs
described in section 7.01(1) of Rev. Proc. 2015-12;
(d) Change to use the safe harbor allocation method for installations and customer drop costs
described in section 7.01(2) of Rev. Proc. 2015-12; or
(e) Change to deduct the labor costs associated with installing customer premises equipment
under section 7.02 of Rev. Proc. 2015-12.
(2) Concurrent automatic change. A taxpayer that wants to make one or more changes in method
of accounting pursuant to this section 3.11 and a change to a UNICAP method under section 12 of
this revenue procedure for the same year of change should file a single Form 3115 that includes
all of these changes and must enter the designated automatic accounting method change numbers
for all of these changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making concurrent changes.
(3) Section 481(a) adjustment.
(a) In general, a change to one or more of the changes in method of accounting described in
section 3.11(1) of this revenue procedure requires an adjustment under § 481(a). The § 481(a)

February 14, 2022 512 Bulletin No. 2022–7
adjustment shall not include any amount attributable to property for which the taxpayer elected to
apply the repair allowance under § 1.167(a)-11(d)(2).
(b) Itemized listing on Form 3115. The taxpayer must include on Form 3115 (Rev. December
2018), Part IV, line 26, the total § 481(a) adjustment for all changes in methods of accounting
being made. If the taxpayer is making more than one change in method of accounting under Rev.
Proc. 2015-12, the taxpayer must include on an attachment to Form 3115:
(i) the information required by Part IV, line 26 for each change in method of accounting
(including the amount of the § 481(a) adjustment for each change in method of accounting, which
includes the portion of the § 481(a) adjustment attributable to UNICAP);
(ii) the information required by Part II, line 14 of Form 3115 that is associated with each change;
and
(iii) the citation to the paragraph of Rev. Proc. 2015-12 that provides for each proposed method
of accounting.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to a method of accounting provided in section 5
or 6 of Rev. Proc. 2015-12 is “208.” The designated automatic accounting method change number
for a change to a method of accounting provided in section 7 of Rev. Proc. 2015-12 is “209.”
(5) Contact information. For further information regarding a change under this section, contact
Merrill Feldstein at (202) 317-5100 (not a toll-free number).
SECTION 4. BAD DEBTS (§ 166)
.01 Change from reserve method to specific charge-off method.
(1) Description of change. This change applies to a taxpayer (other than a bank as defined in
§ 585(a)(2)) that wants to change its method of accounting for bad debts from a reserve method (or
other improper method) to a specific charge-off method that complies with § 166. For procedures
applicable to banks, see § 585(c) and the regulations thereunder and section 25 of this revenue
procedure.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 4.01 is “5.”
(3) Contact information. For further information regarding a change under this section, contact
Renay France at (202) 317-7003 (not a toll-free number).
.02 Conformity election by bank after previous election automatically revoked.
(1) Description of change. This change applies to a bank that wants to change its method of
accounting for bad debts by making the conformity election under § 1.166-2(d)(3)(iii)(C)(3).

Bulletin No. 2022–7 513 February 14, 2022
(2) Applicability. This change only applies to a bank (as defined in § 1.166-2(d)(4)(i)) that:
(a) is subject to supervision by Federal authorities, or by state authorities maintaining
substantially equivalent standards;
(b) has previously adopted or elected to change to the method of accounting for bad debts
described in § 1.166-2(d)(3);
(c) has had that previous election automatically revoked under § 1.166-2(d)(3)(iv)(C);
(d) meets the express determination requirement of § 1.166-2(d)(3)(iii)(D) for the year of
change; and
(e) now seeks the consent of the Commissioner to make an election under § 1.166-2(d)(3)(iii)
(C)(3).
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to this change.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 4.02 is “211.”
(5) Contact information. For further information regarding a change under this section, contact
K. Scott Brown at (202) 317-6945 (not a toll-free number).
SECTION 5. INTEREST EXPENSE (§163) AND AMORTIZABLE BOND PREMIUM (§ 171)
.01 Revocation of § 171(c) election.
(1) Description of change. This change applies to a taxpayer that wants to change its method
of accounting for amortizable bond premium by revoking its § 171(c) election. Under § 171(c), a
taxpayer that holds certain taxable bonds may elect to amortize any bond premium on the bonds in
accordance with regulations prescribed by the Secretary. Sections 1.171-1 through 1.171-5 provide
rules relating to the amortization of bond premium by a taxpayer. Section 1.171-4 provides the
procedures to make a § 171(c) election to amortize bond premium.
(2) Revocation of election. The revocation of a § 171(c) election applies to all taxable bonds
that are held by the taxpayer on the first day of the first taxable year for which the revocation is
effective (year of change), and to all taxable bonds that are subsequently acquired by the taxpayer.
(3) Manner of making change. This change is made using a cut-off basis and applies only
to taxable bonds held on or after the beginning of the year of change. Accordingly, a § 481(a)
adjustment is neither permitted nor required.

February 14, 2022 514 Bulletin No. 2022–7
Under the cut-off basis, for taxable bonds held at the beginning of the year of change, the
taxpayer may not amortize any remaining bond premium on the bonds. Because the cut-off basis
is prescribed for this change, the basis of any bond, adjusted for amounts previously amortized
during the period of the election, is not affected by the revocation.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 5.01 is “16.”
(5) Additional requirements. On a statement attached to the Form 3115, the taxpayer must
provide:
(a) the reason(s) for revoking the election; and
(b) a description of the method by which, and the date on which, the taxpayer made the § 171(c)
election that is proposed to be revoked.
(6) Audit protection. Any audit protection applicable to this change under section 8 of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not preclude the Commissioner from examining the method
used by the taxpayer to determine the amount of amortizable bond premium under § 171(b) for a
taxable year prior to the year of change.
(7) Contact information. For further information regarding a change under this section, contact
William E. Blanchard at (202) 317-3900 (not a toll-free number).
.02 Change to comply with § 163(e)(3).
(1) Description of change. This change applies to a taxpayer that wants to change its method
or methods of accounting to comply with the requirements of § 163(e)(3), which defers certain
deductions attributable to original issue discount debt instruments held by related foreign persons.
Any portion of the original issue discount will not be allowable as a deduction to the U.S. person
issuer until paid.
(2) Accelerated § 481(a) adjustment period in certain situations. In addition to the circumstances
set forth in section 7.03(4) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, the § 481 adjustment
period provided in section 7.03 of Rev. Proc. 2015-13 will be accelerated for a U.S. person with
a remaining balance of a § 481(a) adjustment that arose by reason of a change in method of
accounting described in this section 5.02 if a debt instrument subject to the change is paid off,
retired, or significantly modified within the meaning of § 1.1001-3 prior to the end of the § 481(a)
adjustment period. The portion of the remaining § 481(a) adjustment attributable to the debt
instrument must be taken into account in the taxable year the debt instrument is paid off, retired,
or significantly modified within the meaning of § 1.1001-3.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 5.02 is “212.”
(4) Contact information. For further information regarding a change under this section, contact
Anisa Afshar at (202) 317-6934 (not a toll-free number).

Bulletin No. 2022–7 515 February 14, 2022
SECTION 6. DEPRECIATION OR AMORTIZATION (§ 56(a)(1), 167, 168, 197, 280F(a), or 1502, OR FORMER § 56(g)(4)(A),
168, 1400I, 1400L, or 1400N(d))
.01 Impermissible to permissible method of accounting for depreciation or amortization.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to change from an impermissible
to a permissible method of accounting for depreciation or amortization (depreciation) for any
item of depreciable or amortizable property under the taxpayer’s present or proposed method of
accounting:
(i) for which the taxpayer used the impermissible method of accounting in at least two taxable
years immediately preceding the year of change (but see section 6.01(1)(b) of this revenue
procedure for property placed in service in the taxable year immediately preceding the year of
change);
(ii) for which the taxpayer is making a change in method of accounting under § 1.446-1(e)(2)
(ii)(d);
(iii) for which depreciation is determined under § 56(a)(1), § 56(g)(4)(A) (as in effect on the day
before the date of enactment of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly
referred to as the Tax Cuts and Jobs Act (TCJA)), § 167, §168, §197, §1400I, or §1400L(c), under
§ 168 prior to its amendment in 1986 (former § 168), or under any additional first year depreciation
deduction provision of the Code (for example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d)); and
(iv) that is owned by the taxpayer at the beginning of the year of change (but see section 6.07 of
this revenue procedure for property disposed of before the year of change).
(b) Taxpayer has not adopted a method of accounting for the item of property. If a taxpayer does
not satisfy section 6.01(1)(a)(i) of this revenue procedure for an item of depreciable or amortizable
property because this item of property is placed in service by the taxpayer in the taxable year
immediately preceding the year of change (“1-year depreciable property”), the taxpayer may
change from the impermissible method of determining depreciation to the permissible method
of determining depreciation for the 1-year depreciable property by filing a Form 3115 for this
change, provided the § 481(a) adjustment reported on the Form 3115 includes the amount of any
adjustment that is attributable to all property (including the 1-year depreciable property) subject
to the Form 3115. Alternatively, the taxpayer may change from the impermissible method of
determining depreciation to the permissible method of determining depreciation for a 1-year
depreciable property by filing an amended federal income tax return, or an administrative
adjustment request under § 6227 (AAR), as applicable, for the property’s placed-in-service year
prior to the date the taxpayer files its federal income tax return for the taxable year succeeding the
placed-in-service year.
(c) Inapplicability. This change does not apply to:

February 14, 2022 516 Bulletin No. 2022–7
(i) any property to which § 1016(a)(3) (regarding property held by a tax-exempt organization)
applies;
(ii) a taxpayer that is required under § 263A and the regulations thereunder to capitalize the costs
with respect to which the taxpayer wants to change its method of accounting under this section
6.01 if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its
method to capitalize these costs in conjunction with a change to a UNICAP method under section
12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable);
(iii) any property for which a taxpayer is making a change in depreciation under § 1.446-1(e)
(2)(ii)(d)(2)(vi) or (vii);
(iv) any property subject to § 167(g) regarding property depreciated under the income forecast
method;
(v) any § 1250 property that a taxpayer is reclassifying to an asset class of Rev. Proc. 87-56,
1987-2 C.B. 674 (as clarified and modified by Rev. Proc. 88-22, 1988-1 C.B. 785), or Rev. Proc.
83-35, 1983-1 C.B. 745, as appropriate, that does not explicitly include § 1250 property (for
example, asset class 57.0, Distributive Trades and Services);
(vi) any property for which a taxpayer is revoking a timely valid election, or making a late
election, under § 167, § 168, § 179, §1400I, § 1400L(c), former § 168, § 13261(g)(2) or (3) of
the Revenue Reconciliation Act of 1993 (1993 Act), 1993-3 C.B. 1, 128 (relating to amortizable
§ 197 intangibles), or any additional first year depreciation deduction provision of the Code (for
example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d)). A taxpayer may request consent to
revoke or make the election by submitting a request for a letter ruling under Rev. Proc. 2022-1,
2022-1 I.R.B. 1 (or successor). However, if a taxpayer is revoking or making an election under
§ 179, see § 179(c) and § 1.179-5. See § 1.446-1(e)(2)(ii)(d)(3)(iii);
(vii) any property for which depreciation is determined under § 56(g)(4)(A) (as in effect on
the day before the date of enactment of the TCJA) or § 167 (other than under § 168, § 1400I,
§ 1400L(c), former § 168, or any additional first year depreciation deduction provision of the
Code (for example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d))) and a taxpayer is changing the
useful life of the property. A change in the useful life of property is corrected by adjustments in the
applicable taxable year provided under § 1.446-1(e)(2)(ii)(d)(5)(iv). However, this section 6.01(1)
(c)(vii) does not apply if the taxpayer is changing to or from a useful life, recovery period, or
amortization period that is specifically assigned by the Code (for example, § 167(f)(1), § 168(c)),
the regulations thereunder, or other guidance published in the Internal Revenue Bulletin and,
therefore, this change is a change in method of accounting (unless section 6.01(1)(c)(xv) of this
revenue procedure applies). See § 1.446-1(e)(2)(ii)(d)(3)(i);
(viii) any depreciable property for which the use changes in the hands of the same taxpayer.
See § 1.446-1(e)(2)(ii)(d)(3)(ii). But see sections 6.04 and 6.05 of this revenue procedure for
changing to the methods of accounting provided in § 1.168(i)-1(c)(2)(ii)(I) or § 1.168(i)-1(h)(2),
and § 1.168(i)-4, respectively;
(ix) any property for which depreciation is determined in accordance with § 1.167(a)-11
(regarding the Class Life Asset Depreciation Range System (ADR));
(x) any change in method of accounting involving a change from deducting the cost or other
basis of any property as an expense to capitalizing and depreciating the cost or other basis, or vice

Bulletin No. 2022–7 517 February 14, 2022
versa (but see section 11.08 of this revenue procedure for making such a change in method of
accounting under the final tangible property regulations);
(xi) any change in method of accounting involving a change from one permissible method of
accounting for the property to another permissible method of accounting for the property. For
example:
(A) a change from the straight-line method of depreciation to the income forecast method of
depreciating for videocassettes. See Rev. Rul. 89-62, 1989-1 C.B. 78; or
(B) a change from charging the depreciation reserve with costs of removal and crediting the
depreciation reserve with salvage proceeds to deducting costs of removal as an expense (provided
the costs of removal are not required to be capitalized under any provision of the Code, such as
§ 263(a)) and including salvage proceeds in taxable income (see section 6.02 of this revenue
procedure for making this change for property for which depreciation is determined under § 167);
(xii) any change in method of accounting involving both a change from treating the cost or
other basis of the property as nondepreciable or nonamortizable property to treating the cost or
other basis of the property as depreciable or amortizable property and the adoption of a method
of accounting for depreciation requiring an election under § 167, § 168, §1400I, § 1400L(c),
former § 168, § 13261(g)(2) or (3) of the 1993 Act, or any additional first year depreciation
deduction provision of the Code (for example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d)) (for
example, a change in the treatment of the space consumed in landfills placed in service in 2006
from nondepreciable to depreciable property (assuming section 6.01(1)(c)(xiii) of this revenue
procedure does not apply) and the making of an election under §168(f)(1) to depreciate this
property under the unit-of-production method of depreciation under § 167);
(xiii) any change in method of accounting for any item of income or deduction other than
depreciation, even if the change results in a change in computing depreciation under § 1.446-
1(e)(2)(ii)(d)(2)(i), (ii), (iii), (iv), (v), (vi), (vii), or (viii). For example, a change in method of
accounting involving:
(A) a change in inventory costs (for example, when property is reclassified from inventory
property to depreciable property, or vice versa) (but see section 11.02 of this revenue procedure
for making a change in method of accounting from inventory property to depreciable property
for unrecoverable line pack gas or unrecoverable cushion gas, and section 11.06 of this revenue
procedure for making a change in method of accounting from inventory property to depreciable
property for rotable spare parts); or
(B) a change in the character of a transaction from sale to lease, or vice versa (but see section
6.03 of this revenue procedure for making this change);
(xiv) a change from determining depreciation under § 168 to determining depreciation under
former § 168 for any property subject to the transition rules in § 203(b) or § 204(a) of the Tax
Reform Act of 1986, 1986-3 (Vol. 1) C.B. 1, 60-80;
(xv) any change in the placed-in-service date of a depreciable or amortizable property. This
change is corrected by adjustments in the applicable taxable year provided under § 1.446-1(e)(2)
(ii)(d)(5)(v);

February 14, 2022 518 Bulletin No. 2022–7
(xvi) any property for which the taxpayer has claimed a federal income tax credit (e.g., the
rehabilitation credit under § 47);
(xvii) any qualified improvement property, as defined in § 168(e)(6), placed in service by the
taxpayer after December 31, 2017, to which section 6.19 of this revenue procedure applies;
(xviii) any property to which section 4 or 5 of Rev. Proc. 2020-22, 2020-18 I.R.B. 745, applies.
(See sections 4.02 and 4.03, or 5.02 of Rev. Proc. 2020-22, as applicable, for making any changes
to depreciation for such property.);
(xix) any change in method of accounting to which section 6.21 of this revenue procedure
applies; or
(xx) the change in method of accounting specified in section 6.22 of this revenue procedure.
However, an original Form 3115 for such change in method of accounting may be filed under this
section 6.01 instead of section 6.22 of this revenue procedure if the duplicate copy was properly
filed under this section 6.01 before May 11, 2021.
(2) Certain eligibility rules inapplicable. The eligibility rule in section 5.01(1)(d) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to this change. If during any of the five taxable years
ending with the year of change, a taxpayer requested or made a change in method of accounting
from expensing to capitalizing, or vice versa, the cost or other basis of an asset, the eligibility rule
in section 5.01(1)(f) of Rev. Proc. 2015-13 is not applicable to a change under this section 6.01
for that same asset.
(3) Additional requirements. A taxpayer also must comply with the following:
(a) Permissible method of accounting for depreciation. A taxpayer must change to a permissible
method of accounting for depreciation for the item of depreciable or amortizable property. The
permissible method of accounting is the same method that determines the depreciation allowable
for the item of property (as provided in section 6.01(7) of this revenue procedure).
(b) Statements required. A taxpayer (including a qualified small taxpayer as defined in section
6.01(4)(b) of this revenue procedure) must provide the following statements, if applicable, and
attach them to the completed Form 3115:
(i) a detailed description of the present and proposed methods of accounting. A general
description of these methods of accounting is unacceptable (for example, MACRS to MACRS,
erroneous method to proper method, claiming less than the depreciation allowable to claiming the
depreciation allowable);
(ii) to the extent not provided elsewhere on the Form 3115, a statement describing the taxpayer’s
business or income-producing activities. Also, if the taxpayer has more than one business or
income-producing activity, a statement describing the taxpayer’s business or income-producing
activity in which the item of property at issue is primarily used by the taxpayer;
(iii) to the extent not provided elsewhere on the Form 3115, a statement of the facts and law
supporting the proposed method of accounting, new classification of the item of property, and new
asset class in, as appropriate, Rev. Proc. 87-56 or Rev. Proc. 83-35. If the taxpayer is the owner
and lessor of the item of property at issue, the statement of the facts and law supporting the new

Bulletin No. 2022–7 519 February 14, 2022
asset class also must describe the business or income-producing activity in which that item of
property is primarily used by the lessee;
(iv) to the extent not provided elsewhere on the Form 3115, a statement identifying the year in
which the item of property was placed in service by the taxpayer;
(v) if any item of property is public utility property within the meaning of § 168(i)(10) or former
§ 167(I)(3)(A), as applicable, a statement providing that the taxpayer agrees to the following
additional terms and conditions:
(A) a normalization method of accounting (within the meaning of former § 167(I)(3)(G), former
§ 168(e)(3)(B), or § 168(i)(9), as applicable) will be used for the public utility property subject to
the Form 3115;
(B) as of the beginning of the year of change, the taxpayer will adjust its deferred tax reserve
account or similar reserve account in the taxpayer’s regulatory books of account by the amount of
the deferral of federal income tax liability associated with the § 481(a) adjustment applicable to
the public utility property subject to the Form 3115; and
(C) within 30 calendar days of filing the federal income tax return for the year of change,
the taxpayer will provide a copy of the completed Form 3115 to any regulatory body having
jurisdiction over the public utility property subject to the Form 3115;
(vi) if the taxpayer is changing the classification of an item of § 1250 property placed in service
after August 19, 1996, to a retail motor fuels outlet under § 168(e)(3)(E)(iii), a statement containing
the following representation: “For purposes of § 168(e)(3)(E)(iii) of the Internal Revenue Code,
the taxpayer represents that (A) 50 percent or more of the gross revenue generated from the item of
§ 1250 property is from the sale of petroleum products (not including gross revenue from related
services, such as the labor cost of oil changes and gross revenue from the sale of nonpetroleum
products such as tires and oil filters), (B) 50 percent or more of the floor space in the item of
property is devoted to the sale of petroleum products (not including floor space devoted to related
services, such as oil changes and floor space devoted to nonpetroleum products such as tires and
oil filters), or (C) the item of § 1250 property is 1,400 square feet or less.”; and
(vii) if the taxpayer is changing the classification of an item of property from § 1250 property
to § 1245 property under § 168 or former § 168, a statement of the facts and law supporting
the new § 1245 property classification, and a statement containing the following representation:
“Each item of depreciable property that is the subject of the Form 3115 filed under section 6.01
of Rev. Proc. 2022-14 for the year of change beginning [Insert the date], and that is reclassified
from [Insert, as appropriate: nonresidential real property, residential rental property, qualified
leasehold improvement property, qualified restaurant property, qualified retail improvement
property, qualified improvement property as defined in § 168(e)(6) (as amended by § 13204 of the
TCJA), 19-year real property, 18-year real property, or 15-year real property] to an asset class
of [Insert, as appropriate, either: Rev. Proc. 87-56, 1987-2 C.B. 674, or Rev. Proc. 83-35, 1983-
1 C.B. 745] that does not explicitly include § 1250 property, is § 1245 property for depreciation
purposes.”
(4) Reduced filing requirement for qualified small taxpayers.

February 14, 2022 520 Bulletin No. 2022–7
(a) In general. A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue
procedure, is required to complete only the following information on Form 3115 (Rev. December
2018) to make this change:
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13, 15b, 16c, 17, and 19;
(v) Part IV, all lines except line 25; and
(vi) Schedule E.
(b) Definition of qualified small taxpayer. A “qualified small taxpayer” is a taxpayer whose
average annual gross receipts, as determined under § 1.263(a)-3(h)(3), for the three preceding
taxable years is less than or equal to $10,000,000.
(5) Section 481(a) adjustment. Because the adjusted basis of the property is changed as a result
of a method change made under this section 6.01 (see section 6.01(6) of this revenue procedure),
items are duplicated or omitted. Accordingly, this change is made with a § 481(a) adjustment. This
adjustment may result in either a negative § 481(a) adjustment (a decrease in taxable income) or
a positive § 481(a) adjustment (an increase in taxable income) and may be a different amount
for regular tax, alternative minimum tax, and adjusted current earnings purposes. This § 481(a)
adjustment equals the difference between the total amount of depreciation taken into account in
computing taxable income for the property under the taxpayer’s present method of accounting
(including the amount attributable to any property described in section 6.01(1)(b) of this revenue
procedure that is included in the taxpayer’s Form 3115), and the total amount of depreciation
allowable for the property under the taxpayer’s proposed method of accounting (as determined
under section 6.01(7) of this revenue procedure, and including the amount attributable to any
property described in section 6.01(1)(b) of this revenue procedure that is included in the taxpayer’s
Form 3115), for open and closed years prior to the year of change. However, the amount of
the § 481(a) adjustment must be adjusted to account for the proper amount of the depreciation
allowable that is required to be capitalized under any provision of the Code (for example, § 263A)
at the beginning of the year of change.
(6) Basis adjustment. As of the beginning of the year of change, the basis of depreciable
property to which this section 6.01 applies must reflect the reductions required by § 1016(a)(2) for
the depreciation allowable for the property (as determined under section 6.01(7) of this revenue
procedure).
(7) Meaning of depreciation allowable.
(a) In general. Section 6.01(7) of this revenue procedure provides the amount of the depreciation
allowable determined under § 56(a)(1), § 56(g)(4)(A) (as in effect on the day before the date of
enactment of the TCJA), § 167, § 168, or § 197, or former § 168, § 1400I, or § 1400L(c). This
amount, however, may be limited by other provisions of the Code (for example, § 280F).

Bulletin No. 2022–7 521 February 14, 2022
(b) Section 56(a)(1) property. The depreciation allowable for any taxable year for property for
which depreciation is determined under § 56(a)(1) is determined by using the depreciation method,
recovery period, and convention provided for under § 56(a)(1) that applies for the property’s
placed-in-service date.
(c) Section 56(g)(4)(A) property. The depreciation allowable for any taxable year for property
for which depreciation is determined under § 56(g)(4)(A) (as in effect on the day before the date of
enactment of the TCJA) is determined by using the depreciation method, recovery period or useful
life, as applicable, and convention provided for under § 56(g)(4)(A) (as in effect on the day before
the date of enactment of the Act) that applies for the property’s placed-in-service date.
(d) Section 167 property. Generally, for any taxable year, the depreciation allowable for property
for which depreciation is determined under § 167, is determined either:
(i) under the depreciation method adopted by the taxpayer for the property; or
(ii) if that depreciation method does not result in a reasonable allowance for depreciation
or the taxpayer has not adopted a depreciation method for the property, under the straight-line
depreciation method.
For determining the estimated useful life and salvage value of the property, see § 1.167(a)-1(b)
and (c), respectively.
The depreciation allowable for any taxable year for property subject to § 167(f) (regarding
certain property excluded from § 197) is determined by using the depreciation method and useful
life prescribed in § 167(f). If computer software is depreciated under § 167(f)(1) and is qualified
property (as defined in § 168(k)(2) as amended by the TCJA and § 1.168(k)-2), qualified property
(as defined in § 168(k)(2) as in effect on the day before the date of enactment of the TCJA and
§ 1.168(k)-1), 50-percent bonus depreciation property (as defined in § 168(k)(4) (as in effect on
the day before the date of enactment of the Economic Stimulus Act of 2008, Pub. L. No. 110-185,
122 Stat. 613 (February 13, 2008)) and § 1.168(k)-1), qualified disaster assistance property (as
defined in § 168(n)(2) (as in effect on the day before the date of enactment of the Tax Technical
Corrections Act of 2018, Pub. L. No. 115-141, Division U, 132 Stat. 1211 (March 23, 2018)),
qualified New York Liberty Zone (Liberty Zone) property (as defined in § 1400L(b)(2) (as in
effect on the day before the date of enactment of the Tax Technical Corrections Act of 2018) and
§ 1.1400L(b)-1), qualified Gulf Opportunity Zone (GO Zone) property (as defined in § 1400N(d)
(2) (as in effect on the day before the date of enactment of the Tax Technical Corrections Act of
2018) and sections 2.02 and 2.03 of Notice 2006-77, 2006-2 C.B. 590, as clarified, modified, and
amplified by Notice 2007-36, 2007-1 C.B. 1000), specified Gulf Opportunity Zone extension
property (GO Zone extension property) (as defined in § 1400N(d)(6) (as in effect on the day
before the date of enactment of the Tax Technical Corrections Act of 2018) and section 4 of Notice
2007-36), or qualified Recovery Assistance (RA) property (as defined in sections 2.02 and 2.03
of Notice 2008-67, 2008-32 I.R.B. 307), the depreciation allowable for that computer software
under § 167(f)(1) is also determined by taking into account the additional first year depreciation
deduction provided by § 168(k), § 168(n) (as in effect on the day before the date of enactment of
the Tax Technical Corrections Act of 2018), § 1400L(b) (as in effect on the day before the date
of enactment of the Tax Technical Corrections Act of 2018), or § 1400N(d) (as in effect on the
day before the date of enactment of the Tax Technical Corrections Act of 2018), or by § 15345(a)
(1) and (d)(1) of the Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-246, 122 Stat.
1651 (June 18, 2008), as applicable, unless the taxpayer made a timely valid election not to deduct
any additional first year depreciation for the computer software.

February 14, 2022 522 Bulletin No. 2022–7
(e) Section 168 property. The depreciation allowable for any taxable year for property for which
depreciation is determined under § 168, is determined as follows:
(i) by using either:
(A) the general depreciation system in § 168(a); or
(B) the alternative depreciation system in § 168(g) if the property is required to be depreciated
under the alternative depreciation system pursuant to § 168(g)(1) or other provisions of the Code
(for example, property described in § 263A(e)(2)(A) or § 280F(b)(1)). Property required to be
depreciated under the alternative depreciation system pursuant to § 168(g)(1) includes property in
a class (as set out in § 168(e)) for which the taxpayer made a timely valid election under § 168(g)
(7);
(ii) if the property is qualified property, 50-percent bonus depreciation property, qualified disaster
assistance property, Liberty Zone property, GO Zone property, GO Zone extension property, or
RA property, by also taking into account the additional first year depreciation deduction provided
by § 168(k), § 168(n) (as in effect on the day before the date of enactment of the Tax Technical
Corrections Act of 2018), § 1400L(b) (as in effect on the day before the date of enactment of the
Tax Technical Corrections Act of 2018), or § 1400N(d) (as in effect on the day before the date of
enactment of the Tax Technical Corrections Act of 2018), or by § 15345(a)(1) and (d)(1) of the
Food, Conservation, and Energy Act of 2008, as applicable, unless the taxpayer made a timely
valid election not to deduct the additional first year depreciation (or made a deemed election not
to deduct the additional first year depreciation; for further guidance, see, for example, Rev. Proc.
2002-33, 2002-1 C.B. 963, Rev. Proc. 2003-50, 2003-2 C.B. 119, Notice 2006-77, Notice 2008-
67, section 5 of Rev. Proc. 2011-26, 2011-16 I.R.B. 664, Rev. Proc. 2015-48, 2015-40 I.R.B. 469,
or Rev. Proc. 2019-33, 2019-34 I.R.B. 662) for the class of property (as defined in § 1.168(k)-2(f)
(1)(ii), § 1.168(k)-1(e)(2), § 1.1400L(b)-1(e)(2), or section 4.02 of Notice 2006-77, as applicable)
in which that property is included;
(iii) if the property is qualified second generation biofuel plant property (as defined in § 168(l)
(2) and (3)) or qualified cellulosic biofuel plant property (as defined in former § 168(l)(2) and (3)),
by also taking into account the additional first year depreciation deduction provided by § 168(l)(1),
unless the taxpayer made a timely valid election not to deduct the additional first year depreciation
for the property; and
(iv) if the property is qualified reuse and recycling property (as defined in § 168(m)(2)), by
also taking into account the additional first year depreciation deduction provided by § 168(m)(1),
unless the taxpayer made a timely valid election not to deduct the additional first year depreciation
for the property.
(f) Section 197 property. The amortization allowable for any taxable year for an amortizable
§ 197 intangible (including any property for which a timely election under § 13261(g)(2) of the
1993 Act was made) is determined in accordance with § 1.197-2(f).
(g) Former § 168 property. The depreciation allowable for any taxable year for property subject
to former § 168 is determined by using either:
(i) the accelerated method of cost recovery applicable to the property (for example, for 5-year
property, the recovery method under former § 168(b)(1)); or

Bulletin No. 2022–7 523 February 14, 2022
(ii) the straight-line method applicable to the property if the property is required to be depreciated
under the straight-line method (for example, property described in former § 168(f)(2) or former
§ 280F(b)(2)) or if the taxpayer elected to determine the depreciation allowance under the optional
straight-line percentage (for example, the straight-line method in former § 168(b)(3)).
(h) Qualified revitalization building. The depreciation allowable for any taxable year for any
qualified revitalization building (as defined in § 1400I(b)(1) (as in effect on the day before the date
of enactment of the Tax Technical Corrections Act of 2018)) for which the taxpayer has made a
timely valid election under § 1400I(a) is determined as follows:
(i) if the taxpayer elected to deduct one-half of any qualified revitalization expenditures (as
defined in § 1400I(b)(2) and as limited by § 1400I(c) (as in effect on the day before the date
of enactment of the Tax Technical Corrections Act of 2018)) chargeable to a capital account
with respect to the qualified revitalization building for the taxable year in which the building
is placed in service by the taxpayer, the depreciation allowable for the qualified revitalization
building’s placed-in-service year is equal to one-half of the qualified revitalization expenditures
for the building and the depreciation allowable for the remaining depreciable basis of the qualified
revitalization building for its placed-in-service year and subsequent taxable years is determined
using the general depreciation system of § 168(a) or the alternative depreciation system of
§ 168(g), as applicable; or
(ii) if the taxpayer elected to amortize all of the qualified revitalization expenditures chargeable
to a capital account with respect to the qualified revitalization building ratably over the 120-month
period beginning with the month in which the building is placed in service, the depreciation
allowable for the qualified revitalization expenditures is determined in accordance with this
election and the depreciation allowable for the remaining depreciable basis of the qualified
revitalization building is determined using the general depreciation system of § 168(a) or the
alternative depreciation system of § 168(g), as applicable.
(i) Qualified New York Liberty Zone leasehold improvement property. The depreciation allowable
for any taxable year for qualified New York Liberty Zone leasehold improvement property (as
defined in § 1400L(c)(2) (as in effect on the day before the date of enactment of the Tax Technical
Corrections Act of 2018)) is determined by using the depreciation method and recovery period
prescribed in § 1400L(c) (as in effect on the day before the date of enactment of the Tax Technical
Corrections Act of 2018) unless the taxpayer made a timely valid election under § 1400L(c)(5) (as
in effect on the day before the date of enactment of the Tax Technical Corrections Act of 2018)
not to use that recovery period.
(8) Concurrent automatic change.
(a) A taxpayer making this change for more than one asset for the same year of change should
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all
the changes included in that Form 3115. If one or more of the changes in that single Form 3115
generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a
positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment
for all the changes that are included in that Form 3115 generating such adjustment and a single
positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating
such adjustment. For example, a taxpayer files a single Form 3115 to change the depreciation
methods, recovery periods, and/or conventions under § 168(a) resulting from the reclassification
of two computers from nonresidential real property to 5-year property, one office desk from
nonresidential real property to 7-year property, and two office desks from 5-year property to
7-year property. On that Form 3115, the taxpayer must provide either (i) a single net § 481(a)
adjustment that covers all the changes resulting from all of these reclassifications, or (ii) a single

February 14, 2022 524 Bulletin No. 2022–7
negative § 481(a) adjustment that covers the changes resulting from the reclassifications of the
two computers and one office desk from nonresidential real property to 5-year property and 7-year
property, respectively, and a single positive § 481(a) adjustment that covers the changes resulting
from the reclassifications of the two office desks from 5-year property to 7-year property.
(b) A taxpayer making both this change and a change to a UNICAP method under section
12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of
change should file a single Form 3115 for both changes, in which case the taxpayer must enter
the designated automatic accounting method change numbers for both changes on the appropriate
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making
concurrent changes. For example, a qualified small taxpayer must include on the single Form
3115 the information required by section 6.01(4)(a) of this revenue procedure for this change and
the information required by the lines on Form 3115 applicable to the UNICAP method change,
including Part II line 14 and 15, Part IV, and Schedule D, and must include a separate response
to each line on Form 3115 that is applicable to both changes (such as Part II lines 6b, 7, 8b, 14,
and, as applicable for this change, Part IV) for which the taxpayer’s response is different for this
change and the change to a UNICAP method.
(9) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 6.01 is “7.”
(10) Contact information. For further information regarding a change under this section, contact
James Liechty at (202) 317-7005 (not a toll-free number).
.02 Permissible to permissible method of accounting for depreciation.
(1) Description of change. This change applies to a taxpayer that wants to change from a
permissible method of accounting for depreciation under § 56(g)(4)(A)(iv) (as in effect on the day
before the date of enactment of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly
referred to as the Tax Cuts and Jobs Act (TCJA)) or § 167 to another permissible method of
accounting for depreciation under § 56(g)(4)(A)(iv) (as in effect on the day before the date of
enactment of the TCJA) or § 167. Pursuant to § 1.167(a)-7(a) and (c), a taxpayer may account for
depreciable property either by treating each individual asset as an account or by combining two
or more assets in a single account and, for each account, depreciation allowances are computed
separately.
(2) Applicability.
(a) In general. This change applies to any taxpayer wanting to make a change in method of
accounting for depreciation specified in section 6.02(4) of this revenue procedure for the property
in an account:
(i) for which the present and proposed methods of accounting for depreciation specified in
section 6.02(4) of this revenue procedure are permissible methods for the property under § 56(g)
(4)(A)(iv) (as in effect on the day before the date of enactment of the TCJA) or § 167; and
(ii) that is owned by the taxpayer at the beginning of the year of change.
(b) Inapplicability. This change does not apply to:

Bulletin No. 2022–7 525 February 14, 2022
(i) a taxpayer that is required under § 263A and the regulations thereunder to capitalize the costs
with respect to which the taxpayer wants to change its method of accounting under this section
6.02 if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its
method to capitalize these costs in conjunction with a change to a UNICAP method under section
12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable);
(ii) any property to which § 1016(a)(3) (regarding property held by a tax-exempt organization)
applies;
(iii) any property described in § 167(f) (regarding certain property excluded from § 197);
(iv) any property subject to § 167(g) (regarding property depreciated under the income forecast
method);
(v) any property for which depreciation is determined under § 56(a)(1), § 56(g)(4)(A)(i), (ii),
(iii), or (v) (as in effect on the day before the date of enactment of the TCJA), § 168, § 1400I (as
in effect on the day before the date of enactment of the Tax Technical Corrections Act of 2018,
Pub. L. No. 115-141, Division U, 132 Stat. 1211 (March 23, 2018)), § 1400L(c) (as in effect on the
day before the date of enactment of the Tax Technical Corrections Act of 2018), § 168 prior to its
amendment in 1986 (former § 168), or any additional first year depreciation deduction provision
of the Code (for example, § 168(k), § 168(l), § 1400L(b) (as in effect on the day before the date of
enactment of the Tax Technical Corrections Act of 2018), or § 1400N(d) (as in effect on the day
before the date of enactment of the Tax Technical Corrections Act of 2018));
(vi) any property that the taxpayer elected under § 168(f)(1) or former § 168(e)(2) to exclude
from the application of, respectively, § 168 or former § 168;
(vii) any property for which depreciation is determined in accordance with § 1.167(a)-11 (ADR);
(viii) any depreciable property for which the taxpayer is changing the depreciation method
pursuant to § 1.167(e)-1(b) (change from declining-balance method to straight-line method),
§ 1.167(e)-1(c) (certain changes for § 1245 property), or § 1.167(e)-1(d) (certain changes for
§ 1250 property). These changes must be made prospectively and are not permitted under the cited
regulations for property for which the depreciation is determined under § 168, § 1400I (as in effect
on the day before the date of enactment of the Tax Technical Corrections Act of 2018), § 1400L(c)
(as in effect on the day before the date of enactment of the Tax Technical Corrections Act of
2018), former § 168, or any additional first year depreciation deduction provision of the Code (for
example, § 168(k), § 168(l), § 1400L(b) (as in effect on the day before the date of enactment of
the Tax Technical Corrections Act of 2018), or § 1400N(d) (as in effect on the day before the date
of enactment of the Tax Technical Corrections Act of 2018)); or
(ix) any distributor commissions (as defined by section 2 of Rev. Proc. 2000-38, 2000-2 C.B.
310, as modified by Rev. Proc. 2007-16, 2007-1 C.B. 358) for which the taxpayer is changing
the useful life under the distribution fee period method or the useful life method (both described
in Rev. Proc. 2000-38). A change in this useful life is corrected by adjustments in the applicable
taxable year provided under § 1.446-1(e)(2)(ii)(d)(5)(iv).
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(d) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to this change.

February 14, 2022 526 Bulletin No. 2022–7
(4) Changes covered. This section 6.02 only applies to the following changes in methods of
accounting for depreciation:
(a) a change from the straight-line method to the sum-of-the-years-digits method, the sinking
fund method, the unit-of-production method, or the declining-balance method using any proper
percentage of the straight-line rate;
(b) a change from the declining-balance method using any percentage of the straight-line rate
to the sum-of-the-years-digits method, the sinking fund method, or the declining-balance method
using a different proper percentage of the straight-line rate;
(c) a change from the sum-of-the-years-digits method to the sinking fund method, the declining-
balance method using any proper percentage of the straight-line rate, or the straight-line method;
(d) a change from the unit-of-production method to the straight-line method;
(e) a change from the sinking fund method to the straight-line method, the unit-of-production
method, the sum-of-the-years-digits method, or the declining-balance method using any proper
percentage of the straight-line rate;
(f) a change in the interest factor used in connection with a compound interest method or sinking
fund method;
(g) a change in averaging convention as set forth in § 1.167(a)-10(b). However, as specifically
provided in § 1.167(a)-10(b), in any taxable year in which an averaging convention substantially
distorts the depreciation allowance for the taxable year, it may not be used (see Rev. Rul. 73-202,
1973-1 C.B. 81);
(h) a change from charging the depreciation reserve with costs of removal and crediting the
depreciation reserve with salvage proceeds to deducting costs of removal as an expense and
including salvage proceeds in taxable income as set forth in § 1.167(a)-8(e)(2). See Rev. Rul. 74-
455, 1974-2 C.B. 63. This section 6.02 applies to this change, however, only if:
(i) the change is applied to all items in the account for which the change is being made; and
(ii) the removal costs are not required to be capitalized under any provision of the Code (for
example, § 263(a), 263A, or 280B);
(i) a change from crediting the depreciation reserve with the salvage proceeds realized on
normal retirement sales to computing and recognizing gains and losses on the sales (see Rev. Rul.
70-165, 1970-1 C.B. 43);
(j) a change from crediting ordinary income (including the combination method of crediting
the lesser of estimated salvage value or actual salvage proceeds to the depreciation reserve, with
any excess of salvage proceeds over estimated salvage value credited to ordinary income) with
the salvage proceeds realized on normal retirement sales, to computing and recognizing gains and
losses on the sales (see Rev. Rul. 70-166, 1970-1 C.B. 44);

Bulletin No. 2022–7 527 February 14, 2022
(k) a change from item accounting for specific assets to multiple asset accounting (pooling) for
the same assets, or vice versa;
(l) a change from one type of multiple asset accounting (pooling) for specific assets to a different
type of multiple asset accounting (pooling) for the same assets;
(m) a change from one method described in Rev. Proc. 2000-38 for amortizing distributor
commissions (as defined by section 2 of Rev. Proc. 2000-38) to another method described in Rev.
Proc. 2000-38 for amortizing distributor commissions; or
(n) a change from pooling to a single asset, or vice versa, for distributor commissions (as
defined by section 2 of Rev. Proc. 2000-38) for which the taxpayer is using the distribution fee
period method or the useful life method (both described in Rev. Proc. 2000-38).
(5) Additional requirements. A taxpayer also must comply with the following:
(a) Basis for depreciation. At the beginning of the year of change, the basis for depreciation
of property to which this change applies is the adjusted basis of the property as provided in
§ 1011 at the end of the taxable year immediately preceding the year of change (determined under
taxpayer’s present method of accounting for depreciation). If applicable under the taxpayer’s
proposed method of accounting for depreciation, this adjusted basis is reduced by the estimated
salvage value of the property (for example, a change to the straight-line method).
(b) Rate of depreciation. The rate of depreciation for property changed to:
(i) the straight-line or the sum-of-the-years-digits method of depreciation must be based on the
remaining useful life of the property as of the beginning of the year of change; or
(ii) the declining-balance method of depreciation must be based on the useful life of the property
measured from the placed-in-service date, and not the expected remaining life from the date the
change becomes effective.
(c) Regulatory requirements. For changes in method of depreciation to the sum-of-the-years-
digits or declining-balance method, the property must meet the requirements of § 1.167(b)-0 or
1.167(c)-1, as appropriate.
(d) Public utility property. If any item of property is public utility property within the meaning
of former § 167(l)(3)(A), the taxpayer (including a qualified small taxpayer as defined in section
6.01(4)(b) of this revenue procedure) must attach to the Form 3115 a statement providing that the
taxpayer agrees to the following additional terms and conditions:
(i) a normalization method of accounting within the meaning of former § 167(l)(3)(G) will be
used for the public utility property subject to the Form 3115; and
(ii) within 30 calendar days of filing the federal income tax return for the year of change,
the taxpayer will provide a copy of the completed Form 3115 to any regulatory body having
jurisdiction over the public utility property subject to the Form 3115.

February 14, 2022 528 Bulletin No. 2022–7
(6) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following
information on Form 3115 (Rev. December 2018) to make this change:
(a) The identification section of page 1 (above Part I);
(b) The signature section at the bottom of page 1;
(c) Part I;
(d) Part II, all lines except lines 13, 15b, 16, 17, and 19;
(e) Part IV, line 25; and
(f) Schedule E.
(7) Section 481(a) adjustment. Because the adjusted basis of the property is not changed as a
result of a method change made under this section 6.02, no items are being duplicated or omitted.
Accordingly, a § 481(a) adjustment is neither required nor permitted.
(8) Concurrent automatic change.
(a) A taxpayer making this change for more than one asset for the same year of change should
file a single Form 3115 for all such assets.
(b) A taxpayer making both this change and a change to a UNICAP method under section
12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of
change should file a single Form 3115 for both changes, in which case the taxpayer must enter
the designated automatic accounting method change numbers for both changes on the appropriate
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making
concurrent changes. For example, a qualified small taxpayer must include on the single Form
3115 the information required by section 6.02(6) of this revenue procedure for this change and
the information required by the lines on Form 3115 applicable to the UNICAP method change,
including Part II line 14 and 15, Part IV, and Schedule D, and must include a separate response
to each line on Form 3115 that is applicable to both changes (such as Part II lines 6b, 7, 8b, 14,
and, as applicable for this change, Part IV) for which the taxpayer’s response is different for this
change and the change to a UNICAP method.
(9) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 6.02 is “8.”
(10) Contact information. For further information regarding a change under this section, contact
Bruce Chang at (202) 317-7005 (not a toll-free number).
.03 Sale, lease, or financing transactions.
(1) Description of change and scope.

Bulletin No. 2022–7 529 February 14, 2022
(a) Applicability. This change applies to a taxpayer that wants to change its method of accounting
from:
(i) improperly treating property as sold by the taxpayer to properly treating property as leased
or financed by the taxpayer;
(ii) improperly treating property as leased by the taxpayer to properly treating property as sold
or financed by the taxpayer;
(iii) improperly treating property as financed by the taxpayer to properly treating property as
sold or leased by the taxpayer;
(iv) improperly treating property as purchased by the taxpayer to properly treating property as
leased by the taxpayer; and
(v) improperly treating property as leased by the taxpayer to properly treating property as
purchased by the taxpayer.
(b) Inapplicability. This change does not apply to:
(i) a rent-to-own dealer that wants to change its method of accounting for rent-to-own contracts
described in section 3 of Rev. Proc. 95-38, 1995-2 C.B. 397; or
(ii) a taxpayer that holds assets for sale or lease, if any asset so held is not the subject of a sale
or lease transaction as of the beginning of the year of change.
(2) Manner of making the change. A taxpayer changing its method of accounting under this
section 6.03 must submit a statement with the Form 3115 that provides the name of the counterparty
to the sale, lease, or financing transactions as of the beginning of the year of change.
(3) No ruling on the characterization of any transaction as a sale, lease, or financing transaction.
The consent granted under section 9 of Rev. Proc. 2015-13 for a change specified in this section
6.03 is not a determination by the Commissioner that the taxpayer has properly characterized
any transaction as a sale, lease, or financing transaction and does not create any presumption
that the proposed characterization of any transaction as a sale, lease, or financing transaction is
permissible. The director will ascertain whether the taxpayer’s characterization of any transaction
as a sale, lease, or financing transaction is permissible.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 6.03 is “10.”
(5) Contact information. For further information regarding a change under this section, contact
Edward Schwartz at (202) 317-7006 (not a toll-free number).
.04 Change in general asset account treatment due to a change in the use of MACRS property.
(1) Description of change.

February 14, 2022 530 Bulletin No. 2022–7
(a) Applicability. This change applies to a taxpayer that wants to change the method of
accounting for general asset account treatment of MACRS property (as defined in § 1.168(b)-1(a)
(2)) to the method of accounting provided in § 1.168(i)-1(c)(2)(ii)(I) or § 1.168(i)-1(h)(2), which
applies when there is a change in the use of MACRS property pursuant to § 1.168(i)-4(d).
(b) Taxpayer has not adopted a method of accounting for the item of property. If a taxpayer
does not satisfy section 6.04(1)(a) of this revenue procedure for an item of MACRS property
because a change in the use of this item of MACRS property occurred in the taxable year
immediately preceding the year of change (1-year change in use property), the taxpayer may
change from the impermissible method for general asset account treatment to the permissible
method provided in § 1.168(i)-1(c)(2)(ii)(I) or § 1.168(i)-1(h)(2) for the 1-year change in use
property by filing a Form 3115. Alternatively, the taxpayer may change from the impermissible
method for general asset account treatment to the permissible method provided in § 1.168(i)- 1(c)
(2)(ii)(I) or § 1.168(i)-1(h)(2) for a 1-year change in use property by filing an amended federal
income tax return, or an administrative adjustment request under § 6227 (AAR), as applicable,
for the year of change in the use of such property provided such filing occurs prior to the date the
taxpayer files its federal income tax return for the taxable year succeeding the year of change in
the use of such property.
(c) Inapplicability.
(i) The change described in section 6.04(1)(a) of this revenue procedure does not apply to any
property to which section 4.05 of Rev. Proc. 2020-22, 2020-18 I.R.B. 745, applies unless the
taxpayer and property are within the scope of Rev. Proc. 2021-28, 2021-27 I.R.B. 5. (See sections
4.02 and 4.03 of Rev. Proc. 2020-22, as applicable, for making such changes for such property.);
and
(ii) The change described in section 6.04(1)(a) of this revenue procedure does not apply to any
property to which section 5.04 of Rev. Proc. 2020-22, 2020-18 I.R.B. 745, applies. (See section
5.02 of Rev. Proc. 2020-22 for making such change for such property.).
(2) Certain eligibility rules inapplicable.
(a) In general. The eligibility rule in section 5.01(1)(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a taxpayer making this change.
(b) Special rule. The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a taxpayer within the scope of section 3 of Rev. Proc. 2021-28, 2021-27
I.R.B. 5, making this change for any residential rental property within the scope of section 3 of
Rev. Proc. 2021-28 for a taxable year beginning in 2019, 2020, 2021, or 2022.
(3) Manner of making change.
(a) The change is made on a modified cut-off basis (as defined in § 1.446-1(e)(2)(ii)(d)(5)(iii))
and, thus, the adjusted depreciable basis of the MACRS property as of the beginning of the year of
change is recovered using the proposed method of accounting for general asset account treatment.
Accordingly, a § 481(a) adjustment is neither permitted nor required. See § 1.168(i)-1(h)(2)(ii)
and (iii) for more information regarding how to establish the general asset account when a change
in the use of MACRS property occurs pursuant to § 1.168(i)-4(d).

Bulletin No. 2022–7 531 February 14, 2022
(b) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following
information on Form 3115 (Rev. December 2018) to make this change:
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13, 15b, 16, 17, and 19;
(v) Part IV, line 25; and
(vi) Schedule E, all lines except lines 1, 4c, 5, 6, 7b, and 7c.
(4) Concurrent automatic change.
(a) A taxpayer making this change for more than one asset for the same year of change should
file a single Form 3115 for all such assets.
(b) A taxpayer making this change and a change under section 6.05, section 6.12(3)(b), and/or
section 6.15 of this revenue procedure for the same year of change should file a single Form 3115
for all such changes and must enter the designated automatic accounting method change numbers
for the changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making concurrent changes.
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 6.04 is “87.”
(6) Contact information. For further information regarding a change under this section, contact
Elizabeth Binder at (202) 317-7005 (not a toll-free number).
.05 Change in method of accounting for depreciation due to a change in the use of MACRS
property.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to (i) change the method of
accounting for depreciation of MACRS property (as defined in § 1.168(b)-1(a)(2)) to the method
of accounting for depreciation provided in § 1.168(i)-4, which applies when there is a change
in the use of MACRS property, or (ii) revoke the election provided in § 1.168(i)-4(d)(3)(ii) to
disregard a change in the use of MACRS property. See § 1.168(i)-4(g)(2).
(b) Taxpayer has not adopted a method of accounting for the item of property. If a taxpayer does
not satisfy section 6.05(1)(a)(i) of this revenue procedure for an item of MACRS property because
a change in the use of this item of MACRS property occurred in the taxable year immediately

February 14, 2022 532 Bulletin No. 2022–7
preceding the year of change (1-year change in use property), the taxpayer may change from
the impermissible method of determining depreciation to the permissible method of determining
depreciation provided in § 1.168(i)-4 for the 1-year change in use property by filing a Form 3115
for this change, provided the § 481(a) adjustment reported on the Form 3115 includes the amount
of any adjustment that is attributable to all property (including the 1-year change in use property)
subject to the Form 3115. Alternatively, the taxpayer may change from the impermissible method
of determining depreciation to the permissible method of determining depreciation provided in
§ 1.168(i)-4 for a 1-year change in use property by filing an amended federal income tax return, or
an administrative adjustment request under § 6227 (AAR), as applicable, for the year of change in
the use of such property provided such filing occurs prior to the date the taxpayer files its federal
income tax return for the taxable year succeeding the year of change in the use of such property.
(c) Inapplicability.
(i) The change described in section 6.05(1)(a)(i) of this revenue procedure does not apply to
any property to which section 4.05 of Rev. Proc. 2020-22, 2020-18 I.R.B. 745, applies unless the
taxpayer and property are within the scope of Rev. Proc. 2021-28, 2021-27 I.R.B. 5. (See sections
4.02 and 4.03, or 5.02 of Rev. Proc. 2020-22, as applicable, for making such change for such
property.);
(ii) The change described in section 6.05(1)(a)(i) of this revenue procedure does not apply
to any property to which section 5.04 of Rev. Proc. 2020-22, 2020-18 I.R.B. 745, applies. (See
section 5.02 of Rev. Proc. 2020-22 for making such change for such property.); and
(iii) The change described in this section 6.05 does not apply to any property that is not owned
by the taxpayer at the beginning of the year of change.
(2) Certain eligibility rules inapplicable.
(a) In general. The eligibility rule in section 5.01(1)(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a taxpayer making this change.
(b) Special rule. The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a taxpayer within the scope of section 3 of Rev. Proc. 2021-28, 2021-27
I.R.B. 5, making this change for any residential rental property within the scope of section 3 of
Rev. Proc. 2021-28 for a taxable year beginning in 2019, 2020, 2021, or 2022.
(3) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following
information on Form 3115 (Rev. December 2018) to make this change:
(a) The identification section of page 1 (above Part I);
(b) The signature section at the bottom of page 1;
(c) Part I;
(d) Part II, all lines except lines 13, 15b, 16, 17, and 19;

Bulletin No. 2022–7 533 February 14, 2022
(e) Part IV, all lines except line 25; and
(f) Schedule E, all lines except lines 1, 4c, 5, 6, 7b, and 7c.
(4) Section 481(a) adjustment. A taxpayer changing its method of accounting under this section
6.05 is required to calculate a § 481(a) adjustment as of the first day of the year of change as if the
proposed method of accounting had always been used by the taxpayer beginning with the taxable
year in which the change in the use of the MACRS property occurred by the taxpayer.
(5) Concurrent automatic change.
(a) A taxpayer making this change for more than one asset for the same year of change should
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all
the changes included in that Form 3115. If one or more of the changes in that single Form 3115
generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a
positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment
for all the changes that are included in that Form 3115 generating such adjustment and a single
positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating
such adjustment.
(b) A taxpayer making this change and a change under section 6.04, section 6.12(3)(b), and/or
section 6.15 of this revenue procedure for the same year of change should file a single Form 3115
for all such changes and must enter the designated automatic accounting method change numbers
for the changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making concurrent changes.
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 6.05 is “88.”
(7) Contact information. For further information regarding a change under this section, contact
Elizabeth Binder at (202) 317-7005 (not a toll-free number).
.06 Depreciation of qualified non-personal use vans and light trucks.
(1) Description of change. This change applies to a taxpayer that wants to change the method of
accounting for depreciation for certain vehicles in accordance with § 1.280F-6(f)(2)(iv). Section
1.280F-6(f)(2)(iv) applies to a truck or van that is a qualified nonpersonal use vehicle as defined
under § 1.274-5T(k), was placed in service by the taxpayer before July 7, 2003, and was treated
by the taxpayer as a passenger automobile under § 1.280F-6T as in effect prior to July 7, 2003. If
the taxpayer files Form 3115, in accordance with § 1.280F-6(f)(2)(iv), the treatment of the truck
or van will be changed from property to which § 280F(a) applies to property to which § 280F(a)
does not apply.
(2) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following
information on Form 3115 (Rev. December 2018) to make this change:
(a) The identification section of page 1 (above Part I);

February 14, 2022 534 Bulletin No. 2022–7
(b) The signature section at the bottom of page 1;
(c) Part I;
(d) Part II, all lines except lines 13, 15b, 16, 17, and 19;
(e) Part IV, all lines except line 25; and
(f) Schedule E.
(3) Concurrent automatic change. A taxpayer making this change for more than one asset for
the same year of change should file a single Form 3115 for all such assets and provide a single
net § 481(a) adjustment for all the changes included in that Form 3115. If one or more of the
changes in that single Form 3115 generate a negative § 481(a) adjustment and other changes in
that same Form 3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single
negative § 481(a) adjustment for all the changes that are included in that Form 3115 generating
such adjustment and a single positive § 481(a) adjustment for all the changes that are included in
that Form 3115 generating such adjustment.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 6.06 is “89.”
(5) Contact information. For further information regarding a change under this section, contact
Bernard Harvey at (202) 317-7005 (not a toll-free number).
.07 Impermissible to permissible method of accounting for depreciation or amortization for
disposed depreciable or amortizable property.
(1) Description of change. This change applies to a taxpayer that wants to make the change in
method of accounting for depreciation or amortization (depreciation) provided under section 3 of
Rev. Proc. 2007-16, 2007-1 C.B. 358, for an item of depreciable or amortizable property that has
been disposed of by the taxpayer. Section 3 of Rev. Proc. 2007-16 allows a taxpayer to make a
change in method of accounting for depreciation for the disposed property if the taxpayer used an
impermissible method of accounting for depreciation for the property under which the taxpayer
did not take into account any depreciation allowance, or did take into account some depreciation
but less than the depreciation allowable, in the year of change (as defined in section 6.07(4) of this
revenue procedure) or any prior taxable year.
(2) Applicability.
(a) In general. Except as provided in section 6.07(2)(b) of this revenue procedure, this section
6.07 applies to a taxpayer that is changing from an impermissible method of accounting for
depreciation to a permissible method of accounting for depreciation for any item of depreciable or
amortizable property subject to §§ 167, 168, 197, 1400I, or 1400L(c), to former § 168, or to any
additional first year depreciation deduction provision of the Code (for example, § 168(k), § 168(l),
§ 1400L(b), or § 1400N(d)):
(i) that has been disposed of by the taxpayer during the year of change (as defined in section
6.07(4) of this revenue procedure); and

Bulletin No. 2022–7 535 February 14, 2022
(ii) for which the taxpayer did not take into account any depreciation allowance, or did take into
account some depreciation but less than the depreciation allowable (hereinafter, both are referred
to as “claimed less than the depreciation allowable”), in the year of change (as defined in section
6.07(4) of this revenue procedure) or any prior taxable year.
(b) Inapplicability. This section 6.07 does not apply to:
(i) any property to which § 1016(a)(3) (regarding property held by a tax-exempt organization)
applies;
(ii) any property for which a taxpayer is revoking a timely valid depreciation election, or
making a late depreciation election, under the Code or regulations thereunder, or under other
guidance published in the Internal Revenue Bulletin (including under § 13261(g)(2) or (3) of the
Revenue Reconciliation Act of 1993 (1993 Act), 1993-3 C.B. 1, 128 (relating to amortizable § 197
intangibles));
(iii) any property for which the taxpayer deducted the cost or other basis of the property as an
expense; or
(iv) any property disposed of by the taxpayer in a transaction to which a nonrecognition section
of the Code applies (for example, § 1031, transactions subject to § 168(i)(7)(B)). However, this
section 6.07(2)(b)(iv) does not apply to property disposed of by the taxpayer in a § 1031 or § 1033
transaction if the taxpayer elects under § 1.168(i)-6(i) and (j) to treat the entire basis (that is, both
the exchanged and excess basis (as defined in § 1.168(i)-6(b)(7) and (8), respectively) of the
replacement MACRS property (as defined in § 1.168(i)-6(b)(1)) as property placed in service by
the taxpayer at the time of replacement and treat the adjusted depreciable basis of the relinquished
MACRS property (as defined in § 1.168(i)-6(b)(2)) as being disposed of by the taxpayer at the
time of disposition.
(3) Manner of making the change.
(a) Change made on an original return for the year of change. This change may be made on a
taxpayer’s timely filed (including any extension) original federal tax return for the year of change
(as defined in section 6.07(4) of this revenue procedure), provided the taxpayer files the original
Form 3115 in accordance with section 6.03(1)(a) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419.
(b) Change made on an amended return or an AAR for the year of change. This change may
also be made on an amended federal income tax return, or administrative adjustment request under
§ 6227 (AAR), as applicable, for the year of change (as defined in section 6.07(4) of this revenue
procedure), provided:
(i)(A) the taxpayer files the original Form 3115 with the taxpayer’s amended federal income tax
return for the year of change (as defined in section 6.07(4) of this revenue procedure) prior to the
expiration of the period of limitation for assessment under § 6501(a) for the taxable year in which
the item of depreciable or amortizable property was disposed of by the taxpayer, or if applicable
(B) the partnership subject to the centralized partnership audit regime enacted as part of the
Bipartisan Budget Act of 2015 (BBA partnership) files the original Form 3115 with its AAR for
the year of change (as defined in section 6.07(4) of this revenue procedure) prior to the expiration
of the applicable period of limitations for making adjustments under § 6235 for the reviewed year
as defined in § 301.6241-1(a)(8) of the Procedure and Administration Regulations; and

February 14, 2022 536 Bulletin No. 2022–7
(ii) the taxpayer’s amended federal income tax return, or AAR, as applicable, for the year of
change (as defined in section 6.07(4) of this revenue procedure) includes the adjustments to taxable
income and any collateral adjustments to taxable income or tax liability (for example, adjustments
to the amount or character of the gain or loss of the disposed depreciable or amortizable property)
resulting from the change in method of accounting for depreciation made by the taxpayer under
this section 6.07.
(4) Year of change. The year of change for this change is the taxable year in which the item of
depreciable or amortizable property was disposed of by the taxpayer.
(5) Certain eligibility rules inapplicable. The eligibility rules in sections 5.01(1)(d) and (f) of
Rev. Proc. 2015-13 do not apply to this change.
(6) Filing requirements.
(a) Notwithstanding section 6.03(1)(a) of Rev. Proc. 2015-13, a taxpayer making this change in
accordance with section 6.07(3)(b) of this revenue procedure must attach the original Form 3115
to the taxpayer’s timely filed amended federal income tax return, or AAR, as applicable, for the
year of change and must file the required duplicate copy (with signature) of the Form 3115 with
the IRS in Ogden, UT, no later than when the original Form 3115 is filed with the amended federal
income tax return, or AAR, as applicable, for the year of change. If a taxpayer is making this
change in accordance with section 6.07(3)(a) of this revenue procedure, the filing requirements in
section 6.03(1)(a) of Rev. Proc. 2015-13 apply.
(b) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following
information on Form 3115 (Rev. December 2018) to make this change:
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13, 15b, 16, 17, and 19;
(v) Part IV, all lines except line 25; and
(vi) Schedule E.
(7) Section 481(a) adjustment period. A taxpayer must take the entire § 481(a) adjustment into
account in computing taxable income for the year of change.
(8) Concurrent automatic change. A taxpayer making this change for more than one asset for
the same year of change should file a single Form 3115 for all such assets.
(9) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 6.07 is “107.”

Bulletin No. 2022–7 537 February 14, 2022
(10) Contact information. For further information regarding a change under this section, contact
James Liechty at (202) 317-7005 (not a toll-free number).
.08 Tenant construction allowances.
(1) Description of change and scope.
(a) Applicability. This change applies to a taxpayer that wants to change its method of accounting
for tenant construction allowances:
(i) from improperly treating the taxpayer as having a depreciable interest in the property subject
to the tenant construction allowances for federal income tax purposes to properly treating the
taxpayer as not having a depreciable interest in such property for federal income tax purposes; or
(ii) from improperly treating the taxpayer as not having a depreciable interest in the property
subject to the tenant construction allowances for federal income tax purposes to properly treating
the taxpayer as having a depreciable interest in such property for federal income tax purposes.
(b) Inapplicability. This change does not apply to:
(i) any tenant construction allowance that qualifies under § 110;
(ii) any portion of a tenant construction allowance that is not expended on depreciable property;
or
(iii) any amount expended for depreciable property in excess of the tenant construction
allowance.
(2) Definition. For purposes of this section 6.08, the term “tenant construction allowance(s)”
means any amount received by a lessee from a lessor to construct, acquire, or improve property
for use by the lessee pursuant to a lease.
(3) Manner of making the change. A taxpayer changing its method of accounting under this
section 6.08 must submit the following information:
(a) If a lessee is filing the Form 3115, the lessee must submit a statement with the Form 3115
that provides the amount of the tenant construction allowance received by the lessee, the amount
of such tenant construction allowance expended by the lessee on property, and the name of the
lessor that provided the tenant construction allowance.
(b) If a lessor is filing the Form 3115, the lessor must submit a statement with the Form 3115
that provides the amount of the tenant construction allowance provided to the lessee and the name
of the lessee that received such tenant construction allowance.
(4) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following
information on Form 3115 (Rev. December 2018) to make this change in accordance with section
6.08(3)(a) of this revenue procedure:

February 14, 2022 538 Bulletin No. 2022–7
(a) The identification section of page 1 (above Part I);
(b) The signature section at the bottom of page 1;
(c) Part I;
(d) Part II, all lines except lines 13, 15b, 16, 17, and 19;
(e) Part IV, line 25; and
(f) Schedule E.
(5) No ruling on which party has the depreciable interest in the property subject to tenant
construction allowances. The consent granted under section 9 of Rev. Proc. 2015-13 for a change
specified in this section 6.08 is not a determination by the Commissioner that the taxpayer has
properly determined that the taxpayer has, or does not have, a depreciable interest in the property
subject to the tenant construction allowances for federal income tax purposes and does not create
any presumption that the proposed determination of which party has the depreciable interest in
such property is permissible. The director will ascertain whether the taxpayer’s determination
of which party has the depreciable interest in the property subject to the tenant construction
allowances is permissible.
(6) Concurrent automatic change. A taxpayer making this change for more than one asset for
the same year of change should file a single Form 3115 for all such assets.
(7) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 6.08 is “145.”
(8) Contact information. For further information regarding a change under this section, contact
Elizabeth Binder at (202) 317-7005 (not a toll-free number).
.09 Safe harbor method of accounting for determining the depreciation of certain tangible
assets used by wireless telecommunications carriers under Rev. Proc. 2011-22.
(1) Description of change. This change applies to a taxpayer that is within the scope of Rev.
Proc. 2011-22, 2011-18 I.R.B. 737, and wants to change to the recovery periods described in
section 5 of Rev. Proc. 2011-22 and any collateral change to the depreciation methods for all, or
some of, the assets listed in that section.
(2) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following
information on Form 3115 (Rev. December 2018) to make this change:
(a) The identification section of page 1 (above Part I);
(b) The signature section at the bottom of page 1;

Bulletin No. 2022–7 539 February 14, 2022
(c) Part I;
(d) Part II, all lines except lines 13, 15b, 16, 17, and 19;
(e) Part IV, all lines except line 25; and
(f) Schedule E.
(3) Concurrent automatic change. A taxpayer making this change for more than one asset for
the same year of change should file a single Form 3115 for all such assets and provide a single
net § 481(a) adjustment for all the changes included in that Form 3115. If one or more of the
changes in that single Form 3115 generate a negative § 481(a) adjustment and other changes in
that same Form 3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single
negative § 481(a) adjustment for all the changes that are included in that Form 3115 generating
such adjustment and a single positive § 481(a) adjustment for all the changes that are included in
that Form 3115 generating such adjustment.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 6.09 is “157.”
(5) Contact information. For further information regarding a change under this section, contact
Charles Magee at (202) 317-7005 (not a toll-free number).
.10 Partial dispositions of tangible depreciable assets to which the IRS’s adjustment pertains
(§ 168; § 1.168(i)-8).
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that is described in § 1.168(i)-8(d)(2)(iii)
and, pursuant to § 1.168(i)-8(d)(2)(iii), that wants to make the partial disposition election specified
in § 1.168(i)-8(d)(2)(i) to the disposition of a portion of an asset to which the IRS’s adjustment (as
described in § 1.168(i)-8(d)(2)(iii)) pertains.
(b) Inapplicability. This change does not apply to:
(i) Any asset of which the disposed portion was a part that is not owned by the taxpayer at the
beginning of the year of change; or
(ii) Any partial disposition election specified in § 1.168(i)-8(d)(2)(i) that is not made pursuant to
§ 1.168(i)-8(d)(2)(iii) (for example, this change does not apply to the partial disposition election
specified in § 1.168(i)-8(d)(2)(i) that is made pursuant to § 1.168(i)-8(d)(2)(iv)).
(2) Change in method of accounting. The IRS will treat the making of the late election specified
in section 6.10(1) of this revenue procedure as a change in method of accounting.
(3) Certain eligibility rules inapplicable. The eligibility rules in sections 5.01(1)(d) and (f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to this change.

February 14, 2022 540 Bulletin No. 2022–7
(4) Manner of making change.
(a) A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is
required to complete only the following information on Form 3115 (Rev. December 2018) to
make this change:
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13, 15b, 16, 17, and 19;
(v) Part IV, all lines except line 25; and
(vi) Schedule E.
(b) A taxpayer (including a qualified small taxpayer) making this change must:
(i) Apply § 1.168(i)-8(h)(1) and (3) (accounting for asset disposed of);
(ii) If the asset (as determined under § 1.168(i)-8(c)(4)) of which the disposed portion is a part
is properly included in one of the asset classes 00.11 through 00.4 of Rev. Proc. 87-56, 1987-2
C.B. 674, classify the replacement portion of such asset under the same asset class as the disposed
portion of the asset in the taxable year in which the replacement portion is placed in service by
the taxpayer;
(iii) If the taxpayer’s present method of accounting is not in accord with § 1.168(i)-8(c)
(4) (determination of asset disposed of), change to the appropriate asset as determined under
§ 1.168(i)-8(c)(4);
(iv) If the taxpayer continues to deduct depreciation for the disposed portion of the asset (as
determined under § 1.168(i)-8(c)(4)) under the taxpayer’s present method of accounting, change
from depreciating such disposed portion to recognizing gain or loss for the disposed portion or, if
§ 280B and § 1.280B-1 apply to the disposition, change from depreciating such disposed portion
to capitalizing the loss sustained on account of the demolition to the land on which the demolished
structure was located; and
(v) If any asset is public utility property within the meaning of § 168(i)(10), attach a statement to
its Form 3115 providing that the taxpayer agrees to the following additional terms and conditions:
(A) A normalization method of accounting (within the meaning of § 168(i)(9)) will be used for
the public utility property subject to the Form 3115;

Bulletin No. 2022–7 541 February 14, 2022
(B) Within 30 calendar days of filing the federal income tax return for the year of change,
the taxpayer will provide a copy of the completed Form 3115 to any regulatory body having
jurisdiction over the public utility property subject to the Form 3115; and
(C) As of the beginning of the year of change, the taxpayer will adjust its deferred tax reserve
account or similar account in the taxpayer’s regulatory books of account by the amount of the
deferral of federal income tax liability associated with the § 481(a) adjustment applicable to the
public utility property subject to the Form 3115.
(5) Concurrent automatic change. A taxpayer making this change for more than one asset for
the same year of change should file a single Form 3115 for all such assets. If the change for more
than one asset included in that Form 3115 is specified in section 6.10(1) of this revenue procedure,
the single Form 3115 should provide a single net § 481(a) adjustment for all such changes. If one
or more of the changes specified in section 6.10(1) of this revenue procedure in that single Form
3115 generate a negative § 481(a) adjustment and other changes specified in section 6.10(1) of this
revenue procedure in that same Form 3115 generate a positive § 481(a) adjustment, the taxpayer
may provide a single negative § 481(a) adjustment for all such changes that are included in that
Form 3115 generating such negative adjustment and a single positive § 481(a) adjustment for all
such changes that are included in that Form 3115 generating such positive adjustment.
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to the method of accounting under this section
6.10 is “198.”
(7) Contact information. For further information regarding a change under this section, contact
Patrick Clinton at (202) 317-7005 (not a toll-free number).
.11 Depreciation of leasehold improvements (§§ 167, 168, and 197; § 1.167(a)-4).
(1) Description of change. This change, as described in Rev. Proc. 2014-17, 2014-12 I.R.B. 661,
applies to a taxpayer that wants to change its method of accounting to comply with § 1.167(a)-4
for leasehold improvements in which the taxpayer has a depreciable interest at the beginning of
the year of change:
(a) From improperly depreciating the leasehold improvements to which § 168 applies over the
term of the lease (including renewals, if applicable) to properly depreciating these improvements
under § 168;
(b) From improperly amortizing leasehold improvements to which § 197 applies over the term
of the lease (including renewals, if applicable) to properly amortizing these improvements under
§ 197; or
(c) From improperly amortizing leasehold improvements to which § 167(f)(1) applies over the
term of the lease (including renewals, if applicable) to properly amortizing these improvements
under § 167(f)(1).
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(d) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to a taxpayer making this change.
(3) Manner of making change.

February 14, 2022 542 Bulletin No. 2022–7
(a) A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is
required to complete only the following information on Form 3115 (Rev. December 2018) to
make this change:
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13, 15b, 16, 17, and 19;
(v) Part IV, all lines except line 25; and
(vi) Schedule E.
(b) If any leasehold improvement is public utility property within the meaning of § 168(i)(10)
or former § 167(l)(3)(A), a taxpayer (including a qualified small taxpayer) making this change
must attach to its Form 3115 a statement providing that the taxpayer agrees to the following
additional terms and conditions:
(i) A normalization method of accounting (within the meaning of § 168(i)(9) or former § 167(l)
(3)(G)) will be used for the public utility property subject to the change;
(ii) As of the beginning of the year of change, the taxpayer will adjust its deferred tax reserve
account or similar account in the taxpayer’s regulatory books of account by the amount of the
deferral of federal income tax liability associated with the § 481(a) adjustment applicable to the
public utility property subject to the change; and
(iii) Within 30 calendar days of filing the federal income tax return for the year of change,
the taxpayer will provide a copy of the completed Form 3115 to any regulatory body having
jurisdiction over the public utility property subject to the change.
(4) Concurrent automatic change.
(a) A taxpayer making this change for more than one asset for the same year of change should
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all
the changes included in that Form 3115. If one or more of the changes in that single Form 3115
generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a
positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment
for all the changes that are included in that Form 3115 generating such adjustment and a single
positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating
such adjustment.
(b) A taxpayer making both this change and a change to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of change should
file a single Form 3115 for all such changes and must enter the designated automatic accounting
method change numbers for the changes on the appropriate line on the Form 3115. See section

Bulletin No. 2022–7 543 February 14, 2022
6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes. For example, a
qualified small taxpayer must include on the single Form 3115 the information required by section
6.11(3)(a) of this revenue procedure for this change and the information required by the lines on
Form 3115 applicable to the UNICAP method change, including Part II line 14 and 15, Part IV,
and Schedule D, and must include a separate response to each line on Form 3115 that is applicable
to both changes (such as Part II lines 6b, 7, 8b, 14, and, as applicable for this change, Part IV) for
which the taxpayer’s response is different for this change and the change to a UNICAP method.
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to a method of accounting under this section 6.11
is “199.”
(6) Contact information. For further information regarding a change under this section, contact
Patrick Clinton at (202) 317-7005 (not a toll-free number).
.12 Permissible to permissible method of accounting for depreciation of MACRS property
(§ 168; §§ 1.168(i)-1, 1.168(i)-7, and 1.168(i)-8).
(1) Description of change.
(a) Applicability. This change, as described in Rev. Proc. 2014-54, 2014-41 I.R.B. 675, applies
to a taxpayer that wants to make a change in method of accounting for depreciation that is specified
in section 6.12(3) of this revenue procedure for an asset:
(i) to which § 168 applies (MACRS property);
(ii) for which the present and proposed methods of accounting are permissible methods of
accounting under § 1.168(i)-1, § 1.168(i)-7, or § 1.168(i)-8, as applicable; and
(iii) that is owned by the taxpayer at the beginning of the year of change.
(b) Inapplicability. This change does not apply to any property that is not depreciated under
§ 168 under the taxpayer’s present and proposed methods of accounting.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(d) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to a taxpayer making this change.
(3) Changes covered. This section 6.12 only applies to the following changes in methods of
accounting for depreciation of MACRS property:
(a) For the items of MACRS property not subject to a general asset account election under
§ 168(i)(4) and the regulations thereunder—
(i) a change from single asset accounts (or item accounts) for specific items of MACRS
property to multiple asset accounts (or pools) for the same assets, or vice versa, in accordance
with § 1.168(i)-7;

February 14, 2022 544 Bulletin No. 2022–7
(ii) a change from grouping specific items of MACRS property in multiple asset accounts to a
different grouping of the same assets in multiple asset accounts in accordance with § 1.168(i)-7(c);
(iii) a change in the method of identifying which assets in multiple asset accounts or which
portions of assets have been disposed of by the taxpayer from the specific identification method
under § 1.168(i)-8(g)(1) to the first-in, first-out (FIFO) method of accounting under § 1.168(i)-
8(g)(2)(i) or the modified FIFO method of accounting under § 1.168(i)-8(g)(2)(ii);
(iv) a change in the method of identifying which assets in multiple asset accounts or which
portions of assets have been disposed of by the taxpayer from the FIFO method of accounting
under § 1.168(i)-8(g)(2)(i) or the modified FIFO method of accounting under § 1.168(i)-8(g)(2)
(ii) to the specific identification method under § 1.168(i)-8(g)(1);
(v) a change in the method of identifying which assets in multiple asset accounts or which
portions of assets have been disposed of by the taxpayer from the FIFO method of accounting
under § 1.168(i)-8(g)(2)(i) to the modified FIFO method of accounting under § 1.168(i)-8(g)(2)
(ii), or vice versa;
(vi) a change in the method of identifying which mass assets (as defined in § 1.168(i)-8(b)(3))
in multiple asset accounts or which portions of mass assets have been disposed of by the taxpayer
from the specific identification method under § 1.168(i)-8(g)(1) to a mortality dispersion table in
accordance with § 1.168(i)-8(g)(2)(iii);
(vii) a change in the method of identifying which mass assets (as defined in § 1.168(i)-8(b)
(3)) in multiple asset accounts or which portions of mass assets have been disposed of by the
taxpayer from the FIFO method of accounting under § 1.168(i)-8(g)(2)(i) or the modified FIFO
method of accounting under § 1.168(i)-8(g)(2)(ii) to a mortality dispersion table in accordance
with § 1.168(i)-8(g)(2)(iii);
(viii) a change in the method of identifying which mass assets (as defined in § 1.168(i)-8(b)
(3)) in multiple asset accounts or which portions of mass assets have been disposed of by the
taxpayer from a mortality dispersion table in accordance with § 1.168(i)-8(g)(2)(iii) to the specific
identification method under § 1.168(i)-8(g)(1), the FIFO method of accounting under § 1.168(i)-
8(g)(2)(i), or the modified FIFO method of accounting under § 1.168(i)-8(g)(2)(ii);
(ix) if § 1.168(i)-8(f)(2) applies (disposition of an asset in a multiple asset account) and it is
impracticable from the taxpayer’s records to determine the unadjusted depreciable basis of the
asset disposed of, a change in the method of determining the unadjusted depreciable basis of
all assets in the same multiple asset account from one reasonable method to another reasonable
method; or
(x) if § 1.168(i)-8(f)(3) applies (disposition of a portion of an asset) and it is impracticable from
the taxpayer’s records to determine the unadjusted depreciable basis of the disposed portion of
the asset, a change in the method of determining the unadjusted depreciable basis of all disposed
portions of the asset from one reasonable method to another reasonable method; and
(b) For the items of MACRS property subject to a general asset account election under § 168(i)
(4) and the regulations thereunder—

Bulletin No. 2022–7 545 February 14, 2022
(i) a change from grouping specific items of MACRS property in general asset accounts to a
different grouping of the same assets in general asset accounts in accordance with § 1.168(i)-1(c);
(ii) a change in the method of identifying which assets or which portions of assets have been
disposed of by the taxpayer from the specific identification method under § 1.168(i)-1(j)(2)(i)(A)
to the FIFO method of accounting under § 1.168(i)-1(j)(2)(i)(B) or the modified FIFO method of
accounting under § 1.168(i)-1(j)(2)(i)(C);
(iii) a change in the method of identifying which assets or which portions of assets have been
disposed of by the taxpayer from the FIFO method of accounting under § 1.168(i)-1(j)(2)(i)(B) or
the modified FIFO method of accounting under § 1.168(i)-1(j)(2)(i)(C) to the specific identification
method under § 1.168(i)-1(j)(2)(i)(A);
(iv) a change in the method of identifying which assets or which portions of assets have been
disposed of by the taxpayer from the FIFO method of accounting under § 1.168(i)-1(j)(2)(i)(B) to
the modified FIFO method of accounting under § 1.168(i)-1(j)(2)(i)(C), or vice versa;
(v) a change in the method of identifying which mass assets (as defined in § 1.168(i)-1(b)
(6)) or which portions of mass assets that are in a separate general asset account in accordance
with § 1.168-1(c)(2)(ii)(H), have been disposed of by the taxpayer from the specific identification
method under § 1.168(i)-1(j)(2)(i)(A) to a mortality dispersion table in accordance with § 1.168(i)-
1(j)(2)(i)(D);
(vi) a change in the method of identifying which mass assets (as defined in § 1.168(i)-1(b)(6))
or which portions of mass assets that are in a separate general asset account in accordance with
§ 1.168-1(c)(2)(ii)(H), have been disposed of by the taxpayer from the FIFO method of accounting
under § 1.168(i)-1(j)(2)(i)(B) or the modified FIFO method of accounting under § 1.168(i)-1(j)(2)
(i)(C) to a mortality dispersion table in accordance with § 1.168(i)-1(j)(2)(i)(D);
(vii) a change in the method of identifying which mass assets (as defined in § 1.168(i)-1(b)(6)),
or which portions of mass assets that are in a separate general asset account in accordance with
§ 1.168-1(c)(2)(ii)(H), have been disposed of by the taxpayer from a mortality dispersion table in
accordance with § 1.168(i)-1(j)(2)(i)(D) to the specific identification method under § 1.168(i)-1(j)
(2)(i)(A), the FIFO method of accounting under § 1.168(i)-1(j)(2)(i)(B), or the modified FIFO
method of accounting under § 1.168(i)-1(j)(2)(i)(C); or
(viii) if § 1.168(i)-1(j)(3) applies (basis of a disposed asset or a disposed portion of an asset
in a general asset account) and it is impracticable from the taxpayer’s records to determine the
unadjusted depreciable basis of the disposed asset or the disposed portion of the asset, a change in
the method of determining the unadjusted depreciable basis of all assets in the same general asset
account from one reasonable method to another reasonable method.
(4) Manner of making change.
(a) The changes in methods of accounting specified in section 6.12(3)(a)(i) and (ii) and section
6.12(3)(b)(i) of this revenue procedure are made using a modified cut-off method under which the
unadjusted depreciable basis and the depreciation reserve of the asset as of the beginning of the
year of change are accounted for using the proposed method of accounting.

February 14, 2022 546 Bulletin No. 2022–7
(i) If the change specified in section 6.12(3)(a)(i) of this revenue procedure is a change to a
single asset account, the new single asset account must include a beginning balance for both the
unadjusted depreciable basis and the depreciation reserve of the asset included in that single asset
account.
(ii) If the change specified in section 6.12(3)(a)(i) or (ii) of this revenue procedure is a change
to a multiple asset account (either a new one or a different grouping), the multiple asset account
must include a beginning balance for both the unadjusted depreciable basis and the depreciation
reserve. The beginning balance for the unadjusted depreciable basis of each multiple asset account
is equal to the sum of the unadjusted depreciable bases as of the beginning of the year of change
for all assets included in that multiple asset account. The beginning balance of the depreciation
reserve of each multiple asset account is equal to the sum of the greater of the depreciation allowed
or allowable as of the beginning of the year of change for all assets included in that multiple asset
account.
(iii) The change specified in section 6.12(3)(b)(i) of this revenue procedure requires the general
asset account to include a beginning balance for both the unadjusted depreciable basis and the
depreciation reserve. The beginning balance for the unadjusted depreciable basis of each general
asset account is equal to the sum of the unadjusted depreciable bases as of the beginning of the
year of change for all assets included in that general asset account. The beginning balance of
the depreciation reserve of each general asset account is equal to the sum of the greater of the
depreciation allowed or allowable as of the beginning of the year of change for all assets included
in that general asset account.
(b) The changes in methods of accounting specified in section 6.12(3)(a)(iii), (vi), (ix), and
(x) and section 6.12(3)(b)(ii), (v), and (viii) of this revenue procedure are made using a cut-off
method and apply to dispositions occurring on or after the beginning of the year of change.
(c) Even though the changes in methods of accounting specified in section 6.12(3)(a)(iv), (v),
(vii), and (viii) and section 6.12(3)(b)(iii), (iv), (vi), and (vii) of this revenue procedure are changes
from one permissible method of accounting to another permissible method of accounting, these
changes are made with a § 481(a) adjustment. However, see section 6.12(4)(f) of this revenue
procedure for an exception. For the changes in methods of accounting specified in section 6.12(3)
(b)(iii), (iv), (vi), and (vii) of this revenue procedure, the § 481(a) adjustment should be zero
unless § 1.168(i)-1(e)(3) applies to the asset subject to the change.
(d) A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is
required to complete only the following information on Form 3115 (Rev. December 2018) to
make this change:
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13, 15b, 16, 17, and 19 if the qualified small taxpayer is not
making a change in method of accounting specified in section 6.12(3)(a)(ix) and (x) and section
6.12(3)(b)(viii) of this revenue procedure;

Bulletin No. 2022–7 547 February 14, 2022
(v) Part II, all lines except lines 13, 15b, 16c, 17, and 19 if the qualified small taxpayer is
making a change in method of accounting specified in section 6.12(3)(a)(ix) or (x) or section
6.12(3)(b)(viii) of this revenue procedure;
(vi) Part IV; and
(vii) Schedule E.
(e) If any asset subject to this change is public utility property within the meaning of § 168(i)
(10), a taxpayer (including a qualified small taxpayer) making this change must attach to its
Form 3115 a statement providing that the taxpayer agrees to the following additional terms and
conditions:
(i) A normalization method of accounting (within the meaning of § 168(i)(9)) will be used for
the public utility property subject to the change;
(ii) As of the beginning of the year of change, the taxpayer will adjust its deferred tax reserve
account or similar account in the taxpayer’s regulatory books of account by the amount of the
deferral of federal income tax liability associated with the § 481(a) adjustment applicable to a
change in method of accounting specified in section 6.12(3)(a)(iv), (v), (vii), or (viii) or section
6.12(3)(b)(iii), (iv), (vi), or (vii) of this revenue procedure made for the public utility property
subject to the change; and
(iii) Within 30 calendar days of filing the federal income tax return for the year of change,
the taxpayer will provide a copy of the completed Form 3115 to any regulatory body having
jurisdiction over the public utility property subject to the change.
(f) A taxpayer that met the scope requirements of section 4 of Rev. Proc. 2015-20, 2015-9
I.R.B. 694, and that changed its method of accounting under section 6.37(3)(a)(iv), (a)(v), (a)
(vii), or (a)(viii) of Rev. Proc. 2015-14 (which is now section 6.12(3)(a)(iv), (a)(v), (a)(vii), or
(a)(viii) of this revenue procedure) by following section 5 of Rev. Proc. 2015-20 is required to
calculate a § 481(a) adjustment as of the first day of the year of change that takes into account only
dispositions in taxable years beginning on or after January 1, 2014.
(5) No audit protection. A taxpayer calculating a § 481(a) adjustment under section 6.12(4)(f) of
this revenue procedure that takes into account only dispositions in taxable years beginning on or
after January 1, 2014, does not receive audit protection under section 8.01 of Rev. Proc. 2015-13
for dispositions subject to a change under section 6.12(3)(a)(iv), (a)(v), (a)(vii), or (a)(viii) of this
revenue procedure in taxable years beginning before January 1, 2014. See section 5.03 of Rev.
Proc. 2015-20.
(6) Concurrent change.
(a) A taxpayer making this change for more than one asset for the same year of change should
file a single Form 3115 for all such assets. If the change for more than one asset included in that
Form 3115 is specified in section 6.12(3)(a)(iv), (v), (vii), or (viii) or section 6.12(3)(b)(iii), (iv),
(vi), or (vii) of this revenue procedure, the single Form 3115 also should provide a single net
§ 481(a) adjustment for all such changes. If one or more changes specified in section 6.12(3)(a)
(iv), (v), (vii), or (viii) or section 6.12(3)(b)(iii), (iv), (vi), or (vii) of this revenue procedure in
that single Form 3115 generate a negative § 481(a) adjustment and other changes specified in

February 14, 2022 548 Bulletin No. 2022–7
section 6.12(3)(a)(iv), (v), (vii), or (viii) or section 6.12(3)(b)(iii), (iv), (vi), or (vii) of this revenue
procedure in that same Form 3115 generate a positive § 481(a) adjustment, the taxpayer may
provide a single negative § 481(a) adjustment for all such changes that are included in that Form
3115 generating such negative adjustment and a single positive § 481(a) adjustment for all such
changes that are included in that Form 3115 generating such positive adjustment.
(b) A taxpayer making this change and any change listed in section 6.12(6)(b)(i)-(iv) of this
revenue procedure for the same year of change should file a single Form 3115 for all such changes
and must enter the designated automatic accounting method change numbers for the changes
on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for
information on making concurrent changes. For example, a qualified small taxpayer must include
on the single Form 3115 the information required to be completed on Form 3115 by a qualified
small taxpayer under this revenue procedure for each change in method of accounting included on
that Form 3115. The listed changes are:
(i) A change under section 6.01 of this revenue procedure;
(ii) A change under section 6.13 of this revenue procedure;
(iii) A change under section 6.14 of this revenue procedure;
(iv) A change under section 6.15 of this revenue procedure; and
(v) A change under section 11.07(3)(c) of this revenue procedure.
(7) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to a method of accounting under this section 6.12
is “200.”
(8) Contact information. For further information regarding a change under this section, contact
Patrick Clinton at (202) 317-7005 (not a toll-free number).
.13 Disposition of a building or structural component (§ 168; § 1.168(i)-8).
(1) Description of change.
(a) Applicability. This change, as described in Rev. Proc. 2014-54, 2014-41 I.R.B. 675, applies
to a taxpayer that wants to make a change in method of accounting that is specified in section
6.13(3) of this revenue procedure for disposing of a building or a structural component or disposing
of a portion of a building (including its structural components) to which the partial disposition
rule in § 1.168(i)-8(d)(1) applies. These specified changes are consistent with §§ 1.168(i)-8(b)
(2), 1.168(i)-8(c)(4)(ii)(A), (B), and (D), 1.168(i)-8(f), and 1.168(i)-8(g), as applicable. This
change also affects the determination of gain or loss from disposing of the building, the structural
component, or the portion of the building (including its structural components) and may affect
whether the taxpayer must capitalize amounts paid to restore a unit of property (as determined
under § 1.263(a)-3(e) or (f)) under § 1.263(a)-3(k).
(b) Inapplicability. This change does not apply to the following:

Bulletin No. 2022–7 549 February 14, 2022
(i) Any asset (as determined under § 1.168(i)-8(c)(4)) that is not depreciated under § 168 under
the taxpayer’s present method of accounting and, if applicable, under the taxpayer’s proposed
method of accounting;
(ii) Any asset subject to a general asset account election under § 168(i)(4) and the regulations
thereunder (but see section 6.15 of this revenue procedure for making a change in method of
accounting for dispositions of tangible depreciable assets subject to a general asset account
election);
(iii) Any multiple buildings, condominium units, or cooperative units that are treated as a single
building under the taxpayer’s present method of accounting, or will be treated as a single building
under the taxpayer’s proposed method of accounting, pursuant to § 1.1250-1(a)(2)(ii);
(iv) Any disposition of a portion of an asset in a transaction described in the last sentence in
§ 1.168(i)-8(d)(1) for which the taxpayer did not make a partial disposition election in accordance
with § 1.168(i)-8(d)(2)(ii), (iii), or (iv), as applicable (but see section 6.10 of this revenue procedure
for making a partial disposition election pursuant to § 1.168(i)-8(d)(2)(iii)); or
(v) Any demolition of a structure to which § 280B and § 1.280B-1 apply.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(d) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to a taxpayer making this change.
(3) Covered changes. This section 6.13 only applies to the following changes in methods of
accounting for a building (including its structural components), condominium unit (including its
structural components), cooperative unit (including its structural components), or an improvement
or addition (including its structural components) thereto:
(a) For purposes of applying § 1.168(i)-8(c)(4) (determination of asset disposed of), a change
to the appropriate asset as determined under § 1.168(i)-8(c)(4)(ii)(A), (B), or (D), as applicable;
(b) If the taxpayer makes the change specified in section 6.13(3)(a) of this revenue procedure,
and if the taxpayer disposed of the asset as determined under section 6.13(3)(a) of this revenue
procedure in a taxable year prior to the year of change but under its present method of accounting
continues to deduct depreciation for such disposed asset, a change from depreciating the disposed
asset to recognizing gain or loss upon disposition or, if § 280B and § 1.280B-1 apply to the
disposition, change from depreciating such disposed asset to capitalizing the loss sustained on
account of the demolition to the land on which the demolished structure was located;
(c) If the taxpayer makes the change specified in section 6.13(3)(a) of this revenue procedure,
and if the taxpayer disposed of a portion of the asset as determined under section 6.13(3)(a) of
this revenue procedure in a transaction described in the first sentence in § 1.168(i)-8(d)(1) in a
taxable year prior to the year of change but under its present method of accounting continues to
deduct depreciation for such disposed portion, a change from depreciating the disposed portion to
recognizing gain or loss upon disposition or, if § 280B and § 1.280B-1 apply to the disposition,
change from depreciating such disposed portion to capitalizing the loss sustained on account of
the demolition to the land on which the demolished structure was located;
(d) If the taxpayer’s present method of accounting for its buildings (including their structural
components), condominium units (including their structural components), cooperative units

February 14, 2022 550 Bulletin No. 2022–7
(including their structural components), and improvements or additions (including its structural
components) thereto that are depreciated under § 168 is in accord with § 1.168(i)-8(c)(4)(ii)(A),
(B), and (D), and if the taxpayer disposed of an asset as determined under § 1.168(i)-8(c)(4)(ii)
(A), (B), or (D), as applicable, in a taxable year prior to the year of change but under its present
method of accounting continues to deduct depreciation for such disposed asset, a change from
depreciating the disposed asset to recognizing gain or loss upon disposition or, if § 280B and
§ 1.280B-1 apply to the disposition, change from depreciating such disposed asset to capitalizing
the loss sustained on account of the demolition to the land on which the demolished structure was
located;
(e) If the taxpayer’s present method of accounting for its buildings (including their structural
components), condominium units (including their structural components), cooperative units
(including their structural components), and improvements or additions (including its structural
components) thereto that are depreciated under § 168 is in accord with § 1.168(i)-8(c)(4)(ii)
(A), (B), and (D), and if the taxpayer disposed of a portion of an asset as determined under
§ 1.168(i)-8(c)(4)(ii)(A), (B), or (D), as applicable, in a transaction described in the first sentence
in § 1.168(i)-8(d)(1) in a taxable year prior to the year of change but under its present method of
accounting continues to deduct depreciation for such disposed portion, a change from depreciating
the disposed portion to recognizing gain or loss upon disposition or, if § 280B and § 1.280B-1
apply to the disposition, change from depreciating such disposed portion to capitalizing the loss
sustained on account of the demolition to the land on which the demolished structure was located;
(f) A change in the method of identifying which assets in multiple asset accounts or which
portions of assets have been disposed of from a method of accounting not specified in § 1.168(i)-
8(g)(1) or (2)(i), (ii), or (iii) (for example, the last-in, first-out (LIFO) method of accounting) to a
method of accounting specified in § 1.168(i)-8(g)(1) or (2)(i), (ii), or (iii), as applicable;
(g) If § 1.168(i)-8(f)(2) applies (disposition of an asset in a multiple asset account) and
it is practicable from the taxpayer’s records to determine the unadjusted depreciable basis of
the disposed asset, a change in the method of determining the unadjusted depreciable basis of
the disposed asset from a method of not using the taxpayer’s records to a method of using the
taxpayer’s records;
(h) If § 1.168(i)-8(f)(2) applies (disposition of an asset in a multiple asset account) and it is
impracticable from the taxpayer’s records to determine the unadjusted depreciable basis of the
disposed asset, a change in the method of determining the unadjusted depreciable basis of all
assets in the same multiple asset account from an unreasonable method (for example, discounting
the cost of the replacement asset to its placed-in-service year cost using the Consumer Price
Index) to a reasonable method;
(i) If § 1.168(i)-8(f)(3) applies (disposition of a portion of an asset) and it is practicable from
the taxpayer’s records to determine the unadjusted depreciable basis of the disposed portion of
the asset, a change in the method of determining the unadjusted depreciable basis of the disposed
portion of the asset from a method of not using the taxpayer’s records to a method of using the
taxpayer’s records;
(j) If § 1.168(i)-8(f)(3) applies (disposition of a portion of an asset) and it is impracticable from
the taxpayer’s records to determine the unadjusted depreciable basis of the disposed portion of
the asset, a change in the method of determining the unadjusted depreciable basis of the disposed
portion of the asset from an unreasonable method (for example, discounting the cost of the
replacement portion of the asset to its placed-in-service year cost using the Consumer Price Index)
to a reasonable method; or

Bulletin No. 2022–7 551 February 14, 2022
(k) A change from recognizing gain or loss under § 1.168(i)-8T upon the disposition of an asset
(as determined under § 1.168(i)-8(c)(4)(ii)(A), (B), or (D), as applicable) included in a general
asset account to recognizing gain or loss upon the disposition of the same asset under § 1.168(i)-
8 if: (A) the taxpayer made the change specified in section 6.11 of Rev. Proc. 2016-29, 2016-
21 I.R.B. 880, section 6.34 of Rev. Proc. 2015-14, 2015-5 I.R.B. 450, or section 6.34 of the
APPENDIX to Rev. Proc. 2011-14, 2011-4 I.R.B. 330, as clarified and modified by Rev. Proc.
2012-39, 2012-41 I.R.B. 470, Rev. Proc. 2014-17, 2014-12 I.R.B. 661, and Rev. Proc. 2014-54,
2014-41 I.R.B. 675 (revocation of a general asset account election); (B) the taxpayer made a
qualifying disposition election under § 1.168(i)-1T(e)(3)(iii) in a taxable year prior to the year of
change for the disposition of such asset; (C) the taxpayer’s present method of accounting for such
asset is in accord with § 1.168(i)-8(c)(4)(ii)(A), (B), or (D), as applicable; and (D) the taxpayer
recognized a gain or loss under § 1.168(i)-8T upon the disposition of such asset in a taxable year
prior to the year of change.
(4) Examples. The following examples illustrate the covered changes specified in section
6.13(3) of this revenue procedure.
(a) Example 1. X, a calendar-year taxpayer, acquired and placed in service a building and its structural components in
2000. In 2005, X constructed and placed in service an addition to this building. X depreciates the building, the addition, and
their structural components under § 168. A change by X to treat the original building (including its structural components)
as an asset and the addition to the building (including the structural components of such addition) as a separate asset for
disposition purposes is a change described in section 6.13(3)(a) of this revenue procedure solely for purposes of § 1.168(i)-
8(c)(4).
(b) Example 2. Y, a calendar year taxpayer, acquired and placed in service a building and its structural components in
1990. Y depreciates this building and its structural components under § 168. In 2000, a tornado damaged the roof and,
as a result, Y replaced the entire roof of the building. Y did not recognize a loss on the retirement of the original roof and
continues to depreciate the original roof. Y also capitalized the cost of the replacement roof and has been depreciating this
roof under § 168 since 2000. Because the original roof was disposed of as a result of a casualty event described in § 165,
a change by Y from depreciating the original roof to recognizing a loss upon its retirement is a covered change described
in section 6.13(3)(e) of this revenue procedure solely for purposes of § 1.168(i)-8.
(c) Example 3. The facts are the same as in Example 2, except a tornado did not occur, but Y still replaced the entire roof
of the building in 2000. Because the original roof was not disposed of as a result of any of the events described in the first
sentence in § 1.168(i)-8(d)(1) that require a partial disposition, a partial disposition election must be made to change from
depreciating the original roof to recognizing a loss upon its retirement. Pursuant to section 6.13(1)(b)(iv) of this revenue
procedure, section 6.13 does not apply to the disposition of the original roof in 2000.
(5) Manner of making change.
(a) A taxpayer (including a qualified small taxpayer as defined in section 6.01(4)(b) of this
revenue procedure) making this change must attach to its Form 3115 a statement with the following:
(i) A description of the assets to which this change applies;
(ii) If the taxpayer is making a change specified in section 6.13(3)(a) of this revenue procedure,
a description of the assets for disposition purposes under the taxpayer’s present and proposed
methods of accounting;
(iii) If the taxpayer is making the change specified in section 6.13(3)(f) of this revenue
procedure, a description of the methods of identifying which assets have been disposed of under
the taxpayer’s present and proposed methods of accounting;

February 14, 2022 552 Bulletin No. 2022–7
(iv) If the taxpayer is making the change specified in section 6.13(3)(h) or (j) of this revenue
procedure, a description of the methods of determining the unadjusted depreciable basis of the
disposed asset or disposed portion of the asset, as applicable, under the taxpayer’s present and
proposed methods of accounting; and
(v) If any asset is public utility property within the meaning of § 168(i)(10), a statement
providing that the taxpayer agrees to the following additional terms and conditions:
(A) A normalization method of accounting (within the meaning of § 168(i)(9)) will be used for
the public utility property subject to the application;
(B) As of the beginning of the year of change, the taxpayer will adjust its deferred tax reserve
account or similar account in the taxpayer’s regulatory books of account by the amount of the
deferral of federal income tax liability associated with the § 481(a) adjustment applicable to the
public utility property subject to the application; and
(C) Within 30 calendar days of filing the federal income tax return for the year of change,
the taxpayer will provide a copy of the completed application to any regulatory body having
jurisdiction over the public utility property subject to the application.
(b) A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is
required to complete only the following information on Form 3115 (Rev. December 2018) to
make this change:
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13, 15b, 16, 17, and 19 if the qualified small taxpayer is not
making a change in method of accounting specified in section 6.13(3)(h) and (j) of this revenue
procedure;
(v) Part II, all lines except lines 13, 15b, 16c, 17, and 19 if the qualified small taxpayer is making
a change in method of accounting specified in section 6.13(3)(h) or (j) of this revenue procedure;
(vi) Part IV, all lines except line 25; and
(vii) Schedule E.
(6) No ruling on asset. The consent granted under section 9 of Rev. Proc. 2015-13 for a
change specified in section 6.13(3)(a) of this revenue procedure is not a determination by the
Commissioner that the taxpayer is using the appropriate asset under § 1.168(i)-8(c)(4) for
determining what asset is disposed of by the taxpayer and does not create any presumption that
the proposed asset is permissible under § 1.168(i)-8(c)(4). The director will ascertain whether the
taxpayer’s determination of its asset under § 1.168(i)-8(c)(4) is permissible.

Bulletin No. 2022–7 553 February 14, 2022
(7) Section 481(a) adjustment.
(a) A taxpayer changing its method of accounting under this section 6.13 may use statistical
sampling in determining the § 481(a) adjustment by following the guidance provided in Rev. Proc.
2011-42, 2011-37 I.R.B. 318.
(b) A taxpayer that met the scope requirements of section 4 of Rev. Proc. 2015-20, 2015-9 I.R.B.
694, and that changed its method of accounting under section 6.38 of Rev. Proc. 2015-14 (which
is now this section 6.13) by following section 5 of Rev. Proc. 2015-20 is required to calculate a
section § 481(a) adjustment as of the first day of the year of change that takes into account only
dispositions in taxable years beginning on or after January 1, 2014.
(8) Section 481(a) adjustment period.
(a) A taxpayer must take the entire amount of the § 481(a) adjustment into account in computing
taxable income for the year of change:
(i) If the taxpayer is making the change specified in section 6.13(3)(a) of this revenue procedure
and if the taxpayer recognized a gain or loss under § 1.168(i)-8T on the disposition of the asset (or
if applicable, a portion thereof) in a taxable year prior to the year of change;
(ii) If the taxpayer is making the change specified in section 6.13(3)(k) of this revenue procedure;
or
(iii) If the taxpayer is a qualified taxpayer as defined in section 4.01 of Rev. Proc. 2015-56,
2015-49 I.R.B. 827, and that is within the scope of section 3 of Rev. Proc. 2015-56, and is making
the change specified in section 5.02(5)(b) of Rev. Proc. 2015-56 on or before the first taxable year
that the qualified taxpayer uses the remodel-refresh safe harbor provided in section 5.02 of Rev.
Proc. 2015-56.
(b) If section 6.13(8)(a) of this revenue procedure does not apply, see section 7.03 of Rev. Proc.
2015-13 for the § 481(a) adjustment period.
(c) Example. (i) Y, a fiscal year taxpayer with a taxable year beginning December 1 and ending November 30, acquired
and placed in service a building and its structural components in 2000. Y depreciates this building and its structural
components under § 168. The roof is a structural component of the building. Y replaced the entire roof in June 2010. On
its federal tax return for the taxable year ended November 30, 2010, Y did not recognize a loss on the retirement of the
original roof and continues to depreciate the original roof. Y also capitalized the cost of the replacement roof and has been
depreciating this roof under § 168 since June 2010. The adjusted depreciable basis of the original roof at the time of its
retirement in 2010 (taking into account the applicable convention) is $11,000, and Y claimed depreciation of $1,000 for
such roof after its retirement (taking into account the applicable convention) and before the taxable year ended November
30, 2013 (2012 taxable year). Also the 12-month allowable depreciation deduction for the original roof is $500 for the
2012 taxable year, $500 for the taxable year ended November 30, 2014 (2013 taxable year), and $500 for the taxable year
ended November 30, 2015 (2014 taxable year).
(ii) In accordance with § 1.168(i)-8T(c)(4)(ii)(A) and (B) and section 6.29(3)(a) and (b) of the APPENDIX to Rev.
Proc. 2011-14, as modified by Rev. Proc. 2012-20, 2012-14 I.R.B. 700, Y filed with its federal income tax return for
the taxable year ended November 30, 2013, a Form 3115 to treat the building as an asset and each structural component
of the building as a separate asset for disposition purposes and also to change from depreciating the original roof to
recognizing a loss upon its retirement. The amount of the net negative § 481(a) adjustment on this Form 3115 is $10,000
(adjusted depreciable basis of $11,000 for the original roof at the time of its retirement (taking into account the applicable
convention) less depreciation of $1,000 claimed for such roof after its retirement (taking into account the applicable
convention) and before the 2012 taxable year).

February 14, 2022 554 Bulletin No. 2022–7
(iii) Y complies with § 1.168(i)-8 beginning with its taxable year ended November 30, 2016 (2015 taxable year). For
Y’s 2015 taxable year, the late partial disposition election under section 6.10 of Rev. Proc. 2016-29 does not apply. Y
also decides not to file a private letter ruling requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations to make a partial disposition election for the original roof. In accordance with section 6.13(3)
(a) of this revenue procedure, Y files a Form 3115 with its federal income tax return for the 2015 taxable year to change
to treating the original building (including its original roof and other original structural components) as an asset and the
replacement roof as a separate asset for disposition purposes. Because the late partial disposition election under section
6.10 of Rev. Proc. 2016-29 does not apply for Y’s 2015 taxable year and Y did not receive a private letter ruling granting
an extension of time under § 301.9100-3 to make a partial disposition election for the original roof, Y does not recognize
the net loss of $10,000 upon the retirement of the original roof under § 1.168(i)-8 and Y will continue to depreciate the
original roof. Thus, the net positive § 481(a) adjustment for this change is $8,500 (net loss of $10,000 claimed on the 2012
return for the retirement of the original roof less depreciation of $1,500 for the original roof for the 2012, 2013, and 2014
taxable years) and is included in Y’s taxable income for the 2015 taxable year.
(9) No audit protection. A taxpayer calculating a § 481(a) adjustment under section 6.13(7)(b)
of this revenue procedure that takes into account only dispositions in taxable years beginning on
or after January 1, 2014, does not receive audit protection under section 8.01 of Rev. Proc. 2015-
13 for dispositions subject to a change under this section 6.13 in taxable years beginning before
January 1, 2014. See section 5.04 of Rev. Proc. 2015-20.
(10) Concurrent automatic change.
(a) A taxpayer making this change for more than one asset for the same year of change should
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all
the changes included in that Form 3115. If one or more of the changes in that single Form 3115
generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a
positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment
for all the changes that are included in that Form 3115 generating such negative adjustment and
a single positive § 481(a) adjustment for all the changes that are included in that Form 3115
generating such positive adjustment.
(b) A taxpayer making this change and any change listed in section 6.13(10)(b)(i)-(iv) of this
revenue procedure for the same year of change should file a single Form 3115 for all of such
changes and must enter the designated automatic accounting method change numbers for the
changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent changes. For example, a qualified small taxpayer must
include on the single Form 3115 the information required to be completed on Form 3115 by a
qualified small taxpayer under this revenue procedure for each change in method of accounting
included on that Form 3115. The listed changes are:
(i) A change under section 6.01 of this revenue procedure;
(ii) A change under section 6.12 of this revenue procedure;
(iii) A change under section 6.14 of this revenue procedure; and
(iv) A change under section 6.15 of this revenue procedure.
(11) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to the method of accounting under this section
6.13 is “205.”

Bulletin No. 2022–7 555 February 14, 2022
(12) Contact information. For further information regarding a change under this section, contact
Patrick Clinton at (202) 317-7005 (not a toll-free number).
.14 Dispositions of tangible depreciable assets (other than a building or its structural
components) (§ 168; § 1.168(i)-8).
(1) Description of change.
(a) Applicability. This change, as described in Rev. Proc. 2014-54, 2014-41 I.R.B. 675,
applies to a taxpayer that wants to make a change in method of accounting that is specified in
section 6.14(3) of this revenue procedure for disposing of § 1245 property or a depreciable land
improvement or disposing of a portion of § 1245 property or a depreciable land improvement
to which the partial disposition rule in § 1.168(i)-8(d)(1) applies. These specified changes are
consistent with §§ 1.168(i)-8(c)(4)(i), 1.168(i)-8(c)(4)(ii)(C) and (D), 1.168(i)-8(f), and 1.168(i)-
8(g), as applicable. This change also affects the determination of gain or loss from disposing of
the § 1245 property, the depreciable land improvement, or a portion of the § 1245 property or
depreciable land improvement, and may affect whether the taxpayer must capitalize amounts paid
to restore a unit of property (as determined under § 1.263(a)-3(e) or (f)) under § 1.263(a)-3(k).
(b) Inapplicability. This change does not apply to the following:
(i) Any asset (as determined under § 1.168(i)-8(c)(4)) that is not depreciated under § 168 under
the taxpayer’s present method of accounting and, if applicable, under the taxpayer’s proposed
method of accounting;
(ii) Any building (including its structural components), condominium unit (including its
structural components), cooperative unit (including its structural components), or an improvement
or addition (including its structural components) thereto (but see section 6.13 of this revenue
procedure for making this change);
(iii) Any asset subject to a general asset account election under § 168(i)(4) and the regulations
thereunder (but see section 6.15 of this revenue procedure for making a change for dispositions of
tangible depreciable assets subject to a general asset account election); or
(iv) Any disposition of a portion of an asset in a transaction described in the last sentence in
§ 1.168(i)-8(d)(1) for which the taxpayer did not make a partial disposition election in accordance
with § 1.168(i)-8(d)(2)(ii), (iii), or (iv), as applicable (but see section 6.10 of this revenue procedure
for making a partial disposition election pursuant to § 1.168(i)-8(d)(2)(iii)).
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(d) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to a taxpayer making this change.
(3) Covered changes. This section 6.14 only applies to the following changes in methods of
accounting for a § 1245 property, a depreciable land improvement, or an improvement or addition
thereto:
(a) For purposes of applying § 1.168(i)-8(c)(4) (determination of asset disposed of), a change
to the appropriate asset as determined under § 1.168(i)-8(c)(4)(i), (ii)(C), or (ii)(D), as applicable;

February 14, 2022 556 Bulletin No. 2022–7
(b) If the taxpayer makes the change specified in section 6.14(3)(a) of this revenue procedure,
and if the taxpayer disposed of the asset as determined under section 6.14(3)(a) of this revenue
procedure in a taxable year prior to the year of change but continues to deduct depreciation for such
disposed asset under the taxpayer’s present method of accounting, a change from depreciating the
disposed asset to recognizing gain or loss upon disposition;
(c) If the taxpayer makes the change specified in section 6.14(3)(a) of this revenue procedure,
and if the taxpayer disposed of a portion of the asset as determined under section 6.14(3)(a) of
this revenue procedure in a transaction described in the first sentence in § 1.168(i)-8(d)(1) in a
taxable year prior to the year of change but under its present method of accounting continues to
deduct depreciation for such disposed portion, a change from depreciating the disposed portion to
recognizing gain or loss upon disposition;
(d) If the taxpayer’s present method of accounting for its § 1245 property, depreciable land
improvements, or improvements or additions thereto is in accord with § 1.168(i)-8(c)(4)(i) or (ii),
as applicable, and if the taxpayer disposed of an asset as determined under § 1.168(i)-8(c)(4)(i)
or (ii), as applicable, in a taxable year prior to the year of change but under its present method of
accounting continues to deduct depreciation for this disposed asset, a change from depreciating
the disposed asset to recognizing gain or loss upon disposition;
(e) If the taxpayer’s present method of accounting for its § 1245 property, depreciable land
improvements, or improvements or additions thereto is in accord with § 1.168(i)-8(c)(4)(i) or (ii),
as applicable, and if the taxpayer disposed of a portion of an asset as determined under § 1.168(i)-
8(c)(4)(i) or (ii), as applicable, in a transaction described in the first sentence in § 1.168(i)-8(d)(1)
in a taxable year prior to the year of change but under its present method of accounting continues
to deduct depreciation for such disposed portion, a change from depreciating the disposed portion
to recognizing gain or loss upon disposition;
(f) A change in the method of identifying which assets in multiple asset accounts or which
portions of assets have been disposed of from a method of accounting not specified in § 1.168(i)-
8(g)(1) or (2)(i), (ii), or (iii) (for example, the last-in, first-out (LIFO) method of accounting) to a
method of accounting specified in § 1.168(i)-8(g)(1) or (2)(i), (ii), or (iii), as applicable;
(g) If § 1.168(i)-8(f)(2) applies (disposition of an asset in a multiple asset account) and
it is practicable from the taxpayer’s records to determine the unadjusted depreciable basis of
the disposed asset, a change in the method of determining the unadjusted depreciable basis of
the disposed asset from a method of not using the taxpayer’s records to a method of using the
taxpayer’s records;
(h) If § 1.168(i)-8(f)(2) applies (disposition of an asset in a multiple asset account) and it is
impracticable from the taxpayer’s records to determine the unadjusted depreciable basis of the
disposed asset, a change in the method of determining the unadjusted depreciable basis of all
assets in the same multiple asset account from an unreasonable method (for example, discounting
the cost of the replacement asset to its placed-in-service year cost using the Consumer Price
Index) to a reasonable method;
(i) If § 1.168(i)-8(f)(3) applies (disposition of a portion of an asset) and it is practicable from
the taxpayer’s records to determine the unadjusted depreciable basis of the disposed portion of
the asset, a change in the method of determining the unadjusted depreciable basis of the disposed
portion of the asset from a method of not using the taxpayer’s records to a method of using the
taxpayer’s records;

Bulletin No. 2022–7 557 February 14, 2022
(j) If § 1.168(i)-8(f)(3) applies (disposition of a portion of an asset) and it is impracticable from
the taxpayer’s records to determine the unadjusted depreciable basis of the disposed portion of
the asset, a change in the method of determining the unadjusted depreciable basis of the disposed
portion of the asset from an unreasonable method (for example, discounting the cost of the
replacement portion of the asset to its placed-in-service year cost using the Consumer Price Index)
to a reasonable method; or
(k) A change from recognizing gain or loss under § 1.168(i)-8T upon the disposition of a section
1245 property, depreciable land improvement, or improvement or addition thereto included
in a general asset account to recognizing gain or loss upon the disposition of the same asset
under § 1.168(i)-8 if: (A) the taxpayer made the change specified in section 6.11 of Rev. Proc.
2016-29, section 6.34 of Rev. Proc. 2015-14, or section 6.34 of the APPENDIX to Rev. Proc.
2011-14 (revocation of a general asset account election); (B) the taxpayer made a qualifying
disposition election under § 1.168(i)-1T(e)(3)(iii) in a taxable year prior to the year of change for
the disposition of such asset; (C) the taxpayer’s present method of accounting for such asset is
in accord with § 1.168(i)-8(c)(4)(i) or (ii), as applicable; and (D) the taxpayer recognized a gain
or loss under § 1.168(i)-8T on the disposition of such asset in a taxable year prior to the year of
change.
(4) Manner of making change.
(a) A taxpayer (including a qualified small taxpayer as defined in section 6.01(4)(b) of this
revenue procedure) making this change must attach to its Form 3115 a statement with the following:
(i) A description of the assets to which this change applies;
(ii) If the taxpayer is making a change specified in section 6.14(3)(a) of this revenue procedure,
a description of the assets for disposition purposes under the taxpayer’s present and proposed
methods of accounting;
(iii) If the taxpayer is making the change specified in section 6.14(3)(f) of this revenue
procedure, a description of the methods of identifying which assets have been disposed of under
the taxpayer’s present and proposed methods of accounting;
(iv) If the taxpayer is making the change specified in section 6.14(3)(h) or (j) of this revenue
procedure, a description of the methods of determining the unadjusted depreciable basis of the
disposed asset or disposed portion of the asset, as applicable, under the taxpayer’s present and
proposed methods of accounting; and
(v) If any asset is public utility property within the meaning of § 168(i)(10), a statement
providing that the taxpayer agrees to the following additional terms and conditions:
(A) A normalization method of accounting (within the meaning of § 168(i)(9)) will be used for
the public utility property subject to the application;
(B) As of the beginning of the year of change, the taxpayer will adjust its deferred tax reserve
account or similar account in the taxpayer’s regulatory books of account by the amount of the
deferral of federal income tax liability associated with the § 481(a) adjustment applicable to the
public utility property subject to the application; and

February 14, 2022 558 Bulletin No. 2022–7
(C) Within 30 calendar days of filing the federal income tax return for the year of change,
the taxpayer will provide a copy of the completed application to any regulatory body having
jurisdiction over the public utility property subject to the application.
(b) A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is
required to complete only the following information on Form 3115 (Rev. December 2018) to
make this change:
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13, 15b, 16, 17, and 19 if the qualified small taxpayer is not
making a change in method of accounting specified in section 6.14(3)(h) and (j) of this revenue
procedure;
(v) Part II, all lines except lines 13, 15b, 16c, 17, and 19 if the qualified small taxpayer is making
a change in method of accounting specified in section 6.14(3)(h) or (j) of this revenue procedure;
(vi) Part IV, all lines except line 25; and
(vii) Schedule E.
(5) No ruling on asset. The consent granted under section 9 of Rev. Proc. 2015-13 for a
change specified in section 6.14(3)(a) of this revenue procedure is not a determination by the
Commissioner that the taxpayer is using the appropriate asset under § 1.168(i)-8(c)(4) for
determining what asset is disposed of by the taxpayer and does not create any presumption that
the proposed asset is permissible under § 1.168(i)-8(c)(4). The director will ascertain whether the
taxpayer’s determination of its asset under § 1.168(i)-8(c)(4) is permissible.
(6) Section 481(a) adjustment.
(a) A taxpayer changing its method of accounting under section 6.14 of the revenue procedure
may use statistical sampling in determining the § 481(a) adjustment by following the guidance
provided in Rev. Proc. 2011-42, 2011-37 I.R.B. 318.
(b) A taxpayer that met the scope requirements of section 4 of Rev. Proc. 2015-20, 2015-9 I.R.B.
694, and that changed its method of accounting under section 6.39 of Rev. Proc. 2015-14 (which
is now this section 6.14) by following section 5 of Rev. Proc. 2015-20 is required to calculate a
section § 481(a) adjustment as of the first day of the year of change that takes into account only
dispositions in taxable years beginning on or after January 1, 2014.
(7) Section 481(a) adjustment period.
(a) A taxpayer must take the entire amount of the § 481(a) adjustment into account in computing
taxable income for the year of change:

Bulletin No. 2022–7 559 February 14, 2022
(i) If the taxpayer is making the change specified in section 6.14(3)(a) of this revenue procedure
and if the taxpayer recognized a gain or loss under § 1.168(i)-8T on the disposition of the § 1245
property, depreciable land improvement, or improvement or addition thereto (or if applicable, a
portion of such asset) in a taxable year prior to the year of change; or
(ii) If the taxpayer is making the change specified in section 6.14(3)(k) of this revenue procedure.
(b) If section 6.14(7)(a) of this revenue procedure does not apply, see section 7.03 of Rev. Proc.
2015-13 for the § 481(a) adjustment period.
(8) No audit protection. A taxpayer calculating a § 481(a) adjustment under section 6.14(6)(b)
of this revenue procedure that takes into account only dispositions in taxable years beginning on
or after January 1, 2014, does not receive audit protection under section 8.01 of Rev. Proc. 2015-
13 for dispositions subject to a change under this section 6.14 in taxable years beginning before
January 1, 2014. See section 5.05 of Rev. Proc. 2015-20.
(9) Concurrent automatic change.
(a) A taxpayer making this change for more than one asset for the same year of change should
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all
the changes included in that Form 3115. If one or more of the changes in that single Form 3115
generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a
positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment
for all the changes that are included in that Form 3115 generating such negative adjustment and
a single positive § 481(a) adjustment for all the changes that are included in that Form 3115
generating such positive adjustment.
(b) A taxpayer making this change and any change listed in section 6.14(9)(b)(i)-(iv) of this
revenue procedure for the same year of change should file a single Form 3115 for all of such
changes and must enter the designated automatic accounting method change numbers for the
changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent changes. For example, a qualified small taxpayer must
include on the single Form 3115 the information required to be completed on Form 3115 by a
qualified small taxpayer under this revenue procedure for each change in method of accounting
included on that Form 3115. The listed changes are:
(i) A change under section 6.01 of this revenue procedure;
(ii) A change under section 6.12 of this revenue procedure;
(iii) A change under section 6.13 of this revenue procedure; and
(iv) A change under section 6.15 of this revenue procedure.
(10) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to the method of accounting under this section
6.14 is “206.”

February 14, 2022 560 Bulletin No. 2022–7
(11) Contact information. For further information regarding a change under this section, contact
Patrick Clinton at (202) 317-7005 (not a toll-free number).
.15 Dispositions of tangible depreciable assets in a general asset account (§ 168(i)(4);
§ 1.168(i)-1).
(1) Description of change.
(a) Applicability. This change, as described in Rev. Proc. 2014-54, 2014-41 I.R.B. 675, applies
to a taxpayer that wants to make a change in method of accounting that is specified in section
6.15(3) of this revenue procedure for disposing of an asset subject to a general asset account
election under § 168(i)(4) and the regulations thereunder. These specified changes are consistent
with §§ 1.168(i)-1(e)(1), 1.168(i)-1(e)(2)(viii), and 1.168(i)-1(j), as applicable. This change also
may affect the determination of gain or loss from disposing of the asset and may affect whether
the taxpayer must capitalize amounts paid to restore a unit of property (as determined under
§ 1.263(a)-3(e) or (f)) under § 1.263(a)-3(k).
(b) Inapplicability. This change does not apply to the following:
(i) Any asset (as determined under § 1.168(i)-1(e)(2)(viii)) that is not depreciated under
§ 168 under the taxpayer’s present method of accounting and, if applicable, proposed method of
accounting; or
(ii) Any asset not subject to a general asset account election under § 168(i)(4) and the regulations
thereunder (but see sections 6.13 and 6.14 of this revenue procedure for making a change for
dispositions of tangible depreciable assets not subject to a general asset account election).
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(d) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to a taxpayer making this change.
(3) Covered changes. This section 6.15 only applies to the following changes in methods
of accounting for an asset subject to a general asset account election under § 168(i)(4) and the
regulations thereunder:
(a) For purposes of applying § 1.168(i)-1(e)(2)(viii) (determination of asset disposed of), a
change to the appropriate asset as determined under § 1.168(i)-1(e)(2)(viii)(A) or (B), as applicable;
(b) A change in the method of identifying which assets or which portions of assets have been
disposed of from a method of accounting not specified in § 1.168(i)-1(j)(2)(i)(A), (B), (C), or
(D) (for example, the last-in, first-out (LIFO) method of accounting) to a method of accounting
specified in § 1.168(i)-1(j)(2)(i)(A), (B), (C), or (D), as applicable;
(c) If § 1.168(i)-1(j)(3) applies (basis of disposed asset or disposed portion of an asset) and
it is practicable from the taxpayer’s records to determine the unadjusted depreciable basis of
the disposed asset or the disposed portion of an asset, as applicable, a change in the method of
determining the unadjusted depreciable basis of the disposed asset or the disposed portion of an
asset, as applicable, from a method of not using the taxpayer’s records to a method of using the
taxpayer’s records; or

Bulletin No. 2022–7 561 February 14, 2022
(d) If § 1.168(i)-1(j)(3) applies (basis of disposed asset or disposed portion of an asset) and
it is impracticable from the taxpayer’s records to determine the unadjusted depreciable basis of
the disposed asset or the disposed portion of an asset, as applicable, a change in the method of
determining the unadjusted depreciable basis of all assets in the same general asset account from
an unreasonable method (for example, discounting the cost of the replacement asset to its placed-
in-service year cost using the Consumer Price Index) to a reasonable method.
(4) Manner of making change.
(a) A taxpayer (including a qualified small taxpayer as defined in section 6.01(4)(b) of this
revenue procedure) making this change must attach to its Form 3115 a statement with the following:
(i) A description of the assets to which this change applies;
(ii) If the taxpayer is making the change specified in section 6.15(3)(a) of this revenue procedure,
a description of the assets for disposition purposes under the taxpayer’s present and proposed
methods of accounting;
(iii) If the taxpayer is making the change specified in section 6.15(3)(b) of this revenue
procedure, a description of the methods of identifying which assets have been disposed of under
the taxpayer’s present and proposed methods of accounting;
(iv) If the taxpayer is making the change specified in section 6.15(3)(d) of this revenue
procedure, a description of the methods of determining the unadjusted depreciable basis of the
disposed asset or disposed portion of the asset, as applicable, under the taxpayer’s present and
proposed methods of accounting; and
(v) If any asset is public utility property within the meaning of § 168(i)(10), a statement
providing that the taxpayer agrees to the following additional terms and conditions:
(A) A normalization method of accounting (within the meaning of § 168(i)(9)) will be used for
the public utility property subject to the application;
(B) As of the beginning of the year of change, the taxpayer will adjust its deferred tax reserve
account or similar account in the taxpayer’s regulatory books of account by the amount of the
deferral of federal income tax liability associated with the § 481(a) adjustment applicable to the
public utility property subject to the application; and
(C) Within 30 calendar days of filing the federal income tax return for the year of change,
the taxpayer will provide a copy of the completed application to any regulatory body having
jurisdiction over the public utility property subject to the application.
(b) A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is
required to complete only the following information on Form 3115 (Rev. December 2018) to
make this change:
(i) The identification section of page 1 (above Part I);

February 14, 2022 562 Bulletin No. 2022–7
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13, 15b, 16, 17, and 19 if the qualified small taxpayer is not
making a change in method of accounting specified in section 6.15(3)(a) and (d) of this revenue
procedure;
(v) Part II, all lines except lines 13, 15b, 16c, 17, and 19 if the qualified small taxpayer is making
a change in method of accounting specified in section 6.15(3)(a) or (d) of this revenue procedure;
(vi) Part IV, all lines except line 25; and
(vii) Schedule E.
(5) No ruling on asset. The consent granted under section 9 of Rev. Proc. 2015-13 for a
change specified in section 6.15(3)(a) of this revenue procedure is not a determination by the
Commissioner that the taxpayer is using the appropriate asset under § 1.168(i)-1(e)(2)(viii) for
determining what asset is disposed of by the taxpayer and does not create any presumption that the
proposed asset is permissible under § 1.168(i)-1(e)(2)(viii). The director will ascertain whether
the taxpayer’s determination of its asset under § 1.168(i)-1(e)(2)(viii) is permissible.
(6) Section 481(a) adjustment period.
(a) A taxpayer must take the entire amount of the § 481(a) adjustment into account in computing
taxable income for the year of change:
(i) If the taxpayer makes the change specified in section 6.15(3)(a) of this revenue procedure
and if the taxpayer recognized a gain or loss under § 1.168(i)-1T or § 1.168(i)-8T, as applicable,
on the disposition of a portion of the asset in a taxable year prior to the year of change; or
(iii) If the taxpayer is a qualified taxpayer as defined in section 4.01 of Rev. Proc. 2015-56,
2015-49 I.R.B. 827, and that is within the scope of section 3 of Rev. Proc. 2015-56, and is making
the change specified in section 5.02(5)(b) of Rev. Proc. 2015-56 on or before the first taxable year
that the qualified taxpayer uses the remodel-refresh safe harbor provided in section 5.02 of Rev.
Proc. 2015-56.
(b) If section 6.15(6)(a) of this revenue procedure does not apply, see section 7.03 of Rev. Proc.
2015-13 for the § 481(a) adjustment period.
(c) Example. (i) X, a fiscal year taxpayer with a taxable year beginning December 1 and ending November 30, acquired
and placed in service a building and its structural components in 2000. X depreciates this building and its structural
components under § 168. The roof is a structural component of the building. X replaced the entire roof in June 2010. On
its federal tax return for the taxable year ended November 30, 2010, X did not recognize a loss on the retirement of the
original roof and continues to depreciate the original roof. X also capitalized the cost of the replacement roof and has been
depreciating this roof under § 168 since June 2010. The adjusted depreciable basis of the original roof at the time of its
retirement in 2010 (taking into account the applicable convention) is $11,000, and X claimed depreciation of $1,000 for
such roof after its retirement (taking into account the applicable convention) and before the taxable year ended November
30, 2013 (2012 taxable year). Also the 12-month allowable depreciation deduction for the original roof is $500 for the
2012 taxable year, $500 for the taxable year ended November 30, 2014 (2013 taxable year), and $500 for the taxable year
ended November 30, 2015 (2014 taxable year).

Bulletin No. 2022–7 563 February 14, 2022
(ii) In accordance with § 1.168(i)-1T and section 6.32(1)(a) of the APPENDIX to Rev. Proc. 2011-14, as modified by
Rev. Proc. 2012-20, 2012-14 I.R.B. 700, X filed with its federal tax return for the taxable year ended November 30, 2013,
a Form 3115 to: (1) make a late general asset account election to include the building (including its structural components)
placed in service in 2000 in one general asset account and the replacement roof in a separate general asset account; and
(2) make a late qualifying disposition election for the retirement of the original roof in 2010. As a result, X removed the
original roof from the general asset account and reported a net negative § 481(a) adjustment on this Form 3115 of $10,000
(adjusted depreciable basis of $11,000 for the original roof at the time of its retirement (taking into account the applicable
convention) less depreciation of $1,000 claimed for such roof after its retirement (taking into account the applicable
convention) and before the 2012 taxable year).
(iii) X complies with § 1.168(i)-1 beginning with its taxable year ended November 30, 2016 (2015 taxable year). In
accordance with section 6.15(3)(a) of this revenue procedure, X files a Form 3115 with its federal income tax return for the
2015 taxable year to change to treating the building (including its original roof and other original structural components)
placed in service in 2000 as an asset and the replacement roof as a separate asset for disposition purposes. As a result,
X must include the original roof that X retired in 2010 in the general asset account. Thus, the net positive § 481(a)
adjustment for this change is $8,500 (net loss of $10,000 claimed on the 2012 return for the retirement of the original roof
less depreciation of $1,500 for the original roof for the 2012, 2013, and 2014 taxable years) and is included in X’s taxable
income for the 2015 taxable year.
(7) Concurrent automatic change.
(a) A taxpayer making this change for more than one asset for the same year of change should
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all
the changes included in that Form 3115. If one or more of the changes in that single Form 3115
generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a
positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment
for all the changes that are included in that Form 3115 generating such negative adjustment and
a single positive § 481(a) adjustment for all the changes that are included in that Form 3115
generating such positive adjustment.
(b) A taxpayer making this change and any change listed in section 6.15(7)(b)(i)-(iv) of this
revenue procedure for the same year of change should file a single Form 3115 for all of such
changes and must enter the designated automatic accounting method change numbers for the
changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent changes. For example, a qualified small taxpayer must
include on the single Form 3115 the information required to be completed on Form 3115 by a
qualified small taxpayer under this revenue procedure for each change in method of accounting
included on that Form 3115. The listed changes are:
(i) A change under section 6.01 of this revenue procedure;
(ii) A change under section 6.12 of this revenue procedure;
(iii) A change under section 6.13 of this revenue procedure; and
(iv) A change under section 6.14 of this revenue procedure.
(8) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to the method of accounting under this section
6.15 is “207.”
(9) Contact information. For further information regarding a change under this section, contact
Patrick Clinton at (202) 317-7005 (not a toll-free number).

February 14, 2022 564 Bulletin No. 2022–7
.16 Summary of certain changes in methods of accounting related to dispositions of MACRS
property.
(1) Final regulations. The following chart summarizes the changes in methods of accounting
under § 1.167(a)-4, § 1.168(i)-1, § 1.168(i)-7, and § 1.168(i)-8 that a taxpayer may make under
this revenue procedure.
FINAL REGULATION SECTION
SECTION # in
REV. PROC. 2022-14
DESIGNATED CHANGE
NUMBER (DCN)
§ 1.167(a)-4, Depreciation of leasehold
improvements
6.11199
General Asset Accounts:
FINAL REGULATION SECTION
SECTION # in
REV. PROC.
2022-14
DESIGNATED
CHANGE
NUMBER (DCN)
a. § 1.168(i)-1(c), Change in grouping assets6.12200
b. § 1.168(i)-1(e)(2)(viii), Change in determining asset
disposed of
6.15207
c. § 1.168(i)-1(j)(2), Change in method of identifying
which assets or portions of assets have been disposed
of from one method to another method specified in
§ 1.168(i)-1(j)(2)
6.12200
d. § 1.168(i)-1(j)(2), Change in method of identifying
which assets or portions of assets have been disposed
of from a method not specified in § 1.168(i)-1(j)(2) to a
method specified in § 1.168(i)-1(j)(2)
6.15207
e. § 1.168(i)-1(j)(3), Change in determining unadjusted
depreciable basis of disposed asset or disposed portion
of an asset from one reasonable method to another
reasonable method when it is impracticable from the
taxpayer’s records to determine the unadjusted deprecia-
ble basis of disposed asset or disposed portion of asset
6.12200
f. § 1.168(i)-1(j)(3), Change in determining unadjusted
depreciable basis of disposed asset or disposed por-
tion of an asset from not using to using the taxpayer’s
records when it is practicable from the taxpayer’s
records to determine the unadjusted depreciable basis of
disposed asset or disposed portion of asset
6.15207
g. § 1.168(i)-1(j)(3), Change in determining unadjusted
depreciable basis of disposed asset or disposed portion
of an asset from an unreasonable method to a reasonable
method when it is impracticable from the taxpayer’s
records to determine the unadjusted depreciable basis of
disposed asset or disposed portion of asset
6.15207

Bulletin No. 2022–7 565 February 14, 2022
Single Asset Accounts or Multiple Asset Accounts for MACRS Property:
FINAL REGULATION SECTION
SECTION # in REV.
PROC. 2022-14
DESIGNATED
CHANGE
NUMBER (DCN)
a. § 1.168(i)-7, Change from single asset ac-
counts to multiple asset accounts, or vice versa
6.12200
b. § 1.168(i)-7(c), Change in grouping assets in
multiple asset accounts
6.12200
Dispositions of MACRS Property (not in a general asset account):
FINAL REGULATION SECTION
SECTION # in
REV. PROC.
2022-14
DESIGNATED
CHANGE
NUMBER
(DCN)
a. § 1.168(i)-8(c)(4), Change in determining asset dis-
posed of
6.13 (Building
or structural
component)
6.14 (Proper-
ty other than
a building
or structural
component)
205
206
b. § 1.168(i)-8(f)(2) or (3), Change in determining unad-
justed depreciable basis of disposed asset in a multiple
asset account or disposed portion of an asset from one rea-
sonable method to another reasonable method when it is
impracticable from the taxpayer’s records to determine the
unadjusted depreciable basis of disposed asset or disposed
portion of asset
6.12200
c. § 1.168(i)-8(f)(2) or (3), Change in determining unad-
justed depreciable basis of disposed asset in a multiple
asset account or disposed portion of an asset from not
using to using the taxpayer’s records when it is practicable
from the taxpayer’s records to determine the unadjusted
depreciable basis of disposed asset or disposed portion of
asset
6.13 (Building
or structural
component)
6.14 (Property
other than a
building or
structural com-
ponent)
205
206
d. § 1.168(i)-8(f)(2) or (3), Change in determining unad-
justed depreciable basis of disposed asset in a multiple
asset account or disposed portion of an asset from an
unreasonable method to a reasonable method when it is
impracticable from the taxpayer’s records to determine the
unadjusted depreciable basis of disposed asset or disposed
portion of asset
6.13 (Building
or structural
component)
6.14 (Property
other than a
building or
structural com-
ponent)
205
206
e. § 1.168(i)-8(g), Change in method of identifying which
assets in a multiple asset account or portions of assets
have been disposed of from one method to another method
specified in § 1.168(i)-8(g)(1) or (2)
6.12200

February 14, 2022 566 Bulletin No. 2022–7
FINAL REGULATION SECTION
SECTION # in
REV. PROC.
2022-14
DESIGNATED
CHANGE
NUMBER
(DCN)
f. § 1.168(i)-8(g), Change in method of identifying
which assets in a multiple asset account or portions of
assets have been disposed of from a method not speci-
fied in § 1.168(i)-8(g)(1) or (2) to a method specified in
§ 1.168(i)-8(g)(1) or (2)
6.13 (Building
or structural
component)
6.14 (Property
other than a
building or
structural com-
ponent)
205
206
g. § 1.168(i)-8(h)(1), Change from depreciating a disposed
asset or disposed portion of an asset to recognizing gain
or loss upon disposition when a taxpayer continues to
depreciate the asset or portion that the taxpayer disposed
of prior to the year of change
6.13 (Building
or structural
component)
6.14 (Property
other than a
building or
structural com-
ponent)
205
206
h. § 1.168(i)-8(d)(2)(iii), Partial disposition election for
the disposition of a portion of an asset to which the IRS’s
adjustment pertains
6.10198
.17 Depreciation of fiber optic transfer node and fiber optic cable used by a cable system
operator (§§ 167 and 168).
(1) Description of change.
(a) Applicability. This change applies to a cable system operator that is within the scope of Rev.
Proc. 2015-12, 2015-2 I.R.B. 266, and wants to change to the safe harbor method of accounting
provided in section 8.03 of Rev. Proc. 2015-12 for determining depreciation under §§ 167 and
168 of a fiber optic transfer node and trunk line consisting of fiber optic cable used in a cable
distribution network providing one-way and two-way communication services. The safe harbor
method provided by section 8.03 of Rev. Proc. 2015-12 determines the asset for purposes of
§§ 167 and 168.
(b) Inapplicability. This change does not apply to the following:
(i) any property that is not depreciated under § 168 under the taxpayer’s present and proposed
methods of accounting; or
(ii) any property that is not owned by the taxpayer at the beginning of the year of change.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(d) of Rev. Proc.
2015-13 does not apply to a taxpayer that makes this change.
(3) Concurrent automatic change.

Bulletin No. 2022–7 567 February 14, 2022
(a) A taxpayer that wants to make this change for more than one asset for the same year of change
should file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment
for all the changes included in that Form 3115. If one or more of the changes in that single Form
3115 generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate
a positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment
for all the changes that are included in that Form 3115 generating such adjustment and a single
positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating
such adjustment.
(b) A taxpayer that wants to make both this change and a change to a UNICAP method under
section 12.01, 12.02, 12.08, or 12.12 of this revenue procedure, as applicable, for the same year
of change should file a single Form 3115 for all such changes and must enter the designated
automatic accounting method change numbers for the changes on the appropriate line on the
Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent
changes.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to the method of accounting under this section
6.17 is “210.”
(5) Contact information. For further information regarding a change under this section, contact
Charles Magee at (202) 317-7005 (not a toll-free number).
.18 Late elections or revocation of elections under § 168(k)(5), (7), and (10).
(1) Description of Change.
(a) Applicability. This change applies to a taxpayer within the scope of Rev. Proc. 2019-33,
2019-34 I.R.B. 662, that wants to make a late election, or to revoke an election, provided in
sections 4, 5, and 6 of Rev. Proc. 2019-33 under § 168(k)(5), (7), or (10).
(b) Inapplicability. The IRS will treat the making of a late election, or the revocation of an
election, provided in sections 4, 5, and 6 of Rev. Proc. 2019-33 under § 168(k)(5), (7), and (10) as
a change in method of accounting with a § 481(a) adjustment only for the taxable years specified
in section 6.18(2) of this revenue procedure. This treatment does not apply to a taxpayer that
makes these late elections or revocations before or after the time specified in section 6.18(2) of
this revenue procedure, and any such late election or revocation is not a change in method of
accounting pursuant to § 1.446-1(e)(2)(ii)(d)(3)(iii).
(2) Time for making the change. The change under this section 6.18 must be made for the
taxpayer’s first, second, or third taxable year succeeding the taxpayer’s taxable year beginning
in 2016 and ending on or after September 28, 2017 (2016 taxable year) or beginning in 2017 and
ending on or after September 28, 2017 (2017 taxable year).
(3) Certain eligibility rules inapplicable. The eligibility rules in section 5.01(1)(d) and (f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to this change for the taxpayer’s first, second,
or third taxable year succeeding the taxpayer’s 2016 taxable year or 2017 taxable year.
(4) Concurrent automatic change.

February 14, 2022 568 Bulletin No. 2022–7
(a) A taxpayer making this change for more than one specified plant under section 4 of Rev.
Proc. 2019-33 for the same year of change should file a single Form 3115 for all such specified
plants. The single Form 3115 must provide a single net § 481(a) adjustment for all such changes.
(b) A taxpayer making this change for more than one class of property under section 5 of Rev.
Proc. 2019-33 for the same year of change should file a single Form 3115 for all such classes of
property. The single Form 3115 must provide a single net § 481(a) adjustment for all such changes.
(c) A taxpayer making this change for all qualified property under section 6 of Rev. Proc. 2019-
33 should provide a single net § 481(a) adjustment for all assets that are qualified property.
(d) A taxpayer making a late election, or revoking an election, under more than one section of
Rev. Proc. 2019-33 (for example, under sections 4 and 6 of Rev. Proc. 2019-33) for the same year
of change should file a single Form 3115 for all such changes. The single Form 3115 must provide
a single net § 481(a) adjustment for all such changes.
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to the method of accounting under this section
6.18 is “241.”
(6) Contact information. For further information regarding a change under this section, contact
Elizabeth Binder at (202) 317-7005 (not a toll-free number).
.19 Qualified improvement property placed in service after December 31, 2017 (§ 168).
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to change from an impermissible
to a permissible method of accounting for depreciation of any item of qualified improvement
property, as defined in § 168(e)(6):
(i) that is placed in service by the taxpayer after December 31, 2017;
(ii) for which the taxpayer used the impermissible method of accounting in at least two taxable
years immediately preceding the year of change (but see section 6.19(1)(b) of this revenue
procedure for qualified improvement property placed in service in the taxable year immediately
preceding the year of change); and
(iii) that is owned by the taxpayer at the beginning of the year of change (but see section 6.07
of this revenue procedure for property disposed of before the year of change).
(b) Taxpayer has not adopted a method of accounting for the qualified improvement property.
If a taxpayer does not satisfy section 6.19(1)(a)(ii) of this revenue procedure for an item of
qualified improvement property because the item of qualified improvement property is placed
in service by the taxpayer in the taxable year immediately preceding the year of change (1-year
QIP), the taxpayer may change from the impermissible method of determining depreciation to the
permissible method of determining depreciation for the 1-year QIP by filing a Form 3115 for this
change, provided the § 481(a) adjustment reported on the Form 3115 includes the amount that
is attributable to all property (including the 1-year QIP) subject to the Form 3115. Alternatively,

Bulletin No. 2022–7 569 February 14, 2022
the taxpayer may change from the impermissible method of determining depreciation to the
permissible method of determining depreciation for the 1-year QIP by filing an amended federal
income tax return, or an administrative adjustment request under § 6227 (AAR), as applicable,
for the property’s placed-in-service year prior to the date the taxpayer files its federal income tax
return for the taxable year succeeding the placed-in-service year. In addition, if the 1-year QIP
is within the scope of section 3 of Rev. Proc. 2020-25, 2020-19 I.R.B. 785, the taxpayer may
change from the impermissible method of determining depreciation to the permissible method of
determining depreciation for the 1-year QIP by filing an amended federal income tax return, or
AAR, as applicable, in accordance with section 3.02(3)(a) of Rev. Proc. 2020-25.
(c) Inapplicability. This change does not apply to:
(i) any qualified improvement property placed in service by a taxpayer that made a late election,
or withdrew an election, under § 163(j)(7)(B) (electing real property trade or business) or § 163(j)
(7)(C) (electing farming business) for the taxable year in which the qualified improvement property
is placed in service by the taxpayer, in accordance with Rev. Proc. 2020-22, 2020-18 I.R.B. 745.
Any changes to depreciation for such qualified improvement property, or other depreciable
property, affected by the late election or withdrawn election under § 163(j)(7)(B) or (C) are made
in accordance with sections 4.02 and 4.03, or 5.02 of Rev. Proc. 2020-22, as applicable;
(ii) any qualified improvement property for which the taxpayer is changing from deducting the
cost or other basis as an expense to capitalizing and depreciating the cost or other basis, or vice
versa;
(iii) any qualified improvement property for which the taxpayer is changing its method of
accounting for depreciation to the method of accounting for depreciation provided in § 1.168(i)-4,
which applies when there is a change in use of the property (but see section 6.04 or 6.05 of this
revenue procedure for making this change); or
(iv) any change in method of accounting to which section 6.21 of this revenue procedure applies.
(2) Certain eligibility rules temporarily inapplicable. For an item of qualified improvement
property placed in service by the taxpayer after December 31, 2017, in its taxable year ending in
2018, 2019, or 2020, the eligibility rules in section 5.01(1)(d) and (f) of Rev. Proc. 2015-13, 2015-
5 I.R.B. 419, do not apply to this change for the taxpayer’s first or second taxable year succeeding
the taxable year in which the item of qualified improvement property is placed in service by the
taxpayer.
(3) Reduced filing requirement. A taxpayer making a change under this section 6.19 is required
to complete only the following information on Form 3115 (Rev. December 2018):
(a) The identification section of page 1 (above Part I);
(b) The signature section at the bottom of page 1;
(c) Part I;
(d) Part II, all lines except lines 11, 12, 13, 15, 16, 17, and 19;

February 14, 2022 570 Bulletin No. 2022–7
(e) Part IV, all lines; and
(f) Schedule E, all lines except lines 1, 4b, 5, and 6.
(4) Concurrent automatic change.
(a) A taxpayer making this change for more than one asset for the same year of change should
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all the
changes included in that Form 3115.
(b) A taxpayer making this change and the change in section 6.01 or 6.20 of this revenue
procedure for the same year of change should file a single Form 3115 for all such changes and
must enter the designated automatic accounting method change numbers on the appropriate
line of the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making
concurrent changes.
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to the method of accounting under this section
6.19 is “244.”
(6) Contact information. For further information regarding a change under this section, contact
Elizabeth Binder at (202) 317-7005 (not a toll-free number).
.20 Certain late elections under §§ 168 and 1502 or revocation of certain elections under § 168
(§ 168(g)(7), (k)(5), (k)(7), and (k)(10); §§ 1.168(k)-2 and 1.1502-68).
(1) Description of change.
(a) Applicability. This change applies to:
(i) A taxpayer within the scope of section 4 of Rev. Proc. 2020-25, 2020-19 I.R.B. 785, as
modified by section 8 of Rev. Proc. 2020-50, 2020-48 I.R.B. 1122, that wants to make a late
election provided in section 4.02(2) of Rev. Proc. 2020-25 under § 168(g)(7), (k)(5), (k)(7), or
(k)(10). This change also applies to a taxpayer within the scope of section 5 of Rev. Proc. 2020-
25 that wants to revoke an election provided in section 5.02(2)(b) of Rev Proc. 2020-25 under
§ 168(k)(5), (k)(7), or (k)(10); or
(ii) A taxpayer within the scope of section 5 of Rev. Proc. 2020-50, 2020-48 I.R.B. 1122, that
wants to make a late election under § 168(k)(5), (7), or (10), § 1.168(k)-2(c) (component election),
§ 1.1502-68(c)(4) (designated transaction election), or proposed § 1.168(k)-2(c) (proposed
component election) as provided in section 5.02(2) of Rev. Proc. 2020-50. This change also
applies to a taxpayer within the scope of section 6 of Rev. Proc. 2020-50 that wants to revoke an
election under § 168(k)(5), (k)(7), or (k)(10), or a proposed component election as provided in
section 6.02(2)(b) of Rev. Proc. 2020-50.
(b) Inapplicability.

Bulletin No. 2022–7 571 February 14, 2022
(i) The IRS will treat the making of a late election provided in section 4 of Rev. Proc. 2020-
25 under § 168(g)(7), (k)(5), (k)(7), and (k)(10), or the revocation of an election provided in
section 5 of Rev. Proc. 2020-25 under § 168(k)(5), (k)(7), and (k)(10), as a change in method of
accounting with a § 481(a) adjustment only for the taxable years specified in section 6.20(2)(a) of
this revenue procedure. This treatment does not apply to a taxpayer that makes these late elections
or revocations before or after the time specified in section 6.20(2)(a) of this revenue procedure,
and any such late election or revocation is not a change in method of accounting pursuant to
§ 1.446-1(e)(2)(ii)(d)(3)(iii).
(ii) The IRS will treat the making of a late election under § 168(k)(5), (7), or (10), a late
component election, a late designated transaction election, or a late proposed component election
as provided in section 5 of Rev. Proc. 2020-50, or the revocation of an election under § 168(k)
(5), (k)(7), or (k)(10), or a proposed component election as provided in section 6 of Rev. Proc.
2020-50, as a change in method of accounting with a § 481(a) adjustment only for the taxable
years specified in section 6.20(2)(b) of this revenue procedure. This treatment does not apply to a
taxpayer that makes these late elections or revocations before or after the time specified in section
6.20(2)(b) of this revenue procedure, and any such late election or revocation is not a change in
method of accounting pursuant to § 1.446-1(e)(2)(ii)(d)(3)(iii).
(2) Time for making the change.
(a) The change under section 6.20(1)(a)(i) and (b)(i) of this revenue procedure must be made
for the taxpayer’s first or second taxable year succeeding the taxable year in which the taxpayer
placed in service the property affected by the late election under § 168(g)(7), (k)(5), (k)(7), or (k)
(10), as applicable, or revocation of the election under § 168(k)(5), (k)(7), or (k)(10), as applicable.
(b) The change under section 6.20(1)(a)(ii) and (b)(ii) of this revenue procedure must be made
for the taxpayer’s first or second taxable year succeeding the taxable year in which the taxpayer
(A) placed in service the property affected by the late election under § 168(k)(7) or (10), the
late component election, the late designated transaction election, or the late proposed component
election, as applicable, or by the revocation of the election under § 168(k)(7) or (k)(10), or the
proposed component election, as applicable, or (B) planted or grafted the specified plant to which
the late § 168(k)(5) election applies or to which the revocation of the election under § 168(k)(5)
applies.
(3) Certain eligibility rules inapplicable.
(a) The eligibility rules in section 5.01(1)(d) and (f) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
do not apply to the change under section 6.20(1)(a)(i) and (b)(i) of this revenue procedure for the
taxpayer’s first or second taxable year succeeding the taxable year in which the taxpayer placed
in service the property affected by the late election under § 168(g)(7), (k)(5), (k)(7), or (k)(10), as
applicable, or revocation of the election under § 168(k)(5), (k)(7), or (k)(10), as applicable.
(b) The eligibility rules in section 5.01(1)(d) and (f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, do not apply to the change under section 6.20(1)(a)(ii) and (b)(ii) of this revenue procedure
for the taxpayer’s first or second taxable year succeeding the taxable year in which the taxpayer
(A) placed in service the property affected by the late election under § 168(k)(7) or (10), the
late component election, the late designated transaction election, or the late proposed component
election, as applicable, or by the revocation of the election under § 168(k)(7) or (k)(10), or the
proposed component election, as applicable, or (B) planted or grafted the specified plant to which
the late § 168(k)(5) election applies or to which the revocation of the election under § 168(k)(5)
applies.

February 14, 2022 572 Bulletin No. 2022–7
(4) Reduced filing requirement. A taxpayer making a change under this section 6.20 is required
to complete only the following information on Form 3115 (Rev. December 2018):
(a) The identification section of page 1 (above Part I);
(b) The signature section at the bottom of page 1;
(c) Part I;
(d) Part II, all lines except lines 11, 12, 13, 15, 16, 17, and 19;
(e) Part IV, all lines; and
(f) Schedule E, all lines except lines 1, 4b, 5, and 6.
(5) Concurrent automatic change.
(a) A taxpayer making one or more late elections, and/or revoking one or more elections, under
sections 4 and 5 of Rev. Proc. 2020-25, or under sections 5 and 6 of Rev. Proc. 2020-50, for the
same year of change must file a single Form 3115 for all such changes. The single Form 3115 must
provide a single net § 481(a) adjustment for all such changes for all assets placed in service, and
all specified plants planted or grafted, by the taxpayer during the same taxable year. See section
6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(b) A taxpayer making one or more changes under this section 6.20 and the change in section
6.01, 6.19, or 6.21 of this revenue procedure for the same year of change must file a single Form
3115 for all such changes and must enter the designated automatic accounting method change
numbers on the appropriate line on the Form 3115. The single Form 3115 must provide a single
net § 481(a) adjustment for all such changes for all assets placed in service, and all specified plants
planted or grafted, by the taxpayer during the same taxable year. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making concurrent changes.
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to the method of accounting under this section
6.20 is “245.”
(7) Contact information. For further information regarding a change under this section, contact
Elizabeth Binder at (202) 317-7005 (not a toll-free number).
.21 Change in depreciation as a result of applying the additional first year depreciation
regulations (§ 168(k); §§ 1.168(k)-2 and 1.1502-68).
(1) Description of Change.
(a) Applicability. This change applies to a taxpayer within the scope of section 4 of Rev. Proc.
2020-50, 2020-48 I.R.B. 1122, that wants to change its method of accounting for depreciation
under § 168 to comply with the Final Regulations (as defined in section 2.02(6) of Rev. Proc.
2020-50), the 2019 final regulations (as defined in section 2.02(2) of Rev. Proc. 2020-50), or

Bulletin No. 2022–7 573 February 14, 2022
both the 2019 final regulations and the 2019 proposed regulations (as defined in section 1 of Rev.
Proc. 2020-50), as applicable, for depreciable property and specified plants within the scope of
section 4 of Rev. Proc. 2020-50. A change under this section 6.21 applies to (i) a taxpayer that
is changing from an impermissible method of accounting to a permissible method of accounting
under section 4.03(4)(b) of Rev. Proc. 2020-50 and section 6.21(3) of this revenue procedure, and
(ii) a taxpayer that is changing from one permissible method of accounting to another permissible
method of accounting under section 4.04 of Rev. Proc. 2020-50 and section 6.21(4) of this
revenue procedure. For purposes of this section 6.21, a taxpayer is deemed to change from an
impermissible method of accounting to a permissible method of accounting when, for the first
time, the taxpayer changes its method of accounting for depreciation under this section 6.21 for
depreciable property and specified plants described in section 4.02(1) of Rev. Proc. 2020-50 to
comply with the Final Regulations, the 2019 final regulations, or both the 2019 final regulations
and the 2019 proposed regulations. Further, any subsequent time the taxpayer changes its method
of accounting for depreciation for depreciable property and specified plants described in section
4.02(1) of Rev. Proc. 2020-50 to comply with the Final Regulations, the 2019 final regulations, or
both the 2019 final regulations and the 2019 proposed regulations, is a change from a permissible
method of accounting to another permissible method of accounting under this section 6.21. See
section 4.02(2) of Rev. Proc. 2020-50.
(b) Inapplicability. This change does not apply to any property for which the taxpayer is
changing its method of accounting for depreciation to the method of accounting for depreciation
provided in § 1.168(i)-4, which applies when there is a change in use of the property (but see
section 6.04 or 6.05 of this revenue procedure for making this change).
(2) Certain eligibility rules inapplicable.
(a) In general. The eligibility rule in section 5.01(1)(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a taxpayer making this change for the property and specified plant within
the scope of section 4 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of this revenue
procedure.
(b) Special rule. The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a taxpayer making this change for the property and specified plant within
the scope of section 4 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of this revenue
procedure, for the taxpayer’s first or second taxable year succeeding the taxable year in which the
taxpayer placed in service such property, or planted or grafted such specified plant, as applicable.
(3) Impermissible to permissible method of determining the depreciation deduction allowable.
(a) A taxpayer may change from an impermissible method of accounting to a permissible
method of accounting under section 4.03 of Rev. Proc. 2020-50 for the property and specified
plant within the scope of section 4.03 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of
this revenue procedure, for which the taxpayer used the impermissible method of accounting in
at least two taxable years immediately preceding the year of change (but see section 6.21(3)(b) of
this revenue procedure for property placed in service or a specified plant planted or grafted in the
taxable year immediately preceding the year of change).
(b) If a taxpayer does not satisfy section 6.21(3)(a) of this revenue procedure for depreciable
property that is within the scope of section 4.03 of Rev. Proc. 2020-50, as modified by section
6.21(1)(b) of this revenue procedure, because the depreciable property is placed in service by
the taxpayer in the taxable year immediately preceding the year of change (1-year Property),
the taxpayer may change from the impermissible method of determining depreciation to the

February 14, 2022 574 Bulletin No. 2022–7
permissible method of determining depreciation for the 1-year Property by filing a Form 3115
for this change in accordance with this section 6.21(3), provided the § 481(a) adjustment reported
on the Form 3115 includes the amount of any adjustment attributable to all property, including
the 1-year Property, subject to the Form 3115. Similarly, for a specified plant that is within the
scope of section 4.03 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of this revenue
procedure, and is planted or grafted by the taxpayer in the taxable year immediately preceding
the year of change (1-year Plant), the taxpayer may change from the impermissible method
of determining depreciation to the permissible method of determining depreciation under this
section 6.21(3) for the 1-year Plant by filing a Form 3115 for this change in accordance with this
section 6.21(3), provided the § 481(a) adjustment reported on the Form 3115 includes the amount
of any adjustment attributable to all property, including the 1-year Plant, subject to the Form
3115. Alternatively, the taxpayer may change from the impermissible method of determining
depreciation to the permissible method of determining depreciation for the 1-year Property or
1-year Plant by filing an amended federal income tax return, or an administrative adjustment
request under § 6227 (AAR), as applicable, for the 1-year Property’s placed-in-service year
or 1-year Plant’s planting or grafting year, as applicable, prior to the date the taxpayer files its
federal income tax return for the taxable year succeeding the placed-in-service year or planting
or grafting year, as applicable. In addition, if the 1-year Property or 1-year Plant is within the
scope of section 4.03 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of this revenue
procedure, the taxpayer may change from the impermissible method of determining depreciation
to the permissible method of determining depreciation for the 1-year Property or 1-year Plant by
filing an amended federal income tax return, or AAR, as applicable, in accordance with section
4.03(4)(a) of Rev. Proc. 2020-50.
(c) A change under section 4.03(4)(b) of Rev. Proc. 2020-50 and this section 6.21(3) is made
with a § 481(a) adjustment. However, consent to make a change in method of accounting under
this section 6.21 will be granted by the Commissioner only if the taxpayer satisfies section 4.02 of
Rev. Proc. 2020-50, to the extent relevant. Further, if a taxpayer that has a trade or business with
floor plan financing indebtedness is applying § 1.168(k)-2(b)(2)(ii)(G) of the Final Regulations,
§ 1.168(k)-2(b)(2)(ii)(G) of the 2019 final regulations, or both § 1.168(k)-2(b)(2)(ii)(G) of
the 2019 final regulations and § 1.168(k)-2(b)(2)(ii)(G) of the 2019 proposed regulations for
depreciable property placed in service by the taxpayer in its 2018, 2019, or 2020 taxable year,
consent to make a change in method of accounting under this section 6.21 will be granted by the
Commissioner only if the amount of the § 481(a) adjustment is adjusted to account for the proper
amount of interest expense, taking into account the business interest limitation under § 163(j) and
the regulations thereunder, as of the beginning of the year of change.
(4) Permissible to another permissible method of determining the depreciation deduction
allowable.
(a) A taxpayer may change from one permissible method of accounting to another permissible
method of accounting under section 4.04 of Rev. Proc. 2020-50 for the property and specified
plant within the scope of section 4.04 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of
this revenue procedure.
(b) A change under section 4.04 of Rev. Proc. 2020-50 and this section 6.21(4) is made on a
cut-off basis. Accordingly, neither the modified cut-off method, as described in § 1.446-1(e)(2)(ii)
(d)(5)(iii), nor a § 481(a) adjustment is permitted or required.
(5) Additional requirement. A taxpayer making a change under this section 6.21 also must
comply with section 4.02 of Rev. Proc. 2020-50, to the extent relevant. Once a taxpayer applies
§ 1.168(k)-2 and, to the extent relevant, § 1.1502-68, of the Final Regulations, in their entirety,
for a taxable year, the taxpayer must continue to apply § 1.168(k)-2 and, to the extent relevant,
§ 1.1502-68, of the Final Regulations, in their entirety, for the taxpayer’s subsequent taxable

Bulletin No. 2022–7 575 February 14, 2022
years. See §§ 1.168(k)-2(h)(3)(iii) and 1.1502-68(e)(2)(iii) of the Final Regulations and section
4.02(1) of Rev. Proc. 2020-50.
(6) Reduced filing requirement. A taxpayer making a change under this section 6.21 is required
to complete only the following information on Form 3115 (Rev. December 2018):
(a) The identification section of page 1 (above Part I);
(b) The signature section at the bottom of page 1;
(c) Part I;
(d) Part II, all lines except lines 11, 12, 13, 15, 16, 17, and 19;
(e) Part IV, all lines; and
(f) Schedule E, all lines except lines 1, 4b, 5, and 6.
(7) Concurrent automatic change.
(a) A taxpayer making this change must file a single Form 3115 for all assets placed in service,
and all specified plants planted or grafted, by the taxpayer during the same taxable year and must
provide a single net § 481(a) adjustment for all the changes included in that Form 3115.
(b) A taxpayer making one or more changes under section 6.21(3) of this revenue procedure
and the change in section 6.01, 6.19, or 6.20 of this revenue procedure for the same year of
change must file a single Form 3115 for all such changes and must enter the designated automatic
accounting method change numbers on the appropriate line on the Form 3115. The single Form
3115 must provide a single net § 481(a) adjustment for all such changes for all assets placed in
service, and all specified plants planted or grafted, by the taxpayer during the same taxable year.
See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(8) Designated automatic accounting method change numbers. The designated automatic
accounting method change number for (a) a change under section 6.21(3) of this revenue procedure
is “246”, and (b) a change under section 6.21(4) of this revenue procedure is “247.”
(9) Contact information. For further information regarding a change under this section, contact
Elizabeth Binder at (202) 317-7005 (not a toll-free number).
.22 Depreciation of tangible property under § 168(g) by controlled foreign corporations.
(1) Description of change. This change is applicable to a controlled foreign corporation (as
defined in § 957(a)) (CFC) that seeks to change its method of accounting for depreciation for
an item of property that is described in § 168(g)(1)(A) (except for property excluded from the
application of § 168 as a result of § 168(f)) and owned by the CFC at the beginning of the year
of change to the permissible depreciation method, convention, and recovery period prescribed
under the alternative depreciation system (ADS) in § 168(g) for such property in determining the
CFC’s gross and taxable income under § 1.952-2 as well as its earnings and profits (“E&P”) under

February 14, 2022 576 Bulletin No. 2022–7
§§ 964 and 986(b) and the regulations thereunder. This change applies regardless of whether the
method of accounting for depreciation that the CFC wants to change pursuant to this section 6.22
is impermissible or permissible under the Internal Revenue Code and the regulations thereunder.
(2) CFC has not adopted a method of accounting for the item of property. If a CFC placed in
service an item of property described in section 6.22(1) of this revenue procedure in the taxable
year immediately preceding the year of change (1-year property), the CFC may change its method
of determining depreciation for the 1-year property to ADS if the designated shareholder files a
Form 3115 for this change, provided the § 481(a) adjustment attributable to the 1-year property
is included on the Form 3115. Alternatively, the CFC may change its impermissible method of
determining depreciation for the 1-year property to ADS if each U.S. shareholder of the CFC (or
the agent described in § 1.1502-77(a), if applicable) files an amended federal income tax return
for the taxable year in which or with which the property’s placed-in-service year ends prior to the
date the shareholder files its federal income tax return for the taxable year in which or with which
the CFC’s taxable year succeeding the placed-in-service year ends.
(3) Applicability. This change is effective for a Form 3115 filed on or after May 11, 2021, for a
taxable year of a CFC ending before January 1, 2024.
(4) Limited period to convert a Form 3115 filed under the non-automatic change procedures in
Rev. Proc. 2015-13.
(a) Eligibility. The designated shareholder may convert a Form 3115 that was properly filed on
behalf of a CFC under the non-automatic change procedures in Rev. Proc. 2015-13 requesting the
Commissioner’s consent for a change in method of accounting described in this section 6.22 if:
(i) the CFC is otherwise eligible to use the automatic change procedures in this section 6.22 and
Rev. Proc. 2015-13 (to the extent the eligibility requirements in Rev. Proc. 2015-13 are not waived
by this section 6.22), and
(ii) the Form 3115 was filed before May 11, 2021, and is pending with the national office on
May 11, 2021.
(b) Notification procedures. The designated shareholder must notify the national office contact
person for the Form 3115 (if contact person is unknown, fax the notification to 855-576-2341 or
send the notification to the address specified in section 9.08(6) of Rev. Proc. 2022-1, 2022-1 I.R.B.
1 (or its successor)) of the CFC’s intent to make the change in method of accounting under the
automatic change procedures in this section 6.22 and Rev. Proc. 2015-13 before the later of (i)
June 10, 2021, or (ii) the issuance of a letter ruling granting or denying consent for the change. The
notification must indicate that the designated shareholder chooses on behalf of the CFC to convert
the Form 3115 to the automatic change procedures in this section 6.22 and Rev. Proc. 2015-13.
If the national office is timely and properly notified in accordance with the requirements in this
paragraph, the national office will send a letter to the designated shareholder acknowledging its
request and will return the user fee submitted with the Form 3115.
(c) Resubmission procedures. A designated shareholder converting a Form 3115 to the
automatic change procedures in this section 6.22 and Rev. Proc. 2015-13 for a change in method
of accounting described in this section 6.22 must resubmit a Form 3115 that conforms to the
automatic change procedures, with a copy of the national office letter sent acknowledging the
request to convert attached, by the earlier of (i) the 30th calendar day after the date of the national
office’s letter acknowledging the request to convert, or (ii) the date the designated shareholder is

Bulletin No. 2022–7 577 February 14, 2022
required to file the original Form 3115 under section 6.03(1)(a) of Rev. Proc. 2015-13. See section
6.03(3) of Rev. Proc. 2015-13 regarding additional required copies of Form 3115.
For purposes of the eligibility rules in section 5 of Rev. Proc. 2015-13, the duplicate copy of the
timely resubmitted Form 3115 will be considered filed as of the date the designated shareholder
originally filed the converted Form 3115 under the non-automatic change procedures in Rev. Proc.
2015-13. This paragraph (4) does not extend the date the designated shareholder must file the
original (converted) Form 3115 under section 6.03(1)(a) of Rev. Proc. 2015-13.
(d) Agent treated as designated shareholder. For purposes of this section 6.22, in the case of
a designated shareholder that is a member of a consolidated group, a reference to a designated
shareholder refers to the agent described in § 1.1502-77(a) with respect to the consolidated group
of which the designated shareholder is a member.
(5) Section 481(a) adjustment. A § 481(a) adjustment is required with respect to a change made
under this section 6.22 for any CFC.
(6) Certain eligibility rules inapplicable. The eligibility rules in section 5.01(1)(c), (d), (e), and
(f) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to this change.
(7) Short Form 3115 in lieu of a standard Form 3115. In accordance with § 1.446-1(e)(3)
(ii), the requirement in § 1.446-1(e)(3)(i) to file a standard Form 3115 is waived and, pursuant
to section 6.02(2) of Rev. Proc. 2015-13, a short Form 3115 is authorized with respect to any
CFC making a change under this section 6.22. The short Form 3115 (Rev. December 2018) must
include the following information:
(a) The identification section of page 1 (above Part I);
(b) The signature section at the bottom of page 1;
(c) Part I;
(d) Part II, all lines except lines 10, 13, 16, and 19;
(e) Part IV; and
(f) Schedule E.
(8) Concurrent automatic changes. A designated shareholder making an accounting method
change on behalf of a CFC under this section 6.22 with respect to more than one asset for the same
year of change may file a single short Form 3115 for all such changes. If any § 481(a) adjustment
(or any component of a § 481(a) adjustment) from a change that is included in that Form 3115
shares all of the same characteristics as any other § 481(a) adjustment (or component) from a
change that is included in that Form 3115, those § 481(a) adjustments (or components) must be
provided as a single § 481(a) adjustment, with the characteristics identified, in the Form 3115. Any
§ 481(a) adjustment (or component of a § 481(a) adjustment) from a change that is included in
that Form 3115 that does not share all of the same characteristics as any other § 481(a) adjustment
(or component) from a change that is included in that Form 3115 must be provided as a separate
§ 481(a) adjustment, with the characteristics identified, in the Form 3115. A § 481(a) adjustment

February 14, 2022 578 Bulletin No. 2022–7
(or any component of a § 481(a) adjustment) shares all of the same characteristics as another
§ 481(a) adjustment (or component) if:
(i) The § 481(a) adjustments (or components) relate to the same qualified business unit (QBU),
as defined in § 989(a) and § 1.989(a)-1(b);
(ii) If applicable, the § 481(a) adjustments (or components) relate to the same tested unit, as
defined in § 1.951A-2(c)(7)(iv);
(iii) The § 481(a) adjustments (or components) are either all positive or all negative, as applicable
(for this purpose a negative component of an overall positive adjustment will be treated as positive
and a positive component of an overall negative adjustment will be treated as negative); and
(iv) The § 481(a) adjustments (or components) have the same source, separate limitation
classification, character, and treatment under section 7.07(2) of Rev. Proc. 2015-13, as modified
by section 4 of Rev. Proc. 2021-26, 2021-22 I.R.B. 1163, 1167-68.
(9) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 6.22 is “248.”
(10) Contact information. For further information regarding a change under this section, contact
Natalie Punchak at (202) 317-6934 (not a toll-free number).
SECTION 7. RESEARCH AND EXPERIMENTAL EXPENDITURES (§ 174)
.01 Changes to a different method or different amortization period.
(1) Description of change.
(a) This change applies to a taxpayer that wants to change the treatment of expenditures that
qualify as research and experimental expenditures under § 174. Unless otherwise stated, references
to § 174 in this section 7.01 refer to § 174 as in effect prior to amendment by § 13206 of Public
Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and Jobs Act
(TCJA).
(b) Section 174 and the regulations thereunder provide the specific rules for changing a method
of accounting under § 174 for research and experimental expenditures. Under § 174, a taxpayer
may treat research and experimental expenditures that are paid or incurred by the taxpayer during
the taxable year in connection with the taxpayer’s trade or business as expenses under § 174(a) or
as deferred expenses amortizable ratably over a period of not less than 60 months under § 174(b).
Pursuant to § 1.174-1, research and experimental expenditures that are not treated as expenses or
deferred expenses under § 174 must be treated as a charge to capital account. Further, § 1.174-
1 provides that the expenditures to which § 174 applies may relate either to a general research
program or to a particular project. Finally, §§ 1.174-3(a) and 1.174-4(a)(5) provide that in no
event will a taxpayer be permitted to apply one method as to part of the expenditures relative to
a particular project and apply a different method to the balance of the expenditures relating to the
same project for the same taxable year.

Bulletin No. 2022–7 579 February 14, 2022
(c) If a taxpayer has not treated research and experimental expenditures as expenses under
§ 174(a), § 174(a)(2)(B) and § 1.174-3(b)(2) provide that the taxpayer may, with consent, adopt
the expense method at any time.
(d) If a taxpayer has treated research and experimental expenditures as expenses under § 174(a),
§ 174(a)(3) and § 1.174-3(b)(3) provide that the taxpayer may, with consent, change to a different
method of treating research and experimental expenditures.
(e) If a taxpayer has treated research and experimental expenditures as deferred expenses under
§ 174(b), § 174(b)(2) and § 1.174-4(b)(2) provide that the taxpayer may, with consent, change
to a different method of treating research or experimental expenditures or to a different period of
amortization for deferred expenses.
(2) Applicability.
(a) In general. This change applies to any taxpayer that is changing:
(i) from treating research and experimental expenditures for a particular project or projects as
expenses under § 174(a) to treating such expenditures as deferred expenses under § 174(b), or
vice versa;
(ii) to a different period of amortization for research and experimental expenditures for a
particular project or projects that are being treated as deferred expenses under § 174(b);
(iii) from treating research and experimental expenditures for a particular project or projects as
expenses under § 174(a) or deferred expenses under § 174(b) to treating such expenditures as a
charge to capital account, or vice versa; or
(iv) from treating research and experimental expenditures under any provision of the Code
other than § 174 to treating such expenditures under § 174 and the regulations thereunder.
(b) Inapplicability. This change does not apply to:
(i) a change in the treatment of computer software costs under Rev. Proc. 2000-50, 2000-2
C.B. 601, as modified by Rev. Proc. 2007-16, 2007-1 C.B. 358 (but see section 9 of this revenue
procedure for making that change);
(ii) a change in the treatment of Year 2000 costs under Rev. Proc. 97-50, 1997-2 C.B. 525; or
(iii) any amount paid or incurred in any taxable year for which § 174 as amended by § 13206
of the TCJA is in effect.
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, is not applicable to this change.
(4) Manner of making change.

February 14, 2022 580 Bulletin No. 2022–7
(a) This change is made on a cut-off basis and applies to all research and experimental
expenditures paid or incurred for a particular project or projects on or after the beginning of the
year of change. See § 174(b)(2), and §§ 1.174-3(a), 1.174-3(b)(2), and 1.174-4(a)(5) for more
information regarding a cut-off basis. Accordingly, a § 481(a) adjustment is neither permitted nor
required.
(b) The requirement under §§ 1.174-3(b)(2), 1.174-3(b)(3), and 1.174-4(b)(2) to file an
application (that is, a Form 3115) no later than the end of the first taxable year in which the
different method or different amortization period is to be used is waived for this change. However,
see section 6.03 of Rev. Proc. 2015-13 for filing requirements applicable to a change under this
section 7.01.
(c) The consent granted under section 9 of Rev. Proc. 2015-13 satisfies the consent required
under §§ 174(a)(2)(B), 174(a)(3), and 174(b)(2), and §§ 1.174-3(b)(2), 1.174-3(b)(3), and 1.174-
4(b)(2).
(5) Additional requirement. A taxpayer must attach to its Form 3115 a written statement
providing:
(a) the information required in § 1.174-3(b)(2) if the taxpayer is changing to treating research
and experimental expenditures as expenses under § 174(a);
(b) the information required in § 1.174-3(b)(3) if the taxpayer is changing from treating research
and experimental expenditures as expenses under § 174(a); or
(c) the information required in § 1.174-4(b)(2) if the taxpayer is changing from treating research
and experimental expenditures as deferred expenses under § 174(b) or is changing to a different
period of amortization for research and experimental expenditures being treated as deferred
expenses under § 174(b).
(6) No audit protection. A taxpayer does not receive audit protection under section 8.01 of Rev.
Proc. 2015-13 in connection with this change. See section 8.02(2) of Rev. Proc. 2015-13.
(7) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 7.01 is “17.”
(8) Contact information. For further information regarding a change under this section, contact
Martha M. Garcia or John M. Deininger at (202) 317-6853 (not a toll-free number).
SECTION 8. ELECTIVE EXPENSING PROVISIONS (§ 179D)
.01 Deduction for Energy Efficient Commercial Buildings (§ 179D).
(1) Description of change. This change, as described in Rev. Proc. 2012-39, 2012-41 I.R.B.
470, applies to a taxpayer that wants to change its method of accounting to deduct under § 179D
amounts paid or incurred for the installation of energy efficient commercial building property,

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as defined in § 179D(c)(1). The deduction for energy efficient commercial building property is
subject to the limits of § 179D(b) and must be claimed in the taxable year in which the property is
placed in service. The basis of the energy efficient commercial building property is reduced by the
amount of the § 179D deduction taken and the remaining basis of the energy efficient commercial
building property is depreciated over its recovery period.
(2) Applicability. This change applies to a taxpayer that places in service property for which a
deduction is allowed under § 179D(a).
(3) Inapplicability. This change does not apply to a designer to whom the owner of a government
building allocates the § 179D deduction.
(4) Manner of making change. A taxpayer making this change must attach to its Form 3115
(the original, the duplicate copy filed with the IRS in Ogden, UT, and any additional copies) a
statement with a detailed description of the tax treatment of the property under the taxpayer’s
present and proposed methods of accounting.
(5) Certification requirement. In addition to the statement required by section 8.01(4) of this
revenue procedure, a taxpayer making this change must attach to its Form 3115 a certification as
required by section 4 of Notice 2006-52, 2006-1 C.B. 1175, or section 5 of Notice 2008-40, 2008-
1 C.B. 725, to demonstrate that the energy efficient commercial building property has achieved
the reduction in energy and power costs or in lighting power density necessary to qualify for the
§ 179D deduction.
(6) No ruling on qualification. The consent granted under section 9 of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, for a change provided in this section 8.01 is not a determination by the
Commissioner that the taxpayer qualifies for a deduction under section 179D. The director will
ascertain whether the taxpayer qualifies for a deduction under section 179D (including a review of
the required certifications). See section 12 of Rev. Proc. 2015-13.
(7) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 8.01 is “152.”
(8) Contact information. For further information regarding a change under this section, contact
Charles Hyde at (202) 317-5214 (not a toll-free number).
SECTION 9. COMPUTER SOFTWARE EXPENDITURES (§§ 162, 167, and 197)
.01 Computer software expenditures.
(1) Description of change. This change applies to a taxpayer that wants to change its method of
accounting for the costs of computer software to a method described in Rev. Proc. 2000-50, 2000-
2 C.B. 601, as modified by Rev. Proc. 2007-16, 2007-1 C.B. 358. Section 5 of Rev. Proc. 2000-50
describes the methods applicable to the costs of developing computer software. Section 6 of Rev.
Proc. 2000-50 describes the method applicable to the costs of acquired computer software. Section
7 of Rev. Proc. 2000-50 describes the method applicable to leased or licensed computer software.
Section 13206 of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as
the Tax Cuts and Jobs Act (TCJA), amended § 174 to treat the costs of software development as

February 14, 2022 582 Bulletin No. 2022–7
research or experimental expenditures, effective for amounts paid or incurred in taxable years
beginning after December 31, 2021. In accordance, section 5 of Rev. Proc. 2000-50 (costs of
developing computer software) does not apply to any amount paid or incurred in any taxable year
for which § 174 as amended by § 13206 of the TCJA is in effect.
(2) Scope. This change applies to all costs of computer software as defined in section 2 of Rev.
Proc. 2000-50. However, this change does not apply to any computer software that is subject to
amortization as an “amortizable section 197 intangible” as defined in § 197(c) and the regulations
thereunder, or to costs that a taxpayer has treated as research and experimentation expenditures
under § 174.
(3) Inapplicability. This change does not apply to costs of developing computer software that
are paid or incurred in taxable years for which § 174 as amended by § 13206 of the TCJA is in
effect.
(4) Statement required. If a taxpayer is changing to the method described in section 5.01(2)
of Rev. Proc. 2000-50, the taxpayer must attach to its Form 3115 a statement providing the
information required in section 8.02(2) of Rev. Proc. 2000-50.
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 9.01 is “18.”
(6) Contact information. For further information regarding a change under this section, contact
Bruce Chang at (202) 317-7005 (not a toll-free number).
SECTION 10. START-UP EXPENDITURES AND ORGANIZATIONAL FEES (§§ 195, 248, AND 709)
.01 Start-up expenditures.
(1) Description of change and scope.
(a) Applicability. This change applies to a taxpayer that wants to change its method of accounting
under § 195 to change:
(i) the characterization of an item as a start-up expenditure;
(ii) the determination of the taxable year in which the taxpayer begins the active trade or
business to which the start-up expenditures relate; or
(iii) the amortization period of a start-up expenditure to 180 months.
(b) Inapplicability. This change does not apply to:
(i) start-up expenditures paid or incurred before October 23, 2004; or

Bulletin No. 2022–7 583 February 14, 2022
(ii) start-up expenditures paid or incurred after October 22, 2004, and before August 17, 2011, if
the period of limitations on assessment of tax for the taxable year the election under § 1.195-1(b)
is deemed made has expired.
(2) No rulings.
(a) Characterization of item. The consent granted under section 9 of Rev. Proc. 2015-13 for
a change specified in section 10.01(1)(a)(i) of this revenue procedure is not a determination by
the Commissioner that the taxpayer has properly characterized an item as a start-up expenditure
and does not create any presumption that the proposed characterization of an item as a start-up
expenditure is permissible under § 195(c)(1). The director will ascertain whether the taxpayer’s
characterization of an item as a start-up expenditure is permissible.
(b) When active trade or business begins. The consent granted under section 9 of Rev. Proc.
2015-13 for a change specified in section 10.01(1)(a)(ii) of this revenue procedure is not a
determination by the Commissioner that the taxpayer has properly determined the taxable year
in which the taxpayer begins the active trade or business to which the start-up expenditures
relate and does not create any presumption that the proposed taxable year in which the taxpayer
begins the active trade or business to which the start-up expenditures relate is permissible under
§ 195(c)(2). The director will ascertain whether the taxpayer’s determination of the taxable year
in which the taxpayer begins the active trade or business to which the start-up expenditures relate
is permissible.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to a method of accounting under this section
10.01 is “223.”
(4) Contact information. For further information regarding a change under this section, contact
Elizabeth Binder at (202) 317-7005 (not a toll-free number).
.02 Organizational expenditures under § 248.
(1) Description of change and scope.
(a) Applicability. This change applies to a corporation that wants to change its method of
accounting under § 248 to change:
(i) the characterization of an item as an organizational expenditure;
(ii) the determination of the taxable year in which the corporation begins business to which the
organizational expenditures relate; or
(iii) the amortization period of an organizational expenditure to 180 months.
(b) Inapplicability. This change does not apply to:
(i) organizational expenditures paid or incurred before October 23, 2004; or

February 14, 2022 584 Bulletin No. 2022–7
(ii) organizational expenditures paid or incurred after October 22, 2004, and before August
17, 2011, if the period of limitations on assessment of tax for the taxable year the election under
§ 1.248-1(c) is deemed made has expired.
(2) No rulings.
(a) Characterization of items. The consent granted under section 9 of Rev. Proc. 2015-13 for
a change specified in section 10.02(1)(a)(i) of this revenue procedure is not a determination by
the Commissioner that the corporation has properly characterized an item as an organizational
expenditure and does not create any presumption that the proposed characterization of an item as
an organizational expenditure is permissible under § 248(b) and § 1.248-1(b). The director will
ascertain whether the corporation’s characterization of an item as an organizational expenditure
is permissible.
(b) When the corporation begins business. The consent granted under section 9 of Rev.
Proc. 2015-13 for a change specified in section 10.02(1)(a)(ii) of this revenue procedure is not
a determination by the Commissioner that the corporation has properly determined the taxable
year in which the corporation begins business to which the organizational expenditures relate and
does not create any presumption that the proposed taxable year in which the corporation begins
business to which the organizational expenditures relate is permissible under §1.248-1(d). The
director will ascertain whether the corporation’s determination of the taxable year in which the
corporation begins business to which the organizational expenditures relate is permissible.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 10.02 is “228.”
(4) Contact information. For further information regarding a change under this section, contact
Sharon Horn at (202) 317-7003 (not a toll-free number).
.03 Organization fees under § 709.
(1) Description of change and scope.
(a) Applicability. This change applies to a partnership that wants to change its method of
accounting under § 709 to change:
(i) the characterization of an item as an organizational expense;
(ii) the determination of the taxable year in which the partnership begins business to which the
organizational expenses relate; or
(iii) the amortization period of an organizational expense to 180 months.
(b) Inapplicability. This change does not apply to:
(i) organizational expenses paid or incurred before October 23, 2004; or

Bulletin No. 2022–7 585 February 14, 2022
(ii) organizational expenses paid or incurred after October 22, 2004, and before August 17,
2011, if the period of limitations on assessment of tax for the taxable year the election under
§ 1.709-1(b) is deemed made has expired.
(2) No rulings.
(a) Characterization of items. The consent granted under section 9 of Rev. Proc. 2015-13 for
a change specified in section 10.03(1)(a)(i) of this revenue procedure is not a determination by
the Commissioner that the partnership has properly characterized an item as an organizational
expense and does not create any presumption that the proposed characterization of an item as an
organizational expense is permissible under § 709(b)(3). The director will ascertain whether the
partnership’s characterization of an item as an organizational expense is permissible.
(b) When the partnership begins business. The consent granted under section 9 of Rev. Proc.
2015-13 for a change specified in section 10.03(1)(a)(ii) of this revenue procedure is not a
determination by the Commissioner that the partnership has properly determined the taxable year
in which the partnership begins business to which the organizational expenses relate and does not
create any presumption that the proposed taxable year in which the partnership begins business
to which the organizational expenses relate is permissible under §1.709-2(c). The director will
ascertain whether the partnership’s determination of the taxable year in which the partnership
begins business to which the organizational expenses relate is permissible.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 10.03 is “229.”
(4) Contact information. For further information regarding a change under this section, contact
Meghan Howard at (202) 317-5055 (not a toll-free number).
SECTION 11. CAPITAL EXPENDITURES (§ 263)
.01 Package design costs.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to change its method of
accounting for package design costs that are within the scope of Rev. Proc. 97-35, 1997-2 C.B.
448, as modified by Rev. Proc. 98-39, 1998-1 C.B. 1320, to one of the three alternative methods of
accounting for package design costs described in section 5 of Rev. Proc. 97-35, which are: (i) the
capitalization method, (ii) the design-by-design capitalization and 60-month amortization method,
and (iii) the pool-of-cost capitalization and 48-month amortization method.
(b) Inapplicability. This change does not apply to a taxpayer that wants to change to the
capitalization method for costs of developing or modifying any package design that has an
ascertainable useful life.
(2) Additional requirements. If a taxpayer is changing its method of accounting for package
design costs to the capitalization method or the design-by-design capitalization and 60-month

February 14, 2022 586 Bulletin No. 2022–7
amortization method, the taxpayer must attach a statement to its timely filed Form 3115. The
statement must provide a description of each package design, the date on which each was placed
in service, and the cost basis of each (as determined under sections 5.01(2) or 5.02(2) of Rev.
Proc. 97-35).
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 11.01 is “19.”
(4) Contact information. For further information regarding a change under this section, contact
Alexa Dubert at (202) 317-7003 (not a toll-free number).
.02 Line pack gas or cushion gas.
(1) Description of change. This change applies to a taxpayer that wants to change its method of
accounting for line pack gas or cushion gas to a method consistent with the holding in Rev. Rul.
97-54, 1997-2 C.B. 23. Rev. Rul. 97-54 holds that the cost of line pack gas or cushion gas is a
capital expenditure under § 263, the cost of recoverable line pack gas or recoverable cushion gas
is not depreciable, and the cost of unrecoverable line pack gas or unrecoverable cushion gas is
depreciable under §§ 167 and 168.
(2) Additional requirements. A taxpayer that changes its method of accounting for unrecoverable
line pack gas or unrecoverable cushion gas under this section 11.02 must change to a permissible
method of accounting for depreciation for the cost of that gas as part of this change.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 11.02 is “20.”
(4) Contact information. For further information regarding a change under this section, contact
Douglas Kim at (202) 317-7003 (not a toll-free number).
.03 Removal costs.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to change its method of accounting
for certain costs in the retirement and removal of a depreciable asset to conform with Rev. Rul.
2000-7, 2000-1 C.B. 712, as modified by this revenue procedure, or for removal costs in disposal
of a depreciable asset, including a partial disposition, as described under § 1.263(a)-3(g)(2)(i).
(b) Inapplicability. This change does not apply to a taxpayer that wants to change its method
of accounting for removal costs in the disposal of a component of a unit of property where the
disposal of the component is not a disposition for federal tax purposes. To make that change, see
section 11.08 of this revenue procedure.
(c) Manner of making change. A qualified small taxpayer, as defined in section 6.01(4)(b) of
this revenue procedure, is required to complete only the following information on Form 3115
(Rev. December 2018):

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(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I, line 1(a);
(iv) Part II, all lines except lines 13, 15, 16, 17, and 19, if the change is not to depreciating
property;
(v) Part II, all lines except lines 13, 15b, 16, 17, and 19, if the change is to depreciating property;
(vi) Part IV, lines 26 and 27; and
(vii) Schedule E, if applicable.
(2) Additional requirements.
(a) Except for assets for which depreciation is determined in accordance with § 1.167(a)-11
(ADR), the taxpayer’s proposed method of treating removal costs for assets accounted for in a
multiple asset account must be consistent with the taxpayer’s method of treating salvage proceeds.
See Rev. Rul. 74-455, 1974-2 C.B. 63. (See section 6.02 of this revenue procedure for changing a
taxpayer’s present method of treating salvage proceeds.)
(b) If this change involves assets that are public utility property within the meaning of § 168(i)
(10) or former § 167(l)(3)(A), the taxpayer must comply with the terms and conditions in section
6.01(3)(b)(v) of this revenue procedure.
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to this change.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 11.03 is “21.”
(5) Contact information. For further information regarding a change under this section, contact
Douglas Kim at (202) 317-7003 (not a toll-free number).
.04 Distributor commissions.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to change from currently deducting
distributor commissions (as defined by section 2 of Rev. Proc. 2000-38, 2002-2 C.B. 310, as
modified by Rev. Proc. 2007-16, 2007-1 C.B. 358) to a method of capitalizing and amortizing
distributor commissions using the distribution fee period method, the 5-year method, or the useful
life method (all described in Rev. Proc. 2000-38).

February 14, 2022 588 Bulletin No. 2022–7
(b) Inapplicability. This change does not apply to an amortizable section 197 intangible (including
any property for which a timely election under § 13261(g)(2) of the Revenue Reconciliation Act
of 1993, 1993-3 C.B. 1, 128, was made).
(2) Manner of making change. This change is made on a cut-off basis and applies only to
distributor commissions paid or incurred on or after the beginning of the year of change.
Accordingly, a § 481(a) adjustment is neither permitted nor required.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 11.04 is “47.”
(4) Contact information. For further information regarding a change under this section, contact
Alexa Dubert at (202) 317-7003 (not a toll-free number).
.05 Intangibles.
(1) Description of change. This change applies to a taxpayer that wants to change its treatment
of an item to a method of accounting permitted by §§ 1.263(a)-4, 1.263(a)-5, and 1.167(a)-3(b).
See Rev. Proc. 2006-12, 2006-1 C.B. 310, as modified by Rev. Proc. 2006-37, 2006-2 C.B. 499,
for the specific requirements, information, and documentation required for this change.
(2) Section 481(a) adjustment. In computing the § 481(a) adjustment for this change, the taxpayer
takes into account only amounts paid or incurred in taxable years ending on or after January 24,
2002. See section 5 of Rev. Proc. 2006-12 for detailed rules for computing the § 481(a) adjustment
and reporting it on Form 3115.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 11.05 is “78.”
(4) Contact information. For further information regarding a change under this section, contact
Alicia Lee-Won at (202) 317-7003 (not a toll-free number).
.06 Rotable spare parts safe harbor method.
(1) Description of change. This change applies to a taxpayer that maintains a pool or pools
of rotable spare parts that are primarily used to repair customer-owned (or customer-leased)
equipment under warranty or maintenance agreements, and wants to change its method of
accounting for the rotable spare parts to the safe harbor method of accounting provided in Rev.
Proc. 2007-48, 2007-2 C.B. 110. The taxpayer must meet the requirements in section 4.01 of Rev.
Proc. 2007-48 to use this safe harbor method of accounting.
(2) Change from safe harbor method. A taxpayer that is required to change its method of
accounting from the safe harbor method under section 5.06 of Rev. Proc. 2007-48, must make the
change under section 21.09 of this revenue procedure.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 11.06 is “109.”

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(4) Contact information. For further information regarding a change under this section, contact
Stephen Rothandler at (202) 317-7003 (not a toll-free number).
.07 Repairable and reusable spare parts.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to change its method of accounting
to treat repairable and reusable spare parts as depreciable property to conform with the holdings
in Rev. Rul. 69-200, 1969-1 C.B. 60, and Rev. Rul. 69-201, 1969-1 C.B. 60. This change applies
to repairable and reusable spare parts that: are owned by the taxpayer at the beginning of the year
of change; are used to repair equipment owned by the taxpayer; are acquired by the taxpayer for a
specific type of equipment at the time that the related equipment is acquired; usually have the same
useful life as the related equipment; and have been placed in service by the taxpayer after 1986. A
taxpayer making a change in method of accounting under this section 11.07 may treat its repairable
and reusable spare parts as tangible property for which depreciation is allowable at the time that
the related equipment is placed in service by the taxpayer. The method of computing depreciation
for the repairable and reusable spare parts is the same method of computing depreciation for the
related equipment.
(b) Inapplicability. This change does not apply to:
(i) A taxpayer that is currently capitalizing and depreciating the cost of its repairable and reusable
spare parts, or that is currently capitalizing the cost of its repairable and reusable spare parts and
treating these parts as nondepreciable property (but see section 6.01 of this revenue procedure for
making a change from an impermissible to a permissible method of accounting for depreciation);
(ii) A taxpayer that is using an impermissible method of accounting for depreciation for the
related equipment for which the repairable and reusable spare parts are acquired, unless the taxpayer
concurrently changes its method to use a permissible method of accounting for depreciation under
section 6 of this revenue procedure;
(iii) A repairable and reusable spare part that meets the definition of rotable spare parts,
temporary spare parts, or standby emergency spare parts in § 1.162-3(c)(2) or (3), for which
the cost was paid or incurred by the taxpayer in a taxable year beginning on or after January 1,
2014 (or in a taxable year beginning on or after January 1, 2012, if the taxpayer chooses to apply
§ 1.162-3 to amounts paid or incurred in those taxable years), and for which the taxpayer did not
make the election under § 1.162-3(d) to capitalize and depreciate such repairable and reusable
spare part; or
(iv) a taxpayer that chooses to apply § 1.162-3T to a repairable and reusable spare part that
meets the definition of rotable spare parts or temporary spare parts in § 1.162-3T(c)(2), for which
the cost was paid or incurred by the taxpayer in a taxable year beginning on or after January 1,
2012, and before January 1, 2014, and for which the taxpayer did not make the election under
§ 1.162-3T(d) to capitalize and depreciate such repairable and reusable spare part.
(2) Additional requirements.
(a) To change a method of accounting under this section 11.07, a taxpayer (including a qualified
small taxpayer as defined in section 6.01(4)(b) of this revenue procedure) must complete Schedule

February 14, 2022 590 Bulletin No. 2022–7
E of Form 3115 for the repairable and reusable spare parts and also attach the following information
to the completed Form 3115:
(i) A description of the repairable and reusable spare parts;
(ii) A list of related equipment for which the repairable and reusable spare parts are acquired;
and
(iii) A complete description of the method of computing depreciation (for example, depreciation
method, recovery period, convention, and applicable asset class under Rev. Proc. 87-56, 1987-2
C.B. 674, as clarified and modified by Rev. Proc. 88-22, 1988-1 C.B. 785) that the taxpayer uses
for the related equipment for which the repairable and reusable spare parts are acquired.
(b) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following
information on Form 3115 (Rev. December 2018):
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13, 15b, 16, 17, and 19; and
(v) Part IV, all lines except line 25.
(3) Concurrent automatic change.
(a) A taxpayer making both this change and a change to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of change should
file a single Form 3115 for both changes, in which case the taxpayer must enter the designated
automatic accounting method change numbers for both changes on the appropriate line on that
Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for information on
making concurrent changes. For example, a qualified small taxpayer, as defined in section 6.01(4)
(b) of this revenue procedure, must include on the single Form 3115 the information required by
section 11.07(2)(b) of this revenue procedure and the information required by the lines on Form
3115, applicable to the UNICAP method change, including Part II line 14 and 15, Part IV, and
Schedule D, and must include a separate response to each line on Form 3115 that is applicable to
both changes (such as Part II lines 6b, 7, 8b, 14, and, as applicable for this change, Part IV) for
which the taxpayer’s response is different for this change and the change to a UNICAP method.
(b) A taxpayer making both this change and a change to a permissible method of accounting
for depreciation for repairable and reusable spare parts, or for the related equipment for which
the repairable and reusable spare parts are acquired, under section 6 of this revenue procedure
(as applicable) for the same year of change should file a single Form 3115 for both changes, in
which case the taxpayer must enter the designated automatic accounting method change numbers
for both changes on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making concurrent changes. For example, a qualified small taxpayer

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must include on the single Form 3115 the information required to be completed on Form 3115 by
a qualified small taxpayer under this revenue procedure for each change in method of accounting
included on that Form 3115.
(c) A taxpayer making this change also may establish pools for the repairable and reusable
spare parts or may identify disposed repairable and reusable spare parts in accordance with section
6.12 of this revenue procedure. A taxpayer making both this change and the change under section
6.12 of this revenue procedure for the same year of change should file a single Form 3115 for
both changes, in which case the taxpayer must enter the designated automatic accounting method
change numbers for both changes on the appropriate line on that Form 3115. See section 6.03(1)
(b) of Rev. Proc. 2015-13 for information on making concurrent changes. For example, a qualified
small taxpayer must include on the single Form 3115 the information required to be completed on
Form 3115 by a qualified small taxpayer under this revenue procedure for each change in method
of accounting included on that Form 3115.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 11.07 is “121”.
(5) Contact information. For further information regarding a change under this section, contact
Stephen Rothandler at (202) 317-7003 (not a toll-free number).
.08 Tangible property.
(1) Description of change.
(a) Applicability. This change, as described in Rev. Proc. 2014-16, 2014-9 I.R.B. 606, applies
to a taxpayer that wants to make a change to a method of accounting specified in section 11.08(2)
of this revenue procedure and permitted under:
(i) Section 1.162-3, § 1.162-4, § 1.263(a)-1, § 1.263(a)-2, or § 1.263(a)-3 (the final tangible
property regulations) for taxable years beginning on or after January 1, 2012; or
(ii) Section 1.446-1(e)(2)(ii)(d)(2) if the property for which the taxpayer is otherwise changing
its method of accounting under this section is depreciable under either the present or the proposed
method of accounting.
(b) Inapplicability. This change does not apply to:
(i) A taxpayer that wants to change its method of accounting for dispositions of depreciable
property, including a change in the asset disposed of (but see sections 6.10, 6.13, 6.14, and 6.15
of this revenue procedure);
(ii) Amounts paid or incurred for certain materials and supplies that the taxpayer has elected to
capitalize and depreciate under § 1.162-3(d);
(iii) Amounts paid or incurred to which the taxpayer has elected to apply the de minimis safe
harbor under § 1.263(a)-1(f);

February 14, 2022 592 Bulletin No. 2022–7
(iv) Amounts paid or incurred for employee compensation or overhead that the taxpayer has
elected to capitalize under § 1.263(a)-2(f)(2)(iv)(B);
(v) Amounts paid or incurred to which the taxpayer has elected to apply the safe harbor for
small taxpayers under § 1.263(a)-3(h);
(vi) Amounts paid or incurred for repair and maintenance costs that the taxpayer has elected to
capitalize under § 1.263(a)-3(n);
(vii) Amounts paid or incurred to facilitate the acquisition or disposition of assets that constitute
a trade or business (but see section 10.05 of this revenue procedure); or
(viii) Amounts paid or incurred for repair and maintenance costs that the taxpayer is changing
from capitalizing to deducting and for which the taxpayer has (A) claimed a federal income tax
credit, (B) elected to apply § 168(k)(4) (as in effect on the day before the date of enactment of
Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and
Jobs Act (TCJA)), or (C) received a payment for specified energy property in lieu of tax credits
under section 1603 of the American Recovery and Reinvestment Tax Act of 2009, Div. B of Pub.
L. No. 111-5, 123 Stat. 115 (February 17, 2009), as amended by section 707 of the Tax Relief,
Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312,
124 Stat. 3296 (December 17, 2010).
(2) Covered changes. This section 11.08 only applies to the following changes in methods of
accounting:
(a) A change to deducting amounts paid or incurred to acquire or produce non-incidental
materials and supplies in the taxable year in which they are first used in the taxpayer’s operations
or consumed in the taxpayer’s operations in accordance with §§ 1.162-3(a)(1) and 1.162-3(c)(1);
(b) A change to deducting amounts to acquire or produce incidental materials and supplies in
the taxable year in which paid or incurred in accordance with §§ 1.162-3(a)(2) and 1.162-3(c)(1);
(c) A change to deducting amounts paid or incurred to acquire or produce non-incidental
rotable and temporary spare parts in the taxable year which the taxpayer disposes of the parts in
accordance with §§ 1.162-3(a)(3) and 1.162-3(c)(2);
(d) A change to the optional method of accounting for rotable and temporary spare parts in
accordance with § 1.162-3(e);
(e) A change to deducting amounts paid or incurred for repair and maintenance in accordance
with § 1.162-4, including a change, if any, in identifying the unit of property under § 1.263(a)-
3(e) or, in the case of a building, identifying the building structure or building systems under
§ 1.263(a)-3(e)(2) for purposes of making the change to deducting the amounts;
(f) A change to capitalizing amounts paid or incurred for improvements to tangible property in
accordance with § 1.263(a)-3 and, if depreciable, to depreciating such property under § 167 or
§ 168, including a change, if any, in identifying the unit of property under § 1.263(a)-3(e) or, in
the case of a building, identifying the building structure or building systems under § 1.263(a)-3(e)
(2) for purposes of making the change to capitalizing the amounts;

Bulletin No. 2022–7 593 February 14, 2022
(g) A change by a dealer in property to deduct amounts paid or incurred for commissions and
other costs that facilitate the sale of property in accordance with § 1.263(a)-1(e)(2);
(h) A change by a non-dealer in property to capitalizing amounts paid or incurred for commissions
and other costs that facilitate the sale of property in accordance with § 1.263(a)-1(e);
(i) A change to capitalizing amounts paid or incurred to acquire or produce property in
accordance with § 1.263(a)-2, and if depreciable, to depreciating such property under § 167 or
§ 168;
(j) A change to deducting amounts paid or incurred in the process of investigating or otherwise
pursuing the acquisition of real property if the amounts meet the requirements of § 1.263(a)-2(f)
(2)(iii); and
(k) A change to the optional regulatory accounting method in accordance with § 1.263(a)-3(m)
to determine whether amounts paid or incurred to repair, maintain, or improve tangible property
are treated as deductible expenses or capital expenditures.
(3) Manner of making change.
(a) Form 3115. In addition to the other information required on line 14 of Form 3115, the
taxpayer must include the following:
(i) The citation to the paragraph of the final tangible property regulations that provides for the
proposed method, or methods, of accounting to which the taxpayer is changing (for example,
§ 1.162-3(a), § 1.263(a)-3(i), § 1.263(a)-3(k)); and
(ii) If the taxpayer is changing any unit(s) of property under § 1.263(a)-3(e) or, in the case
of a building, is changing the identification of any building structure(s) or building system(s)
under § 1.263-3(e)(2) for purposes of determining whether amounts are deducted as repair and
maintenance costs under section § 1.162-4 or capitalized as improvement costs under § 1.263(a)-
3, the taxpayer must include a detailed description of the unit(s) of property, building structure(s),
or buildings system(s) used under its present method of accounting and a detailed description of
the unit(s) of property, building structure(s), and building system(s) under its proposed method
of accounting, together with a citation to the paragraph of the final tangible property regulations
under which the unit of property is permitted.
(iii) A taxpayer changing its method of accounting under this section 11.08 to capitalizing
amounts paid or incurred and to depreciating such property under § 167 or § 168, as applicable,
must complete Schedule E of Form 3115.
(b) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following
information on Form 3115 (Rev. December 2018):
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;

February 14, 2022 594 Bulletin No. 2022–7
(iii) Part I, line 1(a);
(iv) Part II, all lines except lines 13, 15, 16, 17, and 19, if the change is to not depreciating
property;
(v) Part II, all lines except line 13, line 15b, 16, 17, and 19, if the change is to depreciating
property;
(vi) Part IV, lines 26 and 27; and
(vii) Schedule E, if applicable.
(4) Concurrent automatic change.
(a) A taxpayer making two or more changes in method of accounting pursuant to this section
11.08 should file a single Form 3115 for all of these changes and must enter the designated
automatic accounting method change numbers for all of these changes on the appropriate line on
the Form 3115.
(b) A taxpayer making both one or more changes in method of accounting pursuant to this
section 11.08 and a change to a UNICAP method under section 12 of this revenue procedure (as
applicable) for the same year of change should file a single Form 3115 that includes all of these
changes and must enter the designated automatic accounting method change numbers for all of
these changes on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making concurrent changes. For example, a qualified small taxpayer,
as defined in section 6.01(4)(b) of this revenue procedure, must include on the single Form 3115
the information required by section 11.08(3)(b) of this revenue procedure for this change and
the information required by the lines on Form 3115, applicable to the UNICAP method change,
including Part II lines 14 and 15, Part IV, and Schedule D, and must include a separate response
to each line on Form 3115 that is applicable to both changes (such as Part II lines 6b, 7, 8b, 14,
and, as applicable for this change, Part IV) for which the taxpayer’s response is different for this
change and the change to a UNICAP method.
(5) Section 481(a) adjustment.
(a) In general. Except as provided in section 11.08(5)(b) of this revenue procedure, a taxpayer
changing to a method of accounting provided in this section 11.08 must apply § 481(a) and take
into account any applicable § 481(a) adjustment in the manner provided in section 7.03 of Rev.
Proc. 2015-13.
(b) Limited adjustment for certain changes.
(i) Final tangible property regulations. A taxpayer changing to a method of accounting under
§ 1.162-3 (except § 1.162-3(e)), § 1.263(a)-2(f)(2)(iii), § 1.263(a)-2(f)(3)(ii), § 1.263(a)-3(m),
§ 1.263A-1(e)(2)(i)(A), and § 1.263A-1(e)(3)(ii)(E) is required to calculate a § 481(a) adjustment
as of the first day of the taxpayer’s taxable year of change that takes into account only amounts
paid or incurred in taxable years beginning on or after January 1, 2014. Optionally, a taxpayer may
take into account amounts paid or incurred in taxable years beginning on or after January 1, 2012.

Bulletin No. 2022–7 595 February 14, 2022
(ii) Small business exception. A taxpayer that met the scope requirements of section 4 of Rev.
Proc. 2015-20, 2015-9 I.R.B. 694, and that changed its method of accounting under section
10.11(3)(a) of Rev. Proc. 2015-14 (which is now section 11.08(2) of this revenue procedure) by
following section 5 of Rev. Proc. 2015-20 is required to calculate a § 481(a) adjustment as of the
first day of the year of change that takes into account only amounts paid or incurred in taxable
years beginning on or after January 1, 2014.
(c) Itemized listing on Form 3115. A taxpayer changing to a method of accounting provided in
this section 11.08 must include on Form 3115 (Rev. December 2018), Part IV, line 26, the total
§ 481(a) adjustment for each change in method of accounting being made. If the taxpayer is making
more than one change in method of accounting under the final tangible property regulations, the
taxpayer (including a qualified small taxpayer) must include on an attachment to Form 3115:
(i) The information required by Part IV, line 26 of Form 3115 (Rev. December 2018) for each
change in method of accounting (including the amount of the § 481(a) adjustment for each change
in method of accounting, which includes the portion of the § 481(a) adjustment attributable to
UNICAP);
(ii) The information required by Part II, line 14 of Form 3115 (Rev. December 2018) for each
change; and
(iii) The citation to the paragraph of the final tangible property regulations that provides for
each proposed method of accounting.
(d) Repair allowance property. A taxpayer changing to a method of accounting provided by
§ 1.263(a)-3 under this section 11.08 must not include in the § 481(a) adjustment any amount
attributable to property for which the taxpayer elected to apply the repair allowance under
§ 1.167(a)-11(d)(2) for any taxable year in which the repair allowance election was made.
(e) Statistical Sampling. Except for any change in accounting method for which a taxpayer is
required to compute a § 481(a) adjustment under section 11.08(5)(b) of this revenue procedure, a
taxpayer changing its method of accounting under this section 11.08 may use statistical sampling
in determining the § 481(a) adjustment by following the guidance provided in Rev. Proc. 2011-42,
2011-37 I.R.B. 318.
(6) No audit protection. A taxpayer calculating a § 481(a) adjustment under section 11.08(5)
(b)(ii) of this revenue procedure that takes into account only amounts paid or incurred in taxable
years beginning on or after January 1, 2014, does not receive audit protection under section 8.01
of Rev. Proc. 2015-13 for amounts subject to a change under this section 11.08 that are paid or
incurred in taxable years beginning before January 1, 2014. See section 5.02 of Rev. Proc. 2015-
20.
(7) Designated automatic accounting method change number. See the following table for the
designated automatic accounting method change numbers (DCN) for the changes in method of
accounting under this section 11.08.
(a) Changes under the final tangible property regulations.

February 14, 2022 596 Bulletin No. 2022–7
Description of ChangeDCNCitation
A change to deducting amounts paid or incurred for repair
and maintenance or a change to capitalizing amounts paid
or incurred for improvements to tangible property and, if
depreciable, to depreciating such property under § 167 or
§ 168. Includes a change, if any, in the method of identifying
the unit of property, or in the case of a building, identifying
the building structure or building systems for the purpose of
making this change.
184§§ 1.162-4, 1.263(a)-3
Change to the regulatory accounting method.185§ 1.263(a)-3(m)
Change to deducting non-incidental materials and supplies
when used or consumed.
186§ 1.162-3(a)(1), (c)(1)
Change to deducting incidental materials and supplies when
paid or incurred.
187§ 1.162-3(a)(2), (c)(1)
Change to deducting non-incidental rotable and temporary
spare parts when disposed of.
188§ 1.162-3(a)(3), (c)(2)
Change to the optional method for rotable and temporary
spare parts.
189§ 1.162-3(e)
Change by a dealer in property to deduct commissions and
other costs that facilitate the sale of property.
190§ 1.263(a)-1(e)(2)
Change by a non-dealer in property to capitalizing commis-
sions and other costs that facilitate the sale of property.
191§ 1.263(a)-1(e)(1)
Change to capitalizing acquisition or production costs and,
if depreciable, to depreciating such property under § 167 or
§ 168.
192§ 1.263(a)-2
Change to deducting certain costs for investigating or pursu-
ing the acquisition of real property (whether and which).
193§ 1.263(a)-2(f)(2)(iii)
(8) Contact information. For further information regarding a change under this section, contact
Douglas Kim at (202) 317-7003 (not a toll-free number).
.09 Railroad track structure expenditures.
(1) Description of change. This change applies to a taxpayer that wants to change its method of
accounting for railroad track structures to:
(a) the safe harbor method provided in Rev. Proc. 2002-65, 2002-2 C.B. 700; or
(b) the safe harbor method provided in Rev. Proc. 2001-46, 2001-2 C.B. 263.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 11.09 is “213.”
(3) Contact information. For further information regarding a change under this section, contact
Douglas Kim at (202) 317-7003 (not a toll-free number).
.10 Remodel-refresh safe harbor method.

Bulletin No. 2022–7 597 February 14, 2022
(1) Description of change.
(a) Applicability. This change applies to a qualified taxpayer as defined in section 4.01 of Rev.
Proc. 2015-56, 2015-49 I.R.B. 827, and within the scope of Rev. Proc. 2015-56 that wants to
change to the remodel-refresh safe harbor method of accounting provided in section 5.02 of Rev.
Proc. 2015-56, as modified by Rev. Proc. 2020-25, 2020-19 I.R.B. 785, for its qualified costs,
including the making of a late general asset account election as provided under section 5.02(6)(d)
of Rev. Proc. 2015-56.
(b) Inapplicability. This change does not apply to the following:
(i) The revocation of a partial disposition election that is made pursuant to section 5.02(4)(b)
(ii)(B) of Rev. Proc. 2015-56;
(ii) A change in determination of the asset disposed of described in section 5.02(5) of Rev.
Proc. 2015-56 (which is made under section 6.13(3)(a) or 6.15(3)(a) of this revenue procedure,
as applicable). See section 11.10(5)(b) of this revenue procedure for making the change under
section 6.13(3)(a) or 6.15(3)(a) of this revenue procedure as a concurrent change;
(iii) The making of a late general asset account election not provided under section 5.02(6)(d)
of Rev. Proc. 2015-56;
(iv) If section 5.02(4)(c) of Rev. Proc. 2015-56 applies to a qualified building (partial disposition
election made in a prior year and the qualified taxpayer did not revoke such election within the
time and in the manner provided in section 5.02(4)(b)(ii) of Rev. Proc. 2015-56), any qualified
costs paid for that qualified building prior to the year of change for a Form 3115 filed to make
the change to the remodel-refresh safe harbor method of accounting under this section 11.10; or
(v) If section 5.02(5)(b) of Rev. Proc. 2015-56 applies to a qualified building (recognized gain
or loss under § 1.168(i)-1 or § 1.168(i)-8, or in a taxable year beginning before January 1, 2012,
for disposition of a component of a qualified building) and the qualified taxpayer did not make the
required change in method of accounting to be in accord with § 1.168(i)-1(e)(2)(viii) or § 1.168-
8(c)(4), as applicable, on or before the first taxable year that the qualified taxpayer uses the
remodel-refresh safe harbor and takes the entire amount of the § 481(a) adjustment into account
in computing the qualified taxpayer’s taxable income for that year of change, any qualified costs
paid for that qualified building prior to the first taxable year that the qualified taxpayer or the
IRS makes the change specified in section 6.13(3)(a) or 6.15(3)(a) of this revenue procedure, as
applicable, for that qualified building and takes into account the entire amount of the § 481(a)
adjustment in computing taxable income for the year of change.
(2) No audit protection. If section 5.02(4)(c) or 5.02(5)(b) of Rev. Proc. 2015-56 applies to a
qualified building (and, in the case of section 5.02(5)(b), the qualified taxpayer does not make the
required change on or before the first taxable year that the qualified taxpayer uses the remodel-
refresh safe harbor), the qualified taxpayer does not receive audit protection under section 8.01 of
Rev. Proc. 2015-13 in connection with this change for that qualified building. See section 8.02(2)
of Rev. Proc. 2015-13.
(3) Manner of making change.

February 14, 2022 598 Bulletin No. 2022–7
(a) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as
defined in section 6.01(4)(b) of this revenue procedure, may complete only the following
information on Form 3115 (Rev. December 2018):
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I, line 1(a);
(iv) Part II, all lines except lines 5, 13, 15, 16, 17, and 19;
(v) Part IV, lines 25, 26, and 27;
(vi) Schedule E; and
(vii) If applicable, the election statement described in section 11.10(3)(b)(ii).
(b) Late general asset account election.
(i) In general. If under section 5.02(6)(d) of Rev. Proc. 2015-56 the qualified taxpayer is
required to make a late general asset account election, the late general asset account election
change is made using a modified cut-off method under which the unadjusted depreciable basis
and the depreciation reserve of the asset as of the beginning of the year of change are accounted
for using the new method of accounting. The late general asset account election change requires
the general asset account to include a beginning balance for both the unadjusted depreciable basis
and the depreciation reserve. The beginning balance for the unadjusted depreciable basis of each
general asset account is equal to the sum of the unadjusted depreciable bases as of the beginning
of the year of change for all assets included in that general asset account. The beginning balance
of the depreciation reserve of each general asset account is equal to the sum of the greater of the
depreciation allowed or allowable as of the beginning of the year of change for all assets included
in that general asset account.
(ii) Election statement. The qualified taxpayer (including a qualified small taxpayer) must
attach to its Form 3115 a statement providing that the qualified taxpayer agrees to the following
additional terms and conditions:
(A) The qualified taxpayer consents to, and agrees to apply, all of the provisions of § 1.168(i)-1
to the assets that are subject to the election specified in section 5.02(6)(d) of Rev. Proc. 2015-56;
and
(B) Except as provided in § 1.168(i)-1(c)(1)(ii)(A), (e)(3), (g), or (h), the election made by
the qualified taxpayer under section 5.02(6)(d) of Rev. Proc. 2015-56 is irrevocable and will be
binding on the qualified taxpayer for computing taxable income for the year of change and for all
subsequent taxable years with respect to the assets that are subject to this election.
(c) Cut-off method required for certain changes.

Bulletin No. 2022–7 599 February 14, 2022
(i) If section 5.02(4)(c) of Rev. Proc. 2015-56 applies to a qualified building, the change to
the remodel-refresh safe harbor method of accounting for that qualified building, and any
improvements to that qualified building, is made using a cut-off method and applies only to
qualified costs paid or incurred for that qualified building, and any improvements to that qualified
building, beginning in the year of change for the change made to the remodel-refresh safe harbor
method of accounting.
(ii) If section 5.02(5)(b) of Rev. Proc. 2015-56 applies to a qualified building and the qualified
taxpayer does not change its present method of accounting to be in accord with § 1.168(i)-1(e)
(2)(viii) or § 1.168(i)-8(c)(4), as applicable, on or before the first taxable year that the qualified
taxpayer used the remodel-refresh safe harbor and take the entire amount of the § 481(a) adjustment
into account in computing the qualified taxpayer’s taxable income for that year of change, the
change to the remodel-refresh safe harbor method of accounting for that qualified building, and
any improvements to that qualified building, is made using a cut-off method and applies only to
qualified costs paid or incurred for that qualified building, and any improvements to that qualified
building, beginning in the year of change for the change made to comply with § 1.168(i)-1(e)
(2)(viii) or § 1.168(i)-8(c)(4), as applicable. See section 6.13(3)(a) and section 6.15(3)(a) of this
revenue procedure, as applicable.
(4) Section 481(a) adjustment.
(a) In general. A qualified taxpayer changing its method of accounting under this section 11.10
must apply § 481(a) and take into account any applicable § 481(a) adjustment in the manner
provided in section 7.03 of Rev. Proc. 2015-13. However, a § 481(a) adjustment is neither
required nor permitted for the late general asset account election under section 5.02(6)(d) of Rev.
Proc. 2015-56 or, if section 5.02(4)(c) or 5.02(5)(b) of Rev. Proc. 2015-56 applies to a qualified
building, and an improvement to a qualified building (and, in the case of section 5.02(5)(b) of
Rev. Proc. 2015-56, the qualified taxpayer did not make the required change on or before the first
taxable year that the qualified taxpayer uses the remodel-refresh safe harbor), for the change to the
remodel-refresh safe harbor method of accounting for that qualified building and an improvement
to that qualified building.
(b) Repair allowance property. A qualified taxpayer changing to the method of accounting
provided under this section 11.10 must not include in the § 481(a) adjustment any amount
attributable to property for which the qualified taxpayer elected to apply the repair allowance
under § 1.167(a)-11(d)(2) for any taxable year in which the repair allowance election was made.
(c) Statistical sampling. A qualified taxpayer changing its method of accounting under this
section 11.10 may use statistical sampling in determining the § 481(a) adjustment only by
following the sampling procedures provided in Rev. Proc. 2011-42, 2011-37 I.R.B. 318.
(5) Concurrent automatic change.
(a) A qualified taxpayer making this change for more than one asset for the same year of change
should file a single Form 3115 for all such assets. The single Form 3115 must provide a single net
§ 481(a) adjustment for all such changes.
(b) A qualified taxpayer making this change, a change under section 6.13(3)(a) of this revenue
procedure, and any change listed in section 6.12(3)(b) or section 6.15 of this revenue procedure
for the same year of change should file a single Form 3115 for all such changes and must enter
the designated automatic accounting method change numbers for the changes on the appropriate

February 14, 2022 600 Bulletin No. 2022–7
line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making
concurrent changes.
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to the method of accounting under this section
11.10 is “222.”
(7) Contact information. For further information regarding a change under this section, contact
Merrill Feldstein at (202) 317-5100 (not a toll-free number).
SECTION 12. UNIFORM CAPITALIZATION (UNICAP) METHODS (§ 263A)
.01 Certain uniform capitalization (UNICAP) methods used by resellers and reseller-producers.
(1) Description of change.
(a) Applicability. This change applies to:
(i) a reseller that is a former small business taxpayer, or a reseller-producer that is a former small
business taxpayer, that wants to change from a permissible non-UNICAP inventory capitalization
method to a permissible UNICAP method specifically described in the regulations in the first
taxable year that it does not qualify as a small business taxpayer;
(ii) a reseller-producer that wants to change from a permissible UNICAP method for both
its production and resale activities to a permissible simplified resale method described in
§ 1.263A-3(d)(3) in any taxable year that it qualifies to use a simplified resale method for both
its production and resale activities under § 1.263A-3(a)(4) (resellers with de minimis production
activities);
(iii) a reseller-producer that wants to change from a permissible simplified resale method
described in § 1.263A-3(d)(3) for both its production and resale activities to a permissible UNICAP
method specifically described in the regulations for both its production and resale activities in the
first taxable year that it does not qualify to use a simplified resale method for both its production
and resale activities under § 1.263A-3(a)(4);
(iv) a reseller that wants to change its permissible UNICAP method to include a special reseller
cost allocation rule;
(v) a reseller or reseller-producer that wants to change to a UNICAP method (or methods)
specifically described in the regulations, including any necessary changes in the identification of
costs subject to § 263A that will be accounted for using the proposed method, in any taxable year
other than the first taxable year that it does not qualify as a small business taxpayer; or
(vi) a reseller or reseller-producer that wants to change from not capitalizing a cost subject to
§ 263A to capitalizing that cost under a UNICAP method (or methods) specifically described in
the regulations that the reseller or reseller-producer is already using.

Bulletin No. 2022–7 601 February 14, 2022
(b) Inapplicability.
(i) Self constructed assets. This change does not apply to a taxpayer that wants to use either
the simplified service cost method, the simplified production method, or the modified simplified
production method for self-constructed assets under §§ 1.263A-1(h)(2)(i)(D), 1.263A-2(b)(2)(i)
(D), and 1.263A-2(c)(2), respectively.
(ii) Election or revocation of election to use a historic absorption ratio. This change does not
apply to a taxpayer that (1) wants to make a historic absorption ratio election with the simplified
production method, the modified simplified production method, or the simplified resale method
under §§ 1.263A-2(b)(4), 1.263A-2(c)(4), or 1.263A-3(d)(4), respectively; or (2) wants to revoke
an election to use a historic absorption ratio with the simplified production method, the modified
simplified production method, or the simplified resale method (see §§ 1.263A-2(b)(4)(iii)(B),
1.263A-2(c)(4), or 1.263A-3(d)(4)(iii)(B), respectively).
(iii) Interest capitalization. This change does not apply to a change in method of accounting for
interest capitalization (but see section 12.14 of this revenue procedure).
(iv) Recharacterizing costs under the simplified resale method, simplified production method,
or modified simplified production method. This change does not include a change to recharacterize
section 471 costs, as defined in § 1.263A-1(d)(2), as additional section 263A costs, as defined in
§ 1.263A-1(d)(3) (or vice versa) for a taxpayer that uses or is changing to the simplified resale
method, the simplified production method, or the modified simplified production method. See
section 12.17 of this revenue procedure for certain changes to recharacterize section 471 costs as
additional section 263A costs (or vice versa).
(v) Revocation of election under § 263A(d)(3). This change does not apply to a taxpayer
that wants to revoke its election under § 263A(d)(3) not to have § 263A apply to certain plants
produced by the taxpayer in a farming business. But see Rev. Proc. 2020-13, 2020-11 I.R.B. 515,
for the procedures to revoke an election under § 263A(d)(3).
(2) Eligibility rule temporarily inapplicable.
(a) Eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to the change described in section 12.01(1)(a)(i) of this revenue
procedure.
(b) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 does not apply to the changes described in section 12.01(1)(a)(ii)-(vi) of this revenue
procedure for the taxpayer’s first, second or third taxable year ending on or after November 20,
2018.
(c) Eligibility rule temporarily inapplicable for certain changes related to cost offset method.
The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 does not apply to a method change
under this section 12.01 if:
(i) the taxpayer made or requested to make a change during any of the five taxable years ending
with the year of change to recover inventory costs in a taxable year prior to the taxable year in
which ownership of the inventory is transferred to the customer to offset inclusions under § 451(b)
and/or 451(c), as applicable;

February 14, 2022 602 Bulletin No. 2022–7
(ii) in the case of a taxpayer with an applicable financial statement (AFS), as defined in section
16.10(1)(b) of this revenue procedure, the taxpayer makes, for the same year of change, a change
in method of accounting for income from the sale of inventory under section 16.10(2)(a)(iii) of
this revenue procedure and, to the extent the taxpayer receives advance payments for the sale
of inventory, section 16.10(2)(a)(iv) of this revenue procedure, or in the case of a taxpayer that
does not have an AFS, the taxpayer concurrently changes its method of accounting for advance
payments from the sale of inventory under section 16.10(2)(b)(ii) of this revenue procedure; and
(iii) the taxpayer makes the change under this section 12.01 for its early application year, as
defined in section 16.10(4)(c)(i) of this revenue procedure, or if a taxpayer does not apply § 1.451-
3 and/or § 1.451-8 for a taxable year beginning before January 1, 2021, for the taxpayer’s first
taxable year beginning on or after January 1, 2021.
(3) Definitions.
(a) “Reseller” means a taxpayer that acquires real or personal property described in § 1221(a)
(1) for resale.
(b) “Producer” means a taxpayer that produces real or tangible personal property.
(c) “Reseller-producer” means a taxpayer that is both a producer and a reseller.
(d) “Permissible UNICAP method” means a method of capitalizing costs that is permissible
under § 263A.
(e) “A UNICAP method specifically described in the regulations” does not include any other
reasonable allocation method within the meaning of § 1.263A-1(f)(4). However, a “UNICAP
method specifically described in the regulations” includes:
(i) the 90-10 de minimis rule to allocate a mixed service department’s costs to resale activities
(§ 1.263A-1(g)(4)(ii));
(ii) the 1/3 - 2/3 rule to allocate labor costs of personnel to purchasing activities (§ 1.263A-3(c)
(3)(ii)(A));
(iii) the 90-10 de minimis rule to allocate a dual-function storage facility’s costs to property
acquired for resale (§ 1.263A-3(c)(5)(iii)(C));
(iv) the specific identification method (§ 1.263A-1(f)(2));
(v) the burden rate method (§ 1.263A-1(f)(3)(i));
(vi) the standard cost method (§ 1.263A-1(f)(3)(ii));
(vii) the direct reallocation method (§ 1.263A-1(g)(4)(iii)(A));
(viii) the step-allocation method (§ 1.263A-1(g)(4)(iii)(B));

Bulletin No. 2022–7 603 February 14, 2022
(ix) the simplified service cost method (§ 1.263A-1(h)) (with either a labor-based allocation
ratio or a production cost allocation ratio);
(x) the simplified resale method without a historic absorption ratio election (§ 1.263A-3(d));
(xi) the alternative method to determine amounts of section 471 costs by using a taxpayer’s
financial statement (§ 1.263A-1(d)(2)(iii));
(xii) the method to determine amounts of section 471 costs by using the amounts incurred in the
taxable year for federal income tax purposes (§ 1.263A-1(d)(2)(i));
(xiii) the safe harbor method for certain variances and under- or over- applied burdens
(§ 1.263A-1(d)(2)(v));
(xiv) the removal of one or more costs from section 471 costs as required in § 1.263A-1(d)(2)
(vi);
(xv) the removal of one or more costs from section 471 costs using negative adjustments to
additional section 263A costs as permitted in § 1.263A-1(d)(3)(ii)(B);
(xvi) the de minimis rule for certain direct labor costs (§ 1.263A-1(d)(2)(iv)(B));
(xvii) the de minimis rule for certain direct material costs (§ 1.263A-1(d)(2)(iv)(C));
(xviii) the simplified production method without a historic absorption ratio election
(§ 1.263A-2(b));
(xix) the modified simplified production method without a historic absorption ratio election
(§ 1.263A-2(c));
(xx) the direct material costs or pre-production labor costs allocation methods for capitalizable
mixed service costs under the modified simplified production method (§ 1.263A-2(c)(3)(iii)(B));
and
(xxi) the 90-10 de minimis rule to allocate capitalizable mixed service costs under the modified
simplified production method (§ 1.263A-2(c)(3)(iii)(C)).
(f) “Special reseller cost allocation rule” means the 90-10 de minimis rule to allocate a mixed
service department’s costs to property acquired for resale (§ 1.263A-1(g)(4)(ii)), the 1/3 – 2/3
rule to allocate labor costs of personnel to purchasing activities (§ 1.263A-3(c)(3)(ii)(A)), and the
90-10 de minimis rule to allocate a dual-function storage facility’s costs to property acquired for
resale (§ 1.263A-3(c)(5)(iii)(C)).
(g) “Permissible non-UNICAP inventory capitalization method” means a method of capitalizing
inventory costs that is permissible under § 471.

February 14, 2022 604 Bulletin No. 2022–7
(h) “Small business taxpayer” means a taxpayer, other than a tax shelter under § 448(d)(3),
proposed § 1.448-2(b)(2), or § 1.448-2(b)(2), as applicable, that meets the § 448(c) gross receipts
test as provided in § 448(c), proposed § 1.263A-1(j), or § 1.263A-1(j), as applicable. The § 448(c)
gross receipts test is met if a taxpayer has average annual gross receipts for the three prior taxable
years of $25,000,000 or less (adjusted for inflation), as described in § 448(c), proposed §§ 1.448-
2(c), or § 1.448-2(c), as applicable. For taxable years beginning in 2019, 2020 and 2021, the
inflation-adjusted amount is $26,000,000. See Rev. Proc. 2018-57, 2018-49 I.R.B. 827, Rev. Proc.
2019-44, 2019-47 I.R.B. 1093, or Rev. Proc. 2020-45, 2020-46 I.R.B. 1016, as applicable. For
a taxable year beginning in 2022, the inflation-adjusted amount is $27,000,000. See Rev. Proc.
2021-45, 2021-48 I.R.B. 764.
(i) “Former small business taxpayer” means a taxpayer that no longer qualifies as a small
business taxpayer. A former small business taxpayer includes a taxpayer that no longer qualifies
as a small business taxpayer for the year of change because it is a tax shelter under § 448(d)(3),
proposed § 1.448-2(b)(2), or § 1.448-2(b)(2), as applicable.
(4) Section 481(a) adjustment period. Except as otherwise provided in this section 12.01(4),
beginning with the year of change, a taxpayer changing its method of accounting for costs
under section 12.01(1)(a)(ii) or 12.01(1)(a)(iii) of this revenue procedure generally must take
any applicable net positive § 481(a) adjustment for such change into account ratably over the
same number of taxable years, not to exceed four, that the taxpayer used its former method of
accounting. A taxpayer changing its method of accounting for costs under section 12.01(1)(a)
(i), 12.01(1)(a)(iv), 12.01(1)(a)(v), or 12.01(1)(a)(vi) of this revenue procedure must take any
applicable net positive § 481(a) adjustment for such change into account as provided in section
7.03 of Rev. Proc. 2015-13.
(5) Multiple changes. A taxpayer making both this change and another change in method of
accounting for the same year of change must comply with the ordering rules of § 1.263A-7(b)(2).
(6) Under examination – certain audit protection exception temporarily inapplicable. For a
taxpayer’s first, second, or third taxable year ending on or after November 20, 2018, the audit
protection rule in section 8.02(1) of Rev. Proc. 2015-13 does not apply to a change in method
of accounting made under this section 12.01. However, section 8.02(1) of Rev. Proc. 2015-13
continues to apply for purposes of determining the § 481(a) adjustment period for a positive
§ 481(a) adjustment provided in section 7.03(3)(b) of Rev. Proc. 2015-13.
(7) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 12.01 is “22.”
(8) Example. The following example illustrates the principles of this section 12.01 and 12.16
for small business taxpayers and former small business taxpayers.
X is a C corporation incorporated on January 2, 2017, that adopted a taxable year ending December 31 and an overall
accrual method of accounting. X is a reseller of personal property. To determine whether X is a small business taxpayer,
as provided in section 12.01(3)(h) of this revenue procedure, X calculated its average annual gross receipts for the three
taxable years (or fewer, if applicable) immediately preceding the taxable year being analyzed as shown in the table below,
in accordance with § 1.263A-1(j):
Current Taxable YearAverage Annual Gross Receipts for the Three Taxable
Years Immediately Preceding the Current Taxable Year
20170
201824,000,000

Bulletin No. 2022–7 605 February 14, 2022
Current Taxable YearAverage Annual Gross Receipts for the Three Taxable
Years Immediately Preceding the Current Taxable Year
201927,000,000
202027,000,000
202125,000,000
Furthermore, X adopted the dollar-value LIFO inventory method and has the following LIFO inventory balances
determined without considering the effects of the UNICAP method:
BeginningEnding
2017$10,000,000$11,000,000
201811,000,00012,000,000
201912,000,00013,000,000
202013,000,00014,000,000
202114,000,00015,000,000
X was not required to use the UNICAP method for 2017 and 2018 because its average annual gross receipts for such
years made X a small reseller, as described in section 12.01(3)(b) of Rev. Proc. 2019-43, prior to modification by Rev. Proc.
2022-9, 2022-2 I.R.B. 310 for 2017, and a small business taxpayer, as described in section 12.01(3)(h) of this revenue
procedure, for 2018. X was required by § 263A to change to the UNICAP method for 2019 because its average annual
gross receipts for the three taxable years immediately preceding 2019 were $27,000,000, which exceeded the $26,000,000
threshold permitted by the small business taxpayer exemption under § 263A(i). Assume that X was required to capitalize
$800,000 of “additional § 263A costs” to the cost of its 2019 beginning inventory because of this change in inventory
method. In addition, X was required to include one-fourth of the § 481(a) adjustment when computing taxable income
for each of the four taxable years beginning with 2019. Thus, X was required to include a $200,000 positive § 481(a)
adjustment in its 2019 taxable income.
X elected to use the simplified resale method without a historic absorption ratio election under § 1.263A-3(d)(3) for
determining the amount of additional § 263A costs to be capitalized to each LIFO layer. Assume that X was required to
add $100,000 of additional § 263A costs to the cost of its 2019 ending inventory because of the $1,000,000 increment
for 2019.
X’s 2019 Ending Inventory:
Beginning Inventory (Without UNICAP costs)$12,000,000
2019 Increment1,000,000
Additional § 263A Costs in Beginning Inventory800,000
Additional § 263A Costs in 2019 Increment100,000
Total 2019 Ending Inventory $13,900,000
X’s Unamortized 2019 § 481(a) Adjustment:
2019 § 481(a) Adjustment$800,000
Amount included in 2019 Taxable Income<200,000>
Unamortized 2019 § 481(a) Adjustment—12/31/19600,000
Because X ’s average annual gross receipts of $27,000,000 for the three taxable years immediately preceding 2020
exceeded the $26,000,000 threshold, X failed to qualify for the small business taxpayer exemption for 2020 and was
required to continue using the UNICAP method for its inventory costs. Furthermore, X was required to include $200,000
of the unamortized 2019 positive § 481(a) adjustment in its 2020 taxable income. Assume that X was required to add
$100,000 of additional § 263A costs to the cost of its 2020 ending inventory because of the $1,000,000 increment for 2020.

February 14, 2022 606 Bulletin No. 2022–7
X’s 2020 Ending Inventory:
Beginning Inventory (With UNICAP costs) $13,900,000
2020 Increment 1,000,000
Additional § 263A Costs in 2020 Increment100,000
Total 2020 Ending Inventory$15,000,000
X’s Unamortized 2019 § 481(a) Adjustment:
Unamortized 2019 § 481(a) Adjustment—12/31/19$600,000
Amount Included in 2020 Taxable Income
<200,000>
Unamortized 2019 § 481(a) Adjustment—12/31/20$400,000
Because X ’s average annual gross receipts of $25,000,000 for the three taxable years immediately preceding 2021 did
not exceed the $26,000,000 threshold, X satisfied the small business taxpayer exemption under section 263A(i) for 2021
and may change voluntarily from the UNICAP method to a method that no longer capitalizes costs under § 263A for 2021,
as provided in section 12.16 of this revenue procedure. To reflect the removal of the additional § 263A costs from the cost
of its 2021 beginning inventory, X must compute a corresponding § 481(a) adjustment, which is a negative $1,000,000
($14,000,000 - $15,000,000). The entire amount of this negative § 481(a) adjustment is included in X’s taxable income for
2021. In addition, X must take the $400,000 remaining portion of the unamortized 2019 § 481(a) adjustment into account
in its taxable income for 2021, as provided in section 12.16(5) of this revenue procedure.
X’s 2021 Ending Inventory:
Beginning Inventory (With UNICAP costs)$15,000,000
2021 Increment1,000,000
2021 § 481(a) Adjustment <Negative>
<1,000,000>
Total 2021 Ending Inventory$15,000,000
X’s Unamortized 2019 § 481(a) Adjustment:
Unamortized 2019 § 481(a) Adjustment—12/31/20$400,000
Amount included in 2021 Taxable Income
<400,000>
Unamortized 2019 § 481(a) Adjustment—12/31/21$ 0
X’s Unamortized 2021 § 481(a) Adjustment:
2021 § 481(a) Adjustment <Negative>$<1,000,000>
Amount included in 2021 Taxable Income 1,000,000
Unamortized 2021 § 481(a) Adjustment—12/31/21 $ 0
(9) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number).
.02 Certain uniform capitalization (UNICAP) methods used by producers and reseller-
producers.
(1) Description of change.

Bulletin No. 2022–7 607 February 14, 2022
(a) Applicability. This change applies to:
(i) a producer as defined in section 12.01(3)(b) of this revenue procedure or a reseller-producer
as defined in section 12.01(3)(c) of this revenue procedure that wants to change to a UNICAP
method (or methods) specifically described in the regulations, including any necessary changes in
the identification of costs subject to § 263A that will be accounted for using the proposed method,
in any taxable year other than the first taxable year that it does not qualify as a small business
taxpayer as defined in section 12.01(3)(h) of this revenue procedure. This change includes a
change from not capitalizing a cost subject to § 263A to capitalizing that cost for a producer or a
reseller-producer under a UNICAP method (or methods) specifically described in the regulations
that the producer or reseller-producer is already using; or
(ii) a producer or reseller-producer that is a former small business taxpayer, as defined in section
12.01(3)(i) of this revenue procedure, that wants to change from not capitalizing costs under
§ 263A(i) to capitalizing costs under a UNICAP method (or methods) specifically described in the
regulations in the first taxable year that the taxpayer does not qualify as a small business taxpayer
as defined in section 12.01(3)(h) of this revenue procedure.
(b) Inapplicability.
(i) Self-constructed assets. This change does not apply to a taxpayer that wants to use either
the simplified service cost method, the simplified production method, or the modified simplified
production method for self-constructed assets under §§ 1.263A-1(h)(2)(i)(D), 1.263A-2(b)(2)(i)
(D), and 1.263A-2(c)(2), respectively.
(ii) Election or revocation of election to use a historic absorption ratio. This change does not
apply to a taxpayer that (1) wants to make a historic absorption ratio election with the simplified
production method or the modified simplified production method under §§ 1.263A-2(b)(4) or
1.263A-2(c)(4), respectively; or (2) wants to revoke an election to use a historic absorption
ratio with the simplified production method or the modified simplified production method (see
§§ 1.263A-2(b)(4)(iii)(B) or 1.263A-2(c)(4), respectively).
(iii) Interest capitalization. This change does not apply to a change in method of accounting for
interest capitalization (but see section 12.14 of this revenue procedure).
(iv) Recharacterizing costs under the simplified production method or modified simplified
production method. This change does not include a change to recharacterize section 471 costs,
as defined in § 1.263A-1(d)(2), as additional section 263A costs, as defined in § 1.263A-1(d)(3),
(or vice versa) for a taxpayer that uses or is changing to the simplified production method or the
modified simplified production method. See section 12.17 of this revenue procedure for certain
changes to recharacterize section 471 costs as additional section 263A costs (or vice versa).
(v) Reseller-producer using the simplified resale method. This change does not apply to a
reseller-producer that uses or is changing to the simplified resale method under § 1.263A-3(d)
(but see section 12.01(1) of this revenue procedure for certain changes that may be made by a
reseller-producer).
(2) Definition. A “UNICAP method specifically described in the regulations” does not include
the simplified resale method under § 1.263A-3(d)(4) or any other reasonable allocation method
within the meaning of § 1.263A-1(f)(4). However, a “UNICAP method specifically described in
the regulations” includes:

February 14, 2022 608 Bulletin No. 2022–7
(a) the 90-10 de minimis rule to allocate a mixed service department’s costs to production or
resale activities (§ 1.263A-1(g)(4)(ii));
(b) the 1/3 - 2/3 rule to allocate labor costs of personnel to purchasing activities (§ 1.263A-3(c)
(3)(ii)(A));
(c) the 90-10 de minimis rule to allocate a dual-function storage facility’s costs to property
acquired for resale (§ 1.263A-3(c)(5)(iii)(C));
(d) the specific identification method (§ 1.263A-1(f)(2));
(e) the burden rate method (§ 1.263A-1(f)(3)(i));
(f) the standard cost method (§ 1.263A-1(f)(3)(ii));
(g) the direct reallocation method (§ 1.263A-1(g)(4)(iii)(A));
(h) the step-allocation method (§ 1.263A-1(g)(4)(iii)(B));
(i) the simplified service cost method (§ 1.263A-1(h)) (with either a labor-based allocation ratio
or a production cost allocation ratio);
(j) the simplified production method without a historic absorption ratio election (§ 1.263A-2(b));
(k) the alternative method to determine amounts of section 471 costs by using a taxpayer’s
financial statement (§ 1.263A-1(d)(2)(iii));
(l) the method to determine amounts of section 471 costs by using the amounts incurred in the
taxable year for federal income tax purposes (§ 1.263A-1(d)(2)(i));
(m) the safe harbor method for certain variances and under- or over-applied burdens
(§ 1.263A-1(d)(2)(v));
(n) the removal of one or more costs from section 471 costs as required in § 1.263A-1(d)(2)(vi);
(o) the removal of one or more costs from section 471 costs using negative adjustments to
additional section 263A costs as permitted in § 1.263A-1(d)(3)(ii)(B);
(p) the de minimis rule for certain direct labor costs (§ 1.263A-1(d)(2)(iv)(B));
(q) the de minimis rule for certain direct material costs (§ 1.263A-1(d)(2)(iv)(C));
(r) the modified simplified production method without a historic absorption ratio election
(§ 1.263A-2(c)(3));

Bulletin No. 2022–7 609 February 14, 2022
(s) the direct material costs or pre-production labor costs allocation methods for capitalizable
mixed service costs under the modified simplified production method (§ 1.263A-2(c)(3)(iii)(B));
and
(t) the 90-10 de minimis rule to allocate capitalizable mixed service costs under the modified
simplified production method (§ 1.263A-2(c)(3)(iii)(C)).
(3) Multiple changes. A taxpayer making both this change and another change in method of
accounting in the same year of change must comply with the ordering rules of § 1.263A-7(b)(2).
(4) Eligibility rule temporarily inapplicable.
(a) Eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a change described in section 12.02(1)(a)(ii) of this revenue
procedure.
(b) In general. The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to the changes described in this section 12.02 for the taxpayer’s first, second,
or third taxable year ending on or after November 20, 2018.
(c) Eligibility rule temporarily inapplicable for certain changes related to cost offset method.
The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 does not apply to a method change
under this section 12.02 if:
(i) the taxpayer made or requested to make a change during any of the five taxable years ending
with the year of change to recover inventory costs in a taxable year prior to the taxable year in
which ownership of the inventory is transferred to the customer to offset inclusions under § 451(b)
and/or 451(c), as applicable;
(ii) in the case of a taxpayer with an applicable financial statement (AFS) as defined in section
16.10(1)(b) of this revenue procedure, the taxpayer makes, for the same year of change, a change
in method of accounting for income from the sale of inventory under section 16.10(2)(a)(iii) of
this revenue procedure and, to the extent the taxpayer receives advance payments for the sale
of inventory, section 16.10(2)(a)(iv) of this revenue procedure, or in the case of a taxpayer that
does not have an AFS, the taxpayer concurrently changes its method of accounting for advance
payments from the sale of inventory under section 16.10(2)(b)(ii) of this revenue procedure; and
(iii) the taxpayer makes the change under this section 12.02 for its early application year, as
defined in section 16.10(4)(c)(i) of this revenue procedure, or if a taxpayer does not apply § 1.451-
3 and/or § 1.451-8, as applicable, for a taxable year beginning before January 1, 2021, for the
taxpayer’s first taxable year beginning on or after January 1, 2021.
(5) Under examination – certain audit protection exception temporarily inapplicable. For a
taxpayer’s first, second, or third taxable year ending on or after November 20, 2018, the audit
protection rule in section 8.02(1) of Rev. Proc. 2015-13 does not apply to a change in method
of accounting made under this section 12.02. However, section 8.02(1) of Rev. Proc. 2015-13
continues to apply for purposes of determining the § 481(a) adjustment period for a positive
§ 481(a) adjustment provided in section 7.03(3)(b) of Rev. Proc. 2015-13.

February 14, 2022 610 Bulletin No. 2022–7
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 12.02 is “23.”
(7) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number).
.03 Impact fees.
(1) Description of change. This change applies to a taxpayer that incurs impact fees as defined
in Rev. Rul. 2002-9, 2002-1 C.B. 614, in connection with the construction of a new residential
rental building that wants to capitalize the costs to the building under §§ 263(a) and 263A. See
Rev. Rul. 2002-9 for further information.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 12.03 is “25.”
(3) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number).
.04 Change to capitalizing environmental remediation costs under § 263A.
(1) Description of change. This change applies to a taxpayer that wants to change its method
of accounting for environmental remediation costs from a method that does not comply with the
holding in Rev. Rul. 2004-18, 2004-1 C.B. 509, to capitalizing them to inventory under § 263A.
(2) Concurrent automatic changes. A taxpayer making both this change and another automatic
change under § 263A for the same year of change may file a single Form 3115 for both changes,
provided the taxpayer enters the designated automatic change numbers for both changes on the
appropriate line on that Form 3115, and complies with the ordering rules of § 1.263A-7(b)(2).
See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for information on making
concurrent changes.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 12.04 is “77.”
(4) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number).
.05 Change in allocating environmental remediation costs under § 263A.
(1) Description of change. This change applies to a taxpayer that capitalizes environmental
remediation costs to inventory under § 263A, but allocates these costs to inventory using a method
of accounting that does not comply with the holding in Rev. Rul. 2005-42, 2005-2 C.B. 67, and
wants to change to allocating these costs to inventory produced during the taxable year in which
the costs are incurred under § 263A. See Rev. Rul. 2005-42 for further information.
(2) Concurrent automatic changes. A taxpayer making both this change and another automatic
change under § 263A for the same year of change may file a single Form 3115 for both changes,

Bulletin No. 2022–7 611 February 14, 2022
provided the taxpayer enters the designated automatic accounting method change numbers for
both changes on the appropriate line on that Form 3115, and complies with the ordering rules of
§ 1.263A-7(b)(2). See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for information
on making concurrent changes.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 12.05 is “92.”
(4) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number).
.06 Safe harbor methods under § 263A for certain dealerships of motor vehicles.
(1) Description of change. This change applies to a motor vehicle dealership, as defined in
section 4 of Rev. Proc. 2010-44, 2010-49 I.R.B. 811, that is within the scope of section 3 of Rev.
Proc. 2010-44 and wants to change its method of accounting to (1) treat its sales facility as a retail
sales facility or (2) be treated as a reseller without production activities, as described in section
5 of Rev. Proc. 2010-44. A motor vehicle dealership that wants to make an automatic change in
method of accounting to use one or both safe harbor methods described in section 5 of Rev. Proc.
2010-44 may make any corresponding changes in the identification of costs subject to § 263A
that will be accounted for using the proposed method (for example, to remove internal profit
from inventory costs) or to no longer include negative amounts as additional § 263A costs in the
numerator of the simplified resale method formula or the simplified production method formula.
However, except as provided in the preceding sentence, a change under this section does not
include a change for purposes of recharacterizing “§ 471 costs” as “additional § 263A costs” (or
vice versa) under the simplified resale method or the simplified production method.
(2) Concurrent automatic changes. A motor vehicle dealership making an automatic change
to one or both safe harbor methods described in section 5 of Rev. Proc. 2010-44 and another
automatic change under § 263A for the same taxable year may file one Form 3115 to make both
changes, provided the dealership enters the designated automatic change numbers for all such
changes in Part I on that Form 3115, and complies with the ordering rules of § 1.263A-7(b)(2).
See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for information on making
concurrent changes.
(3) Multiple adjustments. In the event that a motor vehicle dealership is taking into account a
§ 481(a) adjustment from another accounting method change in addition to the § 481(a) adjustment
required by a change to a safe harbor method described in section 5 of Rev. Proc. 2010-44,
the § 481(a) adjustments must be taken into account separately. For example, a motor vehicle
dealership that changed to comply with § 263A in 2009 and was required to take its § 481(a)
adjustment into account over four years must continue to take into account that adjustment over
the remainder of that four year § 481(a) adjustment period even though the dealership changed to
a safe harbor method described in section 5 of Rev. Proc. 2010-44 in 2010 and has an additional
§ 481(a) adjustment required by that change.
(4) Designated automatic accounting method change numbers. The designated automatic
accounting method change number for a change to treat certain sales facilities as retail sales
facilities as described in section 5.01 of Rev. Proc. 2010-44 is “150.” The designated automatic
accounting method change number for a change to be treated as a reseller without production
activities as described in section 5.02 of Rev. Proc. 2010-44 is “151.”

February 14, 2022 612 Bulletin No. 2022–7
(5) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number).
.07 Change to not apply § 263A to one or more plants removed from the list of plants that have
a preproductive period in excess of 2 years.
(1) Description of change. This change, as described in Rev. Proc. 2013-20, 2013-14 I.R.B.
744, applies to a taxpayer that is not a corporation, partnership, or tax shelter required to use an
accrual method of accounting under § 447 or § 448(a)(3), and either (a) wants to not apply § 263A,
pursuant to § 263A(d)(1) and § 1.263A-4(a)(2), to the production of one or more plants that the
IRS and the Treasury Department have removed from the list of plants that have a nationwide
weighted average preproductive period in excess of 2 years, or (b) properly elected, pursuant to
§ 263A(d)(3) and § 1.263A-4(d), to not apply § 263A to the production of a plant or plants that
have been removed from the list of plants that have a nationwide weighted average preproductive
period in excess of 2 years, and wishes to revoke its § 263A(d)(3) election with respect to those
plants. See Notice 2013-18, 2013-14 I.R.B. 742, or its successor.
(2) Audit protection. If a taxpayer currently does not apply § 263A to its blackberry, raspberry, or
papaya plants in a manner that complies with the requirements of § 263A(d)(1) and § 1.263A-4(a)
(2), the IRS will not raise such method of accounting for a taxable year that ends on or before
February 15, 2013. Also, if the use of such a method of accounting by a taxpayer is an issue under
consideration (within the meaning of section 3.08 of Rev. Proc. 2015-13) for taxable years in
examination, before an Appeals office, or before the U.S. Tax Court in a taxable year that ends on
or before February 15, 2013, the IRS will not further pursue that issue.
(3) Manner of making change. A change under this section 12.07 is made with any necessary
adjustments under § 481(a). For example, the revocation of an election under § 263A(d)(3) results
in a § 481(a) adjustment that must take into account the change in depreciation from the alternative
depreciation system to the general depreciation system included within such revocation.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 12.07 is “181.”
(5) Contact information. For further information regarding a change under this section, contact
Patrick Clinton at (202) 317-7005 (not a toll-free number).
.08 Change to a reasonable allocation method described in § 1.263A-1(f)(4) for self-constructed
assets.
(1) Description of change.
(a) Applicability. This change, as described in Rev. Proc. 2014-16, 2014-9 I.R.B. 606, applies
to a producer (as defined in section 12.01(3)(b) of this revenue procedure) or a reseller-producer
(as defined in section 12.01(3)(c) of this revenue procedure) that wants to change to a reasonable
allocation method within the meaning of § 1.263A-1(f)(4), other than the methods specifically
described in § 1.263A-1(f)(2) or (3), for self-constructed assets produced during the taxable
year, including any necessary changes in the identification of costs subject to § 263A that will
be accounted for using the proposed method. This section 12.08 also includes a change from not
capitalizing a cost subject to § 263A to capitalizing that cost for a producer or reseller-producer
under a reasonable allocation method within the meaning of § 1.263A-1(f)(4) that the producer or
reseller-producer is already using for self-constructed assets, other than the methods specifically

Bulletin No. 2022–7 613 February 14, 2022
described in § 1.263A-1(f)(2) or (3). See section 12.02 of this revenue procedure for a producer or
reseller-producer that wants to change to a method described in § 1.263A-1(f)(2) or (3).
(b) Inapplicability. This change does not apply to an allocation method based on the number
of units produced or an allocation method that does not allocate costs to the units of property
produced. This change does not apply to a change described in another section of this revenue
procedure or in other guidance published in the Internal Revenue Bulletin. For example, this
change does not apply to a change described in section 12.01 or 12.02 of this revenue procedure.
(2) No ruling on reasonableness of method. The consent granted in section 9 of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, for this change is not a determination by the Commissioner that the
taxpayer is using a reasonable allocation method for costs subject to § 263A and does not create
any presumption that the proposed allocation method is permissible. The director will ascertain
whether the taxpayer’s allocation method is reasonable within the meaning of § 1.263A-1(f)(4).
(3) Multiple changes. A taxpayer making both this change and another change in method
of accounting under section 11.08 of this revenue procedure for the same year of change must
comply with the ordering rules of § 1.263A-7(b)(2).
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 12.08 is “194.”
(5) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number).
.09 Real property acquired through foreclosure.
(1) Applicability. This change, as described in Rev. Proc. 2014-16, 2014-9 I.R.B. 606, applies to
a taxpayer that capitalizes costs under § 263A(b)(2) and § 1.263A-3(a)(1) to real property acquired
through foreclosure, or similar transaction, where the taxpayer wants to change its method of
accounting to an otherwise permissible method of accounting under which the acquisition and
holding costs for real property acquired through foreclosure, or similar transaction, are not
capitalized under § 263A(b)(2) and § 1.263A-3(a)(1). To qualify for this change in method of
accounting, a taxpayer must:
(a) originate, or acquire and hold for investment, loans that are secured by real property; and
(b) acquire the real property that secures the loans at a foreclosure sale, by deed in lieu of
foreclosure, or in another similar transaction.
(2) Inapplicability. This change does not apply to costs capitalized under § 263A(b)(1) and
§ 1.263A-2(a)(1) by the taxpayer to the acquired real property as a result of production activities.
(3) Designated automatic accounting method change numbers. The designated automatic
accounting method change number for a change under this section 12.09 is “195.”
(4) Contact information. For further information regarding a change under this section, contact
Roy Hirschhorn at (202) 317-7007 (not a toll-free number).

February 14, 2022 614 Bulletin No. 2022–7
.10 Sales-Based Royalties.
(1) Description of change. This change, as described in Rev. Proc. 2014-33, 2014-22 I.R.B.
1060, applies to a taxpayer that wants to change its method of accounting for sales-based royalties
(as described in § 1.263A-1(e)(3)(ii)(U)(2)) that are properly allocable to inventory property:
(a) From not capitalizing sales-based royalties to capitalizing these costs and allocating them
entirely to cost of goods sold under a taxpayer’s method of accounting;
(b) From not capitalizing sales-based royalties to capitalizing these costs and allocating them to
inventory property under a taxpayer’s method of accounting;
(c) From capitalizing sales-based royalties and allocating these costs to inventory property to
allocating them entirely to cost of goods sold; or
(d) From capitalizing sales-based royalties and allocating these costs entirely to cost of goods
sold to allocating them to inventory property.
(2) Limitations.
(a) A taxpayer may not make a change in method of accounting under this section 12.10 if the
taxpayer wants to change to capitalizing sales-based royalties and allocating them to inventory
property using another reasonable allocation method within the meaning of § 1.263A-1(f)(4).
(b) A taxpayer making the changes described in section 12.10(1)(a) or 12.10(1)(c) of this
revenue procedure that uses a simplified method to determine the additional § 263A costs allocable
to inventory property on hand at year end must remove sales-based royalties allocated to cost of
goods sold from the formulas used to allocate additional § 263A costs to ending inventory in the
same manner that the taxpayer included these amounts in the formulas.
(c) A taxpayer making a change in method of accounting under this section 12.10 that uses
a simplified method with an historic absorption ratio election (see §§ 1.263A-2(b)(4) and
1.263A-3(d)(4)) and currently includes, or is changing its method to include, sales-based royalties
in any part of its historic absorption ratio must revise its previous and current historic absorption
ratios. To revise its historic absorption ratios, the taxpayer must apply its proposed method of
accounting during the test period, during all recomputation years, and during all updated test
periods to determine the § 471 costs and additional § 263A costs that were incurred. The revised
historic absorption ratios must be used to revalue beginning inventory and must be accounted for
in the taxpayer’s § 481(a) adjustment. The taxpayer must use a method described in § 1.263A-7(c)
to revalue beginning inventory.
(3) Concurrent automatic changes. A taxpayer making a change under this section 12.10 and
one or more automatic changes in method of accounting under § 263A for the same year of change
may file a single Form 3115 for all changes, provided the taxpayer enters the designated automatic
change numbers for all changes on the appropriate line on the Form 3115 and complies with the
ordering rules of § 1.263A–7(b)(2). See section 6.03(1)(b) of Rev. Proc. 2015-13 for information
on making concurrent changes.

Bulletin No. 2022–7 615 February 14, 2022
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for changes in method of accounting under this section 12.10
is “201.”
(5) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.11 Treatment of Sales-Based Vendor Chargebacks under a Simplified Method.
(1) Description of change. This change, as described in Rev. Proc. 2014-33, 2014-22 I.R.B.
1060, applies to a taxpayer that wants to change its method of accounting to no longer include cost
adjustments for sales-based vendor chargebacks described in § 1.471-3(e)(1) in the formulas used
to allocate additional § 263A costs to ending inventory under a simplified method.
(2) Limitations.
(a) A taxpayer making this change that uses a simplified method to determine the additional
§ 263A costs allocable to inventory property on hand at year end must remove sales-based vendor
chargebacks from the formulas used to allocate additional § 263A costs to ending inventory in the
same manner that the taxpayer included these amounts in the formulas.
(b) A taxpayer making a change in method of accounting under this section 12.11 that uses
a simplified method with an historic absorption ratio election (see §§ 1.263A-2(b)(4) and
1.263A-3(d)(4)) and currently includes sales-based vendor chargebacks in any part of its historic
absorption ratio must revise its previous and current historic absorption ratio(s). To revise its
historic absorption ratios, the taxpayer must apply its proposed method of accounting during the
test period, during all recomputation years, and during all updated test periods to determine the
§ 471 costs and additional § 263A costs that were incurred. The revised historic absorption ratios
must be used to revalue beginning inventory and must be accounted for in the taxpayer’s § 481(a)
adjustment. The taxpayer must use a method described in § 1.263A-7(c) to revalue beginning
inventory.
(3) Concurrent automatic changes. A taxpayer making both this change and one or more
automatic changes under § 263A, or both this change and the change described in section 21.15 of
this revenue procedure for the same taxable year of change may file a single Form 3115 for both
changes, provided the taxpayer enters the designated automatic change numbers for all changes
on the appropriate line on the Form 3115 and complies with the ordering rules of § 1.263A-7(b)
(2). See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for changes in method of accounting under this section 12.11
is “202.”
(5) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.12 U.S. ratio method.
(1) Change to the U.S. ratio method.

February 14, 2022 616 Bulletin No. 2022–7
(a) Description of change. This change applies to a foreign person, as defined in Notice 88-104,
1988-2 C.B. 443, as modified by Notice 89-67, 1989-1 C.B. 723, that is required to capitalize costs
under § 263A and wants to change its method of accounting to the U.S. ratio method, as described
in Notice 88-104.
(b) Manner of making change. A taxpayer requesting a change on behalf of a foreign person
under section 12.12(1) of this revenue procedure must attach a statement to the Form 3115
providing the following information:
(i) Foreign person requirement. A representation that the foreign person is a qualified business
unit (QBU), as defined in § 1.989(a)-1(b), of a foreign person, or the foreign branch of a U.S.
person that constitutes a separate QBU, within the meaning of Notice 88-104. If the taxpayer is
requesting a change in method of accounting on behalf of multiple foreign persons, please provide
a representation that each foreign person is a QBU, as defined in § 1.989(a)-1(b), of a foreign
person or the foreign branch of a U.S. person that constitutes a separate QBU, within the meaning
of Notice 88-104;
(ii) Description of trade or business. The name and employer identification number (if
applicable) for each foreign person and an explanation of each trade or business, as defined in
§ 1.446-1(d), for which a request to change to the U.S. ratio method is being made under this
section 12.12(1);
(iii) Applicable U.S. trade or business requirement. The identity of the “applicable U.S. trade or
business,” as defined in Notice 88-104, that the foreign person wishes to use and an explanation
of how this U.S. trade or business is “the same as, or most similar to” the trade or business
conducted by the foreign person. If the taxpayer is requesting a change in method of accounting
for multiple foreign persons, the taxpayer must identify the “applicable U.S. trade or business”
for each foreign person, and explain how the respective U.S. trade or business is “the same as, or
most similar to” the trade or business conducted by the foreign person; and
(iv) Relationship requirement. An explanation of how the “applicable U.S. trade or business”
identified in section 12.12(1)(b)(iii) of this revenue procedure is a trade or business conducted in
the United States by a “related person,” as defined in Notice 88-104, with respect to the foreign
person requesting a change under this section. If the taxpayer is requesting a change in method
of accounting for multiple foreign persons, the taxpayer must explain how the “applicable U.S.
trade or business” identified in section 12.12(1)(b)(iii) of this revenue procedure is a trade or
business conducted in the United States by a “related person” for purposes of Notice 88-104 for
each foreign person requesting a change in method of accounting. Use § 267(b) or § 707(b), as
applicable, to explain the relationship.
(c) Additional requirements.
(i) A foreign person must continue to use the U.S. ratio of the applicable U.S. trade or business
identified in section 12.12(1)(b)(iii) of this revenue procedure unless consent of the Commissioner
is obtained to use the U.S. ratio of a different applicable U.S. trade or business under § 446(e) (see
section 12.12(2) of this revenue procedure);
(ii) In the case of a controlled foreign corporation, the controlling U.S. shareholder, or in the
case of a foreign branch of a U.S. person, the U.S. person, must maintain records of the U.S.
ratio used by each foreign person to calculate the additional § 263A costs capitalized to property
produced and property acquired for resale for the year of change and for subsequent taxable years
for each foreign person requesting a change in method of accounting under this section 12.12. In

Bulletin No. 2022–7 617 February 14, 2022
the case of a controlled foreign partnership, the U.S. partner must maintain records of the U.S.
ratio used by each foreign person to calculate the additional § 263A costs capitalized to property
produced and property acquired for resale for the year of change and for subsequent taxable years
for each foreign person requesting a change in method of accounting under this section 12.12.
(iii) The § 481(a) adjustment is computed in the manner provided in Notice 88-104;
(iv) The U.S. ratio is determined, and the ratio is applied to the costs of property produced or
property acquired for resale incurred by the foreign person, in accordance with Notice 88-104; and
(v) If any foreign person is unable to obtain a U.S. ratio from the applicable U.S. trade or
business identified in section 12.12(1)(b)(iii) of this revenue procedure, or is otherwise no longer
eligible to use the U.S. ratio method, the foreign person is no longer permitted to use the U.S.
ratio method. However, the foreign person is not ineligible to use the U.S. ratio method if the
foreign person is able to obtain a U.S. ratio from a different applicable U.S. trade or business,
and changes the applicable U.S. trade or business pursuant to section 12.12(2) of this revenue
procedure or under the non-automatic change procedures of this revenue procedure, as applicable.
If a foreign person is no longer eligible to use the U.S. ratio method, it is required to change its
method of accounting to a method that complies with §§ 263A and 471 using either the automatic
change procedures of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, and sections 12.01, 12.02, or 12.08,
as applicable, of this revenue procedure or the non-automatic change procedures of Rev. Proc.
2015-13.
(2) Change within U.S. ratio method. This change applies to a foreign person currently using
the U.S. ratio method that wants to use the U.S. ratio of a different applicable U.S. trade or
business for purposes of applying the U.S. ratio method as described in section 12.12(2)(a) or
12.12(2)(b) of this revenue procedure.
(a) Required change in the applicable U.S. trade or business.
(i) In general. A foreign person is permitted to change its method of accounting under this
section 12.12(2)(a) to use the U.S. ratio of a different applicable U.S. trade or business, as defined
in Notice 88-104, if the foreign person is no longer able to obtain the U.S. ratio from the applicable
U.S. trade or business previously identified and if: (A) the U.S. person or related person in which
the applicable U.S. trade or business is conducted terminates its existence; (B) the foreign person
is no longer related, within the meaning of § 267(b) or § 707(b), to the U.S. person or related
person in which the applicable U.S. trade or business is conducted; or (C) the U.S. person or
related person ceases to conduct the applicable U.S. trade or business.
(ii) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13 does not apply to the change described in section 12.12(2)(a) of this revenue procedure.
(iii) Manner of making change. A foreign person making a change in method of accounting
under this section 12.12(2)(a) must make the change in accordance with the requirement set forth
in section 12.12(2)(c) of this revenue procedure.
(b) Other changes in the applicable U.S. trade or business.
(i) In general. If the foreign person cannot make the change in method of accounting described
in section 12.12(2)(a) of this revenue procedure, or there is more than one U.S. trade or business

February 14, 2022 618 Bulletin No. 2022–7
that can reasonably be considered the “same as, or most similar to” the foreign person’s trade or
business, the foreign person is permitted to change its method of accounting under this section
12.12(2)(b) to use the U.S. ratio of a different applicable U.S. trade or business.
(ii) Manner of making change. A foreign person making a change in method of accounting
under this section 12.12(2)(b) must make the change in accordance with the requirement set forth
in section 12.12(2)(c) of this revenue procedure.
(c) Short Form 3115 in lieu of a standard Form 3115. In accordance with § 1.446-1(e)(3)(ii), the
requirement of § 1.446-1(e)(3)(i) to file a standard Form 3115 is waived and pursuant to section
6.02(2) of Rev. Proc. 2015-13, a short Form 3115 is authorized for a change described in section
12.12(2)(a) or 12.12(2)(b) of this revenue procedure. The short Form 3115 (Rev. December 2018)
must include the following information:
(i) the identification section of page 1 (above Part I);
(ii) the signature section at the bottom of page 1;
(iii) Part I, line 1(a);
(iv) the information required under section 12.12(1)(b) of this revenue procedure; and
(v) a statement that the change in method of accounting is made under section 12.12(2)(a) or
12.12(2)(b) of Rev. Proc. 2022-14, as applicable.
(3) Designated automatic accounting method change numbers. The designated automatic
accounting method change number for a change under this section 12.12 is “214.”
(4) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number).
.13 Depletion.
(1) Description of change. This change applies to a taxpayer that wants to change its method of
accounting for depletion to treat these amounts as an indirect cost that is only properly allocable
to property that has been sold (that is, for purposes of determining gain or loss on the sale of the
property) under § 1.263A-1(e)(3)(ii)(J).
(2) Limitation.
(a) A taxpayer making this change in method of accounting that uses a simplified method to
determine the additional § 263A costs allocable to inventory property on hand at year end must
remove depletion allocated to cost of goods sold from the formulas used to allocate additional
§ 263A costs to ending inventory in the same manner that the taxpayer included these amounts in
the formulas.
(b) A taxpayer making this change in method of accounting that uses a simplified method with
an historic absorption ratio election (see §§ 1.263A-2(b)(4) and 1.263A-3(d)(4)) and currently

Bulletin No. 2022–7 619 February 14, 2022
includes depletion in any part of its historic absorption ratio must revise its previous and current
historic absorption ratios. To revise its historic absorption ratios, the taxpayer must apply its
proposed method of accounting during the test period, during all recomputation years, and during
all updated test periods to determine the § 471 costs and additional § 263A costs that were incurred.
The revised historic absorption ratios must be used to revalue beginning inventory and must be
accounted for in the taxpayer’s § 481(a) adjustment. The taxpayer must use a method described in
§ 1.263A-7(c) to revalue beginning inventory
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to this change.
(4) Concurrent automatic changes. A taxpayer making both this change and another automatic
change under § 263A for the same year of change may file a single Form 3115 for both changes,
provided the taxpayer enters the designated automatic change numbers for both changes on the
appropriate line on that Form 3115 and complies with the ordering rules of § 1.263A–7(b)(2). See
section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change in method of accounting under this section 12.13
is “215.”
(6) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.14 Interest capitalization.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to change its method of accounting
for interest from not capitalizing any interest, capitalizing interest in accordance with its method
of accounting for financial reporting purposes, or applying an improper method of capitalizing
interest under §§ 1.263A-8 through -14, with respect to the production of designated property,
to capitalizing interest with respect to the production of designated property in accordance with
§§ 1.263A-8 through -14.
(b) Inapplicability. This change does not apply to a taxpayer that wants to change its method
of accounting for interest from either capitalizing interest to not capitalizing interest or not
capitalizing interest to capitalizing interest for improvements that involve the associated property
rules in § 1.263A-11(e)(1)(ii)(B).
(2) Manner of making change. A taxpayer requesting a change under this section 12.14 must
attach a statement to the Form 3115 with the following information:
(a) Representations as to the following:
(i) The taxpayer’s method is in accordance with the avoided cost method under § 1.263A-9; and
(ii) The taxpayer will comply with § 1.263A-14 and Notice 88-89, 1988-2 C.B. 422, should the
taxpayer incur average excess expenditures allocable to related persons; and

February 14, 2022 620 Bulletin No. 2022–7
(b) Details with respect to the taxpayer’s sub-methods of accounting for determining capitalizable
interest in accordance with §§ 1.263A-8 through -14 (for example, whether the taxpayer elects to
not trace debt under § 1.263A-9(d); the computation period(s) used under the new method; and
whether the taxpayer will suspend the capitalization of interest for units of property for which
production has ceased for at least 120 consecutive days as determined under § 1.263A-12(g)).
(3) Concurrent automatic changes. A taxpayer making a change under this section 12.14 and
one or more automatic changes in method of accounting under § 263A for the same year of change
may file a single Form 3115 for all changes, provided the taxpayer enters the designated automatic
change numbers for all changes on the appropriate line on the Form 3115 and complies with the
ordering rules of § 1.263A-7(b)(2). See section 6.03(1)(b) of Rev. Proc. 2015-13 for information
on making concurrent changes.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change in method of accounting under this section 12.14
is “224.”
(5) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number).
.15 Change to not apply § 263A to replanting costs for lost or damaged citrus plants pursuant
to § 263A(d)(2)(C).
(1) Description of change.
(a) In general. This change, as described in Rev. Proc. 2018-35, 2018-28 I.R.B. 204, applies to
a taxpayer, other than the owner described in § 263A(d)(2)(A), that: (i) paid or incurred replanting
costs of citrus plants after the loss or damage of citrus plants by reason of freezing temperatures,
disease, drought, pests, or casualty, as described in § 263A(d)(2)(A); (ii) paid or incurred the
replanting costs after December 22, 2017, and on or before December 22, 2027; (iii) satisfies the
ownership test provided in section 12.15(1)(b) of this revenue procedure; and (iv) wants to change
its method of accounting from applying § 263A to citrus plant replanting costs to not applying
§ 263A to those costs, pursuant to § 263A(d)(2)(C).
(b) Ownership test. The taxpayer satisfies the ownership test if either: (i) the owner described
in § 263A(d)(2)(A) has an equity interest of not less than 50 percent in the replanted citrus plants
at all times during the taxable year in which the taxpayer paid or incurred amounts for replanting
costs, and the taxpayer holds any part of the remaining equity interest; or (ii) the taxpayer acquired
the entirety of the equity interest of the owner described in § 263A(d)(2)(A) in the land on which
the lost or damaged citrus plants were located at the time of the loss or damage, and the replanting
is on such land.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to this change.
(3) Section 481(a) adjustment. A taxpayer making a change under this section 12.15 calculates
a § 481(a) adjustment by taking into account only amounts paid or incurred after December 22,
2017, and on or before December 22, 2027.

Bulletin No. 2022–7 621 February 14, 2022
(4) Multiple changes. A taxpayer making both this change and another change in method of
accounting in the same year of change must comply with the ordering rules of § 1.263A-7(b)(2).
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 12.15 is “232.”
(6) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number).
.16 Small business taxpayer exception from requirement to capitalize costs under § 263A.
(1) Description of change. This change applies to a small business taxpayer, as defined in
section 12.01(3)(h) of this revenue procedure, that chooses to no longer capitalize costs under
§ 263A, including for self-constructed assets, pursuant to § 263A(i), proposed § 1.263A-1(j), or
§ 1.263A-1(j), as applicable.
(2) Inapplicability.
(a) Home construction contracts. This change does not apply to a taxpayer not required by
§ 460(e)(1) to capitalize costs under § 263A for home construction contracts, and that wants to
make a change to no longer capitalize costs under section 263A. See section 19.01 of this revenue
procedure to make this change.
(b) Election under § 263A(d)(3). This change does not apply to a small business taxpayer, as
defined in section 12.01(3)(h) of this revenue procedure, that elected under § 263A(d)(3) not to
have § 263A apply to certain plants produced by the taxpayer in a farming business and wants to
revoke its § 263A(d)(3) election and change to a method of accounting that no longer capitalizes
costs under § 263A. But see Rev. Proc. 2020-13, 2020-11 I.R.B. 511.
(3) Eligibility rules.
(a) Eligibility rule inapplicable. For a change described in section 12.16(1) of this revenue
procedure, if the taxpayer changed from not capitalizing costs under § 263A in accordance with
§ 263A(i), proposed § 1.263A-1(j) or § 1.263A-1(j), as applicable, to capitalizing costs under
§ 263A and the accompanying regulations within the prior five taxable years ending with the year
of change, and such change was made in the first taxable year that the taxpayer did not qualify as
a small business taxpayer, then such change is disregarded for purposes of section 5.01(f) of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419.
(b) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 does not apply to this change for the taxpayer’s first, second or third taxable year
beginning after December 31, 2017. In addition, the eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 does not apply to a taxpayer’s early application year, or, in the case of a taxpayer
that does not apply § 1.263A-1(j) in the early application year, the taxpayer’s first taxable year
beginning on or after January 5, 2021. For purposes of this section 12.16, “early application
year” means the taxable year beginning before January 5, 2021, in which a taxpayer first applies
§ 1.263A-1(j).
(4) Reduced filing requirement. A taxpayer is required to complete only the following information
on Form 3115 (Rev. December 2018) to make this change:

February 14, 2022 622 Bulletin No. 2022–7
(a) The identification section of page 1 (above Part I);
(b) The signature section at the bottom of page 1;
(c) Part I;
(d) Part II, all lines except line 16; and
(e) Part IV, all lines except line 25.
(5) Acceleration of § 481 adjustment. If a taxpayer making a change described in section
12.16(1) of this revenue procedure has a § 481(a) adjustment remaining on a prior change in
method of accounting from not capitalizing costs under § 263A in accordance with § 263A(i),
proposed § 1.263A-1(j) or § 1.263A-1(j), as applicable, to capitalizing costs under § 263A and
the accompanying regulations, then it must take the remaining portion of such prior § 481(a)
adjustment into account in the year of change.
(6) Concurrent automatic changes. A small business taxpayer making a change under this
section 12.16 and a change under sections 15.17, 22.18 and/or 22.19 of this revenue procedure for
the same year of change may file a single Form 3115 for such changes, provided the taxpayer enters
the designated automatic accounting method change number for each change on the appropriate
line of the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making
concurrent changes.
(7) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 12.16 is “234.”
(8) Contact information. For further information regarding a change under this section, contact
Livia Piccolo at (202) 317-7007 (not a toll-free number).
.17 Recharacterizing costs under the simplified resale method, simplified production method, or
the modified simplified production method.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that uses or is changing to the simplified
production method, the modified simplified production method, or the simplified resale method
under §§ 1.263A-2(b), 1.263A-2(c), and 1.263A-3(d), respectively, and that wants to recharacterize
a section 471 cost, as defined in § 1.263A-1(d)(2), as an additional section 263A cost, as defined
in § 1.263A-1(d)(3), or vice versa, in accordance with the characterization requirements of
§ 1.263A-1(d)(2) and (d)(3). For example, this change applies to a taxpayer using the modified
simplified production method that treats a direct cost of property produced or property acquired
for resale as an additional section 263A cost and that wants to change to characterize the direct
cost as a section 471 cost, as required by § 1.263A-1(d)(2)(ii).
(b) Inapplicability. This change does not apply to a change in method of accounting that is
described in another section of this revenue procedure or in other guidance published in the IRB.
For example, this change does not apply to a taxpayer that wants to make a change described in

Bulletin No. 2022–7 623 February 14, 2022
section 12.01 or 12.02 of this revenue procedure, such as a change to use the methods described in
§ 1.263A-1(d)(2)(iv), (v), or (vi), § 1.263A-2(b), § 1.263A-2(c), or § 1.263A-3(d).
(2) Restatement of financial statement. A taxpayer’s restatement of its financial statement does
not invalidate the taxpayer’s method of accounting or change its determination of section 471
costs in earlier taxable years.
(3) Certain eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f)
of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, does not apply to this change for the taxpayer’s first,
second, or third taxable year ending on or after November 20, 2018.
(4) Reduced filing requirement. A taxpayer is required to complete only the following information
on Form 3115 (Rev. December 2018) to make this change:
(a) The identification section of page 1 (above Part I);
(b) The signature section at the bottom of page 1;
(c) Part I;
(d) Part II, all lines except lines 13, 15b, 16c, and 19;
(e) Part IV, all lines except line 25; and
(f) Schedule D, all Parts except Part I.
(5) Limitation. If a taxpayer making this change in method of accounting uses a historic
absorption ratio election under §§ 1.263A-2(b)(4), 1.263A-2(c)(4), or 1.263A-3(d)(4)), and the
change in the characterization of cost(s) under this section 12.17 affects any part of the taxpayer’s
historic absorption ratio, the taxpayer must revise its previous and current historic absorption
ratios. To revise its historic absorption ratios, the taxpayer must apply its proposed method of
accounting during the test period, during all recomputation years, and during all updated test
periods to determine the section 471 costs and additional section 263A costs that were incurred.
The revised historic absorption ratios must be used to revalue beginning inventory and must be
accounted for in the taxpayer’s § 481(a) adjustment. The taxpayer must use a method described in
§ 1.263A-7(c) to revalue beginning inventory.
(6) Concurrent automatic changes. A taxpayer making both this change and another automatic
change under § 263A for the same year of change may file a single Form 3115 for both changes,
provided the taxpayer enters the designated automatic change numbers for both changes on the
appropriate line of that Form 3115 and complies with the ordering rules of § 1.263A-7(b)(2). See
section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(7) Under examination – certain audit protection exception temporarily inapplicable. For a
taxpayer’s first, second, or third taxable year ending on or after November 20, 2018, the audit
protection rule in section 8.02(1) of Rev. Proc. 2015-13 does not apply to a change in method
of accounting made under this section 12.17. However, section 8.02(1) of Rev. Proc. 2015-13
continues to apply for purposes of determining the § 481(a) adjustment period for a positive
§ 481(a) adjustment provided in section 7.03(3)(b) of Rev. Proc. 2015-13.

February 14, 2022 624 Bulletin No. 2022–7
(8) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 12.17 is “237.”
(9) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number).
.18 Revocation of a historic absorption ratio election.
(1) Description of change. This change applies to a taxpayer that uses the simplified resale
method with a historic absorption ratio election that wants to revoke its historic absorption ratio
election and change to the simplified resale method without a historic absorption ratio. This change
also applies to a taxpayer that uses the simplified production method with a historic absorption
ratio election that wants to revoke its historic absorption ratio election and change to the simplified
production method without a historic absorption ratio. This change applies to a revocation of the
simplified resale method with a historic absorption ratio election or the simplified production
method with a historic absorption ratio election regardless of whether the year of change is during
the taxpayer’s qualifying period.
(2) Limited applicability. This change is the exclusive procedure for a taxpayer on the simplified
production method with a historic absorption ratio election or the simplified resale method with
a historic absorption ratio election that wants to revoke its historic absorption election under the
transition rules of §§ 1.263A-2(b)(4)(v)(B) and 1.263A-3(d)(4)(v)(B). This change is applicable
only for the taxpayer’s first, second, or third taxable year ending on or after November 20, 2018.
A taxpayer that complies with the requirements of this section 12.18 will be deemed to have
obtained the consent of the Commissioner to make a revocation of its historic absorption ratio
election under § 446(e).
(3) Certain eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f)
of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, does not apply to this change for the taxpayer’s first,
second or third taxable year ending on or after November 20, 2018.
(4) Manner of making change.
(a) Cut-off basis. This change is made on a cut-off basis. Accordingly, a § 481(a) adjustment is
neither permitted nor required.
(b) Audit protection.
(i) No audit protection. A taxpayer does not receive audit protection under section 8.01 of Rev.
Proc. 2015-13 in connection with this change if the taxpayer’s revocation of a historic absorption
ratio election is during a qualifying period or extended qualifying period. See section 8.02(2) of
Rev. Proc. 2015-13.
(ii) Under examination – certain audit protection exception temporarily inapplicable. For a
taxpayer’s first, second, or third taxable year ending on or after November 20, 2018, the audit
protection rule in section 8.02(1) of Rev. Proc. 2015-13 does not apply to a taxpayer’s revocation
of its historic absorption ratio election as described in this section 12.18 if such revocation is not
during a qualifying period or extended qualifying period. However, section 8.02(1) of Rev. Proc.
2015-13 continues to apply for purposes of determining the § 481(a) adjustment period for a
positive § 481(a) adjustment provided in section 7.03(3)(b) of Rev. Proc. 2015-13.

Bulletin No. 2022–7 625 February 14, 2022
(5) Concurrent automatic changes. A taxpayer making both this change and another automatic
change under § 263A for the same year of change may file a single Form 3115 for both changes,
provided the taxpayer enters the designated automatic change numbers for both changes on the
appropriate line of that Form 3115 and complies with the ordering rules of § 1.263A-7(b)(2). See
section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 12.18 is “238.”
(7) Contact information. For further information regarding a change under this section, contact
Tom McElroy at (202) 317-7007 (not a toll-free number).
.19 Late revocation of elections under § 263A(d)(3).
(1) Description of change.
(a) Applicability. This change applies to an eligible small business taxpayer within the scope of
Rev. Proc. 2020-13, 2020-11 I.R.B. 515, that wants to make a late revocation of the election under
§ 263A(d)(3) provided in section 5.02(2)(b) of Rev. Proc. 2020-13.
(b) Inapplicability. The IRS will treat the late revocation of an election under § 263A(d)(3)
that is provided in section 5.02(2)(b) of Rev. Proc. 2020-13 as a change in method of accounting
with a § 481(a) adjustment only for the taxable years specified in section 12.19(2) of this revenue
procedure. This treatment does not apply to a taxpayer that makes a late revocation under § 263A(d)
(3) provided in section 5.02(2)(b) of Rev. Proc. 2020-13 before or after the time specified in
section 12.19(2) of this revenue procedure, and any such late revocation is not a change in method
of accounting.
(2) Time for making the change. The change under this section 12.19 must be made for the
taxpayer’s first, second, or third taxable year beginning after the taxpayer’s first taxable year
beginning in 2018 (2018 taxable year).
(3) Certain eligibility rules inapplicable. The eligibility rules in section 5.01(1)(d) and (f) of
Rev. Proc. 2015-13, 2015-5 I.R.B 419, do not apply to this change for the taxpayer’s first, second,
or third taxable year succeeding the 2018 taxable year.
(4) Concurrent automatic change. A taxpayer making this change for more than one property
used predominantly in any farming business of the taxpayer under section 5.02(2)(b) of Rev. Proc.
2020-13 for the same year of change should file a single Form 3115 for all such farming property.
The single Form 3115 must provide a single net § 481(a) adjustment for all such changes.
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to the method of accounting under this section
12.19 is “243.”
(6) Contact information. For further information regarding a change under this section, contact
Anna Gleysteen at (202) 317-7007 (not a toll-free number).

February 14, 2022 626 Bulletin No. 2022–7
SECTION 13. LOSSES, EXPENSES AND INTEREST WITH RESPECT TO TRANSACTIONS BETWEEN RELATED
TAXPAYERS (§ 267)
.01 Change to comply with § 267.
(1) Description of change. This change applies to a taxpayer that wants to change its method
or methods of accounting to comply with the requirements of § 267, and, to clarify, this change
also applies to a taxpayer that, by reason of the exception in § 1.267(a)-3(c)(4), wants to change
its method of accounting with respect to the deduction of amounts owed to a controlled foreign
corporation (as defined in § 957) (CFC) that does not have any United States shareholders (as
defined in § 951(b)) owning stock of the CFC within the meaning of § 958(a). However, this
change does not apply to a change for original issue discount (OID), including stated interest that
is OID because it is not qualified stated interest (as defined in § 1.1273-1(c)). See section 5.02 of
this revenue procedure for a change to comply with § 163(e)(3) for OID on an obligation held by
a related foreign person.
(2) Certain eligibility rules inapplicable. The eligibility rules in sections 5.01(1)(e) and (f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to this change to comply with § 267(a)(3),
including a change by reason of the exception in § 1.267(a)-3(c)(4).
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 13.01 is “26.”
(4) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number). For further information regarding
a change to comply with § 267(a)(3), contact Anisa Afshar at (202) 317-6934 (not a toll-free
number).
SECTION 14. DEFERRED COMPENSATION (§ 404)
.01 Deferred compensation.
(1) Description of change. This change applies to a taxpayer using an overall accrual method
of accounting that wants to change its method of accounting to treat bonuses or vacation pay as
follows (see § 404(a)(5) and § 1.404(b)-1T, Q&A 2):
(a) Applicability.
(i) Bonuses.
(A) Bonuses not subject to capitalization under § 263A. If by the end of the taxable year all
the events have occurred that establish the fact of the liability to pay a bonus and the amount of
the liability can be determined with reasonable accuracy (see § 1.446-1(c)(1)(ii)), and the bonus
is otherwise deductible, but the bonus is received by the employee after the 15
th
day of the 3
rd

Bulletin No. 2022–7 627 February 14, 2022
calendar month after the end of that taxable year, to treat the bonus as deductible in the taxable
year of the employer in which or with which ends the taxable year of the employee in which the
bonus is includible in the gross income of the employee; or
(B) Bonuses that are subject to capitalization under § 263A. If by the end of the taxable year all
the events have occurred that establish the fact of the liability to pay a bonus and the amount of
the liability can be determined with reasonable accuracy (see § 1.446-1(c)(1)(ii)), and the bonus
is otherwise deductible (without regard to § 263A), but the bonus is received by the employee
after the 15
th
day of the 3
rd
calendar month after the end of that taxable year, to treat the bonus
as capitalizable (within the meaning of § 1.263A-1(c)(3)) in the taxable year of the employer in
which or with which ends the taxable year of the employee in which the bonus is includible in the
gross income of the employee.
(ii) Vacation pay.
(A) Vacation pay not subject to capitalization under § 263A. If by the end of the taxable year all
the events have occurred that establish the fact of the liability to pay vacation pay and the amount of
the liability can be determined with reasonable accuracy (see § 1.446-1(c)(1)(ii)), and the vacation
pay is otherwise deductible but the vacation pay is received by the employee after the 15
th
day of
the 3
rd
calendar month after the end of that taxable year, to treat the vacation pay as deductible in the
taxable year of the employer in which the vacation pay is paid to the employee; or
(B) Vacation pay that is subject to capitalization under § 263A. If by the end of the taxable
year all the events have occurred that establish the fact of the liability to pay vacation pay and
the amount of the liability can be determined with reasonable accuracy (see § 1.446-1(c)(1)(ii)),
and the vacation pay is otherwise deductible (without regard to § 263A), but the vacation pay is
received by the employee after the 15
th
day of the 3
rd
calendar month after the end of that taxable
year, to treat the vacation pay as capitalizable (within the meaning of § 1.263A-1(c)(3)) in the
taxable year of the employer in which the vacation pay is paid to the employee.
(b) Inapplicability. This change does not apply to a taxpayer that is required under § 263A
and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to
change its method of accounting under this section 14.01 if the taxpayer is not capitalizing these
costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction
with a change to a UNICAP method under section 12.01, 12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 14.01 is “28.”
(3) Contact information. For further information regarding a change under this section, contact
Thomas Scholz at (202) 317-5600 (not a toll-free number).
.02 Grace period contributions.
(1) Description of change. This change applies to a taxpayer that wants to cease deducting
contributions made during the § 404(a)(6) grace period to a qualified cash or deferred arrangement
within the meaning of § 401(k) or to a defined contribution plan as matching contributions with
the meaning of § 401(m) when the contributions are attributable to compensation earned by plan
participants after the end of a taxable year as required by Rev. Rul. 2002-46, 2002-2 C.B. 117, as
modified by Rev. Rul. 2002-73, 2002-2 C.B. 805.

February 14, 2022 628 Bulletin No. 2022–7
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 14.02 is “29.”
(3) Contact information. For further information regarding a change under this section, contact
John Ricotta at 202-317-4102 or Joyce Kahn at 202-317-4148 (not toll-free numbers).
SECTION 15. METHODS OF ACCOUNTING (§ 446)
.01 Change in overall method from the cash method to an accrual method.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to change its overall method of
accounting from the cash receipts and disbursements method (cash method), as defined in section
15.01(2)(a) of this revenue procedure, to an accrual method, as defined in section 15.01(2)(b)
of this revenue procedure. A change under this section 15.01 applies to (1) a taxpayer required
to make this change by § 448, any other section of the Code or regulations, or in other guidance
published in the Internal Revenue Bulletin (IRB), and (2) a taxpayer that wants to make this
change but is not required to do so by § 448, any other section of the Code or regulations, or in
other guidance published in the IRB. A taxpayer changing to an overall accrual method because it
is prohibited from using the overall cash method under § 448 may use this section 15.01 regardless
of whether the year of change is the first taxable year that the taxpayer is required by § 448 to
change from the cash method, as defined in § 1.448-1(g)(1) (“first § 448 year”); or a mandatory
§ 448 year, as defined in proposed § 1.448-2(g)(1) or § 1.448-2(g)(1), as applicable; or a taxable
year other than the taxpayer’s first § 448 year or mandatory § 448 year, as applicable. Similarly,
a taxpayer changing to an overall accrual method because it is prohibited from using the overall
cash method under § 447 may use this section 15.01 regardless of whether the year of change is
the first taxable year that the taxpayer is required by § 447 to change from the cash method or a
subsequent taxable year in which the taxpayer is newly subject to § 447 after previously making a
change in method of accounting that complies with § 447 (“mandatory § 447 year”), or a taxable
year other than a mandatory § 447 year, as applicable.
Additionally, a taxpayer qualifies to change its overall method of accounting from the cash
method to an accrual method using this section 15.01 even if the taxpayer is also making one or
more of the following changes in method of accounting for the same year of change:
(i) adopting the recurring item exception, as defined in section 15.01(2)(c) of this revenue
procedure, for one or more types of recurring items. See § 1.461-5(d);
(ii) adopting or changing to a permissible inventory method of accounting and is either adopting
this inventory method or qualifies to change to this inventory method using the automatic change
procedures of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, and a section of this revenue procedure,
or the change can be made automatically under any section of the Code or regulations, or other
guidance published in the IRB. See Rev. Rul. 90-38, 1990-1 C.B. 57, regarding when a taxpayer
may adopt a method of accounting;
(iii) adopting or changing to a permissible § 263A method of accounting and is either adopting
this § 263A method or qualifies to change to this § 263A method using the automatic change

Bulletin No. 2022–7 629 February 14, 2022
procedures of Rev. Proc. 2015-13 and a section of this revenue procedure, or the change can be
made automatically under any section of the Code or regulations, or other guidance published in
the IRB. See Rev. Rul. 90-38 regarding when a taxpayer may adopt a method of accounting; or
(iv) adopting or changing to any other special method of accounting (as defined in section
15.01(2)(d) of this revenue procedure) and is either adopting this special method or qualifies to
change to this special method using the automatic change procedures of Rev. Proc. 2015-13 and
a section of this revenue procedure, or the change can be made automatically under any section
of the Code or regulations, or other guidance published in the IRB. See Rev. Rul. 90-38 regarding
when a taxpayer may adopt a method of accounting.
Also, a taxpayer qualifies to use this section 15.01 when that taxpayer, in the taxable year
immediately preceding the year of change, has used a permissible inventory method for that year,
and, if that taxpayer was subject to § 263A for that year, has also used a permissible § 263A
method for that year, and the method(s) continue to be used for the year of change.
Lastly, for a taxable year beginning after December 31, 2017, or December 31, 2018 in the case
of specified credit card fees, as defined in § 1.451-3(j)(2), and before January 1, 2021, a taxpayer
with an applicable financial statement (AFS) that is changing its overall method of accounting
from the cash method to an accrual method qualifies to use this section 15.01 to comply with
§ 451(b)(1), and, if applicable, § 451(b)(4), or the proposed regulations under § 1.451-3 (REG-
104870-18; 84 FR 47191) (proposed § 1.451-3). For a taxable year beginning after December 31,
2017, or December 31, 2018 in the case of specified credit card fees, a taxpayer with an AFS that
is changing its overall method of accounting from the cash method to an accrual method qualifies
to use this section 15.01 to comply with § 1.451-3. For purposes of this section 15.01, the term
“AFS” is defined under: § 451(b)(3) for a taxpayer making a change to comply with § 451(b);
proposed § 1.451-3(c)(1) for a taxpayer making a change to comply with proposed § 1.451-3; or
§ 1.451-3(b)(5) for a taxpayer making a change to comply with § 1.451-3.
(b) Inapplicability. This change does not apply to:
(i) a taxpayer that is making a change from a hybrid method of accounting as defined in section
15.01(2)(e) of this revenue procedure;
(ii) a taxpayer that is changing its method of accounting for one or more items of income or
expense, but not its overall method of accounting. See section 15.09 of this revenue procedure
for a description of accounting method changes from the cash method to an accrual method for
specific items that are to be made using the automatic change procedures of Rev. Proc. 2015-13
and that section;
(iii) a taxpayer that is required by the Code, regulations, or other guidance published in the IRB
to use a special method such as, for example, an inventory method, a § 263A method, or a long-
term contract method, in the year of change and fails to adopt or change to that method;
(iv) a taxpayer that has included in its § 481(a) adjustment any amount of deferred compensation
that is described under § 457A(d)(3) that is attributable to services performed before January 1,
2009;
(v) a taxpayer that is engaged in two or more trades or businesses, unless that taxpayer makes
this change for each trade or business so that the identical accrual method is used for each trade or
business beginning with the year of change;

February 14, 2022 630 Bulletin No. 2022–7
(vi) a cooperative organization described in §§ 501(c)(12), 521, or 1381;
(vii) an individual taxpayer, except for activities conducted as a sole proprietorship;
(viii) a taxpayer with an AFS that wants to make a change in method of accounting for
allocating transaction price between item(s) of gross income that are subject to § 451 and item(s)
of gross income that are subject to a special method of accounting, as defined in § 451(b)(2),
proposed § 1.451-3(c)(5) or § 1.451-3(a)(14), as applicable, including a change to comply with
the transaction price allocation rules in § 1.451-3(d)(5);
(ix) a taxpayer with an AFS that wants to change to use the AFS cost offset method, as defined
in § 1.451-3(c), if the taxpayer receives advance payments from the sale of inventory and does
not also make a concurrent change to apply the advance payment cost offset method, as defined
in § 1.451-8(e), for the same year of change by using section 16.10 of this revenue procedure, or
a taxpayer with an AFS that wants to change to use the advance payment cost offset method if the
taxpayer is required to include gross income from the sale of inventory under § 1.451-3 and does
not also make a change to apply the AFS cost offset method;
(x) a taxpayer with an AFS that wants to make a change in method of accounting for specified
fees as defined in proposed § 1.451-3(i)(2) or § 1.451-3(j)(2), as applicable, other than specified
credit card fees;
(xi) a taxpayer that wants to make a change in method of accounting for payments within the
scope of the specified good exception, as defined in § 1.451-8(a)(1)(ii), if the proposed method of
accounting is to include such payments in gross income under § 1.451-3 in one or more taxable
years following the taxable year of receipt; or
(xii) a taxpayer with an AFS that makes a change to apply § 1.451-3 for a taxable year that
begins before January 1, 2021, and fails to comply with the requirements in § 1.451-3(m)(3).
(2) Definitions.
(a) Cash method of accounting is the method identified by § 446(c)(1) and §§ 1.446-1(c)(1)(i),
1.451-1(a), and 1.461-1(a)(1). In addition, solely for purposes of this section 15.01, a method of
accounting in which a taxpayer uses an accrual method for purchases and sales of inventories, and
uses the cash method for computing all other items of income and expense is deemed to be a cash
method of accounting and not a hybrid method of accounting.
(b) Accrual method of accounting is a method identified by § 446(c)(2) and §§ 1.446-1(c)(1)(ii),
1.451-1(a), 1.451-3, and 1.461-1(a)(2). For a taxable year beginning after December 31, 2017, for
which the taxpayer has an AFS, the all events test under § 451(b)(1)(C) and § 1.451-1(a) for any
item of gross income, or portion thereof, is met no later than when that item, or portion thereof, is
taken into account as AFS revenue. See § 451(b)(1) and § 1.451-3(b).
(c) Recurring item exception is the method described in § 461(h)(3) and § 1.461-5.
(d) Special method of accounting within the meaning of this section 15.01 is a method of
accounting, other than the cash method, expressly permitted or required by the Code, regulations,
or in other guidance published in the IRB, that deviates from the tax accrual accounting rules
of §§ 446, 451, 461, and the regulations thereunder. For purposes of this section 15.01, a

Bulletin No. 2022–7 631 February 14, 2022
deferral method under § 451(c) and the regulations thereunder is deemed to be a special method
of accounting. Examples of special methods of accounting include the installment method of
accounting under § 453, the mark-to-market method under § 475, and a long-term contract method
under § 460. In contrast, application of the all-events test under a specific set of facts is not a
special method of accounting. See, for example, Rev. Rul. 69-314, 1969-1 C.B. 139 concerning
the treatment of retainages.
(e) Hybrid method of accounting is a combination of the cash and accrual methods under which
one or more items of income or expense are reported on the cash method and one or more items of
income or expense are reported on an accrual method. For purposes of this section 15.01, a hybrid
method of accounting does not include a method of accounting in which a taxpayer uses an accrual
method for purchases and sales of inventories and uses the cash method for computing all other
items of income and expense.
(3) Manner of making change.
(a) Section 481(a) adjustment.
(i) In general. A taxpayer changing its method of accounting under this section 15.01 must
compute a § 481(a) adjustment. This adjustment must reflect the account receivables, account
payables, inventory, and any other item determined to be necessary in order to prevent items
from being duplicated or omitted. However, the adjustment does not include any item of income
accrued but not received that was worthless or partially worthless, within the meaning of § 166(a),
on the last day of the year immediately prior to the year of change.
(ii) Temporary rule for certain S corporation revocations. The rules in this section 15.01(3)
(a)(ii) apply to an eligible terminated S corporation, as defined in § 481(d)(2), that changes to an
overall accrual method of accounting in the C corporation’s first taxable year after its revocation
of its election under § 1362(a), and such revocation occurs during the two-year period beginning
on December 22, 2017.
(A) Required spread period. Pursuant to § 481(d)(1), an eligible terminated S corporation
required to change to an overall accrual method as a result of a revocation of its S corporation
election that changes its method of accounting under this section 15.01 in the C corporation’s first
taxable year after such revocation, takes into account the resulting positive or negative adjustment
required by § 481(a)(2) ratably during the six-year period beginning with the year of change.
(B) Optional six-year spread period. An eligible terminated S corporation that is permitted to
continue to use the overall cash method after the revocation of its S corporation election, and that
changes to an overall accrual method under this section 15.01 in the C corporation’s first taxable
year after such revocation, may take into account the resulting positive or negative adjustment
required by § 481(a)(2) ratably during the six-year period beginning with the year of change
instead of using the adjustment periods provided in section 7.03(1) of Rev. Proc. 2015-13. An
eligible terminated S corporation that wants to use this six-year spread period must indicate in the
statement required by Line 26 of Form 3115 (Rev. December 2018) that it is making the change
in method of accounting with the spread period permitted under this section 15.01(3)(a)(ii)(B) on
its timely filed Form 3115.
(iii) Section 481(a) adjustment period for changes relating to specified credit card fees. In the
case of income from a specified credit card fee, the § 481(a) adjustment period for any qualified
change in method of accounting is six taxable years (year of change and next five taxable years).
For purposes of this section 15.01(3)(a)(iii), a qualified change in method of accounting is a

February 14, 2022 632 Bulletin No. 2022–7
change in method of accounting for income from a specified credit card fee to a method that is
required by § 451(b), as added by section 13221 of Public Law 115-97, 131 Stat. 2054 (Dec. 22,
2017), commonly referred to the Tax Cuts and Jobs Act (TCJA), for such income, but only for
the taxpayer’s first taxable year beginning after December 31, 2018. Accordingly, a taxpayer that
makes a qualified change in method of accounting as part of its overall method change under
section 15.01 of this revenue procedure is required to use an adjustment period of six taxable
years for the portion of the overall § 481(a) adjustment that is attributable to the qualified change
in method of accounting. The § 481(a) adjustment period for the remainder of the overall § 481(a)
adjustment required by section 15.01(3)(a)(i) of this revenue procedure is determined without
regard to the qualified change in method of accounting.
(b) Change to comply with § 1.451-3. A taxpayer that uses section 15.01(1)(a) of this revenue
procedure to comply with § 1.451-3 must attach a statement to its Form 3115, Application for
Change in Accounting Method (Rev. December 2018) that provides a description of the proposed
method(s) under § 1.451-3 to which it is changing. For example, a taxpayer that chooses to apply
the alternative AFS revenue method in § 1.451-3(b)(2)(ii) must indicate in the statement attached
to its Form 3115 that it is choosing to comply with the AFS income inclusion rule in § 1.451-3(b)
(1) by applying the alternative AFS revenue method described in § 1.451-3(b)(2)(ii).
(c) Adoption of recurring item exception. The taxpayer must attach to its Form 3115 a statement
describing the types of liabilities for which the recurring item exception will be used.
(d) Concurrent automatic change to a special method.
(i) Generally only one Form 3115 required. Except as provided in section 15.01(3)(e)(ii) of this
revenue procedure, a taxpayer that is changing from the overall cash method to an overall accrual
method under this section 15.01 and changing to one or more special methods, as permitted under
section 15.01(1)(a)(ii), (iii), or (iv) of this revenue procedure, must timely file a single Form
3115 for all changes and must enter the designated automatic accounting method change numbers
for all changes on the appropriate line of Form 3115. For example, a taxpayer making both a
change from the overall cash method to an overall accrual method under this section 15.01 and a
change to the deferral method for advance payments under section 16.06 or 16.10 of this revenue
procedure must timely file a single Form 3115 for both changes and enter the designated automatic
accounting method change numbers for both changes on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(ii) Two Forms 3115 required when a concurrent change is being implemented under section
32.01 of this revenue procedure for short-term obligations. When a taxpayer subject to § 1281
is changing its method of accounting for interest income on short-term obligations as part of
the change to an overall accrual method under this section 15.01, that taxpayer must request the
change for the interest income under section 32.01 of this revenue procedure. The taxpayer must
timely file individual Forms 3115 for each change requested. This section 15.01 will govern the
change to an overall accrual method.
(e) Concurrent change in accounting method not permitted to be implemented using the
automatic change procedures of Rev. Proc. 2015-13 and a section of this revenue procedure, any
section of the Code or regulations, or other guidance published in the IRB. A taxpayer that does
not qualify to change from the overall cash method to an overall accrual method under this section
15.01 because that taxpayer is concurrently changing to a method of accounting that may not be
implemented using the automatic change procedures of Rev. Proc. 2015-13 and a section of this
revenue procedure, any section of the Code or regulations, or other guidance published in the
IRB, must timely request both changes using the non-automatic change procedures in Rev. Proc.

Bulletin No. 2022–7 633 February 14, 2022
2015-13. See Rev. Proc. 2022-1, 2022-1 I.R.B. 1 (or successor), for more information on whether
one Form 3115 is required to request the changes, and for information on the appropriate user fee.
(4) Change made in the taxpayer’s first § 448 year or a mandatory § 448 year, as applicable.
(a) First § 448 year. If the year of change is the first § 448 year for a taxpayer that qualifies to
make the change from the cash method under the provisions of § 1.448-1(g) and (h) as well as
this section 15.01, that taxpayer may choose to comply with the requirements and provisions of
§§ 1.448-1(g) and (h) in addition to the requirements and provisions of this section 15.01. For
example, if the taxpayer is a hospital, defined in § 1.448-1(g)(2)(ii)(B), and the taxpayer chooses
to make its change from the cash method for the first § 448 year, as defined in § 1.448-1(g), using
this section 15.01, the applicable § 481(a) adjustment period is provided by § 1.448-1(g)(2)(ii). If
a taxpayer chooses not to implement its change from the cash method using this section 15.01, the
taxpayer must make the change under the provisions of §§ 1.448-1(g) and (h).
(b) Mandatory § 448 year. For a taxpayer applying proposed § 1.448-2 or § 1.448-2, as
applicable, if the year of change is a mandatory § 448 year, as defined in proposed § 1.448-
2(g)(1) or § 1.448-2(g)(1), as applicable, such taxpayer makes the change from the cash method
to an accrual method under the provisions of this section 15.01, and must comply with all the
requirements and provisions of proposed § 1.448-2(g) or § 1.448-2(g), as applicable, in addition
to the requirements and provisions of this section 15.01.
(5) Eligibility rules inapplicable.
(a) Prior change eligibility rule inapplicable. Any prior change to the overall cash method that
the taxpayer implemented using the provisions of Rev. Proc. 2001-10, as modified by Rev. Proc.
2011-14, or Rev. Proc. 2002-28, as modified by Rev. Proc. 2011-14, is disregarded for purposes
of section 5.01(1)(e) of Rev. Proc. 2015-13. Additionally, for a taxpayer making a change from
the cash method in the first § 448 year, a mandatory § 448 year, or a mandatory § 447 year, as
applicable, any prior change to the overall cash method is disregarded for purposes of section
5.01(1)(e) of Rev. Proc. 2015-13.
(b) Eligibility rule temporarily inapplicable for changes to comply with § 451(b). For a taxpayer
with an AFS that changes to an overall accrual method under this section 15.01 that complies
with § 451(b)(1), and, if applicable, § 451(b)(4), or proposed § 1.451-3, the eligibility rule in
section 5.01(1)(e) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, does not apply to such change for the
taxpayer’s first, second or third taxable year beginning after December 31, 2017, provided such
taxable year begins before January 1, 2021. In addition, for a taxpayer with an AFS that changes
to an overall accrual method under this section 15.01 that complies with § 1.451-3 for a taxable
year beginning before January 1, 2021, the eligibility rule in section 5.01(1)(e) of Rev. Proc. 2015-
13 does not apply to such change for such taxable year. For a taxpayer with an AFS that does not
apply § 1.451-3 for a taxable year beginning before January 1, 2021, and changes to an overall
accrual method under this section 15.01 that complies with § 1.451-3 for the first taxable year that
begins on or after January 1, 2021, the eligibility rule in section 5.01(1)(e) of Rev. Proc. 2015-13
does not apply to such change for such taxable year.
(6) No ruling on method used. The consent granted under section 9 of Rev. Proc. 2015-13
for a change made under this section 15.01 is not a determination by the Commissioner that
the new method of accounting is a permissible method of accounting under § 451 and does not
create a presumption that the allocation method used under § 451(b)(4) is a permissible method
of accounting. The director may ascertain whether the new method of accounting is a permissible
method of accounting under § 451 and whether the allocation method is permissible under § 451(b)

February 14, 2022 634 Bulletin No. 2022–7
(4). This section 15.01(6) does not apply to a taxpayer with an AFS that is making a change to a
method of accounting permissible under proposed § 1.451-3 or § 1.451-3.
(7) Designated automatic accounting method change number.
(a) Change made in the first § 448 year. The designated automatic accounting method change
number for a change from the cash method to an accrual method in the first § 448 year is “123.”
Entering designated automatic accounting method change number “123” on the appropriate line
on the Form 3115 fulfills the requirement of § 1.448-1(h)(2)(i) to type or print “Automatic Change
to Accrual Method – Section 448” at the top of page 1 of the Form 3115.
(b) Change made in the mandatory § 448 year. The designated automatic accounting method
change number for a change from the cash method to an accrual method in the mandatory § 448
year is “257.”
(c) Change made for a taxpayer subject to § 447. The designated automatic accounting method
change number for a change from the cash method to an accrual method for a taxpayer subject to
§ 447 under this section 15.01 is “258.”
(d) All other changes from the cash method to an overall accrual method. The designated
automatic accounting method change number for all other changes from the cash method to an
accrual method under this section 15.01 is “122.”
(8) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at 202-317-7007 (not a toll-free number).
.02 Multi-year insurance policies for multi-year service warranty contracts.
(1) Description of change.
(a) Applicability. This change applies to a manufacturer, wholesaler, or retailer of motor
vehicles or other durable consumer goods that wants to change its method of accounting for
insurance costs paid or incurred to insure its risks under multi-year service warranty contracts to
the method described in section 15.02(2) of this revenue procedure. Multi-year service warranty
contracts to which this change applies include only those separately priced contracts sold by a
manufacturer, wholesaler, or retailer also selling the motor vehicles or other durable consumer
goods underlying the contracts (to the ultimate customer or to an intermediary). The classification
of goods as “durable consumer goods” for purposes of this change depends on the common usage
of the goods, rather than the purchaser’s actual intended use of the goods.
(b) Inapplicability. This change does not apply to a taxpayer that covers its risks under its multi-
year service warranty contracts through arrangements not constituting insurance.
(2) Description of method. If a taxpayer purchases a multi-year service warranty insurance
policy (in connection with its sale of multi-year service warranty contracts to customers) by
paying a lump-sum premium in advance, the taxpayer must capitalize the amount paid or incurred
and may only obtain deductions for that amount by prorating (or amortizing) it over the life of the
insurance policy (whether the cash method or an accrual method of accounting is used to account
for service warranty transactions).

Bulletin No. 2022–7 635 February 14, 2022
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.02 is “31.”
(4) Contact information. For further information regarding a change under this section, contact
David Sill at (202) 317-7011 (not a toll-free number).
.03 Nonaccrual-experience method.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to make one or more of the
changes in method of accounting to, from, or within a nonaccrual-experience (NAE) method of
accounting that are described in sections 3.01(1) through (5) of Rev. Proc. 2006-56, 2006-2 C.B.
1169, as modified by Rev. Proc. 2011-14, 2011-4 I.R.B. 330, and as modified and amplified by
Rev. Proc. 2011-46, 2011-42 I.R.B. 518.
(b) Inapplicability. This change does not apply to a taxpayer within the scope of sections 3.01(6)
through 3.01(8) of Rev. Proc. 2006-56, as modified and amplified by Rev. Proc. 2011-46.
(2) Manner of making the change.
(a) Changes made with a § 481(a) adjustment. A change in method of accounting described in
section 3.01(1), (2), (3), or (5) of Rev. Proc. 2006-56, as modified and amplified by Rev. Proc.
2011-46, is made with a § 481(a) adjustment.
(b) Changes made on a cut-off basis.
(i) In general. A change described in section 3.01(4) of Rev. Proc. 2006-56 is made on a
cut-off basis and the new applicable period applies only to the taxpayer’s NAE calculation of
its uncollectible amount for the year of change and for subsequent years. Moreover, a change
described in sections 5.02 and 5.03 of Rev. Proc. 2011-46 is made on a cut-off basis and the
proposed method applies only to accounts receivable earned on or after the first day of the year
of change. Accordingly, a § 481(a) adjustment is neither permitted nor required for a change
described in section 3.01(4) of Rev. Proc. 2006-56 or in section 5.02 or 5.03 of Rev. Proc. 2011-46.
(ii) Special filing rules for changes made under section 5.02 and 5.03 of Rev. Proc. 2011-46, as
modified by this revenue procedure.
(A) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to a change in method of accounting made under
section 5.02 or 5.03 of Rev. Proc. 2011-46, as modified by this revenue procedure.
(B) Filing rules. In accordance with § 1.446-1(e)(3)(ii), the requirement of § 1.446-1(e)(3)(i)
to file a Form 3115 is waived and a statement in lieu of a Form 3115 is authorized for this change.
Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13, the statement
in lieu of a Form 3115 that is permitted under section 5.02 or 5.03 of Rev. Proc. 2011-46 and this
section 15.03 is considered a Form 3115 for purposes of the automatic consent procedures of Rev.
Proc. 2015-13. However, the requirement to file the duplicate copy, under section 6.03(1)(a) of

February 14, 2022 636 Bulletin No. 2022–7
Rev. Proc. 2015-13, is waived. See section 5.02 or 5.03 of Rev. Proc. 2011-46, as applicable, for
what information is required to be provided on the statement.
(3) Concurrent change to overall accrual method and a NAE method of accounting. A taxpayer
making both an automatic change to, from, or within a NAE method of accounting under this
section 15.03 and an automatic change to an overall accrual method under section 15.01 of this
revenue procedure (whether or not it is the taxpayer’s first § 448 year or mandatory § 448 year),
must file a single Form 3115 for both changes. The taxpayer must complete all applicable sections
of Form 3115, including sections that apply to the change to an overall accrual method and to
the change to a NAE method, and must enter the automatic accounting method change numbers
for both changes on Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on
making concurrent changes.
A taxpayer making both an automatic change to, from, or within a NAE method of accounting
under this section 15.03 and a required change to an overall accrual method under § 448 for the
taxpayer’s first § 448 year, and is either not eligible to make the change to an overall accrual
method under section 15.01 of this revenue procedure or chooses to make the change to an overall
accrual method using the procedures of § 1.448-1(h)(2) for the taxpayer’ first § 448 year, must
make both changes (change to, from, or within a NAE method and change to an overall accrual
method) on a single Form 3115. The taxpayer must follow the automatic change procedures of
Rev. Proc. 2015-13 and this section 15.03 for the NAE change, and the procedures of § 1.448-
1(h)(2) for the change to an overall accrual method for the taxpayer’s first § 448 year except that
entering the designated automatic accounting method change number “34” on the Form 3115
fulfills the requirement of § 1.448-1(h)(2) to type or print “Automatic Change to Accrual – Section
448” at the top of page 1 of the Form 3115. The taxpayer must complete all applicable sections
of Form 3115, including sections that apply to the change to an overall accrual method and to the
change to the NAE method and must enter the designated automatic accounting method changes
numbers for both changes on Form 3115.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to, from, or within a NAE method of accounting
under this section 15.03 is “35.”
(5) Contact information. For further information regarding a change under this section, contact
Livia Piccolo at (202) 317-7007 (not a toll-free number).
.04 Interest accruals on short-term consumer loans—Rule of 78’s method.
(1) Description of change. This change applies to a taxpayer that wants to change its method of
accounting from the Rule of 78’s method to the constant yield method for stated interest (including
stated interest that is original issue discount) on short-term consumer loans described in Rev. Proc.
83-40, 1983-1 C.B. 774, which was obsoleted by Rev. Proc. 97-37, 1997-2 C.B. 455.
(2) Background.
(a) A short-term consumer loan is described in Rev. Proc. 83-40, provided:
(i) the loan is a self-amortizing loan that requires level payments, at regular intervals at least
annually, over a period not in excess of five years (with no balloon payment at the end of the loan
term); and

Bulletin No. 2022–7 637 February 14, 2022
(ii) the loan agreement between the borrower and the lender provides that interest is earned, or
upon the prepayment of the loan interest is treated as earned, in accordance with the Rule of 78’s
method.
(b) In general, the Rule of 78’s method allocates interest over the term of a loan based, in part,
on the sum of the periods’ digits for the term of the loan. See Rev. Rul. 83-84, 1983-1 C.B. 97, for
a description of the Rule of 78’s method.
(c) In general, the constant yield method allocates interest and original issue discount over the
term of a loan based on a constant yield. See § 1.1272-1(b) for a description of the constant yield
method. The Rule of 78’s method generally front-loads interest as compared to the constant yield
method.
(d) Rev. Proc. 83-40 was obsoleted because, under §§ 1.446-2 and 1.1272-1 (which were
effective for debt instruments issued on or after April 4, 1994), taxpayers generally must account
for stated interest and original issue discount on a debt instrument (loan) by using a constant yield
method. As a result, the Rule of 78’s method is no longer an acceptable method of accounting for
federal income tax purposes.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.04 is “71.”
(4) Contact information. For further information regarding a change under this section, contact
William E. Blanchard at (202) 317-3900 (not a toll-free number).
.05 Film producer’s treatment of certain creative property costs.
(1) Description of change. This change applies to a taxpayer that wants to change the method
of accounting for creative property costs to the safe harbor method provided by section 5 of Rev.
Proc. 2004-36, 2004-1 C.B. 1063. This safe harbor method of accounting applies to a taxpayer
engaged in the trade or business of film production and to creative property costs (as defined in
section 2.01 of Rev. Proc. 2004-36) properly written off by the taxpayer under The American
Institute of Certified Public Accountants Statement of Position (SOP) 00-2, “Accounting for
Producers or Distributors of Film.”
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.05 is “85.”
(3) Contact information. For further information regarding a change under this section, contact
Bernard Harvey at (202) 317-7005 (not a toll-free number).
.06 Deduction of incentive payments to health care providers.
(1) Description of change. This change applies to a taxpayer that wants to change to the method
of accounting for provider incentive payments under which those payments are included in
discounted unpaid losses without regard to § 404, as provided in Rev. Proc. 2004-41, 2004-2
C.B. 90. A payment by a taxpayer to a health care provider is a “provider incentive payment,”
and thus eligible for this treatment, if (a) the taxpayer is taxable as an insurance company under
Part II of subchapter L; (b) the payment is made pursuant to a written agreement the purpose of
which is to encourage participating health care providers to provide quality health care to the

February 14, 2022 638 Bulletin No. 2022–7
taxpayer’s subscribers in a cost-efficient manner; (c) the taxpayer’s liability for the payment is
dependent on the attainment of one or more preestablished goals during a performance period
consisting of not more than 12 consecutive months; (d) the terms of the arrangement pursuant to
which the payment is made are established unilaterally by the taxpayer, and are not negotiated
with the health care providers; (e) the taxpayer normally makes payments to health care providers
under the arrangement within 12 months after the close of the performance period; (f) deferring
the receipt of income by the health care provider or otherwise providing a tax benefit to the
provider is not a principal purpose of the arrangement; (g) the taxpayer records a liability for the
payment on its annual statement filed for state regulatory purposes, and includes this liability in
the determination of discounted unpaid losses under § 846; and (h) the health care provider is not
an employee, and is not providing health care as an agent, of the taxpayer. See Rev. Proc. 2004-41.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.06 is “90.”
(3) Contact information. For further information regarding a change under this section, contact
Rebecca L. Baxter at (202) 317-6995 (not a toll-free number).
.07 Change by bank for uncollected interest.
(1) Description of change. This change applies to a “bank” as defined in § 1.166-2(d)(4)(i)
that: (a) uses an overall accrual method of accounting to determine its taxable income for federal
income tax purposes; (b) is subject to supervision by Federal authorities, or by state authorities
maintaining substantially equivalent standards; (c) has uncollected interest other than interest
described in § 1.446-2(a)(2); and (d) has six or more years of collection experience. Under the
safe harbor method of accounting provided by section 4 of Rev. Proc. 2007-33, 2007-1 C.B.
1289, a bank determines for each taxable year the amount of uncollected interest (other than
interest described in § 1.446-2(a)(2)) for which it is considered to have a reasonable expectancy
of payment by multiplying: (a) the total accrued (determined under § 1.446-2) but uncollected
interest for the year, by (b) the bank’s “recovery percentage” (determined under section 4.02
of Rev. Proc. 2007-33) for that year. Solely for purposes of this safe harbor, the bank is not
considered to have a reasonable expectancy of payment for the excess, if any, of the accrued but
uncollected interest over the expected collection amount determined using the bank’s recovery
percentage. The bank includes in gross income the portion of accrued but uncollected interest for
which it has a reasonable expectancy of payment. The bank excludes from income the portion of
accrued but uncollected interest for which it has no reasonable expectancy of payment.
(2) Recovery percentage. Subject to the limitations and conditions in Rev. Proc. 2007-33,
sections 4.02(2), (3), and (4), a bank determines its recovery percentage for each taxable year
by dividing: (a) total payments that the bank received on loans (including principal and interest)
during the 5 taxable years immediately preceding the taxable year, by (b) total amounts that were
due and payable to the bank on loans during the same 5 taxable years. The recovery percentage
cannot exceed 100 percent and must be calculated to at least four decimal places. The data used
in the recovery percentage must take into account acquisitions and dispositions. If a bank acquires
the major portion of a trade or business of another person (predecessor) or the major portion of
a separate unit of a trade or business of a predecessor, then in applying Rev. Proc. 2007-33 for
any taxable year ending on or after the acquisition, the data from preceding taxable years of the
predecessor attributable to the portion of the trade or business acquired, if available, must be used
in determining the bank’s recovery percentage. If a bank disposes of a major portion of a trade or
business or the major portion of a separate unit of a trade or business, and the bank furnished the
acquiring person the information necessary for the computations required by Rev. Proc. 2007-33,
then in applying the revenue procedure for any taxable year ending on or after the disposition, the
data from preceding taxable years attributable to the disposed portion of the trade or business may
not be used in determining the bank’s recovery percentage.

Bulletin No. 2022–7 639 February 14, 2022
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.07 is “108.”
(4) Contact information. For further information regarding a change under this section, contact
K. Scott Brown at (202) 317-6945 (not a toll-free number).
.08 Change from the cash method to an accrual method for specific items.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that uses an overall accrual method of
accounting but has identified a specific item or items of income or expense (or both) that are being
accounted for on the cash method of accounting. This change does not apply to a taxpayer that is
changing its overall method of accounting from cash to accrual. Such a taxpayer may be eligible
to change to an overall accrual method using section 15.01 of this revenue procedure.
(b) Inapplicability. This change does not apply to:
(i) a taxpayer that will not have all items of income and expense on an accrual method subsequent
to the change under this section 15.08;
(ii) a cooperative organization described in § 501(c)(12), 521, or 1381;
(iii) an individual taxpayer, except for activities conducted as a sole proprietorship;
(iv) a taxpayer engaged in two or more trades or businesses, unless the taxpayer makes this
change so that the identical accrual method is used for each such trade or business beginning with
the year of change;
(v) a change in method of accounting for any payment liability described in § 1.461-4(g);
(vi) a change in the method of accounting for interest that is not taken into account under
§ 1.446-2;
(vii) a taxpayer that has included in its § 481(a) adjustment any amount of deferred compensation
that is described under § 457A(d)(3) that is attributable to services performed before January 1,
2009; and
(viii) any change that is specifically provided in another section of this revenue procedure.
(2) Definitions.
(a) “Cash method of accounting” is the method identified by § 446(c)(1) and §§ 1.446-1(c)(1)
(i), 1.451-1(a), and 1.461-1(a)(1).

February 14, 2022 640 Bulletin No. 2022–7
(b) “Accrual method of accounting” is the method identified by § 446(c)(2) and §§ 1.446-1(c)
(1)(ii), 1.451-1(a), and 1.461-1(a)(2).
(3) Additional requirements. To change a method of accounting under this section 15.08, a
taxpayer must attach to its completed Form 3115 a full and complete description of each specific
item for which the change in method of accounting is being made and how the accrual method of
accounting applies to each item, and list the § 481(a) adjustment, if any, for each item associated
with the change. The change is fully and completely described if each income and expense
item is described with specificity and how the all-events test (and the economic performance
requirement, if applicable) applies to each item is described under the facts and circumstances of
the taxpayer’s trade or business. For example, a taxpayer that merely states that it is changing its
accounting method for advertising expenses from the cash method to an accrual method, recites
the regulations under § 1.461-1(a)(2), and enters the associated § 481(a) adjustment has failed to
describe fully and completely the specific item for which the change in method of accounting is
being made. In contrast, a taxpayer that states that it is changing its method of accounting for print
advertising expenses from the cash method of accounting to an accrual method of accounting,
describes all of the relevant facts related to the print advertising expenses, and explains how
the all-events test applies to those facts and when economic performance occurs has fully and
completely described the item and the change. See section 6.03 of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, for additional filing requirements.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.08 is “124.”
(5) Contact information. For further information regarding a change under this section, contact
Douglas Kim at (202) 317-7003 (not a toll-free number).
.09 Multi-year service warranty contracts.
(1) Description of change.
(a) Applicability. This change applies to a manufacturer, wholesaler, or retailer of motor
vehicles or other durable consumer goods that uses an overall accrual method of accounting, and
wants to change to the service warranty income method described in section 5 of Rev. Proc. 97-
38, 1997-2 C.B. 479. Under the service warranty income method, a qualifying taxpayer may, in
certain specified and limited circumstances, include a portion of an advance payment related to
the sale of a multi-year service warranty contract in gross income generally over the life of the
service warranty obligation.
(b) Inapplicability. This change does not apply to a taxpayer not within the scope of Rev. Proc.
97-38.
(2) Manner of making change and designated automatic accounting method change number.
(a) This change is made on a cut-off basis and applies only to qualified advance payments for
multi-year service warranty contracts on or after the beginning of the year of change. Accordingly,
a § 481(a) adjustment is neither permitted nor required.
(b) In accordance with § 1.446-1(e)(3)(ii), the requirement of § 1.446-1(e)(3)(i) to file a standard
Form 3115 is waived and pursuant to section 6.02(2) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, a

Bulletin No. 2022–7 641 February 14, 2022
short Form 3115 is authorized for this change. The short Form 3115 (Rev. December 2018) must
include the following information:
(i) the identification section of page 1 (above Part I);
(ii) the signature section at the bottom of page 1;
(iii) Part I, line 1(a); and
(iv) the information required under section 6.03 of Rev. Proc. 97-38, except that the statement
under section 6.03(2) (that the taxpayer agrees to all of the terms and conditions of the revenue
procedure) also should refer to Rev. Proc. 2015-13.
(3) Additional requirement. A taxpayer changing to the service warranty income method of
accounting under this section 15.09 must satisfy the annual reporting requirement set forth in
section 6.04 of Rev. Proc. 97-38.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.09 is “125.”
(5) Contact information. For further information regarding a change under this section, contact
David Christensen at (202) 317-7011 (not a toll-free number).
.10 Overall cash method for specified transportation industry taxpayers.
(1) Description of change. This change applies to a “specified transportation industry taxpayer”
with “average annual gross receipts” of more than the inflation-adjusted amount, as defined in
section 15.10(2)(f) of this revenue procedure, and not in excess of $50,000,000 that wants to
change to the overall cash receipts and disbursement (cash) method. For a small business taxpayer,
as defined in section 15.17(4)(a) of this revenue procedure, see section 15.17 of this revenue
procedure for a change to the overall cash method.
(2) Definitions. For purposes of this section 15.10 the following definitions apply:
(a) Specified transportation industry taxpayer. A specified transportation industry taxpayer is a
taxpayer that satisfies the following criteria for the year of change:
(i) The taxpayer reasonably identifies its “business” (as defined in section 15.10(2)(b) of this
revenue procedure) as being described in one of the following NAICS subsector codes (first three
digits of the six-digit NAICS codes):
(A) Air Transportation, Rail Transportation, Water Transportation, Truck Transportation,
Transit and Ground Passenger Transportation, or Scenic and Sightseeing Transportation, within
the meaning of NAICS subsector codes 481-485 and 487; or
(B) Support Activities for Transportation within the meaning of NAICS subsector code 488.

February 14, 2022 642 Bulletin No. 2022–7
(ii) The taxpayer is not prohibited from using the overall cash method under § 448.
(b) Business. A taxpayer may use any reasonable method of applying the relevant facts and
circumstances to determine its business. A business may consist of several activities, which may
or may not be related. For example, a taxpayer engaged in transportation activities may provide
various services such as transporting air cargo and then subsequently trucking the cargo throughout
a metropolitan area to warehouses and wholesale/retail stores. However, each activity within a
taxpayer’s business must individually satisfy the description of a NAICS subsector code in section
15.10(2)(a)(i)(A) or (B) of this revenue procedure. For example, a sightseeing bus operator that
sells box lunches in connection with its tours is not a “specified transportation industry taxpayer”
because one of the two activities of its business (food sales) does not satisfy the description of
a NAICS subsector code in section 15.10(2)(a)(i)(A) or (B) of this revenue procedure. While
the sightseeing transportation activity satisfies the description of the NAICS subsector code in
section 15.10(2)(a)(i)(A) of this revenue procedure, the food sales activity does not satisfy the
description of any NAICS subsector code in section 15.10(2)(a)(i)(A) or (B) of this revenue
procedure, and thus, the taxpayer’s business fails to meet the criteria of section 15.10(2)(a)(i).
Similarly, a train operator who operates a dining car where meals are served is not a “specified
transportation industry taxpayer” because one of the two activities of its business (food service)
does not satisfy the description of a NAICS subsector code in section 15.10(2)(a)(i)(A) or (B) of
this revenue procedure. While the rail transportation activity satisfies the description of a NAICS
subsector code in section 15.10(2)(a)(i)(A) of this revenue procedure, the food service activity
does not satisfy the description of any NAICS subsector code in section 15.10(2)(a)(i)(A) or (B)
of this revenue procedure, and thus, the taxpayer’s business fails to meet the criteria of section
15.10(2)(a)(i).
(c) Average annual gross receipts. A taxpayer has average annual gross receipts of more than
the inflation-adjusted amount and not in excess of $50,000,000 if the taxpayer’s average annual
gross receipts for the three prior taxable-year period ending with the applicable prior taxable year
are more than the inflation-adjusted amount and do not exceed $50,000,000. If a taxpayer has not
been in existence for three prior taxable years, the taxpayer must determine its average annual
gross receipts for the number of years (including short taxable years) that the taxpayer has been in
existence. See § 448(c)(3)(A).
(d) Gross receipts. Gross receipts is defined consistent with § 1.448-2(c)(2)(iv). Thus, gross
receipts for a taxable year equal all receipts that must be recognized under the method of
accounting actually used by the taxpayer for that taxable year for federal income tax purposes.
See also § 448(c)(3)(C).
(e) Aggregation of gross receipts. For purposes of computing gross receipts under section
15.10(2)(d) of this revenue procedure, all taxpayers treated as a single employer under § 52(a) or
(b) or § 414(m) or (o) (or that would be treated as a single employer under these sections if the
taxpayers had employees) will be treated as a single taxpayer. However, when transactions occur
between taxpayers that are treated as a single taxpayer by the previous sentence, gross receipts
arising from these transactions will not be treated as gross receipts for purposes of the average
annual gross receipts limitation. See § 448(c)(2) and § 1.448-2(c)(2)(ii).
(f) Inflation-adjusted amount. The inflation-adjusted amount is the dollar amount specified in
§ 448(c)(1), adjusted for inflation. See § 448(c)(4). For a taxable year beginning in 2019, 2020,
or 2021, the inflation-adjusted amount is $26,000,000. See Rev. Proc. 2018-57, 2018-49 I.R.B.
827, Rev. Proc. 2019-44, 2019-47 I.R.B. 1093, or Rev. Proc. 2020-45, 2020-46 I.R.B. 1016, as
applicable. For a taxable year beginning in 2022, the inflation-adjusted amount is $27,000,000.
See Rev. Proc. 2021-45, 2021-48 I.R.B. 764.

Bulletin No. 2022–7 643 February 14, 2022
(g) Treatment of short taxable year. In the case of a short taxable year, a taxpayer’s gross
receipts must be annualized by multiplying the gross receipts for the short taxable year by 12 and
then dividing the result by the number of months in the short taxable year. See § 448(c)(3)(B) and
§ 1.448-2(c)(2)(iii).
(h) Treatment of predecessors. Any reference to a taxpayer in this section 15.10 includes a
reference to any predecessor of that taxpayer. See § 448(c)(3)(D).
(i) Cash method. The “cash method” is the method identified by § 446(c)(1) and §§ 1.446-1(c)
(1)(i), 1.451-1(a), and 1.461-1(a)(1).
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.10 is “126.”
(4) Example. Taxpayer X is an LLC and taxed for federal income tax purposes as a partnership. Taxpayer X does not
have any C corporations as partners and Taxpayer X is not a tax shelter within the meaning of § 448(d)(3). Taxpayer X’s
business consists of short-haul trucking among various cities within State Y, which satisfies the description of the NAICS
subsector code 484. Taxpayer X determines that its 3-year average annual gross receipts for each prior taxable year have
been more than the inflation-adjusted amount as defined in section 15.10(2)(f) of this revenue procedure and not in excess
of $50,000,000. Taxpayer X qualifies to change to the overall cash method using this section 15.10.
(5) Contact information. For further information regarding a change under this section, contact
Megan McLaughlin at (202) 317-7007 (not a toll-free number).
.11 Change to overall cash/hybrid method for certain banks.
(1) Description of change.
(a) Applicability. This change applies to a bank described in section 15.11(2)(a) of this revenue
procedure that wants to change to an overall cash/hybrid method described in section 15.11(2)(b)
of this revenue procedure.
(b) Inapplicability. A bank’s change to an overall cash/hybrid method under this section 15.11
does not include any change in the accounting treatment of an item for which the bank uses a
special method (as described in section 15.11(2)(b) of this revenue procedure) before the change,
or is required to use a special method, or will use a special method after the change. A bank may
not change the accounting treatment of such an item under this section 15.11. Any change in the
accounting treatment of such an item must be made under an applicable section of this revenue
procedure, under the non-automatic change procedures of Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
or under another guidance published in the Internal Revenue Bulletin, as appropriate.
(2) Definitions. The following definitions apply for purposes of this section 15.11.
(a) Bank. A bank is described in this section 15.11(2)(a) if the bank:
(i) is a bank as defined in § 581;
(ii) is an S corporation as defined in § 1361(a)(1), or a qualified subchapter S subsidiary as
defined in § 1361(b)(3)(B); and

February 14, 2022 644 Bulletin No. 2022–7
(iii) has average annual gross receipts (computed as described in section 15.11(5) of this revenue
procedure) not in excess of $50,000,000.
(b) Overall cash/hybrid method. An overall cash/hybrid method is the use of a combination
of accounting methods under which some items of income or expense are reported on the cash
receipts and disbursements method (cash method) and other items of income or expense are
reported on methods permitted or required for the accounting treatment of special items (special
methods).
(i) Cash method. The cash method is the method identified by § 446(c)(1) and §§ 1.446-1(c)(1)
(i), 1.451-1(a), and 1.461-1(a)(1).
(ii) Special methods. A few of the special methods typically used by banks include those
provided for the accounting treatment of the following items: securities held by a dealer in
securities as defined in § 475(c)(1) (the mark-to-market method of § 475); securities held by a
dealer in securities as defined in § 1.471-5 (inventories maintained under § 471 and § 1.446-1(c)
(2)(i)); hedging transactions (§ 1.446-4); contracts to which § 1256 applies (§ 1256); original issue
discount on debt instruments (§§ 163(e) and 1271-1275); interest income (including acquisition
discount and original issue discount) on short-term obligations (§§ 1281-1283); and stripped debt
instruments (§ 1286). For example, a bank that regularly purchases or originates mortgages in
the ordinary course of its business and engages in more than negligible sales of those mortgages
generally is a dealer in securities under § 475(c)(1) and § 1.475(c)-1(c) and thus must use the
mark-to-market method of § 475 for mortgages and any other securities (as defined in § 475(c)
(2)) held by the bank.
(3) Additional condition of change. To change to an overall cash/hybrid method under this section
15.11, a bank must comply with the following additional condition. In addition to complying with
the terms and conditions set forth in section 7 of Rev. Proc. 2015-13, the bank must keep its books
and records for the year of change and for subsequent taxable years on an overall cash/hybrid
method allowed by this section 15.11. This condition is considered satisfied if the bank reconciles
the results obtained under the method used in keeping its books and records and those obtained
under the method used for federal income tax purposes pursuant to this section 15.11 and the bank
maintains sufficient records to support such reconciliation. See also § 1.446-1(a)(4).
(4) Additional filing requirement. To change to an overall cash/hybrid method under this section
15.11, a bank must include with its completed Form 3115 a description of each specific item of
the bank’s income or expense that is affected by the change under this section 15.11 and, for each
such item, identify the following: the method of accounting under which the bank reports that item
for federal income tax purposes immediately before the change; and the amount of the § 481(a)
adjustment associated with changing that item to the cash method under this section 15.11.
(5) Computation of average annual gross receipts. For purposes of section 15.11(2)(a)(iii) of
this revenue procedure, a bank’s average annual gross receipts are computed as described in this
section 15.11(5).
(a) Average annual gross receipts. A bank has average annual gross receipts not in excess of
$50,000,000 if, for each prior taxable year ending on or after December 31, 2006, the bank’s
average annual gross receipts for the three prior taxable-year period ending with the applicable
prior taxable year do not exceed $50,000,000. If a bank has not been in existence for three prior
taxable years, the bank must determine its average annual gross receipts for the number of years
(including short taxable years) that the bank has been in existence. See § 448(c)(3)(A).

Bulletin No. 2022–7 645 February 14, 2022
(b) Gross receipts. Gross receipts is defined consistent with § 1.448-2(c)(2)(iv). Thus, gross
receipts for a taxable year equal all receipts that must be recognized under the method of
accounting actually used by the bank for that taxable year for federal income tax purposes. See
also § 448(c)(3)(C).
(c) Aggregation of gross receipts. For purposes of computing gross receipts under section
15.11(5)(b) of this revenue procedure, all taxpayers treated as a single employer under § 52(a) or
(b) or § 414(m) or (o) (or that would be treated as a single employer under these sections if the
taxpayers had employees) will be treated as a single taxpayer (that is, a single bank). However,
when transactions occur between taxpayers that are treated as a single taxpayer by the previous
sentence, gross receipts arising from these transactions will not be treated as gross receipts for
purposes of the average annual gross receipts limitation. See § 448(c)(2) and § 1.448-2(c)(2)(ii).
(d) Treatment of short taxable year. In the case of a short taxable year, a bank’s gross receipts
must be annualized by multiplying the gross receipts for the short taxable year by 12 and then
dividing the result by the number of months in the short taxable year. See § 448(c)(3)(B) and
§ 1.448-2(c)(2)(iii).
(e) Treatment of predecessors. Any reference to a bank or taxpayer in section 15.11(5) of this
revenue procedure includes a reference to any predecessor of that bank or taxpayer. See § 448(c)
(3)(D).
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.11 is “127.”
(7) Contact information. For further information regarding a change under this section, contact
K. Scott Brown at (202) 317-6945 (not a toll-free number).
.12 Change to overall cash method for farmers.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer engaged in the trade or business of farming
that wants to change to the overall cash receipts and disbursement (cash) method. If a taxpayer
is engaged in more than one trade or business, this change applies only to the taxpayer’s trade or
business of farming.
(b) Inapplicability. This change does not apply to a taxpayer that is required to use an accrual
method pursuant to § 447, or prohibited from using the cash method by § 448.
(2) Definitions.
(a) Cash method of accounting is the method defined by § 446(c)(1) and §§ 1.446-1(c)(1)
(i), 1.451-1(a), and 1.461-1(a)(1). See also §§ 1.61-4 and 1.162-12 for specific rules relating to
farmers.
(b) The trade or business of farming is a farming business as defined by § 263A(e)(4) and the
regulations thereunder.

February 14, 2022 646 Bulletin No. 2022–7
(3) Certain eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(e) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, does not apply to this change for a taxpayer’s first, second,
or third taxable year beginning after December 31, 2017.
(4) Manner of making change. Generally, a taxpayer changing its method of accounting under
this section 15.12 must compute a § 481(a) adjustment. However, if the taxpayer is changing from
the crop method, that portion of the change is made using a cut-off basis under which expenses
reported on the crop method and not deducted prior to the year of change are deducted in the year
the related crop is sold.
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.12 is “128.”
(6) Contact information. For further information regarding a change under this section, contact
Sophia Wang at (202) 317-5100 (not a toll-free number).
.13 Nonshareholder contributions to capital under § 118.
(1) Description of change.
(a) Water and sewerage disposal utilities under § 118(c) (as in effect on the day before the date
of enactment of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017) (“former § 118(c)”)).
(i) This change applies to a regulated public utility described in former § 118(c) that wants to
change its method of accounting for payments received from customers as customer connection
fees, which are not contributions to the capital of the regulated public utility within the meaning
of former § 118(c), from excluding the payments from gross income as nontaxable contributions
to capital under § 118 to including the payments in gross income under § 61. See Rev. Rul. 2008-
30, 2008-1 C.B. 1156.
(ii) This change applies to a regulated public utility described in former § 118(c) that wants to
change its method of accounting for payments or property received that are contributions in aid
of construction under former § 118(c) and § 1.118-2 and that meet the requirements of former
§ 118(c)(1)(B) and (c)(1)(C) from including the payments or the fair market value of the property
in gross income under § 61 to excluding the payments or the fair market value of the property from
income as nontaxable contributions to capital under § 118(a).
(b) Other payments or property received. This change applies to a taxpayer that wants to change
its method of accounting for payments or property received (other than the payments received by
a public utility described in former § 118(c) that are addressed in section 15.13(1)(a)(i) of this
revenue procedure) that do not constitute contributions to the capital of the taxpayer within the
meaning of § 118 and the regulations thereunder, from excluding the payments or the fair market
value of the property from gross income as nontaxable contributions to capital under § 118 to
including the payments or the fair market value of the property in gross income under § 61.
(2) Inapplicability. The change described in section 15.13(1)(a)(ii) of this revenue procedure
does not apply to contributions made after December 22, 2017, the date of enactment of Public
Law 115-97 (commonly referred to as the Tax Cuts and Jobs Act).

Bulletin No. 2022–7 647 February 14, 2022
(3) Additional requirement. A taxpayer that is making a change described in section 15.13(1)(a)
(i) or (1)(b) of this revenue procedure must complete Schedule E of Form 3115 for the depreciable
property to which the change relates (as well as all other relevant portions of the Form 3115).
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.13 is “129.”
(5) Contact information. For further information regarding a change under this section, contact
David H. McDonnell at (202) 317-4137 (not a toll-free number).
.14 Debt issuance costs.
(1) Description of change. This change applies to a taxpayer that wants to change its method of
accounting for capitalized debt issuance costs to comply with § 1.446-5, which provides rules for
allocating the costs over the term of the debt. This change also applies to a taxpayer that wants to
change its method of accounting for capitalized debt issuance costs from one permissible method
to another permissible method under the last sentence in § 1.446-5(b)(2) if the total original issue
discount determined for purposes of § 1.446-5 is de minimis.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.14 is “148.”
(3) Contact information. For further information regarding a change under this section, contact
Charles W. Culmer at (202) 317-6945 (not a toll-free number).
.15 Transfers of interties under the safe harbor described in Notice 2016-36 (§ 118).
(1) Description of change.
(a) Safe harbor applicable. This change, as described in Notice 2016-36, 2016-25 I.R.B. 1029,
applies to a utility that wants to change to the safe harbor method of accounting provided in
section III.C of Notice 2016-36 for the treatment under § 118 of a transfer of an intertie, including
a dual-use intertie, by a generator to a utility. Under this safe harbor method of accounting, such a
transfer will not be treated as gross income under § 118(a) or a contribution in aid of construction
(CIAC) under § 118(b) if all of the conditions specified in section III.C of Notice 2016-36 are met.
(b) Safe harbor terminates. This change, as described in Notice 2016-36, applies to a utility that
is using the safe harbor method of accounting provided in section III.C of Notice 2016-36 and is
required to terminate that safe harbor method of accounting because of the occurrence of an event
specified in section IV of Notice 2016-36. The occurrence of such event will require the utility to
recognize income as a consequence of the transfer of an intertie, including a dual-use intertie, to
the utility by a generator.
(2) Definitions. For purposes of this section 15.15, the terms “utility,” “intertie,” “dual-use
intertie,” and “generator” are defined in section III.B of Notice 2016-36.
(3) Certain eligibility rules inapplicable. The eligibility rules in sections 5.01(1)(d) and (f)
of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to a utility making a change under this
section 15.15.

February 14, 2022 648 Bulletin No. 2022–7
(4) Manner of making change.
(a) The change in method of accounting under section 15.15(1)(a) of this revenue procedure is
made with a § 481(a) adjustment.
(b) The change in method of accounting under section 15.15(1)(b) of this revenue procedure is
made using a cut-off method and applies to a transfer of an intertie, including a dual-use intertie,
by a generator to a utility made on or after the beginning of the taxable year in which the safe
harbor method of accounting terminates.
(5) Concurrent automatic change. A utility making a change under this section 15.15 for more
than one transfer of an intertie, including a dual-use intertie, for the same year of change should
file a single Form 3115 for all such transfers. The single Form 3115 must provide a single net
§ 481(a) adjustment for all changes under section 15.15(1)(a) of this revenue procedure.
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change to the methods of accounting under this section
15.15 is “226.”
(7) Contact information. For further information regarding a change under this section, contact
Barbara Campbell at (202) 317-4137 (not a toll-free number).
.16 Change to or from the net asset value (NAV) method.
(1) Description of change. This change, as described in Rev. Proc. 2016-39, 2016-30 I.R.B.
164, applies to a taxpayer that holds shares in a money market fund (MMF) as defined in § 1.446-
7(b)(4) (giving effect to § 1.446-7(c)(5), under which MMF holdings in different accounts are
treated as different MMFs) and that wants to change its method of accounting for gain or loss on
the shares from a realization method to the NAV method described in § 1.446-7 or from the NAV
method to a realization method.
(2) Certain eligibility rules inapplicable. The eligibility rules in sections 5.01(1)(c), (d), and (f)
of Rev. Proc. 2015-13 do not apply to this change.
(3) Definitions.
(a) “Rule 2a-7” means Rule 2a-7 (17 CFR 270.2a-7) under the Investment Company Act of
1940.
(b) “Floating-NAV MMF” means an MMF that is required to value its assets using market
factors and to round its price per share to the nearest basis point (the fourth decimal place, in the
case of a fund with a $1.0000 share price) under Rule 2a-7.
(c) “Stable-NAV MMF” means an MMF that is not a floating-NAV MMF.
(4) Manner of making change.

Bulletin No. 2022–7 649 February 14, 2022
(a) A change to or from the NAV method is made on a cut-off basis. See § 1.446-7(c)(8).
Accordingly, a § 481(a) adjustment is neither permitted nor required. A taxpayer making a change
to or from the NAV method for shares in an MMF applies the new method only to the computation
of gain or loss on the shares beginning with the year of change. Under § 1.446-7(b)(7)(ii), a
taxpayer changing to the NAV method takes a starting basis (as defined in § 1.446-7(b)(7)) in
those shares for the year of change equal to the aggregate adjusted basis of the taxpayer’s shares
in the MMF at the end of the immediately preceding taxable year. A taxpayer changing from the
NAV method to a realization method for shares in an MMF must adjust the basis in the shares
beginning on the first day of the year of change to account for gain or loss previously recognized
under the NAV method. Accordingly, the taxpayer generally takes a basis in each MMF share at
the beginning of the year of change equal to the fair market value of that share under § 1.446-7(b)
(3) used in computing the ending value (as defined in § 1.446-7(b)(2)) of the shares in that MMF
for the final computation period (as defined in § 1.446-7(b)(1)) of the taxable year prior to the year
of change.
(b) Short Form 3115 in lieu of a standard Form 3115. In accordance with § 1.446-1(e)(3)(ii),
the requirement of § 1.446-1(e)(3)(i) to file a standard Form 3115 is waived and, pursuant to
section 6.02(2) of Rev. Proc. 2015-13, a short Form 3115 is authorized for a taxpayer changing
from a realization method to the NAV method, or changing from the NAV method to a realization
method, for shares in an MMF. Unless the change meets the requirements of section 15.16(4)(c)
of this revenue procedure, the taxpayer must file a short Form 3115 (Rev. December 2018) that
includes the following information:
(i) the identification section of page 1 (above Part I);
(ii) the signature section at the bottom of page 1;
(iii) Part I, line 1(a);
(iv) a statement specifying whether the taxpayer is changing from a realization method to the
NAV method or from the NAV method to a realization method; and
(v) a statement specifying the MMF or MMFs to which the change applies, if the change does
not apply to all MMFs in which the taxpayer holds shares (and, to the extent applicable, whether
the change applies only to shares of the MMF or MMFs held in a particular account).
(c) No Form 3115 Required. In accordance with § 1.446-1(e)(3)(ii), a taxpayer changing to the
NAV method for shares in a stable-NAV MMF may change to the NAV method on a federal tax
return without filing a Form 3115 if the following requirements are satisfied:
(i) the taxpayer has not used the NAV method for shares in the MMF for any taxable year prior
to the year of change; and
(ii) prior to the year of change, either
(A) the taxpayer’s basis in each share of the MMF has been at all times equal to the MMF’s
target share price, or
(B) the taxpayer has not realized any gain or loss with respect to shares in the MMF.

February 14, 2022 650 Bulletin No. 2022–7
(5) Multiple changes. A taxpayer making multiple changes under this section 15.16 for the same
year of change on a short Form 3115 should file a single short Form 3115. The short Form 3115
will be treated as applying to all shares that the taxpayer holds in any MMF unless the taxpayer
specifies the MMFs to which the change applies. If the taxpayer specifies an MMF, the short Form
3115 will be treated as applying to all shares in that MMF held in any account by the taxpayer,
unless the short Form 3115 specifies the accounts to which the change applies.
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 15.16 is “227.”
(7) Contact Information. For further information regarding a change under this section, contact
Grace Cho at (202) 317-6945 (not a toll-free number).
.17 Small business taxpayer changing to overall cash method, or to a method of accounting in
which a small business taxpayer uses an accrual method for purchases and sales of inventories
and uses the cash method for computing all other items of income and expense.
(1) Description of change. This change applies to a small business taxpayer, as defined in section
15.17(4)(a) of this revenue procedure, that wants to make a change in method of accounting
described in section 15.17(2) of this revenue procedure. This change includes a change to account
for any exempt construction contracts described in § 1.460-3(b)(1)(ii) under the cash method or, in
the case of an exempt construction contract described in § 1.460-3(b)(1)(ii) that includes the sale
of inventory, a method of accounting that uses an accrual method for purchases and sales of such
inventory and the cash method for computing all other items of income and expense from such
contract. A small business taxpayer may be required to use a method of accounting other than the
cash method for one or more items of income or expense under certain provisions of the Code or
regulations, including, for example §§ 475 and 1272.
(2) Applicability. This change applies to a small business taxpayer that wants to:
(a) change from an overall accrual method of accounting to the overall cash method of
accounting for a trade or business, and is otherwise not prohibited from using the overall cash
method or required to use another overall method of accounting;
(b) change from an overall accrual method of accounting for a trade or business to an accrual
method for purchases and sales of inventories (inventories) and the cash method for computing all
other items of income and expense, and is otherwise not prohibited from using the cash method
under § 448 or required to use another overall method of accounting, such as an accrual method
under § 447; or
(c) change from the overall cash method of accounting for a trade or business to an accrual
method for purchases and sales of inventories (inventories) and the cash method for computing
all other items of income and expense and is otherwise not prohibited from using the cash method
under § 448 or required to use another overall method of accounting, such as an accrual method
under § 447.
(3) Inapplicability. This change does not apply to the following:
(a) Banks changing to hybrid method. This change does not apply to a bank described in
section 15.11(2)(a) of this revenue procedure. However, such a bank may be eligible to change

Bulletin No. 2022–7 651 February 14, 2022
to the overall cash/hybrid method under section 15.11 of this revenue procedure if it meets the
requirements of that section.
(b) Farmers changing to overall cash method. This change does not apply to a farming business
changing to the overall cash method. See, however, section 15.12 of this revenue procedure.
(4) Special rules for open accounts receivable. Notwithstanding § 1001 and the accompanying
regulations, a small business taxpayer that uses the overall cash method for a trade or business
includes amounts attributable to open accounts receivable, as defined in section 15.17(5)(c) of
this revenue procedure, in income as the amounts are actually or constructively received on the
receivables.
(5) Definitions.
(a) Small business taxpayer. “Small business taxpayer” means a taxpayer, other than a tax
shelter under § 448(d)(3), proposed § 1.448-2(b)(2), or § 1.448-2(b)(2), as applicable, that meets
the § 448(c) gross receipts test.
(b) Section 448(c) gross receipts test. The § 448(c) gross receipts test is met if a taxpayer has
average annual gross receipts for the three prior taxable years of $25,000,000 or less (adjusted for
inflation), as described in § 448(c), proposed §§ 1.448-2(c), proposed § 1.460-3(b)(3), § 1.448-
2(c) or § 1.460-3(b)(3), as applicable. For taxable years beginning in 2019, 2020 and 2021, the
inflation-adjusted amount is $26,000,000. See Rev. Proc. 2018-57, 2018-49 I.R.B. 827, Rev. Proc.
2019-44, 2019- 47 I.R.B. 1093, or Rev. Proc. 2020-45, 2020-46 I.R.B. 1016, as applicable. For
a taxable year beginning in 2022, the inflation-adjusted amount is $27,000,000. See Rev. Proc.
2021-45, 2021-48 I.R.B. 764.
(c) Open accounts receivable. For purposes of this section 15.17, an open accounts receivable
is any receivable that is due in full in 120 days or less and that is not subject to § 475.
(6) Eligibility rules.
(a) Eligibility rule inapplicable. For a change described in section 15.17(2) of this revenue
procedure, any prior change in method of accounting to an overall accrual method that was made
in the taxpayer’s first § 448 year (as defined in section 15.01(1)(a) of this revenue procedure), a
mandatory § 448 year (as defined in proposed § 1.448-2(g)(1) or § 1.448-2(g)(1), as applicable),
or a mandatory § 447 year (as defined in section 15.01(1)(a) of this revenue procedure), as
applicable, is disregarded for purposes of section 5.01(1)(e) of Rev. Proc. 2015-13.
(b) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(e) of Rev.
Proc. 2015-13 does not apply to this change for a taxpayer’s first, second, or third taxable year
beginning after December 31, 2017. In addition, the eligibility rule in section 5.01(1)(e) of Rev.
Proc. 2015-13 does not apply to a taxpayer’s early application year, or, in the case of a taxpayer that
does not apply § 1.448-2 in the early application year, the taxpayer’s first taxable year beginning
on or after January 5, 2021. For purposes of this section 15.17, “early application year” means the
taxable year beginning before January 5, 2021, in which a taxpayer first applies § 1.448-2.
(7) Manner of making change.

February 14, 2022 652 Bulletin No. 2022–7
(a) Acceleration of § 481(a) adjustment. If a taxpayer making a change described in section
15.17(2)(a) or (b) of this revenue procedure has a § 481(a) adjustment remaining on a prior overall
change in method of accounting to an accrual method, then it must take the remaining portion of
such prior § 481(a) adjustment into account in the year of change;
(b) Cut-off basis for exempt long-term contracts. A change to account for exempt construction
contracts described in § 1.460-3(b)(1)(ii) under this section 15.17 is made on a cut-off basis and
applies only to contracts entered into on or after the first day of the year of change. Accordingly, a
§ 481(a) adjustment is neither permitted nor required.
(8) Concurrent automatic changes. A small business taxpayer making a change under this
section 15.17 and a change under section 12.16, 22.18 and/or 22.19 of this revenue procedure
for the same year of change may file a single Form 3115 for such changes, provided the taxpayer
enters the designated automatic accounting method change numbers for each change on the
appropriate line of Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on
making concurrent changes.
(9) Designated automatic accounting method change number.
(a) Change to overall cash method. The designated automatic accounting method change
number for a change under section 15.17(2)(a) of this revenue procedure is “233.”
(b) Change to a method of accounting that uses an accrual method for inventories, and the
cash method for computing all other items of income and expense. The designated automatic
accounting method change number for a change under section 15.17(2)(b) or (c) of this revenue
procedure is “259.”
(10) Contact information. For further information regarding a change under this section, contact
Anna Gleysteen at (202) 317-7007 (not a toll-free number).
SECTION 16. TAXABLE YEAR OF INCLUSION (§ 451)
.01 Accrual of interest on nonperforming loans.
(1) Description of change.
(a) This change applies to a taxpayer using an overall accrual method of accounting that is a
bank as defined in § 581 (or whose primary business is making or managing loans) and wants
to change its method of accounting to comply with § 451 and § 1.451-1(a) for qualified stated
interest (as defined in § 1.1273-1(c)) on nonperforming loans.
(b) Section 1.451-1(a) requires income to be accrued when all the events have occurred that
fix the right to receive the income and the amount thereof can be determined with reasonable
accuracy. A taxpayer may not stop accruing qualified stated interest on a nonperforming loan
for federal income tax purposes merely because payments on the loan are overdue by a certain
length of time, such as 90 days, even if a federal, state, or other regulatory authority having

Bulletin No. 2022–7 653 February 14, 2022
jurisdiction over the taxpayer permits or requires that the overdue interest not be accrued for
regulatory purposes.
(c) Under § 451 and § 1.451-1(a), a taxpayer must continue accruing qualified stated interest on
any nonperforming loan until either (i) the loan is worthless under § 166 and charged off as a bad
debt, or (ii) the interest is determined to be uncollectible. In order for interest to be determined
uncollectible, the taxpayer must substantiate, taking into account all the facts and circumstances,
that it has no reasonable expectation of payment of the interest. This substantiation requirement is
applied on a loan by loan basis.
(d) A taxpayer that changes its method of accounting under this section 16.01 must do so for
all of its loans.
(2) Section 481(a) adjustment. In general, the § 481(a) adjustment for a method change under this
section 16.01 represents the amount of qualified stated interest on the taxpayer’s nonperforming
loans outstanding as of the beginning of the year of change that should have been accrued under
§ 451 and § 1.451-1(a) and was not accrued. Interest for which the taxpayer, as of the beginning
of the year of change, has no reasonable expectation of payment is not taken into account in
determining the amount of the § 481(a) adjustment.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 16.01 is “36.”
(4) Contact information. For further information regarding a change under this section, contact
K. Scott Brown at (202) 317-6945 (not a toll-free number).
.02 Advance rentals.
(1) Description of change. This change applies to a taxpayer that wants to change its method
of accounting for advance rentals (other than advance rentals subject to § 467 and the regulations
thereunder) to include such advance rentals in gross income in the taxable year received. See
§ 1.61-8(b).
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 16.02 is “37.”
(3) Contact information. For further information regarding a change under this section, contact
Daniel Cassano at (202) 317-7011 (not a toll-free number).
.03 State or local income or franchise tax refunds.
(1) Description of change. This change applies to a taxpayer using an overall accrual method
of accounting that receives a state or local income or franchise tax refund and wants to accrue
the refund in the taxable year the taxpayer receives payment or notice that the claim has been
approved, whichever is earlier, as provided in Rev. Rul. 2003-3, 2003-1 C.B. 252.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 16.03 is “38.”

February 14, 2022 654 Bulletin No. 2022–7
(3) Contact information. For further information regarding a change under this section, contact
Daniel Cassano at (202) 317-7011 (not a toll-free number).
.04 Capital Cost Reduction Payments.
(1) Description of change. This change applies to a taxpayer that purchases motor vehicles
subject to leases and assumes the associated leases from the vehicles’ dealers and wants to use
the safe harbor method of accounting for capital cost reduction (CCR) payments specified in Rev.
Proc. 2002-36, 2002-1 C.B. 993.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 16.04 is “39.”
(3) Contact information. For further information regarding a change under this section, contact
Bill Ruane at (202) 317-4718 (not a toll-free number).
.05 Credit card annual fees.
(1) Description of change. This change applies to a taxpayer that wants to change its method of
accounting for credit card annual fees as described in Rev. Rul. 2004-52, 2004-1 C.B. 973, either
to a method that satisfies the all events test in accordance with Rev. Rul. 2004-52 or to the Ratable
Inclusion Method for Credit Card Annual Fees that is described in section 4 of Rev. Proc. 2004-32,
2004-1 C.B. 988. Rev. Rul. 2004-52 holds that credit card annual fees are not interest for federal
income tax purposes and that such fees are includible in income by the card issuer when the all events
test under § 451 is satisfied. Rev. Proc. 2004-32 provides additional guidance for taxpayers seeking
to change their methods of accounting for such fees, including guidance with respect to the Ratable
Inclusion Method for Credit Card Annual Fees. However, a taxpayer may make either change under
this revenue procedure only if the taxpayer uses an overall accrual method of accounting for federal
income tax purposes and issues credit cards to, and receives annual fees from, cardholders under
agreements that allow each cardholder to use a credit card to access a revolving line of credit to make
purchases of goods and services and, if so authorized, to obtain cash advances.
(2) Manner of making change. In completing its Form 3115 to make this change, a taxpayer
must identify the specific method to which the taxpayer is changing.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 16.05 to a method that satisfies
the all events test in accordance with Rev. Rul. 2004-52 is “80.” The designated automatic
accounting method change number for a change under this section 16.05 to the Ratable Inclusion
Method for Credit Card Annual Fees is “81.”
(4) Contact information. For further information regarding a change under this section, contact
Kate Sleeth at (202) 317-7053 (not a toll-free number).
.06 Advance payments.
(1) Description of change.

Bulletin No. 2022–7 655 February 14, 2022
(a) Applicability. This change applies to a taxpayer using or changing to an overall accrual
method of accounting that receives advance payments, as defined in Rev. Proc. 2004-34, 2004-
1 C.B. 991, as modified and clarified by Rev. Proc. 2011-18, 2011-5 I.R.B. 443, and Rev. Proc.
2013-29, 2013-33 I.R.B. 141, and as modified by Rev. Proc. 2011-14, 2011-4 I.R.B. 330, and
wants to change to either the full inclusion or deferral method, as described in Rev. Proc. 2004-34,
other than a taxpayer changing to a method described in section 16.08 of this revenue procedure.
See also Notice 2018-35, 2018-18 I.R.B. 520, and Announcement 2004-48, 2004-1 C.B. 998.
(b) Inapplicability.
(i) In general. This change does not apply to a taxpayer that wants to use the Deferral Method
for payments described in section 5.02(4)(a) of Rev. Proc. 2004-34 (other than allocable payments
described in section 5.02(4)(c) of Rev. Proc. 2004-34) or for payments for which a method under
section 5.02(3)(b)(i) or (iii) of Rev. Proc. 2004-34 applies. The taxpayer must request any such
change in method of accounting using the non-automatic change procedures in Rev. Proc. 2015-
13, 2015-5 I.R.B. 419. See section 8.03 of Rev. Proc. 2004-34.
(ii) Limited time to make change. This change does not apply to taxable years beginning on or
after January 1, 2021.
(2) Certain eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, does not apply to a taxpayer that changes to a method of
accounting provided under section 16.06(1)(a) of this revenue procedure for the taxpayer’s first or
second taxable year ending on or after May 9, 2018.
(3) Concurrent automatic change to an overall accrual method. A taxpayer making both a
change to its method of accounting for advance payments under this section 16.06 and a change
to an overall accrual method under section 15.01 of this revenue procedure for the same year
of change must file a single Form 3115 for both changes and enter the designated automatic
accounting method change numbers for both changes on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under section 16.06(1)(a) of this revenue
procedure to use the full-inclusion method is “83.” The designated automatic accounting method
change number for a change under section 16.06(1)(a) of this revenue procedure to use the deferral
method is “84.”
(5) Contact information. For further information regarding a change under this section, contact
Maria Castillo-Valle at (202) 317-7003 (not a toll-free number).
.07 Retainages.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer using an overall accrual method of accounting
that wants to change its method of accounting for treating retainages to a method consistent with
the holding in Rev. Rul. 69-314, 1969-1 C.B. 139. A taxpayer changing its method of accounting
for retainages under this section 16.07 must treat all retainages, that is both receivables and
payables, in the same manner.

February 14, 2022 656 Bulletin No. 2022–7
(b) Inapplicability. This change does not apply to retainages (receivables and payables) for
long-term contracts that must be accounted for under the percentage-of-completion method (PCM)
under § 460. Nor does this change apply to long-term contracts otherwise accounted for under the
PCM or long-term contracts accounted for under exempt percentage-of-completion method or the
completed contract method. For the treatment of retainages under such methods, see §§ 1.460-
4(b)(4)(i)(A) and 1.460-4(d)(3).
(2) Manner of making change.
(a) Except as provided in section 16.07(2)(b) of this revenue procedure, a taxpayer changing
its method of accounting under this section 16.07 must take into account a § 481(a) adjustment.
(b) For retainages received and paid in connection with long term contracts that are exempt
construction contracts (as defined in § 1.460-3(b)(1)) accounted for using the taxpayer’s overall
accrual method of accounting, this change is made on a cut-off basis and applies only to long-term
contracts entered into on or after the beginning of the year of change. See § 1.460-1(c)(2) for a
description of when a contract is treated as “entered into.” Accordingly, a § 481(a) adjustment is
neither permitted nor required.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 16.07 for retainages not
received under long-term contracts is “130.” The designated automatic method change number
for a change under this section 16.07 for retainages received under long-term contracts is “217.”
A taxpayer making a change under this section 16.07 that has both types of retainages must file a
single Form 3115 and enter both change numbers on the appropriate line on Form 3115.
(4) Contact information. For further information regarding a change under this section, contact
Peter Cohn at (202) 317-7011 (not a toll-free number).
.08 Change in applicable financial statements (AFS) for purposes of applying certain revenue
recognition methods of accounting.
(1) Description of change.
(a) Applicability.
(i) This change applies to a taxpayer that has an applicable financial statement (AFS), as defined
in section 4.06 of Rev. Proc. 2004-34, 2004-1 C.B. 991, as modified and clarified by Rev. Proc.
2011-18, 2011-5 I.R.B. 443, and Rev. Proc. 2013-29, 2013-33 I.R.B. 141, and as modified by Rev.
Proc. 2011-14, 2011-4 I.R.B. 330, that: (A) receives advance payments, as defined in section 4
of Rev. Proc. 2004-34, (B) uses the deferral method described in section 5.02(3)(a) of Rev. Proc.
2004-34 for including those advance payments in gross income in accordance with its AFS, (C)
changes the manner in which it recognizes advance payments in revenues in its AFS, and (D) wants
to change its method of accounting to use the new AFS method of recognizing advance payments
in revenues in its AFS for determining the extent to which advance payments are included in gross
income under Rev. Proc. 2004-34. See also Notice 2018-35, 2018-18 I.R.B. 520.
(ii) This change applies to a taxpayer that has an AFS, as defined in proposed § 1.451-8(b)(2)
(REG-104554-18; 84 FR 47191), that: (A) receives advance payments, as defined in proposed
§ 1.451-8(b)(1); (B) uses the deferral method described in proposed § 1.451-8(c); (C) changes
the manner in which it recognizes advance payments in revenues in its AFS; and (D) wants to

Bulletin No. 2022–7 657 February 14, 2022
change its method of accounting to use the new AFS method of recognizing advance payments in
revenues in its AFS for determining the extent to which advance payments are included in income
under proposed § 1.451-8(c).
(iii) This change applies to a taxpayer with an AFS, as defined in § 451(b)(3), that: (A) includes
amounts in income in accordance with § 451(b); (B) changes the manner in which the item, or portion
thereof, is taken into account in revenue in its AFS, as defined in § 451(b)(3), including, if applicable, a
change in the matter in which transaction price is allocated to performance obligations; and (C) wants
to change its method of accounting to use the new AFS method of taking into account the item, or
portion thereof, in revenue in its AFS for purposes of § 451(b)(1)(A), including, if applicable, a change
in the manner in which transaction price is allocated for purposes of § 451(b)(4).
(iv) This change applies to a taxpayer with an AFS, as defined in proposed § 1.451-3(c)(1) (REG-
104870-18; 84 FR 47205), that: (A) includes amounts in income in accordance with proposed
§ 1.451-3; (B) changes the manner in which the item, or portion thereof, is taken into account as
revenue in its AFS, including, if applicable, a change in the manner in which transaction price is
allocated to performance obligations; and (C) wants to change its method of accounting to use
the new AFS method of taking into account the item, or portion thereof, in revenue in its AFS
for purposes of proposed § 1.451-3(b), including, if applicable, a change in the manner in which
transaction price is allocated for purposes of proposed § 1.451-3(g).
(v) This change applies to a taxpayer with an AFS, as defined in § 1.451-3(a)(5), that: (A)
includes amounts in income in accordance with § 1.451-3; (B) changes the manner in which
the item, or portion thereof, is taken into account as AFS revenue, as defined in § 1.451-3(a)
(4), including, if applicable, a change in the manner in which transaction price is allocated to
performance obligations; and (C) wants to change its method of accounting to use the new AFS
method of taking into account the item, or portion thereof, in AFS revenue for purposes of § 1.451-
3(b)(1), including, if applicable, a change in the manner in which transaction price is allocated for
purposes of § 1.451-3(d).
(vi) This change applies to a taxpayer with an AFS, as defined in § 1.451-3(a)(5), that: (A)
receives an advance payment, as defined in § 1.451-8(a)(1); (B) uses the deferral method
described in § 1.451-8(c); (C) changes the manner in which it recognizes advance payments in
AFS revenue, as defined in § 1.451-8(a)(4), including, if applicable, a change in the manner in
which payments are allocated to performance obligations; and (D) wants to change its method
of accounting to use the new AFS method of recognizing advance payments in AFS revenue for
purposes of determining the extent to which advance payments are included in income under
§ 1.451-8, including, if applicable, a change in the manner in which payments are allocated for
purposes of § 1.451-8(c)(8).
(b) Inapplicability.
(i) Changes relating to Rev. Proc. 2004-34. The change described in section 16.08(1)(a)(i) of
this revenue procedure does not apply to:
(A) a taxpayer that uses a present method of accounting for advance payments that is not the
deferral method described in section 5.02(3)(a) of Rev. Proc. 2004-34. For example, this change
does not apply to a taxpayer that uses the full inclusion method under section 5.01 of Rev. Proc.
2004-34;
(B) a taxpayer that wants to change its method for allocating payments under section 5.02(4)
of Rev. Proc. 2004-34; or

February 14, 2022 658 Bulletin No. 2022–7
(C) taxable years beginning on or after January 1, 2021.
(ii) Changes relating to § 451(b), proposed § 1.451-3, or proposed § 1.451-8. A change described
in section 16.08(1)(a)(ii), (iii) or (iv) of this revenue procedure does not apply to:
(A) a taxpayer whose present method of accounting does not comply with § 451(b) or proposed
§ 1.451-3, as applicable, for a change described in section 16.08(1)(a)(iii) or (iv) of this revenue
procedure;
(B) a taxpayer whose present method is not the deferral method under proposed § 1.451-8(c),
for a change described in section 16.08(1)(a)(ii) of this revenue procedure. For example, this
change does not apply to a taxpayer that uses the full inclusion method under § 451(c)(1)(A) or
proposed § 1.451-8(a), or the non-AFS deferral method under proposed § 1.451-8(d);
(C) a taxpayer that wants to change its method for allocating payments under § 451(c)(1)(D) or
proposed § 1.451-8(c)(6);
(D) a taxpayer that wants to change its method for allocating transaction price between
performance obligations that are accounted for under § 451(b) or proposed § 1.451-3, and
performance obligations that are accounted for under a special method of accounting, as defined
in § 451(b)(2) and proposed § 1.451-3(c)(5); or
(E) taxable years beginning on or after January 1, 2021.
(iii) Changes relating to § 1.451-3 or § 1.451-8. A change described in section 16.08(1)(a)(v)
or (vi) of this revenue procedure does not apply to:
(A) a taxpayer whose present method of accounting is not described in § 1.451-3, for a change
described in section 16.08(1)(a)(v) of this revenue procedure. A taxpayer that wants to change to
a method of accounting described in § 1.451-3 must use section 16.10(2)(a)(v) of this revenue
procedure to make such change;
(B) a taxpayer whose present method of accounting for advance payments is not the deferral
method under § 1.451-8(c), for a change described in section 16.08(1)(a)(vi) of this revenue
procedure. For example, this change does not apply to a taxpayer that uses the full inclusion
method under § 1.451-8(b) or the non-AFS deferral method under § 1.451-8(d). However, this
change does apply to a taxpayer that uses both the cost offset method under § 1.451-8(e) and the
deferral method under § 1.451-8(c);
(C) a taxpayer that wants to change its method for allocating payments described in § 1.451-
8(c)(8)(iii); or
(D) a taxpayer that wants to change its method for allocating transaction price for contracts
described in § 1.451-3(d)(5).
(c) Restatements of AFS. A taxpayer’s restatement of its AFS for financial accounting presentation
does not affect the propriety of the taxpayer’s method of accounting for revenue recognized in
the prior taxable year(s). For example, if the taxpayer properly uses the deferral method described

Bulletin No. 2022–7 659 February 14, 2022
in § 1.451-8(c) for including advance payments in gross income in accordance with its AFS, the
taxpayer satisfies the requirement of section 16.08(1)(a)(vi) of this revenue procedure even if the
AFS for that taxable year is later restated and may change its method of accounting under this
section 16.08 if it is otherwise eligible.
(2) Manner of making change.
(a) Cut-off basis or a § 481(a) adjustment.
(i) Cut-off basis for certain changes.
(A) In general. Except as provided in section 16.08(2)(a)(i)(B) of this revenue procedure, a
change made under section 16.08(1)(a)(i), (ii), or (vi) of this revenue procedure is made on a
cut-off basis and applies to advance payments received by the taxpayer on or after the beginning
of the year of change. Accordingly, any advance payments received prior to the year of change
(prior advance payments) are accounted for under the taxpayer’s former method of accounting,
and any advance payments received in the year of change and in subsequent taxable years are
accounted for under the taxpayer’s new method of accounting. A taxpayer that changes its method
of allocating payments for purposes of § 1.451-8(c)(8)(i) must allocate any payments received
prior to the year of change using the taxpayer’s former method of accounting. Accordingly, a
§ 481(a) adjustment is neither permitted nor required.
(B) Section 481(a) adjustment for certain changes. If a taxpayer makes a change under section
16.08(1)(a)(i), (ii), or (vi) of this revenue procedure, and the AFS treatment of prior advance
payments in the year of change or a subsequent taxable year is relevant for purposes of determining
the amount of such payments that is required to be included in gross income in the year of change
or a subsequent taxable year, the taxpayer must implement the change with a § 481(a) adjustment
as provided in sections 7.02 and 7.03 of Rev. Proc. 2015-13.
(ii) Cut-off basis or § 481(a) adjustment for certain changes. A taxpayer that makes a change
under section 16.08(1)(a)(iii) or (iv) of this revenue procedure as a result of adopting the New
Standards, as defined in section 16.09(1) of this revenue procedure, in the year of change may
implement the change with either a § 481(a) adjustment as provided in sections 7.02 and 7.03 of
Rev. Proc. 2015-13, or on a cut-off basis. If the taxpayer implements the change on a cut-off basis,
(A) the change applies to contracts entered into on or after the beginning of the year of change;
(B) all changes made under section 16.08(1)(a)(iii) or (iv) of this revenue procedure for the
same year of change must be implemented using a cut-off basis; and
(C) a § 481(a) adjustment is neither permitted nor required.
(iii) Computing § 481(a) adjustments when the year of change is a year in which the taxpayer
implements a change in accounting principle with a retained earnings adjustment. If the year
of change is a year in which the taxpayer implements a change in accounting principle for AFS
purposes, including a change in the method of applying an accounting principle for AFS purposes,
and the change in accounting principle is implemented with a retained earnings adjustment that is
taken into account during the year of change, the taxpayer is required to treat such adjustment as
being taken into account in the taxable year prior to the year of change for purposes of computing

February 14, 2022 660 Bulletin No. 2022–7
the § 481(a) adjustment. An AFS change to adopt the New Standards, as defined in section 16.09(1)
of this revenue procedure, is an example of a change in accounting principle.
(iv) Example. Computing a § 481(a) adjustment when the taxpayer presently uses the AFS cost offset method - related
accounts. B is in the trade or business of selling computers. B uses an accrual method of accounting and computes Federal
income tax on a calendar-year basis and has an AFS, as defined in § 1.451-3(a)(5). B is not under examination within the
meaning of section 3.18 of Rev. Proc. 2015-13. B does not receive advance payments. For 2021, B makes two changes
in method of accounting to comply with § 1.451-3. Specifically, pursuant to section 16.10(2)(a)(iii)(A) of this revenue
procedure, B changes its method of accounting for gross income from the sale of computers to apply the AFS income
inclusion rule and, pursuant to section 16.10(2)(a)(iii)(C) of this revenue procedure, changes its method of accounting to
apply the AFS cost offset method. For 2022, B changes the manner in which income from the sale of computers is taken
into account as AFS revenue, as defined in § 1.451-3(a)(4), and changes its method of accounting under section 16.08(1)
(a)(v) of this section to use the new AFS method. However, B continues to use the AFS cost offset method. In computing
the § 481(a) adjustment resulting from the change to the new method of computing AFS revenue for 2022 under section
16.08(1)(a)(v) of this revenue procedure, B must take into account its continued use of the AFS cost offset method. See
section 3.15 of Rev. Proc. 2015-13.
(b) In accordance with § 1.446-1(e)(3)(ii), the requirement of § 1.446-1(e)(3)(i) to file a Form
3115 is waived and a statement in lieu of a Form 3115 is authorized for a change made under this
section 16.08. Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, the statement in lieu of a Form 3115 that is permitted under this section 16.08
is considered a Form 3115 for purposes of the automatic consent procedures of Rev. Proc. 2015-
13. However, the requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc.
2015-13, is waived. The statement attached to the taxpayer’s return for the year of change must
include the following information for each applicant:
(i) the designated automatic accounting change number for this change, which is “153;”
(ii) the applicant’s name, employer identification number (or social security number in the case
of an individual), and type of applicant, as would be provided had a Form 3115 been required;
(iii) the year of change (both the beginning and ending dates);
(iv) the type of AFS used by the applicant, as defined in applicable guidance, and which change
the applicant is making under section 16.08(1)(a) of this revenue procedure. See section 4.06 of
Rev. Proc. 2004-34, § 451(b)(3), proposed § 1.451-8(b)(2), proposed § 1.451-3(c)(1), § 1.451-3(a)
(5); and/or § 1.451-8(a)(5), as applicable;
(v) a detailed and complete description of each item affected by the change in AFS revenue
recognition and the line number (or schedule) where the affected item is reflected on the federal
income tax return for the year of change, and if applicable, the § 481(a) adjustment for each
change; and
(vi) a detailed description of the basis used for AFS revenue recognition (that is, the method the
taxpayer uses in its AFS) both before and after the AFS change.
(c) Concurrent automatic change. A taxpayer may make more than one change under this
section 16.08 on the same statement in lieu of a Form 3115 for the same year of change. The
taxpayer must separately provide all of the information required for each change on that statement.

Bulletin No. 2022–7 661 February 14, 2022
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13 does not apply to this change.
(4) No audit protection. A taxpayer does not receive audit protection under section 8.01 of Rev.
Proc. 2015-13 for this change. See section 8.02(2) of Rev. Proc. 2015-13.
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 16.08 is “153.”
(6) Contact information. For further information regarding a change under this section, contact
Maria Castillo-Valle at (202) 317-7003 (not a toll-free number).
. 09 Changes in the timing of recognition of income due to the New Standards.
(1) Description of change. On May 28, 2014, the Financial Accounting Standards Board (FASB)
and the International Accounting Standards Board (IASB) jointly announced new financial
accounting standards for revenue recognition entitled “Revenue from Contracts with Customers
(Topic 606)” (New Standards). See FASB Update No. 2014-09, and IASB International Financial
Reporting Standard (IFRS) 15. Under the New Standards, a taxpayer generally recognizes
revenue for financial accounting purposes when the taxpayer satisfies a performance obligation
by transferring a promised good or service to a customer, as described in the New Standards.
(2) Applicability. This change applies to a taxpayer that wants to change its method of
accounting for the recognition of income for federal income tax purposes to a method under
the New Standards for: (a) identifying performance obligations, (b) allocating transaction price
to performance obligations, and/or (c) considering performance obligations satisfied. A taxpayer
may request a change under this section 16.09 only if the taxpayer’s new method of accounting is
otherwise permissible for federal income tax purposes and the change in method of accounting is
made for the taxable year in which the taxpayer adopts the New Standards for financial accounting
purposes.
(3) Inapplicability. This change does not apply to:
(a) a change in the manner in which the taxpayer identifies contracts or determines the transaction
price, including the inclusion and exclusion of variable consideration in the transaction price,
under the New Standards;
(b) a change in method of accounting for recognizing income that is made in a year that is
different from the year that the taxpayer adopts the New Standards;
(c) a change in method of accounting that does not comply with § 451 or other guidance;
(d) any change in method of accounting that qualifies under another automatic change described
in the List of Automatic Changes provided in this revenue procedure (or any successor), even if it
is described in section 16.09(2) of this revenue procedure, and otherwise satisfies the requirements
of paragraphs 5.01(1)(a)-(d) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419 (or any successor). The
taxpayer must request such change(s) in method of accounting by applying the automatic change
procedures in section 6 of Rev. Proc. 2015-13 (or any successor) and the respective section of Rev.
Proc. 2022-14 (or any successor);

February 14, 2022 662 Bulletin No. 2022–7
(e) any change in the method of accounting for income from a long-term contract, as defined
in § 460(f), unless the long-term contract is excepted from required use of the percentage-of-
completion method by § 460(e)(1); or
(f) an item of gross income that is required to be accounted for under § 451(b) or § 451(c).
Accordingly, a taxpayer that wants to make a change in method of accounting for an item of gross
income to comply with § 451(b), the proposed § 451(b) regulations (REG-104870-18; 84 FR
47205) (proposed § 1.451-3), the proposed § 451(c) regulations (REG-104554-18; 84 FR 47191)
(proposed § 1.451-8), § 1.451-3 and/or § 1.451-8, as applicable, in the year in which it adopts the
New Standards is not permitted to do so under this section 16.09. See, however, sections 16.06,
16.08, or 16.10, as applicable, of this revenue procedure.
(4) Time for making change. The change under this section 16.09 may only be made for a
taxable year ending on or before May 10, 2022.
(5) Manner of making change.
(a) Cut-off basis or § 481(a) adjustment. A taxpayer making a change under this section 16.09
may implement the change with either a § 481(a) adjustment as provided in sections 7.02 and
7.03 of Rev. Proc. 2015-13, or on a cut-off basis. If the taxpayer implements the change on a
cut-off basis, (i) the taxpayer must allocate any payments received prior to the year of change
using the taxpayer’s former method of accounting, (ii) all changes made under this section 16.09
must be implemented using a cut-off basis, and (iii) a § 481(a) adjustment is neither permitted
nor required. Changes under this section 16.09 with regard to taxpayers who are members of
consolidated groups generally are governed by this section 16.09 rather than by § 1.1502-17(b)
(2) (applicable to changes in the application of the timing rules of § 1.1502-13 in accounting for
intercompany transactions (within the meaning of § 1.1502-13(b)(1)(i)). See § 1.1502-17(a) and
(b)(1).
(b) Reduced filing requirement. A taxpayer making a change under this section 16.09 is required
to complete only the following information on Form 3115 (Rev. December 2018):
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,16c, and 19; and
(v) Part IV, all lines. For a taxpayer making a change under this section 16.09 using a § 481(a)
adjustment, the statement required for Line 26 of Form 3115 should list a description of each
change, the § 481(a) adjustment for each change (or a statement that the change is being made on
a cut-off basis) and, if applicable, a description of where the item’s § 481(a) adjustment is reflected
on the federal income tax return (line number (or schedule)).
In addition, the requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc.
2015-13, is waived.

Bulletin No. 2022–7 663 February 14, 2022
(6) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13 does not apply to this change for a taxable year ending on or before May 10, 2022.
(7) No ruling on method used. The consent granted under section 9 of Rev. Proc. 2015-13 for
a change made under this section 16.09 is not a determination by the Commissioner that the new
method of accounting is a permissible method of accounting and does not create any presumption
that the allocation method is a permissible method of accounting under any provision of the Code.
Further, the consent granted under section 9 of Rev. Proc. 2015-13 for a change made under
this section 16.09 is not a determination that the amount of income included in taxable income
using an allocation method described in the New Standards is correct. The director will ascertain
whether the new method of accounting is a permissible method of accounting and whether the
allocation method is permissible under the Code (for example, a method that is permitted under
§ 451).
(8) Concurrent automatic change. A taxpayer that wants to make one or more changes in
method of accounting under this section 16.09 may file a single Form 3115 that includes all of the
changes, must separately state the § 481(a) adjustment for each change made under this section,
and may not net the § 481(a) adjustments with § 481(a) adjustments from other changes.
(9) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 16.09 is “231.”
(10) Contact information. For further information regarding a change under this section, contact
Sharon Horn at (202) 317-7003 (not a toll-free number).
.10 Changes in the timing of income recognition under § 451(b) and (c).
(1) Description of change.
(a) In general. This change applies to an accrual method taxpayer with an applicable financial
statement (AFS) that wants to make certain changes in method of accounting described in section
16.10(2)(a) of this revenue procedure. This change also applies to a taxpayer without an AFS that
wants to make certain changes in method of accounting described in section 16.10(2)(b) of this
revenue procedure.
(b) Applicable terms. For this section 16.10, the term “AFS” is defined under proposed § 1.451-
3(c)(1) (REG-104870-18; 84 FR 47205) for a taxpayer making a change to apply proposed § 1.451-
3 and/or proposed § 1.451-8 (REG-104554-18; 84 FR 47191), as applicable, or under § 1.451-3(b)
(5) for a taxpayer making a change to apply § 1.451-3 and/or § 1.451-8, as applicable. Additionally,
because a change to comply with §§ 1.451-3, 1.451-8, and/or 1.1275-2(l), as applicable, is a change
in method of accounting to which the provisions of § 446 and the accompanying regulations apply,
the item being changed to comply with §§ 1.451-3, 1.451-8, and/or 1.1275-2(l), as applicable, is
determined by applying § 446 and the accompanying regulations. See §§ 1.451-3(l)(1) and 1.451-
8(g)(2). In that regard, while §§ 451(b) and (c) and the final regulations use the term “item of
gross income” to generally refer to income that arises under a specific contract, the term “item of
gross income” is not synonymous with the terms “item” or “material item” as used throughout the
regulations under § 446.
(2) Applicability.

February 14, 2022 664 Bulletin No. 2022–7
(a) Taxpayer with an AFS. This change applies to an accrual method taxpayer with an AFS that:
(i) for a taxable year beginning before January 1, 2021, wants to change to a method of
accounting under proposed § 1.451-3 (including a change for a specified credit card fee under
proposed § 1.451-3(i) and proposed § 1.1275-2(l));
(ii) for a taxable year beginning before January 1, 2021, wants to change to a method of
accounting for advance payments under proposed § 1.451-8(a) or (c);
(iii) wants to make one of the following changes under § 1.451-3:
(A) a change to comply with the AFS income inclusion rule in § 1.451-3(b) under which the
taxpayer determines the amount of an item of gross income that is treated as “taken into account as
AFS revenue” by making the AFS revenue adjustments provided in § 1.451-3(b)(2)(i) (including
a change for specified credit card fees under §§ 1.451-3(j)(2) and 1.1275-2(l));
(B) a change to comply with the AFS income inclusion rule in § 1.451-3(b) under which the
taxpayer determines the amount of the item of gross income that is “taken into account as AFS
revenue” by making the AFS revenue adjustments provided in § 1.451-3(b)(2)(ii) (including
a change for specified credit card fees under §§ 1.451-3(j)(2) and 1.1275(l)) (Alternative AFS
Revenue Method);
(C) except as provided in section 16.10(2)(a)(iii)(E) of this section, a change to apply the AFS
cost offset method in § 1.451-3(c) to determine the amount of an item of gross income from the
sale of inventory that is required to be included in gross income under the AFS income inclusion
rule in § 1.451-3(b);
(D) a change from applying a cost offset method, including the AFS cost offset method in
§ 1.451-3(c), to not applying a cost offset method to determine the amount of an item of gross
income from the sale of inventory that is required to be included in gross income under the AFS
income inclusion rule in § 1.451-3(b);
(E) a change to comply with § 1.451-3(c)(5)(ii) as a result of a concurrent cost-offset related
inventory method change, as defined in section 5.06 of Rev. Proc. 2015-13 (or successor), or
because the taxpayer determines its cost of goods in progress offset by reference to costs that the
taxpayer has impermissibly capitalized and/or allocated under its present method of accounting
for inventory. This section 16.10(2)(a)(iii)(E) applies whether the taxpayer presently uses a cost
offset method, including the AFS cost offset method under § 1.451-3(c), or is proposing to make,
for the same year of change, a change to begin using the AFS cost offset method pursuant to
section 16.10(2)(a)(iii)(C) of this revenue procedure;
(F) a change to comply with the transaction price allocation rules in § 1.451-3(d); or
(G) a change to a method of accounting described in § 1.451-3(h)(4) when a taxpayer’s AFS
covers mismatched reportable periods; or
(iv) wants to make one of the following changes in method of accounting for advance payments
under § 1.451-8:

Bulletin No. 2022–7 665 February 14, 2022
(A) a change to the full inclusion method provided in § 1.451-8(b);
(B) a change to the deferral method provided in § 1.451-8(c);
(C) a change to the specified goods § 451(c) method described in § 1.451-8(f) to treat payments
that otherwise qualify for the specified good exception, as defined in § 1.451-8(a)(1)(ii)(H), as
advance payments and account for such payments either under the full inclusion method provided
in § 1.451-8(b) or under the deferral method provided in § 1.451-8(c);
(D) except as provided in section 16.10(2)(a)(iv)(F) of this revenue procedure, a change to apply
the advance payment cost offset method in § 1.451-8(e) to determine the amount of an advance
payment from the sale of inventory that is required to be included in gross income under either the
full inclusion method in § 1.451-8(b) or the deferral method in § 1.451-8(c), as applicable;
(E) a change from applying a cost offset method, including the advance payment cost offset
method in § 1.451-8(e), to not applying a cost offset method to determine the amount of an advance
payment from the sale of inventory that is required to be included in gross income under either the
full inclusion method in § 1.451-8(b) or the deferral method in § 1.451-8(c), as applicable;
(F) a change to comply with § 1.451-8(e)(8)(ii) as a result of a concurrent cost-offset related
inventory method change, as defined in section 5.06 of Rev. Proc. 2015-13 (or successor), or
because the taxpayer presently determines its cost of goods in progress offset by reference to
costs that the taxpayer has impermissibly capitalized and/or allocated under its present method of
accounting for inventory. This section 16.10(2)(a)(iv)(F) applies whether the taxpayer presently
uses a cost offset method, including the advance payment cost offset method under § 1.451-8(e),
or is proposing to make, for the same year of change, a change to begin using the advance payment
cost offset method pursuant to section 16.10(2)(a)(iv)(D) of this revenue procedure;
(G) a change to a method of accounting described in § 1.451-8(c)(7), which refers to the methods
described in § 1.451-3(h)(4), when a taxpayer’s AFS covers mismatched reporting periods; or
(H) a change to comply with the payment allocation rules in § 1.451-8(c)(8).
(b) Taxpayer without an AFS. This change applies to a taxpayer that does not have an AFS that:
(i) for a taxable year beginning after December 31, 2017, and before January 1, 2021, wants to
change to a method of accounting for advance payments under proposed § 1.451-8(a) or (d); or
(ii) wants to make one of the following changes in method of accounting for advance payments
under § 1.451-8:
(A) a change to the full inclusion method provided in § 1.451-8(b);
(B) a change to the deferral method provided in § 1.451-8(d)(3);
(C) except as provided in section 16.10(2)(b)(ii)(E) of this revenue procedure, a change to apply
the advance payment cost offset method in § 1.451-8(e) to determine the amount of an advance

February 14, 2022 666 Bulletin No. 2022–7
payment from the sale of inventory that is required to be included in gross income under either
the full inclusion method in § 1.451-8(b) or the deferral method in § 1.451-8(d)(3), as applicable;
(D) a change from applying a cost offset method, including the advance payment cost offset
method in § 1.451-8(e), to not applying a cost offset method to determine the amount of an advance
payment from the sale of inventory that is required to be included in gross income under either
the full inclusion method in § 1.451-8(b) or the deferral method in § 1.451-8(d)(3), as applicable;
(E) a change to comply with § 1.451-8(e)(8)(ii) as a result of a concurrent cost-offset related
inventory method change, as defined in section 5.06 of Rev. Proc. 2015-13 (or successor), or
because the taxpayer determines its cost of goods in progress offset by reference to costs that the
taxpayer has impermissibly capitalized and/or allocated under its present method of accounting for
inventory. This section 16.10(2)(b)(ii)(E) applies whether the taxpayer presently uses a cost offset
method, including the advance payment cost offset method under § 1.451-8(e), or is proposing
to make, for the same year of change, a change to begin using the advance payment cost offset
method pursuant to section 16.10(2)(b)(ii)(C) of this revenue procedure; or
(F) a change to a payment allocation method described in § 1.451-8(d)(4)(ii).
(3) Inapplicability. Section 16.10(2) of this revenue procedure does not apply to:
(a) a change in method of accounting to use a special method of accounting, as defined in
proposed § 1.451-3(c)(5) or § 1.451-3(a)(13), as applicable;
(b) a change in method of allocating transaction price between item(s) of gross income that are
accounted for under proposed § 1.451-3 or § 1.451-3, as applicable, and item(s) of gross income
that are accounted for under a special method of accounting, as defined in proposed § 1.451-3(c)
(5) or § 1.451-3(a)(14), as applicable, including a change to comply with § 1.451-3(d)(5);
(c) a change described in section 16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F) or section
16.10(2)(b)(ii)(E) of this revenue procedure, as applicable, if, immediately after such change is
made, the taxpayer’s method of accounting for cost offsets does not otherwise comply with the
AFS cost offset method under § 1.451-3(c) and/or the advance payment cost offset method under
§ 1.451-8(e), as applicable;
(d) a change described in section 16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F) or section
16.10(2)(b)(ii)(E) of this revenue procedure, including a change to comply with § 1.451-3(c)(5)
(ii) or § 1.451-8(e)(8)(ii) because the taxpayer determines its cost of goods in progress offset by
reference to costs that the taxpayer has impermissibly capitalized and/or allocated under its present
method of accounting for inventory, unless the taxpayer makes, for the same year of change, the
cost-offset related inventory method change(s), as defined in section 5.06 of Rev. Proc. 2015-13;
(e) a change to use the AFS cost offset method if the taxpayer receives advance payments from
the sale of inventory and does not also make a change to apply the advance payment cost offset
method, or a change to use the advance payment cost offset method if the taxpayer is required to
include gross income from the sale of inventory under § 1.451-3 and does not also make a change
to apply the AFS cost offset method;
(f) a change to use the deferral method in § 1.451-8(c) for allocable payments described in
§ 1.451-8(c)(8)(iii)(A) (other than allocable payments described in § 1.451-8(c)(8)(iii)(B));

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(g) a taxpayer that presently uses the deferral method in § 1.451-8(c) for allocable payments
described in § 1.451-8(c)(8)(iii)(A) that wants to change its payment allocation method to an
allocation method that is not described in § 1.451-8(c)(8)(iii)(B);
(h) a change to use the deferral method in § 1.451-8(d)(3) for allocable payments described in
§ 1.451-8(d)(4)(i) other than either allocable payments described in § 1.451-8(d)(4)(ii) or allocable
payments that are wholly attributable to two or more items described in § 1.451-8(a)(1)(i)(C);
(i) a taxpayer that presently uses the deferral method in § 1.451-8(d)(3) for allocable payments
described in § 1.451-8(d)(4)(i) that wants to change its payment allocation method to an allocation
method that is not described in § 1.451-8(d)(4)(ii);
(j) a taxpayer without an AFS that wants to change its method of accounting for advance
payments to the deferral method under proposed § 1.451-8(d)(3) or § 1.451-8(d)(3) under which
the taxpayer determines the extent to which an advance payment is earned by using the following:
(i) a statistical basis if adequate data are available to the taxpayer; or (ii) the use of any other basis
that in the opinion of the Commissioner results in a clear reflection of income;
(k) a change in method of accounting for specified fees, as defined in proposed § 1.451-3(i)(2)
or § 1.451-3(j)(2), as applicable, other than specified credit card fees;
(l) a change in method of accounting that qualifies under another automatic change provided in
this revenue procedure including, for example, a change described in section 16.08 of this revenue
procedure;
(m) a change in method of accounting for a liability, as defined in § 1.446-1(c)(1)(ii)(B);
(n) a change in a taxpayer’s mismatched reporting periods method described in § 1.451-3(h)
(4) if the taxpayer uses the deferral method for advance payments under § 1.451-8(c) and does
not also change to the same mismatched reporting periods method for purposes of accounting
for advance payments pursuant to § 1.451-8(c)(7) for the same year of change; or, if applicable,
a change in a taxpayer’s mismatched reporting periods method pursuant to § 1.451-8(c)(7) if the
taxpayer uses the deferral method for advance payments under § 1.451-8(c) and does not also
change to the same mismatched reporting periods method for purposes of § 1.451-3(h)(4) for the
same year of change;
(o) a change in method of accounting for payments within the scope of the specified good
exception, as defined in § 1.451-8(a)(1)(ii), if the proposed method of accounting is to include
such payments in gross income under § 1.451-3 in one or more taxable years following the taxable
year of receipt; and
(p) a taxpayer that makes one or more changes under section 16.10(2)(a)(iii) or (iv) of this
revenue procedure for a taxable year that begins before January 1, 2021, unless the taxpayer
complies with all the requirements in §§ 1.451-3(m)(3), 1.451-8(h)(2), and 1.1275-2(l)(2)(ii), as
applicable.
(4) Manner of making change.
(a) Short Form 3115. A taxpayer making a change under this section 16.10 for its early
application year, as defined in section 16.10(4)(c)(i) of this revenue procedure, or in the case

February 14, 2022 668 Bulletin No. 2022–7
of a taxpayer that does not apply § 1.451-3 and/or § 1.451-8, as applicable, for a taxable year
beginning before January 1, 2021, for its first taxable year beginning on or after January 1, 2021,
is required to complete the following information on Form 3115 (Rev. December 2018), and the
and the requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc. 2015-13 is
waived:
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13, 16c, and 19; and
(v) Part IV, all lines. For a taxpayer making a change under this section 16.10, the statement
required for Line 26 of Form 3115 should list the § 481(a) adjustment(s).
(vi) Schedule B, all lines except line 1e.
(b) Special rules relating to § 481(a) adjustment or cut-off basis.
(i) Section 481(a) adjustment period for changes relating to specified credit card fees. In the
case of income from a specified credit card fee, the § 481(a) adjustment period for any qualified
change in method of accounting described in this section 16.10(4)(b)(i) is six taxable years,
including the year of change and next five taxable years. For purposes of the preceding sentence,
a qualified change in method of accounting is a change in method of accounting for income from
a specified credit card fee to a method that is required by § 451(b), as added by § 13221 of Public
Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and Jobs Act
(TCJA), for such income, but only for the taxpayer’s first taxable year beginning after December
31, 2018. Section 16.10(4)(b)(ii) of this revenue procedure may not be used for a change relating
to specified credit card fees.
(ii) Cut-off basis or § 481(a) adjustment.
(A) In general. Changes under this section 16.10 with regard to taxpayers who are members of
consolidated groups generally are governed by this section 16.10, rather than by § 1.1502-17(b)
(2) (applicable to changes in the application of the timing rules of § 1.1502-13 in accounting for
intercompany transactions (within the meaning of § 1.1502-13(b)(1)(i))). See § 1.1502-17(a) and
(b)(1).
(B) Cut-off basis or § 481(a) adjustment for changes made under section 16.10(2)(a)(i) of
this revenue procedure when taxpayer is also adopting the New Standards. Except as otherwise
provided in this section 16.10(4)(b)(ii), a taxpayer making a change described in section 16.10(2)
(a)(i) of this revenue procedure may implement the change with either a § 481(a) adjustment as
provided in sections 7.02 and 7.03 of Rev. Proc. 2015-13 or on a cut-off basis provided the year
of change is the same year that the taxpayer adopts the New Standards, as defined in section 16.09
of this revenue procedure. A taxpayer described in section 16.10(4)(c)(i)(B) or (C) of this revenue
procedure that uses the streamlined procedures provided in section 16.10(4)(c) of this revenue
procedure may not make a change in method of accounting on a cut-off basis. If the taxpayer
makes a change described in section 16.10(2)(a)(i) of this revenue procedure for the taxable year

Bulletin No. 2022–7 669 February 14, 2022
in which it adopts the New Standards and chooses to implement such change on a cut-off basis, (1)
the change applies to contracts entered into on or after the beginning of the year of change, (2) all
changes made under section 16.10(2)(a)(i) of this revenue procedure must be implemented using
a cut-off basis, and (3) a § 481(a) adjustment is neither permitted nor required.
(C) Cut-off basis or § 481(a) adjustment for certain changes under proposed § 1.451-8(c).
Except as otherwise provided in this section 16.10(4)(b)(ii), a taxpayer that changes its method
of accounting for advance payments to the deferral method under proposed § 1.451-8(c) (as
described in section 16.10(2)(a)(ii) of this revenue procedure), may implement the change with
either a § 481(a) adjustment as provided in sections 7.02 and 7.03 of Rev. Proc. 2015-13 or on a
cut-off basis. A taxpayer described in section 16.10(4)(c)(i)(B) of this revenue procedure that uses
the streamlined procedures provided in section 16.10(4)(c) of this revenue procedure may not
make a change in method of accounting on a cut-off basis. If the taxpayer implements the change
on a cut-off basis, (1) the change applies to contracts entered into on or after the beginning of the
year of change, (2) all changes made under section 16.10(2)(a)(ii) of this revenue procedure to
comply with proposed § 1.451-8(c) must be implemented using a cut-off basis, and (3) a § 481(a)
adjustment is neither permitted nor required.
(D) Computing § 481(a) adjustments when the year of change is a year in which the taxpayer
implements a change in accounting principle with a retained earnings adjustment. If the year
of change is a year in which the taxpayer implements a change in accounting principle for AFS
purposes, including a change in the method of applying an accounting principle for AFS purposes,
and the change in accounting principle is implemented with a retained earnings adjustment that is
taken into account during the year of change, the taxpayer is required to treat such adjustment as
being taken into account in the taxable year prior to the year of change for purposes of computing
the § 481(a) adjustment. An AFS change to adopt the New Standards, as defined in section 16.09(1)
of this revenue procedure, is an example of a change in accounting principle.
(iii) Netting of the § 481(a) adjustment.
(A) Required netting for changes made under § 1.451-3 related to inventory sales. A taxpayer
that makes a change described in section 16.10(2)(a)(iii)(C) or (D) of this revenue procedure
and one or more changes described in section 16.10(2)(a)(iii)(A), (B), and/or (G) of this revenue
procedure for gross income from inventory sales for the same year of change must provide a single
net § 481(a) adjustment for all such changes. The § 481(a) adjustment period described in section
7.03 of Rev. Proc. 2015-13 is determined based on the net § 481(a) adjustment.
(B) Required netting for changes made under § 1.451-8 related to inventory sales for taxpayers
with an AFS. A taxpayer that makes a change described in section 16.10(2)(a)(iv)(D) or (E) of this
revenue procedure and one or more changes described in section 16.10(2)(a)(iv)(A), (B), (C), and/
or (G) of this revenue procedure for advance payments from the sale of inventory for the same
year of change must provide a single net § 481(a) adjustment for all such changes. The § 481(a)
adjustment period described in section 7.03 of Rev. Proc. 2015-13 is determined based on the net
§ 481(a) adjustment.
(C) Required netting for changes made under § 1.451-8 related to inventory sales for taxpayers
without an AFS. A taxpayer that makes a change described in section 16.10(2)(b)(ii)(C) or
(D) of this revenue procedure and one or more changes in method of accounting described in
section 16.10(2)(b)(ii)(A) or (B) of this revenue procedure for advance payments from the sale
of inventory for the same year of change must provide a single net § 481(a) adjustment for all
such changes. The § 481(a) adjustment period described in section 7.03 of Rev. Proc. 2015-13 is
determined based on the net § 481(a) adjustment.

February 14, 2022 670 Bulletin No. 2022–7
(D) Required netting for non-automatic method changes under § 1.451-3 and/or § 1.451-8
related to inventory sales. The rules in section 16.10(4)(b)(iii) of this revenue procedure generally
will apply to a non-automatic change under § 1.451-3 and/or § 1.451-8 for which the netting rules
of section 16.10(4)(b)(iii) of this revenue procedure would otherwise apply if the taxpayer were
eligible to make the change under section 16.10 of this revenue procedure.
(iv) Special § 481(a) adjustment rules for cost offset method change(s) under § 1.451-3 and/or
§ 1.451-8 made with corresponding cost-offset related inventory method change(s).
(A) Required netting rule for changes described in section 16.10(2)(a)(iii)(E). A taxpayer that
makes more than one method change under section 16.10(2)(a)(iii)(E) of this revenue procedure
for the same year of change must provide a single net § 481(a) adjustment for all such changes.
The § 481(a) adjustment period for this net § 481(a) adjustment is determined by applying the
rules in section 16.10(4)(b)(iv)(D) of this revenue procedure.
(B) Required netting rule for changes described in section 16.10(2)(a)(iv)(F). A taxpayer that
makes more than one method change under section 16.10(2)(a)(iv)(F) of this revenue procedure
for the same year of change must provide a single net § 481(a) adjustment for all such changes.
The § 481(a) adjustment period for this net § 481(a) adjustment is determined by applying the
rules in section 16.10(4)(b)(iv)(D) of this revenue procedure.
(C) Required netting rule for changes described in section 16.10(2)(b)(ii)(E). A taxpayer that
makes more than one method change under section 16.10(2)(b)(ii)(E) of this revenue procedure
for the same year of change must provide a single net § 481(a) adjustment for all such changes.
The § 481(a) adjustment period for this net § 481(a) adjustment is determined by applying the
rules in section 16.10(4)(b)(iv)(D) of this revenue procedure.
(D) Special § 481(a) adjustment period. For purposes of sections 7.02 and 7.03 of Rev. Proc.
2015-13, the § 481(a) adjustment period for a cost offset change described in section 16.10(2)
(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)(b)(ii)(E) of this revenue procedure,
whether the § 481(a) adjustment is positive or negative, is the same as the § 481(a) adjustment
period for the corresponding cost-offset related inventory method change, as defined in section
5.06 of Rev. Proc. 2015-13. The rules of section 7.02 and 7.03 of Rev. Proc. 2015-13, including
the short period rule and the accelerated adjustment period rules, apply to determine the § 481(a)
adjustment period for the § 481(a) adjustment for the cost-offset related inventory method
change, which is used to determine the § 481(a) adjustment period for a positive or negative
§ 481(a) adjustment for the corresponding cost offset change described in section 16.10(2)(a)
(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)(b)(ii)(E) of this revenue procedure. If the
taxpayer must net the § 481(a) adjustments for cost offset changes under section 16.10(4)(b)(iv)
(A), (B) or (C) of this revenue procedure, as applicable, the § 481(a) adjustment period for any
such net § 481(a) adjustment is the same as the § 481(a) adjustment period for the corresponding
cost-offset related inventory method changes, determined by netting the § 481(a) adjustments
from such corresponding cost-offset related inventory method changes. The requirement that the
taxpayer net the § 481(a) adjustments for such corresponding cost-offset related inventory method
changes is solely for purposes of determining the § 481(a) adjustment period for the net § 481(a)
adjustment determined under section 16.10(4)(b)(iv)(A), (B), or (C), as applicable. This section
16.10(4)(b)(iv)(D) does not apply if, after applying the netting rules in section 16.10(4)(b)(iv)
(A), (B), or (C), as applicable, the § 481(a) adjustment for the corresponding cost offset change(s)
is zero. For example, if the taxpayer makes a cost-offset related inventory method change that
is implemented on a cut-off basis and the § 481(a) adjustment for the taxpayer’s corresponding
change described in section 16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)(b)
(ii)(E) of this revenue procedure is zero as a result, this section 16.10(4)(b)(iv)(D) does not apply.

Bulletin No. 2022–7 671 February 14, 2022
(v) Examples. For each of the following examples, the taxpayer uses an accrual method of
accounting, is on a calendar year, and has an AFS, as defined in § 1.451-3(a)(5). The taxpayer
implements § 1.451-3 and, if applicable, § 1.451-8, beginning with its 2021 taxable year.
(A) Example 1. Netting rules. A is engaged in a single trade or business of selling and servicing computers. A is not
under examination within the meaning of section 3.18 of Rev. Proc. 2015-13. A does not receive advance payments.
For 2021, A makes multiple changes in method of accounting to apply § 1.451-3. Specifically, A changes its method
of accounting for gross income from the sale of computers to apply the AFS income inclusion rule pursuant to section
16.10(2)(a)(iii)(A) of this revenue procedure and to apply the AFS cost offset method pursuant to section 16.10(2)(a)
(iii)(C) of this revenue procedure. A also changes its method of accounting for gross income from computer services
to apply the AFS income inclusion rule pursuant to section 16.10(2)(a)(iii)(A) of this revenue procedure. Since A made
a change described in section 16.10(2)(a)(iii)(C) of this revenue procedure and a change described in section 16.10(2)
(a)(iii)(A) of this revenue procedure for gross income from computer sales for the same year of change, A must net the
§ 481(a) adjustments resulting from these changes in the manner required by section 16.10(4)(b)(iii)(A) of this revenue
procedure. The § 481(a) adjustment resulting from A’s change in method of accounting for income from computer services
under section 16.10(2)(a)(iii)(A) of this revenue procedure is not netted with the § 481(a) adjustments resulting from the
computer sales method changes.
(B) Example 2. Special § 481(a) adjustment period under section 16.10(4)(b)(iv) of this revenue procedure. The facts
are the same as in Example 1. For 2022, A changes its inventory method under section 12.01 of this revenue procedure and,
as a result, also changes its cost offset method to comply with § 1.451-3(c)(5)(ii) pursuant to section 16.10(2)(a)(iii)(E)
of this revenue procedure. The cost-offset related inventory method change under section 12.01 of this revenue procedure
results in a positive § 481(a) adjustment that is spread over four taxable years under section 7.01 and 7.03 of Rev. Proc.
2015-13. The cost offset method change under section 16.10(2)(a)(iii)(E) of this revenue procedure results in a negative
§ 481(a) adjustment. Section 16.10(4)(b)(iv)(D) of this revenue procedure requires A to spread the negative § 481(a)
adjustment over four taxable years consistent with the § 481(a) adjustment period for the concurrent cost-offset related
inventory method change under section 12.01 of this revenue procedure.
(c) Streamlined method change procedures for certain taxpayers.
(i) Applicability. The procedures described in this section 16.10(4)(c) may be used by a taxpayer
to make a change in method of accounting described in section 16.10(2)(a)(iii)(A), (B), (F), and/or
(G), section 16.10(2)(a)(iv)(A), (B), (C), (G), and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or
(F) of this revenue procedure for the taxpayer’s early application year, provided the taxpayer meets
the requirements in this section 16.10(4)(c). For purposes of this section 16.10, a taxpayer’s “early
application year” means the taxable year beginning before January 1, 2021, in which a taxpayer
first applies § 1.451-3 and/or § 1.451-8, as applicable. In addition, in the case of a taxpayer that
does not apply § 1.451-3 and/or § 1.451-8 for a taxable year beginning before January 1, 2021,
the procedures described in this section 16.10(4)(c) may be used to make a change in method of
accounting described in section 16.10(2)(iii)(A), (B), (F), and/or (G), section 16.10(2)(a)(iv)(A),
(B), (C), (G), and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or (F) of this revenue procedure,
for the taxpayer’s first taxable year beginning on or after January 1, 2021, provided the taxpayer
meets the requirements in section 16.10(4)(c). A taxpayer may not use the streamlined procedures
for any change in method of accounting described in section 16.10(2) of this revenue procedure
if the taxpayer is also making a change in method of accounting described in sections 16.10(2)
(a)(iii)(C), (D), and/or (E), sections 16.10(2)(a)(iv)(D), (E), and/or (F), or sections 16.10(2)(b)(ii)
(C), (D), and/or (E) of this revenue procedure for the same year of change. In addition, a taxpayer
may not use the streamlined procedures if one or more of the inapplicability rules provided in
section 16.10(3) of this revenue procedure applies to the change. A taxpayer that is otherwise
permitted to use the streamlined method change procedures in this section 16.10(4)(c) may use
these streamlined procedures if the taxpayer meets one of the following requirements:
(A) the taxpayer, other than a tax shelter, as defined in § 448(d)(3), meets the § 448(c) gross
receipts test (a “small business taxpayer”) for the year of change. The taxpayer meets the § 448(c)
gross receipts test if the taxpayer has average annual gross receipts for the three prior taxable
years of $25,000,000 or less (adjusted for inflation). See § 448(c)(4). For a taxable year beginning
in 2019, 2020, or 2021, the inflation-adjusted amount is $26,000,000. See Rev. Proc. 2018-57,

February 14, 2022 672 Bulletin No. 2022–7
2018-49 I.R.B. 827, Rev. Proc. 2019-44, 2019-47 I.R.B. 1093, or Rev. Proc. 2020-45, 2020-46
I.R.B. 1016, as applicable. For a taxable year beginning in 2022, the inflation-adjusted amount is
$27,000,000. See Rev. Proc. 2021-45, 2021-48 I.R.B. 764;
(B) the taxpayer is making one or more changes described in section 16.10(2)(a)(iii)(A),
(B), (F), and/or (G) of this revenue procedure, and the § 481(a) adjustment required by each
of the changes is zero. A taxpayer that meets this requirement is permitted to make the changes
described in section 16.10(2)(a)(iii)(A), (B), (F), and/or (G) of this revenue procedure under the
streamlined method change procedures. Notwithstanding any provisions of this section 16.10, a
taxpayer making more than one change in method of accounting under section 16.10(2)(a)(iii)
(A), (B), (F), and/or (G) of this revenue procedure for the same year of change is not permitted
to net the § 481(a) adjustments to determine if the taxpayer meets the requirements to use the
streamlined method change procedures. See section 16.10(7)(a) of this revenue procedure for
more information on making concurrent changes; or
(C) the taxpayer is making one or more changes described in section 16.10(2)(a)(iv)(A), (B),
(C), (G), and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or (F) of this revenue procedure,
and the § 481(a) adjustment required by each of the changes is zero. A taxpayer that meets this
requirement is permitted to make the changes described in section 16.10(2)(a)(iv)(A), (B), (C),
(G), and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or (F) of this revenue procedure under the
streamlined method change procedures. Notwithstanding any provisions of this section 16.10, a
taxpayer making more than one change in method of accounting under section 16.10(2) for the
same year of change is not permitted to net the § 481(a) adjustments to determine if the taxpayer
meets the requirements to use the streamlined method change procedures. See section 16.10(7)(a)
of this revenue procedure for more information on making concurrent changes.
(ii) No Form 3115 required. In accordance with § 1.446-1(e)(3)(ii), the requirement of § 1.446-
1(e)(3)(i) to file a Form 3115 is waived for a taxpayer making a change in method of accounting
under this section 16.10 using the streamlined method change procedures. Thus, a taxpayer using
the streamlined method change procedures is not required to file a Form 3115 and is not required
to attach a separate statement when making a change under this section 16.10.
(d) Certain cost offset changes made on an amended return.
(i) In general. Notwithstanding section 6.03(1)(a) of Rev. Proc. 2015-13, a taxpayer making
a change described in section 16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)
(b)(ii)(E) of this revenue procedure, as applicable, which corresponds to a cost-offset related
inventory method change filed under the non-automatic change procedures of Rev. Proc. 2015-13
for the same year of change may make the corresponding cost offset change described in section
16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)(b)(ii)(E) on an amended federal
income tax return for the cost offset year of change (as defined in section 16.10(4)(d)(ii) of this
revenue procedure) provided:
(A) the taxpayer received consent for the cost-offset related inventory method change filed
under the non-automatic change procedures for the year of change after the time the taxpayer
was required to file the original Form 3115 for the corresponding cost offset change under section
16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)(b)(ii)(E) of this revenue
procedure, as applicable, in accordance with section 6.03(1)(a)(i)(A) of Rev. Proc. 2015-13 for
the cost offset year of change;
(B) the taxpayer timely signs and returns the Consent Agreement for the non-automatic
corresponding cost-offset related inventory method change in accordance with section 11.03(2)

Bulletin No. 2022–7 673 February 14, 2022
(c)(i) of Rev. Proc. 2015-13, and timely implements such non-automatic change in accordance
with section 11.03(2)(c)(ii)(A) or (B) of Rev. Proc. 2015-13;
(C) the taxpayer implements the corresponding cost offset method change described in section
16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)(b)(ii)(E) of this revenue
procedure, as applicable, on the same amended federal income tax return that the taxpayer
implements the cost-offset related inventory method change described in section 16.10(4)(d)(i)
(A) of this revenue procedure; and
(D) the taxpayer’s amended federal income tax return for the year of change includes any
adjustments to taxable income or tax liability resulting from the change(s) in method of accounting
for the cost-offset related inventory method change(s) specified in the letter ruling and the
corresponding cost offset method change(s).
(ii) Cost offset year of change. For purposes of this section 16.10(4)(d), a taxpayer’s cost offset
year of change is the same year of change that the taxpayer received consent under the non-
automatic change procedures for the cost-offset inventory related change.
(iii) Filing requirements. Notwithstanding section 6.03(1)(a) of Rev. Proc. 2015-13, a taxpayer
making a change under section 16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)
(b)(ii)(E) of this revenue procedure in accordance with section 16.10(4)(d) of this revenue procedure
must attach the original Form 3115 to the taxpayer’s timely filed amended federal income tax
return for the cost offset year of change and must file the duplicate copy (with signature) of the
Form 3115 with the IRS in Ogden, UT, no later than the date the taxpayer timely files the amended
federal income tax return that implements the cost-offset related inventory method described in
section 16.10(4)(d)(i)(A) of this revenue procedure, as provided in section 11.03(2)(c)(ii)(A) or
(B) of Rev. Proc. 2015-13.
(5) Eligibility rules inapplicable.
(a) Eligibility rule temporarily inapplicable for changes under sections 16.10(2)(a)(i), (2)(a)
(ii), or (2)(b)(i) of this revenue procedure. Except as otherwise provided in section 16.10(5)(c) of
this revenue procedure, the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 does not
apply to a change under section 16.10(2)(a)(i), (a)(ii) or (2)(b)(i) of this revenue procedure for
a taxpayer’s first, second or third taxable year beginning after December 31, 2017, provided the
taxable year begins before January 1, 2021.
(b) Eligibility rule temporarily inapplicable for changes under sections 16.10(2)(a)(iii), (2)(a)
(iv), or (2)(b)(ii) of this revenue procedure. Except as otherwise provided in section 16.10(5)(c) of
this revenue procedure, for a taxpayer that applies § 1.451-3 and/or § 1.451-8, as applicable, for
a taxable year beginning before January 1, 2021, the eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 does not apply to a change under section 16.10(2)(a)(iii), (2)(a)(iv), or (2)(b)(ii) of
this revenue procedure for a taxpayer’s early application year, as defined in section 16.10(4)(c)(i)
of this revenue procedure. Except as otherwise provided in this section 16.10(5), for a taxpayer
that does not apply § 1.451-3 and/or § 1.451-8 for a taxable year beginning before January 1,
2021, the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 does not apply to a change
under section 16.10(2)(a)(iii), (2)(a)(iv), or (2)(b)(ii) of this revenue procedure for a taxpayer’s
first taxable year beginning on or after January 1, 2021.
(c) Changes related to specified credit card fees. The eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 does not apply to a specified credit card fee change made under section 16.10(2)
(a)(i) of this revenue procedure for a taxpayer’s first or second taxable year beginning after

February 14, 2022 674 Bulletin No. 2022–7
December 31, 2018, provided the taxable year begins before January 1, 2021. In addition, for a
taxpayer that applies § 1.451-3 and § 1.1275-2(l) for specified credit card fees for a taxable year
beginning before January 1, 2021, the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13
does not apply to a specified credit card fee change under section 16.10(2)(a)(iii) of this revenue
procedure for the taxpayer’s early application year, as defined in section 16.10(4)(c)(i) of this
revenue procedure. For a taxpayer that does not apply § 1.451-3 and § 1.1275-2(l) for specified
credit card fees for a taxable year beginning before January 1, 2021, the eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13 does not apply to a specified credit card fee change under section
16.10(2)(a)(iii) of this revenue procedure for the taxpayer’s first taxable year beginning on or after
January 1, 2021.
(d) Certain cost offset method changes. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13 does not apply to a change under section 16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F) or
section 16.10(2)(b)(ii)(E) of this revenue procedure.
(e) Certain changes with § 481(a) adjustment of zero disregarded for eligibility rule. A change
made under section 16.10(2)(a)(iii)(A), (B), (F) and/or (G), section 16.10(2)(a)(iv)(A), (B), (C),
(G) and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or (F) of this revenue procedure will be
disregarded for purposes of section 5.01(1)(f) of Rev. Proc. 2015-13 if the change meets the
following requirements:
(i) the change is made for the taxpayer’s early application year, as defined in section 16.10(4)
(c)(i) of this revenue procedure or, in the case of a taxpayer that does not apply § 1.451-3 and/or
§ 1.451-8 for a taxable year beginning before January 1, 2021, for the taxpayer’s first taxable year
beginning on or after January 1, 2021, and
(ii) the § 481(a) adjustment required to implement the change is zero.
Notwithstanding any provisions of this section 16.10, a taxpayer that makes more than one
change in method of accounting described in this section 16.10(5)(e) for the same year of change
is not permitted to net the § 481(a) adjustments from such changes to determine if the requirement
in section 16.10(5)(e)(ii) of this revenue procedure is satisfied.
(f) Example. Application of section 5.01(1)(f) of Rev. Proc. 2015-13. B, a calendar year taxpayer, is engaged in a
single trade or business of selling computers. B is not under examination within the meaning of section 3.18 of Rev.
Proc. 2015-13. B does not receive advance payments. B presently recognizes gross income from the sale of computers
in the taxable year it begins manufacturing the computer without regard to whether there is a contract with a customer,
and does not apply a cost offset method. For 2020, B makes a change in method of accounting for gross income from
the sale of computers under section 16.10(2)(a)(iii)(A) of this revenue procedure to apply the AFS income inclusion rule
under § 1.451-3(b). Unless a waiver of eligibility applies, section 5.01(1)(f) of Rev. Proc. 2015-13 applies to prevent
B from automatically changing its method of accounting for gross income from the sale of computers under section
16.10(2)(a)(iii)(C) of this revenue procedure to apply the AFS cost offset method under § 1.451-3(c) for any of the four
taxable years succeeding the 2020 year of change (taxable year 2021 through 2024) because the 2020 change was for
the same item.
(6) Audit protection.
(a) Streamlined procedures. A taxpayer making a change in method of accounting under this
section 16.10 using the streamlined method change procedures provided in section 16.10(4)
(c) of this revenue procedure does not receive audit protection under section 8.01 of Rev. Proc.
2015-13.
(b) Taxpayers under examination.

Bulletin No. 2022–7 675 February 14, 2022
(i) In general – certain audit protection exception temporarily inapplicable. Except as otherwise
provided in this section 16.10(6)(b)(ii) and (iii) of this revenue procedure, for a taxpayer’s first,
second or third taxable year beginning after December 31, 2017, and before January 1, 2021,
section 8.02(1) of Rev. Proc. 2015-13 does not apply to a change in method of accounting made
under section 16.10(2)(a)(i), (2)(a)(ii) or (2)(b)(i) of this revenue procedure. In addition, except
as otherwise provided in section 16.10(6)(b)(ii) and (iii) of this revenue procedure, for a taxpayer
that applies § 1.451-3 and/or § 1.451-8, as applicable, for a taxable year beginning before January
1, 2021, section 8.02(1) of Rev. Proc. 2015-13, does not apply to change a method of accounting
made under section 16.10(2)(a)(iii), (2)(a)(iv) or (2)(b)(ii) of this revenue procedure for a taxpayer’s
early application year, as defined in section 16.10(4)(c)(i) of this revenue procedure. Except as
otherwise provided in section 16.10(6)(b)(ii) and (iii) of this revenue procedure, for a taxpayer
that does not apply § 1.451-3 or § 1.451-8 for a taxable year beginning before January 1, 2021,
section 8.02(1) of Rev. Proc. 2015-13 does not apply to a change in method of accounting made
under section 16.10(2)(a)(iii), (2)(a)(iv), or (2)(b)(ii) of this revenue procedure for a taxpayer’s
first taxable year beginning on or after January 1, 2021. In addition, except as otherwise provided
in section 16.10(4) of this revenue procedure, section 8.02(1) of Rev. Proc. 2015-13 continues to
apply for purposes of determining the § 481(a) adjustment period provided in section 7.03(3)(b)
of Rev. Proc. 2015-13.
(ii) Changes related to specified credit card fees. Except as otherwise provided in section
16.10(6)(b)(iii) of this revenue procedure, for a taxpayer’s first or second taxable year beginning
after December 31, 2018, and before January 1, 2021, section 8.02(1) of Rev. Proc. 2015-13 does
not apply to a change under section 16.10(2)(a)(i) of this revenue procedure for specified credit
card fees. In addition, except as otherwise provided in section 16.10(6)(b)(iii) of this revenue
procedure, for a taxpayer that applies § 1.451-3 and § 1.1275-2(l) to specified credit card fees
for a taxable year beginning before January 1, 2021, section 8.02(1) of Rev. Proc. 2015-13 does
not apply to a change for specified credit card fees under section 16.10(2)(a)(iii) of this revenue
procedure for the taxpayer’s early application year, as defined in section 16.10(4)(c)(i) of this
revenue procedure. Except as otherwise provided in section 16.10(6)(b)(iii) of this revenue
procedure, for a taxpayer that does not apply § 1.451-3 and § 1.1275-2(l) to specified credit card
fees for a taxable year beginning before January 1, 2021, section 8.02(1) of Rev. Proc. 2015-13
does not apply to a change for specified credit card fees under section 16.10(2)(a)(iii) of this
revenue procedure for the taxpayer’s first taxable year beginning on or after January 1, 2021.
In addition, except as otherwise provided in section 16.10(4)(b)(i) of this revenue procedure,
section 8.02(1) of Rev. Proc. 2015-13 continues to apply for purposes of determining the § 481(a)
adjustment period provided in section 7.03(3)(b) of Rev. Proc. 2015-13.
(iii) Exception. Sections 16.10(6)(b)(i) and (ii) of this revenue procedure do not apply to a
taxpayer that uses the streamlined method change procedures under section 16.10(4)(c) of this
revenue procedure.
(iv) No audit protection for certain cost offset changes. For a taxpayer under examination that
makes a change in method of accounting under section 16.10(2)(a)(iii)(E), section 16.10(a)(iv)
(F), or section 16.10(2)(b)(ii)(E) of this revenue procedure, the taxpayer does not receive audit
protection under section 8.01 of Rev. Proc. 2015-13 for such change if, at the time of filing, the
taxpayer’s method of accounting for the item being changed by the corresponding cost-offset
related inventory method change, as defined in section 5.06 of Rev. Proc. 2015-13 (or successor),
is an issue under consideration for the taxable year under examination. However, if the taxpayer
ultimately receives audit protection for the corresponding cost-offset related inventory method
change under section 8.02(1)(f) of Rev. Proc. 2015-13, then the preceding sentence does not apply
and the normal audit protection rules in section 8 of Rev. Proc. 2015-13 apply.
(7) Concurrent automatic changes.

February 14, 2022 676 Bulletin No. 2022–7
(a) Changes under this section 16.10. A taxpayer that wants to make one or more concurrent
changes in method of accounting under this section 16.10 may file a single Form 3115 that
includes all of the changes. Except as otherwise required by section 16.10(4)(b)(iii) of this
revenue procedure, the taxpayer may not net the § 481(a) adjustment from one change with the
§ 481(a) adjustment from another change, and must separately state the § 481(a) adjustment
for each change. If a taxpayer makes a concurrent change in method of accounting to allocate
transaction price and/or payments under section 16.10(2)(a)(i), (iii), or (iv) or section 16.10(2)
(b)(ii) of this revenue procedure, the taxpayer is required to make the allocation change before
any other change described in section 16.10(2)(a)(i), (iii), or (iv) or section 16.10(2)(b)(ii) of this
revenue procedure, as applicable.
(b) Concurrent cost offset change and cost-offset related inventory method change. See section
6.03(1)(b) of Rev. Proc. 2015-13 for a taxpayer that makes one or more change(s) under section
16.10(2)(a)(iii)(E), (a)(iv)(F), or (b)(ii)(E) of this revenue procedure and one or more cost-offset
related inventory method change(s), as defined in section 5.06 of Rev. Proc. 2015-13, under
this revenue procedure in the same year of change. Additionally, such taxpayer is required to
implement the cost-offset related inventory method change(s) under this revenue procedure before
it implements the corresponding change(s) under section 16.10(2)(a)(iii)(E), (a)(iv)(F), or (b)(ii)
(E) of this revenue procedure, as applicable. A taxpayer that makes a change under section 16.10(2)
(a)(iii)(C) and (E) and/or section 16.10(2)(a)(iv)(D) and (F), or section 16.10(2)(b)(ii)(C) and (E)
of this revenue procedure, as applicable, for the same year of change is required to implement the
change under section 16.10(2)(a)(iii)(C), 16.10(2)(a)(iv)(D), or 16.10(2)(b)(ii)(C) of this revenue
procedure, as applicable, before it implements any cost-offset related inventory method change(s),
as defined in section 5.06 of Rev. Proc. 2015-13, and the change(s) under section 16.10(2)(a)(iii)
(E), 16.10(2)(a)(iv)(F), or 16.10(2)(b)(ii)(E) of this revenue procedure, as applicable.
(8) Limited Applicability. Notwithstanding the inapplicability rules in section 16.10(3) of this
revenue procedure, the changes described in section 16.10(2)(a)(iii)(A) and (B) of this revenue
procedure are applicable only for taxable years beginning before January 1, 2021, and for a
taxpayer’s first, second or third taxable year beginning after December 31, 2020.
(9) Designated automatic accounting method change number. See the following tables for the
designated automatic method change number (DCN) for the changes in method of accounting
under this section 16.10.
(a) Changes under proposed §§ 1.451-3 and 1.451-8.
Timing of Income Recognition - Taxpayer with an AFS:
Description of change
SECTION # in REV.
PROC. 2022-14
DESIGNATED
CHANGE
NUMBER (DCN)
Changes to proposed § 1.451-316.10(2)(a)(i)242
Changes to account for advance payments
under proposed § 1.451-8(a) or (c)
16.10(2)(a)(ii)242

Bulletin No. 2022–7 677 February 14, 2022
Timing of Income Recognition - Taxpayer without an AFS:
Description of change
SECTION # in REV.
PROC. 2022-14
DESIGNATED
CHANGE
NUMBER (DCN)
Changes to account for advance payments
under proposed § 1.451-8(a) or (d)
16.10(2)(b)(i)242
(b) Changes under the final regulations of §§ 1.451-3 and 1.451-8.
Description of change
SECTION # in REV.
PROC. 2022-14
DESIGNATED
CHANGE
NUMBER (DCN)
Changes related to § 1.451-3 other than cost
offset
16.10(2)(a)(iii)(A),
(B), (F), (G)
250
Changes related to cost offset under § 1.451-3,
except concurrent cost-offset related inventory
method changes
16.10(2)(a)(iii)(C),
(D)
251
Changes related to the deferral method for
advance payments - § 1.451-8 other than cost
offset
16.10(2)(a)(iv)(B),
(C), (G) and (H),
16.10(2)(b)(ii)(B) or
(F)
252
Changes related to cost offset under § 1.451-8,
except concurrent cost-offset related inventory
method changes
16.10(2)(a)(iv)(D),
(E), 16.10(2)(b)(ii)(C)
or (D)
253
Changes related to full-inclusion method under
§ 1.451-8(b)
16.10(2)(a)(iv)(A) and
(C), 16.10(2)(b)(ii)(A)
254
Changes related to cost offsets resulting from
concurrent cost-offset related inventory chang-
es
16.10(2)(a)(iii)(E),
16.10(2)(a)(iv)(F), and
16.10(2)(b)(ii)(E)
255
(10) Contact information. For further information regarding a change under this section, contact
Sharon Horn at (202) 317-7003 (not a toll-free number). For further information regarding a
change under this section for OID and specified fees (including specified credit card fees), contact
Deepan Patel at (202) 317-3423 (not a toll-free number).
SECTION 17. OBLIGATIONS ISSUED AT DISCOUNT (§ 454)
.01 Series E, EE or I U.S. savings bonds.
(1) Description of change. This change applies to a taxpayer that uses the overall cash receipts
and disbursements (cash) method of accounting and that wants to change its method of accounting
for interest income on Series E, EE, or I U.S. savings bonds. However, this change only applies to
a taxpayer that previously made an election under § 454 to report as interest income the increase in
redemption price on a bond occurring in a taxable year, and that now wants to report this income
in the taxable year in which the bond is redeemed, disposed of, or finally matures, whichever is
earliest.

February 14, 2022 678 Bulletin No. 2022–7
(2) Manner of making change and designated automatic accounting method change number.
(a) This change is made on a cut-off basis and is effective for any increase in redemption price
occurring after the beginning of the year of change for all Series E, EE and I U.S. savings bonds
held by the taxpayer on or after the beginning of the year of change. Accordingly, a § 481(a)
adjustment is neither permitted nor required.
(b) In accordance with § 1.446-1(e)(3)(ii), the requirement of § 1.446-1(e)(3)(i) to file
a Form 3115 is waived and a statement in lieu of a Form 3115 is authorized for this change.
Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, the statement in lieu of a Form 3115 that is permitted under this section 17.01 is considered a
Form 3115 for purposes of the automatic consent procedures of Rev. Proc. 2015-13. However, the
requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc. 2015-13, is waived.
The statement must include the following information:
(i) the designated automatic accounting method change number for this change, which is “131”;
(ii) the taxpayer’s name and employer identification number or social security number, as
applicable;
(iii) the year of change (both the beginning and ending dates);
(iv) the Series E, EE or I U.S. savings bonds for which this change in accounting method is
requested;
(v) a statement that the taxpayer will report all interest on any U.S. savings bonds acquired
during or after the year of change when the interest is realized upon disposition, redemption, or
final maturity, whichever is earliest; and
(vi) a statement that the taxpayer will report all interest on the U.S. savings bonds acquired
before the year of change when the interest is realized upon disposition, redemption, or final
maturity, whichever is earliest, with the exception of any interest income previously reported in
prior taxable years.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 17.01 is “131.”
(4) Contact information. For further information regarding a change under this section, contact
William E. Blanchard at (202) 317-3900 (not a toll-free number).
SECTION 18. PREPAID SUBSCRIPTION INCOME (§ 455)
.01 Prepaid subscription income.
(1) Description of change. This change applies to a taxpayer using an overall accrual method
of accounting that wants to change its method of accounting for prepaid subscription income to

Bulletin No. 2022–7 679 February 14, 2022
the method described in § 455 and the regulations thereunder, including an eligible taxpayer that
wants to make the “within 12 months” election under § 1.455-2.
(2) Manner of making change and designated automatic accounting method change number.
(a) Cut-off basis. This change is made on a cut-off basis and applies only to prepaid subscription
income received on or after the beginning of the year of change. The taxpayer must continue to
account for prepaid subscription income received prior to the year of change under the taxpayer’s
present method of accounting. Accordingly, a § 481(a) adjustment is neither permitted nor required.
(b) Short Form 3115 in lieu of a standard Form 3115. In accordance with § 1.446-1(e)(3)(ii), the
requirement of § 1.446-1(e)(3)(i) to file a standard Form 3115 is waived and, pursuant to section
6.02(2) of Rev. Proc. 2015-13, a short Form 3115 is authorized for a change described in section
18.01(a) of this revenue procedure. The requirement in § 1.455-6 to file a statement requesting
consent is satisfied by filing such short Form 3115. The short Form 3115 (Rev. December 2018)
must include the following information:
(i) the identification section of page 1 (above Part I);
(ii) the signature section at the bottom of page 1;
(iii) Part I, line 1(a);
(iv) the information described in § 1.455-6(a), as required by § 1.455-6(b); and
(v) if the taxpayer wants to make a “within 12 months” election under § 1.455-6(c), the
information described in section § 1.455-6(c)(2).
(c) Section 455 election made with consent. The consent granted in section 9 of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, satisfies the consent required under § 455(c)(3) and § 1.455-6(b).
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 18.01 is “132.”
(4) Contact information. For further information regarding a change under this section, contact
Patrick Clinton at (202) 317-7005 (not a toll-free number).
SECTION 19. SPECIAL RULES FOR LONG-TERM CONTRACTS (§ 460)
.01 Small business taxpayer exceptions from requirement to account for certain long-term
contracts under § 460 or to capitalize costs under § 263A for certain home construction contracts.
(1) Description of change. This change applies to a taxpayer that (a) wants to change its method
of accounting for exempt long-term construction contracts described in § 460(e)(1)(B) from the
percentage-of-completion method of accounting described in § 1.460-4(b) to an exempt contract

February 14, 2022 680 Bulletin No. 2022–7
method of accounting described in § 1.460-4(c); or (b) chooses to stop capitalizing costs under
§ 263A for home construction contracts described in § 460(e)(1)(A) and meets the requirements
of § 460(e)(1)(B)(i) and (ii).
(2) Inapplicability. A taxpayer can use a method of accounting for its exempt long-term contracts
that is different from the method used for contracts that are not exempt. Thus, a taxpayer must
use the percentage-of-completion method of accounting for nonresidential long-term construction
contracts that do not meet the requirements of § 460(e)(1)(B), proposed §1.460-3(b)(1)(ii), or
§1.460-3(b)(1)(ii), as applicable, in the first taxable year it enters into such a contract, but must
continue to use its exempt contract method of accounting for its existing exempt long-term
construction contracts. Similarly, in the first taxable year that a taxpayer enters into a nonresidential
long-term construction contract that meets the requirements of § 460(e)(1)(B), proposed §1.460-
3(b)(1)(ii), or §1.460-3(b)(1)(ii), as applicable, the taxpayer can use a permissible exempt contract
method of accounting for such a contract. Rev. Rul. 92-28, 1992-1 C.B. 153. Accordingly, only a
taxpayer who previously adopted the percentage-of-completion method of accounting for exempt
long-term construction contracts and wants to change to another permissible exempt contract
method of accounting is required to request consent to change under this section 19.01. Similarly,
a taxpayer that enters into a home construction contract described in § 460(e)(1)(A) and that meets
the requirements of § 460(e)(1)(B)(i) and (ii) requires consent to change its method of accounting
to not capitalize costs under § 263A only if the taxpayer has previously applied § 263A to home
construction contracts exempt from the capitalization requirement under § 460(e)(1).
(3) Manner of making change. This change is made on a cut-off basis and applies only to long-
term construction contracts entered into on or after the first day of the year of change. Accordingly,
a § 481(a) adjustment is neither permitted nor required.
(4) Certain eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, does not apply to this change for a taxpayer’s first, second,
or third taxable year ending after December 31, 2017.
(5) Reduced filing requirement. A taxpayer is required to complete only the following information
on Form 3115 (Rev. December 2018) to make this change:
(a) The identification section of page 1 (above Part I);
(b) The signature section at the bottom of page 1;
(c) Part I;
(d) Part II, all lines except line 16;
(e) Part IV, line 25; and
(f) Schedule D, Part I.
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 19.01 is “236.”

Bulletin No. 2022–7 681 February 14, 2022
(7) Contact information. For further information regarding changes under this section, contact
Innessa Glazman at (202) 317-7006 (not a toll-free number).
SECTION 20. TAXABLE YEAR INCURRED (§ 461)
In general. Applicable provisions of the Code, regulations and other guidance published in
the Internal Revenue Bulletin may prescribe the manner in which a taxpayer takes into account
a liability that has been incurred. For example, for a taxpayer with inventories and subject to
§ 263A, the taxpayer must include direct and indirect costs in inventory costs, which may be
recovered through cost of goods sold. See § 1.263A-1(e)(2)(i)(B). A taxpayer may not rely on
any provision in this section 20 to take a current year deduction if another applicable provision
requires the taxpayer to take the liability into account in a year other than the year incurred.
.01 Timing of incurring liabilities for employee compensation.
(1) Self-insured employee medical benefits.
(a) Description of change.
(i) Applicability. This change applies to a taxpayer using an overall accrual method of accounting
that wants to change its method of accounting for self-insured liabilities (including any amounts
not covered by insurance, such as a “deductible” amount under an insurance policy) relating
to employee medical expenses (including liabilities resulting from medical services provided to
retirees whom the employer reimburses for the cost of medical services, or for whom the employer
directly pays a 3
rd
party medical provider, no later than the 15
th
day of the 3
rd
calendar month after
the end of the taxable year of the retirement, and to employees and former employees who have
filed claims under a workers’ compensation act) that are not paid from a welfare benefit fund
within the meaning of § 419(e) to a method as follows:
(A) If the taxpayer has a liability to pay an employee for medical expenses incurred by the
employee, the taxpayer will treat the liability as incurred in the taxable year in which the employee
files the claim with the employer. See United States v. General Dynamics Corp., 481 U.S. 239
(1987), 1987-2 C.B. 134.
(B) If the taxpayer has a liability to pay a 3
rd
party for medical services provided to its
employees, the taxpayer will treat the liability as incurred in the taxable year in which the services
are provided.
(ii) Inapplicability. This change does not apply to a taxpayer that is required under § 263A
and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to
change its method of accounting under this section 20.01(1) if the taxpayer is not capitalizing these
costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction
with a change to a UNICAP method under section 12.01, 12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).
(b) Concurrent automatic change. A taxpayer making both this change and a change to a
UNICAP method described in section 20.01(1)(a)(ii) of this revenue procedure under section
12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of

February 14, 2022 682 Bulletin No. 2022–7
change should file a single Form 3115 for both changes, in which case the taxpayer must enter
the designated automatic accounting method change numbers for both changes on the appropriate
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for
information on making concurrent changes.
(c) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.01(1) is “42.”
(2) Bonuses.
(a) Description of change.
(i) Applicability. This change applies to a taxpayer using an overall accrual method of
accounting that wants to change its method of accounting to treat bonuses as incurred in the
taxable year in which all events have occurred that establish the fact of the liability to pay a bonus
and the amount of the liability can be determined with reasonable accuracy (see § 1.446-1(c)(1)
(ii)). Specifically, a taxpayer may change its method of accounting under this section 20.01(2) to
one of the following methods:
(A) If all the events that establish the fact of the liability to pay a bonus have occurred by the
end of the taxable year in which the related services are provided, and the bonus is received by
the employee no later than the 15
th
day of the 3
rd
calendar month after the end of the taxable year
in which the related services are provided, the taxpayer will treat the bonus liability as incurred
in that taxable year. See Rev. Rul. 55-446, 1955-2 C.B. 531, as modified by Rev. Rul. 61-127,
1961-2 C.B. 36.
(B) If all the events that establish the fact of the liability to pay a bonus occur in the taxable year
subsequent to the taxable year in which the related services are provided, the taxpayer will treat
the bonus liability as incurred in such subsequent taxable year.
(ii) Inapplicability. This change does not apply to a taxpayer that is required under § 263A
and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to
change its method of accounting under this section 20.01(2) if the taxpayer is not capitalizing these
costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction
with a change to a UNICAP method under section 12.01, 12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).
(b) Concurrent automatic change. A taxpayer making both this change and a change to a
UNICAP method described in section 20.01(2)(a)(ii) of this revenue procedure under section
12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of
change should file a single Form 3115 for both changes, in which case the taxpayer must enter
the designated automatic accounting method change numbers for both changes on the appropriate
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making
concurrent changes.
(c) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.01(2) is “133.”
(3) Vacation pay, sick pay, and severance pay.

Bulletin No. 2022–7 683 February 14, 2022
(a) Description of change.
(i) Applicability. This change applies to a taxpayer using an overall accrual method of accounting
that wants to change its method of accounting to treat vacation pay, sick pay, and severance pay as
incurred in the taxable year in which all events have occurred that establish the fact of the liability
to pay vacation pay, sick pay, and severance pay and the amount of the liability can be determined
with reasonable accuracy (see § 1.446-1(c)(1)(ii)). Specifically, a taxpayer may change its method
of accounting under this section 20.01(3) to one of the following methods:
(A) If all the events that establish the fact of the liability to pay vacation pay, sick pay, and
severance pay have occurred by the end of the taxable year in which the related services are
provided, the vacation pay, sick pay, and severance pay vests in the taxable year the related services
are provided, and the vacation pay, sick pay, and severance pay is received by the employee no
later than the 15
th
day of the 3
rd
calendar month after the end of the taxable year in which the
related services are provided, the taxpayer will treat the vacation pay, sick pay, and severance pay
liability as incurred in the taxable year in which the related services are provided.
(B) If all the events that establish the fact of the liability to pay vacation pay, sick pay, and
severance pay occur in the taxable year subsequent to the taxable year in which the related services
are provided, the taxpayer will treat the vacation pay, sick pay, and severance pay liability as
incurred in such subsequent taxable year.
(ii) Inapplicability. This change does not apply to a taxpayer that is required under § 263A
and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to
change its method of accounting under this section 20.01(3) if the taxpayer is not capitalizing these
costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction
with a change to a UNICAP method under section 12.01, 12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).
(b) Concurrent automatic change. A taxpayer making both this change and a change to a
UNICAP method described in section 20.01(3)(a)(ii) of this revenue procedure under section
12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of
change should file a single Form 3115 for both changes, in which case the taxpayer must enter
the designated automatic accounting method change numbers for both changes on the appropriate
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making
concurrent changes.
(c) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.01(3) is “134.”
(4) Commissions.
(a) Description of change.
(i) Applicability. This change applies to a taxpayer using an overall accrual method of accounting
that wants to change its method of accounting to treat commissions as incurred in the taxable year
in which all events have occurred that establish the fact of the liability to pay a commission, and
the amount of the liability can be determined with reasonable accuracy (see § 1.446-1(c)(1)(ii)).
Specifically, a taxpayer may change its method of accounting under this section 20.01(4) to one
of the following methods:

February 14, 2022 684 Bulletin No. 2022–7
(A) If all the events that establish the fact of the liability to pay a commission have occurred
by the end of the taxable year in which the related services are provided, and the commission is
received by the employee no later than the 15
th
day of the 3
rd
calendar month after the end of the
taxable year in which the related services are provided, the taxpayer will treat the commission
liability as incurred in that taxable year.
(B) If all the events that establish the fact of the liability to pay a commission occur in the
taxable year subsequent to the taxable year in which the related services are provided, the taxpayer
will treat the commission liability as incurred in such subsequent taxable year.
(ii) Inapplicability. This change does not apply to a taxpayer that is required under § 263A
and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to
change its method of accounting under this section 20.01(4) if the taxpayer is not capitalizing these
costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction
with a change to a UNICAP method under section 12.01, 12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).
(b) Concurrent automatic change. A taxpayer making both this change and a change to a
UNICAP method described in section 20.01(4)(a)(ii) of this revenue procedure under section
12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of
change should file a single Form 3115 for both changes, in which case the taxpayer must enter
the designated automatic accounting method change numbers for both changes on the appropriate
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making
concurrent changes.
(c) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.01(4) is “249.”
(5) Contact information. For further information regarding a change under this section, contact
Maria Castillo-Valle or Alicia Lee-Won at (202) 317-7003 (not a toll-free number).
.02 Timing of incurring liabilities for real property taxes, personal property taxes, state income
taxes, and state franchise taxes.
(1) Background. A taxpayer using an overall accrual method of accounting generally incurs a
liability in the taxable year that all the events have occurred that establish the fact of the liability,
the amount of the liability can be determined with reasonable accuracy, and economic performance
has occurred with respect to the liability. See § 1.446-1(c)(1)(ii). Under § 1.461-4(g)(6), if the
liability of the taxpayer is to pay a tax, economic performance occurs as the tax is paid to the
government authority that imposed the tax.
(2) Description of change.
(a) Applicability. This change applies to a taxpayer using an overall accrual method of
accounting that wants to change its method of accounting to:
(i) treat liabilities (for which the all events test of § 461(h)(4) is otherwise met) for real property
taxes, personal property taxes, state income taxes, or state franchise taxes as incurred in the taxable
year in which the taxes are paid, under § 461 and § 1.461-4(g)(6);

Bulletin No. 2022–7 685 February 14, 2022
(ii) account for real property taxes, personal property taxes, state income taxes, or state franchise
taxes under the recurring item exception method under § 461(h)(3) and § 1.461-5(b)(1); or
(iii) revoke an election under § 461(c) (ratable accrual election).
(b) Inapplicability. This change does not apply to:
(i) a taxpayer’s liability for a tax subject to the limitation on acceleration of accrual of taxes
under § 461(d); or
(ii) a taxpayer that is required under § 263A and the regulations thereunder to capitalize the costs
with respect to which the taxpayer wants to change its method of accounting under this section
20.02 if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its
method to capitalize these costs in conjunction with a change to a UNICAP method under section
12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable).
(3) Concurrent automatic change. A taxpayer making both this change and a change to a
UNICAP method described in section 20.02(2)(b)(ii) of this revenue procedure under section
12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of
change should file a single Form 3115 for both changes, in which case the taxpayer must enter
the designated automatic accounting method change numbers for both changes on the appropriate
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for
information on making concurrent changes.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.02 is “43.”
(5) Contact information. For further information regarding a change under this section, contact
Christine Merson at (202) 317-5100 (not a toll-free number).
.03 Timing of incurring liabilities under a workers’ compensation act, tort, breach of contract,
or violation of law.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer using an overall accrual method of
accounting that wants to change its method of accounting for self-insured liabilities (including
any amounts not covered by insurance, such as a “deductible” amount under an insurance policy)
arising under any workers’ compensation act or out of any tort, breach of contract, or violation of
law, to treating the liability for the workers’ compensation, tort, breach of contract, or violation
of law as being incurred in the taxable year in which all the events have occurred that establish
the fact of the liability, the amount of the liability can be determined with reasonable accuracy,
and payment is made to the person to which the liability is owed. See § 461 and § 1.461-4(g)(1)
and (2). If the taxpayer has self-insured liabilities resulting from medical services provided to
employees who have filed claims under a workers compensation act, the taxpayer may change its
method of accounting for those liabilities under section 20.01(1) of this revenue procedure (if the
taxpayer is otherwise eligible).
(b) Inapplicability. This change does not apply to a taxpayer that is required under § 263A
and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to

February 14, 2022 686 Bulletin No. 2022–7
change its method of accounting under this section 20.03 if the taxpayer is not capitalizing these
costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction
with a change to a UNICAP method under section 12.01, 12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).
(2) Concurrent automatic change. A taxpayer making both this change and change to either a
method provided in section 20.01(1) of this revenue procedure for self-insured employee medical
expenses or a UNICAP method described in section 20.03(1)(b) of this revenue procedure under
section 12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year
of change should file a single Form 3115, in which case the taxpayer must enter the designated
automatic accounting method change numbers for each change on the appropriate line on that
Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for information on
making concurrent changes.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.03 is “44.”
(4) Contact information. For further information regarding a change under this section, contact
Christine Merson at (202) 317-5100 (not a toll-free number).
.04 Timing of incurring certain liabilities for payroll taxes.
(1) Description of change.
(a) Applicability. This change applies to:
(i) an employer using an overall accrual method of accounting that wants to change its method
of accounting for:
(A) FICA and FUTA taxes to a method consistent with the holding in Rev. Rul. 96-51, 1996-2
C.B. 36. Rev. Rul. 96-51 permits an accrual method employer to take into account in Year 1, under
the all events test of § 461, its otherwise deductible FICA and FUTA taxes imposed with respect to
year-end wages properly accrued in Year 1, but paid in Year 2, if the requirements of the recurring
item exception are met; and
(B) state unemployment taxes and, in the event the taxpayer is an employer within the meaning
of the Railroad Retirement Tax Act (RRTA) (see § 3231(a)), RRTA taxes to a method under which
the taxpayer may take into account in Year 1 its otherwise deductible state unemployment taxes
and railroad retirement taxes (if applicable) imposed with respect to year-end wages properly
accrued in Year 1, but paid in Year 2, if the requirements of the recurring item exception are met
(including the requirement that, as of the end of the taxable year, all events have occurred that
establish the fact of the liability and the amount of the liability can be determined with reasonable
accuracy, see § 1.461-5(b));
(ii) an accrual method employer that utilizes a method of accounting for FICA and FUTA taxes
that is consistent with the holding in Rev. Rul. 96-51 and wants to change its method of accounting
for state unemployment taxes and, in the event the employer is an employer within the meaning of
R RTA (see § 3231(a)), RRTA taxes to a method under which the taxpayer may take into account
in Year 1 its otherwise deductible state unemployment taxes and railroad retirement taxes (if
applicable) imposed with respect to year-end wages properly accrued in Year 1, but paid in Year 2,

Bulletin No. 2022–7 687 February 14, 2022
if the requirements of the recurring item exception are met (including the requirement that, as of
the end of the taxable year, all events have occurred that establish the fact of the liability and the
amount of the liability can be determined with reasonable accuracy, see § 1.461-5(b)); or
(iii) a taxpayer using an overall accrual method of accounting that wants to change its method
of accounting for FICA and FUTA taxes to the safe harbor method provided in Rev. Proc. 2008-25,
2008-1 C.B. 686. Rev. Proc. 2008-25 provides that for purposes of the recurring item exception,
a taxpayer will be treated as satisfying the requirement in § 1.461-5(b)(1)(i) for its payroll tax
liability in the same taxable year in which all events have occurred that establish the fact of
the related compensation liability and the amount of the related compensation liability can be
determined with reasonable accuracy.
(b) Inapplicability. This change does not apply to a taxpayer that is required under § 263A
and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to
change its method of accounting under this section 20.04 if the taxpayer is not capitalizing these
costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction
with a change to a UNICAP method under section 12.01, 12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).
(2) Recurring item exception. A taxpayer that previously has not changed to or adopted the
recurring item exception for FICA taxes, FUTA taxes, state unemployment taxes, and RRTA taxes
(if applicable) must change to the recurring item exception method for FICA taxes, FUTA taxes,
state unemployment taxes, and RRTA taxes (if applicable) as specified in § 461(h)(3) as part of
this change.
(3) Concurrent automatic change. A taxpayer making both this change and a change to a
UNICAP method described in section 20.04(1)(b) of this revenue procedure under section 12.01,
12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of change should
file a single Form 3115 for both changes, in which case the taxpayer must enter the designated
automatic accounting method change numbers for both changes on the appropriate line on that
Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for information on
making concurrent changes.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under section 20.04(1)(a)(i) or (ii) of this revenue
procedure is “45.” The designated automatic accounting method change number for a change
under section 20.04(1)(a)(iii) of this revenue procedure is “113.”
(5) Contact information. For further information regarding a change under this section, contact
James Williford at (202) 317-5100 (not a toll-free number).
.05 Cooperative advertising.
(1) Description of change. This change applies to a taxpayer using an overall accrual method
of accounting that wants to change its method of accounting for cooperative advertising costs
to a method consistent with the holding in Rev. Rul. 98-39, 1998-2 C.B. 198. Rev. Rul. 98-39
generally provides that, under the all events test of § 461, an accrual method manufacturer’s
liability to pay a retailer for cooperative advertising services is incurred in the year in which the
services are performed, provided the manufacturer is able to reasonably estimate this liability, and
even though the retailer does not submit the required claim form until the following year.

February 14, 2022 688 Bulletin No. 2022–7
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.05 is “46.”
(3) Contact information. For further information regarding a change under this section, contact
Vincent Brodbeck at (202) 317-5100 (not a toll-free number).
.06 Timing of incurring certain liabilities for services or insurance.
(1) Description of change. This change applies to a taxpayer using an overall accrual method
of accounting that is currently treating the mere execution of a contract for services or insurance
as establishing the fact of the liability under § 461 and wants to change from that method of
accounting for liabilities for services or insurance to comply with Rev. Rul. 2007-3, 2007-1 C.B.
350, that is, all the events needed to establish the fact of the liability occur when (a) the event
fixing the liability, whether that be the required performance or other event occurs or (b) payment
is due, whichever happens earliest.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.06 is “106.”
(3) Contact information. For further information regarding a change under this section, contact
Sharon Horn at (202) 317-7003 (not a toll-free number).
.07 Rebates and allowances.
(1) Description of change.
(a) Applicability. This change applies to taxpayer using an overall accrual method of accounting
that wants to change its method of accounting for treating its liability for rebates and allowances
to the recurring item exception method under § 461(h)(3) and § 1.461-5.
(b) Inapplicability. This change does not apply to a taxpayer’s liability to pay a refund.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.07 is “135.”
(3) Contact information. For further information regarding a change under this section, contact
Hyowon Lee at (202) 317-5100 (not a toll-free number).
.08 Ratable accrual of real property taxes.
(1) Description of change. This change applies to a taxpayer using an overall accrual method
of accounting that wants to change its method of accounting for real property taxes to the method
described in § 461(c) and § 1.461-1(c)(1) (ratable accrual election). This change applies to real
property taxes that relate to a definite period of time. This change does not apply to a taxpayer’s
first taxable year in which the taxpayer incurs real property taxes, in which case the change is
made using the provisions of § 1.461-1(c)(3)(i).
(2) Manner of making change and designated automatic accounting method change number.

Bulletin No. 2022–7 689 February 14, 2022
(a) Cut-off basis. This change is made on a cut-off basis and applies only to real property taxes
accrued on or after the beginning of the year of change. Any real property taxes accrued prior
to the year of change are accounted for under the taxpayer’s former method of accounting. See
§ 1.461-1(c)(6), Examples (2) – (5). Accordingly, a § 481(a) adjustment is neither permitted nor
required.
(b) Short Form 3115 in lieu of a standard Form 3115. In accordance with § 1.446-1(e)(3)(ii),
the requirement in § 1.461-1(e)(3)(i) to file a standard Form 3115 is waived and, pursuant to
section 6.02(2) of Rev. Proc. 2015-13, a short Form 3115 is authorized with respect to a taxpayer
making a change under this section 20.08. The taxpayer’s short Form 3115 (Rev. December 2018)
must include all of the following information:
(i) the identification section of page 1 (above Part I);
(ii) the signature section at the bottom of page 1;
(iii) Part I, line 1(a); and
(iv) the information described in § 1.461-1(c)(3)(ii)(a) through (f).
(c) Section 461 election made with consent. The consent granted under section 9 of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, satisfies the consent required under § 461(c)(2)(B) and § 1.461-1(c)
(3)(ii).
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.08 is “149.”
(4) Contact information. For further information regarding a change under this section, contact
Daniel Cassano at (202) 317-7011 (not a toll-free number).
.09 California Franchise Taxes.
(1) Description of change. This change applies to a taxpayer using an overall accrual method
of accounting that wants to change its method of accounting for California franchise taxes to a
method consistent with the holding in Rev. Rul. 2003-90, 2003-2 C.B. 353. Rev. Rul. 2003-90
provides that for taxable years beginning on or after January 1, 2000, a taxpayer that uses an
accrual method of accounting incurs a liability for California franchise tax for federal income tax
purposes in the taxable year following the taxable year in which the California franchise tax is
incurred under the Cal. Rev. & Tax Code, as amended.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.09 is “154.”
(3) Contact information. For further information regarding a change under this section, contact
Sharon Horn at (202) 317-7003 (not a toll-free number).
.10 Gift cards issued as a refund for returned goods.

February 14, 2022 690 Bulletin No. 2022–7
(1) Description of change.
(a) Applicability. This change applies to a taxpayer using an overall accrual method of
accounting that sells goods at retail and that wants to change its method of accounting for gift
cards (as defined by section 4.02 of Rev. Proc. 2011-17, 2011-5 I.R.B. 441) issued as a refund for
returned goods to treat the transaction as (1) the payment of a cash refund in the amount of the gift
card, and (2) the sale of a gift card in the amount of the gift card.
(b) Treatment of proceeds of the deemed sale. A taxpayer must treat the proceeds of the deemed
sale of a gift card in accordance with the method of accounting it otherwise employs for sales of
gift cards.
(2) Concurrent automatic change. A taxpayer making both this change and an automatic change
to the deferral method for advance payments under Rev. Proc. 2004-34 (see section 16.06 of this
revenue procedure) for the same taxable year of change must file a single Form 3115 for both
changes and enter the designated automatic accounting method change numbers for both changes
on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, for information on making concurrent changes.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.10 is “156.”
(4) Contact information. For further information regarding a change under this section, contact
Alicia Lee-Won at (202) 317-7003 (not a toll-free number).
.11 Timing of incurring liabilities under the recurring item exception to the economic
performance rules.
(1) Description of change. This change applies to a taxpayer using an overall accrual method
of accounting that wants to conform to any of the holdings in Rev. Rul. 2012-1, 2012-2 I.R.B.
255, which clarifies the treatment of certain liabilities under the recurring item exception to the
economic performance requirement under § 461(h)(3) by addressing the application of the “not
material” and “better matching” requirements, and distinguishes contracts for the provision of
services from insurance and warranty contracts.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 20.11 is “161.”
(3) Contact information. For further information regarding a change under this section, contact
Justin Grill at (202) 317-7003 (not a toll-free number).
.12 Economic performance safe harbor for ratable service contracts.
(1) Description of change. This change applies to an accrual method taxpayer that wants to
change its treatment of Ratable Service Contracts to conform to the safe harbor method provided
by Rev. Proc. 2015-39, 2015-33 I.R.B. 195.

Bulletin No. 2022–7 691 February 14, 2022
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for changes in methods of accounting under this section 20.12
is “220.”
(3) Contact information. For further information regarding a change under this section, contact
David Christensen at (202) 317-7011 or Douglas Kim at (202) 317-7003 (not toll-free numbers).
.13 Timing of incurring inventory costs.
(1) Applicability. This change applies to an accrual method taxpayer that wants to change its
method of accounting for one or more inventory costs to treat such costs as incurred in accordance
with § 1.461-1(a)(2) and § 1.461-4(d)(4) if:
(a) under the taxpayer’s present method of accounting, the taxpayer takes one or more inventory
costs into account in a taxable year prior to the taxable year in which such costs are incurred under
§ 461 and the regulations thereunder, and recovers such costs in a taxable year prior to the taxable
year in which ownership of inventory is transferred to the customer to offset income inclusions
under § 451(b) and/or § 451(c);
(b) in the case of a taxpayer with an applicable financial statement (AFS), as defined in section
16.10(1)(b) of this revenue procedure, the taxpayer makes, for the same year of change, a change
in method of accounting for income from the sale of inventory under section 16.10(2)(a)(iii) of
this revenue procedure and, to the extent the taxpayer receives advance payments for the sale
of inventory, section 16.10(2)(a)(iv) of this revenue procedure, or in the case of a taxpayer that
does not have an AFS, the taxpayer makes, for the same year of change, a change in method of
accounting for advance payments from the sale of inventory under section 16.10(2)(b)(ii) of this
revenue procedure;
(c) the taxpayer makes, for the same year of change, a change in method of accounting for
such inventory costs under section 12.01, 12.02, 22.04, 22.10, 22.17, or 22.18 of this revenue
procedure, as applicable; and
(d) the taxpayer makes the change for its inventory costs under this section 20.13 for its early
application year, as defined in section 16.10(4)(c)(i) of this revenue procedure, or if a taxpayer
does not apply § 1.451-3 and/or § 1.451-8, as applicable, for a taxable year beginning before
January 1, 2021, for the taxpayer’s first taxable year beginning on or after January 1, 2021.
(2) Inapplicability. This section 20.13 does not apply to a taxpayer that is not on a permissible
method of accounting for its inventory as required under § 471 and § 263A, as applicable, unless
the taxpayer changes to a permissible method of accounting under § 471 or § 263A, as applicable,
for the same year of change.
(3) Eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13
does not apply to a change described in section 20.13(1) of this revenue procedure.
(4) No ruling on method used. The consent granted under section 9 of Rev. Proc. 2015-13
for a change made under this section 20.13 is not a determination by the Commissioner that the
proposed method of accounting is a permissible method of accounting under § 1.461-1(a)(2) and
§ 1.461-4(d)(4), and does not create a presumption that the proposed method of accounting is
a permissible method of accounting under a provision of the Code. The director will ascertain

February 14, 2022 692 Bulletin No. 2022–7
whether the proposed method is permissible and in accordance with § 1.461-1(a)(2) and § 1.461-
4(d)(4).
(5) Concurrent automatic change. A taxpayer that is making a change described in section
20.13(1) of this revenue procedure and one or more changes described in section 12.01, 12.02,
22.04, 22.10, 22.17, or 22.18 of this revenue procedure for the same year of change must timely
file a single Form 3115 for all such changes and must enter the designated automatic accounting
change numbers for all such changes on the appropriate line of Form 3115. If the taxpayer is
making a change described in section 20.13(1) of this revenue procedure for one or more inventory
costs, and a change described in section 12.01, 12.02, 22.04, 22.10, 22.17, or 22.18 of this revenue
procedure for the same year of change, the taxpayer may provide a single net § 481(a) adjustment
for all such changes. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making
concurrent changes.
(6) Designated automatic accounting method change number. The designated automatic method
change number (DCN) for a change to the method of accounting under this section 20.13 is “256.”
(7) Contact information. For further information regarding a change under this section, contact
Douglas Kim at (202) 317-7003 (not a toll-free number).
SECTION 21. RENT (§ 467)
.01 Change from an improper method of inclusion of rental income or expense to inclusion in
accordance with the rent allocation.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that:
(i) is a party to § 467 rental agreements (within the meaning of § 1.467-1(c)(1) for rental
agreements entered into after May 18, 1999, and § 467(d) for all other agreements); and
(ii) except as provided in section 21.01(1)(b)(ii) of this revenue procedure, wants to change its
method of accounting for its fixed rent (as defined in § 1.467-1(d)(2)) to the rent allocation method
provided in § 1.467-1(d)(2)(iii).
(b) Inapplicability. This change does not apply to:
(i) rental agreements for which taxpayers are required to use the constant rental accrual method,
as described in § 1.467-3(a), or the proportional rental accrual method, as described in § 1.467-
2(a), for their fixed rent; and
(ii) rental agreements that provide a specific allocation of fixed rent as described in § 1.467-1(c)
(2)(ii)(A)(2) that allocate rent to periods other than when such rents are payable.

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(2) Additional requirements. The taxpayer must attach to its Form 3115 a copy of one of its
§ 467 rental agreements to be covered by this automatic change (or at least the pages of the
agreement relating to the manner in which rent is allocated).
(3) Audit protection limited. Any audit protection under section 8 of Rev. Proc. 2015-13, 2015-
5 I.R.B. 419, does not apply to this change for any § 467 rental agreement determined by the
Commissioner to be a disqualified leaseback or long-term agreement described in § 1.467-3(b).
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 21.01 is “136.”
(5) Contact information. For further information regarding a change under this section, contact
William Ruane at (202) 317-4718 (not a toll-free number).
SECTION 22. INVENTORIES (§ 471)
.01 Cash discounts.
(1) Description of change. This change applies to a taxpayer that wants to change its method
of accounting for cash discounts (that is, discounts granted for timely payment) when they
approximate a fair interest rate, from a method of consistently including the price of the goods
before discount in the cost of the goods and including in gross income any discounts taken (the
“gross invoice method”), to a method of reducing the cost of the goods by the cash discounts and
deducting as an expense any discounts not taken (the “net invoice method”), or vice versa. See
Rev. Rul. 73-65, 1973-1 C.B. 216.
(2) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Computation of § 481(a) adjustment for changes to net invoice method. In the case of a
taxpayer changing from the gross invoice method to the net invoice method, a negative § 481(a)
adjustment is required to prevent duplications arising from the fact that the gross invoice method
reported income upon timely payment for some or all of the goods that remain in inventory, and
a positive § 481(a) adjustment is required to prevent omissions arising from the fact that the
gross invoice method included the invoice price, unadjusted for the cash discounts, of some or all
goods in cost of goods sold and the discount will be earned by payment in a subsequent taxable
year. The net § 481(a) adjustment is computed by deducting the “Applicable Discount” at the
beginning of the year of change from the “Available Discount” at the beginning of the year of
change. The Available Discount is equal to the difference between the accounts payable balance
under the gross invoice method and the net invoice method. The Applicable Discount is equal to
the difference between the beginning inventory value under the gross invoice method and the net
invoice method.
Example. Taxpayer’s accounts payable balance at the beginning of the year of change was $1,000 under the gross
invoice method and $980 under the net invoice method. Taxpayer’s inventory value was $3,000 under the gross invoice
method and $2,955 under the net invoice method. The Available Discount is $20 ($1,000 - $980) and the Applicable
Discount is $45 ($3,000 - $2,955). Thus, Taxpayer’s net § 481(a) adjustment is a negative $25 ($20 - $45).

February 14, 2022 694 Bulletin No. 2022–7
(4) Computation of § 481(a) adjustment for changes to gross invoice method. In the case of a
taxpayer changing from the net invoice method to the gross invoice method, a positive § 481(a)
adjustment is required to prevent omissions arising from the fact that the net invoice method did
not report income upon timely payment for some or all of the goods that remain in inventory,
and a negative § 481(a) adjustment is required to prevent duplications arising from the fact that
the net invoice method included the invoice price, adjusted for the cash discounts, of some or all
goods in cost of goods sold and the discount will be earned by payment in a subsequent taxable
year. The net § 481(a) adjustment can be computed by deducting the “Available Discount” at the
beginning of the year of change from the “Applicable Discount” at the beginning of the year of
change. The Available Discount is equal to the difference between the accounts payable balance
under the gross invoice method and the net invoice method. The Applicable Discount is equal to
the difference between the beginning inventory value under the gross invoice method and the net
invoice method.
Example. Taxpayer’s accounts payable balance at the beginning of the year of change was $980 under the net invoice
method and $1,000 under the gross invoice method. Taxpayer’s inventory value was $2,955 under the net invoice method
and $3,000 under the gross invoice method. The Applicable Discount is $45 ($3,000 - $2,955) and the Available Discount
is $20 ($1,000 - $980). Thus, Taxpayer’s net § 481(a) adjustment is a positive $25 ($45 - $20).
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.01 is “48.”
(6) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.02 Estimating inventory “shrinkage” .
(1) Description of change. This change applies to a taxpayer that wants to change to a method
of accounting for estimating inventory shrinkage in computing ending inventory, using:
(a) the “retail safe harbor method” described in section 4 of Rev. Proc. 98-29, 1998-1 C.B. 857,
as modified by this revenue procedure; or
(b) a method other than the retail safe harbor method, provided (i) the taxpayer’s present method
of accounting does not estimate inventory shrinkage, and (ii) the taxpayer’s proposed method of
accounting (that estimates inventory shrinkage) clearly reflects income under § 446(b).
(2) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Additional requirements. If the taxpayer wants to change to a method of accounting for
inventory shrinkage other than the retail safe harbor method, the taxpayer must attach to its Form
3115 a statement setting forth a detailed description of all aspects of the proposed method of
estimating inventory shrinkage (including, for last-in, first-out (LIFO) taxpayers, the method
of determining inventory shrinkage for, or allocating inventory shrinkage to, each LIFO pool).
The director or national office subsequently may review whether the proposed method clearly
reflects the taxpayer’s income under § 446(b), notwithstanding any provision of Rev. Proc. 2015-
13, 2015-5 I.R.B. 419 (or successor). If the director or the national office determines that the
proposed method of accounting does not clearly reflect the taxpayer’s income, the taxpayer will

Bulletin No. 2022–7 695 February 14, 2022
be treated as having made a change in method of accounting without obtaining the consent of the
Commissioner as required by § 446(e). See sections 2.01(3) and 2.03 of Rev. Proc. 2015-13.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.02 is “49.”
(5) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.03 Qualifying volume-related trade discounts.
(1) Description of change. This change applies to a taxpayer that wants to change its method
of accounting to treat qualifying volume-related trade discounts as a reduction in the cost of
merchandise purchased at the time the discount is recognized in accordance with § 1.471-3(b).
A “qualifying volume-related trade discount” means a discount satisfying the following criteria:
(a) the taxpayer receives or earns the discount based solely upon the purchase of a particular
volume of the merchandise to which the discount relates;
(b) the taxpayer is neither obligated nor expected to perform or provide any services in exchange
for the discount; and
(c) the discount is not a reimbursement of any expenditure incurred or to be incurred by the
taxpayer.
(2) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Section 481(a) adjustment. The net § 481(a) adjustment attributable to the change is
computed in a manner similar to the computation of a net § 481(a) adjustment in the case of a
change to the net invoice method of accounting for cash discounts. See section 22.01(2) of this
revenue procedure.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.03 is “53.”
(5) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.04 Impermissible methods of identification and valuation of inventories.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to change from an impermissible
method of identifying or valuing inventories to a permissible method of identifying or valuing
inventories. For example, a taxpayer:

February 14, 2022 696 Bulletin No. 2022–7
(i) using last-in, first-out (LIFO) as its inventory-identification method may change its inventory-
valuation method from below cost to cost;
(ii) using an impermissible method of accounting described in §§ 1.471-2(f)(1) through (5) may
change to a permissible method of accounting that corrects the impermissible method described
in §§ 1.471-2(f)(1) through (5);
(iii) using a method that is not in accordance with § 1.471-2(c) may change to a permissible
method of valuing “subnormal goods” under § 1.471-2(c);
(iv) changing from a gross profit method. For this purpose, a gross profit method is a method
in which the taxpayer estimates the cost of goods sold by reducing its gross sales by a percentage
“mark-up” from cost. The estimated cost of goods sold is subtracted from the sum of the beginning
inventory and purchases and the result is used as the ending inventory; or
(v) changing from a method of determining market that is not in accordance with § 1.471-4.
For this purpose, an example of a method of determining market that is not in accordance with
§ 1.471-4 is where a taxpayer, under ordinary circumstances, determines the market value of
purchased merchandise using judgment factors, and not using the prevailing current bid price on
the inventory date for the particular merchandise in the volume in which it is usually purchased
by the taxpayer.
(b) Inapplicability. This change does not apply to:
(i) any change for real property or improvements to the real property because real property is
not inventoriable property under § 1.471-1;
(ii) a taxpayer who meets the definition of a “dealer in securities” under both § 1.471-5 and
§ 475 because such dealer is required to account for securities, as defined in § 475, under § 475
and may not use the rules described in § 1.471-5 for those securities;
(iii) any change described in another section of this revenue procedure or in other guidance
published in the Internal Revenue Bulletin, or to any change within the last-in, first-out (LIFO)
inventory method. For example, this change does not apply to a taxpayer that wants to change to
a rolling-average method (but see section 22.13 of this revenue procedure) or to a taxpayer that
accounts for inventory, or proposes to account for inventory, under § 471(c), proposed § 1.471-
1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a
taxpayer is required to comply with § 1.471-1(b);
(iv) any change to a method of allocating costs to inventory under § 471 or any change to a
method under § 263A (but see sections 12.01 and 12.02 of this revenue procedure); or
(v) a taxpayer that is currently deducting inventories (but see section 22.17 of this revenue
procedure).
(c) Permissible method defined. For purposes of this change, a permissible method is an inventory
method of identification or valuation, or both, specifically permitted by the Code, the regulations,
or other guidance published in the Internal Revenue Bulletin, or a decision of the United States
Supreme Court. However, an otherwise permissible inventory method is not permissible under

Bulletin No. 2022–7 697 February 14, 2022
this section 22.04 for a specific taxpayer if that taxpayer is prohibited from using that method or
if that taxpayer is required to use a different method.
(d) Eligibility rule temporarily inapplicable for certain changes related to cost offset method.
The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 does not apply to a method change
under this section 22.04 if:
(i) the taxpayer made or requested to make a change during any of the five taxable years ending
with the year of change to recover inventory costs in a taxable year prior to the taxable year in
which ownership of the inventory is transferred to the customer to offset inclusions under § 451(b)
and/or § 451(c), as applicable;
(ii) in the case of a taxpayer with an applicable financial statement (AFS), as defined in section
16.10(1)(b) of this revenue procedure, the taxpayer makes, for the same year of change, a change
in method of accounting for income from the sale of inventory under section 16.10(2)(a)(iii) of
this revenue procedure and, to the extent the taxpayer receives advance payments for the sale
of inventory, section 16.10(2)(a)(iv) of this revenue procedure, or in the case of a taxpayer that
does not have an AFS, the taxpayer concurrently changes its method of accounting for advance
payments from the sale of inventory under section 16.10(2)(b)(ii) of this revenue procedure; and
(iii) the taxpayer makes the change under this section 22.04 for its early application year, as
defined in section 16.10(4)(c)(i) of this revenue procedure, or if a taxpayer does not apply § 1.451-
3 and/or § 1.451-8, as applicable, for a taxable year beginning before January 1, 2021, for the
taxpayer’s first taxable year beginning on or after January 1, 2021.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.04 is “54.”
(3) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.05 Core Alternative Valuation Method.
(1) Description of change.
(a) Applicability. This change applies to a remanufacturer and rebuilder of motor vehicle parts
and a reseller of remanufactured and rebuilt motor vehicle parts that use the cost or market,
whichever is lower (LCM), inventory valuation method to value their inventory of cores held for
remanufacturing or sale and wants to use the Core Alternative Valuation (CAV) method specified
in Rev. Proc. 2003-20, 2003-1 C.B. 445.
(b) Inapplicability. This change does not apply to a taxpayer that:
(i) values its inventory of cores at cost, including a taxpayer using the LIFO inventory method,
unless the taxpayer concurrently changes, under section 6.02 of Rev. Proc. 2003-20, from cost to
the LCM method for its cores, including labor and overhead related to the cores in raw materials,
work-in-process, and finished goods; or

February 14, 2022 698 Bulletin No. 2022–7
(ii) accounts for inventory, or proposes to account for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5,
2021, a taxpayer is required to comply with § 1.471-1(b).
(2) Concurrent automatic change. A taxpayer making both this change and (i) a change from
the cost method to the LCM method under section 22.10 of this revenue procedure, or (ii) a
change from the LIFO inventory method to a permitted method for identification under (and
as determined and defined in) section 23.01(1)(b) of this revenue procedure for the same year
of change, should file a single Form 3115 for both changes, provided the taxpayer enters the
designated automatic accounting method change numbers for both changes on the appropriate
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for
information on making concurrent changes.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.05 is “55.”
(4) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.06 Replacement cost for automobile dealers’ parts inventory.
(1) Description of change. This change applies to a taxpayer that is engaged in the trade or
business of selling vehicle parts at retail, that is authorized under an agreement with one or more
vehicle manufacturers or distributors to sell new automobiles or new light, medium, or heavy-duty
trucks, and that wants to use the replacement cost method described in section 4 of Rev. Proc.
2002-17, 2002-1 C.B. 676, as modified by Rev. Proc. 2006-14, 2006-1 C.B. 350, for its vehicle
parts inventory. See Rev. Proc. 2002-17 for further information regarding this change.
(2) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Manner of making change. This change is made on a cut-off basis and applies only to the
computation of ending inventories on or after the beginning of the year of change. Accordingly, a
§ 481(a) adjustment is neither permitted nor required.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.06 is “63.”
(5) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.07 Replacement cost for heavy equipment dealers’ parts inventory.
(1) Description of change. This change applies to a heavy equipment dealer that is engaged
in the trade or business of selling heavy equipment parts at retail, that is authorized under an
agreement with one or more heavy equipment manufacturers or distributors to sell new heavy
equipment, and that wants to use the replacement cost method described in section 4 of Rev. Proc.
2006-14, 2006-1 C.B. 350, for its heavy equipment parts inventory.

Bulletin No. 2022–7 699 February 14, 2022
(2) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Manner of making the change. This change is made on a cut-off basis and applies only to
the computation of ending inventories after the beginning of the year of change. Accordingly, a
§ 481(a) adjustment is neither permitted nor required.
(4) Concurrent automatic change. A taxpayer making both this change and another automatic
change in method of accounting under § 263A (see section 12 of this revenue procedure) for the
same year of change may file a single Form 3115 for both changes, provided the taxpayer enters
the designated automatic accounting method change numbers for both changes on the appropriate
line on that Form 3115, and complies with the ordering rules of § 1.263A-7(b)(2).
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.07 is “96.”
(6) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.08 Rotable spare parts.
(1) Description of change. This change applies to a taxpayer that is using the safe harbor method
of accounting to treat its rotable spare parts as depreciable assets in accordance with Rev. Proc.
2007-48, 2007-2 C.B. 110, as modified by this revenue procedure, and wants to change its method
of accounting to treat its rotable spare parts as inventoriable items. This change also applies to a
taxpayer who is treating its rotable spare parts as depreciable assets in a manner similar to the safe
harbor method described in Rev. Proc. 2007-48, and wants to change its method of accounting to
treat its rotable spare parts as inventoriable items. A taxpayer changing its method of accounting
for rotable spare parts under this section 22.08, must use a proper inventory method to identify
and value its rotable spare parts.
(2) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a taxpayer that is required to make the change in method of
accounting pursuant to section 5.06 of Rev. Proc. 2007-48.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.08 is “110.”
(5) Contact information. For further information regarding a change under this section, contact
Stephen Rothandler at (202) 317-7003 (not a toll-free number).
.09 Advance Trade Discount Method.

February 14, 2022 700 Bulletin No. 2022–7
(1) Description of change. This change applies to a taxpayer that wants to use the Advance
Trade Discount Method described in Rev. Proc. 2007-53, 2007-2 C.B. 233.
(2) Applicability. This change in method of accounting applies to a taxpayer using an overall
accrual method of accounting that is required to use an inventory method of accounting, that
maintains inventories as provided in § 471 and the regulations thereunder, and that receives
advance trade discounts as defined in section 4.03 of Rev. Proc. 2007-53.
(3) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.09 is “111.”
(5) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.10 Permissible methods of identification and valuation of inventories.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to change from one permissible
method of identifying or valuing inventories to another permissible method of identifying or
valuing inventories. For example, a taxpayer using the first-in, first-out (FIFO) method as its
inventory-identification method may change its inventory-valuation method from cost to cost or
market, whichever is lower (LCM), or a taxpayer valuing “subnormal” goods at cost may change
its valuation method to another permissible method of valuing “subnormal goods” under § 1.471-
2(c).
(b) Inapplicability. This change does not apply to:
(i) any change for real property or improvements to the real property because real property is
not inventoriable property under § 1.471-1:
(ii) a taxpayer who meets the definition of a “dealer in securities” under both § 1.471-5 and
§ 475 because such dealer is required to account for securities, as defined in § 475, under § 475
and may not use the rules described in § 1.471-5 for those securities;
(iii) any change described in another section of this revenue procedure or in other guidance
published in the Internal Revenue Bulletin, or to any change within the last-in, first-out (LIFO)
inventory method. For example, this change does not apply to a taxpayer that wants to change to
a rolling-average method (but see section 22.13 of this revenue procedure) or to a taxpayer that
accounts for inventory, or proposes to account for inventory, under § 471(c), proposed § 1.471-
1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a
taxpayer is required to comply with § 1.471-1(b); or

Bulletin No. 2022–7 701 February 14, 2022
(iv) any change to a method of allocating costs to inventory under § 471 or any change to a
method under § 263A (but see sections 12.01 and 12.02 of this revenue procedure).
(c) Permissible method defined. For purposes of this change, a permissible method is an inventory
method of identification or valuation, or both, specifically permitted for inventories by the Code,
the regulations, or other guidance published in the Internal Revenue Bulletin, or a decision of
the United States Supreme Court. However, an otherwise permissible inventory method is not
permissible under this section 22.10 for a specific taxpayer if that taxpayer is prohibited from
using that method or if that taxpayer is required to use a different method.
(d) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 does not apply to a method change under this section 22.10 if:
(i) the taxpayer made or requested to make a change during any of the five taxable years ending
with the year of change to recover inventory costs in a taxable year prior to the taxable year in
which ownership of the inventory is transferred to the customer to offset inclusions under § 451(b)
and/or 451(c), as applicable;
(ii) in the case of a taxpayer with an applicable financial statement (AFS), as defined in section
16.10(1)(b) of this revenue procedure, the taxpayer makes, for the same year of change, a change
in method of accounting for income from the sale of inventory under section 16.10(2)(a)(iii) of
this revenue procedure and, to the extent the taxpayer receives advance payments for the sale
of inventory, section 16.10(2)(a)(iv) of this revenue procedure, or in the case of a taxpayer that
does not have an AFS, the taxpayer concurrently changes its method of accounting for advance
payments from the sale of inventory under section 16.10(2)(b)(ii) of this revenue procedure; and
(iii) the taxpayer makes the change under this section 22.10 for its early application year, as
defined in section 16.10(4)(c)(i) of this revenue procedure, or if a taxpayer does not apply § 1.451-
3 and/or § 1.451-8, as applicable, for a taxable year beginning before January 1, 2021, for the
taxpayer’s first taxable year beginning on or after January 1, 2021.
(e) Permissible method determination. The eligibility waiver under section 22.10(1)(d) of this
revenue procedure is not a determination by the Commissioner that the taxpayer’s present method
of accounting described in section 22.10(1)(d)(i) of this revenue procedure is a permissible method
of accounting. The method of accounting described in section 22.10(1)(d)(i) of this revenue
procedure is not a permissible method of accounting for any taxable year in which §§ 1.451-3 and
1.451-8 are applicable.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.10 is “137.”
(3) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.11 Change in the official used vehicle guide utilized in valuing used vehicles.
(1) Description of change. Used vehicles taken in trade as part payment on the sale of vehicles
by a dealer may be valued for inventory purposes at valuations comparable to those listed in an
official used vehicle guide as the average wholesale prices for comparable vehicles. See Rev. Rul.
67-107, 1967-1 C.B. 115. This change applies to:

February 14, 2022 702 Bulletin No. 2022–7
(a) a taxpayer that wants to change from not using an official used vehicle guide to using an
official used vehicle guide for valuing used vehicles; or
(b) a taxpayer that wants to change to a different official used vehicle guide for valuing used
vehicles.
(2) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.11 is “138.”
(4) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.12 Invoiced advertising association costs for new vehicle retail dealerships.
(1) Description of change. This change applies to a taxpayer that is engaged in the trade or
business of retail sales of new automobiles or new light-duty trucks (“dealership”) that wants
to discontinue capitalizing certain advertising costs as acquisition costs under § 1.471-3(b). The
change applies to advertising costs that meet the following criteria: (a) the dealership must pay
this advertising fee when acquiring vehicles from the manufacturer; (b) the advertising costs
are separately coded and included in the manufacturer’s invoice cost of the new vehicle; (c)
the advertising cost is a flat fee per vehicle or a fixed percentage of the invoice price; and (d)
the fees collected by the manufacturer are paid to local advertising associations that promote
and advertise the manufacturer’s products in the dealership’s market area. Under the proposed
method, the dealership will exclude advertising costs that meet the above criteria from the cost of
new vehicles and deduct the advertising costs under § 162 as the advertising services are provided
to the dealership. See § 1.461-4(d)(2)(i).
(2) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.12 is “139.”
(4) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.13 Rolling-average method of accounting for inventories.
(1) Description of change. This change applies to a taxpayer that uses a rolling-average method
to value inventories for financial accounting purposes and wants to use the same rolling-average
method to value inventories for federal income tax purposes in accordance with Rev. Proc. 2008-
43, 2008-30 C.B. 186, as modified by Rev. Proc. 2008-52, 2008-2 C.B. 587 (see section 13).

Bulletin No. 2022–7 703 February 14, 2022
(2) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b). See, however, section 22.17 of this revenue procedure for certain
changes.
(3) Manner of making change. This change is made on a cut-off basis and is applied only to
the computation of ending inventories after the beginning of the year of change. However, if the
taxpayer’s books and records contain sufficient information to compute a § 481(a) adjustment, the
taxpayer may choose to implement the change with a § 481(a) adjustment as provided in sections
7.02 and 7.03 of Rev. Proc. 2015-13, 2015-5 I.R.B. 419.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.13 is “114.”
(5) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.14 Sales-Based Vendor Chargebacks.
(1) Description of change. This change, as described in Rev. Proc. 2014-33, 2014-22 I.R.B.
1060, applies to a taxpayer that wants to change its method of accounting to treat sales-based
vendor chargebacks as a reduction in cost of goods sold in accordance with § 1.471-3(e)(1).
(2) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Concurrent automatic changes. A taxpayer making both this change and the change
described in section 12.10 of this revenue procedure for the same taxable year of change may
file a single Form 3115 for both changes, provided the taxpayer enters the designated automatic
change numbers for both changes on the appropriate line on the Form 3115, and complies with the
ordering rules of § 1.263A-7(b)(2). See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, for information on making concurrent changes.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for changes in methods of accounting under this section 22.14
is “203.”
(5) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.15 Certain changes to the cost complement of the retail inventory method.
(1) Description of change. This change, as described in Rev. Proc. 2014-48, 2014-36 I.R.B. 527,
applies to a taxpayer using the retail inventory method that wants to make one of the following
changes:

February 14, 2022 704 Bulletin No. 2022–7
(a) From adjusting to not adjusting the numerator of the cost complement by the amount of
an allowance, discount, or price rebate that is required under § 1.471-3(e) to reduce only cost of
goods sold;
(b) From adjusting to not adjusting the denominator of the cost complement for temporary
markups and markdowns;
(c) In the case of a retail LCM taxpayer, to computing the cost complement using a method
described in § 1.471-8(b)(3), including changes from a method described in § 1.471-8(b)(3) to
another method described in § 1.471-8(b)(3); or
(d) In the case of a retail cost taxpayer, from not adjusting to adjusting the denominator of the
cost complement for permanent markups and markdowns.
(2) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Effective date. This section 22.15 is effective for taxable years beginning after December
31, 2014.
(4) Multiple changes. A taxpayer making multiple changes under this section 22.15 for the same
year of change should file a single Form 3115.
(5) Manner of making change. A taxpayer making a change under this section 22.15 for its first
or second taxable year beginning after December 31, 2014, may use either a § 481(a) adjustment
as provided in sections 7.02 and 7.03 of Rev. Proc. 2015-13 or implement the change on a cut-off
basis. If the taxpayer uses a cut-off basis, the change applies only to the computation of ending
inventories after the beginning of the year of change, and a § 481(a) adjustment is neither permitted
nor required if a change is made on a cut-off basis.
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for changes in methods of accounting under this section 22.15
is “204.”
(7) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.16 Certain changes within the retail inventory method .
(1) Description of change. This change applies to a taxpayer using the retail inventory method
that wants to change from including to not including temporary markups and markdowns in
determining the retail selling prices of goods on hand at the end of the taxable year.
(2) Inapplicability. This change does not apply to a taxpayer that accounts for inventory, or
proposes to account for inventory, under § 471(c), proposed § 1.471-1(b), or § 1.471-1(b), as
applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).

Bulletin No. 2022–7 705 February 14, 2022
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for changes in methods of accounting under this section 22.16
is “225.”
(4) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.17 Change from currently deducting inventories to permissible methods of identification and
valuation of inventories.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer that wants to change from currently
deducting inventories to a permissible method of identifying and valuing inventories. For
example, a taxpayer currently deducting inventories may change to using the first-in, first-out
(FIFO) method as its inventory-identification method and cost or market, whichever is lower
(LCM), as its inventory-valuation method.
(b) Inapplicability. This change does not apply to:
(i) any change for real property or improvements to the real property because real property is
not inventoriable property under § 1.471-1;
(ii) a taxpayer who meets the definition of a “dealer in securities” under both § 1.471-5 and
§ 475 because such dealer is required to account for securities, as defined in § 475, under § 475
and may not use the rules described in § 1.471-5 for those securities;
(iii) any change described in another section of this revenue procedure or in other guidance
published in the Internal Revenue Bulletin, or to any change within the last-in, first-out (LIFO)
inventory method. For example, this change does not apply to a taxpayer that wants to change to
a rolling-average method (but see section 22.13 of this revenue procedure) or to a taxpayer that
accounts for inventory, or proposes to account for inventory, under § 471(c), proposed § 1.471-
1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a
taxpayer is required to comply with § 1.471-1(b). See, however, section 22.18, 22.19 or 22.20 of
this revenue procedure, as applicable; or
(iv) any change to a method of allocating costs to inventory under § 471 or any change to a
method under § 263A (but see sections 12.01 and 12.02 of this revenue procedure).
(c) Permissible method defined. For purposes of this change, a permissible method is an inventory
method of identification or valuation, or both, specifically permitted for inventories by the Code,
the regulations, or other guidance published in the Internal Revenue Bulletin, or a decision of
the United States Supreme Court. However, an otherwise permissible inventory method is not
permissible under this section 22.17 for a specific taxpayer if that taxpayer is prohibited from
using that method or if that taxpayer is required to use a different method.
(d) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 does not apply to a method change under this section 22.17 if:

February 14, 2022 706 Bulletin No. 2022–7
(i) the taxpayer made or requested to make a change during any of the five taxable years ending
with the year of change to recover inventory costs in a taxable year prior to the taxable year in
which ownership of the inventory is transferred to the customer to offset inclusions under § 451(b)
and/or 451(c), as applicable;
(ii) in the case of a taxpayer with an applicable financial statement (AFS), as defined in section
16.10(1)(b) of this revenue procedure, the taxpayer makes, for the same year of change, a change
in method of accounting for income from the sale of inventory under section 16.10(2)(a)(iii) of
this revenue procedure and, to the extent the taxpayer receives advance payments for the sale
of inventory, section 16.10(2)(a)(iv) of this revenue procedure, or in the case of a taxpayer that
does not have an AFS, the taxpayer concurrently changes its method of accounting for advance
payments from the sale of inventory under section 16.10(2)(b)(ii) of this revenue procedure; and
(iii) the taxpayer makes the change under this section 22.17 for its early application year, as
defined in section 16.10(4)(c)(i) of this revenue procedure, or if a taxpayer does not apply § 1.451-
3 and/or § 1.451-8, as applicable, for a taxable year beginning before January 1, 2021, for the
taxpayer’s first taxable year beginning on or after January 1, 2021.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for changes in methods of accounting under this section 22.17
is “230.”
(3) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.18 Small business taxpayer § 471(c) inventory methods.
(1) Description of change. This change applies to a small business taxpayer, as defined in
section 22.18(2) of this revenue procedure, that wants to change its § 471 method of accounting
for inventory to one of the following methods provided in this section 22.18(1).
(a) Changes under § 471(c) or proposed § 1.471-1(b). For a taxable year beginning after
December 31, 2017, and before January 5, 2021, a change to:
(i) a method that treats inventory as non-incidental materials and supplies (NIMS) under
§ 471(c)(1)(B)(i);
(ii) a method that treats inventory as NIMS under proposed § 1.471-1(b)(4);
(iii) a method that conforms to § 471(c)(1)(B)(ii) by using the taxpayer’s method of accounting
reflected in its applicable financial statements (AFS), as defined in § 451(b)(3), with respect to the
taxable year, or if the taxpayer does not have an AFS for the taxable year, the books and records of
the taxpayer prepared in accordance with the taxpayer’s accounting procedures; or
(iv) the AFS section 471(c) method described in proposed § 1.471-1(b)(5), or if the taxpayer
does not have an AFS for the taxable year, the non-AFS section 471(c) method described in
proposed § 1.471-1(b)(6).
(b) Changes to a method under § 1.471-1(b). A change to:

Bulletin No. 2022–7 707 February 14, 2022
(i) the section 471(c) NIMS inventory method provided in § 1.471-1(b)(4);
(ii) the AFS section 471(c) inventory method provided in § 1.471-1(b)(5), for taxpayers with an
AFS, as defined in § 1.471-1(b)(5)(ii), or
(iii) the non-AFS section 471(c) inventory method provided in § 1.471-1(b)(6), for taxpayers
that do not have an AFS, as defined in § 1.471-1(b)(5)(ii).
(2) Small business taxpayer defined. Small business taxpayer means a taxpayer, other than a tax
shelter under § 448(d)(3), proposed § 1.448-2(b)(2), or § 1.448-2(b)(2), as applicable, that meets
the § 448(c) gross receipts test as provided in § 448(c), proposed § 1.471-1(b)(2), or § 1.471-1(b)
(2), as applicable. The § 448(c) gross receipts test is met if a taxpayer has average annual gross
receipts for the three prior taxable years of $25,000,000 or less (adjusted for inflation), as described
in § 448(c), proposed §§ 1.448-2(c), or § 1.448-2(c), as applicable. For taxable years beginning
in 2019, 2020 and 2021, the inflation-adjusted gross receipts test amount is $26,000,000. See
Rev. Proc. 2018-57, 2018-49 I.R.B. 827, Rev. Proc. 2019-44, 2019-47 I.R.B. 1093, or Rev. Proc.
2020-45, 2020-46 I.R.B. 1016, as applicable. For a taxable year beginning in 2022, the inflation-
adjusted amount is $27,000,000. See Rev. Proc. 2021-45, 2021-48 I.R.B. 764.
(3) Inapplicability. This change does not apply to:
(i) any change described in section 22.19 of this revenue procedure; or
(ii) any change from the LIFO inventory method under § 472. See however, section 23.01 of
this revenue procedure.
(4) Acceleration of § 481 adjustment. If a taxpayer making a change under this section 22.18
has a § 481(a) adjustment remaining on a prior change in method of accounting to account for
inventory in accordance with § 1.471-1(a), then it must take the remaining portion of such prior
§ 481(a) adjustment into account in the year of change.
(5) Eligibility rules.
(a) Eligibility rule inapplicable. For a change described in section 22.18(1) of this revenue
procedure, if the taxpayer changed from accounting for inventory in accordance with § 471(c),
proposed § 1.471-1(b) or § 1.471-1(b), as applicable, to accounting for inventory in accordance
with § 1.471-1(a) within the prior five taxable years ending with the year of change, and such
change was made in the first taxable year that the taxpayer did not qualify as a small business
taxpayer, then such prior change is disregarded for purposes of section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419.
(b) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 does not apply to the changes described in this section 22.18 for a taxpayer’s first,
second, or third taxable year beginning after December 31, 2017. In addition, the eligibility rule
in section 5.01(1)(f) of Rev. Proc. 2015-13 does not apply to a taxpayer’s early application year,
or, in the case of a taxpayer that does not apply § 1.471-1(b) in the early application year, the
taxpayer’s first taxable year beginning on or after January 5, 2021. For purposes of this section
22.18 “early application year” means the taxable year of change beginning before January 5,
2021, in which a taxpayer first applies § 1.471-1(b).

February 14, 2022 708 Bulletin No. 2022–7
(c) Certain changes with § 481(a) adjustment of zero disregarded for eligibility rule. A change
made under section 22.18(1)(b) of this revenue procedure will be disregarded for purposes of
section 5.01(1)(f) of Rev. Proc. 2015-13 if the change meets the following requirements:
(i) the change is made for the taxpayer’s early application year, or, in the case of a taxpayer that
does not apply § 1.471-1(b) for a taxable year beginning before January 5, 2021, for the taxpayer’s
first taxable year beginning on or after January 5, 2021, and
(ii) the § 481(a) adjustment required to implement the change is zero.
(6) Manner of making change.
(a) Reduced filing requirement. A taxpayer is required to complete only the following information
on Form 3115 (Rev. December 2018) to make this change:
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, all lines except line 16; and
(v) Part IV, all lines except line 25.
(b) Streamlined method change procedures for certain taxpayers.
(i) Applicability. The procedures described in this section 22.18(6)(b) may be used by a taxpayer
to make a change in method of accounting described in section 22.18(1)(b) for the taxpayer’s
early application year, as defined in section 22.18(5)(b) of this revenue procedure. Additionally,
in the case of a taxpayer that does not apply § 1.471-1(b) for a taxable year beginning before
January 5, 2021, the procedures described in this section 22.18(6)(b) may be used to make a
change in method of accounting described in section 22.18(1)(b) of this revenue procedure in the
taxpayer’s first taxable year beginning on or after January 5, 2021. A taxpayer that is otherwise
permitted to use the streamlined method change procedures in this section 22.18(6)(b) may
use these streamlined procedures if the taxpayer is making a change under section 22.18(1)
(b) of this revenue procedure and the net § 481(a) adjustment required by such change is zero.
Notwithstanding any provisions of this section 22.18, a taxpayer making more than one change in
method of accounting under this revenue procedure for the same year of change is not permitted
to net the § 481(a) adjustments to determine if the taxpayer meets the requirements to use the
streamlined method change procedures. See section 22.18(8) of this revenue procedure for more
information on making concurrent changes.
(ii) No Form 3115 required. In accordance with § 1.446-1(e)(3)(ii), the requirement of § 1.446-
1(e)(3)(i) to file a Form 3115 is waived for a taxpayer making a change in method of accounting
under this section 22.18 using the streamlined method change procedures. Thus, a taxpayer using
the streamlined method change procedures is not required to file a Form 3115 and is not required
to attach a separate statement when making a change under this section 22.18(6)(b).

Bulletin No. 2022–7 709 February 14, 2022
(7) No ruling on certain method of accounting used. The consent granted under section 9 of Rev.
Proc. 2015-13 for a change made under section 22.18(1)(a)(i) or (iii) of this revenue procedure
is not a determination by the Commissioner that the proposed inventory method of accounting
is permissible, and does not create any presumption that the proposed method is a permissible
method of accounting under a provision of the Code. The director will ascertain whether the
proposed method is permissible under the Code.
(8) Concurrent automatic changes. A taxpayer making a change under this section 22.18 and
a change under section 15.17 and/or 12.16 of this revenue procedure for the same year of change
may file a single Form 3115 for all changes provided the taxpayer enters the designated automatic
change numbers for the changes on the appropriate line of Form 3115. See section 6.03(1)(b) of
Rev. Proc. 2015-13 for information on making concurrent changes.
(9) Designated automatic accounting method change number.
(a) Change to apply section 471(c) NIMS inventory method, as provided in section 22.18(1)(b)
(i) of this revenue procedure. The designated automatic accounting method change number for a
change to apply the section 471(c) NIMS inventory method as provided in section 22.18(1)(b)(i)
of this revenue procedure is “260.”
(b) Change to apply AFS section 471(c) inventory method or non-AFS section 471(c) inventory
method, as provided in section 22.18(1)(b)(ii) or (iii) of this revenue procedure. The designated
automatic accounting method change number for a change to apply the AFS section 471(c) method
or the non-AFS section 471(c) method provided in section 22.18(1)(b)(ii) or (iii) of this revenue
procedure is “261.”
(c) All other changes to a method described in section 22.18(1)(a) of this revenue procedure.
The designated automatic accounting method change number for all other changes to a method
of accounting for inventory described in section 22.18(1)(a) of this revenue procedure is “235.”
(10) Contact information. For further information regarding a change under this section, contact
Livia Piccolo at (202) 317-7007 (not a toll-free number).
.19 Changes within a § 471(c) inventory method.
(1) Description of change. This change applies to a small business taxpayer, as defined in
section 22.18(2) of this revenue procedure, that:
(a) for a taxable year beginning after December 31, 2017, and before January 5, 2021, treats its
inventory as non-incidental materials and supplies (NIMS) under § 471(c)(1)(B)(i) and wants to
change from one permissible method, as defined in section 22.10(1)(c) of this revenue procedure,
of identifying or valuing inventories to another permissible method of identifying or valuing
inventories. For example, a taxpayer that uses specific identification as its inventory identification
method may change to using the first-in, first-out (FIFO) method for purposes of its NIMS method
under § 471(c)(1)(B)(i) under this section 22.19;
(b) uses the section 471(c) NIMS inventory method as provided in § 1.471-1(b)(4) and wants
to change:

February 14, 2022 710 Bulletin No. 2022–7
(i) to a method of identification or valuation permitted by § 1.471-1(b)(4)(ii) such as, for
example, specific identification, FIFO, cost or average cost;
(ii) its allocation method to a method permitted by § 1.471-1(b)(4)(iii); or
(iii) to capitalize a direct cost of property produced or acquired for resale, or to deduct an
indirect cost of property produced or acquired for resale, as provided in § 1.471-1(b)(4)(ii).
(c) for a taxable year beginning after December 31, 2017, and before January 5, 2021, uses
a method conforming to § 471(c)(1)(B)(ii) by using the taxpayer’s method of accounting for
inventory reflected in its applicable financial statements (AFS), as defined in § 451(b)(3), with
respect to the taxable year, or if the taxpayer does not have an AFS for the taxable year, the books
and records of the taxpayer prepared in accordance with the taxpayer’s accounting procedures,
and wants to change the manner in which it accounts for inventory in its AFS or books and
records, as applicable; and is required to use such method of accounting for inventory in its AFS
or its books and records, as applicable, for purposes of applying § 471(c)(1)(B)(ii); or
(d) uses the AFS section 471(c) inventory method provided in § 1.471-1(b)(5), or if the taxpayer
does not have an AFS as defined in § 1.471-1(b)(5)(ii) for the taxable year, the non-AFS section
471(c) inventory method provided in § 1.471-1(b)(6), and wants to change the manner in which
it accounts for inventory in its AFS or books and records, as applicable; and is required to use
such method of accounting for inventory in its AFS or its books and records, as applicable, in
applying the AFS section 471(c) inventory method in §1.471-1(b)(5), or the non-AFS section
471(c) inventory method in § 1.471-1(b)(6), as applicable.
(2) Eligibility rules.
(a) Eligibility rule inapplicable. The eligibility rule in section 5.01(f) of Rev. Proc. 2015-13 does
not apply to a change described in section 22.19(1)(c) or 22.19(1)(d) of this revenue procedure.
(3) Section 481(a) adjustment period. Beginning with the year of change, a taxpayer making
a change described in section 22.19(1)(c) or 22.19(1)(d) of this revenue procedure must take
any applicable net positive § 481(a) adjustment for such change into account ratably over the
same number of taxable years, not to exceed four, that the taxpayer used its former method of
accounting. Additionally, a taxpayer making a change described in section 22.19(1)(c) or 22.19(1)
(d) of this revenue procedure that has a § 481(a) adjustment remaining on a prior change in
method of accounting that is described in section 22.19(1)(c) or section 22.19(1)(d) of this revenue
procedure must take the remaining portion of such prior § 481(a) adjustment into account in the
year of change.
(4) Reduced filing requirement. A taxpayer is required to complete only the following information
on Form 3115 (Rev. December 2018) to make this change:
(a) The identification section of page 1 (above Part I);
(b) The signature section at the bottom of page 1;
(c) Part I;

Bulletin No. 2022–7 711 February 14, 2022
(d) Part II, all lines except lines 7, 16b and 16c. In the response to line 16a, include a statement
that the taxpayer satisfies the § 448(c) gross receipts test for the year of change.
(e) Part IV, all lines except line 25; and
(f) Schedule D, Part II, lines 1-3.
(5) Concurrent automatic changes. A taxpayer that wants to make one or more concurrent
changes in method of accounting under this section 22.19 or wants to make a change under this
section 22.19 and a change under sections 15.17 or 12.16 of this revenue procedure for the same
year of change may file a single Form 3115 for such changes, provided the taxpayer enters the
designated automatic accounting method change numbers for each change on the appropriate lines
of the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for more information on making
concurrent changes.
(6) No audit protection. A taxpayer making a change in method of accounting for inventory
under section 22.19(1)(c) or 22.19(1)(d) of this revenue procedure does not receive audit protection
under section 8.01 of Rev. Proc. 2015-13.
(7) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.19 is “262.”
(8) Contact information. For further information regarding a change under this section, contact
Livia Piccolo at (202) 317-7007 (not a toll-free number).
.20 Change from a small business taxpayer § 471(c) inventory method to an inventory method
under § 471(a).
(1) Description of change. This change applies to a taxpayer that wants to change from using a
small business taxpayer inventory method under § 471(c), proposed § 1.471-1(b)(4), (5), or (6), or
§ 1.471-1(b)(4), (5) or (6), as applicable, to accounting for inventory in accordance with § 471(a)
and § 1.471-1(a).
(2) Inapplicability. This change does not apply to any change within the last-in, first-out (LIFO)
inventory method.
(3) Eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-
13, 2015-5 I.R.B. 419, does not apply to a change described in section 22.20(1) of this revenue
procedure if such change is being made in the first taxable year that the taxpayer does not qualify
as a small business taxpayer as defined in section 22.18(2) of this revenue procedure.
(4) Concurrent automatic changes. A taxpayer making a change under this section 22.20 and
a change under sections 12.01 or 12.02 and/or 15.01 of this revenue procedure for the same
year of change may file a single Form 3115 for such changes, provided the taxpayer enters the
designated automatic accounting method change numbers for each change on the appropriate lines
of the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for more information on making
concurrent changes.

February 14, 2022 712 Bulletin No. 2022–7
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 22.20 is “263.”
(6) Contact information. For further information regarding a change under this section, contact
Livia Piccolo at (202) 317-7007 (not a toll-free number).
SECTION 23. LAST-IN, FIRST-OUT (LIFO) INVENTORIES (§ 472)
.01 Change from the LIFO inventory method.
(1) Description of change.
(a) In general. This change applies to a taxpayer that wants to:
(i) change from the LIFO inventory method for all its LIFO inventory or for the entire content
of one or more dollar-value pools; and
(ii) change to a permitted method or methods as determined in section 23.01(1)(b) of this
revenue procedure.
(b) Method to be used.
(i) Determining the permitted method to be used. A taxpayer may change to one or more non-
LIFO inventory methods for the LIFO inventories that are the subject of this accounting method
change, but only if the selected non-LIFO method is a permitted method for the inventory goods
to which it will be applied. For example, a heavy equipment dealer may change to the specific
identification method for new heavy equipment inventories and the replacement cost method, as
described in Rev. Proc. 2006-14, 2006-1 C.B. 350, for heavy equipment parts inventories.
(ii) Permitted method defined. For purposes of this section 23.01, an inventory method
(identification or valuation, or both) is a permitted method if it is specifically permitted for the
inventory goods by the Code, the regulations, or other guidance published in the Internal Revenue
Bulletin, or a decision of the United States Supreme Court and if the taxpayer is neither prohibited
from using that method nor required to use a different inventory method for those inventory goods.
A permitted method includes a method described in § 471(c), proposed § 1.471-1(b)(4), (5) or (6),
or § 1.471-1(b)(4), (5) or (6), as applicable, provided the taxpayer is a small business taxpayer as
defined in section 22.18(2) of this revenue procedure.
(iii) Determining permitted method. Whether an inventory method is a permitted method is
determined without regard to the types and amounts of costs capitalized under the taxpayer’s
method of computing inventory cost. See § 263A and the regulations thereunder, which govern
the types and amounts of costs required to be included in inventory cost for taxpayers subject to
those provisions.
(2) Eligibility rules.

Bulletin No. 2022–7 713 February 14, 2022
(a) Eligibility rules inapplicable.
(i) The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, does not
apply for the first taxable year that the taxpayer does not or will not comply with the requirements
of § 472(e)(2) because the taxpayer has applied or will apply International Financial Reporting
Standards in its financial statements or because the taxpayer has been acquired by an entity that
has not or will not use the LIFO method in its financial statements.
(ii) For a change by a small business taxpayer to a permitted method described in the last sentence
of section 23.01(1)(b)(ii) of this revenue procedure, if the taxpayer changed from accounting for
inventory in accordance with § 471(c), proposed § 1.471-1(b) or § 1.471-1(b), as applicable, to
accounting for inventory in accordance with § 472 and the accompanying regulations within the
prior five taxable years ending with the year of change, and such change was made in the first
taxable year that the taxpayer did not qualify as a small business taxpayer, then such change is
disregarded for purposes of section 5.01(1)(f) of Rev. Proc. 2015-13.
(b) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 does not apply to a taxpayer’s early application year, or, in the case of a taxpayer
that does not apply § 1.471-1(b) in the early application year, the taxpayer’s first taxable year
beginning on or after January 5, 2021. For purposes of this section 23.01, “early application year”
means the taxable year of change beginning before January 5, 2021, in which a taxpayer first
applies § 1.471-1(b).
(3) Limitation on LIFO election. The taxpayer may not re-elect the LIFO inventory method for
a period of at least five taxable years beginning with the year of change unless, based on a showing
of unusual and compelling circumstances, consent is specifically granted by the Commissioner to
change the method of accounting at an earlier time. A taxpayer that wants to re-elect the LIFO
inventory method within a period of five taxable years (beginning with the year of change) must
file a Form 3115 in accordance with the non-automatic change procedures in Rev. Proc. 2015-13.
A taxpayer that wants to re-elect the LIFO inventory method after a period of five taxable years
(beginning with the year of change) does not file a Form 3115 using the non-automatic change
procedures in Rev. Proc. 2015-13, but, rather, must file a Form 970, Application To Use LIFO
Inventory Method, in accordance with § 1.472-3.
(4) Effect of subchapter S election by corporation. See section 7.03(4)(b) and (c) of Rev. Proc.
2015-13.
(5) Additional requirements. The taxpayer must complete the following statements and attach
them to its Form 3115. If the taxpayer will use different methods for different inventory goods to
which the change applies, the taxpayer must complete the statements for each of those different
types of inventory goods.
(a) “The proposed method of identifying [Insert description of inventory goods] is the [Insert
method, as appropriate; that is, specific identification; FIFO; retail; etc.] method.”
(b) “The proposed method of valuing [Insert description of inventory goods] is [Insert method,
as appropriate; that is, cost; LCM; etc.].”
(6) Pool split and partial termination. If a taxpayer must remove goods from a LIFO inventory
pool because those goods are not within the scope of that pool (for example, removing resale
goods from a manufacturing pool), and if the taxpayer wants to change from the LIFO inventory

February 14, 2022 714 Bulletin No. 2022–7
method for those removed goods, the taxpayer may split the pool pursuant to section 23.10 of this
revenue procedure and then may change from the LIFO method pursuant to this section 23.01.
See section 23.10(2) of this revenue procedure. The taxpayer must file a separate Form 3115 for
each such change.
(7) Section 481(a) adjustment required.
(a) General rule. A taxpayer changing from a LIFO inventory method must compute a § 481(a)
adjustment for the year of change. See section 7.02 of Rev. Proc. 2015-13.
(b) Special rule for changes that would otherwise be implemented on a cut-off basis. If a taxpayer
is changing from the LIFO inventory method to a method of accounting that is implemented
on a cut-off basis under another section of this revenue procedure (see, for example, sections
22.06, 22.07, and 22.13 of this revenue procedure), the taxpayer’s § 481(a) adjustment is “the
LIFO recapture amount” as defined in § 312(n)(4)(B) and (C). A taxpayer computing the § 481(a)
adjustment under this special rule must then compute its ending inventory value for the year of
change using the proposed method (that is, treat the deemed change from the first-in, first-out
(FIFO) method to the proposed method on a cut-off basis).
(8) No ruling on certain method of accounting used. The consent granted under section 9 of
Rev. Proc. 2015-13 for a change made by a small business taxpayer to an inventory method in
accordance with § 471(c) under this section 23.01 is not a determination by the Commissioner that
the proposed inventory method of accounting is permissible and does not create any presumption
that the proposed method is a permissible method of accounting under a provision of the Code.
The director will ascertain whether the proposed method is permissible under the Code. This
section 23.01(8) does not apply to a small business taxpayer that is making a change to a method
of accounting permissible under proposed § 1.471-1(b) or § 1.471-1(b).
(9) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 23.01 is “56.”
(10) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.02 Determining current-year cost under the LIFO inventory method.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer using the LIFO inventory method that wants
to change its method of determining current-year cost to:
(i) the actual cost of the goods most recently purchased or produced (most-recent-acquisitions
method);
(ii) the actual cost of the goods purchased or produced during the taxable year in the order of
acquisition (earliest-acquisitions method);

Bulletin No. 2022–7 715 February 14, 2022
(iii) the average unit cost equal to the aggregate actual cost of all the goods purchased or produced
throughout the taxable year divided by the total number of units so purchased or produced. See
§ 1.472-8(e)(2)(ii);
(iv) the specific identification method; or
(v) a rolling-average method if the taxpayer uses that rolling-average method in accordance
with Rev. Proc. 2008-43, 2008-30 I.R.B. 186, as modified by Rev. Proc. 2008-52, 2008-36 I.R.B.
587 (see section 13).
(b) Inapplicability. This change does not apply to a taxpayer using the lower of cost or market
method to determine current-year cost. A taxpayer using the lower of cost or market method that
valued inventory below cost may not change to a proper cost valuation under this section 23.02.
(2) Manner of making change. This change is made using a cut-off basis and applies only to
the computations of current-year cost after the beginning of the year of change. Accordingly, a
§ 481(a) adjustment is neither permitted nor required.
(3) Concurrent change to a rolling-average method. A taxpayer making both a change to a
rolling-average method of determining current-year cost for its LIFO inventory under this section
23.02 and a change to a rolling-average method of accounting for non-LIFO inventories under
Rev. Proc. 2008-43 (see section 22.13 of this revenue procedure) should file a single Form 3115 for
both changes, in which case the taxpayer must enter the designated automatic accounting method
change numbers for both changes on the appropriate line on that Form 3115. See section 6.03(1)
(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for information on making concurrent changes.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 23.02 is “57.”
(5) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.03 Alternative LIFO inventory method for retail automobile dealers.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer engaged in the trade or business of retail
sales of new automobiles or new light-duty trucks (“automobile dealer”) that wants to change to
the “Alternative LIFO method” described in section 4 of Rev. Proc. 97-36, 1997-2 C.B. 450, as
modified by Rev. Proc. 2008-23, 2008-1 C.B. 664, for its LIFO inventories of new automobiles
and new light-duty trucks. Light-duty trucks are trucks with a gross vehicle weight of 14,000
pounds or less, which also are referred to as class 1, 2, or 3 trucks.
(b) Inapplicability. This change does not apply to an automobile dealer that uses the inventory
price index computation (IPIC) method for goods other than new automobiles, new light-duty
trucks, parts and accessories, used automobiles, and used trucks.
(2) Manner of making change.

February 14, 2022 716 Bulletin No. 2022–7
(a) Cut-off basis. This change is made using a cut-off basis and applies only to the computation
of ending inventories after the beginning of the year of change. See section 5.03(6) of Rev. Proc.
97-36 for more information regarding a cut-off basis. Accordingly, a § 481(a) adjustment is neither
permitted nor required.
(b) Concurrent change from IPIC method. An automobile dealer using the IPIC method that
also has parts and accessories, used automobiles, or used light-duty trucks (other goods) inventory
may incorporate a change, using a cut-off basis, from IPIC to another acceptable LIFO method for
those other goods into this change. When changing from IPIC to a dollar-value LIFO method for
its other goods, the automobile dealer must establish separate inventory pools for new automobiles
and new light-duty trucks, unless the automobile dealer also concurrently changes to the Vehicle-
Pool Method (see section 23.08 of this revenue procedure). Further, the automobile dealer must
establish a separate inventory pool for the parts and accessories. See section 6.03(1)(b) of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, for information on making concurrent changes.
(c) Additional requirements. An automobile dealer also must comply with the following:
(i) the conditions in section 5.03 of Rev. Proc. 97-36; and
(ii) for an automobile dealer changing from the IPIC method under this section 23.03, the
automobile dealer also must attach to its Form 3115 a schedule setting forth the classes of goods
for which the automobile dealer has elected to use the LIFO method and the accounting method
changes being made under this section 23.03 for each class of goods.
(3) Concurrent change to the Vehicle-Pool Method. A taxpayer making both a change to the
Alternative LIFO Method under this section 23.03 and a change to the Vehicle-Pool Method
under Rev. Proc. 2008-23 (see section 23.08 of this revenue procedure) should file a single Form
3115 for both changes, in which case the taxpayer must enter the designated automatic accounting
method change numbers for both changes on the appropriate line on that Form 3115. See section
6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 23.03 is “58.”
(5) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.04 Used vehicle alternative LIFO method.
(1) Description of change. This change applies to a taxpayer that sells used automobiles
and used light-duty trucks (“used vehicle dealers”) that wants to change to the “Used Vehicle
Alternative LIFO Method” as described in Rev. Proc. 2001-23, 2001-1 C.B. 784, as modified by
Announcement 2004-16, 2004-1 C.B. 668, and Rev. Proc. 2008-23, 2008-1 C.B. 664.
(2) Additional requirements. A taxpayer making this change must comply with the additional
conditions set forth in section 5.04 of Rev. Proc. 2001-23.
(3) Manner of making change.

Bulletin No. 2022–7 717 February 14, 2022
(a) Cut-off basis. This change is made on a cut-off basis, which requires that the value of the
taxpayer’s used automobile and used light-duty truck inventory at the beginning of the year of
change must be the same as the value of that inventory at the end of the preceding taxable year,
plus cost restorations, if any, required by section 5.04(5) of Rev. Proc. 2001-23. Accordingly, a
§ 481(a) adjustment is neither permitted nor required.
(b) Bargain purchase. If the taxpayer has previously improperly accounted for a bulk bargain
purchase, the taxpayer must, as part of this change, first change its method of accounting to comply
with Hamilton Industries, Inc. v. Commissioner, 97 T.C. 120 (1991), and compute a § 481(a)
adjustment for that part of the change. See Announcement 91-173, 1991-47 I.R.B. 29. Upon
examination, if a taxpayer has properly changed under this section 23.04 except for complying
with this section 23.04(3)(b), an examining agent may not deny the taxpayer the change. However,
the taxpayer does not receive audit protection under section 8.01 of Rev. Proc. 2015-13, 2015-
5 I.R.B. 419, with respect to the improper method of accounting for the bargain purchase. See
section 8.02(2) of Rev. Proc. 2015-13. Accordingly, the examining agent may make any necessary
adjustments in any year for which the period of limitations on assessment and collection of tax is
open to effect compliance with Hamilton Industries, Inc.
(c) New base year. In effecting a change to the Used Vehicle Alternative LIFO Method under
this revenue procedure, the taxpayer must retain any LIFO inventory cost increments previously
determined and the value of those increments. Instead of using the earliest taxable year for which
the taxpayer adopted LIFO as the base year, the taxpayer must use the year of change as the new
base year in determining the value of all existing LIFO cost increments for the year of change
and later taxable years. (The cumulative index at the beginning of the year of change is 1.00).
The taxpayer must restate the base-year cost of all LIFO cost increments at the beginning of the
year of change in terms of new base-year costs, using the year of change as the new base year,
and must recompute the indexes for previously determined inventory increments accordingly. The
new base-year cost of a pool is equal to the total current-year cost of all the vehicles in the pool.
(d) Form 3115. A completed Form 3115 includes the completion of Part I of Schedule C.
(4) Concurrent change from IPIC method. A used vehicle dealer using the IPIC method that
also has parts and accessories, new automobiles, or new light-duty trucks (other goods) inventory
may incorporate a change, using a cut-off basis, from IPIC to another acceptable LIFO method for
those other goods into this change. When changing from IPIC to a dollar-value LIFO method for its
other goods, the used vehicle dealer must establish separate inventory pools for new automobiles
and new light-duty trucks, unless the used vehicle dealer also concurrently changes to the Vehicle-
Pool Method (see section 23.08 of this revenue procedure). Further, the used vehicle dealer must
establish a separate inventory pool for the parts and accessories. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making concurrent changes.
(5) Concurrent change to the Vehicle-Pool Method. A taxpayer making both a change to the
Used Vehicle Alternative LIFO Method under this section 23.04 and a change to the Vehicle-Pool
Method under Rev. Proc. 2008-23 (see section 23.08 of this revenue procedure) should file a single
Form 3115 for both changes, in which case the taxpayer must enter the designated automatic
accounting method change numbers for both changes on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 23.04 is “59.”

February 14, 2022 718 Bulletin No. 2022–7
(7) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.05 Determining the cost of used vehicles purchased or taken as a trade-in.
(1) Description of change.
(a) Applicability. This change applies to a taxpayer using the LIFO inventory method that wants
to:
(i) determine the cost of used vehicles acquired by trade-in using the average wholesale price
listed by an official used vehicle guide on the date of the trade-in. See Rev. Rul. 67-107, 1967-1
C.B. 115. The taxpayer must consistently use the official used vehicle guide selected unless the
taxpayer receives permission to use a different guide;
(ii) use a different official used vehicle guide for determining the cost of used vehicles acquired
by trade-in;
(iii) determine the cost of used vehicles purchased for cash using the actual purchase price of
the vehicle; or
(iv) reconstruct the beginning-of-the-year cost of used vehicles purchased for cash using values
computed by national auto auction companies based on vehicles purchased for cash. The national
auto auction company selected must be consistently used.
(b) Inapplicability. This change does not apply to a taxpayer that adopted or changed to the
Used Vehicle Alternative LIFO Method (see section 23.04 of this revenue procedure).
(2) Manner of making change. This change is made on a cut-off basis and applies only to
used vehicles acquired on or after the beginning of the year of change. Accordingly, a § 481(a)
adjustment is neither permitted nor required.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 23.05 is “60.”
(4) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.06 Change to the inventory price index computation (IPIC) method.
(1) Description of change. This change applies to a taxpayer that wants to change:
(a) from a non-IPIC LIFO inventory method to the IPIC method in accordance with all relevant
provisions of § 1.472-8(e)(3); or
(b) from the IPIC method as described in T.D. 7814, 1982-1 C.B. 84, (March 15, 1982) (the
old IPIC method) to the IPIC method as described in § 1.472-8(e)(3) (see T.D. 8976, 2002-1 C.B.

Bulletin No. 2022–7 719 February 14, 2022
421, (January 8, 2002)) (the new IPIC method), which includes the following required changes
(if applicable):
(i) from using 80% of the inventory price index (IPI) to using 100% of the IPI to determine the
base-year cost and dollar-value of a LIFO pool(s);
(ii) from using a weighted arithmetic mean to using a weighted harmonic mean to compute an
IPI for a dollar-value pool(s); and
(iii) from using a components-of-cost method to define inventory items to using a total-product-
cost method to define inventory items.
(2) Manner of making change. This change is made on a cut-off basis and applies only to
the computation of ending inventories after the beginning of the year of change. Accordingly, a
§ 481(a) adjustment is neither permitted nor required.
(3) Bargain purchase. If the taxpayer has previously improperly accounted for a bulk bargain
purchase, the taxpayer must, as part of this change, first change its method of accounting
to comply with Hamilton Industries, Inc. v. Commissioner, 97 T.C. 120 (1991), and compute
a § 481(a) adjustment for that part of the change. See Announcement 91-173, 1991-47 I.R.B.
29. Upon examination, if a taxpayer has properly changed under this section 23.06 except for
complying with section 23.06(3) of this revenue procedure, an examining agent may not deny the
taxpayer the change. However, the taxpayer does not receive audit protection under section 8.01
of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, with respect to the improper method of accounting
for the bargain purchase. See section 8.02(2) of Rev. Proc. 2015-13. Accordingly, the examining
agent may make any necessary adjustments in any year for which the period of limitations on
assessment and collection of tax is open to effect compliance with Hamilton Industries, Inc.
(4) Concurrent automatic changes.
(a) A taxpayer making this change and to change its method of determining current-year cost
under section 23.02 of this revenue procedure for the same year of change may file a single Form
3115 for both changes, provided the taxpayer enters the designated automatic accounting method
change numbers for both changes on the appropriate line on that Form 3115. See section 6.03(1)
(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(b) A taxpayer making this change and to change its method of pooling to IPIC-method pools
described in § 1.472-8(b)(4) or § 1.472-8(c)(2) under section 23.07 of this revenue procedure for
the same year of change may file a single Form 3115, provided the taxpayer enters the designated
automatic accounting method change numbers for both changes on the appropriate line on that
Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent
changes.
(c) A taxpayer making this change and to change its method of pooling under section 23.10
of this revenue procedure for the same year of change may file a single Form 3115, provided the
taxpayer enters the designated automatic accounting method change numbers for both changes
on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for
information on making concurrent changes.

February 14, 2022 720 Bulletin No. 2022–7
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 23.06 is “61.”
(6) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.07 Changes within the inventory price index computation (IPIC) method.
(1) Description of change. This change applies to a taxpayer using the IPIC method described in
§ 1.472-8(e)(3) as revised by T.D. 8976, 2002-1 C.B. 421, (new IPIC method) that wants to make
one or more of the following changes:
(a) change from the double-extension IPIC method to the link-chain IPIC method, or vice versa.
See § 1.472-8(e)(3)(iii)(E) for principles concerning the computation of the inventory price index
under the double-extension IPIC method and the link-chain IPIC method;
(b) change to or from the 10 percent method. See § 1.472-8(e)(3)(iii)(C) for principles
concerning the assignment of inventory items to Bureau of Labor Statistics (BLS) categories
under the IPIC method;
(c) change to IPIC-method pools described in § 1.472-8(b)(4) or § 1.472-8(c)(2), including a
change to begin or discontinue applying one or both of the 5 percent pooling rules;
(d) change to combine or separate pools as a result of the application of a 5 percent pooling rule
described in § 1.472-8(b)(4) or § 1.472-8(c)(2);
(e) change its selection of BLS table from Table 3 (Consumer Price Index for All Urban
Consumers (CPI-U): U.S. city average, detailed expenditure categories) of the monthly CPI
Detailed Report to Table 9 (Producer price indexes (PPI) and percent changes for commodity
and service groupings and individual items, not seasonally adjusted) of the monthly PPI Detailed
Report (formerly, Table 6), or vice versa. See § 1.472-8(e)(3)(iii)(B)(2) for principles concerning
the selection of a BLS table under the IPIC method;
(f) change the assignment of one or more inventory items to BLS categories under either Table 3
(CPI-U): U.S. City average, detailed expenditure categories) of the monthly CPI Detailed Report
or Table 9 (PPI and percent changes for commodity and service groupings and individual items,
not seasonally adjusted) of the monthly PPI Detailed Report (formerly, Table 6). See § 1.472-
8(e)(3)(iii)(C) for principles concerning the assignment of inventory items to BLS categories
under the IPIC method. As part of this change, a taxpayer may separate a reassigned item from
an inappropriate pool and combine the reassigned item with items in an appropriate pool. See
§ 1.472-8(g)(2) for principles concerning the manner of combining and separating dollar-value
pools;
(g) change the representative month when necessitated because of a change in taxable year
or a change in method of determining current-year cost made pursuant to section 23.02 of this
revenue procedure. See § 1.472-8(e)(3)(iii)(B) for principles concerning the determination of a
representative month under the IPIC method. A change in method of determining current-year cost
and a change of the representative month may be made using a single Form 3115, provided the
taxpayer enters the designated automatic accounting method change numbers for both changes on
the appropriate line on that Form 3115;

Bulletin No. 2022–7 721 February 14, 2022
(h) change from using preliminary BLS price indexes to using final BLS price indexes to
compute an inventory price index, or vice versa. See § 1.472-8(e)(3)(iii)(D)(2) for principles
concerning the selection of BLS price indexes under the IPIC method; and
(i) change from using a representative appropriate month to using an appropriate month. See
§ 1.472-8(e)(3)(iii)(B)(3) for principles concerning the selection of an appropriate month.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to the changes described in sections 23.07(1)(d), (f)
in the case of a taxpayer using the 10 percent method described in § 1.472-8(e)(3)(iii)(C)(2), and
(g) of this revenue procedure.
(3) Manner of making change.
(a) Cut-off basis. These changes are made on a cut-off basis and apply only to the computation
of ending inventories after the beginning of the year of change. Accordingly, a § 481(a) adjustment
is neither permitted nor required.
(b) New base year. A taxpayer that changes pursuant to sections 23.07(1)(a), (b), and (e) of this
revenue procedure must establish a new base year in the year of change.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 23.07 is “62.”
(5) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.08 Changes to the Vehicle-Pool Method.
(1) Description of change. This change applies to a retail dealer or wholesale distributor
(“reseller”) of cars and light-duty trucks that wants to change to the “Vehicle-Pool Method” as
described in Rev. Proc. 2008-23, 2008-1 C.B. 664.
(2) Manner of making change.
(a) Cut-off basis. This change is made on a cut-off basis and applies only to the computation of
ending inventories after the beginning of the year of change. Accordingly, a § 481(a) adjustment
is neither permitted nor required. A reseller that changes its method of pooling under Rev. Proc.
2008-23 and this section 23.08 must comply with § 1.472-8(g).
(b) New base year. Instead of using the earliest taxable year for which the reseller adopted the
LIFO method for any items in a pool, the reseller must use the year of change as the base year
when determining the LIFO value of that pool for the year of change and subsequent taxable years
(that is, the cumulative index at the beginning of the year of change is 1.00). The reseller must
restate the base-year cost of all layers of increment in a pool at the beginning of the year of change
in terms of new base-year cost. For an example of establishing a new base year, see § 1.472-8(e)
(3)(iv)(B)(1)(ii).

February 14, 2022 722 Bulletin No. 2022–7
(3) Concurrent change to the Alternative LIFO Method or the Used Vehicle Alternative LIFO
Method. A reseller making both a change to the Vehicle-Pool Method under this section 23.08
and a change to the Alternative LIFO Method under Rev. Proc. 97-36 (see section 23.03 of this
revenue procedure) or the Used Vehicle Alternative LIFO Method under Rev. Proc. 2001-23 (see
section 23.04 of this revenue procedure) should file a single Form 3115 for both changes, in which
case the taxpayer must enter the designated automatic accounting method change numbers for
both changes on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-
13, 2015-5 I.R.B. 419, for information on making concurrent changes.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 23.08 is “112.”
(5) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.09 Changes within the used vehicle alternative LIFO method.
(1) Description of change. This change applies to a taxpayer using the “Used Vehicle
Alternative LIFO Method” as described in Rev. Proc. 2001-23, 2001-1 C.B. 784, as modified by
Announcement 2004-16, 2004-1 C.B. 668, and Rev. Proc. 2008-23, 2008-1 C.B. 664, that wants
to change the particular “official used vehicle guide” utilized by the taxpayer in connection with
the Used Vehicle Alternative LIFO Method or any change in the precise manner of its utilization
(for example, a change in the specific guide category that a taxpayer uses to represent vehicles of
average condition for purposes of section 4.02(5)(a) of Rev. Proc. 2001-23).
(2) Manner of making change.
(a) Cut-off basis. This change is made on a cut-off basis and applies only to the computation of
ending inventories after the beginning of the year of change. Accordingly, a § 481(a) adjustment
is neither permitted nor required.
(b) New base year. A taxpayer that changes its method pursuant to this section 23.09 must
establish a new base year in the year of change.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 23.09 is “140.”
(4) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
.10 Changes to dollar-value pools of manufacturers.
(1) Description of change. This change applies to a manufacturer that:
(a) purchases goods for resale (resale goods) and, thus, must reassign resale goods from the
pool(s) it maintains for the goods it manufactures to one or more resale pools;

Bulletin No. 2022–7 723 February 14, 2022
(b) wants to change from using multiple pools described in § 1.472-8(b)(3) to using natural
business unit (NBU) pools described in § 1.472-8(b)(1), or vice versa; or
(c) wants to reassign items in NBU pools described in § 1.472-8(b)(1) into the same number or
a greater number of NBU pools.
(2) Manner of making change. This change is made on a cut-off basis and applies only to
the computation of ending inventories after the beginning of the year of change. Accordingly,
a § 481(a) adjustment is neither permitted nor required. A taxpayer that changes its method of
pooling pursuant to this section 23.10 must combine or separate pools as required by § 1.472-8(g).
If a taxpayer splits a pool into two or more permissible pools pursuant to this section 23.10, which
must be implemented on a cut-off basis, the taxpayer then may file a separate Form 3115 to change
from the LIFO inventory method for one or more of the resulting pools pursuant to section 23.01
of this revenue procedure, which must be implemented with a § 481(a) adjustment.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 23.10 is “141.”
(4) Contact information. For further information regarding a change under this section, contact
Andrew Braden at (202) 317-7007 (not a toll-free number).
SECTION 24. MARK-TO-MARKET ACCOUNTING METHODS (Including § 475 )
.01 Commodities dealers, securities traders, and commodities traders electing to use the mark-
to-market method of accounting under § 475(e) or (f).
(1) Description of change. This change applies to certain taxpayers that have elected to use
the mark-to-market method of accounting under § 475(e) or (f). Under § 475(e) and (f) and Rev.
Proc. 99-17, 1999-1 C.B. 503, if a taxpayer makes a timely election under § 475(e) or (f), then
beginning with the first taxable year for which the election is effective (election year), mark to
market is the only permissible method of accounting for securities or commodities subject to the
election. Thus, if the electing taxpayer’s method of accounting for its taxable year immediately
preceding the election year is inconsistent with § 475, the taxpayer is required to change its method
of accounting to comply with the election. A taxpayer that makes a § 475(e) or (f) election but fails
to change its method of accounting to comply with that election is using an impermissible method.
See section 4 of Rev. Proc. 99-17.
(2) Applicability. This change applies to a taxpayer if all of the following conditions are satisfied:
(a) the taxpayer is a commodities dealer, securities trader, or commodities trader that has made
a valid election under § 475(e) or (f) (see section 5.03(1) of Rev. Proc. 99-17) and that is required
to change its method of accounting to comply with the election;
(b) the method of accounting to which the taxpayer changes is in accordance with its election
under § 475(e) or (f); and
(c) the year of change is the election year.

February 14, 2022 724 Bulletin No. 2022–7
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(d) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to this change.
(4) Election under Rev. Proc. 99-17. In accordance with section 5.03(1) of Rev. Proc. 99-17,
to make a § 475(e) or (f) election, a taxpayer must file a statement satisfying the requirements in
section 5.04 of Rev. Proc. 99-17. The taxpayer must file the statement not later than the due date
(without regard to any extension) of the original federal income tax return for the taxable year
immediately preceding the election year and must attach the statement either to that return or,
if applicable, to a request for an extension of time to file that return. For example, if a calendar
year individual taxpayer wants to make a § 475(e) or (f) election for 2018 (the election year),
the taxpayer must file the statement on or before April 18, 2018, with the taxpayer’s timely filed
(without regard to any extension) federal income tax return for 2017 or the taxpayer’s timely filed
request for an extension of time to file the 2017 federal income tax return. On the Form 3115
filed for the year of change, a taxpayer should indicate that the taxpayer has filed the statement in
compliance with section 5.03(1) of Rev. Proc. 99-17.
(5) Limited § 301.9100 relief. Section 301.9100-3 relief for failure to comply with the
requirements of this section 24.01 will be granted only in unusual and compelling circumstances.
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 24.01 is “64.”
(7) Contact information. For further information regarding a change under this section, contact
Marsha Sabin at (202) 317-6945 (not a toll-free number).
.02 Taxpayers requesting to change their method of accounting from the mark-to-market method
of accounting described in § 475 to a realization method.
(1) Description of change. This change applies to any taxpayer requesting permission to change
its method of accounting for securities or commodities as defined in § 475 from the mark-to-market
method of accounting described in § 475 to a realization method of accounting. For example,
this section 24.02 applies when a taxpayer is required to change its method of accounting to a
realization method after revoking an election under § 475(e), (f)(1), or (f)(2). This change is not
limited to a change required by § 475 (for example, this section 24.02 applies to a change from a
mark-to-market method of accounting for notional principal contracts providing for nonperiodic
payments even if the taxpayer is not subject to § 475) and, in such a case, references to § 475 in
this section 24.02 are interpreted accordingly. For purposes of this section 24.02, a change to a
realization method of accounting includes a change in which the taxpayer also is required to use a
mark-to-market method of accounting under a specific Code section to account for all or some of
the taxpayer’s securities or commodities (for example, § 1256 for commodities).
(2) Exclusive procedure. The procedure set forth in this section 24.02 is the exclusive procedure
for changing a taxpayer’s method of accounting from the mark-to-market method described in
§ 475 to a realization method. Thus, filing the Notification Statement described in section 24.02(6)
of this revenue procedure is the exclusive manner of revoking a § 475(e), (f)(1), or (f)(2) election.
Moreover, any taxpayer requesting permission to change to a realization method must follow the
procedures described in this section 24.02 and other applicable provisions of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, to request consent to change its method of accounting for securities described
in § 475(c)(2) (Section 475 Securities), commodities described in § 475(e)(2) (Section 475
Commodities), or both.

Bulletin No. 2022–7 725 February 14, 2022
(3) Applicability. This change applies to a taxpayer if all of the following conditions in
paragraphs (a) through (c) below are satisfied:
(a) the taxpayer is using, properly or improperly, the mark-to-market method of accounting
described in § 475;
(b) the taxpayer is requesting permission to change to a realization method of accounting and
report gains or losses from the disposition of Section 475 Securities, Section 475 Commodities,
or both, under § 1001; and
(c) the taxpayer meets the requirements of this section 24.02, including the requirement that
it timely file the Notification Statement described in section 24.02(6) of this revenue procedure.
(4) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(d) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to this change.
(5) Manner of making change. This change is made using a cut-off basis and applies only to
Section 475 Securities, Section 475 Commodities, or both, that are accounted for using the mark-
to-market method of accounting described in § 475 and for which a change in method is requested
under this section 24.02. Accordingly, a § 481(a) adjustment is neither permitted nor required.
Under the cut-off basis, a taxpayer must make a final mark of all Section 475 Securities,
Section 475 Commodities, or both, that are being marked to market and that are the subject of
the accounting method change being requested, on the last business day of the year preceding
the year of change. As a result of the final mark, gain or loss attributable to those securities and
commodities is also recognized on the last business day of the year preceding the year of change.
In the case of any Section 475 Security or Section 475 Commodity that a taxpayer holds on the
first day of the year of change, the taxpayer must make proper adjustment in the amount of any
subsequently realized gain or loss to take into account adjustments for the gain or loss recognized
prior to the first day of the year of change pursuant to the use of the mark-to-market method of
accounting described in § 475 in order to prevent amounts from being duplicated or omitted. Any
change in value on or after the first day of the year of change will be taken into account using a
realization method of accounting unless section 24.02(7) of this revenue procedure permits the
taxpayer to resume a mark-to-market method and the taxpayer resumes a mark-to-market method.
(6) Notification Statement required. In addition to filing the Form 3115 required under section
6.03(1) of Rev. Proc. 2015-13, to change to a realization method of accounting under this section
24.02, a taxpayer must also file a Notification Statement that satisfies the requirements in section
24.02(6) of this revenue procedure. The Notification Statement must be filed not later than the
due date (without regard to any extension) of the original federal income tax return for the taxable
year immediately preceding the year of change and must be attached either to that return or, if
applicable, to a request for an extension of time to file that return.
(a) Notification Statement contents. The Notification Statement must contain (1) the name of
the taxpayer that will change its method of accounting (that is, the applicant), and, if applicable,
the filer (for example, its parent corporation); (2) a statement that the taxpayer is requesting to
change its method of accounting from the mark-to-market method of accounting described in
§ 475 to a realization method; (3) the year of change (both the beginning and ending dates);
and (4) the types of instruments subject to the method change, that is, Section 475 Securities,
Section 475 Commodities, or both. If a taxpayer has made an election under § 475(e), (f)(1), or
(f)(2), the taxpayer must also include a statement revoking the taxpayer’s section 475 election or

February 14, 2022 726 Bulletin No. 2022–7
elections for the Section 475 Securities, Section 475 Commodities, or both, for which a change in
accounting method is sought.
(b) Effect of filing Notification Statement. Once the taxpayer files a Notification Statement for the
year of change, a realization method of accounting is the only permissible method of accounting
for Section 475 Securities, Section 475 Commodities, or both, described in the Notification
Statement for the entire year of change and all subsequent years (unless section 24.02(7)(a) of
this revenue procedure applies). A taxpayer that files the Notification Statement described in this
section 24.02 but fails to change its method of accounting using the procedures described in Rev.
Proc. 2015-13 and this section 24.02 is using an impermissible method.
(c) Limited § 301.9100 relief. Section 301.9100 relief for failure to comply with the requirements
of this section 24.02(6) will be granted only in unusual and compelling circumstances.
(7) Additional requirements.
(a) Resuming the mark-to-market method of accounting. A taxpayer may not use the automatic
change procedures in Rev. Proc. 2015-13 and section 24.01 of this revenue procedure to resume
using the mark-to-market method of accounting described in § 475 for the Section 475 Securities,
Section 475 Commodities, or both, that are the subject of the method change being requested
using this section 24.02 during any of the five taxable years beginning with the year of change.
To resume using the mark-to-market method of accounting described in § 475 during this 5-year
period, a taxpayer must: (i) request the change using the non-automatic change procedures in Rev.
Proc. 2015-13, (ii) request the change by the date an election for the year of change would be due
under section 5.03 of Rev. Proc. 99-17, 1999-1 C.B. 503, and (iii) include a statement that satisfies
all applicable requirements of section 5.04 of Rev. Proc. 99-17.
(b) Copy of Notification Statement. A taxpayer must attach a copy of the Notification Statement
required in section 24.02(6) of this revenue procedure to its Form 3115 filed under this section
24.02.
(c) No audit protection for valuation. A taxpayer does not receive audit protection under section
8.01 of Rev. Proc. 2015-13 for the method of valuation used by the taxpayer to determine the fair
market value of the taxpayer’s Section 475 Securities, Section 475 Commodities, or both, for a
taxable year prior to the year of change, or for a failure to comply with the requirements in Rev.
Proc. 99-17 to properly elect the mark-to-market method. See section 8.02(2) of Rev. Proc. 2015-
13.
(8) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 24.02 is “218”.
(9) Contact information. For further information regarding a change under this section, contact
Marsha Sabin at (202) 317-6945 (not a toll-free number).
SECTION 25. BANK RESERVES FOR BAD DEBTS (§ 585)
.01 Changing from the § 585 reserve method to the § 166 specific charge-off method.

Bulletin No. 2022–7 727 February 14, 2022
(1) Description of change.
(a) Applicability. This change applies to a bank (as defined in § 581, including a bank for which
a qualified subchapter S subsidiary (Qsub) election is filed) that wants to change its method of
accounting for bad debts from the § 585 reserve method to the § 166 specific charge-off method.
(b) Inapplicability. This change does not apply to a large bank as defined in § 585(c)(2).
(2) Certain eligibility rule inapplicable. A bank that changed from the § 593 reserve method
under § 593(g) to the § 585 reserve method is not prohibited under section 5.01(1)(f) of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, from changing its method of accounting for bad debts under
this section 25.01 solely because of the § 593(g) change. A bank for which a Qsub election is filed
will not be prohibited under section 5.01(1)(f) of Rev. Proc. 2015-13 from changing its method of
accounting for bad debts under this section 25.01 solely because of the deemed liquidation of the
bank arising from a Qsub election.
(3) Section 481(a) adjustment. Generally, the amount of the § 481(a) adjustment for a change
in method of accounting under this section 25.01 is the amount of the bank’s reserve for bad debts
as of the close of the taxable year immediately before the year of change. However, the amount of
the § 481(a) adjustment does not include the amount of a bank’s pre-1988 reserves (as described in
§ 593(g)(2)(A)(ii), without taking into account § 593(g)(2)(B)) if the bank changed in a prior year
from the § 593 reserve method to the § 585 reserve method and § 593(g) applied to that change.
The deemed liquidation of a bank occurring solely because its parent makes a Qsub election does
not accelerate the § 481(a) adjustment. In accordance with section 7.03(4)(a) of Rev. Proc. 2015-
13, a bank that ceases to be a bank under § 581 must accelerate its § 481(a) adjustment.
(4) Change from § 585 required when electing S corporation status.
(a) General rule. A bank electing S corporation status (or a bank for which a Qsub election is
filed) cannot use the § 585 reserve method. The filing by a bank of a Form 2553, Election by a
Small Business Corporation, or the filing by a bank’s parent of Form 8869, Qualified Subchapter
S Subsidiary Election, with respect to the bank will constitute an agreement by the bank to change
its method of accounting for bad debts from the § 585 reserve method to the § 166 specific charge-
off method effective as of the taxable year for which the S corporation election or Qsub election
is effective (year of change) in accordance with all of the automatic change procedures of Rev.
Proc. 2015-13 and this section 25.01. The resulting § 481(a) adjustment is recognized built-in
gain under § 1374, unless the bank elects under § 1361(g) and section 25.01(4)(b) of this revenue
procedure to take the § 481(a) adjustment into account in determining taxable income for the
taxable year immediately preceding the year of change. See § 1.1374-4(d).
(b) Election to include § 481(a) adjustment in taxable year immediately preceding the year of
change.
(i) Election requirements. A bank that changes its method of accounting for bad debts under
this section 25.01, from the § 585 reserve method to the § 166 specific charge-off method for the
first taxable year for which the bank’s S corporation election is effective (year of change) may
elect under § 1361(g) to take into account the amount of the resulting § 481(a) adjustment in
determining taxable income for the taxable year immediately preceding the year of change. To
make this election, a bank must (1) file an original and copy of Form 3115 under section 6.03(1)
of Rev. Proc. 2015-13 (and any other copy required under section 6.03) for the year of change, (2)
file an additional copy of the Form 3115 with its original (or amended) federal income tax return
for the taxable year immediately preceding the year of change filed no later than the date the

February 14, 2022 728 Bulletin No. 2022–7
original Form 3115 is properly filed under section 6.03(1) of Rev. Proc. 2015-13 (and any other
copy required under section 6.03) and (3) include the amount of the § 481(a) adjustment in gross
income for the taxable year immediately preceding the year of change. The bank must attach a
statement to the original and both copies of Form 3115 stating that the bank elects under § 1361(g)
to take the § 481(a) adjustment into account in determining taxable income for the taxable year
immediately preceding the year of change.
(ii) Special rule for Qsub banks. In the case of a Qsub bank, the S corporation parent must
file an original and copy of Form 3115 under section 6.03(1) of Rev. Proc. 2015-13 for the year
of change. The Qsub bank must file an additional copy of the Form 3115 with its original (or
amended) federal income tax return for the taxable year immediately preceding the year of change
filed no later than the date the original Form 3115 is properly filed under section 6.03(1) of Rev.
Proc. 2015-13, and include the amount of the § 481(a) adjustment in gross income for the taxable
year immediately preceding the year of change. In the case of a Qsub bank, the Form 3115 should
indicate that the “filer” is the S corporation parent and the “applicant” is the Qsub bank.
(iii) The following example illustrates the principles of section 25.01(4)(b) of this revenue
procedure.
Example. X, a calendar year taxpayer, is a calendar year bank as defined in § 581 and is not a large bank as defined in
§ 585(c)(2). For taxable years before 2015, X accounted for its bad debts under the § 585 reserve method. By March 15,
2015, X properly filed a Form 2553 electing to be an S corporation effective January 1, 2015. Pursuant to section 25.01(4)
(a) of this revenue procedure, the filing of the Form 2553 constituted an agreement by X to change from the § 585 reserve
method to the § 166 specific charge-off method for 2015 in accordance with all of the automatic change procedures of Rev.
Proc. 2015-13, and the applicable provisions of this section 25.01. Thus, for example, X must file a Form 3115 for this
2015 change in duplicate, in accordance with section 6.03(1) of Rev. Proc. 2015-13, by attaching the original Form 3115
to X’s timely filed (including any extension) original federal income tax return for 2015 and filing a duplicate copy of the
Form 3115 with the Ogden, UT, office. The amount of X’s § 481(a) adjustment for the change is the amount of X’s bad
debt reserve as of the close of December 31, 2014. X wishes to elect under § 1361(g) to include the § 481(a) adjustment
in income in the taxable year ending December 31, 2014, the taxable year immediately preceding the year of change. To
make this election, X must (1) file an original and copy of Form 3115 for the 2015 change under section 6.03(1) of Rev.
Proc. 2015-13, (2) file an additional copy of that Form 3115 with its original (or amended) federal income tax return for
2014 filed no later than the date the original Form 3115 is properly filed under section 6.03(1) of Rev. Proc. 2015-13, and
(3) include the amount of its § 481(a) adjustment in gross income in its return for 2014. X must attach a statement to the
original and both copies of Form 3115 stating that X elects under § 1361(g) to take the § 481(a) adjustment into account in
determining taxable income for 2014, the taxable year immediately preceding the year of change.
(5) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 25.01 is “66.”
(6) Contact information. For further information regarding a change under this section, contact
K. Scott Brown at (202) 317-6945, Laura Fields at (202) 317-6850, or Adrienne Mikolashek at
(202) 317-6850 (not toll-free numbers).
SECTION 26. INSURANCE COMPANIES (§§ 807, 816, 832, 833)
.01 Safe harbor method of accounting for premium acquisition expenses.
(1) Description of change. Rev. Proc. 2002-46, 2002-2 C.B. 105, sets forth a safe harbor
method of accounting for premium acquisition expenses of certain non-life insurance companies.
Under this method, an insurance company is permitted to treat as premium acquisition expenses
incurred for the taxable year an amount equal to the sum of (a) the amount of premium acquisition

Bulletin No. 2022–7 729 February 14, 2022
expenses paid during the taxable year; (b) the difference between the unpaid premium acquisition
expenses shown on the company’s annual statement for the taxable year and the unpaid premium
acquisition expenses shown on the company’s annual statement for the preceding taxable year; and
(c) the difference between the amount of the insurance company’s pro forma premium acquisition
expenses at the end of the taxable year and the company’s pro forma premium acquisition expenses
at the end of the preceding taxable year. The amount taken into account as a net increase in the pro
forma premium acquisition expenses, however, cannot exceed the insurance company’s unearned
premium reserve offset amount for that year. A special rule applies to premium acquisition
expenses with respect to certain contracts with installment premiums. See Rev. Proc. 2002-46.
(2) Applicability. The automatic change in this section 26.01 applies to any insurance company
that is subject to tax under § 831(a) and determines its premiums earned for insurance contracts
during the taxable year under § 832(b)(4) in accordance with the provisions of § 1.832-4. The
automatic change does not apply to an existing Blue Cross or Blue Shield organization or any
other organization to which § 833 applies.
(3) Certain eligibility rules inapplicable. The eligibility rules in sections 5.01(1)(d) and (f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to this change.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 26.01 is “67.”
(5) Contact information. For further information regarding a change under this section, contact
Rebecca L. Baxter at (202) 317-6995 (not a toll-free number).
.02 Certain changes in method of accounting for organizations to which § 833 applies
(1) Description of change. This change applies to an existing Blue Cross or Blue Shield
organization within the meaning of § 833(c)(2), or an organization described in § 833(c)(3), that
is required to change its method of accounting for unearned premiums by reason of failing to meet
the Medical Loss Ratio (MLR) requirements of § 833(c)(5), or by reason of meeting the MLR
requirements of § 833(c)(5) after failing to meet those requirements in a prior year. See Notice
2011-4, 2011-2 I.R.B. 282.
(2) Certain eligibility rules inapplicable. The eligibility rules in sections 5.01(1)(d) and (f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to this change.
(3) Accelerated § 481(a) adjustment period in certain situations. In addition to the circumstances
set forth in section 7.03(4) of Rev. Proc. 2015-13, the § 481 adjustment period provided in section
7.03 of Rev. Proc. 2015-13 will be accelerated in the event a taxpayer with a remaining balance
of a § 481(a) adjustment that arose by reason of a change in method of accounting described in
this section 26.02 is required to effect another change in method of accounting described in this
section 26.02. Thus, for example, a taxpayer that fails to satisfy the requirements of § 833(c)
(5) and as a result has a positive § 481(a) adjustment, is required to accelerate the remaining
balance, if any, of that adjustment in a subsequent taxable year in which the taxpayer meets the
requirements of § 833(c)(5).
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 26.02 is “155.”

February 14, 2022 730 Bulletin No. 2022–7
(5) Contact information. For further information regarding this section, contact Rebecca L.
Baxter at (202) 317-6995 (not a toll-free number).
.03 Change in qualification as life/nonlife insurance company under § 816.
(1) Description of change. This change applies to an insurance company that changes from
being taxed as a life insurance company under part I of subchapter L to being taxed as a non-life
insurance company under part II of subchapter L, or vice versa. Whether an insurance company
is taxed under § 801 as a life insurance company under part I of subchapter L is determined under
§ 816.
(2) Certain eligibility rules inapplicable. The eligibility rules in sections 5.01(1)(d) and (f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to this change.
(3) No audit protection or ruling on qualification as a life insurance company. The taxpayer
does not receive either: (a) any audit protection under section 8.01 of Rev. Proc. 2015-13 or (b)
ruling reliance under section 10 of Rev. Proc. 2015-13 in connection with the consent granted
under section 9 of Rev. Proc. 2015-13 for a change under this section 26.03 regarding whether the
taxpayer qualifies as a life insurance company. The director will ascertain whether the taxpayer
qualifies as a life insurance company.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 26.03 is “219.”
(5) Contact information. For further information regarding a change under this section, contact
Rebecca L. Baxter at (202) 317-6995 (not a toll-free number).
.04 Changes in basis of computing reserves under § 807(f).
(1) Description of change and applicability. This automatic change applies to a change in
basis of computing any item referred to in § 807(c), as described in § 807(f), by a life insurance
company or by an insurance company that is not a life insurance company (nonlife insurance
company). See § 1.807-4.
(2) Manner of making change.
(a)(i) Life insurance companies. If a life insurance company changes its basis of computing any
item referred to in § 807(c) during a taxable year (year of change), then for purposes of applying
§ 807(a) and (b) with respect to contracts issued before the year of change, the amount of the item
at the close of the year of change attributable to those contracts is computed on the old basis and
the amount of the item at the opening of the succeeding taxable year attributable to those contracts
is computed on the new basis. The amount of such item attributable to contracts issued during the
year of change and thereafter must be computed on the new basis. See § 1.807-4(c)(1).
(ii) Nonlife insurance companies. If a nonlife insurance company changes its basis of computing
an item referred to in § 807(c)(1) (life insurance reserves (as defined in § 816(b))) during a taxable
year (year of change), then for purposes of applying § 832(b)(4), (A) for the year of change, life
insurance reserves at the end of the year of change with respect to contracts issued before the
year of change are computed on the old basis and (B) for the year following the year of change,
life insurance reserves at the end of the preceding taxable year with respect to contracts issued

Bulletin No. 2022–7 731 February 14, 2022
before the year of change are computed on the new basis. Life insurance reserves attributable to
contracts issued during the year of change and thereafter must be computed on the new basis. See
§ 1.807-4(c)(2).
(iii) Requirement to file Form 3115. A taxpayer that changes its basis of computing any item
referred to in § 807(c) is subject to the procedures that apply to obtain the automatic consent of the
Commissioner to change a method of accounting. Under these procedures, (A) the taxpayer must
file Form 3115 as provided in this section 26.04, (B) the taxpayer will receive audit protection for
taxable years prior to the year of change as provided in section 8 of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, in connection with the change, and (C) the § 481(a) adjustment period generally will
be one taxable year (year of change) for a negative § 481(a) adjustment and four taxable years
(year of change and next three taxable years) for a positive § 481(a) adjustment in accordance with
section 7.03(1) of Rev. Proc. 2015-13.
(iv) Examples. The following examples each illustrate the rules of sections 26.04(2)(a)(i) and (ii) of this revenue
procedure in two situations: (A) a change in basis in computing life insurance reserves (reserves) for contracts issued
prior to the year of change that results in an increase in the reserves at the end of the year of change (negative § 481(a)
adjustment) and (B) a change in basis in computing reserves for contracts issued prior to the year of change that results in
a decrease in the reserves at the end of the year of change (positive § 481(a) adjustment). The following table summarizes
the reserve amounts for contracts issued before the year of change.
Old BasisNew Basis
(Negative § 481(a)
Adjustment)
New Basis
(Positive § 481(a)
Adjustment)
End of Year Prior to Year of Change100
End of Year of Change105109101
End of Year Following Year of Change112104
Section 481(a) Adjustment105-109=(4)105-101=4
A. Example 1. The taxpayer is a life insurance company. Under section 26.04(2)(a)(i) of this revenue procedure,
reserves for contracts issued before the year of change are reported under the old basis at the close of the year of change
and under the new basis at the beginning of the year following the year of change; reserves for contracts issued during
the year of change and thereafter are computed under the new basis. The remainder of this example describes only the
deductions and income inclusions relating to reserves for contracts issued before the year of change.
Deduction for a net increase in reserves for the year of change. In both the negative and positive § 481(a) adjustment
situations, the company must take $105 of reserves into account (on the old basis) at the end of the year of change, resulting
in a $5 increase in reserves ($105-$100) and a corresponding deduction for a net increase in reserves for the year of change.
Negative § 481(a) adjustment situation. As described in section 26.04(2)(a)(iii) of this revenue procedure, the negative
§ 481(a) adjustment of $4 ($109-$105) is taken into account in the year of change, such that the company recognizes a
deduction for an increase in reserves under § 807(f) of $4 in the year of change. This results in total deductions in the year
of change of $9 ($5+$4).
At the beginning of the following year, the company must take $109 of reserves into account (new basis) and the
deduction for the net increase in reserves for that year is $3 ($112-$109).
Positive § 481(a) adjustment situation. As described in section 26.04(2)(a)(iii) of this revenue procedure, the positive
§ 481(a) adjustment of $4 ($101-$105) is taken into account over four taxable years, such that the company recognizes
additional income from a decrease in reserves under § 807(f) of $1 (1/4th of the § 481(a) adjustment) in the year of change.
This results in a net reduction in taxable income in the year of change of $4 ($5-$1).
At the beginning of the following year, the company takes $101 of reserves into account (new basis), and the deduction
for the net increase in reserves for that year is $3 ($104-$101). The company also recognizes another 1/4th of the § 481(a)
adjustment, resulting in a $1 increase in income due to a decrease in reserves under § 807(f) and a net reduction in taxable

February 14, 2022 732 Bulletin No. 2022–7
income of $2 ($3-$1) in that year. The remaining $2 of the § 481(a) adjustment is recognized as a $1 increase in income
due to a decrease in reserves under § 807(f) in each of the two remaining years of the § 481(a) adjustment period.
B. Example 2. The taxpayer is a nonlife insurance company. Under section 26.04(2)(a)(ii) of this revenue procedure,
reserves at the end of the year of change with respect to contracts issued before the year of change are computed under
the old basis for the year of change and under the new basis for the taxable year following the year of change; reserves for
contracts issued during the year of change and thereafter are computed under the new basis. The remainder of this example
only relates to reserves for contracts issued before the year of change.
Effect on premiums earned in year of change. In both the negative and positive § 481(a) adjustment situations, the
company must add to the result obtained under § 832(b)(4)(A) the $100 of reserves on outstanding business at the end of
the preceding taxable year and then deduct the $105 of reserves (computed under the old basis) on outstanding business
at the end of the year of change.
Negative § 481(a) adjustment situation. As described in section 26.04(2)(a)(iii) of this revenue procedure, the negative
§ 481(a) adjustment of $4 ($109-$105) is taken into account in the year of change, such that the company recognizes an
additional reduction in premiums earned of $4 in the year of change. This results in a total reduction in premiums earned
of $9 ($5+$4).
In the taxable year after the year of change, the reserves on outstanding business at the end of the preceding year are
$109 (computed on the new basis) and the net reduction in premiums earned is $3 ($109-$112).
Positive § 481(a) adjustment situation. As described in section 26.04(2)(a)(iii) of this revenue procedure, the positive
§ 481(a) adjustment of $4 ($101-$105) is taken into account over four taxable years, such that the company recognizes an
additional $1 (1/4th of the § 481(a) adjustment) increase in premiums earned in the year of change. This results in a net
reduction in premiums earned in the year of change of $4 ($5-$1).
In the taxable year after the year of change, the reserves on outstanding business at the end of the preceding year
are $101 (computed on the new basis) and the net reduction in premiums earned is $3 ($101-$104). The company also
recognizes another 1/4th of the § 481(a) adjustment, resulting in an additional $1 increase in premiums earned and a net
reduction in premiums earned of $2 ($3-$1) in that year. The remaining $2 of the § 481(a) adjustment is recognized as a $1
increase in premiums earned in each of the two remaining years of the § 481(a) adjustment period.
(b) Section 481(a) adjustment.
(i) Computation of § 481(a) adjustment at end of year. In general, a change in basis of computing
any item referred to in § 807(c) requires an adjustment under § 481(a). The § 481(a) adjustment
is computed as of the end of the year of change and is only with respect to contracts issued before
the year of change. See § 1.807-4(b)(1).
(ii) Number of § 481(a) adjustments. Multiple changes during the same taxable year in methods,
assumptions, or factors, each of which alone would constitute a change in basis of computing
any item referred to in § 807(c), are considered a single change in basis, and the effects of such
multiple changes are netted and treated as a single net negative § 481(a) adjustment or net positive
§ 481(a) adjustment. A separate § 481(a) adjustment must be determined for each item referred to
in § 807(c) and each such § 481(a) adjustment must be taken into account separately.
(iii) Loss of company status. If for any taxable year a taxpayer that was an insurance company
for the year of change is no longer an insurance company, then the taxpayer must take into account
in the preceding taxable year (that is, the last taxable year it was an insurance company) the
balance of any § 481(a) adjustment. A taxpayer that was an insurance company for the year of
change does not accelerate the balance of any § 481(a) adjustment merely because it changes from
a life insurance company to a nonlife insurance company or because it changes from a nonlife
insurance company to a life insurance company. See § 1.807-4(b)(2).

Bulletin No. 2022–7 733 February 14, 2022
(c) No ruling protection for year of change or subsequent years. The consent granted under
section 9 of Rev. Proc. 2015-13 for a change under this section 26.04 is not a determination
by the Commissioner that the new basis of computing any item referred to in § 807(c) is a
permissible basis of computing such item and does not create any presumption that the new basis
is a permissible basis of computing such item. The director may ascertain whether the new method
of accounting is a permissible method of accounting. Thus, a taxpayer that changes its basis of
computing any item referred to in § 807(c) under this section 26.04 may be required to change
or modify that basis of computing such item for the year of change or any subsequent year if it is
determined by the Commissioner that the basis to which the taxpayer changed does not meet the
requirements of federal income tax law.
(d) Information required to be furnished. A taxpayer that files a Form 3115 under this section
26.04 is required to complete or provide only the following information on Form 3115:
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, lines 4, 5, 6a-d, 7a-b, 8a-d, 9, 11a-c, 12, 17, and 18;
(v) The following information, in lieu of completing Part II, line 14:
• The item in § 807(c) to which the change in basis relates,
• The type of contract to which the change relates,
• If a life insurance reserve, a description of the applicable tax reserve method (e.g.,
Commissioners’ Reserve Valuation Method or Commissioners’ Annuity Reserve
Valuation Method),
• A description of the change in basis,
• A description of the reason for the change in basis, including (i) whether the change
results from a change in the method prescribed by the National Association of Insurance
Commissioners or from another change (such as a change in assumption for mortality,
morbidity, or interest rate), regardless of whether the change is reflected on an annual
statement and (ii) whether the change results from a prior incorrect application of federal
income tax law and the nature of such incorrect application.
(vi) Part IV. (The taxpayer may indicate that the § 481(a) adjustment is an estimate or is to be
determined.)
(e) Concurrent automatic changes. A taxpayer that makes multiple changes in basis under this
section 26.04 may file a single Form 3115 that includes all the changes in basis for the year of
change. Likewise, a single Form 3115 may be filed for all changes in basis for members of a
group filing a consolidated return. The information required by section 26.04(2)(d) of this revenue
procedure is required for each separate change for each member of the group.
(f) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13 does not apply to a change under this section 26.04.

February 14, 2022 734 Bulletin No. 2022–7
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 26.04 is “240.”
(4) Contact information. For further information regarding a change under this section, contact
Dan Phillips at (202) 317-6995 (not a toll-free number).
SECTION 27. DISCOUNTED UNPAID LOSSES (§ 846)
.01 Composite method for discounting unpaid losses.
(1) Description of change. Section 846 defines “discounted unpaid losses” for purposes of
computing the insurance company taxable income of certain insurance companies. Notice 88-
100, 1988-2 C.B. 439, section V, sets forth a composite method for computing unpaid losses with
respect to accident years not separately stated on the NAIC annual statement. Rev. Proc. 2002-74,
2002-2 C.B. 980, section 3.01, clarifies that the composite method of Notice 88-100, section V, is
permitted, but not required; section 3.02 sets forth an alternative method for those taxpayers that
do not use the composite method of section 3.01. An insurance company using a method provided
in section 3.01 or 3.02 of Rev. Proc. 2002-74 to compute discounted unpaid losses, must use the
same method to compute discounted estimated salvage recoverable. An insurance company that
currently uses a permissible method of accounting for discounted unpaid losses may change its
method of accounting to or from the composite method of Notice 88-100, section V, without the
consent of the Commissioner. This change applies to insurance companies that are required to
discount unpaid losses under § 846. See Rev. Proc. 2002-74.
(2) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 27.01 is “68.”
(3) Contact information. For further information regarding a change under this section, contact
Rebecca L. Baxter at (202) 317-6995 (not a toll-free number).
SECTION 28. REAL ESTATE MORTGAGE INVESTMENT CONDUIT (REMIC) (§§ 860A-860G)
.01 REMIC inducement fees.
(1) Description of change. A taxpayer that receives an inducement fee in connection with
becoming the holder of a noneconomic residual interest in a REMIC must take that fee into
account over the remaining expected life of the applicable REMIC in accordance with § 1.446-6.
This change applies to a taxpayer that seeks to change from any method of accounting for such
inducement fees to one of the safe harbor methods provided under § 1.446-6(e)(1)-(2). See Rev.
Proc. 2004-30, 2004-1 C.B. 950, for additional guidance relating to this change.
(2) Manner of making change. A taxpayer making this change must identify the specific safe
harbor method under § 1.446-6(e) to which the taxpayer is changing.

Bulletin No. 2022–7 735 February 14, 2022
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 28.01 is “79.”
(4) Contact information. For further information regarding a change under this section, contact
John W. Rogers, III at (202) 317-6895 (not a toll-free number).
SECTION 29. FUNCTIONAL CURRENCY (§ 985)
.01 Change in functional currency.
(1) Description of change. This change applies to a taxpayer that wants to change its functional
currency or the functional currency of a qualified business unit (QBU) of the taxpayer. The
preceding sentence does not apply to a QBU of a taxpayer described in § 1.985-1(b)(1)(iii).
(2) Manner of making change. A taxpayer making this change must make all necessary
adjustments required by such change. See §§ 1.985-5, 1.985-8(c). A taxpayer must attach a
statement to the Form 3115 representing that it has made the adjustments set forth in § 1.985-5
or § 1.985-8(c). The statement must also provide the amount of any unrealized exchange gain
or loss required to be taken into account pursuant to § 1.985-5 or § 1.985-8(c) and the date on
which a taxpayer took such amount into account. Finally, the statement must provide a detailed
and complete description of any other adjustments required pursuant to § 1.985-5 or § 1.985-8(c).
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 29.01 is “70.”
(4) Contact information. For further information regarding a change under this section, contact
Peter Merkel at (202) 317-4919 (not a toll-free number).
SECTION 30. ORIGINAL ISSUE DISCOUNT (§§ 1272, 1273)
.01 De minimis original issue discount (OID).
(1) Description of change. This change applies to a taxpayer that wants to change to the
principal-reduction method of accounting described in section 5 of Rev. Proc. 97-39, 1997-2 C.B.
485. The principal-reduction method of accounting is an aggregate method of accounting for de
minimis OID (discount) on certain loans originated by the taxpayer.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to this change.
(3) Description. The principal-reduction method of accounting is a permissible method for use
by taxpayers to account for discount on one or more categories of loans described in section 4.02
or 4.03 of Rev. Proc. 97-39. If the principal-reduction method is used to account for any loans

February 14, 2022 736 Bulletin No. 2022–7
in a category of loans, the method must be used for the entire category of loans. The principal-
reduction method applies only to loans described in section 3 of Rev. Proc. 97-39.
(4) Manner of making change.
(a) This change is made on a cut-off basis and applies only to loans described in section 3 of
Rev. Proc. 97-39 that were acquired on or after the beginning of the year of change. Accordingly,
a § 481(a) adjustment is neither permitted nor required.
(b) The taxpayer must maintain books and records sufficient to satisfy the director that old and
new loans have been adequately segregated.
(5) Additional requirements. On a statement attached to the Form 3115, the taxpayer must:
(a) identify the categories of loans to which the proposed method will apply; and
(b) describe any “additional categories” permitted under section 4.03 of Rev. Proc. 97-39.
(6) No audit protection. A taxpayer does not receive audit protection under section 8.01 of Rev.
Proc. 2015-13 in connection with this change. See section 8.02(2) of Rev. Proc. 2015-13.
(7) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 30.01 is “72.”
(8) Contact information. For further information regarding a change under this section, contact
William E. Blanchard at (202) 317-3900 (not a toll-free number).
.02 Proportional method of accounting for OID on a pool of credit card receivables.
(1) Description of change. This change applies to a taxpayer that wants to change to the
proportional method of accounting for OID on a pool of credit card receivables as described in
Rev. Proc. 2013-26, 2013-22 I.R.B. 1160, as modified by Rev. Proc. 2021-35, 2021-35 I.R.B. 355,
to reflect changes made to the treatment of certain credit card fees by § 451(b), as amended by
Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and
Jobs Act (TCJA), and §§ 1.451-3 and 1.1275-2(l). The proportional method of accounting applies
to OID and certain amounts that would not otherwise be treated as OID (for example, market
discount or bond premium). Under § 1.1275-2(l), OID does not include items that are subject
to the timing rules in § 1.451-3, such as credit card late fees, credit card cash advance fees, and
interchange fees (specified credit card fees). Therefore, items subject to the timing rules in § 1.451-
3, such as specified credit card fees, are excluded from the proportional method. See section 16.10
of this revenue procedure for the procedures by which a taxpayer, including a taxpayer using the
proportional method of accounting, can change its method of accounting for specified credit card
fees to comply with § 451(b), as amended by the TCJA, and §§ 1.451-3 and 1.1275-2(l).
(2) Manner of making change.
(a) This change is made on a cut-off basis. Accordingly, a § 481(a) adjustment is neither required
nor permitted.

Bulletin No. 2022–7 737 February 14, 2022
(b) The unaccrued OID for the pool as of the beginning of the first period in the year of change
is equal to the unaccrued OID for the pool as of the end of the preceding taxable year under
the taxpayer’s previous method of accounting for OID on the pool, reduced by any amounts
representing charges or fees that are not properly treated as OID (for example, specified credit
card fees).
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 30.02 is “183.”
(4) Contact information. For further information regarding this section, please contact Deepan
Patel at (202) 317-3423 (not a toll-free number).
SECTION 31. MARKET DISCOUNT BONDS (§ 1278)
.01 Revocation of § 1278(b) election.
(1) Description of change. This change applies to a taxpayer that wants to change its method
of accounting for market discount bonds by revoking its § 1278(b) election. Under § 1278(b), a
taxpayer may elect a method of accounting under which market discount is currently included
in gross income for the taxable years to which the discount is attributable. See Rev. Proc. 92-67,
1992-2 C.B. 429, for the procedures to make a § 1278(b) election (including a deemed § 1278(b)
election for certain taxable years). For purposes of this section 31.01, a taxpayer also is treated as
having made a deemed § 1278(b) election for a taxable year if, for one or more market discount
bonds that were acquired by the taxpayer during that taxable year, the taxpayer includes in gross
income on the tax return for that taxable year and on the tax return for the following taxable year
the market discount attributable to each taxable year, other than as a result of a disposition of the
bond or a partial principal payment on the bond. The procedures for revoking a § 1278 election
were formerly provided in section 7 of Rev. Proc. 92-67.
(2) Revocation of election. The revocation of a § 1278(b) election (or a deemed § 1278(b)
election) applies to all market discount bonds that are held by the taxpayer on the first day of
the first taxable year for which the revocation is effective (year of change), and to all market
discount bonds that are subsequently acquired by the taxpayer. If a § 1278(b) election (or a
deemed § 1278(b) election) is revoked, then for purposes of § 1278(a), accrued market discount
with respect to any bond previously subject to the election means accrued market discount as
defined in § 1276(b) less any market discount included in income while the bond was subject to
the § 1278(b) election (or the deemed § 1278(b) election).
(3) Manner of making change. This change is made on a cut-off basis and applies only to
market discount accruing on or after the beginning of the year of change. Accordingly, a § 481(a)
adjustment is neither permitted nor required. Market discount accruing on a bond prior to the year
of change was currently included in income and market discount accruing on the bond on and after
the first day of the year of change is included in income generally upon disposition of the bond.
See § 1276(a). Because a cut-off basis is prescribed for this change, the basis of any bond, adjusted
for amounts previously included in income during the period of the election, is not affected by the
revocation.
(4) Additional requirements. On a statement attached to the Form 3115, the taxpayer must
provide:

February 14, 2022 738 Bulletin No. 2022–7
(a) the reason(s) for revoking the § 1278(b) election (or deemed § 1278(b) election);
(b) a description of the method by which, and the date on which, the taxpayer made the § 1278(b)
election (or deemed § 1278(b) election) that is being revoked; and
(c) a statement that, after the revocation, the taxpayer will not make a constant interest rate
election for any bond that has been subject to the § 1278(b) election (or deemed § 1278(b)
election) being revoked and for which a constant interest rate election was not effective in the
year of acquisition.
(5) Audit protection. A taxpayer may receive audit protection, as provided in section 8.01 of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, in connection with this change. Any audit protection applicable
to this change under section 8.01 of Rev. Proc. 2015-13 does not preclude the Commissioner from
examining the method used by the taxpayer to determine the amount of accrued market discount
under § 1276(b) for a taxable year prior to the year of change.
(6) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 31.01 is “73.”
(7) Contact information. For further information regarding a change under this section, contact
William E. Blanchard at (202) 317-3900 (not a toll-free number).
SECTION 32. SHORT-TERM OBLIGATIONS (§ 1281)
.01 Interest income on short-term obligations.
(1) Description of change.
(a) This change applies to a taxpayer that wants to change its method of accounting to comply
with § 1281 for interest income on short-term obligations.
(b) Under § 1281, a holder of certain short-term obligations, including a bank as defined in
§ 581, must include in gross income any accrued interest income on such obligations, regardless
of the holder’s overall method of accounting. Section 1281 applies to all types of interest income,
including acquisition discount, original issue discount (OID), and stated interest. See S. Rep. No.
99-313, 99
th
Cong., 2d Sess. 903 (1986), 1986-3 (Vol. 3) C.B. 903.
(c) Section 1283(a)(1) generally defines a short-term obligation as any bond, debenture, note,
certificate, or other evidence of indebtedness that matures in one year or less from its issue date.
(d) Under §§ 1281(a) and 1283(c), a holder of a short-term obligation subject to § 1281 must
include in gross income an amount equal to the sum of the daily portions of the acquisition
discount or OID, whichever is applicable, on the obligation for each day during the taxable year
that the obligation is held by the holder. See § 1283(b), as modified by § 1283(c), to determine
the daily portions of acquisition discount or OID. In addition, § 1281(a) requires the holder to
include in gross income any stated interest that is payable on the short-term obligation (other than

Bulletin No. 2022–7 739 February 14, 2022
stated interest taken into account to determine the amount of the acquisition discount or OID) as
it accrues.
(2) Section 481(a) adjustment period. A taxpayer must take the entire § 481(a) adjustment into
account in computing taxable income for the year of change.
(3) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 32.01 is “74.”
(4) Contact information. For further information regarding a change under this section, contact
William E. Blanchard at (202) 317-3900 (not a toll-free number).
.02 Stated interest on short-term loans of cash method banks.
(1) Description of change. This change applies to a bank that uses the cash receipts and
disbursements (cash) method of accounting as its overall accounting method and that wants to
change its method of accounting from accruing stated interest on short-term loans made in the
ordinary course of business to using the cash method for that interest. For example, see Security
State Bank v. Commissioner, 214 F.3d 1254 (10
th
Cir. 2000), aff ’g 111 T.C. 210 (1998), acq., 2001-
1 C.B. xix; and Security Bank Minnesota v. Commissioner, 994 F.2d 432 (8
th
Cir. 1993), aff ’g 98
T.C. 33 (1992), in which the courts held that § 1281 does not apply to short-term loans made by a
cash method bank in the ordinary course of its business.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply to this change.
(3) Section 481(a) adjustment period. A taxpayer making this change must take the entire
§ 481(a) adjustment into account in computing taxable income for the year of change.
(4) Designated automatic accounting method change number. The designated automatic
accounting method change number for a change under this section 32.02 is “75.”
(5) Contact information. For further information regarding a change under this section, contact
William E. Blanchard at (202) 317-3900 (not a toll-free number).
EFFECTIVE DATE
.01 In general. Except as otherwise provided under this EFFECTIVE DATE section, this
revenue procedure is effective for a Form 3115 filed on or after January 31, 2022, for a year of
change ending on or after May 31, 2021, that is filed under the automatic change procedures of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, as clarified and modified by Rev. Proc. 2015-33, 2015-24
I.R.B. 1067, and as modified by Rev. Proc. 2021-34, 2021-35 I.R.B. 337, Rev. Proc. 2021-26,
2021-22 I.R.B. 1163, Rev. Proc. 2017-59, 2017-48 I.R.B. 543, and section 17.02(b) and (c) of Rev.
Proc. 2016-1, 2016-1 I.R.B. 1.
.02 Transition rules. The following transition rules apply:

February 14, 2022 740 Bulletin No. 2022–7
(1) Limited time period to convert a Form 3115 filed under the non-automatic change procedures
in Rev. Proc. 2015-13. Except as provided in section 6.22 of this revenue procedure, section 5.02
of Rev. Proc. 2021-34, or section 7.02 of Rev. Proc. 2022-09, as applicable, if before January
31, 2022, a taxpayer properly filed a Form 3115 under the non-automatic change procedures in
Rev. Proc. 2015-13 requesting the Commissioner’s consent for a change in method of accounting
described in this revenue procedure, and the Form 3115 is pending with the national office on
January 31, 2022, the taxpayer may choose to make the change in method of accounting under
the automatic change procedures in Rev. Proc. 2015-13 if the taxpayer is otherwise eligible to use
this revenue procedure and the automatic change procedures in Rev. Proc. 2015-13. The taxpayer
must notify the national office contact person (if unknown, fax the notification to 855-574-9031
or send the notification to the attention of Control Clerk, CC:ITA, Room 4512 at the address
specified in section 9.08(6) of Rev. Proc. 2022-1, 2022-1 I.R.B. 1 (or its successor)) for the Form
3115 of the taxpayer’s intent to make the change in method of accounting under the automatic
change procedures in Rev. Proc. 2015-13 before the later of (a) March 2, 2022, or (b) the issuance
of a letter ruling granting or denying consent for the change. The notification should indicate that
the taxpayer chooses to convert the Form 3115 to the automatic change procedures in Rev. Proc.
2015-13. If the taxpayer timely notifies the national office that it chooses to convert the Form 3115
to the automatic change procedures in Rev. Proc. 2015-13, the national office will send a letter to
the taxpayer acknowledging its request and will return the user fee submitted with the Form 3115.
A taxpayer converting a Form 3115 to the automatic change procedures in Rev. Proc. 2015-13
for a change in method of accounting described in this revenue procedure must resubmit a Form
3115 that conforms to the automatic change procedures, with a copy of the national office letter
sent acknowledging the taxpayer’s request attached, to the IRS in Ogden, UT by the earlier of (a)
the 30
th
calendar day after the date of the national office’s letter acknowledging the taxpayer’s
request, or (b) the date the taxpayer is required to file the duplicate copy of the Form 3115 under
SECTION 6.03(1)(a)(i)(B) of Rev. Proc. 2015-13. See SECTION 6.03(3) of Rev. Proc. 2015-13
regarding additional required copies of Form 3115.
For purposes of the eligibility rules in SECTION 5 of Rev. Proc. 2015-13, the duplicate copy
of the timely resubmitted Form 3115 will be considered filed as of the date the taxpayer originally
filed the converted Form 3115 under the non-automatic change procedures in Rev. Proc. 2015-13.
This paragraph (1) does not extend the date the taxpayer must file the original (converted) Form
3115 under SECTION 6.03(1)(a)(i)(A) of Rev. Proc. 2015-13.
A Form 3115 filed under the non-automatic change procedures in Rev. Proc. 2015-13 before
January 31, 2022, for a change in method of accounting described in this revenue procedure, will
be disregarded for purposes of the prior five year change rules in SECTIONS 5.04 and 5.05 of
Rev. Proc. 2015-13 if the taxpayer converts the Form 3115 pursuant to this paragraph (1).
(2) Forms 3115 for changes in methods of accounting that can no longer be filed under the
automatic change procedures. Except as provided in subsection .02(2)(a) of this EFFECTIVE
DATE section, section 5.03 of Rev. Proc. 2021-34, or section 7.02 of Rev. Proc. 2022-09, as
applicable, the following transition rules apply to the changes in methods of accounting that
can no longer be filed under the automatic change procedures in Rev. Proc. 2015-13 because of
changes made in this revenue procedure. An example of such changes in methods of accounting
is described in subsection .01(10) of the SIGNIFICANT CHANGES section of this revenue
procedure.
(a) If before January 31, 2022, a taxpayer properly filed the original, or the duplicate copy,
of a Form 3115 under the automatic change procedures in Rev. Proc. 2015-13 for a change in
method of accounting that can no longer be filed under the automatic change procedures in Rev.
Proc. 2015-13, the taxpayer may continue to make that change in method of accounting under the
automatic change procedures in Rev. Proc. 2015-13 for the year of change. The taxpayer is not

Bulletin No. 2022–7 741 February 14, 2022
required to resubmit a duplicate copy of the Form 3115 to the IRS in Ogden, UT under section
6.03(1)(a)(i)(B) of Rev. Proc. 2015-13.
(b) If before January 31, 2022, a taxpayer did not properly file the original, or the duplicate
copy, of a Form 3115 under the automatic change procedures in Rev. Proc. 2015-13 for a change
in method of accounting that can no longer be filed under the automatic change procedures in
Rev. Proc. 2015-13, the taxpayer must make that change in method of accounting under the non-
automatic change procedures in Rev. Proc. 2015-13. Notwithstanding § 1.446-1(e)(3)(i), the
taxpayer may file a Form 3115 to request the Commissioner’s consent to change the method of
accounting under the non-automatic change procedures in Rev. Proc. 2015-13 for the taxpayer’s
last taxable year ending before January 31, 2022, on or before the due date of the federal income
tax return for that taxable year. Solely for purposes of this paragraph (2)(b), the due date of the
taxpayer’s federal income tax return includes extensions, notwithstanding that the taxpayer may
not have extended the due date.
(3) Transition rule for taxpayers that properly filed the duplicate copy of Form 3115 before
January 31, 2022, for a change that continues to qualify under the automatic change procedures.
(a) Option to implement change as described in Rev. Proc. 2019-43 or under this revenue
procedure. If, before January 31, 2022, a taxpayer properly filed the duplicate copy of the Form
3115, pursuant to section 6.03(1)(a)(i)(B) of Rev. Proc. 2015-13, requesting consent to change
its method of accounting for a change described in Rev. Proc. 2019-43, 2019-48 I.R.B. 1107,
as modified prior to January 31, 2022, that continues to be eligible for the automatic change
procedures in this revenue procedure, but has not filed its timely filed (including extensions)
original Federal income tax return for the year of change implementing the change, the taxpayer
may choose to implement the change as described in either Rev. Proc. 2019-43 or this revenue
procedure, but not both.
(b) Procedures to implement change as described Rev. Proc. 2019-43. A taxpayer who meets
the requirements of paragraph (3)(a) and chooses to implement the change as described in Rev.
Proc. 2019-43 is not required to resubmit a duplicate copy of the Form 3115 to the IRS in Ogden,
UT. However, if requested by the Director, the taxpayer must provide written substantiation that
the duplicate copy of the Form 3115 was filed before January 31, 2022, pursuant to section 6.03(1)
(a)(i)(B) of Rev. Proc. 2015-13. Such written substantiation may include proof of mailing or
faxing, as appropriate, of the duplicate copy of the Form 3115.
(c) Procedures to implement the change as described in this revenue procedure. A taxpayer who
meets the requirements of paragraph (3)(a) and chooses to implement the change as described
in this revenue procedure, must resubmit a duplicate copy (with signature) of the Form 3115
to the IRS in Ogden, UT for the year of change under this revenue procedure, pursuant to the
requirements of section 6.03(1)(a)(i)(B) of Rev. Proc. 2015-13. The resubmitted duplicate copy
must include the following statement on the top of page 1 of the Form 3115: “FILED UNDER
REV. PROC. 2022-14, AS PROVIDED IN SECTION .02(3)(c) OF THE EFFECTIVE DATE
SECTION OF REV. PROC. 2022-14”. For purposes of the eligibility rules in section 5 of Rev.
Proc. 2015-13, the duplicate copy of the resubmitted Form 3115 will be considered filed as of
the date the taxpayer originally filed the duplicate copy of the Form 3115 requesting the change
under Rev. Proc. 2019-43. This paragraph (3)(c) does not extend the date the taxpayer must file
either the resubmitted duplicate copy or original Form 3115 under section 6.03(1)(a) of Rev.
Proc. 2015-13. If requested by the Director, the taxpayer must provide written substantiation
that the duplicate copy of the Form 3115 requesting the change under Rec. Proc. 2019-43 was
filed before January, 31, 2022, pursuant to section 6.03(1)(a)(i)(B) of Rev. Proc. 2015-13. Such
written substantiation may include proof of mailing or faxing, as appropriate, of the duplicate
copy of the Form 3115.

February 14, 2022 742 Bulletin No. 2022–7
EFFECT ON OTHER DOCUMENTS
.01 This revenue procedure amplifies and modifies Rev. Proc. 2019-43, 2019-48 I.R.B. 1107.
Rev. Proc. 2019-43, as amplified and modified is superseded in part. The second sentence in the
subsection .01 under the EFFECT ON OTHER DOCUMENTS section of Rev. Proc. 2019-43
remains in effect (that is, the second sentences in sections 14.01 and 14.02, and sections 14.04,
14.05, 14.06, and 14.07 of Rev. Proc. 2011-14, 2011-4 I.R.B. 330, remain in effect). All other
sections of Rev. Proc. 2019-43 are superseded.
.02 Rev. Proc. 2011-46, 2011-42 I.R.B. 518, is modified as follows:
(1) Section 5.02(3)(a) is modified to remove the first two sentences in the Manner of Making
Change section and to substitute the following three new sentences in its place:
(a) In accordance with § 1.446-1(e)(3)(ii), the requirement under § 1.446-1(e)(3)(i) to file
a Form 3115 is waived and a statement in lieu of a Form 3115 is authorized for this change.
Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, the statement in lieu of a Form 3115 that is permitted under this paragraph 5.02(3)(a) is
considered a Form 3115 for purposes of the automatic consent procedures in Rev. Proc. 2015-13.
However, the requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc. 2015-
13, is waived.
(2) Section 5.03(2)(a) is modified to remove the first two sentences in the Manner of Making
Change section and to substitute the following three new sentences in its place:
(a) In accordance with § 1.446-1(e)(3)(ii), the requirement under § 1.446-1(e)(3)(i) to file
a Form 3115 is waived and a statement in lieu of a Form 3115 is authorized for this change.
Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13, the statement
in lieu of a Form 3115 that is permitted under this paragraph 5.03(2)(a) is considered a Form 3115
for purposes of the automatic consent procedures in Rev. Proc. 2015-13. However, the requirement
to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc. 2015-13, is waived.
.03 Rev. Rul. 2004-62, 2004-1 C.B. 1072, is modified to remove the second sentence in the
CHANGE IN METHOD OF ACCOUNTING section and to substitute the following new two
sentences in its place:
A taxpayer that wants to change its method of accounting to comply with this revenue ruling must
follow the automatic change procedures in Rev. Proc. 2015-13, 2015-5 I.R.B. 419, (or successor)
if the taxpayer is eligible to request such consent under the automatic change procedures therein.
The eligibility rules in section 5.01(1) of Rev. Proc. 2015-13 (or successor) apply to a change in
method of accounting described in section 3.04 of Rev. Proc. 2022-14, 2022-7 I.R.B. XXX (or
successor).
.04 Rev. Rul. 2000-7, 2000-9 C.B. 712, is modified to remove the fourth sentence of the
paragraph in the APPLICATION section and to substitute the following new fourth sentence:

Bulletin No. 2022–7 743 February 14, 2022
A taxpayer that wants to change its method of accounting to conform with the holding in this
revenue ruling must follow the automatic change procedures in Rev. Proc. 2015-13, 2015-5 I.R.B.
419, (or successor) if the taxpayer is eligible to request such consent under the automatic change
procedures therein, except that the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 (or
successor) does not apply to a change described in section 11.03 of Rev. Proc. 2022-14, 2022-7
I.R.B. XXX (or successor).
.05 Rev. Rul. 2000-4, 2000-1 C.B. 331, is modified to remove the second sentence of the
paragraph in the APPLICATION section, and to substitute the following two new sentences in
that paragraph in its place:
A taxpayer that wants to change its method of accounting to conform with the holding in this
revenue ruling must follow the automatic change procedures in Rev. Proc. 2015-13, 2015-5 I.R.B.
419, (or successor) if the taxpayer is eligible to request such consent under the automatic change
procedures therein. The eligibility rules in section 5.01(1) of Rev. Proc. 2015-13 (or successor)
apply to a change in method of accounting under section 3.02 of Rev. Proc. 2022-14, 2022-7
I.R.B. XXX (or successor).
.06 Rev. Proc. 2007-48, 2007-2 C.B. 110, is modified to remove section 5.06(1) and to substitute
it with the following sentence:
The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, (or successor)
does not apply to a change in method of accounting described in section 5.06 of Rev. Proc. 2007-
48, and made under section 22.08 of Rev. Proc. 2022-14, 2022-7 I.R.B. XXX (or successor).
. 07 Rev. Proc. 2007-16, 2007-1 C.B. 358, is modified as follows:
(1) The second sentence in section 4.01 is modified by substituting “and Rev. Proc. 2015-13,
2015-5 I.R.B. 419” for “and, as applicable, Rev. Proc. 97-27 or Rev. Proc. 2002-9.”
(2) The first sentence in section 4.02 is modified by:
(a) Substituting “the non-automatic change or automatic change procedures of Rev. Proc. 2015-
13” for “Rev. Proc. 97-27 or Rev. Proc. 2002-9, as applicable,”; and
(b) Substituting “(as defined in section 3.19 of Rev. Proc. 2015-13)” for “(as defined in section
5.02(2) of Rev. Proc. 97-27 or section 5.02 of Rev. Proc. 2002-9, as applicable)”.
(c) Section 4.03 is modified by substituting “Rev. Proc. 2015-13,” for “Rev. Proc. 97-27 or Rev.
Proc. 2002-9, as applicable,”.
PAPERWORK REDUCTION ACT
The collection of information contained in this revenue procedure has been reviewed and
approved by the Office of Management and Budget under OMB control numbers 1545-0074 for
individual filers, 1545-0123 for business filers, and 1545-0047 for tax-exempt filers, in accordance

February 14, 2022 744 Bulletin No. 2022–7
with the Paperwork Reduction Act (44 U.S.C. 3507(d)). An agency may not conduct or sponsor,
and a person is not required to respond to, a collection of information unless the collection of
information displays a valid OMB control number. The collections of information in this revenue
procedure are in sections 3, 5, 6, 7, 8, 9, 11, 12, 15, 16, 17, 18, 20, 21, 22, 23, 24, 25, 26, 29, 30,
31, and .02(3) of the Effective Date. This information is necessary and will be used to determine
whether the taxpayer properly changed to a permitted method of accounting. The collections of
information are required for the taxpayer to obtain consent to change its method of accounting.
SIGNIFICANT CHANGES
.01 Significant changes made by this revenue procedure to the List of Automatic Changes in
Rev. Proc. 2019-43 include:
(1) Section 20.01, relating to a taxpayer changing its timing of incurring liabilities for employee
compensation, is modified to add new paragraph (4) which allows a taxpayer using an overall
accrual method of accounting to change its method of accounting for taking into account certain
employee commission liabilities;
(2) Section 6.01, relating to impermissible to permissible depreciation method changes, is
modified by removing language in paragraph (1)(c)(viii) and paragraph (1)(c)(xvii) allowing a
Form 3115 to be filed under 6.01 for certain changes described in sections 6.04, 6.05 and/or 6.19
of this revenue procedure if the original Form 3115 was filed between specified dates beginning
and ending before January 31, 2022, because this language is obsolete;
(3) Section 6.18, relating to late elections or revocation of elections under § 168(k)(5), (7),
and (10), is modified to clarify the waiver of the eligibility rules in sections 5.01(1)(d) and (f) of
Rev. Proc. 2015-13 applies for the taxpayer’s first, second, or third taxable year succeeding the
taxpayer’s taxable year beginning in 2016 or 2017 and ending on or after September 28, 2017;
(4) Section 6.19, relating to changes for qualified improvement property placed in service after
December 31, 2017, is modified by removing language in paragraph (2) providing for a waiver of
the eligibility rules in section 5.01(d) and section 5.01(f) of Rev. Proc. 2015-13 for changes made
under section 6.19 for a taxable year for which the original Form 3115 was filed between specified
dates beginning and ending before January 31, 2022, because this language is obsolete;
(5) Section 6.20, relating to certain late elections or revocations of elections under sections 168
and 1502, is modified by removing language in paragraph (2) requiring a changes under 6.20(1)
(a)(i) and (a)(ii) and (b)(i) and (b)(ii) to be made for a taxable year for which the taxpayer timely
files an original federal income tax return between specified dates beginning and ending before
January 31, 2022, because this language is obsolete. Section 6.20 is further modified by removing
language in paragraph (3) providing for a waiver of the eligibility rules under section 5.01(d) and
section 5.01(f) of Rev. Proc. 2015-13 for changes made under section 6.20(1)(a)(i) and (a)(ii) and
(b)(i) and (b)(ii) for a taxable year for which the taxpayer timely files an original federal income
tax return between specified dates beginning and ending before January 31, 2022, because this
language is obsolete;

Bulletin No. 2022–7 745 February 14, 2022
(6) Section 6.21, relating to changes in depreciation as a result of applying the additional first
year depreciation regulations, is modified by removing language in paragraph (2)(b) providing
of a waiver of the eligibility rule in section 5.01(f) of Rev. Proc. 2015-13 for a change for the
property or specified plant within the scope of section 4 of Rev. Proc. 2020-50 as modified by
section 6.21(1)(b) of this revenue procedure, where the taxpayer files an original federal income
tax return between specified dates beginning and ending before January 31, 2022, because this
language is obsolete;
(7) Section 6.21, relating to a change in depreciation as a result of applying the additional
first year depreciation regulations, is modified to clarify paragraph (3)(b) as follows. First, an
amended federal income tax return, or AAR, as applicable, to change from the impermissible
method of determining depreciation to the permissible method of determining depreciation for the
1-year Property or 1-year Plant must be filed prior to the date the taxpayer files its federal income
tax return for the taxable year succeeding the 1-year Property’s placed-in-service year or 1-year
Plant’s planting or grafting year, as applicable. Second, if the 1-year Property or 1-year Plant
is within the scope of section 4.03 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of
this revenue procedure, the taxpayer may change from the impermissible method of determining
depreciation to the permissible method of determining depreciation for the 1-year Property or
1-year Plant by filing an amended federal income tax return, or AAR, as applicable, in accordance
with section 4.03(4)(a) of Rev. Proc. 2020-50;
(8) Section 6.22, relating to depreciation of tangible property under § 168(g) by controlled
foreign corporations, is modified to require any § 481(a) adjustment (or component of a § 481(a)
adjustment) from a change under this section that shares all of the same characteristics as any
other § 481(a) adjustment (or component) from a change under this section included in the same
Form 3115 to be provided as a single § 481(a) adjustment on the Form 3115, and any § 481(a)
adjustment (or component) from a change under this section that does not share all of the same
characteristics as any other § 481(a) adjustment (or component) from a change under this section
included in the same Form 3115 to be provided as a separate § 481(a) adjustment on the Form
3115;
(9) Section 7.01, relating to a change in method of accounting for the treatment of expenditures
that qualify as research and experimental expenditures under § 174 as in effect prior to amendment
by § 13206 of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the
Tax Cuts and Jobs Act (TCJA), is modified to provide that section 7.01 does not apply to any
amount paid or incurred in any taxable year for which § 174 as amended by § 13206 of the TCJA
is in effect;
(10) Section 9.01, relating to a change in method of accounting for the costs of computer
software to a method described in Rev. Proc. 2000-50, 2000-2 C.B. 601, as modified by Rev. Proc.
2007-16, 2007-1 C.B. 358, is modified to provide that section 5 of Rev. Proc. 2000-50 (costs of
developing computer software) does not apply to any amount paid or incurred in any taxable year
for which § 174 as amended by § 13206 of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017),
commonly referred to as the Tax Cuts and Jobs Act (TCJA) is in effect;
(11) Section 12.01, relating to certain uniform capitalization (UNICAP) methods used by
resellers and reseller-producers, is modified as follows. First, to provide that section 12.01 applies
to a taxpayer that uses a historic absorption ratio election with the simplified production method,
the modified simplified production method, or the simplified resale method and wants to change
to a different method for determining the additional section 263A costs that must be capitalized
to ending inventories or other eligible property on hand at the end of the taxable year (that is,
to a different simplified method or a facts-and-circumstances method). Second, to remove the
transition rule in section 12.01(1)(b)(ii)(B) because this language is obsolete;

February 14, 2022 746 Bulletin No. 2022–7
(12) Section 12.02, relating to certain uniform capitalization (UNICAP) methods used by
producers and reseller-producers, is modified as follows. First, to provide that section 12.02
applies to a taxpayer that uses a historic absorption ratio election with the simplified production
method or the modified simplified production method and wants to change to a different method
for determining the additional section 263A costs that must be capitalized to ending inventories
or other eligible property on hand at the end of the taxable year (that is, to a different simplified
method or a facts-and-circumstances method). Second, to remove the transition rule in section
12.02(1)(b)(ii)(B) because this language is obsolete;
(13) Section 12.14, relating to interest capitization, is modified to provide that section 12.14
does not apply to a taxpayer that wants to change its method of accounting for interest from either
capitalizing interest to not capitalizing interest or not capitalizing interest to capitalizing interest
for improvements that involve the associated property rules in § 1.263A-11(e)(1)(ii)(B);
(14) Section 13.01, relating to a taxpayer changing its method of accounting to comply with
§ 267, is clarified to provide such section also applies to a taxpayer that, by reason of the exception
in § 1.267(a)-3(c)(4), wants to change its method of accounting with respect to the deduction
of amounts owed to a controlled foreign corporation (as defined in § 957) (CFC) that does not
have any United States shareholders (as defined in § 951(b)) owning stock of the CFC within the
meaning of § 958(a);
(15) Section 15.10, relating to a specified transportation industry taxpayer that wants to change
to the overall cash receipts and disbursement (cash) method, has been modified to provide that
such taxpayer must have average annual gross receipts of more than the inflation-adjusted amount
provided in § 448(c)(4) and not in excess of $50,000,000;
(16) Section 15.17, relating to a change to the overall cash method or to a method of accounting
in which a small business taxpayer uses an accrual method for purchases and sales of inventories
and uses the cash method for computing all other items of income and expense, is modified to
clarify that the acceleration of a § 481(a) adjustment remaining on a prior overall change in
method of accounting to an accrual method, as provided in section 15.17(7)(a) of this revenue
procedure, applies to a taxpayer making a change described in section 15.17(2)(a) or (b) of this
revenue procedure;
(17) Section 16.10 (formerly section 16.12 of Rev. Proc. 2019-43, as modified by Rev. Proc.
2021-34), relating to changes in the timing of income recognition under § 451(b) and (c), is
modified as follows. First, paragraph 16.10(4)(b)(ii)(C) is modified to provide that a taxpayer
making a change to the full inclusion method under proposed section 1.451-8(a) is not permitted
to make the change on a cut-off basis. Second, paragraph 16.10(5) is modified to provide that a
change made under section 16.10(2)(a)(iii)(A), (B), (F) and/or (G), section 16.10(2)(a)(iv)(A),
(B), (C), (G) and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or (F) will be disregarded for
purposes of section 5.01(1)(f) of Rev. Proc. 2015-13 if: (i) the change is made for the taxpayer’s
early application year, as defined in section 16.10(4)(c)(i) or, in the case of a taxpayer that does
not apply § 1.451-3 and/or § 1.451-8 for a taxable year beginning before January 1, 2021, for the
taxpayer’s first taxable year beginning on or after January 1, 2021, and (ii) the § 481(a) adjustment
required to implement the change is zero;
(18) Section 16.10 (formerly section 16.12 of Rev. Proc. 2019-43, as modified by Rev. Proc.
2021-34) is clarified to provide (i) an example on how the 5-year item eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13 applies to changes made under section 16.10 and (ii) the situations
in which the cost-offset related inventory method changes in sections 16.10(2)(a)(iii)(E), 16.10(2)
(a)(iv)(F), and 16.10(2)(b)(ii)(E) apply, and to provide guidance regarding the ordering of
concurrent cost-offset and cost-offset related inventory method changes;

Bulletin No. 2022–7 747 February 14, 2022
(19) Section 20.01, relating to a taxpayer changing its timing of incurring liabilities for
employee compensation, is modified to provide paragraph (1) does not include any amounts for
medical services that are deferred compensation under § 404;
(20) Section 20.12, relating to an accrual method taxpayer changing its treatment of Ratable
Service Contracts to conform to the safe harbor method provided by Rev. Proc. 2015-39, is
modified to remove paragraph (2), relating to the temporary waiver of the eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13, because the paragraph is obsolete;
(21) Section 22.18, relating to a small business taxpayer, as defined in section 22.18(2) of this
revenue procedure, that wants to change its § 471 method of accounting for inventory, is modified
to add paragraph 22.18(5)(c), providing that a change made under section 22.18(1)(b) of this
revenue procedure will be disregarded for purposes of section 5.01(1)(f) of Rev. Proc. 2015-13 if:
(i) the change is made for the taxpayer’s early application year, as defined in section 16.10(4)(c)(i)
or, in the case of a taxpayer that does not apply § 1.471-1(b) for a taxable year beginning before
January 5, 2021, for the taxpayer’s first taxable year beginning on or after January 5, 2021, and
(ii) the § 481(a) adjustment required to implement the change is zero; and
(22) Section 26.04, relating to a change in basis of computing reserves under § 807(f), is
modified as follows. First, paragraphs (2)(a) and (b) are modified to clarify the manner in which a
nonlife insurance company implements a change in basis of computing life insurance reserves, to
require the netting of § 481(a) adjustments at the level of each item referred to in § 807(c), and to
provide that a taxpayer that was an insurance company for the year of change does not accelerate
a § 481(a) adjustment merely because it changes from a life insurance company to a nonlife
insurance company or vice versa. Second, paragraph (2)(d)(i), relating to the information required
to be furnished with a taxpayer’s return or on Form 3115, is removed because § 1.801-5(c) has
been removed by T.D. 9911, 2020-45 I.R.B. 966 (November 2, 2020).
DRAFTING INFORMATION
The principal author of this revenue procedure is Bruce Chang of the Office of Associate Chief
Counsel (Income Tax and Accounting). For further information regarding this revenue procedure,
contact Mr. Chang at (202) 317-4870 (not a toll-free number).
For further information regarding a specific change in method of accounting in this revenue
procedure, contact the individual listed in the “Contact Person(s)” section located at the end of
each section of the revenue procedure (numbers are not toll-free) or see the CONTACT LIST
at the end of this revenue procedure. The contact person is with one of the following Offices of
Associate Chief Counsel: Corporate (CORP), Financial Institutions and Products (FI&P), Income
Tax & Accounting (IT&A), International (INTL), Passthroughs and Special Industries (P&SI), or
Employee Benefits, Exempt Organizations, and Employment Taxes (EEE).

February 14, 2022 748 Bulletin No. 2022–7
LIST OF AUTOMATIC CHANGES CONTACT LIST
Section Number
Designated Automatic
Accounting Change
NumberContact NameTelephone NumberOffice
1.0191William E. Blanchard(202) 317-3900FI&P
2.011William Ruane(202) 317-4718IT&A
3.012Alicia Lee-Won(202) 317-7003IT&A
3.023Justin Grill(202) 317-7003IT&A
3.034Renay France(202) 317-7003IT&A
3.0486Alexa Dubert(202) 317-7003IT&A
3.05See § 11.08See § 11.08See § 11.08IT&A
3.06See § 11.08See § 11.08See § 11.08IT&A
3.07158Ian Heminsley(202) 317-5100IT&A
3.08159Sophia Wang(202) 317-5100IT&A
3.09160Natasha Mulleneaux(202) 317-5100IT&A
3.10182Morgan Lawrence(202) 317-7011IT&A
3.11208, 209Merrill Feldstein(202) 317-5100IT&A
4.015Renay France(202) 317-7003IT&A
4.02211K. Scott Brown(202) 317-6945FI&P
5.0116William E. Blanchard(202) 317-3900FI&P
5.02212Anisa Afshar(202) 317-6934INTL
6.017James Liechty(202) 317-7005IT&A
6.028Bruce Chang(202) 317-7005IT&A
6.0310Edward Schwartz(202) 317-7006IT&A
6.0487Elizabeth Binder(202) 317-7005IT&A
6.0588Elizabeth Binder(202) 317-7005IT&A
6.0689Bernard Harvey(202) 317-7005IT&A
6.07107James Liechty(202) 317-7005IT&A
6.08145Elizabeth Binder(202) 317-7005IT&A
6.09157Charles Magee(202) 317-7005IT&A
6.10198Patrick Clinton(202) 317-7005IT&A
6.11199Patrick Clinton(202) 317-7005IT&A
6.12200Patrick Clinton(202) 317-7005IT&A
6.13205Patrick Clinton(202) 317-7005IT&A
6.14206Patrick Clinton(202) 317-7005IT&A
6.15207Patrick Clinton(202) 317-7005IT&A
6.16
Summary of changes related to
dispositions of MACRS property
6.17210Charles Magee(202) 317-7005IT&A
6.18241Elizabeth Binder(202) 317-7005IT&A
6.19244Elizabeth Binder(202) 317-7005IT&A
6.20245Elizabeth Binder(202) 317-7005IT&A
6.21246, 247Elizabeth Binder(202) 317-7005IT&A
6.22248Natalie Punchak(202) 317-6934INTL
7.0117Martha M. Garcia(202) 317-6853P&SI

Bulletin No. 2022–7 749 February 14, 2022
Section Number
Designated Automatic
Accounting Change
NumberContact NameTelephone NumberOffice
John M. Deininger
8.01152Charles Hyde(202) 317-5214P&SI
9.0118Bruce Chang(202) 317-7005IT&A
10.01223Elizabeth Binder(202) 317-7005IT&A
10.02228Sharon Horn(202) 317-7003IT&A
10.03229Meghan Howard(202) 317-5055P&SI
11.0119Alexa Dubert(202) 317-7003IT&A
11.0220Douglas Kim(202) 317-7003IT&A
11.0321Douglas Kim(202) 317-7003IT&A
11.0447Alexa Dubert(202) 317-7003IT&A
11.0578Alicia Lee-Won(202) 317-7003IT&A
11.06109Stephen Rothandler(202) 317-7003IT&A
11.07121Stephen Rothandler(202) 317-7003IT&A
11.08184-193Douglas Kim(202) 317-7003IT&A
11.09213Douglas Kim (202) 317-7003IT&A
11.10222Merrill Feldstein(202) 317-5100IT&A
12.0122Megan McLaughlin(202) 317-7007IT&A
12.0223Megan McLaughlin(202) 317-7007IT&A
12.0325Megan McLaughlin(202) 317-7007IT&A
12.0477Megan McLaughlin(202) 317-7007IT&A
12.0592Megan McLaughlin(202) 317-7007IT&A
12.06150, 151Megan McLaughlin(202) 317-7007IT&A
12.07181Patrick Clinton(202) 317-7005IT&A
12.08194Megan McLaughlin(202) 317-7007IT&A
12.09195Roy Hirschhorn(202) 317-7007IT&A
12.10201Andrew Braden(202) 317-7007IT&A
12.11202Andrew Braden(202) 317-7007IT&A
12.12214Megan McLaughlin(202) 317-7007IT&A
12.13215Andrew Braden(202) 317-7007IT&A
12.14224Megan McLaughlin(202) 317-7007IT&A
12.15232Megan McLaughlin(202) 317-7007IT&A
12.16234Livia Piccolo(202) 317-7007IT&A
12.17237Megan McLaughlin(202) 317-7007IT&A
12.18238Tom McElroy(202) 317-7007IT&A
12.19243Anna Gleysteen(202) 317-7007IT&A
13.0126Megan McLaughlin(202) 317-7007IT&A
Anisa Afshar(202) 317-6934INTL
14.0128Thomas Scholz(202) 317-5600EEE
14.0229John Ricotta (202) 317-4102EEE
Joyce Kahn (202) 317-4148EEE
15.01122, 123, 257, 258Megan McLaughlin(202) 317-7007IT&A
15.0231David Sill(202) 317-7011IT&A
15.0334, 35Livia Piccolo(202) 317-7007IT&A

February 14, 2022 750 Bulletin No. 2022–7
Section Number
Designated Automatic
Accounting Change
NumberContact NameTelephone NumberOffice
15.0471William E. Blanchard(202) 317-3900FI&P
15.0585Bernard Harvey(202) 317-7005IT&A
15.0690Rebecca L. Baxter(202) 317-6995FI&P
15.07108K. Scott Brown(202) 317-6945FI&P
15.08124Douglas Kim(202) 317-7003IT&A
15.09125Dave Christensen(202) 317-7011IT&A
15.10126Megan McLaughlin(202) 317-7007IT&A
15.11127K. Scott Brown(202) 317-6945FI&P
15.12128Sophia Wang(202) 317-5100IT&A
15.13129David H. McDonnell(202) 317-4137P&SI
15.14148Charles W. Culmer(202) 317-6945FI&P
15.15226Barbara Campbell(202) 317-4137P&SI
15.16227Grace Cho(202) 317-6945FI&P
15.17233,259Anna Gleysteen(202) 317-7007IT&A
16.0136K. Scott Brown(202) 317-6945FI&P
16.0237Daniel Cassano(202) 317-7011IT&A
16.0338Daniel Cassano(202) 317-7011IT&A
16.0439Bill Ruane(202) 317-4718IT&A
16.0580, 81Kate Sleeth(202) 317-7053FI&P
16.0683, 84Maria Castillo-Valle(202) 317-7003IT&A
16.07130, 217Peter Cohn(202) 317-7011IT&A
16.08153Maria Castillo-Valle(202) 317-7003IT&A
16.09231Sharon Horn(202) 317-7003IT&A
16.10239, 242, 250-255Sharon Horn(202) 317-7003IT&A
Deepan Patel(202) 317-3423FI&P
17.01131William E. Blanchard(202) 317-3900FI&P
18.01132Patrick Clinton(202) 317-7005IT&A
19.01236Innessa Glazman(202) 317-7006IT&A
20.0142, 133, 134, 249Maria Castillo-Valle(202) 317-7003IT&A
Alicia Lee-Won(202) 317-7003IT&A
20.0243Christine Merson(202) 317-5100IT&A
20.0344Christine Merson(202) 317-5100IT&A
20.0445, 113James Williford(202) 317-5100IT&A
20.0546Vincent Brodbeck(202) 317-5100IT&A
20.06106Sharon Horn(202) 317-7003IT&A
20.07135Hyowon Lee(202) 317-5100IT&A
20.08149Daniel Cassano(202) 317-7011IT&A
20.09154Sharon Horn(202) 317-7003IT&A
20.10156Alicia Lee-Won(202) 317-7003IT&A
20.11161Justin Grill(202) 317-7003IT&A
20.12220Douglas Kim(202) 317-7003IT&A
David Christensen(202) 317-7011IT&A

Bulletin No. 2022–7 751 February 14, 2022
Section Number
Designated Automatic
Accounting Change
NumberContact NameTelephone NumberOffice
20.13256Douglas Kim(202) 317-7003IT&A
21.01136William Ruane(202) 317-4718IT&A
22.0148Andrew Braden(202) 317-7007IT&A
22.0249Andrew Braden(202) 317-7007IT&A
22.0353Andrew Braden(202) 317-7007IT&A
22.0454Andrew Braden(202) 317-7007IT&A
22.0555Andrew Braden(202) 317-7007IT&A
22.0663Andrew Braden(202) 317-7007IT&A
22.0796Andrew Braden(202) 317-7007IT&A
22.08110Stephen Rothandler(202) 317-7003IT&A
22.09111Andrew Braden(202) 317-7007IT&A
22.10137Andrew Braden(202) 317-7007IT&A
22.11138Andrew Braden(202) 317-7007IT&A
22.12139Andrew Braden(202) 317-7007IT&A
22.13114Andrew Braden(202) 317-7007IT&A
22.14203Andrew Braden(202) 317-7007IT&A
22.15204Andrew Braden(202) 317-7007IT&A
22.16225Andrew Braden(202) 317-7007IT&A
22.17230Andrew Braden(202) 317-7007IT&A
22.18235, 260, 261Livia Piccolo(202) 317-7007IT&A
22.19262Livia Piccolo(202) 317-7007IT&A
22.20263Livia Piccolo(202) 317-7007IT&A
23.0156Andrew Braden(202) 317-7007IT&A
23.0257Andrew Braden(202) 317-7007IT&A
23.0358Andrew Braden(202) 317-7007IT&A
23.0459Andrew Braden(202) 317-7007IT&A
23.0560Andrew Braden(202) 317-7007IT&A
23.0661Andrew Braden(202) 317-7007IT&A
23.0762Andrew Braden(202) 317-7007IT&A
23.08112Andrew Braden(202) 317-7007IT&A
23.09140Andrew Braden(202) 317-7007IT&A
23.10141Andrew Braden(202) 317-7007IT&A
24.0164Marsha Sabin(202) 317-6945FI&P
24.02218Marsha Sabin(202) 317-6945FI&P
25.0166K. Scott Brown(202) 317-6945FI&P
Laura Fields(202) 317-6850P&SI
Adrienne Mikolashek(202) 317-6850P&SI
26.0167Rebecca L. Baxter(202) 317-6995FI&P
26.02155Rebecca L. Baxter(202) 317-6995FI&P
26.03219Rebecca L. Baxter(202) 317-6995FI&P
26.04240Dan Phillips(202) 317-6995FI&P
27.0168Rebecca L. Baxter(202) 317-6995FI&P
28.0179John W. Rogers, III(202) 317-6895FI&P

February 14, 2022 752 Bulletin No. 2022–7
Section Number
Designated Automatic
Accounting Change
NumberContact NameTelephone NumberOffice
29.0170Peter Merkel(202) 317-4919INTL
30.0172William E. Blanchard(202) 317-3900FI&P
30.02183Deepan Patel(202) 317-3423FI&P
31.0173William E. Blanchard(202) 317-3900FI&P
32.0174William E. Blanchard(202) 317-3900FI&P
32.0275William E. Blanchard(202) 317-3900FI&P

Bulletin No. 2022–7 753 February 14, 2022
Part IV
Notice of Proposed
Rulemaking
REG-118250-20
Guidance on Passive
Foreign Investment
Companies and Controlled
Foreign Corporations Held
by Domestic Partnerships
and S Corporations and
Related Person Insurance
Income
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and partial withdrawal of notice of pro-
posed rulemaking.
SUMMARY: This document contains
proposed regulations regarding the treat-
ment of domestic partnerships and S cor-
porations that own stock of passive for-
eign investment companies (“PFICs”) and
their domestic partners and shareholders
(the “proposed regulations”). The pro-
posed regulations also provide guidance
regarding the determination of the con-
trolling domestic shareholders of foreign
corporations, the owner of a controlled
foreign corporation (“CFC”) or qualified
electing fund (“QEF”) that makes an elec-
tion under section 1411, the treatment of
S corporations with accumulated earn-
ings and profits under subpart F of part
III of subchapter N of chapter 1 of the
Internal Revenue Code (“subpart F” of
the “Code”), and the determination and
inclusion of related person insurance in-
come (“RPII”) under section 953(c). The
proposed regulations affect United States
persons that own, directly or indirectly,
stock in certain foreign corporations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by April 25, 2022. Requests for a
public hearing must be submitted as pre-
scribed in the “Comments and Requests
for a Public Hearing” section.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically. Submit electronic submis-
sions via the Federal eRulemaking Portal
at www.regulations.gov (indicate IRS and
REG-118250-20) by following the online
instructions for submitting comments.
Once submitted to the Federal eRulemak-
ing Portal, comments cannot be edited or
withdrawn. The IRS expects to have limited
personnel available to process public com-
ments that are submitted on paper through
mail. Until further notice, any comments
submitted on paper will be considered to
the extent practicable. The Department of
the Treasury (“Treasury Department”) and
the IRS will publish for public availability
any comment submitted electronically, and
to the extent practicable on paper, to its pub-
lic docket. Send hard copy submissions to:
CC:PA:LPD:PR (REG-118250-20), Room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations under §§1.958-1(d), 1.964-1,
1.1291-1, 1.1291-9, 1.1293-1, 1.1295-1,
1.1296-1, 1.1297-0, 1.1297-3, 1.1298-1,
1.1298-3, and 1.1411-10, Edward Tracy at
(202) 317-6934; concerning proposed reg-
ulation §1.958-1(e), Jennifer N. Keeney
at (202) 317-5045; concerning proposed
regulation §1.953-3, Raphael Cohen at
(202) 317-3756 or Josephine Firehock at
(202) 317-6938; concerning submissions
of comments or requests for a public hear-
ing, Regina Johnson at (202) 317-5177
(not toll free numbers).
SUPPLEMENTARY INFORMATION:
Background
I. Regulations Addressing the Treatment
of Domestic Partnerships for Purposes of
Sections 951(a) and 951A
On October 10, 2018, the Treasury
Department and the IRS published in the
Federal Register proposed regulations
under section 951A (REG-104390-18, 83
FR 51072) (“2018 proposed regulations”).
The 2018 proposed regulations provid-
ed a hybrid approach to the treatment of
a domestic partnership that is a United
States shareholder, as defined in section
951(b) (“U.S. shareholder”), with respect
to a CFC (“U.S. shareholder partner-
ship”). Under the hybrid approach, a U.S.
shareholder partnership would determine
its section 951A inclusion, and the part-
ners of the partnership that were not also
U.S. shareholders of the CFC (“non-U.S.
shareholder partners”) would take into ac-
count their distributive share of the inclu-
sion. See proposed §1.951A-5(b), 83 FR
51072, 51101. Partners that were them-
selves U.S. shareholders of a CFC (“U.S.
shareholder partners”) would not take
into account their distributive share of the
partnership’s global intangible low-taxed
income (“GILTI”) inclusion amount and
instead would be treated as proportionate-
ly owning the stock of the CFC within the
meaning of section 958(a) as if the domes-
tic partnership were a foreign partnership.
See proposed §1.951A-5(c), 83 FR 51072,
51101-51102.
On June 21, 2019, the Treasury De-
partment and the IRS published final reg-
ulations (TD 9866) in the Federal Regis-
ter (84 FR 29288, as corrected at 84 FR
44223, 84 FR 44693, and 84 FR 53052)
under sections 951, 951A, 1502, and 6038
that include guidance with respect to the
treatment of domestic partnerships that
own stock in CFCs for purposes of sec-
tion 951A (the “final section 951A regula-
tions”). The final section 951A regulations
did not adopt the hybrid approach set forth
in the 2018 proposed regulations and in-
stead generally treat a domestic partner-
ship as an aggregate of all of its partners
for purposes of computing income inclu-
sions under section 951A (and other pro-
visions that apply by reference to section
951A). The final section 951A regulations
apply to taxable years of foreign corpora-
tions beginning after December 31, 2017,
and to taxable years of U.S. shareholders
in which or with which such taxable years
of foreign corporations end. §1.951A-7.
On the same date, the Treasury Depart-

February 14, 2022 754 Bulletin No. 2022–7
ment and the IRS published proposed reg-
ulations (REG-101828-19) in the Federal
Register (84 FR 29114) that extended this
aggregate treatment of domestic partner-
ships for purposes of computing subpart
F inclusions under section 951 (the “2019
proposed regulations”).
In the preamble to the 2019 proposed reg-
ulations, the Treasury Department and the
IRS requested comments on the application
of sections 1291 and 1293 through 1298 of
the Code (the “PFIC regime”) to domestic
partnerships that directly or indirectly own
PFIC stock and their domestic partners, in-
cluding the operation of the PFIC regime
with respect to non-U.S. shareholder part-
ners of domestic partnerships under section
1297(d). 84 FR 29120. The 2019 proposed
regulations are issued, with modifications,
as final regulations in the Rules and Regu-
lations section of this issue of the Federal
Register (the “final regulations”).
On August 22, 2019, the Treasury
Department and the IRS released Notice
2019-46, 2019-37 I.R.B. 695, announc-
ing the intention to issue regulations that
will permit a domestic partnership or S
corporation to apply the hybrid approach
set forth in proposed §1.951A-5 for tax-
able years ending before June 22, 2019
(that is, the hybrid approach set forth in
the 2018 proposed regulations, which was
revised in the 2019 final section 951A reg-
ulations to reflect an aggregate approach
for purposes of section 951A). The notice
also addressed the applicability of penal-
ties in the case of a domestic partnership
or S corporation that consistently applied
proposed §1.951A-5 on or before June 21,
2019, but filed a tax return consistent with
the final section 951A regulations under
§1.951A-1(e). The notice was issued to
address the compliance burden, and relat-
ed penalty exposure, of domestic partner-
ships and S corporations that filed returns
based on the hybrid approach set forth in
the 2018 proposed regulations for taxable
years ending before June 22, 2019, but
later became subject to the aggregate ap-
proach of §1.951A-1(e) for those years.
II. Treatment of Domestic Partnerships
as Entities or Aggregates of their
Partners—In General
For purposes of applying a particu-
lar provision of the Code, a partnership
may be treated as either an entity separate
from its partners or as an aggregate of its
partners. Under the aggregate approach,
the partners of a partnership, and not the
partnership, are treated as owning the
partnership’s assets and conducting the
partnership’s operations. Under the entity
approach, the partnership is respected as
separate and distinct from its partners, and
therefore the partnership, and not the part-
ners, is treated as owning the partnership’s
assets and conducting the partnership’s
operations. Whether the aggregate or en-
tity approach applies depends on which
approach is more appropriate to carry out
the scope and purpose of a particular Code
provision. See H.R. Rep. No. 83-2543, at
59 (1954) (Conf. Rep.) (“Both the House
provisions and the Senate amendment
provide for the use of the ‘entity’ approach
in the treatment of transactions between a
partner and a partnership . . . . No inference
is intended, however, that a partnership is
to be considered as a separate entity for
the purpose of applying other provisions
of the internal revenue laws if the con-
cept of the partnership as a collection of
individuals is more appropriate for such
provisions.”); see also Holiday Village
Shopping Center v. United States, 5 Cl.
Ct. 566, 570 (1984), aff’d 773 F.2d 276
(Fed. Cir. 1985) (“[T]he proper inquiry is
not whether a partnership is an entity or
an aggregate for purposes of applying the
internal revenue laws generally, but rather
which is the more appropriate and more
consistent with Congressional intent with
respect to the operation of the particular
provision of the Internal Revenue Code at
issue.”); Casel v. Commissioner, 79 T.C.
424, 433 (1982) (“When the 1954 Code
was adopted by Congress, the conference
report . . . clearly stated that whether an
aggregate or entity theory of partnerships
should be applied to a particular Code sec-
tion depends upon which theory is more
appropriate to such section.”); §1.701-2(e)
(1) (“The Commissioner can treat a part-
nership as an aggregate of its partners in
whole or in part as appropriate to carry out
the purpose of any provision of the Inter-
nal Revenue Code or the regulations pro-
mulgated thereunder.”).
Consistent with this authority under
subchapter K, the Treasury Department
and the IRS have previously adopted the
aggregate approach to partnerships to car-
ry out the purpose of various provisions,
including international provisions, of the
Code. In addition to applying the aggre-
gate approach for purposes of determining
section 951 and section 951A inclusions
in the final section 951A regulations and
the final regulations, regulations under
section 871 apply the aggregate approach
in applying the 10 percent shareholder test
of section 871(h)(3) to determine wheth-
er interest paid to a partnership would be
considered portfolio interest under section
871(h)(2). §1.871-14(g)(3)(i). The aggre-
gate approach was also adopted in regu-
lations issued under section 367(a) to ad-
dress the transfer of property by a domestic
or foreign partnership to a foreign corpo-
ration in an exchange described in section
367(a)(1). See §1.367(a)-1T(c)(3)(i)(A).
Similarly, the Treasury Department and
the IRS adopted the aggregate approach
for purposes of applying the regulations
under section 367(b). See §1.367(b)-2(k);
see also §§1.367(e)-1(b)(2) (treating stock
and securities of a distributing corporation
owned by or for a partnership (domestic
or foreign) as owned proportionately by
its partners) and 1.861-9(e)(2) (requiring
certain corporate partners to apportion
interest expense, including the partner’s
distributive share of partnership interest
expense, by reference to the partner’s as-
sets).
III. PFIC Rules
A. Section 1291
Under section 1291, a United States
person (“U.S. person”) may be subject
to ordinary income treatment and an in-
terest charge when it receives an “excess
distribution” from a PFIC or recognizes
gain on the sale or disposition of PFIC
stock (the “excess distribution rules”).
These charges are determined based on
the person’s holding period and the years
in which the foreign corporation qualified
as a PFIC. The excess distribution rules
do not apply, however, if a shareholder
makes certain elections with respect to the
PFIC for its entire holding period of the
PFIC stock.
The Treasury regulations under section
1291 apply the excess distribution rules to
“shareholders” of a PFIC. See §1.1291-1(b)
(2)(v). Under §1.1291-1(b)(7), a “share-

Bulletin No. 2022–7 755 February 14, 2022
holder” of a PFIC generally is defined as a
U.S. person that owns PFIC stock directly
or indirectly through certain corporations
or pass-through entities (an “indirect share-
holder”), within the meaning of section
1298(a) and §1.1291-1(b)(8) (collectively,
a “PFIC shareholder”). For purposes of
sections 1291 and 1298, neither a domestic
partnership nor an S corporation is treated
as a PFIC shareholder except for purposes
of any information reporting requirements
(including the requirement to file an annual
report under section 1298(f)) or where oth-
erwise explicitly provided in regulations.
Section 1.1291-1(b)(8)(iii)(A) and (B)
provides that if a domestic partnership or S
corporation owns PFIC stock, the partners
or S corporation shareholders, respective-
ly, are considered to own the PFIC stock
proportionately in accordance with their
ownership interests. As a result, if a domes-
tic partnership or S corporation owns PFIC
stock, the excess distribution rules apply
at the partner or S corporation shareholder
level.
B. Qualified electing funds
A PFIC shareholder may elect to treat
the PFIC as a QEF (a “QEF election”)
under the rules in sections 1293 through
1295 (the “QEF rules”). Under the QEF
rules, provided the PFIC complies with
certain information reporting require-
ments, the PFIC shareholder includes its
pro rata share of the ordinary earnings and
net capital gain generated by the QEF on a
current basis under section 1293(a) (“QEF
inclusions”), and any gain on a future dis-
position of the QEF shares may be treated
as capital gain not subject to the excess
distribution rules. Unlike for the excess
distribution rules, under §1.1295-1(j) do-
mestic partnerships and S corporations are
treated as PFIC shareholders for purpos-
es of the QEF rules. A PFIC shareholder
making a valid QEF election effective as
of the beginning of its holding period in
the PFIC stock is not subject to the excess
distribution rules with respect to that PFIC
(a “pedigreed QEF”). Conversely, a PFIC
shareholder that makes a QEF election ef-
fective after the beginning of its holding
period in the PFIC stock is simultaneously
subject to the excess distribution rules and
the QEF rules with respect to that PFIC
(an “unpedigreed QEF”).
A domestic partnership or S corpora-
tion that owns PFIC stock generally makes
the QEF election with respect to the PFIC
under §1.1295-1(d)(2)(i)(A) and (d)(2)
(ii). Section 1.1293-1(c)(1) provides that
the domestic partnership or S corporation
recognizes any QEF inclusions at the en-
tity level, and each U.S. person that is an
interest holder in the domestic partnership
or S corporation takes into account its pro
rata share of the inclusions.
C. Mark-to-market PFICs
Under section 1296 (the “mark-to-mar-
ket (MTM) rules”), if stock in a PFIC is
marketable stock (“section 1296 stock”),
a U.S. person owning that stock can make
a mark-to-market election with respect
to the PFIC (an “MTM election”). For
this purpose, pursuant to section 1296(g)
(1), U.S. persons may be deemed to own
certain marketable stock held by foreign
partnerships, trusts, or estates. Section
1296(a) provides that if a U.S. person
makes an MTM election with respect to
a PFIC, the U.S. person is treated as if
it sold the section 1296 stock at the end
of each year, with any gain being recog-
nized as ordinary income (“MTM gain”)
and any loss potentially resulting in a de-
duction (“MTM loss,” and together with
MTM gains, “MTM amounts”).
If a domestic partnership or an S corpo-
ration owns, or is treated as owning under
§1.1296-1(e) (providing ownership rules
for PFIC stock owned through certain
foreign entities), section 1296 stock, the
domestic partnership or S corporation can
make an MTM election with respect to the
PFIC because the election is made by the
U.S. person owning or treated as owning
the stock. See §1.1296-1(h)(1)(i). The do-
mestic partnership or S corporation, by
virtue of being a U.S. person, includes or
deducts any MTM amounts at the entity
level. See §1.1296-1(c)(1) and (3).
D. CFC/PFIC overlap
Section 957(a) defines a CFC as any
foreign corporation in which U.S. share-
holders own (within the meaning of sec-
tion 958(a)), or are considered as owning
by applying the ownership rules of sec-
tion 958(b), more than 50 percent of the
total combined voting power or value of
the stock of the corporation on any day
during the taxable year of the corporation.
Under section 951(b), a U.S. sharehold-
er is a U.S. person that owns (within the
meaning of section 958(a)), or is consid-
ered as owning by applying the ownership
rules of section 958(b), at least 10 percent
of the total combined voting power of all
classes of stock entitled to vote or at least
10 percent of the total value of all classes
of stock of a foreign corporation. Section
957(c) defines a U.S. person by reference
to section 7701(a)(30), which defines the
term as a citizen or resident of the United
States, a domestic partnership, a domestic
corporation, and certain domestic estates
and trusts.
Under section 1297(d), a foreign cor-
poration that is both a CFC and a PFIC
(a “CFC/PFIC”) is not considered to be a
PFIC with respect to a shareholder during
the shareholder’s qualified portion (as
defined in section 1297(d)(2)) of its hold-
ing period (the “CFC overlap rule”). The
term “qualified portion” generally means
the portion of the shareholder’s holding
period during which the shareholder is a
U.S. shareholder with respect to the PFIC
and during which the PFIC is also a CFC.
Generally, this means that the PFIC re-
gime should not apply to a U.S. person
that is subject to the subpart F rules. The
legislative history to the CFC overlap
rule indicates that it was enacted due to
concern about the simultaneous applica-
tion of the subpart F and PFIC regimes
to the same shareholders, explaining that
“a shareholder that is subject to current
inclusion under the subpart F rules with
respect to stock of a PFIC that is also a
CFC generally is not subject also to the
PFIC provisions with respect to the same
stock.” H.R. Rep. 105-148, at 534 (1997).
E. PFIC purging elections
1. Section 1291(d)(2) purging elections
Under section 1291(d)(2), a PFIC
shareholder that owns, or is treated as
owning, shares in an unpedigreed QEF
may make certain elections to “purge” the
PFIC taint and thereby no longer be sub-
ject simultaneously to the excess distri-
bution and QEF rules with respect to that
PFIC. Under section 1291(d)(2)(A) and
§1.1291-10, a PFIC shareholder may elect

February 14, 2022 756 Bulletin No. 2022–7
to recognize any gain on a deemed dispo-
sition of its PFIC stock with the gain being
subject to the excess distribution rules. Al-
ternatively, under section 1291(d)(2)(B)
and §1.1291-9, if the unpedigreed QEF
is also a CFC (that is, it is a CFC/PFIC),
the PFIC shareholder may elect to include
its share of the CFC/PFIC’s post-1986 ac-
cumulated earnings and profits (“E&P”)
as a dividend subject to the excess dis-
tribution rules (together with the election
described in the preceding sentence, the
“section 1291 purging elections”). The
section 1291 purging elections are made
by a PFIC “shareholder” as defined in
§1.1291-9(j)(3), which is a U.S. person
that is a shareholder or indirect sharehold-
er, as defined in §1.1291-1(b)(7) or (8), re-
spectively. If the PFIC shareholder makes
one of the section 1291 purging elections,
the QEF is a pedigreed QEF with respect
to the shareholder.
2. Section 1298(b)(1) purging elections
Pursuant to section 1298(b)(1) and
§1.1298-3, a PFIC shareholder may make
certain purging elections with respect to a
foreign corporation that qualifies as a “for-
mer PFIC” or a “section 1297(e) PFIC.”
These purging elections result in the for-
eign corporation no longer being treated
as a PFIC as to the shareholder.
Under §1.1291-9(j)(2)(iv), a “former
PFIC” is a foreign corporation that satis-
fies neither the income test nor the asset
test under section 1297(a), but its stock
held by the PFIC shareholder is treated
as stock of a PFIC as a result of section
1298(b)(1) (that is, the corporation was
a PFIC that was not a QEF at some time
during the PFIC shareholder’s holding
period). Pursuant to §1.1291-9(j)(2)
(v), a foreign corporation is a “section
1297(e) PFIC”
1
if it (i) qualifies as a
PFIC under section 1297(a) on the first
day on which the “qualified portion”
(as defined in section 1297(d)(2)) of the
PFIC shareholder’s holding period in
the foreign corporation begins (as de-
termined under section 1297(e)(2)); and
(ii) the stock of the foreign corporation
held by the PFIC shareholder is treated
as stock of a PFIC pursuant to section
1298(b)(1) because at any time during
the PFIC shareholder’s holding period
of the stock, other than the qualified
portion, the corporation was a PFIC that
was not a QEF.
Similar to the section 1291 purging
elections, under §§1.1297-3 and 1.1298-
3, a PFIC shareholder can make either a
deemed sale election or deemed dividend
purging election with respect to either
a former PFIC or section 1297(e) PFIC
(the “section 1298 purging elections” and,
together with the section 1291 purging
elections, the “PFIC purging elections”).
The rules applicable to the section 1298
purging elections in §§1.1297-3(a) and
1.1298-3(a) are substantially the same as
those applicable to the section 1291 purg-
ing elections, including that each section
1298 purging election is made by a PFIC
“shareholder” as defined in §1.1291-9(j)
(3).
F. PFIC information reporting
requirements under section 1298(f)
Under section 1298(f), each U.S. per-
son that is a PFIC shareholder as defined in
§1.1291-1(b)(7) must file an annual report
with respect to the PFIC containing the in-
formation required by the IRS. Generally,
pursuant to §1.1298-1(b)(1), a U.S. person
that is a PFIC shareholder must file Form
8621, “Information Return by a Share-
holder of a Passive Foreign Investment
Company or Qualified Electing Fund,”
if, during the shareholder’s taxable year,
it is (i) a direct PFIC shareholder; (ii) an
indirect PFIC shareholder that holds any
interest in the PFIC through one or more
foreign entities; or (iii) an indirect PFIC
shareholder that is treated as the owner of
any portion of a domestic grantor trust that
owns stock of a PFIC directly or through
one or more foreign entities.
Certain other indirect PFIC sharehold-
ers are also required to file Form 8621.
Specifically, under §1.1298-1(b)(2)(i),
an indirect PFIC shareholder that owns
stock of a PFIC through one or more U.S.
persons must file Form 8621 with respect
to the PFIC if, during the indirect share-
holder’s taxable year, it is (i) treated as
receiving an excess distribution with re-
spect to the PFIC; (ii) treated as recog-
nizing gain that is treated as an excess
distribution as a result of a disposition
of the PFIC; (iii) required to recognize
QEF inclusions under section 1293(a);
(iv) required to include or deduct MTM
amounts under section 1296(a); or (v)
required to report the status of an elec-
tion under section 1294 with respect to
the PFIC. However, under §1.1298-1(b)
(2)(ii), an indirect PFIC shareholder that
is required to either recognize QEF in-
clusions under section 1293(a) or MTM
amounts under section 1296(a) is gen-
erally not required to file Form 8621 if
another PFIC shareholder through which
the indirect PFIC shareholder owns its in-
terest in the PFIC timely files Form 8621.
Thus, if an indirect PFIC shareholder is
treated as owning an interest in a PFIC by
reason of an interest in a domestic part-
nership or S corporation and the domes-
tic partnership or S corporation recogniz-
es QEF inclusions or MTM amounts and
timely files Form 8621, the indirect PFIC
shareholder is generally not required to
file Form 8621. Pursuant to §1.1298-1(b)
(2)(ii), this exception does not apply to
a PFIC shareholder that transfers stock
in a PFIC subject to a QEF election to
a domestic partnership or S corporation
if the domestic partnership or S corpora-
tion does not make a QEF election with
respect to the PFIC after the transfer, in
which case the transferor-PFIC share-
holder is still required to file Form 8621.
G. Section 1298 attribution of ownership
provisions
For purposes of the entire PFIC re-
gime, section 1298(a) contains various
attribution rules that generally apply to
treat stock of a PFIC as owned by a U.S.
person. However, pursuant to section
1298(a)(1)(B), except as provided in reg-
ulations, section 1298(a) does not apply
to treat stock owned (or treated as owned)
by a U.S. person as owned by any other
person. Under section 1298(a)(3), stock
owned directly or indirectly by a partner-
ship, estate, or trust is considered as being
owned proportionately by its partners or
beneficiaries.
1
Although the PFIC regulations use the term “section 1297(e)” PFIC, the term refers to CFC/PFICs under current section 1297(d). The regulations were issued before section 1297(e) was
redesignated as section 1297(d) by the Tax Technical Corrections Act of 2007, Pub. L. 110–172, sec. 11(a)(24)(A), Dec. 29, 2007, 121 Stat 2473.

Bulletin No. 2022–7 757 February 14, 2022
IV. Subpart F Rules
A. Controlling domestic shareholders
The controlling domestic sharehold-
ers of a foreign corporation take certain
actions with respect to the foreign cor-
poration, such as electing the method of
calculating its E&P under section 964(a).
See §1.964-1(c)(3). Under §1.964-1(c)(5)
(i), the controlling domestic shareholders
of a CFC are defined as the United States
shareholders, within the meaning of sec-
tion 951(b) or section 953(c), that, in the
aggregate, own (within the meaning of
section 958(a)) more than 50 percent of the
total combined voting power of all classes
of stock of the CFC entitled to vote and
that undertake to act on the CFC’s behalf.
If the more than 50 percent ownership re-
quirement is not satisfied, the controlling
domestic shareholders of the CFC are all
of the U.S. shareholders that own (within
the meaning of section 958(a)) stock of
the CFC. Under §1.964-1(c)(5)(ii), with
respect to a noncontrolled section 902 cor-
poration (as defined in section 904(d)(2)
(E)), the controlling domestic sharehold-
ers are the majority domestic corporate
shareholders, which are those domestic
corporations that meet certain ownership
requirements under section 902(a) (as it
existed before its repeal in 2017) and that
own, directly or indirectly, more than 50
percent of the combined voting power of
the stock of the noncontrolled section 902
corporation owned, directly or indirect-
ly, by all domestic corporations. Under
§1.964-1(c)(3)(iii), a controlling domestic
shareholder that takes actions with respect
to a foreign corporation under §1.964-1(c)
(3) must provide notice of those actions to
certain other domestic shareholders of the
foreign corporation.
With respect to a U.S. shareholder part-
nership, the 2019 proposed regulations
provided that aggregate treatment does
not apply for purposes of determining
whether any U.S. shareholder is a con-
trolling domestic shareholder. Proposed
§1.958-1(d)(2). In response to a request
for comments on this rule in the pream-
ble to the 2019 proposed regulations, one
comment was received. That comment
recommended, on balance, that aggregate
treatment should not apply for purposes of
determining whether a U.S. shareholder
is a controlling domestic shareholder for
purposes of section 964.
The final regulations do not extend ag-
gregate treatment for purposes of deter-
mining controlling domestic shareholders
of foreign corporations and, thus, adopt
the exception included in the 2019 pro-
posed regulations. §1.958-1(d)(2)(v).
B. Treatment of S corporation
distributions under section 1368 and
treatment of S corporations and S
corporation shareholders under section
1373 and subpart F
1. S corporation distributions
Section 1368(b) and (c) provides for
the treatment of distributions made by an S
corporation (as defined in section 1361(a)
(1)) with respect to its stock to which sec-
tion 301(c) would apply but for section
1368(a). Section 1368(b) addresses the
treatment of those distributions by an S
corporation that does not have accumu-
lated E&P (“AE&P”). Section 1368(b)(1)
provides that a distribution by an S corpo-
ration is not included in the gross income
of an S corporation shareholder to the
extent that the amount of the distribution
does not exceed the shareholder’s adjust-
ed basis in its S corporation stock. Section
1368(b)(2) provides that, if the amount of
the distribution exceeds the shareholder’s
adjusted basis in its S corporation stock,
that excess is treated as gain from the sale
or exchange of property.
Section 1368(c) addresses the treat-
ment of distributions by an S corporation
that has AE&P (for example, if the S cor-
poration generated E&P in years before
its election to be treated as an S corpo-
ration) and therefore has an accumulated
adjustments account (“AAA”), as defined
by section 1368(e)(1). AE&P does not in-
clude amounts that would increase an S
corporation’s AAA. See section 1371(c).
Accordingly, an S corporation’s AAA
functions similarly to the stock basis ad-
justment rules of section 1367 and is in-
creased to account for income taxed to its
shareholders. See section 1368(e)(1)(A).
AAA is limited to income generated by
the corporation during its status as an S
corporation and preserves the single-lev-
el-of-tax treatment to S corporation share-
holders.
With regard to distributions by S cor-
porations with AE&P, section 1368(c) first
applies the distribution to the S corpora-
tion’s AAA. Section 1368(c)(1) provides
that the portion of the distribution that
does not exceed the S corporation’s AAA
is governed by section 1368(b) and is ei-
ther not included in a shareholder’s gross
income (if that amount does not exceed the
shareholder’s adjusted basis in its S cor-
poration stock) or is treated as gain from
the sale or exchange of property (if that
amount does not exceed the S corpora-
tion’s AAA but exceeds the shareholder’s
adjusted basis in its S corporation stock).
After the application of section 1368(c)
(1), section 1368(c)(2) provides that any
remaining portion of the distribution that
exceeds the amount of the S corporation’s
AAA is treated as a dividend (as defined in
section 316) to the extent of the S corpora-
tion’s remaining AE&P. Lastly, under sec-
tion 1368(c)(3), the portion of the distri-
bution remaining after the application of
section 1368(c)(1) and (2) is governed by
section 1368(b) and either not included in
gross income or treated as gain, depending
on the shareholder’s adjusted basis in its S
corporation stock.
2. Treatment of S corporations for
purposes of subpart F
Section 1373(a) provides that an S
corporation is treated as a domestic part-
nership and its shareholders as partners
of a domestic partnership for purposes of
subpart F of the Code, which includes sec-
tions 951, 951A, and 958. Therefore, un-
der §1.958-1(d)(1) of the final regulations,
for purposes of determining section 951
or section 951A inclusions with respect
to a CFC owned by an S corporation, the
S corporation is not treated as owning the
CFC’s stock within the meaning of section
958(a). Instead, the CFC stock is treated
as owned by a foreign partnership for pur-
poses of determining the U.S. person that
owns the CFC stock within the meaning of
section 958(a).
As a result, section 951 or section 951A
inclusions with respect to CFC stock held
by an S corporation are determined and
taken into account at the S corporation
shareholder level but only if the S corpo-
ration shareholder is a U.S shareholder of
the CFC. With respect to S corporations

February 14, 2022 758 Bulletin No. 2022–7
with AE&P, this aggregate treatment does
not increase the S corporation’s AAA be-
cause any section 951 or section 951A
inclusions are taken into account directly
by the S corporation shareholders. An S
corporation’s AAA generally is increased,
however, by dividends received by the S
corporation from a foreign corporation
even if the E&P from which the dividend
distributions are made is attributable to
amounts that are, or have been, included
in gross income of one or more share-
holders of the S corporation under section
951(a) or 951A(a). See section 1368(e)(1)
(A). In contrast, if section 951 and 951A
amounts were included by a S corpora-
tion, the S corporation’s AAA would not
be increased for distributions excluded
from the S corporation’s gross income
pursuant to section 959(a).
3. Notice 2020-69
In response to the final section 951A
regulations, a comment asserted that ag-
gregate treatment for purposes of comput-
ing section 951A inclusions is inappropri-
ate for S corporations, notwithstanding
the language of section 1373(a) (treating
an S corporation as a partnership and S
corporation shareholders as partners of
a partnership), particularly where an S
corporation has AE&P. Specifically, the
comment suggested that the aggregate ap-
proach creates a mismatch between when
S corporation shareholders recognize in-
come with respect to a CFC and the cre-
ation of AAA maintained by the S corpo-
ration. This mismatch can cause certain
distributions out of AE&P made by an S
corporation to be taxable to its sharehold-
ers despite the fact that the shareholders
were already taxed on the CFC’s earnings
under the final section 951A regulations.
Notice 2020-69, 2020-39 I.R.B. 604,
released on September 1, 2020, announced
that the Treasury Department and the IRS
intend to issue regulations under section
958 to ease the transition of S corporations
with AE&P on September 1, 2020, from
the historic entity treatment (and the hy-
brid treatment under proposed §1.951A-5)
to the aggregate treatment required under
the final section 951A regulations (the “S
corporation transition approach”). Under
the S corporation transition approach, an
S corporation is subject to entity treatment
with respect to a taxable year if (i) an
election is made; (ii) the corporation has
elected S corporation status before June
22, 2019; (iii) the S corporation would be
treated as owning, within the meaning of
section 958(a), stock of a CFC on June 22,
2019, if entity treatment applied; (iv) the
S corporation has “transition AE&P” on
September 1, 2020, or on the first day of
any subsequent taxable year; and (v) the S
corporation maintains records to support
the determination of the transition AE&P
amount. Under this entity treatment, an
S corporation that owns stock of a CFC
is treated as owning, within the meaning
of section 958(a), the CFC stock for pur-
poses of applying section 951A such that
the S corporation determines its GILTI in-
clusion amount, and its shareholders take
into account their distributive share of that
amount. Generally, an electing S corpo-
ration is treated as an entity under the S
corporation transition approach until the
first taxable year for which it has no tran-
sition AE&P on the first day of that year,
at which point it is treated as an aggregate
of its shareholders for that year and each
successive year.
C. Related person insurance income
Section 952(a) provides that subpart
F income includes insurance income,
as defined in section 953. Under section
953(c)(2), RPII is any insurance income
(as defined in section 953(a)) attributable
to a policy of insurance or reinsurance
that directly or indirectly insures a United
States shareholder (as defined in section
953(c)(1)(A)) of the controlled foreign
corporation (as defined in section 953(c)
(1)(B)), or a person related to that share-
holder. Under section 953(c)(1)(A), the
term “United States shareholder” means,
with respect to any foreign corporation, a
U.S. person (as defined in section 957(c))
who owns (within the meaning of section
958(a)) any stock of the foreign corpora-
tion (“RPII U.S. shareholder”). Section
953(c)(1)(B) provides that the term “con-
trolled foreign corporation” has the mean-
ing given to such term by section 957(a)
determined by substituting “25 percent or
more” for “more than 50 percent” (“RPII
CFC”).
On April 17, 1991, the Treasury De-
partment and the IRS published in the
Federal Register proposed regulations
under section 953 (INTL-939-86, 56 FR
15540) (the “1991 proposed regulations”).
Section 1.953-3 of the 1991 proposed reg-
ulations contains, among other provisions,
general rules for determining RPII and
definitions that apply for RPII purposes.
Section 1.953-3(b)(1) of the 1991 pro-
posed regulations defines RPII as premi-
um and investment income attributable to
a policy of insurance or reinsurance that
provides insurance coverage to a related
insured on risks located outside the RPII
CFC’s country of incorporation and also
provides an analogous rule for annuity
contracts.
Section 1.953-3(b)(5) of the 1991 pro-
posed regulations provides that insurance
income attributable to a cross-insurance
arrangement is treated as RPII. In gen-
eral, a cross-insurance arrangement is an
arrangement in which a RPII CFC insures
a person that is not a related insured and,
as part of the same arrangement, another
person insures a person that would be a re-
lated insured if insured by the RPII CFC.
The cross-insurance rule was issued
pursuant to section 953(c)(8)(A), which
as the Conference Report states, “requires
the Secretary to prescribe such regulations
as may be necessary to carry out the pur-
poses of the new sub-part F rules for cap-
tive insurers, including regulations pre-
venting the avoidance of the new rules
through cross-insurance arrangements or
otherwise.” H.R. Rep. No. 99-841 at II-
620 (Sep. 18, 1986) (emphasis added).
Congress recognized the need for regu-
lations because cross-insurance can be
used to replicate the economics and tax
benefits of a captive insurance arrange-
ment through cooperative risk sharing
while improperly avoiding the application
of section 953(c)(2). “The conferees do
not believe that U.S. shareholders should
be able to obtain the deferral of U.S. tax
on income attributable to insurance of
risks of U.S. persons who are in turn in-
suring the risks of those shareholders.
Accordingly, under the regulations, the in-
come of the two companies in the example
attributable to the insurance business de-
scribed [in a cross-insurance arrangement]
is to be treated as related person insurance
income.” Id. at II-621.
Regulatory activity on the 1991 pro-
posed regulations was suspended in 1999

Bulletin No. 2022–7 759 February 14, 2022
due to the temporary enactment of changes
to the definition of insurance income under
section 953 and the temporary enactment
of section 954(i) (together, the “Insurance
Active Financing Exception”). See Uni-
fied Agenda, 64 FR 21831 (Apr. 26, 1999).
These statutory changes were adopted on a
permanent basis by the Protecting Ameri-
cans from Tax Hikes Act of 2015, Pub. L.
114-113 (Dec. 18, 2015). Although much
of the 1991 proposed regulations requires
modification to account for the Insurance
Active Financing Exception, other provi-
sions in the 1991 proposed regulations, in-
cluding the cross-insurance rule, were not
affected by the statutory changes.
V. Net Investment Income Tax
Section 1411 imposes a 3.8-percent
tax on the net investment income of cer-
tain individuals, trusts, and estates. Under
§1.1411-10(g), an election can be made
with respect to a CFC or PFIC that is a
QEF to treat amounts included in income
under section 951(a) or section 1293(a)
(1)(A) with respect to the CFC or QEF
as net investment income for purposes of
§1.1411-4(a)(1)(i), and to take amounts
included in income under section 1293(a)
(1)(B) into account for purposes of cal-
culating the net gain attributable to dis-
positions of property under §1.1411-4(a)
(1)(iii). Pursuant to §1.1411-10(g)(3), the
election may be made by any individual,
estate, trust, domestic partnership, S cor-
poration, or common trust fund that owns
the relevant CFC or QEF directly or indi-
rectly through one or more foreign enti-
ties. In addition, if a domestic partnership,
S corporation, estate, trust, or common
trust fund that directly owns the CFC or
QEF does not make the election, an indi-
vidual, estate, trust, domestic partnership,
S corporation, or common trust fund that
owns the CFC or PFIC indirectly through
the non-electing entity may itself make
the election. §1.1411-10(g)(3).
Explanation of Provisions
I. PFIC Rules
A. Definition of PFIC shareholder
The Treasury Department and the IRS
have concluded that, because domestic
partnerships and S corporations should
be treated as aggregates of their partners
and shareholders, respectively, for purpos-
es of the QEF and MTM rules (see parts
I.B.1 and I.C.1 of this Explanation of
Provisions), the definition of shareholder
under §1.1291-1(b)(7) should be updated
to reflect aggregate treatment for purposes
of the PFIC regime. Thus, under the pro-
posed regulations, neither domestic part-
nerships nor S corporations are considered
shareholders for purposes of making QEF
or MTM elections, recognizing QEF in-
clusions or MTM amounts, making PFIC
purging elections, or filing Forms 8621.
Proposed §§1.1291-1(b)(7), 1.1295-1(j)
(3), 1.1296-1(a)(4).
B. QEF rules
1. Treatment of pass-through entities for
purposes of sections 1293 and 1295
Various comments in response to the
2019 proposed regulations addressed the
treatment of domestic partnerships as ag-
gregates of their partners for purposes of
the QEF rules. Some comments requested
that domestic partnerships continue to be
treated as PFIC shareholders for purposes
of making QEF elections and recognizing
QEF inclusions based on administrability
considerations (including reducing com-
pliance burdens for small partners) and
access to information. Other comments
recommended an aggregate approach to
QEFs, citing consistency with section
951, section 951A, and other aspects of
the PFIC regime (specifically sections
1291, 1294, and 1297(d)). Additionally,
comments recommended that, because
QEF inclusions are taken into account in
computing taxable income at the partner
level, a partner should determine whether
the QEF rules apply. One comment rec-
ommended a transition to an aggregate
approach to QEFs with an alternative
that would permit a domestic partnership
to make a QEF election on behalf of its
partners if permitted under the partnership
agreement.
The Treasury Department and the IRS
have concluded that it is more appropriate
to treat domestic partnerships and S corpo-
rations as aggregates of their partners and
shareholders, respectively, for purposes of
sections 1293 and 1295. Aggregate treat-
ment is consistent with the general treat-
ment of partnerships for purposes of the
PFIC regime under section 1298(a)(3) and
aligns the QEF rules with the treatment of
domestic partnerships and S corporations
for purposes of the CFC overlap rule. It
also provides partners and S corporation
shareholders, the persons most affected
by a QEF election, with the ability to de-
cide whether to make the election. In ad-
dition, the new reporting by partnerships
on Schedule K-2, “Partners’ Distributive
Share Items—International,” and Sched-
ule K-3, “Partner’s Share of Income, De-
ductions, Credits, etc.—International” is
expected to facilitate a partner’s ability
to make the QEF election. The Treasury
Department and the IRS are aware that in
limited circumstances, as a result of cer-
tain nonconforming tax years between a
partner and a partnership, the partner may
be required to file its return on which it
makes a QEF election (and includes its
QEF inclusion) before the deadline for
the partnership to provide it with Sched-
ule K-3. In such a case, the Treasury De-
partment and the IRS expect that a partner
seeking to make a QEF election will make
arrangements with the partnership to pro-
vide the partner with the necessary infor-
mation in a timely fashion.
Accordingly, the proposed regulations
provide that a partner or S corporation
shareholder, rather than the domestic part-
nership or S corporation, respectively,
makes a QEF election, and each electing
partner or S corporation shareholder must
notify the partnership or S corporation,
respectively, of the election to assist the
partnership or S corporation with infor-
mation reporting and tracking basis in the
QEF stock. Proposed §1.1295-1(d)(2)(i)
(A) and (d)(2)(ii)(A). Similarly, partners
and S corporation shareholders include
their pro rata shares of ordinary earnings
and net capital gain attributable to the
QEF stock as if such shareholder owned
its share of the QEF stock directly, and
not as a share of the pass-through entity’s
income. See proposed §1.1293-1(c)(1).
Contrary to the current regulations, how-
ever, a QEF election made under proposed
§1.1295-1(d)(2)(i)(A) or (d)(2)(ii)(A) by
a partner or S corporation shareholder
with respect to PFIC stock held indirectly
through a domestic partnership or S cor-
poration applies to all stock of that PFIC

February 14, 2022 760 Bulletin No. 2022–7
owned by such partner or S corporation
shareholder, even if owned outside of the
partnership or S corporation.
In response to the comments’ concerns
regarding the administrability of part-
ner-level QEF elections, the Treasury De-
partment and the IRS request comments
on whether final regulations should per-
mit a domestic partnership- or S corpo-
ration-level QEF election on behalf of its
partners or shareholders, respectively, in
conjunction with the general rule requir-
ing the partner or shareholder to make the
election. Comments should specifically
address (i) the legal mechanism by which
the domestic partnership or S corporation
would be delegated the ability to make a
QEF election on behalf of its partners or
shareholders; (ii) the standard of delega-
tion that should be required, including
whether delegation should be based on
the partnership agreement or the S cor-
poration’s organizational documents, or
some other instrument, and, if so, whether
delegation should be explicit or implicit
within the instrument; (iii) whether the
domestic partnership or S corporation’s
election should be binding on all part-
ners or shareholders, or only on certain
partners or shareholders; (iv) if binding
on all partners or shareholders, whether
certain partners or shareholders should be
allowed to opt out and whether an opt-out
is consistent with the current rules; and (v)
the timing, filing, and notification require-
ments that should apply to a domestic
partnership- or S corporation-level QEF
election, taking into account the possibili-
ty of nonconforming taxable years among
the partners and partnership (or sharehold-
ers and S corporation) and the QEF.
2. Transfers of stock to domestic pass-
through entities
The current regulations include special
rules that apply when stock of a PFIC sub-
ject to a QEF election is transferred to a
domestic pass-through entity, depending
on whether the transferee entity makes
a QEF election with respect to the trans-
ferred PFIC. Under §1.1293-1(c)(2)(i),
if PFIC stock subject to a QEF election
is transferred to a domestic pass-through
entity of which the transferor is an inter-
est holder, and the transferee pass-through
entity makes a QEF election with respect
to the PFIC, thereafter the transferor and
other interest holders that become PFIC
shareholders as a result of the transfer
begin taking into account their pro rata
shares of the pass-through entity’s QEF
inclusions. However, under §1.1293-1(c)
(2)(ii), if the transferee pass-through en-
tity does not make a QEF election with
respect to the transferred PFIC, the trans-
feror-shareholder (but not other indirect
shareholders resulting from the transfer)
continues to be subject to QEF inclusions
with respect to the PFIC.
To provide consistency with the ag-
gregate treatment of domestic partner-
ships and S corporations under the QEF
rules, the proposed regulations provide
that, if a shareholder transfers stock of a
PFIC with respect to which it has made a
QEF election to a pass-through entity, the
transferor continues to be subject to QEF
inclusions with respect to the transferred
stock, and the other interest holders of the
pass-through entity are subject to QEF in-
clusions from the PFIC only if they make
a QEF election with respect to the trans-
ferred stock. Proposed §1.1293-1(c)(3)(i)
and (ii). However, because domestic non-
grantor trusts continue to be shareholders
for purposes of the QEF rules, the pro-
posed regulations retain the rule in current
§1.1293-1(c)(2)(i) but limit its application
to domestic nongrantor trusts. Therefore,
if stock of a PFIC subject to a QEF elec-
tion is transferred to a domestic nongrant-
or trust, and the transferee trust makes a
QEF election with respect to the stock, the
electing trust includes its pro rata share of
the QEF inclusions, and its beneficiaries
account for such amounts according to
the general rules applicable to inclusions
of income from the trust. See proposed
§1.1293-1(c)(3)(iii). If the domestic non-
grantor trust does not make a QEF election
with respect to the transferred stock, only
the transferor is subject to QEF inclusions
with respect to the transferred stock. Id.
3. Continuation of preexisting QEF
elections
The Treasury Department and the IRS
have concluded that QEF elections made
by a domestic partnership or S corporation
that are effective for taxable years of a
PFIC ending on or before the date of pub-
lication of the Treasury decision adopting
these rules as final regulations in the Fed-
eral Register (such PFIC a “preexisting
QEF,” and the election, a “preexisting
QEF election”) will continue for any part-
ner or S corporation shareholder owning
an interest in a preexisting QEF on that
date. See proposed §1.1295-1(d)(2)(i)
(B), (d)(2)(ii)(B), and (f)(3). Treating the
preexisting QEF elections as if they were
effectively made by each partner or S cor-
poration shareholder owning an interest
in the preexisting QEF before the date
of publication of the Treasury decision
adopting these rules as final regulations
in the Federal Register should minimize
the number of additional QEF elections
required by partners and S corporation
shareholders, thus making the QEF rules
more administrable for taxpayers and the
IRS when transitioning from the historic
entity approach to the aggregate approach
of the proposed regulations. However, al-
though a new election is not required to
be made with respect to a preexisting QEF
by partners or S corporation shareholders
that indirectly owned the QEF before the
finalization of the proposed regulations,
they are subject to QEF inclusions under
the new aggregate approach. See proposed
§1.1293-1(c)(1).
4. Additional changes to QEF rules
The proposed regulations make several
modifications to the rules that characterize
stock held through a pass-through entity
under §1.1295-1(b)(3)(iv). First, consis-
tent with the general aggregate approach
to domestic pass-through entities under
the QEF rules (other than domestic non-
grantor trusts and domestic estates), the
rule now governs how stock of a PFIC will
be treated as stock of a pedigreed QEF to
a shareholder, as defined in proposed
§1.1295-1(j)(3), rather than all interest
holders or beneficiaries of a pass-through
entity as under the current provision. This
paragraph is also modified to address
both the treatment of PFICs as pedigreed
QEFs to shareholders owning such PFICs
through domestic partnerships and S cor-
porations that have made preexisting QEF
elections, and the treatment of PFICs
owned through domestic pass-through
entities (other than domestic nongrantor
trusts and domestic estates) to sharehold-
ers making the QEF election. Further, the

Bulletin No. 2022–7 761 February 14, 2022
rule addresses the treatment of PFICs as
pedigreed QEFs when PFIC stock is ac-
quired by, or transferred to, pass-through
entities. See proposed §1.1295-1(b)(3)(iv)
(A) through (C). Additionally, in order to
ensure the proper application of proposed
§1.1295-1(b)(3)(iv), proposed §1.1295-
1(b)(3)(iv)(A) and (B) do not apply to
transactions in which gain is not fully rec-
ognized.
The proposed regulations also make
several changes to conform §1.1295-1
to the general aggregate treatment of do-
mestic pass-through entities (other than
domestic non-grantor trusts and domes-
tic estates) under the QEF rules. These
changes include (i) limiting the appli-
cation of paragraphs (b)(3)(i) and (ii) to
domestic nongrantor trusts and domestic
estates, which are the only domestic pass-
through entities that may make a QEF
election under the proposed regulations;
(ii) applying the partnership termination
rule only with respect to partnerships that
have made preexisting QEF elections and
their partners; (iii) revising rules govern-
ing the treatment of PFIC stock distrib-
uted by a partnership as stock of a pedi-
greed QEF to transferee partners; and (iv)
providing that shareholders owning QEF
stock through a domestic partnership or
S corporation that has made a preexisting
QEF election are required to file Form
8621 for such QEFs. Proposed §1.1295-
1(b)(3)(i) through (iii) and (v) and (f)(2)
(i). In addition, the proposed regulations
remove the rule in §1.1295-1(i)(1)(ii)
that allows the Commissioner to invali-
date a pass-through entity QEF election
with respect to a shareholder if, as a re-
sult of nonconforming taxable years be-
tween the shareholder and a pass-through
entity, the QEF inclusion is not included
in income within two years of the PFIC’s
year end. The rule was removed because
it specifically applies to pass-through en-
tity QEF elections and inclusions, which,
as a result of aggregate treatment, gen-
erally will only be relevant in limited
circumstances involving domestic trusts.
The Commissioner continues to have
discretion to invalidate or terminate a
shareholder’s QEF election in appropri-
ate circumstances if the requirements of
section 1295 are not met by a sharehold-
er, an intermediary, or the relevant PFIC.
§1.1295-1(i)(1)(i).
C. MTM rules
1. Treatment of pass-through entities for
purposes of section 1296
The Treasury Department and the IRS
received comments addressing the treat-
ment of domestic partnerships as aggre-
gates of their partners for purposes of the
MTM rules, which generally were similar
to the comments received with respect to
QEFs. For reasons similar to those noted
for QEFs, some comments recommended
maintaining entity treatment of domestic
partnerships under the MTM rules for
administrability reasons, such as reduced
compliance burdens for small partners
and limited access to information. Other
comments recommended an aggregate ap-
proach to maintain consistency with sec-
tions 951 and 951A and the PFIC regime
(including the comments’ proposed aggre-
gate treatment of domestic partnerships
for the QEF rules) and to allow the per-
sons most affected by a MTM election, the
partners, to determine whether the MTM
rules apply. The comment discussed in
part I.B.1 of this Explanation of Provi-
sions that recommended an alternative
that would permit a domestic partnership
to make a QEF election on behalf of its
partners made the same recommendation
with respect to MTM elections.
For the reasons noted by the com-
ments recommending an aggregate ap-
proach and to further consistency in the
treatment of domestic partnerships and S
corporations across the PFIC regime, the
Treasury Department and the IRS have
concluded that domestic partnerships and
S corporations should also be treated as
aggregates of their partners and share-
holders, respectively, for purposes of the
MTM rules. Accordingly, the proposed
regulations extend aggregate treatment to
domestic partnerships and S corporations
for purposes of the MTM rules by pro-
viding that the MTM rules apply to PFIC
shareholders, as defined in proposed
§1.1291-1(b)(7), which term does not
include domestic partnerships or S cor-
porations. See proposed §1.1296-1(a)(4)
and (e). As a result, partners of a domes-
tic partnership or S corporation share-
holders make an MTM election with re-
spect to PFIC stock owned through the
partnership or S corporation and deter-
mine their own MTM gain or loss, rather
than taking into account their distributive
share of the domestic partnership or S
corporation’s MTM gain or loss. See pro-
posed §1.1296-1(b)(1) and (c)(1) and (3).
Partners and S corporation shareholders
making an MTM election with respect
to a PFIC held through a partnership or
S corporation, respectively, must noti-
fy the partnership or S corporation of
the election to assist the partnership or
S corporation with information report-
ing and tracking basis in the PFIC stock.
Proposed §1.1296-1(h)(1)(i)(B). Incor-
porating the proposed §1.1291-1(b)(7)
definition of shareholder into §1.1296-1
also clarifies that the MTM rules apply
to grantors of domestic grantor trusts that
own PFIC stock, and that domestic non-
grantor trusts and domestic estates con-
tinue to be treated as entities for purposes
of the MTM rules.
To reflect the transition to the aggre-
gate treatment of domestic partnerships
and S corporations for purposes of the
MTM rules, various other conforming
changes are made to apply the MTM rules
to PFIC shareholders rather than U.S. per-
sons. See proposed §1.1296-1(b)(2) and
(3); §1.1296-1(c)(5); §1.1296-1(d)(1) and
(2); §1.1296-1(e) and (f); §1.1296-1(g)
(1) and (2); §1.1296-1(h)(1)(i) and (ii);
§1.1296-1(h)(2)(ii); §1.1296-1(h)(3); and
§1.1296-1(i)(1). Additionally, the rule
in §1.1296-1(g)(3), providing that when
an MTM PFIC is owned through certain
foreign pass-through entities any MTM
gain or loss is determined as of the end
of the foreign pass-through entity’s tax
year, has been removed. Under the gener-
al aggregate treatment of pass-through en-
tities (besides domestic nongrantor trusts
and domestic estates) for purposes of the
MTM rules, the appropriate taxable year
with respect to which any MTM gain or
loss is determined is the taxable year end
of the shareholder that owns the MTM
PFIC through a pass-through entity, not
the pass-through entity’s taxable year.
As in part I.B.1 of this Explanation of
Provisions, the Treasury Department and
the IRS request comments on whether a
form of partnership- or S corporation-lev-
el MTM election could be accommodat-
ed in final regulations. Comments should
address the same considerations noted in
part I.B.1 of this Explanation of Provi-

February 14, 2022 762 Bulletin No. 2022–7
sions regarding the delegation of authority
to make an MTM election to a domestic
partnership or S corporation.
2. Continuation of preexisting MTM
elections
The Treasury Department and the IRS
have concluded that MTM elections made
with respect to a PFIC by a domestic part-
nership or S corporation for taxable years
of the PFIC ending on or before the date
of publication of the Treasury decision
adopting these rules as final regulations in
the Federal Register (“preexisting MTM
election”) should be treated as made by
any partner or S corporation sharehold-
er owning its interest on that date. This
treatment should minimize the number
of additional MTM elections that would
be made by such partners or S corpora-
tion shareholders, thus making the MTM
rules more administrable for taxpayers
and the IRS as a result of the transition
from the historic entity approach to the
aggregate approach of the proposed reg-
ulations. Accordingly, MTM elections
made by domestic partnerships and S cor-
porations effective for taxable years of a
PFIC ending on or before finalization of
the proposed regulations under proposed
§1.1296-1(h)(1)(i)(A) continue to be valid
and will be treated as made by the owners
of such entities. As a result, going forward
the owners of those entities will determine
their MTM gain or loss as if they held the
section 1296 stock directly.
3. Modifications to the MTM
coordination rule
Under section 1296(j) and §1.1296-
1(i), if a taxpayer makes an MTM elec-
tion with respect to a foreign corporation
that was a PFIC (other than a QEF) before
the first taxable year to which the MTM
election was effective, the excess distribu-
tion rules apply to any (i) distributions by
the PFIC with respect to the section 1296
stock; (ii) disposition of the section 1296
stock; and (iii) MTM gain recognized on
the last day of the U.S. person’s taxable
year (the “MTM coordination rule”). Be-
fore the proposed regulations, if section
1296 stock subject to the MTM coordi-
nation rule was held by a domestic part-
nership or S corporation, it may have been
unclear how to apply the MTM coordina-
tion rule since the excess distribution rules
are not applied at the domestic partnership
or S corporation level.
Accordingly, to conform to the general
transition to an aggregate approach under
the MTM rules, the proposed regulations
clarify that the MTM coordination rule is
applied to a PFIC shareholder. See pro-
posed §1.1296-1(i)(2) introductory text
and (i)(2)(ii). To coordinate with MTM
rules other than those under section 1296,
the proposed regulations also modify
§1.1291-1(c)(4)(ii) so that computations
apply to PFIC shareholders.
D. CFC overlap rule
1. Application based on aggregate
treatment for sections 951 and 951A
The CFC overlap rule provides that, for
purposes of the PFIC regime, a corpora-
tion is not treated as a PFIC with respect to
a shareholder during the qualified portion
of the shareholder’s holding period with
respect to stock in the corporation. Section
1297(d)(1). Thus, this rule applies sepa-
rately with respect to each shareholder of
the foreign corporation, and the foreign
corporation may be a PFIC with respect to
one shareholder but not another. The CFC
overlap rule was intended to eliminate the
simultaneous application of the subpart F
and PFIC regimes only for a shareholder
that is “subject to current inclusion under
the subpart F rules.” H.R. Rep. 105-148
at 534.
Under the final regulations (and
§1.951A-1(e) as applicable before the fi-
nal regulations), domestic partnerships
and S corporations do not have inclusions
under section 951 or section 951A and,
because the inclusions are instead deter-
mined directly and solely by the partners
or S corporation shareholders that are
U.S. shareholders, partners and S cor-
poration shareholders that are not U.S.
shareholders do not have section 951 or
section 951A inclusions. See §1.958-1(d)
(1). Thus, a U.S. person that is not a U.S.
shareholder of a foreign corporation that
would otherwise be a PFIC with respect
to that person if held directly should not
be permitted to rely on the CFC overlap
rule to avoid the PFIC regime simply be-
cause the U.S. person owns its interest in
the foreign corporation indirectly through
a domestic partnership or S corporation.
Although section 1297(d) does not de-
fine the term “shareholder” for this pur-
pose, under §1.1291-1(b)(7), a domestic
partnership or S corporation is not a share-
holder to which the CFC overlap rule ap-
plies.
2
Thus, this regulation sets forth an
exception to the general rule in section
1298(a)(1)(B), which provides that a U.S.
person is not treated as constructively
owning stock that is owned by another
U.S. person (including, for example, a
domestic partnership). Accordingly, under
the general rule of section 1298(a)(1)(A),
constructive ownership of PFIC stock un-
der section 1298(a) applies to the extent
that the effect is to treat PFIC stock held
by a domestic partnership or S corporation
as owned by partners and shareholders
of the entities that are U.S. persons. The
ownership provisions of section 1298(a),
in turn, apply for purposes of sections
1291 through 1298, including section
1297(d). Thus, neither a domestic partner-
ship nor an S corporation is a shareholder
for purposes of section 1297(d) by oper-
ation of §1.1291-1(b)(7), notwithstanding
that, under §1.958-1(d)(2)(i), a domestic
partnership or an S corporation may be a
U.S. shareholder of the foreign corpora-
tion within the meaning of section 951(b).
Consistent with this aggregate approach to
section 951 and section 951A in applying
the CFC overlap rule under the existing
regulations, the proposed regulations con-
2
Section 1.1291-1(b)(7) provides that a PFIC shareholder is a U.S. person that directly owns PFIC stock or that is an indirect shareholder under §1.1291-1(b)(8); further, it states that for
purposes of sections 1291 and 1298, neither a domestic partnership nor an S corporation is treated as a PFIC shareholder, except for information reporting purposes. This definition of
shareholder was first adopted as a temporary regulation, applicable to taxable years of shareholders ending on or after December 31, 2013 (T.D. 9650, 78 FR 79602, 79608 (Dec. 31, 2013))
and was subsequently issued as a final regulation without substantive change with the same applicability date (T.D. 9806, 81 FR 95459, 95465 (Dec. 28, 2016)). Both temporary and final
§1.1291-1(b)(7) were issued after several private letter rulings (“PLRs”), such as PLR 201108020 (Feb. 25, 2011) and PLR 200943004 (Oct. 23, 2009), which were issued with respect to the
application of section 1297(d) to domestic partnerships.

Bulletin No. 2022–7 763 February 14, 2022
firm that for purposes of section 1297(d),
the term “qualified portion” does not in-
clude any portion of a domestic partner or
S corporation shareholder’s holding peri-
od during which the partner or sharehold-
er was not a U.S. shareholder with respect
to the CFC/PFIC. Proposed §1.1291-1(c)
(5)(i).
2. Transition rule for entity treatment
Although the CFC overlap rule, in
conjunction with the shareholder defini-
tion in §1.1291-1(b)(7), properly reflects
the aggregate approach to subpart F (as
discussed in part III.A of this Explana-
tion of Provisions), the Treasury Depart-
ment and the IRS have determined that
the application of these rules could lead
to inappropriate results under the entity
approach to subpart F that applied un-
der prior law. In particular, under entity
treatment for subpart F, the CFC over-
lap rule would not apply with respect to
partners or S corporation shareholders of
the CFC/PFIC that were not U.S. share-
holders even though they would take into
account their share of inclusions of the
domestic partnership or S corporation
under section 951 and, as applicable, sec-
tion 951A. Thus, the CFC/PFIC would
be treated as a PFIC with respect to such
partners or S corporation shareholders
even though the partner or shareholder
was subject to current inclusions under
the subpart F regime.
Accordingly, the Treasury Department
and the IRS have determined that it is ap-
propriate to provide a transition rule that
would apply to taxable years of share-
holders beginning before the date of pub-
lication of the Treasury decision adopt-
ing these rules as final regulations in the
Federal Register, or for taxable years of
shareholders of an S corporation in which
the S corporation elects to apply §1.958-
1(e). When this transition rule applies, the
CFC overlap rule will benefit certain per-
sons that are indirect PFIC shareholders,
but not U.S. shareholders, due to owning
stock of foreign corporations through
domestic partnerships or S corporations,
during periods when the shareholder was
subject to current inclusions under section
951 or section 951A (for example, under
the rules described in Notices 2019-46 and
2020-69) as a share of a domestic partner-
ship or S corporation’s income inclusions.
Proposed §1.1291-1(c)(5)(ii).
E. PFIC purging elections
Under the current regulations, it may
be unclear whether a domestic partnership
or an S corporation that owns PFIC stock
is eligible to make a PFIC purging elec-
tion, particularly with respect to the sec-
tion 1291 purging elections, both of which
require simultaneous QEF elections that
are generally made by domestic partner-
ships and S corporations.
Consistent with the aggregate treat-
ment of domestic partnerships and S cor-
porations for purposes of making elec-
tions and determining income inclusions
within the PFIC regime, the Treasury
Department and the IRS have determined
that the PFIC purging elections with re-
spect to PFICs owned by partnerships and
S corporations should be made at the part-
ner or shareholder level because each of
the PFIC purging elections can result in
the recognition of excess distributions un-
der section 1291, and those inclusions are
directly taken into account at the partner
or shareholder level and rely on partner or
shareholder specific tax attributes, such as
holding period. Each PFIC purging elec-
tion is made by a shareholder as defined in
proposed §1.1291-1(b)(7), which has been
modified to make explicit that neither do-
mestic partnerships nor S corporations are
PFIC shareholders for any purpose. As a
result, under the proposed regulations,
PFIC purging elections are made at the
partner or S corporation shareholder level.
F. PFIC information reporting
Consistent with the aggregate treat-
ment of domestic partnerships and S cor-
porations for purposes of the QEF and
MTM rules, the Treasury Department and
the IRS have concluded that domestic
partnerships and S corporations should no
longer be required to file an annual report
(Form 8621) under section 1298(f) and
§1.1298-1. The requirement to file Form
8621 applies only to PFIC shareholders
within the meaning of §1.1291-1(b)(7),
which includes, for example, partners or
S corporation shareholders that indirectly
own PFICs through domestic partnerships
or S corporations. §1.1298-1(a). Domes-
tic partnerships and S corporations will
not be subject to this filing obligation due
to the revised definition of shareholder in
proposed §1.1291-1(b)(7), under which
domestic partnerships and S corporations
are not PFIC shareholders for any pur-
pose.
To reflect this change, proposed
§1.1298-1(b)(1) revises the general rule
requiring a PFIC shareholder to file Form
8621 to clarify that the requirement ap-
plies to PFIC shareholders as defined in
§1.1291-1(b)(7). Additionally, proposed
§1.1298-1(b)(1)(i) and (ii) provides that
the general rule concerning who has to file
Form 8621 with respect to a PFIC applies
to a PFIC shareholder that is either (i) a
direct PFIC shareholder or (ii) an indirect
PFIC shareholder (within the meaning of
§1.1291-1(b)(8)) that holds an interest in a
PFIC through one or more entities, each of
which is not a PFIC shareholder within the
meaning of §1.1291-1(b)(7). As a result,
because a domestic grantor trust is not a
PFIC shareholder within the meaning of
§1.1291-1(b)(7), the proposed regulations
remove §1.1298-1(b)(1)(iii). Similarly,
the proposed regulations remove §1.1298-
1(c)(6) because domestic partnerships are
not PFIC shareholders under proposed
§1.1291-1(b)(7) and thus have no filing
obligation under the proposed regulations.
These changes limit the application of
§1.1298-1(b)(2) (which currently requires
certain indirect shareholders to file Form
8621 when those shareholders own an in-
terest in a PFIC through one or more U.S.
persons) to only beneficiaries of domestic
estates and domestic nongrantor trusts,
because an indirect PFIC shareholder
owning stock in a PFIC through a domes-
tic partnership, S corporation, or domestic
grantor trust will be required to file a Form
8621 under proposed §1.1298-1(b)(1)(ii).
An indirect PFIC shareholder owning
stock of a PFIC by reason of an interest
in a domestic estate or domestic nongrant-
or trust that recognizes its share of the
estate or trust’s QEF inclusions or MTM
amounts would continue to be able to rely
on the exception of §1.1298-1(b)(2)(ii) if
the domestic estate or domestic nongrant-
or trust files Form 8621 with respect to the
QEF or MTM PFIC. The proposed regula-
tions remove the last sentence of §1.1298-
1(b)(2)(ii) regarding the inability to apply
the exception with respect to stock in a

February 14, 2022 764 Bulletin No. 2022–7
QEF contributed to domestic partnerships
or S corporations, because these entities
cannot make a QEF election under the
proposed regulations.
The changes to the section 1298(f) in-
formation reporting requirements in pro-
posed §1.1298-1 reflect the general shift
in the treatment of domestic partnerships
and S corporations as aggregates for pur-
poses of the PFIC regime. While these
changes represent a change in the PFIC
shareholders required to file an annual
report under section 1298(f), a domestic
partnership or S corporation will contin-
ue to have a responsibility to report infor-
mation with respect to the PFICs it owns
to its interest holders on Schedule K-3,
“Partner’s Share of Income, Deductions,
Credits, etc.—International,” of Forms
1065, “U.S. Return of Partnership In-
come,” and 1120-S, “U.S. Income Tax Re-
turn for an S Corporation,” respectively,
when required. The general information
reporting obligations of domestic partner-
ships and S corporations with respect to
their interest holders should result in the
interest holders receiving the information
required to satisfy their filing obligations
under section 1298(f).
G. Other changes
1. Section 1297(e) PFICs
The term “section 1297(e) PFIC” and
other associated references to “section
1297(e)” related to section 1297(e) before
it was re-designated as current section
1297(d) by the Tax Technical Corrections
Act of 2007. Accordingly, the proposed
regulations change the defined term “sec-
tion 1297(e) PFIC” to “section 1297(d)
PFIC” and replace references to “section
1297(e) PFICs” and “section 1297(e)
(2)” with references to “section 1297(d)
PFICs” and “section 1297(d)(2),” respec-
tively.
2. Changes to definition of post-1986
earnings and profits
The term “post-1986 earnings and
profits” is the basis upon which a deemed
dividend under §§1.1291-9, 1.1297-3, and
1.1298-3 is determined, and each of those
sections generally defines the term by ref-
erence to the definition of “undistributed
earnings, within the meaning of section
902(c).” However, because section 902
was repealed by the Tax Cuts and Jobs Act,
Pub. L. 115-97, December 22, 2017, 131
Stat 2054 (“TCJA”), the proposed regu-
lations revise the definition of post-1986
earnings and profits in §§1.1291-9(a)(2)
(i), 1.1297-3(c)(3)(i)(A), and 1.1298-3(c)
(3)(i) to eliminate references to section
902(c) and to define the term by reference
to earnings and profits computed in accor-
dance with sections 964(a) and 986.
II. Subpart F Rules
A. Modifications to §1.964-1(c),
including determination of controlling
domestic shareholders
As discussed in part IV.A of the Back-
ground section of this preamble, the final
regulations do not extend aggregate treat-
ment for purposes of determining con-
trolling domestic shareholders of foreign
corporations. Nevertheless, the Treasury
Department and the IRS have further con-
sidered the benefits of maintaining entity
treatment of domestic partnerships for
purposes of determining the controlling
domestic shareholders of a CFC, includ-
ing the administrative convenience of
centralizing the various actions taken by
controlling domestic shareholders, and
have concluded that such actions should
generally be taken by those persons whose
tax liability is directly affected thereby.
Accordingly, the Treasury Department
and the IRS have concluded that domestic
partnerships should be treated as aggre-
gates for purposes of determining whether
a U.S. shareholder is a controlling domes-
tic shareholder of a CFC. This approach
is consistent with the final regulations,
which provide that neither section 951 nor
section 951A inclusions arise at the U.S.
shareholder partnership level but instead
arise directly to U.S. shareholder partners.
In other words, actions that affect the de-
termination of inclusions under sections
951 and 951A are determined by the same
persons that have the direct inclusions un-
der those provisions.
Accordingly, proposed §1.958-1(d)(1)
provides that domestic partnerships are
not considered to own stock of a foreign
corporation under section 958(a) for pur-
poses of §1.964-1(c) as well as any pro-
vision that specifically applies by refer-
ence to §1.964-1(c). As a result, domestic
partnerships and S corporations (by virtue
of section 1373(a)) would be treated as
aggregates of their partners and share-
holders, respectively, for purposes of de-
termining the controlling domestic share-
holders of foreign corporations under the
proposed regulations.
In addition to applying for purposes
of determining the controlling domestic
shareholders of a foreign corporation, ag-
gregate treatment also generally applies
for purposes of the notice requirement
of §1.964-1(c)(3)(iii). Extending aggre-
gate treatment to this notice requirement
ensures that other persons known by the
controlling domestic shareholders to be
U.S. persons that own (within the mean-
ing of section 958(a)) stock of a foreign
corporation (“domestic shareholders”)
through a domestic partnership (but that
are not themselves controlling domes-
tic shareholders) are made aware of any
action undertaken by the controlling do-
mestic shareholders under §1.964-1(c)
(3). However, proposed §1.964-1(c)(3)
(iii)(B) provides that a controlling do-
mestic shareholder is deemed to satisfy
the notice requirement with respect to
domestic shareholders that are partners in
a domestic partnership by providing the
notice to the domestic partnership (known
to the controlling domestic shareholder)
through which the domestic sharehold-
ers own stock of the foreign corporation,
which could then provide the notice to its
partners that are domestic shareholders.
Additionally, to help facilitate notice to
the person that prepares and maintains the
foreign corporation’s books and records
for U.S. federal income tax purposes, no-
tice is also required to be provided to any
U.S. person (such as a domestic partner-
ship) that controls, within the meaning of
section 6038(e), the foreign corporation
(in other words, any U.S. person that is a
Category 4 filer of Form 5471, “Informa-
tion Return of U.S. Persons With Respect
to Certain Foreign Corporations,” with re-
spect to the foreign corporation).
Additionally, in light of the repeal
of section 902 as part of the TCJA, the
proposed regulations replace the term
“noncontrolled section 902 corporation”
in §1.964-1(c)(5)(ii) with the term “non-
controlled foreign corporation,” which is

Bulletin No. 2022–7 765 February 14, 2022
defined as any foreign corporation (other
than a CFC as defined in section 957 or
section 953) as to which a U.S. share-
holder owns stock within the meaning of
section 958(a). Proposed §1.964-1(c)(5)
(ii). The proposed regulations similarly
replace the term “majority domestic cor-
porate shareholders” with the term “ma-
jority domestic shareholders,” to reflect
the repeal of section 902. Id.
B. Treatment of S Corporations with
AE&P
After the issuance of Notice 2020-69
(announcing an intent to issue regulations
adopting the S corporation transition ap-
proach), a comment requested additional
guidance on issues applicable to S corpo-
rations under sections 951 and 951A. Spe-
cifically, the comment requested (i) tran-
sition rules for taxpayers that elected into
the S corporation transition approach; (ii)
guidance on the aggregate treatment of S
corporations for purposes of sections 951
and 951A; and (iii) the ability of all S cor-
porations to elect entity treatment similar
to the S corporation transition approach
described in Notice 2020-69, regardless
of whether the S corporation has AE&P.
3
The proposed regulations adopt the S
corporation transition approach, as de-
scribed in Notice 2020-69. See proposed
§1.958-1(e). The Treasury Department
and the IRS have concluded that the S
corporation transition approach in the pro-
posed regulations appropriately smooths
the transition for S corporations to be on
an equal footing with domestic partner-
ships. The S corporation transition ap-
proach ensures that amounts correspond-
ing to income of a CFC already taxed
to S corporation shareholders can, even
without being distributed by the CFC, be
distributed tax-free by the S corporation
and have priority over distributions of C
corporation AE&P, while the latter will
continue to be taxed as dividends when
distributed, consistent with section 1368.
Because section 951 and section 951A in-
clusions at the entity level will generate
AAA, S corporations with AE&P will be
able to make distributions to shareholders
with respect to those amounts rather than
distributions of dividends out of AE&P.
The proposed regulations do not ex-
tend the S corporation transition approach
to all S corporations, regardless of AE&P.
The Treasury Department and the IRS be-
lieve that permitting all S corporations to
elect to be treated as an entity for purpos-
es of sections 951 and 951A is inconsis-
tent with section 1373(a) and the aggre-
gate approach adopted in the final section
951A regulations and the final regulations.
Further, the Treasury Department and the
IRS have determined that, in recognition
of certain issues specific to S corpora-
tions with AE&P as of a certain date, the
S corporation transition approach, with its
conditions, sufficiently transitions those S
corporations that elect entity treatment to
the aggregate treatment provided in the fi-
nal section 951A regulations and the final
regulations. Accordingly, this comment is
not adopted.
C. Entity treatment under section 951A
and inapplicability of penalties
The proposed regulations include the
rules announced in Notice 2019-46 that
permit domestic partnerships and S cor-
porations to apply the hybrid approach
for taxable years ending before June 22,
2019. Consistent with Notice 2019-46,
to apply the hybrid approach, domestic
partnerships and S corporations must sat-
isfy certain notice requirements. Proposed
§1.951A-1(e)(2)(i) and (iii). In addition, if
the domestic partnership or S corporation
satisfies these notification requirements
it will not be subject to certain penalties
for failures to file or furnish statements to
the extent such failures arise from acting
consistently with the 2018 proposed reg-
ulations before June 22, 2019. Proposed
§1.951A-1(e)(2)(ii).
D. Related person insurance income
1. Aggregate treatment of partnerships
A comment in response to the 2019
proposed regulations requested that aggre-
gate treatment be applied to domestic part-
nerships for purposes of determining RPII
and that domestic partnerships be treated
the same way as foreign partnerships for
this purpose. In addition, the Treasury De-
partment and the IRS recognize that treat-
ing a domestic partnership as an entity for
purposes of section 953(c) could produce
disproportionate RPII inclusions in light
of the special rules contained in section
953(c)(5). Therefore, proposed §1.958-
1(d)(1) modifies the list of provisions
subject to aggregate treatment to include
section 953(c), and a domestic partnership
is not treated as a RPII U.S. shareholder
for the purpose of characterizing income
as RPII. The proposed regulations, how-
ever, provide that §1.958-1(d)(1) does not
apply for purposes of section 953(c)(1)
(A) in determining whether any foreign
corporation is a controlled foreign corpo-
ration as defined in section 953(c)(1)(B),
953(c)(3)(E), or 953(d)(1)(A). Proposed
§1.958-1(d)(2)(v). This approach is con-
sistent with §1.958-1(d)(2)(ii) (providing
that §1.958-1(d)(1) does not apply for
purposes of determining whether a foreign
corporation is a controlled foreign corpo-
ration as defined in section 957).
Corresponding changes are made to the
definition of RPII under proposed §1.953-
3 to conform with the aggregate treatment
of partnerships under proposed §1.958-
1(d)(1). RPII is generally defined as pre-
mium and investment income attributable
to an annuity, insurance, or reinsurance
policy that directly or indirectly provides
coverage to a related insured. Proposed
§1.953-3(b)(1)(i). The new definition of
RPII is modeled on the 1991 proposed reg-
ulations but has been modified to account
for the aggregate treatment of partnerships
and the Insurance Active Financing Ex-
3
This comment also requested guidance to (i) clarify the determination of a partner’s proportionate share of CFC stock in accordance with the allocation of tested items under section 951A
to a U.S. shareholder that owns stock in a CFC through an interest in a partnership and (ii) provide rules on the allocation of tested items under section 951A and on the maintenance of pre-
viously-taxed earnings and profits (“PTEP”) accounts. The long-standing issues of measuring a partner’s proportionate share of income under subpart F as well as the treatment of targeted
capital accounts are outside the scope of these proposed regulations and therefore are not addressed. With respect to the request for guidance related to PTEP, the Treasury Department and
the IRS intend to separately address certain issues pertaining to partnerships and S corporations. In particular, this guidance will include rules to address the transition of S corporations from
entity treatment to aggregate treatment as noted in section 3.04 of Notice 2020-69.

February 14, 2022 766 Bulletin No. 2022–7
ception. Section 1.953-3(b)(1) of the 1991
proposed regulations is withdrawn.
A related insured is defined to include
a RPII U.S. shareholder or a person relat-
ed to a RPII U.S. shareholder. Proposed
§1.953-3(b)(1)(ii)(A) and (B). In addition,
if a related insured indirectly owns stock
in a RPII CFC through a partnership, the
partnership is treated as a related insured.
Proposed §1.953-3(b)(1)(ii)(C). This rule
applies to foreign and domestic partner-
ships (other than publicly traded partner-
ships) and to S corporations.
Proposed §1.953-3(b)(1)(ii)(D) also
provides that a person (other than a pub-
licly traded corporation or partnership)
is treated as a related insured if it is more
than 50 percent owned (directly, indirect-
ly, or constructively) by RPII U.S. share-
holders. This rule is intended to prevent
the avoidance of RPII when the insured is
held by multiple RPII U.S. shareholders
(or their affiliates) and is issued pursuant
to the authority granted in section 953(c)
(8)(A). The Treasury Department and the
IRS request comments on whether the fi-
nal regulations should include a rule under
which a U.S. person that holds an option
to acquire stock (or another non-stock in-
terest) in a RPII CFC also should be treat-
ed as a related insured.
The term “related insured” describes
those persons who, if insured, would cause
a RPII CFC’s income to be characterized
as RPII. A person who is not actually in-
sured by a RPII CFC can meet the defini-
tion of a related insured for purposes of
the proposed regulations (though a RPII
CFC’s income will not be characterized
as RPII unless it is attributable to a poli-
cy that provides coverage to a related in-
sured). No inference is intended concern-
ing the standard for determining whether
a person is characterized as being insured
for other tax purposes.
When a partnership is insured by a
RPII CFC, the amount of RPII is deter-
mined based on the portion of the premi-
um that is allocated to related insureds
(other than partnerships or S corpora-
tions). Proposed §1.953-3(b)(1)(iii). In
the case of tiered partnerships, the pro-
posed regulations take into account the
portion of the premium that is allocated
to a partner who indirectly owns a part-
nership through one or more upper-tier
partnerships. The proposed regulations
provide that the premium allocated to the
relevant partner is determined based on
the partnership agreement and section
704(b). Proposed §1.953-3(b)(1)(iii)(C)
(1). The Treasury Department and the
IRS are also considering whether, solely
for purposes of determining the amount
of RPII, another method of allocating the
premium payments should be required
under the authority provided in section
953(c)(8). One potential method includes
allocating the premium payments in pro-
portion to each partner’s nonseparately
stated share of partnership income or
loss. Comments are requested on whether
this or another alternative would be more
appropriate.
The Treasury Department and the IRS
request comments on the appropriate ap-
plication of aggregate principles to RPII.
The Treasury Department and the IRS
also are considering revising forms and in-
structions to facilitate information sharing
and reporting between RPII U.S. share-
holders, RPII CFCs, and partnerships and
request comments in this regard.
2. Cross-insurance rule
The Treasury Department and IRS are
aware of abusive marketed offshore cap-
tive insurance arrangements that, notwith-
standing the directive in section 953(c)
(8)(A) and legislative history described
in part IV.C of the Background section of
this preamble and the 1991 proposed reg-
ulations, attempt to avoid the RPII rules
through the use of cross-insurance. Con-
sistent with the Congressional directive,
the proposed regulations contain a special
rule to address cross-insurance arrange-
ments, which replaces the cross-insurance
rule contained in the 1991 proposed regu-
lations. Proposed §1.953-3(b)(5) provides
that insurance income is treated as RPII
if it is attributable to an arrangement in
which a RPII CFC insures a person that
is not a related insured and, as part of the
same arrangement, another person insures
a related insured of the RPII CFC. This
rule applies to direct or indirect arrange-
ments involving two or more insurance
companies, and also covers other arrange-
ments with a similar degree of coopera-
tive risk sharing and applies regardless
of whether the shareholders of each RPII
CFC are engaged in a similar line of busi-
ness. Section 1.953-3(b)(5) of the 1991
proposed regulations is withdrawn.
The Treasury Department and the IRS
request comments with respect to other
parts of the 1991 proposed regulations
relating to RPII, including whether other
parts should be reproposed, such as the
exception for indirect ownership through
publicly traded corporations under
§1.953-3(b)(2)(iii) of the 1991 proposed
regulations.
III. Net Investment Income Tax
As discussed in part V of the Back-
ground section of this preamble, a domestic
partnership or S corporation that directly or
indirectly (through one or more foreign en-
tities) owns a CFC or QEF may make an
election under §1.1411-10(g) with respect
to the CFC or QEF, and certain persons that
own a CFC or QEF indirectly through a
domestic partnership or S corporation may
also make such an election, but only if the
domestic partnership or S corporation does
not make the election.
Consistent with the transition to ag-
gregate treatment and provisions in this
rulemaking requiring QEF elections to be
made (and QEF inclusions to arise) at the
partner or S corporation shareholder level,
the Treasury Department and the IRS have
determined that elections under §1.1411-
10(g) should no longer be permitted to be
made by a domestic pass-through entity,
but instead should be made only by an in-
dividual, estate, or trust that holds the CFC
or QEF indirectly through the domestic
pass-through entity. This rule permits the
election to be made solely by the person
whose tax liability is directly affected
by the election. Accordingly, proposed
§1.1411-10(g)(3)(i) generally requires
the election to be made by an individual,
estate, or trust that indirectly holds the
relevant CFC or QEF indirectly through
a partnership or S corporation. However,
for taxable years that an S corporation
elects to be treated as an entity under pro-
posed §1.958-1(e), the S corporation may
make the election under §1.1411-10(g)
with respect to CFCs it owns, directly or
indirectly; if the S corporation does not
make the election under §1.1411-10(g), its
shareholders that are individuals, estates,
or trusts may make it instead. Proposed
§1.1411-10(g)(3)(ii).

Bulletin No. 2022–7 767 February 14, 2022
The proposed regulations also remove
§1.1411-10(g)(2)(iii), which provided
rules applicable when a partnership termi-
nated under section 708(b)(1)(B), because
section 708(b)(1)(B) was repealed as part
of the TCJA.
Finally, the Treasury Department and
the IRS are considering providing ad-
ditional guidance (perhaps in the final-
ization of these proposed regulations)
under section 1411 on the calculation of
net gain for indirect shareholders when,
for example, PFIC stock is sold by a for-
eign partnership through which the in-
direct shareholder owns the PFIC stock
in a year after the indirect shareholder
includes MTM gain. Compare section
1296(b)(1)(A) (providing an increase to
the basis of PFIC stock held by a direct
shareholder), with section 1296(b)(2)(A)
and proposed §1.1296-1(d)(2)(i) (pro-
viding, for purposes of chapter 1 of the
Code, an increase to the basis of PFIC
stock indirectly held). In light of this dif-
ference in wording, and the placement of
section 1411 in chapter 2A of the Code,
the question arises whether net gain un-
der section 1411 could be overstated.
But see section 1411(c)(1)(A)(iii) and
§1.1411-4(a)(1)(iii) (providing that net
investment income includes net gain at-
tributable to the disposition of property
but only “to the extent taken into account
in computing taxable income.”) Com-
ments are requested on this issue.
IV. Applicability Dates
A. In general
The regulations under sections 964,
1291, 1293, 1295, 1296, 1298, and 1411
and §1.958-1(d) are proposed to apply to
taxable years beginning on or after the
date of publication of the Treasury deci-
sion adopting these rules as final regula-
tions in the Federal Register.
B. Entity treatment of certain domestic
partnerships and S corporations
With respect to the rules relating to
domestic partnerships and S corporations
that applied the hybrid approach to de-
termining section 951A inclusions con-
tained in previously proposed §1.951A-5
(83 FR 51072, 51101-51104), proposed
§1.951A-1(e)(2) is proposed to apply to
taxable years of foreign corporations end-
ing before June 22, 2019, and to taxable
years of U.S. shareholders in which or
with which such taxable years end. Tax-
payers may continue to rely on Notice
2019-46 until these regulations are final-
ized.
C. Elective entity treatment for certain S
corporations
With respect to the rules relating to
S corporations with AE&P, proposed
§1.958-1(e) is proposed to apply to tax-
able years of S corporations ending on
after September 1, 2020. However, tax-
payers may rely on proposed §1.958-1(e)
for taxable years of S corporations ending
on or after June 22, 2019, and ending be-
fore September 1, 2020, provided that the
S corporation and its shareholders that are
U.S. shareholders consistently apply those
rules with respect to all CFCs whose stock
the S corporation owns with the meaning
of section 958(a).
D. RPII provisions
The general RPII rules in proposed
§1.953-3(b)(1) apply to taxable years of
foreign corporations beginning on or af-
ter the date of publication of the Treasury
decision adopting these rules as final reg-
ulations in the Federal Register, and to
taxable years of United States persons in
which or with which such taxable years of
foreign corporations end.
The cross-insurance rule in proposed
§1.953-3(b)(5) applies to taxable years
of foreign corporations ending on or after
January 24, 2022, and to taxable years of
United States persons in which or with
which such taxable years of foreign cor-
porations end. As noted in part IV.C of the
Background section of this preamble, sec-
tion 953(c)(8)(A) and the legislative histo-
ry refer to cross insurance in offshore cap-
tive insurance arrangements as avoidance
transactions, and the legislative history
states that deferral is not intended for such
cases. The applicability date of the final
regulations is not intended to address the
effect of the statute and legislative history
on taxpayers who participated in cross-in-
surance arrangements in years ending be-
fore January 24, 2022.
Special Analyses
I. Regulatory Planning and Review –
Economic Analysis
These regulations are not subject to re-
view under section 6(b) of Executive Or-
der 12866 pursuant to the Memorandum
of Agreement (April 11, 2018) between
the Treasury Department and the Office
of Management and Budget (“OMB”) re-
garding review of tax regulations.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) (‘‘PRA’’) gener-
ally requires that a federal agency obtain
the approval of the OMB before collecting
information from the public, whether such
collection of information is mandatory,
voluntary, or required to obtain or retain
a benefit.
The collections of information includ-
ed in these proposed regulations are in
proposed §1.951A-1(e)(2)(iii); proposed
§1.958-1(e)(1)(v) and (e)(2); proposed
§1.964-1(c)(3)(ii) and (iii); proposed
§1.1295-1(d)(2)(i)(A) and (d)(2)(ii)(A);
proposed §1.1296-1(h)(1)(i) introduc-
tory text and (h)(1)(i)(B); and proposed
§1.1298-1(b)(1) and (2). The information
in the collections of information provid-
ed will generally be used by the IRS for
tax compliance purposes or by taxpayers
to facilitate proper reporting and compli-
ance.
A. Collections of information under
existing tax forms
1. Collections of information in proposed
§1.951A-1
The collections of information in pro-
posed §1.951A-1(e)(2)(iii) are required
to be provided by domestic partnerships
and S corporations that elect to apply the
rules in proposed §1.951A-5, as contained
in the 2018 proposed regulations (83 FR
51072, 51101-51104), for taxable years
ending before June 22, 2019. These col-
lections of information are satisfied by
the domestic partnership or S corporation
attaching a statement to its return. In cer-
tain instances, the domestic partnership or
S corporation must also file Form 8992,

February 14, 2022 768 Bulletin No. 2022–7
“U.S. Shareholder Calculation of Global
Intangible Low-Taxed Income (GILTI),”
with its return and separately state each
partner’s or shareholder’s share of any
distributions of E&P received by the do-
mestic partnership or S corporation that
relate to the GILTI inclusion amount re-
flected on its Schedules K-1, “Partner’s
Share of Income, Deductions, Credits,
etc.” or Schedules K-1, “Shareholder’s
Share of Income, Deductions, Credits,
etc.,” as applicable.
For purposes of the PRA, the reporting
burden associated with the collections of
information in proposed §1.951A-1(e)(2)
(iii) will be reflected in the Paperwork Re-
duction Act Submissions associated with
Forms 1065 and 1120-S (OMB control
number 1545-0123).
2. Collections of information in proposed
§1.958-1
The collection of information in pro-
posed §1.958-1(e)(2) is a statement at-
tached to Form 1120-S that identifies that
the S corporation and its shareholders
(where applicable) are electing for the S
corporation to be treated as an entity for
purposes of determining who is subject
to income inclusions under sections 951
and 951A for the first taxable year end-
ing on or after September 1, 2020, states
the amount of the S corporation’s AE&P,
and is signed (where applicable) by a
person authorized to sign the S corpora-
tion’s Form 1120-S. A similar collection
of information is required for taxpayers
(certain S corporations and their share-
holders) that elect for the S corporation
to be treated as an entity for purposes of
sections 951 and 951A for taxable years
ending before September 1, 2020, and af-
ter June 21, 2019.
For purposes of the PRA, the report-
ing burden associated with the collection
of information in proposed §1.958-1(e)
(2) will be reflected in the Paperwork
Reduction Act Submissions associated
with Form 1120-S (OMB control number
1545-0123). Additionally, where an S cor-
poration and its shareholders elect for the
S corporation to be treated as an entity for
taxable years ending before September 1,
2020, and after June 21, 2019, the report-
ing burden associated with the collection
of information in proposed §1.958-1(e)
(2) will be reflected in the Paperwork
Reduction Act Submissions associated
with Form 1120-S (OMB control number
1545-0123), the Form 1040 series (OMB
control number 1545-0074), and the Form
1041 series (OMB control number 1545-
0092).
3. Collections of information in §1.964-1
and proposed §1.964-1
The collection of information in pro-
posed §1.964-1(c)(3)(ii) applies to tax-
payers that are controlling domestic share-
holders of foreign corporations (as defined
in §1.964-1(c)(5)) and that make certain
elections with respect to, or adopt or
change methods of accounting or taxable
years for, the foreign corporations. This
collection of information is satisfied by
the controlling domestic shareholder filing
a statement containing certain prescribed
information with its own tax return (or
information return, if applicable) for its
taxable year in which or within which the
affected taxable year of the foreign corpo-
ration ends. The collection of information
in proposed §1.964-1(c)(3)(ii) applies to
U.S. shareholder partners (and not to U.S.
shareholder partnerships) as a result of
proposed §1.958-1(d)(1).
The collection of information in pro-
posed §1.964-1(c)(3)(iii) requires con-
trolling domestic shareholders of for-
eign corporations to notify certain U.S.
persons known to them of actions taken
with respect to the foreign corporation,
such as certain tax elections and adop-
tions of or changes to the foreign corpo-
ration’s accounting methods or tax years.
Under proposed §1.964-1(c)(3)(iii)(A),
this collection of information is satisfied
by the controlling domestic shareholder
providing notice to prescribed U.S. per-
sons known to the controlling domestic
shareholder setting forth the name, coun-
try of organization, and U.S. employer
identification number (if applicable) of
the foreign corporation; providing the
names, addresses, and stock interests of
the controlling domestic shareholders
of the foreign corporation; describing
the nature of the action taken on behalf
of the foreign corporation and the tax-
able year for which the action was taken;
and identifying a designated shareholder
that retains a jointly executed consent
confirming that such action has been ap-
proved by all of the controlling domestic
shareholders and containing the signature
of a principal officer of each such share-
holder (or its common parent). Proposed
§1.964-1(c)(3)(iii)(B) provides that a
controlling domestic shareholder will
be deemed to satisfy the general notice
requirement with respect to U.S. per-
sons known to the controlling domestic
shareholder that own stock in the foreign
corporation through a domestic partner-
ship by providing the notice containing
the same information to the partnership
instead of to each U.S. person.
For purposes of the PRA, the re-
porting burden associated with the col-
lections of information in proposed
§1.964-1(c)(3)(ii) and (iii) will be re-
flected in the Paperwork Reduction Act
Submissions associated with the Forms
for persons which can be considered
controlling domestic shareholders un-
der the proposed regulations, including
individuals and certain domestic trusts,
domestic estates, domestic corporations,
certain tax-exempt entities. Thus, the re-
porting burden associated with these col-
lections of information will be reflected
in the Paperwork Reduction Act Submis-
sions associated with the Form 990 se-
ries (OMB control number 1545-0047),
the Form 1040 series (OMB control
number 1545-0074), the Form 1041 se-
ries (OMB control number 1545-0092),
and the Form 1120 series (OMB control
number 1545-0123).
4. Collections of information in proposed
§1.1295-1
The collections of information in pro-
posed §1.1295-1(d)(2)(i)(A) and (d)(2)
(ii)(A) apply to partners in partnerships
and S corporation shareholders that make
QEF elections with respect to a PFIC held
through a partnership or S corporation.
The collections of information in these
sections are satisfied, in part, by the part-
ners and S corporation shareholders filing
Form 8621 to make the QEF election. For
purposes of the PRA, the reporting burden
associated with the collection of informa-
tion in the Form 8621 will be reflected in
the Paperwork Reduction Act Submis-
sions associated with Form 8621 (OMB
control number 1545-1002).

Bulletin No. 2022–7 769 February 14, 2022
5. Collection of information in proposed
§1.1296-1
The collections of information in pro-
posed §1.1296-1(h)(1)(i) apply to part-
ners in partnerships and S corporation
shareholders that make MTM elections
with respect to PFICs held through a
partnership or S corporation. These col-
lections of information are satisfied, in
part, by the partners and S corporation
shareholders filing Form 8621 to make
the MTM election. For purposes of the
PRA, the reporting burden associated
with the collections of information in the
Form 8621 will be reflected in the Pa-
perwork Reduction Act Submissions as-
sociated with Form 8621 (OMB control
number 1545-1002).
6. Collections of information in proposed
§1.1298-1
The collections of information in pro-
posed §1.1298-1(b)(1) apply to partners in
partnerships and S corporation sharehold-
ers that own PFICs indirectly through part-
nerships and S corporations with respect to
which they are required to file an annual re-
port in their capacity as PFIC shareholders,
as defined in proposed §1.1291-1(b)(7).
The collections of information in proposed
§1.1298-1(b)(2) apply to certain benefi-
ciaries of domestic estates and domestic
nongrantor trusts that own PFICs indirect-
ly through the domestic estate or domestic
nongrantor trust. These collections of in-
formation are satisfied by annually filing
Form 8621. For purposes of the PRA, the
reporting burden associated with the col-
lections of information in the Form 8621
will be reflected in the Paperwork Reduc-
tion Act Submissions associated with Form
8621 (OMB control number 1545-1002).
7. Estimated number of respondents
The following table displays the num-
ber of respondents estimated to be re-
quired to satisfy the collections of infor-
mation described in this part II.A of the
Special Analysis. The ranges in the fol-
lowing table may be overstated in some
cases for various reasons, including over-
counting domestic partnerships or S cor-
porations that are themselves partners in
domestic partnerships and overestimating
the number of taxpayers who will make an
election or take a relevant action.
Tax Forms Impacted
Collection of informationNumber of respondents
(estimated)
Forms to which the
information may be attached
Proposed §1.951A-1(e) (2)(iii)
Election for domestic partnerships to apply the hybrid approach in
proposed §1.951A-5 of the 2018 proposed regulations
0 - 7,000 Form 1065
Proposed §1.951A-1(e)(2)(iii)
Election for S corporations to apply the hybrid approach in proposed
§1.951A-5 of the 2018 proposed regulations
0 - 4,000Form 1120-S
Proposed §1.958-1(e)(2)
Election for S corporations with AE&P to apply entity treatment for
purposes of sections 951 and 951A
2,300 - 4,300Form 1120-S
Form 1040 series
Form 1041 series
Proposed §1.964-1(c)(3)(ii) and (iii)
Statement attached to tax return of controlling domestic shareholders
of certain foreign corporations and notification to certain other U.S.
persons
6,600 - 7,000Form 990 series
Form 1040 series
Form 1041 series
Form 1120 series
Proposed §1.1295-1(d)(2)(i)(A)
QEF election made by partner that indirectly owns stock of a PFIC
through a partnership
1,200,000 - 1,400,000Form 8621
Proposed §1.1295-1(d)(2)(ii)(A)
QEF election made by shareholder of an S corporation that indirectly
owns stock of a PFIC through the S corporation
2,000Form 8621
Proposed §1.1296-1(h)(1)(i)
MTM election made by partner that indirectly owns stock of a PFIC
through a partnership
75,000 - 200,000Form 8621
Proposed §1.1296-1(h)(1)(i)
MTM election made by shareholder of an S corporation that indirect-
ly owns stock of a PFIC through the S corporation
200 - 300Form 8621

February 14, 2022 770 Bulletin No. 2022–7
Tax Forms Impacted
Collection of informationNumber of respondents
(estimated)
Forms to which the
information may be attached
Proposed §1.1298-1(b)(1)
Annual report for partners that indirectly own stock of a PFIC
through a partnership
1,250,000 - 1,500,000Form 8621
Proposed §1.1298-1(b)(1)
Annual report for shareholders of S corporations that indirectly own
stock of a PFIC through the S corporation
2,300 - 2,500Form 8621
Proposed §1.1298-1(b)(2)
Annual report for certain beneficiaries of domestic estates or do-
mestic grantor trusts that indirectly own stock of a PFIC through the
estate or grantor trust
5,000Form 8621
Source: Research, Applied Analytics and Statistics division (RAAS) (IRS), Compliance Data Warehouse (CDW) (IRS)
8. Status of PRA submissions
The current status of the PRA submis-
sions related to the tax forms on which
reporting under these regulations will be
required is summarized in the following
table. The burdens associated with the
information collections in the forms are
included in aggregated burden estimates
for the OMB control numbers 1545-0047
(which represents a total estimated bur-
den time for all forms and schedules for
tax-exempt entities of 50.5 million hours
and total estimated monetized costs of
$3.59 billion ($2018)), 1545-0074 (which
represents a total estimated burden time
for all forms and schedules for individu-
als of 1.784 billion hours and total esti-
mated monetized costs of $31.764 billion
($2017)), 1545-0092 (which represents a
total estimated burden time for all forms
and schedules for trusts and estates of
307.8 million hours and total estimated
monetized costs of $9.95 billion ($2016)),
and 1545-0123 (which represents a total
estimated burden time for all forms and
schedules for corporations of 3.157 billion
hours and total estimated monetized costs
of $58.148 billion ($2017)). The burden
estimates provided in the OMB control
numbers in the following table are aggre-
gate amounts that relate to the entire pack-
age of forms associated with the OMB
control number and will in the future in-
clude, but not isolate, the estimated bur-
den of the tax forms that will be revised
as a result of the information collections
in these proposed regulations. These num-
bers are therefore unrelated to the future
calculations needed to assess the burden
imposed by these proposed regulations.
To guard against over-counting the burden
that international tax provisions imposed
prior to the Act, the Treasury Department
and the IRS urge readers to recognize that
these burden estimates have also been cit-
ed by regulations (such as the foreign tax
credit regulations, 84 FR 69022) that rely
on the applicable OMB control numbers
in order to collect information from the
applicable types of filers.
In 2018, the IRS released and invit-
ed comment on drafts of Forms 990-PF
(Return of Private Foundation or Sec-
tion 4947(a)(1) Trust Treated as Private
Foundation), 990-T (Exempt Organiza-
tion Business Income Tax Return), 1040
(U.S. Individual Income Tax Return),
(U.S. Income Tax Return for Estates and
Trusts), 1065 (U.S. Return of Partnership
Income), 1120 (U.S. Corporation Income
Tax Return), and 8621 (Return by a Share-
holder of a Passive Foreign Investment
Company or Qualified Electing Fund).
The IRS received comments only regard-
ing Forms 1040, 1065, and 1120 during
the comment period. After reviewing all
such comments, the IRS made the forms
available on December 21, 2018, for use
by the public.
No burden estimates specific to the
forms affected by the proposed regulations
are currently available. The Treasury De-
partment and the IRS have not estimated
the burden, including that of any new infor-
mation collections, related to the require-
ments under the proposed regulations. The
Treasury Department and the IRS request
comments on all aspects of information
collection burdens related to the proposed
regulations, including estimates for how
much time it would take to comply with
the paperwork burdens for each relevant
form and ways for the IRS to minimize the
paperwork burden. In addition, drafts of
IRS forms are posted for public review at
https://apps.irs.gov/app/picklist/list/draft-
TaxForms.htm. Comments on these forms
can be submitted at https://www.irs.gov/
forms-pubs/comment-on-tax-forms-and-
publications. These forms will not be final-
ized until after they have been approved by
OMB under the PRA.
B. Collections of information for which
new OMB control numbers are being
requested
1. Collection of information in proposed
§1.958-1
The collection of information in pro-
posed §1.958-1(e)(1)(v) is required for
certain S corporations to make valid elec-
tions under proposed §1.958-1(e)(1)(i)
to apply entity treatment for purposes of
determining income inclusions under sec-
tions 951 and 951A. This collection of in-
formation is satisfied by the S corporation
maintaining sufficient records to support
the determination of its AE&P amount.
Estimated annual reporting burden:
213
Estimated total annual monetized cost
burden: $20,188
Estimated average annual burden
hours per respondent: 0.5

Bulletin No. 2022–7 771 February 14, 2022
Estimated number of respondents: 425
Estimated annual frequency of re-
sponses: Once
2. Collections of information in proposed
§1.1295-1
Part of the collection of information in
proposed §1.1295-1(d)(2)(i)(A) is for a
partner to notify the partnership that the
partner has made a QEF election with re-
spect to a PFIC it owns indirectly through
the partnership. This collection of infor-
mation is satisfied by the partner notify-
ing the partnership of the election no later
than 30 days after filing the return with
which the election is made. The partner
may notify the partnership in any reason-
able manner.
Estimated annual reporting burden:
650,000
Estimated total annual monetized cost
burden: $61,750,000
Estimated average annual burden
hours per respondent: 0.5
Estimated number of respondents:
1,300,000
Estimated annual frequency of re-
sponses: One-time election
Part of the collection of information in
proposed §1.1295-1(d)(2)(ii)(A) is for an
S corporation shareholder to notify the S
corporation that the shareholder has made
a QEF election with respect to a PFIC it
owns indirectly through the S corporation.
This collection of information is satisfied
by the shareholder notifying the S corpora-
tion of the election no later than 30 days af-
ter filing the return with which the election
is made. The shareholder may notify the S
corporation in any reasonable manner.
Estimated annual reporting burden:
1,000
Estimated total annual monetized cost
burden: $95,000
Estimated average annual burden
hours per respondent: 0.5
Estimated number of respondents:
2,000
Estimated annual frequency of re-
sponses: One-time election
3. Collection of information in proposed
§1.1296-1
The collection of information in pro-
posed §1.1296-1(h)(1)(i)(B) is for a
partner or an S corporation sharehold-
er to notify the partnership or S corpo-
ration, respectively, that the partner or
shareholder has made an MTM election
with respect to a PFIC it owns indirectly
through the partnership or S corporation.
This collection of information is satisfied
by the partner or shareholder notifying
the partnership or S corporation of the
election no later than 30 days after fil-
ing the return with which the election is
made. The partner or shareholder may
notify the partnership or S corporation in
any reasonable manner.
Estimated annual reporting burden:
35,500
Estimated total annual monetized cost
burden: $3,372,500
Estimated average annual burden
hours per respondent: 0.5
Estimated number of respondents:
71,000
Estimated annual frequency of re-
sponses: One-time election
4. Submission to OMB and request for
comments
The collections of information con-
tained in proposed §§1.958-1(e)(1)(v);
1.1295-1(d)(2)(i)(A) and (d)(2)(ii)(A);
and 1.1296-1(h)(1)(i)(B) are either gen-
eral recordkeeping or notice requirements
and cannot be associated with existing
OMB control numbers. These collections
of information will be submitted to the
Office of Management and Budget for
review and, if approved, assigned new
OMB control numbers in accordance
with the PRA. Comments on the collec-
tions of information should be sent to the
Office of Management and Budget, Attn:
Desk Officer for the Department of the
Treasury, Office of Information and Reg-
ulatory Affairs, Washington, DC 20503,
with copies to the Internal Revenue Ser-
vice, Attn: IRS Reports Clearance Officer,
SE:W:CAR:MP:T:T:SP, Washington, DC
20224. Comments on the collection of
information should be received by March
28, 2022. Comments are specifically re-
quested concerning:
Whether the proposed collection of
information is necessary for the proper
performance of the duties of the IRS, in-
cluding whether the information will have
practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information;
How the quality, utility, and clarity of
the information to be collected may be en-
hanced;
How the burden of complying with
the proposed collection of information
may be minimized, including through the
application of automated collection tech-
niques or other forms of information tech-
nology; and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchases of services to provide informa-
tion for the collections discussed in part
II.B of this Special Analyses.
III. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), it is hereby cer-
tified that the proposed regulations would
not have a significant economic impact
on a substantial number of small entities
within the meaning of section 601(6) of
the Regulatory Flexibility Act (“small en-
tities”).
The Small Business Administration es-
tablishes small business size standards (13
CFR part 121) by annual receipts or num-
ber of employees. There are several indus-
tries that may be identified as small even
through their annual receipts are above
$25 million or because of the number of
employees. The Treasury Department
and the IRS do not have data indicating
the number of small entities that will be
significantly impacted by the proposed
regulations. Nevertheless, regardless of
the number of small entities potentially
impacted, the Treasury Department and
the IRS have concluded that the proposed
regulations will not have a significant eco-
nomic impact on small entities.
First, the proposed regulations provide
guidance with respect to domestic part-
nerships under the PFIC regime, which
generally affects U.S. taxpayers that have
ownership interests in certain foreign cor-
porations that are not CFCs. To the extent
that a foreign entity might be considered a
small entity for purposes of the Regulato-
ry Flexibility Act (because it has a place of
business in the United States and makes a
significant contribution to the U.S. econ-
omy, for example), because the proposed

February 14, 2022 772 Bulletin No. 2022–7
regulations would not affect foreign part-
nerships, foreign partners of the affected
domestic partnerships, or the PFIC itself,
there would be no economic impact on
those foreign entities. Therefore, a small
entity generally would not be affected by
the proposed regulations unless it is a U.S.
taxpayer that has an ownership interest in
a foreign corporation. For purposes of the
Regulatory Flexibility Act, natural per-
sons are not considered small entities.
Although data on U.S. businesses that
invest in a PFIC is limited, data available
to the IRS shows that individuals (Form
1040 filers) make up approximately 70
percent of those who report PFIC income
while U.S. businesses of all sizes make up
approximately 20 percent of Form 8621 fil-
ers. To estimate the magnitude of the taxes
currently collected as a result of U.S. busi-
nesses investing in PFICs, the Treasury De-
partment and the IRS calculated the ratio
of PFIC regime tax to (gross) total income
for 2013 through 2018 for corporations that
filed Form 1120 (“C corporations”) with a
Form 8621 attached. Total income was de-
termined by matching each C corporation
filing Form 8621 to its Form 1120. Ordi-
nary QEF income, QEF capital gains, and
MTM income were assumed to be taxed at
35 percent (21 percent for 2018), and the
section 1291 tax and interest charge tax
were included as reported. Only those cor-
porations where a match was found and that
had positive total income were included in
the analysis. For the approximately 150 to
300 C corporations for which a match was
available in a given year, the average annu-
al ratio of the calculated tax to total income
was never greater than 0.00035 percent.
For the approximately 60 to 200 C corpo-
rations per year with $25 million or less for
which a match was available, the average
annual ratio was never greater than 1.068
percent.
201320142015201620172018
($ millions)
All C corporations
Tax 5121482242
Total Income4,204,79510,154,52019,935,84520,076,87621,625,15913,317,244
Tax to Total Income0.000%0.000%0.000%0.000%0.000%0.000%
C corporations with total income of $25 million or less
Tax(*)(*)4453
Total Income463563627573460741
Tax to Total Income0.060%0.014%0.576%0.689%1.068%0.400%
Source: RAAS, CDW. * indicates less than $1 million.
Thus, even if the economic impact of
the proposed regulations is interpreted
broadly to include the tax liability due
under the PFIC regime, which small en-
tities would be required to pay even if the
proposed regulations were not issued, the
tax-related economic impact should not be
regarded as significant under the Regula-
tory Flexibility Act.
A portion of the economic impact of
the proposed regulations derives from
the administration of the new rules and
the collection of information require-
ments imposed by the PFIC-related pro-
visions in proposed §§1.1295-1(d)(2)
(i)(A) and (d)(2)(ii)(A), 1.1296-1(h)(1)
(i), and 1.1298-1(b)(1) and (2). For the
collections of information in proposed
§§1.1295-1(d)(2)(i)(A) and (d)(2)(ii)(A)
and 1.1296-1(h)(1)(i), the Treasury De-
partment and the IRS have determined
that the average burden is approximately
half an hour per response. The IRS’s Re-
search, Applied Analytics, and Statistics
division estimates that the appropriate
wage rate for this set of taxpayers is $95
per hour. Thus, the annual burden per tax-
payer from the collection of information
requirement for each of these provisions
is approximately $48. Additionally, these
requirements apply only if a taxpay-
er chooses to make an election. For the
collections of information in proposed
§1.1298-1(b)(1) and (2), the Treasury
Department and the IRS have determined
that the average burden is approximate-
ly 49 hours per response. The IRS’s Re-
search, Applied Analytics, and Statistics
division estimates that the appropriate
wage rate for this set of taxpayers is $95
per hour. Thus, the annual burden per tax-
payer from the collection of information
requirement in this provision is approxi-
mately $4,655. This requirement applies
to taxpayers required to file Form 8621
with respect to a PFIC. In each case, the
compliance burden associated with the
PFIC-related provisions in the proposed
regulations is generally shifted from the
entity level to the owner level. For exam-
ple, under proposed §§1.1295-1(d)(2)(i)
(A) and 1.1298-1(b)(1), a domestic part-
nership no longer makes a QEF election
with respect to, and no longer files Form
8621 for, PFICs it owns; rather, the elec-
tion and associated Form 8621 will be
made and filed, respectively, by the part-
ners. While this shift could result in some
duplication of the overall compliance
burden associated with the PFIC-related
provisions in the proposed regulations,
the Treasury Department and the IRS do
not believe this shift should have a signif-
icant economic impact on taxpayers.
Additionally, the proposed regulations
provide guidance with respect to sever-
al statutory provisions within subpart F,
which generally affect U.S. sharehold-
ers of CFCs. To estimate the magnitude

Bulletin No. 2022–7 773 February 14, 2022
of the tax impact of these provisions on
small entities, the Treasury Department
and the IRS examined the gross receipts
of all taxpayers that e-filed Forms 5471
as a Category 4 or 5 filer for 2015 and
2016, which amounted to approximately
25,000 to 35,000 taxpayers in each year.
The Treasury Department and the IRS
then determined the tax revenue gener-
ated from the approximately 25,000 to
35,000 taxpayers’ section 951A inclu-
sions
4
estimated by the Joint Committee
on Taxation for businesses of all sizes is
less than 0.3 percent of gross receipts, as
shown in the table that follows. Based
on data for 2015 and 2016, total gross
receipts for all businesses with gross re-
ceipts under $25 million is $60 billion
while those over $25 million is $49.1
trillion. Given that tax on section 951A
inclusions is generally correlated with
gross receipts, this results in businesses
with less than $25 million in gross re-
ceipts accounting for approximately 0.01
percent of the tax revenue. Additionally,
although data are generally not readily
available to determine the sectoral break-
down of these entities, the number of do-
mestic partnerships and S corporations
subject to these provisions under the pro-
posed regulations should make up only
a portion of the totals. For example, the
Treasury Department and the IRS esti-
mate that there were approximately 7,000
domestic partnerships that e-filed at least
one Form 5471 as a Category 4 or 5 filer
in each of 2015 and 2016, amounting to
28 percent of the low-end estimate of all
taxpayers filing Form 5471 as a Category
4 or 5 filer and 20 percent of the high-
end estimate. Based on this analysis, the
proposed regulations do not impose a
significant economic impact on smaller
businesses, in particular domestic part-
nerships and S corporations.
2017201820192020202120222023202420252026
Joint Committee on
Taxation (JCT) tax
revenue
7.7
billion
12.5
billion
9.6
billion
9.5
billion
9.3
billion
9.0
billion
9.2
billion
9.3
billion
15.1
billion
21.2
billion
Total gross receipts30727
billion
53870
billion
566676
billion
59644
billion
62684
billion
65865
billion
69201
billion
72710
billion
76348
billion
80094
billion
Percent0.030.020.020.020.010.010.010.010.020.03
Source: Research, Applied Analytics and Statistics division (IRS), Compliance Data Warehouse (IRS) (E-filed Form 5471, category 4 or 5, C and S corporations and
partnerships); Conference Report, at 689.
Thus, even if the economic impact of
the proposed regulations is interpreted
broadly to include the tax liability due un-
der subpart F, which small entities would
be required to pay even if the proposed
regulations were not issued, the tax-re-
lated economic impact should not be re-
garded as significant under the Regulatory
Flexibility Act.
A portion of the economic impact of
the proposed regulations derives from
the collection of information require-
ments imposed by the provisions related
to CFCs and other types of foreign cor-
porations in proposed §1.951A-1(e)(2)
(iii), proposed §1.958-1(e)(1)(v) and (e)
(2), and proposed §1.964-1(c)(3)(ii) and
(iii). The Treasury Department and the
IRS have determined that the average
burden for each of these provisions is
approximately half an hour per response.
The IRS’s Research, Applied Analytics,
and Statistics division estimates that the
appropriate wage rate for this set of tax-
payers is $95 per hour. Thus, the annual
burden per taxpayer from the collection
of information requirement for each of
these provisions is approximately $48.
These requirements apply only if a tax-
payer chooses to make an election with
respect to the CFC or other foreign cor-
poration. In the case of proposed §1.964-
1(c)(3)(ii) and (iii), the compliance bur-
den is generally shifted from the U.S.
shareholder partnership level to its U.S.
shareholder partners. While this shift
could result in some duplication of the
overall compliance burden associated
with these provisions, the Treasury De-
partment and the IRS do not believe this
shift should result in a significant eco-
nomic impact on taxpayers.
Accordingly, it is hereby certified that
the proposed regulations would not have a
significant economic impact on a substan-
tial number of small entities.
IV. Section 7805(f)
Pursuant to section 7805(f), the pro-
posed regulations have been submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on their impact on small business-
es. The Treasury Department and the IRS
also request comments from the public on
the analysis in part III of the Special Anal-
yses.
V. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions be-
fore issuing a final rule that includes any
Federal mandate that may result in expen-
ditures in any one year by a state, local,
or tribal government, in the aggregate, or
by the private sector, of $100 million in
4
The Treasury Department and the IRS determined that using section 951A inclusions, rather than section 951 inclusions, would serve as a better indication of the potential tax impact of the
proposed regulations on small entities that own CFCs because the base upon which a U.S. shareholder’s section 951A inclusion is computed (a CFC’s gross income—with certain excep-
tions—less allocable deductions) is generally broader than the base upon which its section 951 inclusion is computed (a CFC’s income from specified transactions).

February 14, 2022 774 Bulletin No. 2022–7
1995 dollars, updated annually for infla-
tion. This rule does not include any Fed-
eral mandate that may result in expendi-
tures by state, local, or tribal governments,
or by the private sector in excess of that
threshold.
VI. Executive Order 13132: Federalism
Executive Order 13132 (entitled
“Federalism”) prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes
substantial, direct compliance costs on
state and local governments, and is not
required by statute, or preempts state law,
unless the agency meets the consultation
and funding requirements of section 6 of
the Executive order. These proposed reg-
ulations do not have federalism implica-
tions and do not impose substantial direct
compliance costs on state and local gov-
ernments or preempt state law within the
meaning of the Executive order.
Comments and Requests for Public
Hearing
Before the proposed amendments are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this preamble under the ADDRESSES
section. The Treasury Department and the
IRS request comments on all aspects of
the proposed regulations. See also parts
I.B.1 and I.C.1 of the Explanation of
Provisions requesting comments related
to the possibility of delegating authority
to domestic partnerships and S corpora-
tions to make QEF and MTM elections
on behalf of their owners; part II.D of
the Explanation of Provisions requesting
comments on (i) whether a U.S. person
holding an option to acquire stock (or
other non-stock interest) in a RPII CFC
should be treated as a related insured, (ii)
the allocation of premium payments made
by a partnership, (iii) the general applica-
tion of aggregate principles to RPII, (iv)
necessary revisions to forms and instruc-
tions to facilitate information sharing and
reporting for RPII purposes, and (v) oth-
er parts of the 1991 proposed regulations
relating to RPII, including whether other
parts should be reproposed (such as the
exception for indirect ownership through
publicly traded corporations); and part III
of the Explanation of Provisions request-
ing comments on the calculation of indi-
rect shareholders’ net gain for purposes of
section 1411. Any electronic comments
submitted, and to the extent practicable
any paper comments submitted, will be
made available at www.regulations.gov or
upon request.
A public hearing will be scheduled if
requested in writing by any person who
timely submits electronic or written com-
ments. Requests for a public hearing are
also encouraged to be made electronically.
If a public hearing is scheduled, notice of
the date and time for the public hearing
will be published in the Federal Register.
Announcement 2020-4, 2020-17 IRB 1,
provides that until further notice, public
hearings conducted by the IRS will be
held telephonically. Any telephonic hear-
ing will be made accessible to people with
disabilities.
Drafting Information
The principal authors of these regula-
tions are Edward Tracy, Raphael Cohen,
and Josephine Firehock of the Office of
Associate Chief Counsel (International),
and Caroline E. Hay and Jennifer N. Kee-
ney of the Office of Associate Chief Coun-
sel (Passthroughs and Special Industries).
However, other personnel from the Trea-
sury Department and the IRS participated
in their development.
Statement of Availability of IRS
Documents
IRS Revenue Procedures, Revenue
Rulings, Notices, and other guidance cit-
ed in this document are published in the
Internal Revenue Bulletin or Cumulative
Bulletin and are available from the Su-
perintendent of Documents, U.S. Govern-
ment Publishing Office, Washington, DC
20402, or by visiting the IRS website at
www.irs.gov.
Partial Withdrawal of Proposed
Regulations
Under the authority of 26 U.S.C. 7805,
proposed §1.953-3(b)(1) and (5) contained
in the notice of proposed rulemaking that
was published in the Federal Register on
April 17, 1991 (56 FR 15540), is with-
drawn.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by:
1. Adding a sectional authority for
§1.953-3 in numerical order;
2. Revising the sectional authorities for
§§1.1293-1, 1.1295-1, and 1.1296-1;
3. Adding sectional authorities for
§§1.1297-0 and 1.1297-3 in numerical
order;
4. Arranging the sectional authority for
§1.1298-1 in numerical order and revising
the authority; and
5. Adding a sectional authority for
§1.1298-3 in numerical order.
The additions and revisions read as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Section 1.953-3 also issued under 26
U.S.C. 953(c)(8).
* * * * *
Section 1.1293-1 also issued under 26
U.S.C. 1298(g).
* * * * *
Section 1.1295-1 also issued under 26
U.S.C. 1295(b)(2) and 1298(g).
* * * * *
Section 1.1296-1 also issued under 26
U.S.C. 1298(a)(1)(B) and (g).
* * * * *
Section 1.1297-0 also issued under 26
U.S.C. 1298(g).
* * * * *
Section 1.1297-3 also issued under 26
U.S.C. 1298(g).
* * * * *
Section 1.1298-1 also issued under 26
U.S.C. 1298(f) and (g).
* * * * *
Section 1.1298-3 also issued under 26
U.S.C. 1298(g).
* * * * *

Bulletin No. 2022–7 775 February 14, 2022
Par. 2. Section 1.951A-1 is amended by
revising paragraph (e) to read as follows:
§1.951A-1 General provisions.
* * * * *
(e) Stock owned through domestic
partnerships and S corporations—(1)
Cross-references. See §1.958-1(d) for
rules regarding the ownership of stock of
a foreign corporation through a domestic
partnership (or S corporation, as defined
in section 1361(a)(1), by reason of section
1373(a)) for purposes of section 951A and
for purposes of any provision that spe-
cifically applies by reference to section
951A or the section 951A regulations. See
§1.958-1(e) for rules regarding an election
for certain S corporations to be treated as
an entity for purposes of section 951A and
the section 951A regulations.
(2) Application of entity treatment
for taxable years ending before June 22,
2019—(i) General rule. If a domestic
partnership or S corporation satisfies the
notification and reporting requirements
in paragraph (e)(2)(iii) of this section, the
domestic partnership or S corporation may
apply the rules in proposed §1.951A-5 as
if the amendments proposed on October
10, 2018, had been finalized in their en-
tirety (proposed GILTI rules), for taxable
years ending before June 22, 2019.
(ii) Inapplicability of penalties. If a do-
mestic partnership or S corporation satis-
fies the requirements of paragraph (e)(2)
(iii) of this section, penalties for failures
described in sections 6698(a), 6699(a),
6722(a), or any similar provision will not
apply to the domestic partnership or S cor-
poration to the extent such failures arise
from acting consistently with the pro-
posed GILTI rules before June 22, 2019.
(iii) Notification and reporting require-
ments—(A) Notification. To be eligible
for the rules described in paragraphs (e)
(2)(i) and (ii) of this section, a domestic
partnership or S corporation must provide
the notification described in paragraphs
(e)(2)(iii)(A)(1) through (3) of this section
to each partner of the partnership or share-
holder of the S corporation. Such notifi-
cation must be provided no later than the
due date (taking into account extensions,
if any, or any additional time that would
have been granted if the domestic partner-
ship or S corporation had made an exten-
sion request) of the domestic partnership’s
or S corporation’s tax return for the last
taxable year ending before June 22, 2019,
and may be provided through any reason-
able method, including via mail, e-mail,
or posting on a website through which
the domestic partnership or S corpora-
tion would ordinarily disseminate tax in-
formation to its partners or shareholders.
The domestic partnership or S corporation
must also attach the notification described
in this paragraph (e)(2)(iii)(A) and Form
8992, “U.S. Shareholder Calculation of
Global Intangible Low-Taxed Income
(GILTI),” reflecting computations under
the proposed GILTI rules to any tax return
with respect to which the rules described
in paragraph (e)(2)(i) or (ii) of this section
are being applied if the tax return has not
been filed as of September 9, 2019. The
notification required under this paragraph
(e)(2)(iii) must provide—
(1) That the Schedule K-1, “Partner’s
Share of Income, Deductions, Credits,
etc.,” or the Schedule K-1, “Shareholder’s
Share of Income, Deductions, Credits,
etc.,” provided to the partner or share-
holder, respectively, is consistent with the
proposed GILTI rules;
(2) Whether the domestic partnership
or S corporation filed a Form 1065, “U.S.
Return of Partnership Income,” or Form
1120-S, “U.S. Income Tax Return for an
S Corporation,” consistent with the pro-
posed GILTI rules or this paragraph (e);
and
(3) That the notification is provided in
accordance with Notice 2019-46, 2019-37
I.R.B. 695.
(B) Schedule K-1 distribution report-
ing. If a domestic partnership or S corpo-
ration furnished a Schedule K-1 based on
the proposed GILTI rules, the domestic
partnership or S corporation must sepa-
rately state on Schedules K-1 for subse-
quent taxable years the partner’s or share-
holder’s distributive share or pro rata share
of a foreign corporation’s distributions to
the domestic partnership or S corporation
of earnings and profits that relate to the
GILTI inclusion amount of the partnership
or S corporation that was reflected on the
initially provided Schedules K-1. This in-
formation must be provided for each tax-
able year of the domestic partnership or S
corporation following the taxable year to
which the first Schedule K-1 relates.
* * * * *
Par. 3. Section 1.951A-7 is amended by
adding paragraph (e) to read as follows:
§1.951A-7 Applicability dates.
* * * * *
(e) Entity treatment of domestic part-
nerships and S corporations. Section
1.951A-1(e)(2) applies to taxable years of
foreign corporations ending before June
22, 2019, and to taxable years of Unit-
ed States shareholders in which or with
which such taxable years end.
Par. 4. Section 1.953-3 is revised to
read as follows:
§1.953-3 Related person insurance
income.
(a) [Reserved]
(b) Related person insurance income—
(1) Definition of related person insurance
income—(i) In general. Insurance income
under section 953(a) includes related
person insurance income under section
953(c)(2). Related person insurance in-
come is premium and investment income
attributable to an annuity, insurance, or
reinsurance policy that directly or indi-
rectly provides coverage to a related in-
sured as defined in paragraph (b)(1)(ii) of
this section. For purposes of this section,
the terms United States shareholder and
controlled foreign corporation have the
meaning provided in section 953(c)(1).
(ii) Related insured. Except as provided
in paragraph (b)(5)(ii) of this section, with
respect to a foreign corporation, a related
insured means any of the following—
(A) A United States shareholder of the
foreign corporation;
(B) A person that is related to a United
States shareholder within the meaning of
section 953(c)(6);
(C) A pass-through entity, if a related
insured (other than a pass-through enti-
ty) owns stock in the foreign corporation
indirectly (within the meaning of section
958(a)) through the pass-through entity;
or
(D) A person (other than a public-
ly traded corporation or publicly traded
partnership) that is more than 50 percent
owned by United States shareholders of
the foreign corporation as described in
paragraph (b)(1)(v) of this section.

February 14, 2022 776 Bulletin No. 2022–7
(iii) Amount treated as related person
insurance income with respect to a pass-
through entity—(A) In general. In the case
of a pass-through entity that is a related in-
sured, the amount treated as related person
insurance income is equal to the insurance
income attributable to the policy that di-
rectly or indirectly provides coverage to
the pass-through entity multiplied by the
fraction described in paragraph (b)(1)(iii)
(B) of this section.
(B) Fraction. The fraction described in
this paragraph (b)(1)(iii)(B) is equal to—
(1) The total amount of premiums paid
or accrued by the pass-through entity for
the policy that is allocated (directly or in-
directly, through one or more pass-through
entities) to all related insureds (other than
pass-through entities); divided by
(2) The total amount of premiums paid
or accrued by the pass-through entity for
the policy.
(C) Allocation—(1) Partnerships. For
purposes of paragraph (b)(1)(iii)(B) of
this section, the total amount of premiums
paid or accrued by a partnership that is
allocated to the related insureds is deter-
mined in accordance with the partnership
agreement and section 704(b).
(2) S corporations. For purposes of
paragraph (b)(1)(iii)(B) of this section,
the total amount of premiums paid or ac-
crued by an S corporation that is allocated
to the related insureds is determined on a
pro rata basis.
(iv) Pass-through entities. For pur-
poses of paragraph (b)(1) of this section,
a pass-through entity is an S corporation
or a domestic or foreign partnership (other
than a publicly traded partnership).
(v) Ownership. The ownership thresh-
old described in paragraph (b)(1)(ii)(D) of
this section is met if United States share-
holders collectively own (after applying
the principles of section 958(a) and (b))
more than 50 percent of the stock in a cor-
poration (by vote or value), more than 50
percent of the capital or profits interests in
a partnership, or more than 50 percent of
the interests in a trust or estate.
(vi) Stock owned through domes-
tic partnerships or S corporations. See
§1.958-1(d) for rules regarding the own-
ership of stock of a foreign corporation
through a domestic partnership or S cor-
poration for purposes of section 953(c)
and for purposes of any provision that
specifically applies by reference to section
953(c) or the regulations in this part under
section 953 that relate to section 953(c).
(vii) Examples. The following exam-
ples illustrate the rules of paragraph (b)(1)
of this section.
(A) Example 1—(1) Facts. FC is a foreign cor-
poration engaged in the insurance business. FC is
wholly owned by FP, a foreign partnership. DC, a
domestic corporation, owns 25% of the interests in
FP. The remaining interests in FP are held by unrelat-
ed foreign corporations. Under the partnership agree-
ment, all items of income, gain, loss, deduction, and
credit are allocated 25% to DC and 75% to the other
partners. In Year 1, FC issues the FP policy, under
which FP is insured. FP pays a premium of $80 for
the FP policy. The insurance income attributable to
the FP policy (including both premium and invest-
ment income) is $100. FC earns an additional $1,000
of income that is treated as related person insurance
income. Under section 704(b), DC would be allocat-
ed $20 (25%) of the premium paid or accrued by FP.
(2) Result. Under paragraph (b)(1)(ii)(C) of this
section, FP is treated as a related insured with respect
to FC because it is a pass-through entity through
which DC indirectly owns stock in FC. Therefore,
under paragraph (b)(1)(i) of this section, a portion
of the insurance income attributable to the FP policy
is treated as related person insurance income. Under
paragraph (b)(1)(iii)(A) of this section, the amount
of related person insurance income with respect to
FP is equal to the insurance income attributable to
the FP policy ($100) multiplied by the fraction de-
scribed in paragraph (b)(1)(iii)(B) of this section.
That fraction is equal to the portion of the premium
paid by FP that is allocable to DC ($20) divided by
the total premium paid by FP ($80), or 25%. There-
fore, FC has $25 of related person insurance income
under section 953(c)(2) attributable to the FP policy
in Year 1.
(B) Example 2—(1) Facts. FC is a foreign cor-
poration engaged in the insurance business. Two do-
mestic corporations, DC1 and DC2, each own 50%
of the stock of FC. In addition, DC1 and DC2 each
own 50% of the stock in DC3, a domestic corpo-
ration. In Year 1, FC issues the DC3 policy, under
which DC3 is insured. The insurance income attrib-
utable to the DC3 policy is $100. FC earns an ad-
ditional $1,000 of income that is treated as related
person insurance income.
(2) Result. DC3 meets the requirements of para-
graph (b)(1)(v) of this section because United States
shareholders of FC (DC1 and DC2) collectively own
all the stock of DC3. Therefore, under paragraph (b)
(1)(ii)(D) of this section, DC3 is treated as a relat-
ed insured with respect to FC. Consequently, under
paragraph (b)(1)(i) of this section, all of FC’s $100
of insurance income attributable to the DC3 policy
is treated as related person insurance income under
section 953(c)(2).
(2) through (4) [Reserved]
(5) Cross-insurance arrangements—
(i) In general. Related person insurance
income includes insurance income attrib-
utable to an arrangement (or a substan-
tially similar arrangement with a similar
degree of cooperative risk sharing) where-
by a foreign corporation issues an insur-
ance, reinsurance, or annuity contract to
a person other than a related insured and,
as part of the arrangement (involving one
or more other persons), another person is-
sues an insurance, reinsurance, or annuity
contract to a related insured of the foreign
corporation.
(ii) Related insured. For purposes of
applying paragraph (b)(5)(i) of this sec-
tion before the applicability date described
in paragraph (c)(1) of this section, the
term related insured means, with respect
to a foreign corporation, a United States
shareholder of the foreign corporation or
a person that is related to a United States
shareholder within the meaning of section
953(c)(6).
(iii) Example. Controlled foreign corporation X
is owned by 30 unrelated United States sharehold-
ers. Controlled foreign corporation Y is owned by
30 unrelated United States shareholders (that is, un-
related to X and Y and the shareholders of X and
Y). X agrees to provide insurance protection to Y’s
shareholders, and Y agrees to provide insurance to
X’s shareholders. The insurance income of both X
and Y that is attributable to insuring the shareholders
of the other corporation constitutes related person
insurance income.
(c) Applicability date—(1) In general.
Paragraph (b)(1) of this section applies
to taxable years of foreign corporations
beginning on or after [date of publication
of the Treasury decision adopting these
rules as final regulations in the Federal
Register], and to taxable years of Unit-
ed States persons in which or with which
such taxable years of foreign corpora-
tions end.
(2) Cross-insurance rule. Paragraph
(b)(5) of this section applies to taxable
years of foreign corporations ending on
or after January 24, 2022, and to taxable
years of United States persons in which or
with which such taxable years of foreign
corporations end (in each case without re-
gard to when the arrangement was entered
into).
Par. 5. Section 1.958-1, as amended in
a final rule published elsewhere in this is-
sue of the Federal Register, effective Jan-
uary 25, 2022, is amended by:
1. Revising the first sentence of para-
graph (d)(1);
2. Revising paragraph (d)(2)(v);
3. Adding a sentence to the end of para-
graph (d)(4)(i); and
4. Adding paragraph (e).

Bulletin No. 2022–7 777 February 14, 2022
The revisions and addition read as fol-
lows:
§1.958-1 Direct and indirect ownership
of stock.
* * * * *
(d) * * * (1) * * * Except as otherwise
provided in paragraph (d)(2) of this sec-
tion, for purposes of sections 951, 951A,
953(c), and 956(a) and §1.964-1(c), and
for purposes of any provision that specif-
ically applies by reference to any of such
sections or the regulations in this part under
section 951, 951A, 953, or 956 (but only
as the regulations in this part under section
953 or section 956 relate to section 953(c)
or section 956(a), respectively), a domestic
partnership is not treated as owning stock
of a foreign corporation within the meaning
of section 958(a). * * *
(2) * * *
(v) Applying section 953(c)(1)(A) for
purposes of determining whether any for-
eign corporation is a controlled foreign
corporation as defined in sections 953(c)
(1)(B), 953(c)(3)(E), or 953(d)(1)(A).
* * * * *
(4) * * *
(i) * * * Notwithstanding the prior sen-
tences, paragraph (d)(2)(v) of this section
and the inclusion of the references to sec-
tion 953(c) and §1.964-1(c) in paragraph
(d)(1) of this section apply to taxable
years of foreign corporations beginning
on or after [date of publication of the Trea-
sury decision adopting these rules as final
regulations in the Federal Register], and
to taxable years of United States persons
in which or with which such taxable years
of foreign corporations end.
* * * * *
(e) Elective entity treatment for certain
S corporations—(1) In general. Except as
otherwise provided in this paragraph (e),
with respect to an S corporation (as de-
fined in section 1361(a)(1)), paragraph (d)
(1) of this section shall not apply, and such
S corporation shall be treated as owning
stock of a foreign corporation within the
meaning of section 958(a), if—
(i) The S corporation and its sharehold-
ers (where applicable) make the election
described in paragraph (e)(2) of this section;
(ii) The S corporation made its elec-
tion under section 1362(a) before June 22,
2019;
(iii) The S corporation would have been
treated as owning stock of a controlled
foreign corporation within the meaning
of section 958(a) on June 22, 2019, if
§1.951A-1(e) (as in effect and contained
in 26 CFR part 1, as revised April 1, 2021)
did not apply to it;
(iv) The S corporation had transition
accumulated earnings and profits (as de-
fined in paragraph (e)(3) of this section)
on September 1, 2020, or on the first day
of any subsequent taxable year; and
(v) The S corporation maintains suffi-
cient records to support the determination
of the transition accumulated earnings and
profits amount.
(2) Election—(i) Time and manner of
making election. With respect to the first
taxable year ending on or after September
1, 2020, an S corporation may irrevocably
elect to apply the provisions of paragraph
(e)(1) of this section on a timely-filed (in-
cluding extensions) original Form 1120-S,
“U.S. Income Tax Return for an S Corpo-
ration,” by attaching a statement to such
return including the contents of paragraph
(e)(2)(ii) of this section. For taxable years
of an S corporation ending before Septem-
ber 1, 2020, and after June 21, 2019, the S
corporation and all of its shareholders may
irrevocably elect to apply the provisions of
paragraph (e)(1) of this section on time-
ly-filed (including extensions) original re-
turns or on amended returns filed by March
15, 2021, by attaching a statement includ-
ing the contents of paragraph (e)(2)(ii) of
this section thereto. An election described
in Section 3.02 of Notice 2020-69, 2020-
39 I.R.B. 604 that is filed (in the time and
manner specified in Section 3.02 of Notice
2020-69) on or before [date of publication
of the Treasury decision adopting these
rules as final regulations in the Federal
Register] is deemed to satisfy the election
requirement of this paragraph (e)(2).
(ii) Contents of election statement. The
statement described in paragraph (e)(2)(i)
of this section must:
(A) Identify that the S corporation and
its shareholders (where applicable) are
electing for the S corporation to be treated
as owning stock of a foreign corporation
within the meaning of section 958(a) un-
der paragraph (e)(2) of this section;
(B) Include the amount of transition ac-
cumulated earnings and profits (as defined
in paragraph (e)(3) of this section); and
(C) Where applicable, be signed by a
person authorized to sign the S corpora-
tion’s return that is required to be filed un-
der section 6037.
(3) Transition accumulated earnings
and profits—(i) In general. For purposes
of this section, the term transition accu-
mulated earnings and profits means, with
respect to an S corporation and its share-
holders, the amount of accumulated earn-
ings and profits of the S corporation cal-
culated as of September 1, 2020, reduced
as described in paragraph (e)(3)(ii) of this
section. Transition accumulated earnings
and profits are not increased as a result of
transactions occurring (or entity classifi-
cation elections described in §301.7701-3
of this chapter filed) after September 1,
2020. For purposes of this section, transi-
tion accumulated earnings and profits are
not transferable to another person under
any provision of the Code.
(ii) Reduction solely by distributions.
An S corporation with transition accu-
mulated earnings and profits is treated as
having no transition accumulated earnings
and profits if, beginning after September
1, 2020, the S corporation distributes in
one or more distributions a cumulative
amount of accumulated earnings and prof-
its equal to or greater than the amount of
the S corporation’s transition accumulated
earnings and profits as of September 1,
2020.
(4) Required aggregate treatment. In
the case of an S corporation that has made
an election under paragraph (e)(2) of this
section and which satisfies the additional
requirements of paragraph (e)(1) of this
section, paragraph (d) of this section shall
apply beginning with the S corporation’s
first taxable year for which the S corpo-
ration has no transition accumulated earn-
ings and profits on the first day of that
year, and to each subsequent taxable year
of the S corporation.
(5) Examples. The following examples
illustrate the application of paragraph (e).
(i) Example 1—(A) Facts. Individual A and In-
dividual B, each a United States citizen, respective-
ly own 5% and 95% of the single class of stock of
SCX, an S corporation. SCX’s sole asset is 100%
of the single class of stock of FC, a controlled for-
eign corporation, which SCX has held since June 1,
2019. None of SCX, Individual A, or Individual B
own shares, directly or indirectly, in any other con-
trolled foreign corporation. Individual A, Individual
B, SCX, and FC all use the calendar year as their
taxable year. On January 1, 2021, SCX has transition

February 14, 2022 778 Bulletin No. 2022–7
accumulated earnings and profits of $100x and AAA
of $0. SCX elects to apply the transition rules un-
der paragraph (e)(1) of this section. During the 2021
taxable year, FC has $200x of tested income (within
the meaning of §1.951A-2(b)(1)) and $0 of qualified
business asset investment (QBAI) (within the mean-
ing of §1.951A-3(b)).
(B) Analysis—(1) S corporation level. As an
electing S corporation with transition accumulated
earnings and profits on the first day of the taxable
year (January 1, 2021), SCX is treated as owning
(within the meaning of section 958(a)) all the stock
of FC for purposes of applying sections 951 and
951A and any provision that applies specifically by
reference thereto. Accordingly, SCX, a United States
shareholder of FC, determines its GILTI inclusion
amount under §1.951A-1(c)(1) for its 2021 taxable
year. SCX’s pro rata share of FC’s tested income is
$200x, and its pro rata share of FC’s QBAI is $0.
SCX’s net CFC tested income (within the meaning
of §1.951A-1(c)(2)) is $200x, and its net deemed
tangible income return (within the meaning of
§1.951A-1(c)(3)) is $0. As a result, SCX’s GILTI
inclusion amount for 2021 is $200x. At the end of
2021, SCX increases its AAA by $200x to reflect the
GILTI inclusion amount. Because SCX computes
its income as an individual under section 1363(b),
it cannot take a section 250 deduction for any GILTI
inclusion amount. See §1.250(a)-1(c)(1).
(2) S corporation shareholder level. Neither In-
dividual A nor Individual B is treated as owning the
stock in FC within the meaning of section 958(a).
Accordingly, Individual A and Individual B include
in gross income their pro rata shares of SCX’s GILTI
inclusion amount as described in section 1366(a),
which is $10x ($200x x 5%) for Individual A and
$190x ($200x x 95%) for Individual B.
(ii) Example 2—(A) Facts. The facts are the
same as in paragraph (e)(5)(i) of this section, except
that, on December 31, 2021, SCX distributes $300x
to its shareholders. In addition, FC has an addition-
al $200x of tested income (within the meaning of
§1.951A-2(b)(1)) and $0 of QBAI (within the mean-
ing of §1.951A-3(b)) during the 2022 taxable year.
(B) Analysis—(1) Determination of transition
accumulated earnings and profits. Before taking into
account the distribution on December 31, 2021, the
results for taxable year 2021 are the same as in para-
graph (e)(5)(i)(B) of this section. For 2021, $200x,
the portion of SCX’s $300x distribution that does not
exceed AAA, is subject to section 1368(c)(1). The
remaining distribution of $100x is treated as a divi-
dend under section 316 to the extent of SCX’s accu-
mulated earnings and profits. As of January 1, 2022,
SCX has $0 of transition accumulated earnings and
profits under paragraph (e)(3) of this section because
the cumulative amount of SCX’s distributions out of
accumulated earnings and profits after September 1,
2020, equals or exceeds the amount of SCX’s transi-
tion accumulated earnings and profits as of Septem-
ber 1, 2020.
(2) S corporation level. Because SCX has no
transition accumulated earnings and profits as
of January 1, 2022, paragraph (d) of this section
applies to SCX for its taxable year 2022 and for
each subsequent taxable year. As a result, for pur-
poses of determining a GILTI inclusion amount in
its taxable year 2022, SCX is not treated as own-
ing (within the meaning of section 958(a)) the FC
stock; instead, SCX is treated in the same manner
as a foreign partnership for purposes of determin-
ing the FC stock owned by Individual A and In-
dividual B under section 958(a)(2). Accordingly,
SCX does not have a GILTI inclusion amount for
its 2022 taxable year (or for any subsequent tax-
able year) and therefore will not increase its AAA
as a result of GILTI inclusion amounts attributable
to FC stock for its taxable year 2022 (or for any
subsequent taxable year).
(3) S corporation shareholder level. With re-
spect to Individual A, for purposes of determining
the GILTI inclusion amount for taxable year 2022,
Individual A is treated as owning 5% of the FC stock
under section 958(a). Individual A is not a United
States shareholder of FC because Individual A owns
(within the meaning of section 958(a) and (b)) less
than 10% of the FC stock. Accordingly, Individual A
does not have a GILTI inclusion amount for taxable
year 2022. With respect to Individual B, for purpos-
es of determining the GILTI inclusion amount for
taxable year 2022, Individual B is treated as owning
95% of the FC stock under section 958(a). In addi-
tion, Individual B is a United States shareholder of
FC because Individual B owns (within the meaning
of section 958(a) and (b)) at least 10% of the FC
stock. Accordingly, Individual B’s pro rata share of
FC’s tested income is $190x ($200x x 95%), and In-
dividual B’s pro rata share of FC’s QBAI is $0. Indi-
vidual B’s net CFC tested income is $190x, and Indi-
vidual B’s net deemed tangible income return is $0.
As a result, Individual B’s GILTI inclusion amount
for taxable year 2022 is $190x.
(6) Applicability date. This paragraph
(e) applies to taxable years of S corpo-
rations ending on or after September 1,
2020. Taxpayers may choose to apply this
paragraph (e) to taxable years of S corpo-
rations ending on or after June 22, 2019,
provided that the S corporation and its
shareholders that are United States share-
holders consistently apply the rules set
forth in this paragraph (e) with respect to
all controlled foreign corporations whose
stock the S corporation owns within the
meaning of section 958(a).
* * * * *
Par. 6. Section 1.964-1 is amended by:
1. Revising the first sentence of para-
graph (c)(2);
2. Removing the language “domestic
shareholders” in the first sentence of para-
graph (c)(3)(ii) and adding “United States
persons” in its place;
3. Revising paragraph (c)(3)(iii);
4. Removing the language “noncon-
trolled section 902 corporation” in para-
graphs (c)(4)(i)(B) and (c)(4)(ii) and add-
ing “noncontrolled foreign corporation” in
its place;
5. Revising paragraph (c)(5)(ii);
6. Redesignating paragraph (c)(8) as
paragraph (c)(9);
7. Adding a new paragraph (c)(8); and
8. In paragraph (d):
i. Revising the heading;
ii. Removing “Paragraphs (c)(1)(v)
through (c)(6),” “26 CFR §§ 1.964-1T(c)
(1)(v) through (c)(6),” and “paragraphs
(c)(1)(v) through (c)(6)” everywhere they
appear and adding “Paragraphs (c)(1)
(v) and (vi) and (c)(2) through (6),” “26
CFR 1.964-1T(c)(1)(v) and (vi) and (c)(2)
through (6),” and “paragraphs (c)(1)(v)
and (vi) and (c)(2) through (6)” in their
places, respectively; and
iii. Adding two sentences to the end of
the paragraph.
The revisions and additions read as fol-
lows:
§1.964-1 Determination of the earnings
and profits of a foreign corporation.
* * * * *
(c) * * *
(2) * * * For the first taxable year of a
foreign corporation in which such foreign
corporation first qualifies as a controlled
foreign corporation (as defined in section
957 or 953) or a foreign corporation (oth-
er than a controlled foreign corporation as
defined in section 957 or 953) as to which
a United States person that is a United
States shareholder (within the meaning
of section 951(b)) owns stock (within the
meaning of section 958(a)) (such corpo-
ration, a “noncontrolled foreign corpo-
ration”), any method of accounting or
taxable year allowable under this section
may be adopted, and any election allow-
able under this section may be made, by
such foreign corporation or on its behalf
notwithstanding that, in previous years,
its books or financial statements were
prepared on a different basis, and notwith-
standing that such election is required by
the Code or regulations in this chapter to
be made in a prior taxable year. * * *
(3) * * *
(iii) Notice—(A) In general. Except
as otherwise provided in paragraph (c)
(3)(iii)(B) of this section, on or before
the filing date described in paragraph (c)
(3)(ii) of this section, the controlling do-
mestic shareholders must provide written
notice of the election made or the adop-
tion or change of method or taxable year

Bulletin No. 2022–7 779 February 14, 2022
effected to all other persons known by
them to be United States persons that own
(within the meaning of section 958(a))
stock of the foreign corporation (domes-
tic shareholders) and to any other United
States person that is a “Category 4 fil-
er” of Form 5471, “Information Return
of U.S. Persons With Respect to Certain
Foreign Corporations,” with respect to the
foreign corporation (that is, certain Unit-
ed States persons that control, within the
meaning of section 6038(e), the foreign
corporation). Thus, for example, this no-
tice is required to be provided to domestic
shareholders that own (within the mean-
ing of section 958(a)) stock in the foreign
corporation through one or more domestic
partnerships. The notice required in this
paragraph (c)(3)(iii)(A) must set forth the
name, country of organization, and U.S.
employer identification number (if ap-
plicable) of the foreign corporation, and
the names, addresses, and stock interests
of the controlling domestic shareholders.
Such notice must also describe the nature
of the action taken on behalf of the for-
eign corporation and the taxable year for
which made, and identify a designated
shareholder that retains a jointly executed
consent confirming that such action has
been approved by all of the controlling
domestic shareholders and containing the
signature of a principal officer of each
such shareholder (or its common parent).
However, the failure of the controlling do-
mestic shareholders to provide such notice
to a person required to be notified does not
invalidate the election made or the adop-
tion or change of method or taxable year
effected.
(B) Special rule for domestic partner-
ships. A controlling domestic shareholder
will be deemed to satisfy the notice re-
quirement of paragraph (c)(3)(iii)(A) of
this section with respect to any domestic
shareholder that is a partner in a domes-
tic partnership by providing notice to a
domestic partnership (known to the con-
trolling domestic shareholder) through
which the domestic shareholder owns
stock of the foreign corporation, instead
of to the domestic shareholder.
* * * * *
(5) * * *
(ii) Noncontrolled foreign corpora-
tions. For purposes of this paragraph (c),
the controlling domestic shareholders
of a noncontrolled foreign corporation
are its majority domestic shareholders.
The majority domestic shareholders of
a noncontrolled foreign corporation are
those United States shareholders (within
the meaning of section 951(b)) that own
(within the meaning of section 958(a))
stock in the noncontrolled foreign cor-
poration and that, in the aggregate, own
(within the meaning of section 958(a)),
or are considered as owning by apply-
ing the rules of section 958(b), more
than 50 percent of the combined voting
power of all of the voting stock of the
noncontrolled foreign corporation that is
owned by all United States shareholders
that own (within the meaning of section
958(a)), or are considered as owning
by applying the rules of section 958(b),
stock of the noncontrolled foreign cor-
poration.
* * * * *
(8) Stock owned through domestic
partnerships. See §1.958-1(d) for rules
regarding the ownership of stock of a for-
eign corporation through a domestic part-
nership for purposes of paragraph (c) of
this section and for purposes of any provi-
sion that specifically applies by reference
to paragraph (c) of this section.
* * * * *
(d) Applicability dates. * * * Notwith-
standing the preceding sentences in this
paragraph (d), paragraphs (c)(2), (c)(3)
(ii) and (iii), (c)(4)(i)(B), (c)(4)(ii), (c)
(5)(ii), and (c)(8) of this section apply to
taxable years of foreign corporations be-
ginning on or after [date of publication of
the Treasury decision adopting these rules
as final regulations in the Federal Regis-
ter], and to taxable years of United States
persons in which or with which such tax-
able years end. For taxable years of for-
eign corporations beginning before [date
of publication of the Treasury decision
adopting these rules as final regulations
in the Federal Register], and to taxable
years of foreign United States persons in
which or with which such taxable years
end, see §1.964-1(c)(2), (c)(3)(ii) and (iii),
(c)(4)(i)(B), (c)(4)(ii), and (c)(5)(ii) as in
effect and contained in 26 CFR part 1, as
revised April 1, 2021.
Par. 7. Section 1.1291-1 is amended by:
1. Revising paragraphs (b)(7), (c)(4)(i),
and (c)(4)(ii)(A) and (B);
2. Adding paragraph (c)(5);
3. Removing the language “Paragraphs
(c)(3) and (4)” in paragraph (j)(1) and
adding “Paragraph (c)(3)” in its place;
4. Removing the language “paragraphs
(b)(2)(ii) and (v), (b)(7) and (8), and (e)
(2) of this section” in paragraph (j)(3) and
adding “paragraphs (b)(2)(ii) and (v), (b)
(8), and (e)(2) of this section” in its place;
and
5. Adding paragraph (j)(5).
The revisions and additions read as fol-
lows:
§1.1291-1 Taxation of U.S. persons that
are shareholders of section 1291 funds.
* * * * *
(b) * * *
(7) Shareholder. Except as otherwise
provided in this paragraph (b)(7) or para-
graph (e) of this section, a shareholder of a
PFIC is a United States person that direct-
ly owns stock of a PFIC (a direct share-
holder), or that is an indirect shareholder
(as defined in paragraph (b)(8) of this
section). Notwithstanding the previous
sentence, neither a domestic partnership
nor an S corporation (as defined in section
1361(a)(1)) is treated as a shareholder of a
PFIC. In addition, to the extent that a per-
son is treated under sections 671 through
678 as the owner of a portion of a domestic
trust, the trust is not treated as a sharehold-
er of a PFIC with respect to PFIC stock
held by that portion of the trust, except for
purposes of the information reporting re-
quirements of §1.1298-1(b)(3)(i) (impos-
ing an information reporting requirement
on domestic liquidating trusts and fixed
investment trusts).
* * * * *
(c) * * *
(4) * * * (i) In general. If PFIC stock
is marked to market for any taxable year
under section 475 or any other provision
of chapter 1 of the Internal Revenue Code,
other than section 1296, regardless of
whether the application of such provision
is mandatory or results from an election by
the shareholder (as defined in paragraph
(b)(7) of this section) or another person,
then, except as provided in paragraph (c)
(4)(ii) of this section, section 1291 and the
regulations in this part thereunder do not
apply to any distribution with respect to
such PFIC stock or to any disposition of
such PFIC stock for such taxable year. See

February 14, 2022 780 Bulletin No. 2022–7
§§1.1295-1(i)(3) and 1.1296-1(h)(3)(i) for
rules regarding the automatic termination
of an existing election under section 1295
or section 1296 when a shareholder marks
to market PFIC stock under section 475 or
any other provision of chapter 1 of the In-
ternal Revenue Code.
(ii) * * * (A) Notwithstanding any
provision in this section to the contrary,
with respect to a shareholder (as defined
in paragraph (b)(7) of this section), the
rule of paragraph (c)(4)(ii)(B) of this
section applies to the first taxable year
in which the shareholder’s PFIC stock is
marked to market under a provision of
chapter 1 of the Internal Revenue Code,
other than section 1296, if such foreign
corporation was a PFIC for any taxable
year before the taxable year in which the
PFIC stock is marked to market, which
is during the shareholder’s holding peri-
od (as defined in section 1291(a)(3)(A)
and §1.1296-1(f)) in such stock, and for
which such corporation was not treated
as a QEF with respect to such sharehold-
er.
(B) For the first taxable year of a share-
holder in which the shareholder’s PFIC
stock is marked to market under any pro-
vision of chapter 1 of the Internal Revenue
Code, other than section 1296, such share-
holder, in lieu of the rules under which
the stock is marked to market, applies
the rules of §1.1296-1(i)(2) and (3) as if
an election had been made under section
1296 for such first taxable year.
(5) Coordination with section
1297(d)—(i) In general. For purposes of
section 1297(d), with respect to a partner
or S corporation shareholder that would
be considered an indirect shareholder,
through its ownership in a domestic part-
nership or S corporation, with respect to
a foreign corporation that is a PFIC and
a controlled foreign corporation (as de-
fined in section 957), the term “qualified
portion” does not include any portion of
such indirect shareholder’s holding period
during which it was not a United States
shareholder (as defined in section 951(b))
with respect to the foreign corporation.
(ii) Transition rule. For taxable years
of shareholders beginning before [date of
publication of the Treasury decision adopt-
ing these rules as final regulations in the
Federal Register], or for taxable years of
shareholders of an S corporation in which
the S corporation elects to apply §1.958-
1(e), for purposes of section 1297(d), a
partner’s or S corporation shareholder’s
qualified portion with respect to the for-
eign corporation includes the portion of its
holding period during which it—
(A) Is an indirect shareholder under
paragraph (b)(8)(iii)(A) or (B) of this sec-
tion with respect to the foreign corpora-
tion; and
(B) Included in gross income its dis-
tributive or pro rata share of any amount
that the domestic partnership or S corpo-
ration, respectively, included under sec-
tions 951(a)(1) and 951A(a) with respect
to stock in the foreign corporation (treat-
ing the requirement in this paragraph (c)
(5)(ii)(B) as not satisfied to the extent
§1.958-1(d)(1) through (3) is applied
with respect to the domestic partnership
or S corporation before their general ap-
plicability date under §1.958-1(d)(4) or
the domestic partnership or S corporation
relied on the earlier proposed version
of such provisions). See, for example,
§1.951A-1(e)(2).
* * * * *
(j) * * *
(5) Paragraphs (b)(7), (c)(4)(i), (c)(4)
(ii)(A) and (B), and (c)(5) of this section
apply to taxable years of shareholders be-
ginning on or after [date of publication of
the Treasury decision adopting these rules
as final regulations in the Federal Regis-
ter]. For taxable years of shareholders be-
ginning before [date of publication of the
Treasury decision adopting these rules as
final regulations in the Federal Register],
see §1.1291-1(b)(7), (c)(4)(i), and (c)(4)
(ii)(A) and (B) as in effect and contained
in 26 CFR part 1, as revised April 1, 2021.
§1.1291-9 [Amended]
Par. 8. Section 1.1291-9 is amended by:
1. Removing the language “the undis-
tributed earnings and profits, within the
meaning of section 902(c)(1)” in para-
graph (a)(2)(i) and adding “the amount
of the earnings and profits of the foreign
corporation (computed in accordance with
sections 964(a) and 986)” in its place;
2. Removing the language “section
1297(e) PFIC” in paragraphs (i) and (j)(2)
(v) introductory text and adding “section
1297(d) PFIC” in its place wherever it ap-
pears; and
3. Removing the language “section
1297(e)(2)” in paragraph (j)(2)(v)(A) and
adding “section 1297(d)(2)” in its place.
Par. 9. Section 1.1293-1 is amended by:
1. Adding paragraphs (a)(3) and (4);
2. Revising paragraphs (c)(1) and (2);
3. Redesignating paragraph (c)(3) as
paragraph (c)(4);
4. Adding a new paragraph (c)(3); and
5. Revising newly redesignated para-
graph (c)(4).
The additions and revisions read as fol-
lows:
§1.1293-1 Current taxation of income
from qualified electing funds.
(a) * * *
(3) Pass-through entity defined. For
purposes of this section, the term pass-
through entity has the meaning provided
in §1.1295-1(j)(2).
(4) Applicability dates. Paragraph (a)
(3) of this section applies to taxable years
of shareholders beginning on or after [date
of publication of the Treasury decision
adopting these rules as final regulations in
the Federal Register].
* * * * *
(c) * * * (1) In general. Except as
otherwise provided in this paragraph (c),
a shareholder that makes a section 1295
election as provided in §1.1295-1(d)(2)
with respect to stock in a PFIC that it is
treated as owning by reason of an interest
in a pass-through entity, or a shareholder
that is treated as owning stock in a QEF
by reason of an interest in a domestic
partnership that has made a preexisting
partnership section 1295 election (within
the meaning of §1.1295-1(d)(2)(i)(B)) or
in an S corporation that has made a pre-
existing S corporation section 1295 elec-
tion (within the meaning of §1.1295-1(d)
(2)(ii)(B)), includes in income its pro rata
share of ordinary earnings and net capital
gain attributable to the QEF stock as if the
shareholder directly owned its share of the
QEF stock held by the pass-through entity.
(2) Section 1295 election made by do-
mestic nongrantor trust or domestic es-
tate. Notwithstanding paragraph (c)(1)
of this section, if a domestic nongrantor
trust or domestic estate makes a section
1295 election as provided in §1.1295-1(d)
(2)(iii)(A)(1) with respect to PFIC stock
that it owns, the domestic nongrantor trust

Bulletin No. 2022–7 781 February 14, 2022
or domestic estate includes in income its
pro rata share of ordinary earnings and net
capital gain attributable to the QEF stock.
A shareholder that is treated as owning
such QEF stock by reason of an interest
in the domestic nongrantor trust or domes-
tic estate accounts for its pro rata share of
ordinary earnings and net capital gain at-
tributable to such stock according to the
general rules applicable to inclusions of
income from the domestic nongrantor
trust or domestic estate.
(3) QEF stock transferred to a pass-
through entity—(i) In general. Except as
otherwise provided in this paragraph (c)
(3), if a shareholder transfers stock in a
PFIC subject to a section 1295 election
to a pass-through entity in which it is an
interest holder, such shareholder contin-
ues to include in income its pro rata share
of ordinary earnings and net capital gain
attributable to the QEF stock held by the
transferee pass-through entity, under para-
graph (c)(1) of this section. Proper adjust-
ments to reflect an inclusion in income
under section 1293 by the indirect share-
holder must be made, under the principles
of §1.1291-9(f), to the basis of the indirect
shareholder’s interest in the pass-through
entity.
(ii) Shareholders other than the trans-
feror. Except as otherwise provided in this
paragraph (c)(3), if a shareholder trans-
fers stock in a PFIC subject to a section
1295 election to a pass-through entity and
such stock is not subject to a preexisting
QEF election made by the pass-through
entity, any other person that becomes a
shareholder of such PFIC as a result of
the transfer will be subject to the income
inclusion rules of this section only if such
person makes a section 1295 election with
respect to the transferred PFIC stock un-
der §1.1295-1(d)(2).
(iii) QEF stock transferred to domes-
tic nongrantor trust. Notwithstanding
paragraphs (c)(3)(i) and (ii) of this sec-
tion, if a shareholder transfers stock in a
PFIC subject to a section 1295 election
to a domestic nongrantor trust in which
it is a beneficiary, and the transferee do-
mestic nongrantor trust makes a section
1295 election with respect to that stock
pursuant to §1.1295-1(d)(2)(iii)(A)(1),
the domestic nongrantor trust, and the
transferor and any person that becomes
a shareholder of the QEF as a result of
the transfer, take into account their share
of ordinary earnings and net capital gain
attributable to the QEF shares under
paragraph (c)(2) of this section. If the
transferee domestic nongrantor trust does
not make a section 1295 election with re-
spect to the transferred PFIC stock, the
transferor continues to be subject, in its
capacity as an indirect shareholder, to the
income inclusion rules of paragraph (c)
(1) of this section.
(4) Applicability date. Paragraph (c)
of this section applies to taxable years of
shareholders beginning on or after [date
of publication of the Treasury decision
adopting these rules as final regulations in
the Federal Register]. For taxable years
of shareholders beginning before [date
of publication of the Treasury decision
adopting these rules as final regulations in
the Federal Register], see §1.1293-1(c),
as in effect and contained in 26 CFR part
1, as revised April 1, 2021.
Par. 10. Section 1.1295-1 is amended
by:
1. Revising paragraph (b)(3);
2. Removing the language “are defined
in paragraph (j) of this section” in para-
graph (c)(1) and adding “are defined in
paragraphs (j)(3) and (4) of this section,
respectively” in its place;
3. Removing the language “(as defined
in paragraph (j) of this section)” in para-
graph (c)(2)(iv) and adding “(as defined
in paragraph (j)(2) of this section)” in its
place;
4. Revising paragraphs (d)(1), (d)(2)(i)
(A) and (B), and (d)(2)(ii);
5. In paragraph (d)(2)(iii)(A)(1):
i. Removing the language Ҥ1.1293-
1(c)(1)” and adding “§1.1293-1(c)(2)” in
its place; and
ii. Removing the language “domes-
tic trust or estate” and adding “domestic
nongrantor trust or domestic estate” in its
place;
6. Revising paragraph (f)(2)(i) intro-
ductory text;
7. Redesignating paragraph (f)(3) as
paragraph (f)(5);
8. Adding a new paragraph (f)(3) and
paragraph (f)(4);
9. Removing the language “as de-
fined in paragraph (j) of this section” in
paragraph (g)(3) and adding “as defined
in paragraph (j)(1) of this section” in its
place;
10. Removing the language “(as de-
fined in paragraph (j) of this section)” and
“§ 1.1295-1” in paragraph (h) and adding
“(as defined in paragraph (j)(4) of this sec-
tion)” and “this section” in their places,
respectively;
11. Removing and reserving paragraph
(i)(1)(ii);
12. Revising paragraph (j); and
13. In paragraph (k):
i. Revising the heading;
ii. Removing the language “(b)(3),” in
the first sentence;
iii. Removing the language “and (c)
through (j) of this section” in the first sen-
tence and adding “(c), (d)(2)(iv), (d)(3)
through (d)(6), (e), (f)(1), (f)(2)(ii), (g),
(h), (i)(1)(i) and (iii), and (i)(2) through
(5) of this section” in its place;
iv. Removing the language “(f) and (g)
of this section” in the second sentence of
and adding “(f)(1), (f)(2)(ii), and (g) of
this section” in its place;
v. Removing the third sentence; and
vi. Adding two sentences at the end of
the paragraph.
The revisions and additions read as fol-
lows:
§1.1295-1 Qualified electing funds.
* * * * *
(b) * * *
(3) Application of general rules to
stock held by a pass through entity—(i)
Stock subject to a section 1295 election
transferred to a domestic nongrantor
trust or domestic estate. A shareholder’s
section 1295 election will not apply to a
domestic nongrantor trust or domestic
estate to which the shareholder transfers
stock subject to a section 1295 election,
or to any other United States person that
is a beneficiary of the domestic nongrant-
or trust or estate. However, as provid-
ed in paragraph (c)(2)(iv) of this section
(relating to a transfer to a domestic pass
through entity of stock subject to a section
1295 election), a shareholder that transfers
stock subject to a section 1295 election to
a domestic nongrantor trust or domestic
estate will continue to be subject to the
section 1295 election with respect to the
stock indirectly owned through the do-
mestic nongrantor trust or domestic estate
and any other stock of that PFIC owned by
the shareholder.

February 14, 2022 782 Bulletin No. 2022–7
(ii) Limitation on application of domes-
tic nongrantor trust’s or domestic estate’s
section 1295 election. Except as provided
in paragraph (c)(2)(iv) of this section, a
section 1295 election made by a domestic
nongrantor trust or domestic estate does
not apply to other stock of the PFIC held
directly or indirectly by the beneficiary.
(iii) Effect of partnership termination
on preexisting partnership section 1295
election. The termination of a preexisting
partnership section 1295 election (within
the meaning of paragraph (d)(2)(i)(B) of
this section) by reason of the termination
of the partnership under section 708(b)
will not terminate the section 1295 elec-
tion with respect to partners of the termi-
nated partnership that are partners of the
new partnership (continuing partners).
The stock of the PFIC of which a new
partner (partners other than continuing
partners) is an indirect shareholder will be
treated as stock of a QEF with respect to
such partner only if the new partner makes
or has made a section 1295 election with
respect to that stock under paragraph (d)
(2)(i)(A) of this section.
(iv) Characterization of stock held
through a pass-through entity. Stock of
a PFIC held through a pass-through enti-
ty will be treated as stock of a pedigreed
QEF with respect to a shareholder (as de-
fined in paragraph (j)(3) of this section)
that is treated as owning such stock by
reason of an interest in the pass-through
entity only if—
(A) In the case of PFIC stock acquired
(other than in a transaction in which gain
is not fully recognized, including pursuant
to regulations in this part under section
1291(f)) and held by a domestic pass-
through entity, the domestic pass-through
entity has made a preexisting section 1295
election under paragraph (d)(2)(i)(B) or
(d)(2)(ii)(B) of this section, or makes an
election under paragraph (d)(2)(iii)(A)(1)
of this section, and the PFIC has been a
QEF with respect to the pass-through en-
tity for all taxable years that are included
in the pass-through entity’s holding period
of the PFIC stock and during which the
foreign corporation was a PFIC within the
meaning of §1.1291-9(j)(1);
(B) In the case of PFIC stock acquired
(other than in a transaction in which gain
is not fully recognized, including pursuant
to regulations in this part under section
1291(f)) and held by a domestic pass-
through entity, other than PFIC stock de-
scribed in paragraph (b)(3)(iv)(A) of this
section, through which the shareholder is
treated as owning such PFIC stock, the
shareholder makes the section 1295 elec-
tion under paragraph (d)(2)(i)(A), (d)(2)
(ii)(A), (d)(2)(iii)(A)(2), or (d)(2)(iii)(B)
of this section, and the PFIC has been a
QEF with respect to the shareholder for
all taxable years that are included in the
shareholder’s holding period for the PFIC
stock, and during which the foreign corpo-
ration was a PFIC within the meaning of
§1.1291-9(j)(1); or
(C) In the case of PFIC stock trans-
ferred by an interest holder or beneficiary
to a pass-through entity in a transaction
in which gain is not fully recognized (in-
cluding pursuant to regulations in this part
under section 1291(f)), if the pass-through
entity made a preexisting section 1295
election under paragraph (d)(2)(i)(B) or
(d)(2)(ii)(B) of this section with respect
to the PFIC stock, or the shareholder or
pass-through entity, as applicable, makes
a section 1295 election under paragraph
(d)(2)(i)(A), (d)(2)(ii)(A), (d)(2)(iii)(A)
(1) or (2), or (d)(2)(iii)(B) of this section,
in each case for the taxable year in which
the transfer was made, or the sharehold-
er’s section 1295 election continues pur-
suant to paragraph (c)(2)(iv) of this sec-
tion. If the foreign corporation was a PFIC
within the meaning of §1.1291-9(j) at the
time of the transfer, the PFIC stock trans-
ferred will be treated as stock of a ped-
igreed QEF with respect to a transferor,
however, only if that stock was treated as
stock of a pedigreed QEF with respect to
the transferor at the time of the transfer. In
all cases subject to this paragraph (b)(3)
(iv)(C), the PFIC stock will be treated as
stock of a pedigreed QEF only if the PFIC
has been a QEF for all taxable years of the
PFIC that are included wholly or partly
in the shareholder’s holding period of the
PFIC stock during which the foreign cor-
poration was a PFIC within the meaning
of §1.1291-9(j).
(v) Characterization of stock distribut-
ed by a partnership. In the case of PFIC
stock distributed by a partnership to one
or more partners in a transaction in which
gain is not fully recognized (including
pursuant to regulations in this part under
section 1291(f)), the PFIC stock will be
treated as stock of a pedigreed QEF by a
shareholder only if that stock was treated
as stock of a pedigreed QEF with respect
to the shareholder immediately before the
distribution, or, in the case of a distribu-
tion of PFIC stock by a partnership to one
or more partners in the first year of the dis-
tributee partner or partners’ holding period
of the PFIC stock, the distributee partner
or partners make an election as provided
in paragraph (d)(2) of this section.
* * * * *
(d) * * * (1) General rule. Except as
otherwise provided in this paragraph (d),
any shareholder (as defined in paragraph
(j)(3) of this section) of a PFIC, includ-
ing a shareholder that holds stock of a
PFIC in bearer form, may make a section
1295 election with respect to that PFIC.
The shareholder need not own directly
or indirectly any stock of the PFIC when
the shareholder makes the section 1295
election provided the shareholder is a
shareholder of the PFIC during the tax-
able year of the PFIC that ends with or
within the taxable year of the sharehold-
er for which the section 1295 election is
made.
(2) * * * (i) * * * (A) In general. If
a partnership (domestic or foreign) holds
stock of a PFIC, the section 1295 election
with respect to such PFIC is made by a
shareholder (as defined in paragraph (j)
(3) of this section) indirectly owning the
PFIC stock by reason of its interest in the
partnership. A section 1295 election made
by a shareholder under this paragraph (d)
(2)(i)(A) applies to the stock of the PFIC
indirectly owned by the shareholder by
reason of its interest in the partnership and
to any other stock of the PFIC owned by
the shareholder. A shareholder making an
election under this paragraph (d)(2)(i)(A)
must do so in the form and manner pro-
vided in paragraph (f) of this section. The
shareholder must also notify the partner-
ship of the election no later than 30 days
after filing the return in which the elec-
tion is made; the shareholder may notify
the partnership in any reasonable manner.
However, the failure of the shareholder to
notify the partnership of its election does
not invalidate an otherwise valid election
under this paragraph (d)(2)(i)(A). A share-
holder making an election under this para-
graph (d)(2)(i)(A) accounts for its pro rata
share of ordinary earnings and net capital

Bulletin No. 2022–7 783 February 14, 2022
gain attributable to the QEF stock as pro-
vided in §1.1293-1(c)(1).
(B) Preexisting section 1295 election
by domestic partnership. Any section
1295 election made by a domestic part-
nership with respect to a PFIC effective
for taxable years of the PFIC ending on or
before [date of publication of the Treasury
decision adopting these rules as final reg-
ulations in the Federal Register] (preex-
isting partnership section 1295 election)
will be treated as if it were made by each
shareholder that is treated as owning stock
in the PFIC by reason of its interest in the
domestic partnership on or before such
date, and the stock in the PFIC will contin-
ue to be treated as stock in a QEF to such
shareholder; any partner that becomes a
shareholder of the PFIC by acquiring an
interest in the domestic partnership after
[date of publication of the Treasury deci-
sion adopting these rules as final regula-
tions in the Federal Register] and wishes
to have a section 1295 election applicable
with respect to the PFIC may make a sec-
tion 1295 election under paragraph (d)(2)
(i)(A) of this section with respect to stock
treated as owned by reason of its interest
in the domestic partnership. A shareholder
that is treated as owning stock of a QEF by
reason of an interest in a domestic partner-
ship that has made a preexisting partner-
ship section 1295 election accounts for its
pro rata share of the ordinary earnings and
net capital gain attributable to such QEF
stock as provided in §1.1293-1(c)(1).
(ii) S corporation—(A) In general. If
an S corporation holds stock of a PFIC,
the section 1295 election with respect to
such PFIC is made by a shareholder (as
defined in paragraph (j)(3) of this section)
indirectly owning the PFIC stock by rea-
son of its interest in the S corporation. A
section 1295 election made by a share-
holder under this paragraph (d)(2)(ii)(A)
applies to the stock of the PFIC held by
the shareholder by reason of its interest in
the S corporation and to any other stock
of the PFIC held by the shareholder. A
shareholder making an election under this
paragraph (d)(2)(ii)(A) must do so in the
form and manner provided in paragraph
(f) of this section. The shareholder must
also notify the S corporation of the elec-
tion no later than 30 days after filing the
return in which the election is made; the
shareholder may notify the S corporation
in any reasonable manner. However, the
failure of the shareholder to notify the S
corporation of its election does not inval-
idate an otherwise valid election under
this paragraph (d)(2)(ii)(A). A shareholder
making an election under this paragraph
(d)(2)(ii)(A) accounts for its pro rata share
of ordinary earnings and net capital gain
attributable to the QEF stock as provided
in §1.1293-1(c)(1).
(B) Preexisting section 1295 election
by S corporation. Any section 1295 elec-
tion made by an S corporation with re-
spect to a PFIC effective for taxable years
of such PFIC ending on or before [date
of publication of the Treasury decision
adopting these rules as final regulations
in the Federal Register] (preexisting S
corporation section 1295 election) will be
treated as if it were made by each share-
holder that is treated as owning stock in
the PFIC by reason of its interest in the
S corporation on or before such date, and
the stock in the PFIC will continue to be
treated as stock in a QEF to such share-
holder; any S corporation shareholder that
becomes a shareholder of the PFIC by
acquiring an interest in the S corporation
after [date of publication of the Treasury
decision adopting these rules as final regu-
lations in the Federal Register] and wish-
es to have a section 1295 election applica-
ble with respect to the PFIC may make a
section 1295 election under paragraph (d)
(2)(ii)(A) of this section with respect to
stock treated as owned by reason of its in-
terest in the S corporation. A shareholder
that is treated as owning stock of a QEF by
reason of an interest in an S corporation
that has made a preexisting S corporation
section 1295 election accounts for its pro
rata share of the ordinary earnings and net
capital gain attributable to the QEF stock
as provided in §1.1293-1(c)(1).
* * * * *
(f) * * *
(2) * * * (i) In general. A shareholder
that makes a section 1295 election with
respect to a PFIC, or a shareholder that
is treated as owning stock in a QEF by
reason of an interest in a domestic part-
nership that has made a preexisting part-
nership section 1295 election (within the
meaning of paragraph (d)(2)(i)(B) of this
section) or by reason of an interest in an
S corporation that has made a preexisting
S corporation section 1295 election (with-
in the meaning of paragraph (d)(2)(ii)(B)
of this section), for each taxable year to
which the section 1295 election applies,
must—
* * * * *
(3) Preexisting partnership or S corpo-
ration section 1295 election. A sharehold-
er that is treated as owning stock in a QEF
by reason of an interest in a domestic part-
nership that has made a preexisting part-
nership section 1295 election or by reason
of an interest in an S corporation that has
made a preexisting S corporation section
1295 election does not need to make a
section 1295 election with respect to such
QEF under the rules of paragraph (f)(1) of
this section. However, such shareholder
must comply with the annual election re-
quirements as provided in paragraph (f)(2)
of this section.
(4) Notice requirement for partners
and S corporation shareholders. See para-
graphs (d)(2)(i)(A) and (d)(2)(ii)(A) of
this section for a notice requirement for
partners and S corporation shareholders
making a section 1295 election under this
section.
* * * * *
(j) Definitions. For purposes of this
section—
(1) Intermediary. The term intermedi-
ary means a nominee or shareholder of
record that holds stock on behalf of the
shareholder or on behalf of another per-
son in a chain of ownership between the
shareholder and the PFIC, and any direct
or indirect beneficial owner of PFIC stock
(including a beneficial owner that is a
pass-through entity) in the chain of own-
ership between the shareholder and the
PFIC.
(2) Pass-through entity. The term pass-
through entity means a partnership, S cor-
poration, trust, or estate.
(3) Shareholder. The term shareholder
has the meaning provided in §1.1291-1(b)
(7).
(4) Shareholder’s election year. The
term shareholder’s election year means
the taxable year of the shareholder for
which it makes the section 1295 election.
(k) Applicability dates. * * * Para-
graphs (b)(3), (d)(1), (d)(2)(i) and (ii), (f)
(2)(i), (f)(3) and (4), and (j) of this section
apply to taxable years of shareholders be-
ginning on or after [date of publication of
the Treasury decision adopting these rules

February 14, 2022 784 Bulletin No. 2022–7
as final regulations in the Federal Regis-
ter]. For taxable years of shareholders be-
ginning before [date of publication of the
Treasury decision adopting these rules as
final regulations in the Federal Register],
see §1.1295-1(b)(3), (d)(1), (d)(2)(i) and
(ii), (f)(2)(i), (i)(1)(ii), and (j) as in effect
and contained in 26 CFR part 1, as revised
April 1, 2021.
Par. 11. Section 1.1296-1 is amended
by:
1. Adding paragraph (a)(4);
2. Revising paragraph (e)(1);
3. Removing paragraph (g)(3);
4. Revising paragraphs (h)(1)(i) and
(j); and
5. For each paragraph listed in the
following table, removing the language
in the “Remove” column and adding in
its place the language in the “Add” col-
umn.
ParagraphRemoveAdd
(b)(1)United States personshareholder
(b)(2), headingUnited States personshareholder
(b)(2), first sentenceUnited States personshareholder
(b)(2), first sentenceU.S. personshareholder
(b)(2), second sentenceUnited States person’sshareholder’s
(b)(3), second sentenceUnited States person’sshareholder’s
(b)(3), second sentenceperson owns directlyshareholder owns directly
(c)(1) United States person’sshareholder’s
(c)(1)United States personshareholder
(c)(3)United States person’sshareholder’s
(c)(3)such personsuch shareholder
(c)(5)United States personshareholder
(d)(1)United States personshareholder
(d)(2), headingcertain foreign entitiespass-through entities
(d)(2)(i), first and last sentencesUnited States personshareholder
(d)(2)(i), first sentencecertain foreign entitiespass-through entities
(d)(2)(i), first sentenceforeign entityentity
(d)(2)(i), last sentenceUnited States person’sshareholder’s
(e), headingforeign entitiespass-through entities
(f)taxpayershareholder
(f)taxpayer’sshareholder’s
(g)(1)United States personshareholder
(g)(2), headingUnited States personshareholder
(g)(2)(i)United States personshareholder
(h)(1)(ii)controlling United States shareholderscontrolling domestic shareholders
(h)(2)(ii), first sentenceUnited States personshareholder
(h)(2)(ii), last sentenceUnited States person’sshareholder’s
(h)(3)(i), first sentenceUnited States person’sshareholder’s
(h)(3)(i), first sentenceUnited States personshareholder
(h)(3)(ii), second sentenceUnited States personshareholder
(i)(1)United States person’sshareholder’s
(i)(1)United States personshareholder
(i)(2), introductory textUnited States personshareholder
(i)(2)(ii)United States person’sshareholder’s
(i)(2)(ii)taxpayer’sshareholder’s
The addition and revisions read as follows:

Bulletin No. 2022–7 785 February 14, 2022
§1.1296-1 Mark to market election for
marketable stock.
(a) * * *
(4) Shareholder. The term shareholder
has the meaning provided in §1.1291-1(b)
(7).
* * * * *
(e) * * * (1) In general. Except as pro-
vided in paragraph (e)(2) of this section,
the following rules apply in determining
stock ownership for purposes of this sec-
tion. PFIC stock owned, directly or indi-
rectly, by or for a partnership (domestic
or foreign), S corporation, foreign trust
(other than a foreign trust that is described
in sections 671 through 679), or foreign
estate is considered as being owned pro-
portionately by its partners, shareholders,
or beneficiaries, respectively. PFIC stock
owned, directly or indirectly, by or for a
trust (domestic or foreign) described in
sections 671 through 679 is considered
as being owned proportionately by its
grantors or other persons treated as own-
ers under sections 671 through 679 of any
portion of the trust that includes the stock.
The determination of a person’s propor-
tionate interest in a partnership, S corpo-
ration, trust, or estate will be made on the
basis of all the facts and circumstances.
Stock considered owned by a person by
reason of this paragraph is treated as actu-
ally owned by such person for purposes of
applying the rules of this section.
* * * * *
(h) * * * (1) * * * (i) Shareholders.
Except as otherwise provided in this para-
graph (h), a shareholder (as defined in
paragraph (a)(4) of this section) that owns
marketable stock in a PFIC, or is treated
as owning marketable stock under para-
graph (e) of this section, on the last day of
the shareholder’s taxable year, must make
a section 1296 election for such taxable
year on or before the due date (including
extensions) of its income tax return for
that year. The section 1296 election must
be made on the Form 8621, “Return by
a Shareholder of a Passive Foreign In-
vestment Company or Qualified Electing
Fund” (or successor form), included with
the original or superseding tax return of
the shareholder for that year.
(A) Preexisting section 1296 election.
Notwithstanding paragraph (h)(1)(i) of
this section, any section 1296 election
with respect to a PFIC made by a domes-
tic partnership or S corporation effective
for taxable years of the PFIC ending on
or before [date of publication of the Trea-
sury decision adopting these rules as fi-
nal regulations in the Federal Register]
(preexisting section 1296 election) will
continue to apply, and any stock in the
PFIC that a shareholder is treated as own-
ing by reason of its interest in the domes-
tic partnership or S corporation on or be-
fore such date will continue to be treated
as section 1296 stock to such sharehold-
er; any person that becomes a sharehold-
er of the PFIC by acquiring an interest in
the domestic partnership or S corporation
after such date that wishes for a section
1296 election to apply with respect to the
PFIC may make a section 1296 election
as provided in paragraphs (b)(1) and (h)
(1)(i) of this section. A shareholder that is
treated as owning section 1296 stock by
reason of an interest in a domestic part-
nership or S corporation that has made a
preexisting 1296 election under this para-
graph (h)(1)(i)(A) accounts for its share,
through its ownership in the domestic
partnership or S corporation, of any mark
to market gain recognized under para-
graph (c)(1) of this section and any mark
to market loss under paragraph (c)(3)
of this section as if it owned the section
1296 stock directly.
(B) Notice. A shareholder that makes
a section 1296 election with respect to
section 1296 stock owned through a part-
nership or S corporation must notify the
partnership or S corporation of the elec-
tion no later than 30 days after filing the
return in which the election is made; the
shareholder may provide such notifica-
tion in any reasonable manner. However,
the failure of the shareholder to notify the
partnership or S corporation of its election
will not invalidate an otherwise valid sec-
tion 1296 election.
* * * * *
(j) Applicability date. Except as oth-
erwise provided in this paragraph (j), the
provisions in this section apply to taxable
years beginning on or after May 3, 2004.
The provisions of paragraph (d)(4) of this
section relating to section 1022 apply on
and after January 19, 2017. The provi-
sions of paragraphs (a)(4); (b)(1) through
(3); (c)(1), (3), and (5); (d)(1) and (d)(2)
(i); (e)(1); (f); (g)(1), (g)(2)(i), and (g)
(3); (h)(1)(i) and (ii), (h)(2)(ii), and (h)(3)
(i) and (ii); and (i)(1), (i)(2) introductory
text, and (i)(2)(ii) apply to taxable years
of shareholders beginning on or after [date
of publication of the Treasury decision
adopting these rules as final regulations in
the Federal Register]. For taxable years
of shareholders beginning before [date
of publication of the Treasury decision
adopting these rules as final regulations in
the Federal Register], see §1.1296-1(b)
(1) through (3); (c)(1), (3), and (5); (d)
(1) and (d)(2)(i); (e)(1); (f); (g)(1), (g)(2)
(i), and (g)(3); (h)(1)(i) and (ii), (h)(2)(ii),
and (h)(3)(i) and (ii); and (i)(1), (i)(2) in-
troductory text, and (i)(2)(ii) as in effect
and contained in 26 CFR part 1, as revised
April 1, 2021.
§1.1297-0 [Amended]
Par. 12. Section 1.1297-0 is amend-
ed by removing the language “section
1297(e) PFIC” from the heading for the
entry for §1.1297-3 and adding “section
1297(d) PFIC” in its place.
Par. 13. Section 1.1297-3 is amended
by:
1. Revising the section heading;
2. Removing the language “section
1297(e)” in paragraph (a) and adding
“section 1297(d)” in its place;
3. Removing the language “section
1297(e) PFIC” in paragraphs (b)(1) and
(2) and adding “section 1297(d) PFIC” in
its place;
4. Removing the language “section
1297(e)(2)” in paragraph (b)(2) and add-
ing “section 1297(d)(2)” in its place;
5. Removing the language “section
1297(e) PFIC” in paragraphs (c)(1) and
(2) and adding “section 1297(d) PFIC” in
its place;
6. Removing the language “section
1297(e)(2)” in paragraph (c)(2) and add-
ing “section 1297(d)(2)” in its place;
7. Removing the language “the post-
1986 undistributed earnings, within the
meaning of section 902(c)(1) (determined
without regard to section 902(c)(3))” in
paragraphs (c)(3)(i)(A) and (B) and add-
ing “the amount of the earnings and prof-
its of the foreign corporation (computed
in accordance with sections 964(a) and
986)” in its place; and
8. Removing the language “section
1297(e) PFIC” in paragraphs (d) and (e)

February 14, 2022 786 Bulletin No. 2022–7
(1) and adding “section 1297(d) PFIC” in
its place.
The revision reads as follows:
§1.1297-3 Deemed sale or deemed
dividend election by a U.S. person that is
a shareholder of a section 1297(d) PFIC.
* * * * *
Par. 14. Section 1.1298-1 is amended
by:
1. Revising paragraphs (b)(1), (b)(2)
heading, (b)(2)(i) introductory text, and
(b)(2)(ii);
2. Removing paragraph (c)(6);
3. Redesignating paragraphs (c)(7)
through (9) as paragraphs (c)(6) through
(8), respectively;
4. Removing the language “Except as
provided in paragraph (h)(2) of this sec-
tion” in paragraph (h)(1) and adding “Ex-
cept as provided in paragraph (h)(2) or (3)
of this section” in its place;
5. Removing the language “Paragraph
(c)(9)” in paragraph (h)(2) and adding
“Paragraph (c)(8)” in its place; and
6. Adding paragraph (h)(3).
The revisions and addition read as fol-
lows:
§1.1298-1 Section 1298(f) annual
reporting requirements for United States
persons that are shareholders of a
passive foreign investment company.
* * * * *
(b) * * * (1) General rule. Except as
otherwise provided in this section, a Unit-
ed States person that is a shareholder of a
PFIC (as defined in §1.1291-1(b)(7)) must
complete and file Form 8621, “Informa-
tion Return by a Shareholder of a Passive
Foreign Investment Company or Qualified
Electing Fund” (or successor form), under
section 1298(f) and this section for the
PFIC if, during the shareholder’s taxable
year, the shareholder—
(i) Directly owns stock of the PFIC; or
(ii) Is an indirect shareholder under
§1.1291-1(b)(8) that holds any interest
in the PFIC through one or more entities,
domestic or foreign, each of which is not
a shareholder of such PFIC within the
meaning of §1.1291-1(b)(7).
(2) Additional requirement to file for
certain beneficiaries of domestic estates
and domestic nongrantor trusts—(i)
General rule. Except as otherwise pro-
vided in this section, an indirect share-
holder that owns an interest in a PFIC
by reason of an interest in a domestic es-
tate or domestic nongrantor trust (as de-
scribed in §1.1291-1(b)(8)(iii)(C)) also
must file Form 8621 (or successor form)
with respect to the PFIC under section
1298(f) and this section if, during the
indirect shareholder’s taxable year, the
indirect shareholder is—
* * * * *
(ii) Exception to indirect shareholder
reporting for certain QEF inclusions and
MTM inclusions. The filing requirements
under paragraph (b)(2)(i) of this section
do not apply with respect to an interest in
a PFIC owned by an indirect sharehold-
er described in paragraph (b)(2)(i)(C) or
(D) of this section if the domestic non-
grantor trust or domestic estate through
which the indirect shareholder owns such
interest in the PFIC timely files Form
8621 (or successor form) with respect to
the PFIC under paragraph (b)(1) of this
section.
* * * * *
(h) * * *
(3) Paragraphs (b)(1) and (b)(2)(i) and
(ii) of this section apply to taxable years
of shareholders beginning on or after [date
of publication of the Treasury decision
adopting these rules as final regulations in
the Federal Register]. For taxable years
of shareholders beginning before [date
of publication of the Treasury decision
adopting these rules as final regulations in
the Federal Register], see §1.1298-1(b)
(1) and (b)(2)(i) and (ii) as in effect and
contained in 26 CFR part 1, as revised
April 1, 2021.
§1.1298-3 [Amended]
Par. 15. Section 1.1298-3 is amended
by removing the language “the post-1986
undistributed earnings, within the mean-
ing of section 902(c)(1) (determined with-
out regard to section 902(c)(3))” in para-
graph (c)(3)(i) and adding “the amount
of the earnings and profits of the foreign
corporation (computed in accordance with
sections 964(a) and 986)” in its place.
Par. 16. Section 1.1411-10 is amended
by:
1. Removing paragraph (g)(2)(iii);
2. Revising paragraph (g)(3);
3. Removing paragraph (g)(4)(ii);
4. Redesignating paragraphs (g)(4)(iii)
and (iv) as paragraphs (g)(4)(ii) and (iii),
respectively; and
5. Revising newly redesignated para-
graph (g)(4)(iii) and paragraph (i).
The revisions read as follows:
§1.1411-10 Controlled foreign
corporations and passive foreign
investment companies.
* * * * *
(g) * * *
(3) Who may make the election—(i)
In general. An individual, estate, or trust
may make an election under paragraph (g)
of this section with respect to each CFC
or QEF that it holds directly or indirect-
ly through one or more entities, each of
which is a foreign entity or a domestic
pass-through entity. The election, if made,
for an estate or trust must be made by the
fiduciary of the estate or trust.
(ii) Special rule for certain S corpo-
rations. For taxable years in which an S
corporation elects to apply §1.958-1(e),
the S corporation may make an election
under this paragraph (g)(3)(ii) with re-
spect to each CFC that it holds, directly
or indirectly. If an S corporation does not
make the election under this paragraph (g)
(3)(ii), the election may be made by its
shareholders that are individuals, estates,
or trusts instead.
(4) * * *
(iii) Time for making election. The
election under paragraph (g) of this sec-
tion must be made in the manner pre-
scribed by forms, instructions, or in other
guidance on the individual’s, estate’s,
or trust’s original or amended return for
the taxable year for which the election
is made. An election can be made on an
amended return only if the taxable year
for which the election is made, and all
taxable years that are affected by the
election, are not closed by the period of
limitations on assessments under section
6501. Extensions of time to make the
election are not available under any other
provision of the law, including §301.9100
of this chapter.
* * * * *
(i) Applicability dates. Except as oth-
erwise provided in this paragraph (i), this
section applies to taxable years beginning

Bulletin No. 2022–7 787 February 14, 2022
after December 31, 2013. However, tax-
payers may apply this section to taxable
years beginning after December 31, 2012,
in accordance with §1.1411-1(f). Para-
graphs (g)(3) and (g)(4)(iii) of this sec-
tion apply to taxable years beginning on
or after [date of publication of the Trea-
sury decision adopting these rules as fi-
nal regulations in the Federal Register].
For taxable years beginning before [date
of publication of the Treasury decision
adopting these rules as final regulations
in the Federal Register], see paragraphs
(g)(3) and (g)(4)(iii) of this section as in
effect and contained in 26 CFR part 1, as
revised April 1, 2021.
Douglas W. O’Donnell,
Deputy Commissioner for Services
and Enforcement.
(Filed by the Office of the Federal Register on Jan-
uary 24, 2021, 8:45 a.m., and published in the issue
of the Federal Register for January 25, 2022, 87 F.R.
3890)

Bulletin No. 2022–7 i February 14, 2022
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cas-
es in litigation, or the outcome of a Ser-
vice study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI
—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

February 14, 2022 ii Bulletin No. 2022–7
Numerical Finding List
1
Bulletin 2022–7
AOD:
2022-1, 2022-06 I.R.B. 466
Notices:
2022-1, 2022-02 I.R.B. 304
2022-2, 2022-02 I.R.B. 304
2022-3, 2022-02 I.R.B. 308
2022-4, 2022-02 I.R.B. 309
2022-5, 2022-05 I.R.B. 457
2022-6, 2022-05 I.R.B. 460
2022-7, 2022-06 I.R.B. 469
2022-8, 2022-07 I.R.B. 491
Proposed Regulations:
REG-118250-20, 2022-07 I.R.B. 753
Revenue Procedures:
2022-1, 2022-01 I.R.B. 1
2022-2, 2022-01 I.R.B. 120
2022-3, 2022-01 I.R.B. 144
2022-4, 2022-01 I.R.B. 161
2022-5, 2022-01 I.R.B. 256
2022-7, 2022-01 I.R.B. 297
2022-9, 2022-02 I.R.B. 310
2022-11, 2022-03 I.R.B. 449
2022-8, 2022-04 I.R.B. 451
2022-10, 2022-06 I.R.B. 473
2022-13, 2022-06 I.R.B. 477
2022-12, 2022-07 I.R.B. 494
2022-14, 2022-07 I.R.B. 502
Revenue Rulings:
2022-1, 2022-02 I.R.B. 301
2022-2, 2022-04 I.R.B. 451
2022-3, 2022-06 I.R.B. 467
Treasury Decisions:
9959, 2022-03 I.R.B. 328
9961, 2022-03 I.R.B. 430
9960, 2022-07 I.R.B. 481
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2020–27 through 2020–52 is in Internal Revenue Bulletin
2020–52, dated December 27, 2021.

Bulletin No. 2022–7 iii February 14, 2022
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2022–7
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2020–27 through 2020–52 is in Internal Revenue Bulletin
2020–52, dated December 27, 2021.

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