rp-13-20.pdf

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26 CFR 601.204: Changes in accounting periods and methods of accounting
(Also Part I, §§ 263A, 446, 481; 1.263A-4, 1.446-1)

Rev. Proc. 2013-20

SECTION 1. PURPOSE
This revenue procedure modifies Revenue Procedure 2011-14, 2011-4 I.R.B.
330, to provide procedures for a taxpayer to obtain the automatic consent of the
Commissioner under § 446(e) of the Internal Revenue Code to change its method of
accounting under § 263A for the production of one or more plants removed from the list
of plants grown in commercial quantities in the United States having a preproductive
period in excess of two years based on the nationwide weighted average preproductive
period for such plant.
SECTION 2. BACKGROUND
.01 Section 263A requires generally that the direct costs and an allocable share
of indirect costs of real or tangible personal property produced by a taxpayer be
capitalized. Under § 263A, taxpayers generally are required to capitalize the costs of
producing property in a farming business (including animals and plants without regard to
the length of their preproductive period).
.02 Sections 263A(d) and (e) set forth special rules for property produced in the

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trade or business of farming. Under § 263A(d)(1) and § 1.263A-4(a)(2), taxpayers that
are not required by § 447 to use an accrual method of accounting and are not tax
shelters prohibited by § 448(a)(3) from using the cash receipts and disbursements
method of accounting (“qualified taxpayers”) are not required to capitalize (1) the costs
of producing animals in a farming business, or (2) the costs of producing plants with a
preproductive period of 2 years or less. In addition, under § 263A(d)(3) and § 1.263A-
4(d), a qualified taxpayer may elect to have § 263A not apply to the cost of producing
plants in a farming business (other than citrus or almond trees). Thus, unless an
election is made to have § 263A not apply in accordance with § 263A(d)(3), qualified
taxpayers generally are required to capitalize the costs of producing plants that have a
preproductive period in excess of 2 years.
.03 Section 263A(e)(3)(B) and § 1.263A-4(b)(2)(i)(B) provide that, for purposes of
determining whether a plant has a preproductive period in excess of 2 years, the
preproductive period of plants grown in commercial quantities in the United States must
be based on the nationwide weighted average preproductive period for such plants.
The legislative history of § 263A explains that Congress expected the Treasury
Department to periodically publish a list of the preproductive periods of various plants
based on the nationwide weighted averages for such plants. See H.R. Rep. No. 426,
99th Cong., 1st Sess. 628 (1985), 1986-3 (Vol. 2) C.B. 628. A proposed list was
included in the preamble of the proposed § 1.263A-4 regulations (REG-208151-91,
1997-2 C.B. 35 [62 Fed. Reg. 44542]). The Internal Revenue Service (Service) and
Treasury Department received and considered comments on the proposed list in

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prepar
aving a nationwide weighted
averag
and
ds that have a nationwide
weight
nd
of
ss must obtain the consent of the Commissioner to not apply § 263A to
such c
rules
and once an election is made,
it is rev
ry

ing Notice 2000-45.
.04 In Notice 2000-45, 2000-2 C.B. 256, the Service and the Treasury
Department published a nonexclusive list of plants h
e preproductive period in excess of 2 years.
.05. Concurrently with the issuance of this revenue procedure, the Service and
the Treasury Department are issuing Notice 2013-18 (2013-14 I.R.B. __), modifying
superseding Notice 2000-45. Notice 2013-18 removes blackberry, raspberry, and
papaya plants from the list of plants that produce crops or yiel
ed average preproductive period in excess of 2 years.
.06 Not applying § 263A to the production of a plant pursuant to § 263A(d)(1) a
§ 1.263A-4(a)(2) is a method of accounting under § 446. Therefore, a taxpayer that
currently applies § 263A to the costs of producing plants with a preproductive period
2 years or le
osts.
.07 The election pursuant to § 263A(d)(3) and § 1.263A-4(d) to not have the
of § 263A(d) apply to all plants produced in a farming business conducted by the
electing taxpayer is a method of accounting under § 446,
ocable only with consent of the Commissioner.
.08 Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe
administrative procedures setting forth the limitations, terms, and conditions necessa
to permit a taxpayer to obtain consent to change a method of accounting. Revenue
Procedure 2011-14 provides the procedures by which a taxpayer may obtain automatic

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f accounting described in the
APPEN
O REV. PROC. 2011-14
t of
consent from the Commissioner to change to a method o
DIX of Rev. Proc. 2011-14.
SECTION 3. MODIFICATION T
Revenue Procedure 2011-14 is modified to add new section 11.08 of the
APPENDIX to read as follows:
.08 Change to not apply § 263A to one or more plants removed from the lis
plants that have a preproductive period in excess of 2 years.
(1) Description of change
. This change applies to a taxpayer that is not
corporation, partnership, or tax shelter required to use an accrual method of accounting
under § 447 or § 448(a)(3), and either (a) wishes to obtain the consent of the
Commissioner to not apply § 263A, pursuant to § 263A(d)(1) and § 1.263A-4(a
the production of one or more plants that the Service and the Treasury Departm
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 pl
plants that have been removed from the list of plants that have a nationwide w
average prep
a

)(2), to
ent
ant or
eighted
roductive period in excess of 2 years, and wishes to revoke its
§ 263A(d)(3) election with respect to those plants. See Notice 2013-18, or its
successor.
(2) Certain scope limitations temporarily inapplicable
. The scope limitations in
sections 4.02(1) through (4) and (7) of this revenue procedure do not apply to a
taxpayg after er that wants to make the change for its first or second taxable year endin

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February 15, 2013.
(3) Audit protection. If a taxpayer currently does not apply § 263A to its
blackberry, raspberry, or papaya plants in a manner that complies with the requi
of § 263A(d)(1) and § 1.263A-4(a)(2), such method of accounting will not be raised as
an issue by the Service in a taxable year that ends on or before February 15, 201
Also, if the use of such a method of accounting by a taxpayer is an issue under
consideration (within the
rements
3.
meaning of section 3.08 of this revenue procedure) 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, that issue will not be pursued
further by the Service.
(4) Manner of making change
. A change under this section 11.08 is made with
any necessary adjustments under section 481(a). For example, the revocation of an
election under section 263A(d)(3) results in a section 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.
(5) Designated automatic accounting method change number
. The designated
automatic accounting method change number for a change under sec

tion 11.08 of this
APPENDIX is “181.” See section 6.02(4) of this revenue procedure.
(6) Contact information
. For further information regarding a change under this
202-622-4950 (not a toll-free call). section, contact Patrick Clinton at
SECTION 4. EFFECT ON OTHER DOCUMENTS
Rev. Proc. 2011-14 is modified.

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principal author of this revenue procedure is Patrick M. Clinton of the Office
of Associate Chief Counsel (Income Tax & Accounting). For further information
regarding this revenue procedure contact Patrick M. Clinton at 202-622-4950 (not a toll
free call).
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective for taxable years ending after February 15,
2013, the date this revenue procedure was announced by news release.
SECTION 6. DRAFTING INFORMATION
The