rp-25-08.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.204: Changes in accounting periods and in methods of accounting.
(Also, Part 1, §§ 174, 446; 1.446-1.)

Rev. Proc. 2025-8

SECTION 1. PURPOSE
This revenue procedure modifies section 7 of Rev. Proc. 2024-23, 2024-23 I.R.B.
1334, to modify the procedures under § 446 of the Internal Revenue Code (Code)
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and
§ 1.446-1(e) for obtaining automatic consent of the Commissioner of Internal Revenue
(Commissioner) to change methods of accounting for expenditures paid or incurred in
taxable years beginning after December 31, 2021, to comply with § 174 or to rely on
interim guidance provided in sections 3 through 7 of Notice 2023-63, 2023-39 I.R.B.
919, as modified by Notice 2024-12, 2024-5 I.R.B. 616. References in this revenue
procedure to “former § 174” refer to that section as in effect for research or experimental
expenditures paid or incurred in taxable years beginning before January 1, 2022, that is,

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Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax
Regulations (26 CFR part 1).

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prior to the effective date of the amendments made to § 174 by § 13206(a) of Public
Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and
Jobs Act (TCJA). References to “§ 174” in this revenue procedure refer to § 174 as
amended by the TCJA.
SECTION 2. BACKGROUND
.01 Treatment of research and experimental expenditures under former § 174.

Former § 174 allowed taxpayers to deduct research or experimental expenditures
paid or incurred in connection with a trade or business as current expenses, or
alternatively, charge such expenditures to capital account and amortize them ratably
over a period of not less than 60 months.
.02 Treatment of SRE expenditures under § 174.

(1) Section 13206(a) of the TCJA amended former § 174. For amounts paid or
incurred in taxable years beginning after December 31, 2021, that meet the definition of
specified research or experimental (SRE) expenditures under § 174(b), § 174(a)(1)
disallows deductions for such amounts, except as provided in § 174(a)(2). Section
174(a)(2) requires taxpayers to charge SRE expenditures to capital account and allows
amortization deductions of such capitalized expenditures ratably over a 5-year period in
the case of SRE expenditures attributable to domestic research, or a 15-year period in
the case of SRE expenditures attributable to foreign research, beginning with the
midpoint of the taxable year in which such expenditures are paid or incurred. For
additional background on former § 174 and the TCJA amendments to former § 174, see
section 2 of Notice 2023-63.
(2) Section 13206(b) of the TCJA requires taxpayers to treat the amendments

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made by § 13206(a) of the TCJA as a change in method of accounting for purposes of
§ 481 that is (i) initiated by the taxpayer, (ii) made with the consent of the Secretary of
the Treasury or her delegate, and (iii) applied on a cut-off basis to SRE expenditures
paid or incurred in taxable years beginning after December 31, 2021. Thus, no
adjustments under § 481(a) are required or permitted with respect to research or
experimental expenditures paid or incurred in taxable years beginning before January 1,
2022.
.03 Procedural guidance under Rev. Proc. 2023-11.

On December 29, 2022, the Department of the Treasury (Treasury Department)
and the Internal Revenue Service (IRS) issued Rev. Proc. 2023-11, 2023-3 I.R.B. 417,
modifying and superseding Rev. Proc. 2023-8, 2023-3 I.R.B. 407, to provide procedures
to obtain automatic consent to change methods of accounting for SRE expenditures to
comply with § 174. The change in method of accounting provided by Rev. Proc. 2023-
11 was subsequently included in section 7.02 of Rev. Proc. 2023-24, 2023-28 I.R.B.
1207.
.04 Interim guidance under Notice 2023-63, as modified by Notice 2024-12.

Notice 2023-63 was issued on September 8, 2023, to announce that the Treasury
Department and the IRS intend to issue proposed regulations addressing (1) the
capitalization and amortization of SRE expenditures under § 174, (2) the treatment of
SRE expenditures under § 460, and (3) the application of § 482 to cost sharing
arrangements involving SRE expenditures. Sections 3 through 9 of Notice 2023-63
provide interim guidance regarding issues intended to be addressed by forthcoming
proposed regulations. Notice 2024-12 was issued on December 22, 2023, to provide

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additional interim guidance to clarify and modify Notice 2023-63.
.05 Procedural guidance under Rev. Proc. 2024-9.
Revenue Procedure 2024-9, 2024-5 I.R.B. 628, was issued on December 22,
2023, to provide procedures for taxpayers to obtain automatic consent to change
methods of accounting for expenditures paid or incurred in taxable years beginning after
December 31, 2021, to comply with § 174 or to rely on interim guidance under §§ 174
and 460 provided in Notice 2023-63, as modified by Notice 2024-12. The change in
method of accounting for § 174 provided in section 3 of Rev. Proc. 2024-9 modified
section 7.02 of Rev. Proc. 2023-24. Rev. Proc. 2023-24 was subsequently superseded
in part by Rev. Proc. 2024-23. Rev. Proc. 2024-23 renumbered section 7.02 as section
7.01 and removed former section 7.01 as obsolete.
.06 Procedural guidance under Rev. Proc. 2024-34.
(1) Revenue Procedure 2024-34, 2024-38 I.R.B. 604, was issued on August 29,
2024, to provide procedures for taxpayers to obtain automatic consent to change
methods of accounting for expenditures paid or incurred in taxable years beginning after
December 31, 2021, to comply with § 174 or to rely on interim guidance provided in
sections 3 through 7 of Notice 2023-63, as modified by Notice 2024-12. Section 3 of
Rev. Proc. 2024-34 modified section 7.01(5) and (6) of Rev. Proc. 2024-23.
(2) Section 7.01(5)(a) of Rev. Proc. 2024-23, as modified by section 3.01 of Rev.
Proc. 2024-34, waives the eligibility rules in section 5.01(1)(d) (regarding changes made
in the final year of a trade or business) and section 5.01(1)(f) (regarding changes made
in the previous five years for the same item) of Rev. Proc. 2015-13 for a change
described in section 7.01(1)(a) of Rev. Proc. 2024-23 made by a taxpayer for any

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taxable year beginning in 2022 or 2023.
(3) Section 7.01(5)(b) of Rev. Proc. 2024-23, as modified by section 3.01 of Rev.
Proc. 2024-34, provides that a taxpayer may make a change described in section
7.01(1)(a) of Rev. Proc. 2024-23 for a taxable year beginning in 2022 or 2023,
regardless of whether the taxpayer made a change for the same item for any previous
taxable year beginning in 2022 or 2023.
(4) Section 7.01(6) of Rev. Proc. 2024-23, as modified by section 3.01 of Rev.
Proc. 2024-34, provides the following: First, a taxpayer does not receive audit
protection under section 8.01 of Rev. Proc. 2015-13 for a change under section
7.01(1)(a) of Rev. Proc. 2024-23 with respect to expenditures paid or incurred in taxable
years beginning on or before December 31, 2021. Second, a taxpayer does not receive
audit protection under section 8.01 of Rev. Proc. 2015-13 for a change under section
7.01(1)(a) of Rev. Proc. 2024-23 made for any taxable year beginning in 2022 or 2023
(other than the first taxable year beginning after December 31, 2021), with respect to
expenditures paid or incurred in the first taxable year beginning after December 31,
2021, if the taxpayer did not change its method of accounting under section 7.01(1)(a)
in an effort to comply with § 174 for the first taxable year beginning after December 31,
2021. See section 8.02(2) of Rev. Proc. 2015-13.
.07 Changing methods of accounting under § 446(e).
(1) Except as otherwise expressly provided in the Code and the regulations
thereunder, § 446(e) and § 1.446-1(e)(2) require a taxpayer to secure the consent of the
Commissioner before changing a method of accounting for Federal income tax
purposes. Section 1.446-1(e)(3)(i) states, in part, that except as otherwise provided

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under the authority of § 1.446-1(e)(3)(ii), to secure the Commissioner’s consent to a
taxpayer’s change in method of accounting the taxpayer generally must file a Form
3115, Application for Change in Accounting Method, with the Commissioner during the
taxable year in which the taxpayer desires to make the change in method of accounting.
Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe administrative
procedures under which taxpayers will be permitted to change their method of
accounting. The administrative procedures will prescribe those terms and conditions
necessary to obtain the Commissioner’s consent to effect the change and to prevent
amounts from being duplicated or omitted.
(2) 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, sets forth the
general administrative procedures by which a taxpayer may obtain the automatic
consent of the Commissioner to change a method of accounting described in the List of
Automatic Changes. Rev. Proc. 2024-23 contains the current List of Automatic
Changes.
(3) A change in a taxpayer’s treatment of expenditures paid or incurred in taxable
years beginning after December 31, 2021, to comply with § 174 or to rely on the interim
guidance in sections 3 through 7 of Notice 2023-63 is generally a change in method of
accounting to which §§ 446(e) and 481, and the corresponding regulations, apply. A
taxpayer that changes its method of accounting to comply with § 174 or to rely on the
interim guidance in sections 3 through 7 of Notice 2023-63 must use the accounting

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method change procedures in Rev. Proc. 2015-13 or its successor. Section 3 of this
revenue procedure modifies the eligibility rules in section 7.01 of Rev. Proc. 2024-23 to
allow taxpayers to obtain automatic consent to change their method of accounting to
comply with § 174 or to rely on the interim guidance provided in sections 3 through 7 of
Notice 2023-63 for taxable years beginning after December 31, 2021.
(4) Specifically, the Treasury Department and the IRS are aware that certain
taxpayers may not be eligible to file automatic changes in methods of accounting under
section 7.01 of Rev. Proc. 2024-23 for a taxable year beginning in 2024. This is
because the waiver of the eligibility rules in section 5.01(1)(d) and (f) of Rev. Proc.
2015-13 applies only to a change described in section 7.01(1)(a) of Rev. Proc. 2024-23
made by a taxpayer for any taxable year beginning in 2022 or 2023. Therefore, the
procedures in section 3 of this revenue procedure modify the eligibility rules in section
7.01(5)(a) of Rev. Proc. 2024-23 to provide that the eligibility rules in section 5.01(1)(d)
and (f) of Rev. Proc. 2015-13 do not apply to a change described in section 7.01(1)(a)
of Rev. Proc. 2024-23 made by a taxpayer for any taxable year beginning in 2022,
2023, or 2024. The procedures in section 3 of this revenue procedure also modify the
rules for changes made in successive taxable years in section 7.01(5)(b) of Rev. Proc.
2024-23 to provide that a taxpayer may make a change described in section 7.01(1)(a)
of Rev. Proc. 2024-23 for a taxable year beginning in 2022, 2023, or 2024, regardless of
whether the taxpayer made a change for the same item for any previous taxable year
beginning in 2022, 2023, or 2024.
SECTION 3. MODIFICATIONS TO REV. PROC. 2024-23

.01 Modification of section 7.01(5) of Rev. Proc. 2024-23. Section 7.01(5) of Rev.

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Proc. 2024-23, is modified to read as follows:
(5) Certain eligibility rules inapplicable.
(a) In general. 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 a change described in section 7.01(1)(a) of
this revenue procedure made by a taxpayer for any taxable year beginning in 2022,
2023, or 2024.
(b) C
hanges made in successive taxable years. A taxpayer may make a
change described in section 7.01(1)(a) of this revenue procedure for a taxable year
beginning in 2022, 2023, or 2024, regardless of whether the taxpayer made a change
for the same item for any previous taxable year beginning in 2022, 2023, or 2024.
SECTION 4. EFFECT ON OTHER DOCUMENTS
This revenue procedure modifies section 7.01 of Rev. Proc. 2024-23.
SECTION 5. EFFECTIVE DATE
.01 In general. Except as otherwise provided under this section 5, this revenue
procedure is effective for Forms 3115 filed on or after December 17, 2024.
.02 Limited time period to convert a Form 3115 filed under the non-automatic change
procedures in Rev. Proc. 2015-13.
(1) If, before December 17, 2024, 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 section
7.01(1)(a) of Rev. Proc. 2024-23, and the Form 3115 is pending with the national office
on December 17, 2024, the taxpayer may choose to make the change in method of
accounting under the automatic change procedures in Rev. Proc. 2015-13 if the

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taxpayer is now eligible to use the automatic accounting method change described in
section 7.01(1)(a) of Rev. Proc. 2024-23 as a result of the modifications made by this
Rev. Proc. 2025-8 (and is otherwise eligible to use section 7.01(1)(a) of Rev. Proc.
2024-23 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. 2024-1, 2024-1 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) January 17, 2025, 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.
(2) 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 30th 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

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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.
(3) 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 section 5.02 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.
(4) A Form 3115 filed under the non-automatic change procedures in Rev. Proc.
2015-13 before December 17, 2024, 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 section 5.04 and 5.05 of Rev. Proc. 2015-13 if the taxpayer converts the Form
3115 pursuant to this section 5.02.
SECTION 6. 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 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 collection of information in this revenue procedure is in section
5.02 of this revenue procedure. This information is necessary and will be used to
determine whether the taxpayer properly changed to a permitted method of accounting.

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The collection of information is required for the taxpayer to obtain consent to change its
method of accounting.
SECTION 7. DRAFTING INFORMATION
The principal author of this revenue procedure is Jeremy Pfeifer of the Office of
Associate Chief Counsel (Income Tax & Accounting). For further information regarding
this revenue procedure, please contact Mr. Pfeifer at (202) 317-4176 (not a toll-free
number).