Internal Revenue Bulletin 2014-12 (PDF rendition): IRS Revenue Procedures

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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.
INCOME TAX
Notice 2014–15, page 661.
Notice 2012–18, published in the Internal Revenue Bulletin on
March 5, 2012, provided state housing finance agencies that
participated in the Physical Inspections Pilot Program a tem-
porary alternative method to satisfy the physical inspection and
certification review requirements of § 1.42–5(c)(2) of the Income
Tax Regulations. The availability of this alternative method ended
on December 31, 2012. This notice extends the time period
announced in Notice 2012–18 through December 31, 2014.
Rev. Proc. 2014–17, page 661.
Rev. Proc. 2014 –17 provides the procedures by which a
taxpayer may obtain the automatic consent of the Commis-
sioner of Internal Revenue to change to the methods of ac-
counting provided in §§ 1.167(a)– 4 and 1.168(i)–7 of the
Income Tax Regulations (T.D. 9636), §§ 1.167(a)– 4T,
1.168(i)–1T, 1.168(i)–7T, and 1.168(i)– 8T of the temporary
regulations (T.D. 9564), and §§1.168(i)–1, 1.168(i)–7, and
1.168(i)– 8 of the proposed regulations (REG–110732–13). This
revenue procedure also modifies Rev. Proc. 2011–14 and allows
a late partial disposition election under Prop. Reg. § 1.168(i)– 8 or
a revocation of a general asset account election under
§ 1.168(i)–1T or Prop. Reg. § 1.168(i)–1 to be treated as a
change in method of accounting for a limited period of time.
Finally, this revenue procedure modifies section 6.01 of the AP-
PENDIX of Rev. Proc. 2011–14 to waive a scope limitation in
certain circumstances.
Rev. Proc. 2014–23, page 684.
The proposed revenue procedure provides issuers of qualified
mortgage bonds, as defined in § 143(a) of the Internal Revenue
Code, and issuers of mortgage credit certificates, as defined in
§ 25(c), with the United States median gross income figure
most recently computed by the Department of Housing and
Urban Development (HUD). The proposed revenue proce-
dure also provides these issuers with guidance concerning
the area median gross incomes as computed by HUD.
Issuers of qualified mortgage bonds (QMB) and mortgage
credit certificates (MCC) must use these income figures in
determining whether the income limitation placed on the
beneficiaries of the mortgages and certificates may be in-
creased because the residences to be financed are located
in high housing cost areas. See §§ 25(c)(2)(A)(iii)(IV) and
143(f)(5).
T.D. 9652, page 655.
Final regulations provide rules under sections 263A and 471 of
the Code relating to capitalizing and allocating sales-based
royalties, and adjusting the cost of merchandise inventory for
sales-based vendor allowances. The regulations provide rules
for accounting for these items under the simplified production
method and the simplified resale method.
T.D. 9659, page 653.
Section 83 addresses the income tax consequences of prop-
erty transferred in connection with the performance of ser-
vices. The final regulations clarify the definition of a substantial
risk of forfeiture under §1.83–3(c)(1). The final regulations also
update the regulations under §1.83–3 to incorporate the hold-
ings in Revenue Ruling 2005– 48 (2005–2 CB 259) which
address the substantial risk of forfeiture created by liability
under Section 16(b) of the Securities Exchange Act of 1934.
Rev. Rul. 2005– 48 (2005–2 CB 259) is obsolete as of Febru-
ary 26, 2014.
(Continued on the next page)
Finding Lists begin on page ii.
Index for July through March begins on page iv.
Bulletin No. 2014–12
March 17, 2014

EMPLOYEE PLANS
T.D. 9659, page 653.
Section 83 addresses the income tax consequences of prop-
erty transferred in connection with the performance of ser-
vices. The final regulations clarify the definition of a substantial
risk of forfeiture under §1.83–3(c)(1). The final regulations also
update the regulations under §1.83–3 to incorporate the hold-
ings in Revenue Ruling 2005– 48 (2005–2 CB 259) which
address the substantial risk of forfeiture created by liability
under Section 16(b) of the Securities Exchange Act of 1934.
Rev. Rul. 2005– 48 (2005–2 CB 259) is obsolete as of Febru-
ary 26, 2014.
ADMINISTRATIVE
Rev. Proc. 2014–23, page 684.
The proposed revenue procedure provides issuers of qualified
mortgage bonds, as defined in § 143(a) of the Internal Revenue
Code, and issuers of mortgage credit certificates, as defined in
§ 25(c), with the United States median gross income figure
most recently computed by the Department of Housing and
Urban Development (HUD). The proposed revenue procedure
also provides these issuers with guidance concerning the area
median gross incomes as computed by HUD. Issuers of qual-
ified mortgage bonds (QMB) and mortgage credit certificates
(MCC) must use these income figures in determining whether
the income limitation placed on the beneficiaries of the mort-
gages and certificates may be increased because the resi-
dences to be financed are located in high housing cost areas.
See §§ 25(c)(2)(A)(iii)(IV) and 143(f)(5).

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, 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
substantive 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 internal
management are not published; however, statements of inter-
nal 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 rulings to
taxpayers or technical advice to Service field offices, identify-
ing 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
the disposition of other cases. In applying published rulings and
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, Legisla-
tion 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 Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Sec-
retary (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.
March 17, 2014Bulletin No. 2014–12

Part I. Rulings and Decisions Under the Internal Revenue Code
of 1986
TD 9659
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Property Transferred in
Connection with the
Performance of Services
under Section 83
AGENCY: Internal Revenue Service, De-
partment of Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations relating to property trans-
ferred in connection with the performance
of services under section 83 of the Internal
Revenue Code (Code). These final regu-
lations affect certain taxpayers who re-
ceive property transferred in connection
with the performance of services.
DATES:Effective Date:These regula-
tions are effective on February 26, 2014.
Applicability Date:For dates of appli-
cability, see §1.83–3(l).
FOR FURTHER INFORMATION
CONTACT: Thomas Scholz or Michael
Hughes at (202) 317-5600 (not a toll-free
number).
SUPPLEMENTARY INFORMATION:
Background
On May 30, 2012, the Department of
Treasury (Treasury) and the Internal Rev-
enue Service (IRS) published a notice of
proposed rulemaking (REG–141075–09)
in theFederal Register(77 FR 31783)
under section 83 of the Code. Treasury
and the IRS received two comments re-
sponding to the notice of proposed rule-
making. No public hearing was requested
and no public hearing was held. After
consideration of these comments, Trea-
sury and the IRS adopt the proposed reg-
ulations as final regulations with the mod-
ifications described in this preamble.
Explanation of Provisions
Section 83 of the Code addresses the
tax consequences of the transfer of prop-
erty in connection with the performance
of services. These final regulations pro-
vide several clarifications regarding
whether a substantial risk of forfeiture ex-
ists in connection with property subject to
section 83. Specifically, the final regula-
tions clarify that (1) except as specifically
provided in section 83(c)(3) and §§1.83–
3(j) and (k), a substantial risk of forfeiture
may be establishedonlythrough a service
condition or a condition related to the
purpose of the transfer, (2) in determining
whether a substantial risk of forfeiture ex-
ists based on a condition related to the
purpose of the transfer, both the likelihood
that the forfeiture event will occur and the
likelihood that the forfeiture will be en-
forced must be considered, and (3) except
as specifically provided in section
83(c)(3) and §§1.83–3(j) and (k), transfer
restrictions do not create a substantial risk
of forfeiture, including transfer restric-
tions that carry the potential for forfeiture
or disgorgement of some or all of the
property, or other penalties, if the restric-
tion is violated.
Summary of Comments
Treasury and the IRS received two
written comments on the notice of pro-
posed rulemaking. The first comment was
not responsive to the notice of proposed
rulemaking. The second comment ex-
pressed concern that the proposed regula-
tions result in a narrowing of the circum-
stances that would establish a substantial
risk of forfeiture and requested clarifica-
tion regarding whether an involuntary
separation from service without cause
could establish a substantial risk of forfei-
ture. The comment noted that, for pur-
poses of section 409A, an amount that is
payable only upon a service provider’s
involuntary separation from service with-
out cause is subject to a substantial risk of
forfeiture if the possibility of forfeiture is
substantial, and it suggested that these
regulations specifically state that an invol-
untary separation without cause may qual-
ify as a substantial risk of forfeiture under
section 83 in appropriate circumstances.
These regulations are intended to clar-
ify the definition of a substantial risk of
forfeiture and are consistent with the in-
terpretation that the IRS historically has
applied, and therefore from the perspec-
tive of Treasury and the IRS they do not
constitute a narrowing of the requirements
to establish a substantial risk of forfeiture.
SeeRobinson v. Commissioner, 805 F.2d
38 (1
st
Cir. 1986). Further, Treasury and
the IRS believe that these regulations
should not be modified to state that an
involuntary separation from service with-
out cause may qualify as a substantial risk
of forfeiture under section 83. While a
service provider’s right to receive prop-
erty (or an amount in cash) in the future
upon the service provider’s involuntary
separation from service without cause
may be subject to a substantial risk of
forfeiture for purposes of section 409A if
the possibility of forfeiture is substantial,
a substantial risk of forfeiture under sec-
tion 83 can exist only when property is
actually transferred in connection with the
performance of services. A right to re-
ceive property in the future is generally
not property for purposes of section 83.
See § 1.83–3(e). Accordingly, an involun-
tary separation from service without cause
cannot qualify as a substantial risk of for-
feiture under section 83 if property is not
transferred until after the separation from
service occurs.
When a transfer of property does oc-
cur, a substantial risk of forfeiture may be
established through a substantial services
condition or a condition related to the
purpose of the transfer if the possibility of
forfeiture is substantial. The acceleration
of vesting upon an involuntary separation
from service without cause (or separation
from service as a result of death or dis-
ability) will not cause a requirement of
substantial services that otherwise would
be treated as a substantial risk of forfeiture
to fail to qualify as a substantial risk of
forfeiture, provided that facts and circum-
stances do not demonstrate that the occur-
rence of an involuntary separation from
Bulletin No. 2014–12March 17, 2014
653

service without cause is likely to occur
during the agreed upon service period.
Certain practitioners informally re-
quested clarification regarding the appli-
cation of section 83(c)(3) to a variation of
the facts set forth inExample 4of pro-
posed regulation § 1.83–3(j)(2). Specifi-
cally, practitioners asked whether the pur-
chase of shares in a transaction not
exempt from section 16(b) of the Securi-
ties Exchange Act of 1934 prior to the
exercise of a stock option that would not
otherwise give rise to section 16(b) liabil-
ity would defer taxation of the stock op-
tion exercise. Treasury and the IRS do not
believe that such a non-exempt purchase
of shares would defer taxation of the sub-
sequent stock option exercise. This result
is consistent withExample 3of § 1.83–
3(j)(2). In response to these requests for
clarification, Treasury and the IRS have
revisedExample 4of proposed regulation
§ 1.83–3(j)(2) to address the situation
raised.
Applicability Date
These regulations apply to property
transferred on or after January 1, 2013.
Effect on Other Documents
Rev. Rul. 2005–48 (2005–2 CB 259) is
obsolete as of February 26, 2014.
Special Analyses
It has been determined that this final
regulation is not a significant regulatory
action as defined in Executive Order
12866, as supplemented by Executive Or-
der 13653. Therefore, a regulatory assess-
ment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions, and because the regulations do not
impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
the notice of proposed rule making pre-
ceding these final regulations was submit-
ted to the Chief Counsel for Advocacy of
the Small Business Administration for
comment on their impact on small busi-
ness.
Drafting Information
The principal authors of these final reg-
ulations are Thomas Scholz and Michael
Hughes, Office of the Division Counsel/
Associate Chief Counsel (Tax Exempt
and Government Entities). Other person-
nel from Treasury and the IRS also par-
ticipated in their development.
*****
List of Subjects in 26 CFR Part 1
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR Part 1 is
amended 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 1.83–3 is amended by:
1.
Revising paragraph (c)(1).
2. AddingExample 6andExample 7to
paragraph (c)(4).
3. AddingExample 4to paragraph
(j)(2).
4. Removing paragraph (j)(3).
5. Removing paragraph (k).
6. Redesignating paragraph (k)(1) as
paragraph (k).
7. Adding paragraph (l).
The revisions and additions read as fol-
lows:
§ 1.83–3 Meaning and use of certain
terms.
*****
(c)Substantial risk of forfeiture. (1)In
general. For purposes of section 83 and
these regulations, whether a risk of forfei-
ture is substantial or not depends upon the
facts and circumstances. Except as set
forth in paragraphs (j) and (k) of this
section, a substantial risk of forfeiture ex-
ists only if rights in property that are
transferred are conditioned, directly or in-
directly, upon the future performance (or
refraining from performance) of substan-
tial services by any person, or upon the
occurrence of a condition related to a pur-
pose of the transfer if the possibility of
forfeiture is substantial. Property is not
transferred subject to a substantial risk of
forfeiture if at the time of transfer the facts
and circumstances demonstrate that the
forfeiture condition is unlikely to be en-
forced. Further, property is not transferred
subject to a substantial risk of forfeiture to
the extent that the employer is required to
pay the fair market value of a portion of
such property to the employee upon the
return of such property. The risk that the
value of property will decline during a
certain period of time does not constitute a
substantial risk of forfeiture. A nonlapse
restriction, standing by itself, will not re-
sult in a substantial risk of forfeiture. A
restriction on the transfer of property,
whether contractual or by operation of
applicable law, will result in a substantial
risk of forfeiture only if and to the extent
that the restriction is described in para-
graph (j) or (k) of this section. For this
purpose, transfer restrictions that will not
result in a substantial risk of forfeiture
include, but are not limited to, restrictions
that if violated, whether by transfer or
attempted transfer of the property, would
result in the forfeiture of some or all of the
property, or liability by the employee for
any damages, penalties, fees, or other
amount.
*****
(4)***
Example 6. On April 3, 2013, Y corporation
grants to Q, an officer of Y, a nonstatutory option to
purchase Y common stock. Although the option is
immediately exercisable, it has no readily ascertain-
able fair market value when it is granted. Under the
option, Q has the right to purchase 100 shares of Y
common stock for $10 per share, which is the fair
market value of a Y share on the date of grant of the
option. On August 1, 2013, Y sells its common stock
in an initial public offering. Pursuant to an under-
writing agreement entered into in connection with
the initial public offering, Q agrees not to sell, oth-
erwise dispose of, or hedge any Y common stock
from August 1 through February 1 of 2014 (“the
lock-up period”). Q exercises the option and Y
shares are transferred to Q on November 15, 2013,
during the lock-up period. The underwriting agree-
ment does not impose a substantial risk of forfeiture
on the Y shares acquired by Q because the provi-
sions of the agreement do not condition Q’s rights in
the shares upon anyone’s future performance (or
refraining from performance) of substantial services
or on the occurrence of a condition related to the
purpose of the transfer of shares to Q. Accordingly,
neither section 83(c)(3) nor the imposition of the
lock-up period by the underwriting agreement pre-
cludes taxation under section 83 when the shares
resulting from exercise of the option are transferred
to Q.
March 17, 2014Bulletin No. 2014–12
654

Example 7. Assume the same facts as inExample
6, except that on August 1, 2013, Y also adopts an
insider trading compliance program, under which, as
applied to 2013, insiders (such as Q) may trade Y
shares only during a limited number of days follow-
ing each quarterly earnings release (“a trading win-
dow”). Under the program, if Q trades Y shares
outside a trading window without Y’s permission, Y
has the right to terminate Q’s employment. How-
ever, the exercise of the nonstatutory options outside
a trading window for Y shares is not prohibited
under the insider trading compliance program. Q
fully exercises the option, and Y shares are trans-
ferred to Q, on November 15, 2013. The exercise of
the option occurs outside a trading window, and, on
the date of exercise, Q is in possession of material
nonpublic information concerning Y that would sub-
ject him to liability under Rule 10b–5 under the
Securities Exchange Act of 1934 if Q sold the Y
shares while in possession of such information. Nei-
ther the insider trading compliance program nor the
potential liability under Rule 10b–5 impose a sub-
stantial risk of forfeiture on the Y shares acquired by
Q because the provisions of the program and Rule
10b–5 do not condition Q’s rights in the shares upon
anyone’s future performance (or refraining from per-
formance) of substantial services or on the occur-
rence of a condition related to the purpose of the
transfer of shares to Q. Accordingly, none of section
83(c)(3), the imposition of the trading windows by
the insider trading compliance program, and the po-
tential liability under Rule 10b–5 preclude taxation
under section 83 when the shares resulting from
exercise of the option are transferred to Q.
*****
(j)***
(2)***
Example 4. (i) On June 3, 2013, Y corporation
grants to Q, an officer of Y, a nonstatutory option to
purchase Y common stock. Y stock is traded on an
established securities market. Although the option is
immediately exercisable, it has no readily ascertain-
able fair market value when it is granted. Under the
option, Q has the right to purchase 100 shares of Y
common stock for $10 per share, which is the fair
market value of a Y share on the date of grant of the
option. The grant of the option is not one that satis-
fies the requirements for a transaction that is exempt
from section 16(b) of the Securities Exchange Act of
1934. On December 15, 2013, Y stock is trading at
more than $10 per share. On that date, Q fully
exercises the option, paying the exercise price in
cash, and receives 100 Y shares. Q’s rights in the
shares received as a result of the exercise are not
conditioned upon the future performance of substan-
tial services. Because no exemption from section
16(b) was available for the June 3, 2013 grant of the
option, the section 16(b) liability period expires on
December 1, 2013. Accordingly, the section 16(b)
liability period expiresbeforethe date that Q exer-
cises the option and the Y common stock is trans-
ferred to Q. Thus, the shares acquired by Q pursuant
to the exercise of the option are not subject to a
substantial risk of forfeiture under section 83(c)(3)
as a result of section 16(b). As a result, section
83(c)(3) does not preclude taxation under section 83
when the shares acquired pursuant to the December
15, 2013 exercise of the option are transferred to Q.
(ii) Assume the same facts as in paragraph (i) of
thisExample 4except that Q exercises the nonstat-
utory option on October 30, 2013 when Y stock is
trading at more than $10 per share. The shares ac-
quired are subject to a substantial risk of forfeiture
under section 83(c)(3) as a result of section 16(b)
through December 1, 2013.
(iii) Assume the same facts as in paragraph (i) of
thisExample 4except that on November 5, 2013, Q
also purchases 100 shares of Y common stock on the
public market. The purchase of the shares is not a
transaction exempt from section 16(b) of the Secu-
rities Exchange Act of 1934. Because no exemption
from section 16(b) was available for the November
5, 2013 purchase of shares, the section 16(b) liability
period with respect to such shares will last for a
period of six months after the November 5, 2013
purchase of shares. Notwithstanding the non-exempt
purchase of Y common stock on November 5, 2013,
the shares acquired by Q pursuant to the December
15, 2013 exercise of the option are not subject to a
substantial risk of forfeiture under section 83(c)(3)
as a result of section 16(b). As a result, section
83(c)(3) does not preclude taxation under section 83
when the shares acquired pursuant to the December
15, 2013 exercise of the option are transferred to Q.
*****
(l)Effective/applicability date. This
section applies to property transferred on
or after January 1, 2013. For rules relating
to property transferred before that date,
see § 1.83–3 as contained in 26 CFR part
1 (as of April 1, 2012).
John Dalrymple,
Deputy Commissioner for
Services and Enforcement.
Approved, January 31, 2014.
Mark J. Mazur,
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register on February 25,
2014, 8:45 a.m., and published in the issue of the Federal
Register for February 26, 2014, 79 F.R. 10663)
Section 167.—Depreciation
Procedures are provided by which a taxpayer may
obtain the automatic consent of the Commissioner of
Internal Revenue to change to the methods of account-
ing provided in § 1.167(a)–4 of the Income Tax Reg-
ulations (T.D. 9636) and § 1.167(a)–4T of the tempo-
rary regulations (T.D. 9564). See Rev. Proc. 2014–17,
page 661.
Section 197.—Amortization
of goodwill and certain
other intangibles
Procedures are provided by which a taxpayer
may obtain the automatic consent of the Commis-
sioner of Internal Revenue to change from improp-
erly amortizing leasehold improvements to which
§ 197 applies over the term of the lease (including
renewals, if applicable) to properly amortizing these
improvements under § 197. See Rev. Proc. 2014–17,
page 661.
TD 9652
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Sales-Based Royalties and
Vendor Allowances
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations relating to the capitaliza-
tion and allocation of royalties that are
incurred only upon the sale of property
produced or property acquired for resale
(sales-based royalties). This document
also contains final regulations relating to
adjusting inventory costs for a type of an
allowance, discount, or price rebate
earned on the sale of merchandise (sales-
based vendor chargebacks). These regula-
tions modify the simplified production
method and the simplified resale method
of allocating capitalized costs between
ending inventory and cost of goods sold.
These regulations affect taxpayers that in-
cur capitalizable sales-based royalties or
earn sales-based vendor chargebacks.
DATES:Effective Date: These regula-
tions are effective on January 13, 2014.
Comment Date: Comments will be ac-
cepted until April 14, 2014.
Applicability Date: For dates of appli-
cability, see §§1.263A–1(l), 1.263A–2(f),
1.263A–3(f), and 1.471–3(g).
ADDRESSES: Written (including elec-
tronic) comments should be submitted to
Internal Revenue Service, CC:PA:
Bulletin No. 2014–12March 17, 2014
655

LPD:PR (REG–149338–08), Room 5203,
Internal Revenue Service, PO Box 7604,
Ben Franklin Station, Washington, DC 20044,
or electronically towww.regulations.gov(IRS
REG–149338–08). Alternatively, com-
ments may be hand-delivered Monday
through Friday between the hours of 8
a.m. and 4 p.m. to CC:PA:LPD:PR
(REG–149338–08), Courier’s Desk, In-
ternal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC. All com-
ments will be available for public inspec-
tion and copying.
FOR FURTHER INFORMATION
CONTACT: John Roman Faron, 202-
317-7005 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regula-
tions that amend the Income Tax Regula-
tions (26 CFR part 1) relating to the allo-
cation under section 263A of the Internal
Revenue Code (Code) of certain sales-
based royalties and relating to the deter-
mination of cost of merchandise in inven-
tory under section 471 when a taxpayer
earns a type of sales-based vendor allow-
ance. On December 17, 2010, a notice of
proposed rulemaking (REG–149335–08)
was published in the Federal Register (75
FR 78940). Written comments responding
to the notice of proposed rulemaking were
received. The comments are available for
public inspection at www.regulations.gov
or on request. A public hearing was re-
quested and held on April 13, 2011. After
consideration of all the comments, the
proposed regulations are adopted as re-
vised by this Treasury decision. The com-
ments are discussed in the preamble.
Summary of Comments and
Explanation of Provisions
Sales-based royalties
The proposed regulations clarified that
sales-based royalties, like other royalties,
may be capitalizable to property a tax-
payer produces or acquires for resale.
Royalty costs are capitalizable when they
are incurred in securing the contractual
right to use a trademark, corporate plan,
manufacturing procedure, special recipe,
or other similar right associated with
property produced or property acquired
for resale. Sales-based royalty costs are
royalties that are incurred only upon the
sale of property produced or acquired for
resale.
The proposed regulations provided that
sales-based royalties required to be capi-
talized must be allocated only to property
that has been sold or, for inventory prop-
erty, deemed to be sold under the taxpay-
er’s inventory cost flow assumption. In
response to concerns that the requirement
to allocate sales-based royalties only to
cost of goods sold would unduly burden
taxpayers using simplified allocation
methods, the final regulations provide that
the allocation of sales-based royalties to
property sold is optional rather than man-
datory. Therefore, the final regulations
permit taxpayers to either allocate sales-
based royalties entirely to property sold
and include those costs in cost of goods
sold or to allocate sales-based royalties
between cost of goods sold and ending
inventory using a facts-and-circumstances
cost allocation method described in
§ 1.263A–1(f) or a simplified method pro-
vided in § 1.263A–2(b) (the simplified
production method) or § 1.263A–3(d) (the
simplified resale method). The final regu-
lations also clarify that sales-based royal-
ties that a taxpayer allocates entirely to
inventory property sold are included in
cost of goods sold and may not be in-
cluded in determining the cost of goods on
hand at the end of the taxable year regard-
less of the taxpayer’s cost flow assump-
tion.
A commentator suggested that the final
regulations acknowledge that a sales-
based royalty payable by a reseller of in-
ventory to its supplier is a direct acquisi-
tion cost under section 471 and included
in cost of goods sold when the inventory
item is sold. The final regulations do not
adopt this comment because whether a
cost is a royalty described in §1.263A–
1(e)(3)(ii)(U) or is a contingent acquisi-
tion cost is beyond the scope of these
regulations.
Sales-based vendor allowances in
general
The proposed regulations provided that
the amount of an allowance, discount, or
price rebate that a taxpayer earns by sell-
ing specific merchandise is a reduction in
the cost of the merchandise sold or
deemed sold under a taxpayer’s cost flow
assumption. The preamble to the proposed
regulations referred to this type of allow-
ance as a sales-based vendor allowance.
The proposed regulations required that
these allowances reduce cost of goods
sold and not reduce ending inventory cost
or value of goods on hand at the end of the
taxable year.
A commentator disagreed with the re-
quirement in the proposed regulations that
the vendor allowances described in the
proposed regulations always must reduce
cost of goods sold. The commentator dis-
puted that a vendor allowance should re-
duce cost of goods sold merely because
the allowance is dependent on a sale of
merchandise. CitingPittsburgh Milk Co.
v. Commissioner, 26 T.C. 707 (1956), the
commentator suggested that sales-based
vendor allowances that are the subject of
an advance agreement between the vendor
and the purchaser at the time the merchan-
dise is purchased must be netted against
the original cost of the merchandise and
applied to ending inventory or cost of
goods sold depending on the taxpayer’s
inventory cost flow assumption. Accord-
ingly, the commentator suggested that the
regulations be revised to provide that a
sales-based vendor allowance may prop-
erly reduce the value of goods on hand at
the end of the taxable year.
The final regulations reflect the com-
mentator’s suggestion that a vendor al-
lowance does not reduce the cost of goods
sold merely because the allowance is de-
pendent on a sale of merchandise. The
proposed regulations were overbroad be-
cause they required taxpayers to allocate
to cost of goods sold all allowances that
arise from selling merchandise. For exam-
ple, if, after selling a certain number of
units, a taxpayer earns a discount off each
unit purchased during the taxable year, the
allowance properly may be allocable to
both the cost of units that remains in end-
ing inventory and the cost of units in-
cluded in cost of goods sold during the
year. Similarly, a sales-volume allowance
that provides only a reduction in the cost
of any purchases made by a taxpayer in
the next taxable year properly reduces the
cost of the units of the product purchased
in the next year. As the preceding two
March 17, 2014Bulletin No. 2014–12
656

examples illustrate, the proposed regula-
tions were overbroad in that they could be
interpreted to require these allowances to
reduce cost of goods sold solely because
they arose as a result of selling merchan-
dise. The extent to which a vendor allow-
ance is properly allocable to the cost of
goods in ending inventory or the cost of
goods sold depends on all facts and cir-
cumstances, including the terms and con-
ditions of the agreement between the ven-
dor and the taxpayer. SeePittsburgh Milk
Co. v. Commissioner. As described later
in this preamble, the final regulations
more clearly identify a type of sales-based
vendor allowance that, to clearly reflect
income, must reduce the cost of goods
sold.
The commentator also asserted that
Rev. Rul. 2001–8 (2001–1 CB 726), see §
601.601(d)(2), and earlier rulings support
the proposition that sales-based vendor al-
lowances are an adjustment to the cost of
merchandise physically removed from in-
ventory. Although allowances, discounts,
and price rebates properly are treated as
adjustments to the price of merchandise,
the final regulations do not adopt the com-
mentator’s rationale for determining
whether these adjustments properly re-
duce ending inventory or cost of goods
sold. Rev. Rul. 2001–8 does not establish
a general principle that sales-based vendor
allowances reduce the invoice cost of
merchandise physically sold. Rev. Rul.
2001–8 addresses a unique cost adjust-
ment (floor stocks payments) that relates
to goods physically on hand on a particu-
lar date and should not be applied beyond
its specific facts.
Sales-based vendor chargebacks
In response to comments that the pro-
posed regulations were overbroad, the
Treasury and IRS are considering alterna-
tives to a broad definition of sales-based
vendor allowances. The final regulations,
however, specifically identify one type of
sales-based vendor allowance (sales-
based vendor chargebacks) that, to clearly
reflect income, reduces cost of goods sold
and does not reduce the cost of goods on
hand at the end of the taxable year. There-
fore, the final regulations apply the rule
articulated in the notice of proposed rule-
making to sales-based vendor charge-
backs. A sales-based vendor chargeback is
defined as an allowance, discount, or price
rebate that a taxpayer becomes uncondi-
tionally entitled to by selling a vendor’s
merchandise to specific customers identi-
fied by the vendor at a price determined
by the vendor. Sales-based vendor charge-
backs protect a taxpayer from realizing a
loss or a reduced profit on the sale of
specific merchandise when the taxpayer is
obligated by contract with the vendor of
the merchandise to resell the merchandise
at a specific price (in some cases below
the taxpayer’s cost). Under the terms and
conditions of the agreement between the
vendor and the taxpayer and the econom-
ics of the transaction, it is inappropriate to
treat the allowance as an adjustment to the
cost of goods in ending inventory. A
sales-based vendor chargeback properly
reduces only cost of goods sold because it
arises from and relates only to merchan-
dise sold. Thus, it reduces the invoice cost
of the merchandise sold and clearly re-
flects income only if it reduces cost of
goods sold.
Sales-based vendor allowances other
than chargebacks
The final regulations reserve rules for
the treatment of other sales-based vendor
allowances. Given the factual nature of
particular vendor allowance arrangements
between sellers and purchasers of mer-
chandise, the IRS and Treasury Depart-
ment request comments regarding addi-
tional guidance defining or describing
particular sales-based vendor allowances
and on objective rules for allocating such
allowances to the purchase price of goods
acquired in the future, ending inventory,
or cost of goods sold.
Effective/Applicability Date
These regulations apply for taxable
years ending on or after January 13, 2014.
Special Analyses
This Treasury decision is not a signif-
icant regulatory action as defined in Ex-
ecutive Order 12866, as supplemented by
Executive Order 13563. Therefore, a reg-
ulatory assessment is not required. Section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply to
these regulations, and because the regula-
tions do not impose a collection of infor-
mation on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does
not apply. Pursuant to section 7805(f) of
the Code, the notice of proposed rulemak-
ing that preceded these final regulations
was submitted to the Chief Counsel for
Advocacy of the Small Business Admin-
istration for comment on its impact on
small business. No comments were re-
ceived from the Small Business Adminis-
tration.
Drafting Information
The principal author of these regula-
tions is John Roman Faron of the Office of
the Associate Chief Counsel (Income Tax
and Accounting). However, other person-
nel from the IRS and Treasury Depart-
ment participated in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
amended 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***
Section 1.263A–1 also issued under 26
U.S.C. 263A.
Section 1.263A–2 also issued under 26
U.S.C. 263A.
Section 1.263A–3 also issued under 26
U.S.C. 263A.***
Section 1.471–3 also issued under 26
U.S.C. 471.***
Par. 2. Section 1.263A–0 Table of
Contents is amended by adding new en-
tries for §§ 1.263A–1(c)(5), (k), and (l);
1.263A–2(b)(3)(ii)(C), (e), and (f);
1.263A–3(d)(3)(i)(C)(3) and (f); and re-
vising the entry for § 1.263A–1(e)(3)(ii)
to read as follows:
§ 1.263A– 0 Outline of regulations under
section 263A.
*****
Bulletin No. 2014–12March 17, 2014
657

§ 1.263A–1 Uniform Capitalization of
Costs.
*****
(c)***
(5) Costs allocable only to property
sold.
*****
(e)***
(3)***
(ii) Examples of indirect costs required
to be capitalized.
*****
(k) Change in method of accounting.
(1) In general.
(2) Scope limitations.
(3) Audit protection.
(4) Section 481(a) adjustment.
(5) Time for requesting change.
(l) Effective/applicability date.
§ 1.263A–2 Rules Relating to Property
Produced by the Taxpayer.
*****
(b)***
(3)***
(ii)***
(C) Costs allocable only to property sold.
*****
(e) Change in method of accounting.
(1) In general.
(2) Scope limitations.
(3) Audit protection.
(4) Section 481(a) adjustment.
(5) Time for requesting change.
(f) Effective/applicability date.
§ 1.263A–3 Rules Relating to Property
Acquired for Resale.
*****
(d)***
(3)***
(i)***
(C)***
(3) Costs allocable only to property sold.
*****
(f) Effective/applicability date.
*****
Par. 3. Section 1.263A–1 is amended
by:
1. Adding a new paragraph (c)(5).
2. Revising paragraph (e)(3)(i), the in-
troductory text of paragraph (e)(3)(ii), and
paragraph (l).
3. Redesignating paragraph (e)(3)(ii)(U)
as paragraph (e)(3)(ii)(U)(1), revising the
second sentence of newly-designated para-
graph (e)(3)(ii)(U)(1), and adding a sentence
to the end of newly-designated paragraph
(e)(3)(ii)(U)(1).
4. Adding a new paragraph (e)(3)(ii)(U)(2).
The additions and revisions read as fol-
lows:
§ 1.263A–1 Uniform capitalization of
costs.
*****
(c)***
(5)Costs allocable to property sold.A
cost that is allocated under this section,
§ 1.263A–2, or § 1.263A–3 entirely to
property sold must be included in cost of
goods sold and may not be included in
determining the cost of goods on hand at
the end of the taxable year.
*****
(e)***
(3)***
(i)In general. (A) Indirect costs are
defined as all costs other than direct ma-
terial costs and direct labor costs (in the
case of property produced) or acquisition
costs (in the case of property acquired for
resale). Taxpayers subject to section 263A
must capitalize all indirect costs properly
allocable to property produced or property
acquired for resale. Indirect costs are
properly allocable to property produced or
property acquired for resale when the
costs directly benefit or are incurred by
reason of the performance of production
or resale activities. Indirect costs may di-
rectly benefit or be incurred by reason of
the performance of production or resale
activities even if the costs are calculated
as a percentage of revenue or gross profit
from the sale of inventory, are determined
by reference to the number of units of
property sold, or are incurred only upon
the sale of inventory. Indirect costs may
be allocable to both production and resale
activities, as well as to other activities that
are not subject to section 263A. Taxpayers
must make a reasonable allocation of in-
direct costs between production, resale,
and other activities.
(B)Example. The following example
illustrates the provisions of this paragraph
(e)(3)(i):
Example. (i) Taxpayer A manufactures table-
cloths and other linens. A enters into a licensing
agreement with Company L under which A may
label its tablecloths with L’s trademark if the table-
cloths meet certain specified quality standards. In
exchange for its right to use L’s trademark, the
licensing agreement requires A to pay L a royalty of
$X for each tablecloth carrying L’s trademark that A
sells. The licensing agreement does not require A to
pay L any minimum or lump-sum royalties.
(ii) The licensing agreement provides A with the
right to use L’s intellectual property, a trademark.
The licensing agreement also requires A to conduct
its production activities according to certain stan-
dards as a condition of exercising that right. Thus,
A’s right to use L’s trademark under the licensing
agreement is directly related to A’s production of
tablecloths. The royalties the licensing agreement
requires A to pay for using L’s trademark are the
costs A incurs in exchange for these rights. There-
fore, although A incurs royalty costs only when A
sells a tablecloth carrying L’s trademark, the royalty
costs directly benefit production activities and are
incurred by reason of production activities within the
meaning of paragraph (e)(3)(i)(A) of this section.
(ii)Examples of indirect costs required to be
capitalized. The following are examples of indirect
costs that must be capitalized to the extent they are
properly allocable to property produced or property
acquired for resale:
*****
(U)Licensing and franchise costs.(1)
* * * These costs include the otherwise
deductible portion (such as amortization)
of the initial fees incurred to obtain the
license or franchise and any minimum an-
nual payments and any royalties that are
incurred by a licensee or a franchisee.
These costs also include fees, payments,
and royalties otherwise described in this
paragraph (e)(3)(ii)(U) that a taxpayer in-
curs (within the meaning of section 461)
only upon the sale of property produced or
acquired for resale.
(2) If a taxpayer incurs (within the
meaning of section 461) a fee, payment,
or royalty described in this paragraph
(e)(3)(ii)(U) only upon the sale of prop-
erty produced or acquired for resale and
the cost is required to be capitalized under
this paragraph (e)(3), the taxpayer may
properly allocate the cost entirely to prop-
erty produced or acquired for resale by the
taxpayer that has been sold.
*****
(l)Effective/applicability date. (1)
Paragraphs (h)(2)(i)(D), (k), and (l) of this
section apply for taxable years ending on
or after August 2, 2005.
(2) Paragraphs (c)(5), (e)(3)(i), and
(e)(3)(ii)(U) of this section apply for taxable
years ending on or after January 13, 2014.
Par. 4. Section 1.263A–2 is amended
by:
March 17, 2014Bulletin No. 2014–12
658

1. Adding paragraphs (b)(3)(ii)(C) and
(b)(4)(ii)(A)(4).
2. Revising paragraph (f).
The additions and revision read as fol-
lows:
§ 1.263A–2 Rules relating to property
produced by the taxpayer.
*****
(b)***
(3)***
(ii)***
(C)Costs allocated to property sold.
Additional section 263A costs incurred
during the taxable year, as defined in para-
graph (b)(3)(ii)(A)(1) of this section, sec-
tion 471 costs incurred during the taxable
year, as defined in paragraph
(b)(3)(ii)(A)(2) of this section, and section
471 costs remaining on hand at year end,
as defined in paragraph (b)(3)(ii)(B) of
this section, do not include costs described
in § 1.263A–1(e)(3)(ii) or cost reductions
described in § 1.471–3(e) that a taxpayer
properly allocates entirely to property that
has been sold.
*****
(4)***
(ii)***
(A)***
(4) Additional section 263A costs in-
curred during the test period, as defined in
paragraph (b)(4)(ii)(A)(2) of this section,
and section 471 costs incurred during the
test period, as defined in paragraph
(b)(4)(ii)(A)(3) of this section, do not in-
clude costs specifically described in
§ 1.263A–1(e)(3)(ii) or cost reductions
described in § 1.471–3(e) that a taxpayer
properly allocates entirely to property that
has been sold.
*****
(f)Effective/applicability date. (1)
Paragraphs (b)(2)(i)(D), (e), and (f) of this
section apply for taxable years ending on
or after August 2, 2005.
(2) Paragraphs (b)(3)(ii)(C) and
(b)(4)(ii)(A)(4) of this section apply for
taxable years ending on or after January
13, 2014.
Par. 5. In § 1.263A–3, paragraphs
(d)(3)(i)(C)(3), (d)(3)(i)(D)(3), (d)(3)(i)(E)(3),
and (f) are added to read as follows:
§ 1.263A–3 Rules relating to property
acquired for resale.
*****
(d)***
(3)***
(i)***
(C)***
(3)Costs allocable to property sold.
Section 471 costs remaining on hand at
year end, as defined in paragraph
(d)(3)(i)(C)(2) of this section, do not in-
clude costs that are specifically described
in § 1.263A–1(e)(3)(ii) or cost reductions
described in § 1.471–3(e) that a taxpayer
properly allocates entirely to property that
has been sold.
(D)***
(3) Current year’s storage and handling
costs, beginning inventory, and current
year’s purchases, as defined in paragraph
(d)(3)(i)(D)(2) of this section, do not in-
clude costs that are specifically described
in § 1.263A–1(e)(3)(ii) or cost reductions
described in § 1.471–3(e) that a taxpayer
properly allocates entirely to property that
has been sold.
(E)***
(3) Current year’s purchasing costs and
current year’s purchases, as defined in
paragraph (d)(3)(i)(E)(2) of this section,
do not include costs that are specifically
described in § 1.263A–1(e)(3)(ii) or cost
reductions described in § 1.471–3(e) that a
taxpayer properly allocates entirely to
property that has been sold.
*****
(f)Effective/applicability date. Para-
graphs (d)(3)(i)(C)(3), (d)(3)(i)(D)(3), and
(d)(3)(i)(E)(3) of this section apply for
taxable years ending on or after January
13, 2014.
Par. 6. Section 1.471–3 is amended by:
1. Adding paragraphs (e) and (g).
2. Designating the undesignated text
following paragraph (d) as paragraph (f).
The additions read as follows:
§ 1.471–3 Inventories at cost.
*****
(e)Sales-based vendor allowances—
(1)Treatment of sales-based vendor
chargebacks—(i)In general
. A sales-
based vendor chargeback is an allowance,
discount, or price rebate that a taxpayer
becomes unconditionally entitled to by
selling a vendor’s merchandise to specific
customers identified by the vendor at a
price determined by the vendor. A sales-
based vendor chargeback decreases cost
of goods sold and does not reduce the cost
of goods on hand at the end of the taxable
year.
(ii)Example. The following example
illustrates the provisions of this paragraph
(e)(1).
Example. (i) W is a wholesaler of pharmaceuti-
cals. W purchases Drug X from the manufacturer, M,
for $10x per unit. M has agreements with specific
customers that allow those customers to acquire
Drug X from M’s wholesalers for $6x per unit.
Under an agreement between W and M, W is re-
quired to sell Drug X to specific customers at the
prices M has negotiated with such customers ($6x
per unit) and, in exchange, M agrees to provide a
price rebate to W equal to the difference between
W’s cost for Drug X and the price W is required to
charge specific customers under the agreement (a
difference of $4x per unit). W sells Drug X to
specific customer Y for $6x. Under the agreement
between W and M, the price rebate can be paid to W,
credited against M’s invoice to W for W’s purchase
of Drug X, or it can be credited to W’s future
purchases of drugs from M.
(ii) Under the terms of the agreement, W is
unconditionally entitled to the price rebate of Drug X
when it sells Drug X to specific customer Y, a
specifically identified customer of M. The price re-
bate received by W for the sale of Drug X to Y is a
sales-based vendor chargeback. Therefore, the
amount of the sales-based vendor charge back, $4x
per unit for Drug X, whether paid to W, credited
against M’s invoice to W for W’s purchase of Drug
X or credited against a future purchase, decreases
cost of goods sold and does not reduce the cost of
Drug X on hand at the end of the taxable year.
(2)Treatment of other sales-based ven-
dor allowances. [Reserved]
*****
(g)Effective/applicability date. Para-
graph (f) of this section applies to taxable
years ending on or after January 13, 2014.
John Dalrymple
Deputy Commissioner
for Services and Enforcement.
Approved, December 13, 2013
Mark J. Mazur
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register on January 10,
2014, 8:45 a.m., and published in the issue of the Federal
Register for January 13, 2014, 79 F.R. 2094)
Bulletin No. 2014–12March 17, 2014
659

Section 446.—General rule
for methods of accounting
Modifications are made to the procedures in Rev.
Proc. 2012–20, 2012–14 I.R.B. 700, and Rev. Proc.
2011–14, 2011–4 I.R.B. 330, regarding certain
changes in method of accounting for dispositions of
tangible depreciable property. Procedures are pro-
vided by which a taxpayer may obtain the automatic
consent of the Commissioner of Internal Revenue to
change to the methods of accounting provided in
§§ 1.167(a)–4 and 1.168(i)–7 of the Income Tax
Regulations (T.D. 9636), §§ 1.167(a)–4T, 1.168(i)–
1T, 1.168(i)–7T, and 1.168(i)–8T of the temporary
regulations (T.D. 9564), and §§ 1.168(i)–1,
1.168(i)–7, and 1.168(i)–8 of the proposed regula-
tions (REG–110732–13). Modifications are also
made to Rev. Proc. 2011–14 to allow a late partial
disposition election under Prop. Reg. § 1.168(i)–8 or
a revocation of a general asset account election un-
der § 1.168(i)–1T or Prop. Reg. § 1.168(i)–1 to be
treated as a change in method of accounting for a
limited period of time. Finally, modifications are
made to section 6.01 of the APPENDIX of Rev.
Proc. 2011–14 to waive a scope limitation in certain
circumstances. See Rev. Proc. 2014–17, page 661.
March 17, 2014Bulletin No. 2014–12
660

Part III. Administrative, Procedural, and Miscellaneous
Extension of Notice 2012–
18 Treatment for States
Participating in the
Physical Inspections Pilot
Program
Notice 2014–15
PURPOSE
This notice extends the time period for
the alternative method, announced in Notice
2012–18, 2012–10 I.R.B. 438, to satisfy cer-
tain physical inspection and certification re-
view requirements under § 1.42–5(c)(2) of
the Income Tax Regulations.
BACKGROUND
Section 42 of the Internal Revenue
Code sets forth rules for determining the
amount of the low-income housing credit.
Section 1.42–5(c) and (d) provides phys-
ical inspection and certification review
procedures that a state or local housing
credit agency (or its Authorized Delegate
within the meaning of § 1.42–5(f)(1)) (a
“state housing finance agency”) must fol-
low in monitoring for compliance with the
provisions of § 42.
In 2011, the Rental Policy Working
Group established by the White House
Domestic Policy Council instituted a
Physical Inspections Pilot Program for
state housing finance agencies in partici-
pating states. Under this program, to avoid
duplicate inspections, participating state
housing finance agencies addressed their
physical inspection responsibilities under
§ 1.42–5(c)(2) by using the inspection
protocol of the Real Estate Assessment
Center (REAC) of the Department of
Housing and Urban Development.
As described in Notice 2012–18, how-
ever, some details of the REAC protocol
differ from the requirements in § 1.42–
5(c)(2), and the use of the REAC protocol
poses administrative difficulties for state
housing finance agencies in satisfying
their certification review responsibilities.
Notice 2012–18, therefore, provided that
if a state housing finance agency partici-
pated in the Physical Inspections Pilot
Program, then for the year of participa-
tion—
(1) The inspections under the program
were deemed to satisfy the requirements
of § 1.42–5(c)(2)(ii) regarding on-site
physical inspections of at least 20 percent
of the low-income units and of all build-
ings in a project; and
(2) The state housing finance agency
was able to satisfy the certification review
requirements of § 1.42–5(c)(2)(ii) by re-
viewing the appropriate records for 20
percent of the low-income units in the
project regardless of whether any of the
units whose files were reviewed were
among the units that were physically
inspected.
These provisions of Notice 2012–18
applied from November 7, 2011, through
December 31, 2012.
EXTENSION OF NOTICE 2012–18
TREATMENT
This notice extends the provisions of
Notice 2012–18 through December 31,
2014. Thus, if a state housing finance
agency participated and/or participates in
the Physical Inspections Pilot Program in
2013 and/or 2014, then the provisions of
Notice 2012–18 that are described above
apply to the agency’s satisfaction of the
physical inspection and certification re-
view requirements of § 1.42–5(c)(2)(ii)
for the year or years in which the agency
participated and/or participates in the pro-
gram.
As is described in the Department of
the Treasury 2013–2014 Priority Guid-
ance Plan, the Internal Revenue Service
and the Department of the Treasury are
working on regulations under § 42 relat-
ing to compliance monitoring, including
issues identified in Notice 2012–18. If
those regulations apply for 2014, their ap-
plication in 2014 will be no less favorable
than the provisions of Notice 2012–18 as
extended by this notice.
EFFECT ON OTHER DOCUMENTS
Notice 2012–18 is amplified.
DRAFTING INFORMATION
The principal author of this notice is
Jian H. Grant of the Office of the Associ-
ate Chief Counsel (Passthroughs and Spe-
cial Industries). For further information
regarding this notice, please contact Ms.
Grant at (202) 317-4137 (not a toll-free
number).
26 CFR 601.204: Changes in accounting periods
and in methods of accounting.
(Also Part I, §§ 162, 167, 168, 197, 446, 481; 1.162–3,
1.167(a)– 4, 1.168(i)–7, 1.446 –1.)
Rev. Proc. 2014–17
SECTION 1. PURPOSE
This revenue procedure modifies the pro-
cedures in Rev. Proc. 2012–20, 2012–14
I.R.B. 700, and Rev. Proc. 2011–14,
2011–4 I.R.B. 330, regarding certain
changes in method of accounting for dispo-
sitions of tangible depreciable property.
This revenue procedure supersedes Rev.
Proc. 2012–20 and provides the procedures
by which a taxpayer may obtain the auto-
matic consent of the Commissioner of In-
ternal Revenue to change to the methods of
accounting provided in §§ 1.167(a)–4 and
1.168(i)–7 of the Income Tax Regulations,
§§ 1.167(a)–4T, 1.168(i)–1T, 1.168(i)–7T,
and 1.168(i)–8T of the temporary regula-
tions, and §§ 1.168(i)–1, 1.168(i)–7, and
1.168(i)–8 of theproposed regulations.
This revenue procedure also modifies
Rev. Proc. 2011–14 and allows a late
partial disposition election under Prop.
Reg. § 1.168(i)–8 or a revocation of a
general asset account election under
§ 1.168(i)–1T or Prop. Reg. § 1.168(i)–1
to be treated as a change in method of
accounting for a limited period of time.
Finally, this revenue procedure modifies
section 6.01 of the APPENDIX of Rev.
Proc. 2011–14 to waive a scope limita-
tion in certain circumstances.
SECTION 2. BACKGROUND
.01 The Internal Revenue Service (IRS)
and the Treasury Department recently is-
sued final regulations under §§ 1.167(a)–4
and 1.168(i)–7 (T.D. 9636, 2013–43 I.R.B.
331, 78 Fed. Reg. 57686) (the final regula-
tions). Section 1.167(a)–4 provides rules for
depreciating or amortizing leasehold im-
provements. Section 1.168(i)–7 provides
rules for accounting for property depreci-
Bulletin No. 2014–12March 17, 2014
661

ated under § 168 of the Internal Revenue
Code (MACRS property). The final regula-
tions generally apply to taxable years begin-
ning on or after January 1, 2014, but also
permit a taxpayer to choose to apply
these sections to taxable years begin-
ning on or after January 1, 2012. Alter-
natively, the final regulations permit a
taxpayer to apply thetemporary regulations
under §§ 1.167(a)–4T and 1.168(i)–7T (T.D.
9564, 2012-14 I.R.B. 614, 76 Fed. Reg.
81060) to taxable years beginning on or after
January 1, 2012, and before January 1, 2014.
.02 The IRS and the Treasury Depart-
ment also recently issued proposed regu-
lations under §§ 1.168(i)–1, 1.168(i)–7,
and 1.168(i)–8 (REG–110732–13, 2013–43
I.R.B. 404, 78 Fed. Reg. 57547) (the pro-
posed regulations). Prop. Reg.
§ 1.168(i)–1, when finalized, will modify
the rules for general asset accounts. Prop.
Reg. § 1.168(i)–7, when finalized, will
provide rules for accounting for partial
dispositions of MACRS property. Prop.
Reg. § 1.168(i)–8, when finalized, will
provide rules for dispositions of MACRS
property. The proposed regulations, when
finalized, will apply to taxable years be-
ginning on or after January 1, 2014, and
will permit a taxpayer to choose to rely on
them for taxable years beginning on or
after January 1, 2012, and before January
1, 2014. Alternatively, the proposed reg-
ulations, when finalized, will permit a tax-
payer to apply the temporary regulations
under §§ 1.168(i)–1T, 1.168(i)–7T, and
1.168(i)–8T (T.D. 9564, 2012–14 I.R.B.
614, 76 Fed. Reg. 81060) to taxable years
beginning on or after January 1, 2012, and
before January 1, 2014.
.03 Except as otherwise expressly pro-
vided by the Code or 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.
.04 Section 1.446–1(e)(2)(ii)(d) pro-
vides the changes in depreciation or amor-
tization that are changes in a method of
accounting and the changes in deprecia-
tion or amortization that are not changes
in a method of accounting. For changes in
a method of accounting under § 1.446–
1(e)(2)(ii)(d) the item being changed gen-
erally is the depreciation treatment of each
individual depreciable or amortizable as-
set. However, the item is the depreciation
treatment of each general asset account
for a depreciable asset for which the tax-
payer has elected general asset account
treatment under § 168(i)(4).
.05 Section 1.446–1(e)(2)(ii)(d)(2)
provides, in relevant part, that each of the
following changes in depreciation or
amortization is a change in method of
accounting:
(1) A change in the depreciation
method or amortization method, period of
recovery, or convention of a depreciable
or amortizable asset;
(2) A change in the accounting for de-
preciable or amortizable assets from a sin-
gle asset account to a multiple asset ac-
count (pooling), or vice versa, or from one
type of multiple asset account (pooling) to
a different type of multiple asset account
(pooling);
(3) For depreciable or amortizable as-
sets that are mass assets accounted for in
multiple asset accounts or pools, a change
in the method of identifying which assets
have been disposed of; and
(4) Any other change in depreciation or
amortization as the Secretary may desig-
nate by publication in the Federal Register
or in the Internal Revenue Bulletin.
.06 Section 1.446–1(e)(2)(ii)(d)(3)
provides, in relevant part, that none of the
following changes in depreciation or
amortization is a change in method of
accounting:
(1) An adjustment in the useful life of
a depreciable or amortizable asset for
which depreciation is determined under
§ 167 (other than under § 168, § 1400I,
§ 1400L(c), former § 168, or an additional
first year depreciation deduction provision
of the Code (for example, § 168(k),
§ 1400L(b), or § 1400N(d))). However, if
a taxpayer is changing to or from a useful
life (or recovery period or amortization
period) that is specifically assigned by the
Code (for example, § 167(f)(1), § 168(c),
§ 168(g)(2), § 168(g)(3), or § 197), the
regulations thereunder, or other guidance
published in the Internal Revenue Bulle-
tin, such a change is a change in method
of accounting;
(2) The making of a late depreciation
or amortization election or the revocation
of a timely valid depreciation or amorti-
zation election, except as otherwise ex-
pressly provided by the Code, the regula-
tions thereunder, or other guidance
published in the Internal Revenue Bulletin;
(3) Any change in the placed-in-
service date of a depreciable or amortiz-
able asset, except as otherwise expressly
provided by the Code, the regulations
thereunder, or other guidance published in
the Internal Revenue Bulletin; and
(4) Any other change in depreciation or
amortization as the Secretary may desig-
nate by publication in the Federal Register
or in the Internal Revenue Bulletin.
.07 Section 1.446–1(e)(2)(ii)(d)(5)(iii)
provides that except as otherwise ex-
pressly provided by the Code, the regula-
tions thereunder, or other guidance pub-
lished in the Internal Revenue Bulletin, no
§ 481(a) adjustment is required or permit-
ted for a change from one permissible
method of computing depreciation or
amortization to another permissible
method of computing depreciation or
amortization for an asset. Instead, this
change is implemented by either a cut-off
method (see section 2.06 of Rev. Proc.
2011–14, 2011–4 I.R.B. 330, 338) or a
modified cut-off method, as appropriate.
Under the modified cut-off method, the
adjusted depreciable basis of the asset as
of the beginning of the year of change is
recovered using the new permissible
method of accounting. Section 1.446–
1(e)(2)(ii)(d)(5)(iii) also provides that a
change from an impermissible method of
computing depreciation or amortization to
a permissible method of computing depre-
ciation or amortization for an asset results
in a § 481 adjustment.
.08 Section 1.446–1(e)(3)(ii) autho-
rizes the Commissioner to prescribe ad-
ministrative procedures setting forth the
terms and conditions necessary for a tax-
payer to obtain consent to change a
method of accounting. Rev. Proc.
2011–14 provides the procedures by
which a taxpayer may obtain automatic
consent of the Commissioner to change to
a method of accounting described in the
APPENDIX of Rev. Proc. 2011–14.
.09 Section 3.02 of this revenue proce-
dure modifies the APPENDIX of Rev.
Proc. 2011–14 by (1) revising sections
6.27 through 6.32 to provide additional
changes in method of accounting that are
consistent with Prop. Reg. § 1.168(1)–1,
Prop. Reg. § 1.168(i)–7, or Prop. Reg.
§ 1.168(i)–8, (2) revising section 6.01 to
March 17, 2014Bulletin No. 2014–12
662

provide an additional scope limitation that
is not applicable, (3) removing section
6.20 because it is obsolete, and (4) revis-
ing section 10.07 to provide additional
inapplicability provisions that are consis-
tent with § 1.162–3 or § 1.162–3T.
.10 Section 3.03 of this revenue proce-
dure modifies the APPENDIX of Rev.
Proc. 2011–14 by adding sections 6.33
through 6.37 to the APPENDIX to pro-
vide additional changes in method of ac-
counting that are consistent with
§ 1.167(a)–4, § 1.168(i)–7, Prop. Reg.
§ 1.168(i)–1, or Prop. Reg. § 1.168(i)–8.
SECTION 3. CHANGES IN
METHODS OF ACCOUNTING
.01In general.
(1) Except as provided in section 3.01(2)
of this revenue procedure and in § 1.446–
1(e)(2)(ii)(d)(3)(iii) (the making of a late
depreciation or amortization election
or the revocation of a timely valid depreci-
ation or amortization election), a change to
comply with § 1.168(i)–7, § 1.168(i)–1T,
§ 1.168(i)–7T, or § 1.168(i)–8T is a
change in method of accounting to which
§ 446(e) applies.See§ 1.168(i)–7(e)(4),
§ 1.168(i)–1T(m)(3), § 1.168(i)–7T(e)(3),
and § 1.168(i)–8T(i)(3).Except as pro-
vided in section 3.01(2) of this revenue pro-
cedure and in § 1.446–1(e)(2)(ii)(d)(3)(i)
(a change in useful life), a change to com-
ply with § 1.167(a)–4 or § 1.167(a)–4T
also is a change in method of accounting
to which § 446(e) applies.See§ 1.167(a)–
4(b)(4) and § 1.167(a)–4T(b)(4). Except
as provided in section 3.01(2) of this rev-
enue procedure and in § 1.446–
1(e)(2)(ii)(d)(3)(iii) (the making of a late
depreciation or amortization election or
the revocation of a timely valid deprecia-
tion or amortization election), a change to
rely on Prop. Reg. § 1.168(i)–1, Prop.
Reg. § 1.168(i)–7, or Prop. Reg.
§ 1.168(i)–8 is a change in method of
accounting to which § 446(e) applies.See
Prop. Reg. § 1.168(i)–1(m)(5), Prop. Reg.
§ 1.168(i)–7(e)(5), and Prop. Reg.
§ 1.168(i)–8(j)(5). A taxpayer that wants
to change to a method of accounting de-
scribed in section 3.03 of this revenue
procedure must use the automatic change
in method of accounting provisions in
Rev. Proc. 2011–14, as modified by this
revenue procedure.
(2) If a taxpayer placed in service as-
sets in a taxable year ending before De-
cember 30, 2003 (pre-2003 assets), the
taxpayer may treat the change to comply
with § 1.167(a)–4, § 1.168(i)–7,
§ 1.167(a)–4T, § 1.168(i)–1T, § 1.168(i)–
7T, or § 1.168(i)–8T, or to rely on Prop.
Reg. § 1.168(i)–1, Prop. Reg.
§ 1.168(i)–7, or Prop. Reg. § 1.168(i)–8,
for all, or some, of the pre-2003 assets as
not a change in method of accounting. In
this situation, the taxpayer should file
amended federal tax returns for the
placed-in-service year of the pre-2003 as-
set and all subsequent taxable years, lim-
ited to the taxable years open under the
period of limitation for assessment, to im-
plement the change to comply with
§ 1.167(a)–4, § 1.168(i)–7, § 1.167(a)–
4T, § 1.168(i)–1T, § 1.168(i)–7T, or
§ 1.168(i)–8T, or to rely on Prop. Reg.
§ 1.168(i)–1, Prop. Reg. § 1.168(i)–7, or
Prop. Reg. § 1.168(i)–8, for these pre-
2003 assets. If the taxpayer files such
amended federal tax returns for the pre-
2003 assets, neither an adjustment under
§ 481 or a similar cumulative depreciation
adjustment is required or permitted.
.02Modifications to existing automatic
changes.
(1) Section 6.01(2) of the APPENDIX
of Rev. Proc. 2011–14 is modified to read
as follows:
(2)Certain scope limitations inappli-
cable. The scope limitations in sections
4.02(4) and 4.02(5) of this revenue proce-
dure are not applicable to this change. If
during any of the five taxable years ending
with the year of change, a taxpayer re-
quested or made a change in method of
accounting from expensing to capitaliz-
ing, or vice versa, the cost or other basis
of an asset, the scope limitation in section
4.02(7) of this revenue procedure is not
applicable to a change under this section
6.01 of the APPENDIX for that same
asset.
(2) Section 6.01(10) of the APPENDIX
of Rev. Proc. 2011–14 is modified to read
as follows:
(10)Contact information. For further
information regarding a change under this
section, contact Douglas Kim at 202-317-
7005 (not a toll-free call).
(3) Section 6.20 of the APPENDIX of
Rev. Proc. 2011–14 is modified to read as
follows:
6.20Reserved.
(4) Section 6.27 of the APPENDIX of
Rev. Proc. 2011–14 is modified to read as
follows:
6.27Depreciation of leasehold
improvements (sections 167, 168, and
197; § 1.167(a)– 4T).
(1)Description of change.
(a)Applicability. This change applies
to a taxpayer that wants to change its
method of accounting to comply with
§ 1.167(a)–4T for leasehold improve-
ments in which the taxpayer has a depre-
ciable interest at the beginning of the year
of change:
(i) from improperly depreciating the
leasehold improvements to which § 168
applies over the term of the lease (includ-
ing renewals, if applicable) to properly
depreciating these improvements under
§ 168;
(ii) from improperly amortizing lease-
hold improvements to which § 197 applies
over the term of the lease (including re-
newals, if applicable) to properly amortiz-
ing these improvements under § 197; or
(iii) from improperly amortizing lease-
hold improvements to which § 167(f)(1)
applies over the term of the lease (includ-
ing renewals, if applicable) to properly
amortizing these improvements under
§ 167(f)(1).
(b)Inapplicability. This change does
not apply to a taxpayer that wants to make
this change for any taxable year beginning
before January 1, 2012, or beginning on or
after January 1, 2014.
(2)Certain scope limitations inappli-
cable. The scope limitations in section
4.02 of this revenue procedure do not ap-
ply to a taxpayer that makes this change
for any taxable year beginning on or after
January 1, 2012, and beginning before
January 1, 2014.
(3)Manner of making change.
(a) 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 (“qualifying taxpayer”) is
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663

required to complete 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, line 1(a);
(iv) Part II, all lines except lines 11, 14,
15, and 17;
(v) Part IV, lines 25 and 26; 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 qualifying taxpayer)
making this change must attach to its
Form 3115 a statement providing that the
taxpayer agrees to the following addi-
tional terms and conditions:
(i) A normalization method of account-
ing (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 de-
ferred tax reserve account or similar ac-
count 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 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 11.01, 11.02, or
11.09 of this APPENDIX (as applicable)
for the same year of change should file a
single Form 3115 for all such changes and
must enter the designated automatic ac-
counting method change numbers for the
changes on the appropriate line on the
Form 3115. For guidance on filing a single
application for two or more changes, see
section 6.02(1)(b)(ii) of this revenue pro-
cedure.
(5)Ogden copy of Form 3115 required
in lieu of national office copy. A taxpayer
changing its method of accounting under
this section 6.27 of the APPENDIX must
file a signed copy of its completed Form
3115 with the IRS in Ogden, UT (Ogden
copy), in lieu of filing the national office
copy, no earlier than the first day of the
year of change and no later than the date
the taxpayer files the original Form 3115
with its federal income tax return for the
year of change. If a taxpayer makes both
this change and a change to a UNICAP
method under section 11.01, 11.02, or
11.09 of this APPENDIX (as applicable)
on a single Form 3115 for the same year
of change in accordance with section
6.27(4)(b) of this APPENDIX, the tax-
payer must file a signed copy of that com-
pleted Form 3115 with the IRS in Ogden,
UT (Ogden copy), in lieu of filing the
national office copy, no earlier than the
first day of the year of change and no later
than the date the taxpayer files the original
Form 3115 with its federal income tax
return for the year of change.Seesections
6.02(3)(a)(ii)(B) (providing the general
rules) and 6.02(7)(b) (providing the mail-
ing address) of this revenue procedure.
(6)Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to a method of ac-
counting under section 6.27 of this AP-
PENDIX is “175.”Seesection 6.02(4) of
this revenue procedure.
(7)Contact information. For further in-
formation regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free call).
(5) Section 6.28 of the APPENDIX of
Rev. Proc. 2011–14 is modified to read as
follows:
6.28Permissible to permissible method
of accounting for depreciation of
MACRS property (section 168;
§§ 1.168(i)–1T, 1.168(i)–7T, and
1.168(i)– 8T, Prop. Reg. §§ 1.168(i)–1,
1.168(i)–7, and 1.168(i)– 8).
(1)Description of change.
(a)Applicability. This change applies
to a taxpayer that wants to make a change
in method of accounting for depreciation
that is specified in section 6.28(3) of this
APPENDIX 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)–
1T, § 1.168(i)–7T, § 1.168(i)–8T, Prop.
Reg. § 1.168(i)–1, Prop. Reg.
§ 1.168(i)–7, or Prop. Reg. § 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 the following:
(i) A taxpayer that wants to make this
change for any taxable year beginning be-
fore January 1, 2012, or beginning on or
after January 1, 2014; or
(ii) Any property that is not depreci-
ated under § 168 under the taxpayer’s
present and proposed methods of account-
ing.
(2)Certain scope limitations inappli-
cable. The scope limitations in section
4.02 of this revenue procedure do not ap-
ply to a taxpayer that makes this change
for any taxable year beginning on or after
January 1, 2012, and beginning before
January 1, 2014.
(3)Changes covered. Section 6.28 of
this APPENDIX only applies to the fol-
lowing changes in methods of accounting
for depreciation of MACRS property:
(a) For the items of MACRS property
not subject to a general asset account elec-
tion 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 ac-
counts (or pools) for the same assets, or
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vice versa, in accordance with
§ 1.168(i)–7T or Prop. Reg. § 1.168(i)–7;
(ii) a change from grouping specific
items of MACRS property in multiple as-
set accounts to a different grouping of the
same assets in multiple asset accounts in
accordance with § 1.168(i)–7T(c);
(iii) for the items of MACRS property
accounted for in multiple asset accounts, a
change in the method of identifying which
assets have been disposed of by the tax-
payer from the specific identification
method under § 1.168(i)–8T(f)(1) or
Prop. Reg. § 1.168(i)–8(g)(1), as applica-
ble, to the first-in, first-out (FIFO) method
of accounting under § 1.168(i)–
8T(f)(2)(i) or Prop. Reg. § 1.168(i)–
8(g)(2)(i), as applicable, or the modified
FIFO method of accounting under
§ 1.168(i)–8T(f)(2)(ii) or Prop. Reg.
§ 1.168(i)–8(g)(2)(ii), as applicable;
(iv) for the items of MACRS property
accounted for in multiple asset accounts, a
change in the method of identifying which
assets have been disposed of by the tax-
payer from the FIFO method of account-
ing under § 1.168(i)–8T(f)(2)(i) or Prop.
Reg. § 1.168(i)–8(g)(2)(i), as applicable,
or the modified FIFO method of account-
ing under § 1.168(i)–8T(f)(2)(ii) or Prop.
Reg. § 1.168(i)–8(g)(2)(ii), as applicable,
to the specific identification method under
§ 1.168(i)–8T(f)(1) or Prop. Reg.
§ 1.168(i)–8(g)(1), as applicable;
(v) for the items of MACRS property
accounted for in multiple asset accounts, a
change in the method of identifying which
assets have been disposed of by the tax-
payer from the FIFO method of account-
ing under § 1.168(i)–8T(f)(2)(i) or Prop.
Reg. § 1.168(i)–8(g)(2)(i), as applicable,
to the modified FIFO method of account-
ing under § 1.168(i)–8T(f)(2)(ii) or Prop.
Reg. § 1.168(i)–8(g)(2)(ii), as applicable,
or vice versa;
(vi) for the items of MACRS property
that are mass assets (as defined in
§ 1.168(i)–8T(b)(2) or Prop. Reg.
§ 1.168(i)–8(b)(3), as applicable) ac-
counted for in multiple asset accounts, a
change in the method of identifying which
assets have been disposed of by the tax-
payer from the specific identification
method under § 1.168(i)–8T(f)(1) or
Prop. Reg. § 1.168(i)–8(g)(1), as applica-
ble, to a mortality dispersion table in ac-
cordance with § 1.168(i)–8T(f)(2)(iii) or
Prop. Reg. § 1.168(i)–8(g)(2)(iii), as ap-
plicable;
(vii) for the items of MACRS property
that are mass assets (as defined in
§ 1.168(i)–8T(b)(2) or Prop. Reg.
§ 1.168(i)–8(b)(3), as applicable) ac-
counted for in multiple asset accounts, a
change in the method of identifying which
assets have been disposed of by the tax-
payer from the FIFO method of account-
ing under § 1.168(i)–8T(f)(2)(i) or Prop.
Reg. § 1.168(i)–8(g)(2)(i), as applicable,
or the modified FIFO method of account-
ing under § 1.168(i)–8T(f)(2)(ii) or Prop.
Reg. § 1.168(i)–8(g)(2)(ii), as applicable,
to a mortality dispersion table in accor-
dance with § 1.168(i)–8T(f)(2)(iii) or
Prop. Reg. § 1.168(i)–8(g)(2)(iii), as ap-
plicable;
(viii) for the items of MACRS property
that are mass assets (as defined in
§ 1.168(i)–8T(b)(2) or Prop. Reg.
§ 1.168(i)–8(b)(3), as applicable) ac-
counted for in multiple asset accounts, a
change in the method of identifying which
assets have been disposed of by the tax-
payer from a mortality dispersion table in
accordance with § 1.168(i)–8T(f)(2)(iii)
or Prop. Reg. § 1.168(i)–8(g)(2)(iii), as
applicable, to the specific identification
method under § 1.168(i)–8T(f)(1) or
Prop. Reg. § 1.168(i)–8(g)(1), as applica-
ble, the FIFO method of accounting under
§ 1.168(i)–8T(f)(2)(i) or Prop. Reg.
§ 1.168(i)–8(g)(2)(i), as applicable, or the
modified FIFO method of accounting un-
der § 1.168(i)–8T(f)(2)(ii) or Prop. Reg.
§ 1.168(i)–8(g)(2)(ii), as applicable;
(ix) if § 1.168(i)–8T(e)(2) or Prop.
Reg. § 1.168(i)–8(f)(2), as applicable, ap-
plies to a disposition of an item of
MACRS property in a multiple asset ac-
count, a change in the method of deter-
mining the unadjusted depreciable basis
of all assets in the multiple asset account
from one reasonable method to another
reasonable method for purposes of deter-
mining the unadjusted depreciable basis
of the disposed asset; or
(x) if Prop. Reg. § 1.168(i)–8(f)(3) ap-
plies to a disposition of more than one
portion of the same asset, a change in the
method of determining the unadjusted de-
preciable basis of all portions of the asset
from one reasonable method to another
reasonable method for purposes of deter-
mining the unadjusted depreciable basis
of each disposed portion of the asset; and
(b) For the items of MACRS property
subject to a general asset account election
under § 168(i)(4) and the regulations
thereunder—
(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)–1T(c) or Prop.
Reg. § 1.168(i)–1(c), as applicable;
(ii) a change in the method of identi-
fying which assets have been disposed of
by the taxpayer from the specific identifi-
cation method under § 1.168(i)–
1T(j)(2)(i) or Prop. Reg. § 1.168(i)–
1(j)(2)(i)(A), as applicable, to the FIFO
method of accounting under § 1.168(i)–
1T(j)(2)(ii) or Prop. Reg. § 1.168(i)–
1(j)(2)(i)(B), as applicable, or the modi-
fied FIFO method of accounting under
§ 1.168(i)–1T(j)(2)(iii) or Prop. Reg.
§ 1.168(i)–1(j)(2)(i)(C), as applicable;
(iii) a change in the method of identi-
fying which assets have been disposed of
by the taxpayer from the FIFO method of
accounting under § 1.168(i)–1T(j)(2)(ii)
or Prop. Reg. § 1.168(i)–1(j)(2)(i)(B), as
applicable, or the modified FIFO method
of accounting under § 1.168(i)–
1T(j)(2)(iii) or Prop. Reg. § 1.168(i)–
1(j)(2)(i)(C), as applicable, to the specific
identification method under § 1.168(i)–
1T(j)(2)(i) or Prop. Reg. § 1.168(i)–
1(j)(2)(i)(A), as applicable;
(iv) a change in the method of identi-
fying which assets have been disposed of
by the taxpayer from the FIFO method of
accounting under § 1.168(i)–1T(j)(2)(ii)
or Prop. Reg. § 1.168(i)–1(j)(2)(i)(B), as
applicable, to the modified FIFO method
of accounting under § 1.168(i)–
1T(j)(2)(iii), or Prop. Reg. § 1.168(i)–
1(j)(2)(i)(C), as applicable, or vice versa;
(v) for the items of MACRS property
that are mass assets (as defined in
§ 1.168(i)–1T(b)(5) or Prop. Reg.
§ 1.168(i)–1(b)(6), as applicable) ac-
counted for in a separate general asset
account in accordance with § 1.168–
1T(c)(2)(ii)(H) or Prop. Reg. § 1.168(i)–
1(c)(2)(ii)(H), as applicable, a change in
the method of identifying which assets
have been disposed of by the taxpayer
from the specific identification method
under § 1.168(i)–1T(j)(2)(i) or Prop. Reg.
Bulletin No. 2014–12March 17, 2014
665

§ 1.168(i)–1(j)(2)(i)(A), as applicable, to a
mortality dispersion table in accordance
with § 1.168(i)–1T(j)(2)(iv) or Prop. Reg.
§ 1.168(i)–1(j)(2)(i)(D), as applicable;
(vi) for the items of MACRS property
that are mass assets (as defined in
§ 1.168(i)–1T(b)(5) or Prop. Reg.
§ 1.168(i)–1(b)(6), as applicable) ac-
counted for in a separate general asset
account in accordance with § 1.168–
1T(c)(2)(ii)(H) or Prop. Reg. § 1.168(i)–
1(c)(2)(ii)(H), as applicable, a change in
the method of identifying which assets
have been disposed of by the taxpayer
from the FIFO method of accounting un-
der § 1.168(i)–1T(j)(2)(ii) or Prop. Reg.
§ 1.168(i)–1(j)(2)(i)(B), as applicable, or
the modified FIFO method of accounting
under § 1.168(i)–1T(j)(2)(iii) or Prop.
Reg. § 1.168(i)–1(j)(2)(i)(C), as applica-
ble, to a mortality dispersion table in ac-
cordance with § 1.168(i)–1T(j)(2)(iv) or
Prop. Reg. § 1.168(i)–1(j)(2)(i)(D), as ap-
plicable;
(vii) for the items of MACRS property
that are mass assets (as defined in
§ 1.168(i)–1T(b)(5) or Prop. Reg.
§ 1.168(i)–1(b)(6), as applicable) ac-
counted for in a separate general asset
account in accordance with § 1.168–
1T(c)(2)(ii)(H) or Prop. Reg. § 1.168(i)–
1(c)(2)(ii)(H), as applicable, a change in
the method of identifying which assets
have been disposed of by the taxpayer
from a mortality dispersion table in accor-
dance with § 1.168(i)–1T(j)(2)(iv) or
Prop. Reg. § 1.168(i)–1(j)(2)(i)(D), as ap-
plicable, to the specific identification
method under § 1.168(i)–1T(j)(2)(i) or
Prop. Reg. § 1.168(i)–1(j)(2)(i)(A), as ap-
plicable, the FIFO method of accounting
under § 1.168(i)–1T(j)(2)(ii) or Prop. Reg.
§ 1.168(i)–1(j)(2)(i)(B), as applicable, or
the modified FIFO method of accounting
under § 1.168(i)–1T(j)(2)(iii) or Prop.
Reg. § 1.168(i)–1(j)(2)(i)(C), as applica-
ble; or
(viii) for purposes of determining the
unadjusted depreciable basis of a disposed
asset or a disposed portion of an asset in a
general asset account, a change in the
method of determining the unadjusted de-
preciable basis of all assets in the general
asset account from one reasonable method
to another reasonable method, in accor-
dance with § 1.168(i)–1T(j)(3) or Prop.
Reg. § 1.168(i)–1(j)(3), as applicable.
(4)Manner of making change.
(a) The changes in methods of account-
ing specified in section 6.28(3)(a)(i) and
(ii) and section 6.28(3)(b)(i) of this AP-
PENDIX are made using a modified cut-
off method under which the unadjusted
depreciable basis and the depreciation re-
serve of the asset as of the beginning of
the year of change are accounted for using
the new method of accounting.
(i) If the change specified in section
6.28(3)(a)(i) of this APPENDIX is a
change to a single asset account, the new
single asset account must include a begin-
ning balance for both the unadjusted de-
preciable basis and the depreciation re-
serve of the asset included in that single
asset account.
(ii) If the change specified in section
6.28(3)(a)(i) or (ii) of this APPENDIX is
a change to a multiple asset account (ei-
ther 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 re-
serve. The beginning balance for the un-
adjusted depreciable basis of each multi-
ple asset account is equal to the sum of the
unadjusted depreciable bases as of the be-
ginning 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 ac-
count.
(iii) The change specified in section
6.28(3)(b)(i) of this APPENDIX requires
the general asset account to include a be-
ginning balance for both the unadjusted
depreciable basis and the depreciation re-
serve. The beginning balance for the un-
adjusted depreciable basis of each general
asset account is equal to the sum of the
unadjusted depreciable bases as of the be-
ginning of the year of change for all assets
included in that general asset account. The
beginning balance of the depreciation re-
serve 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 ac-
count.
(b) The changes in methods of account-
ing specified in section 6.28(3)(a)(iii),(vi),
(ix), and (x) and section 6.28(3)(b)(ii), (v),
and (viii) of this APPENDIX are made
using a cut-off method and apply to dis-
positions occurring on or after the begin-
ning of the year of change.
(c) Even though the changes in meth-
ods of accounting specified in section
6.28(3)(a)(iv), (v), (vii), and (viii) and
section 6.28(3)(b)(iii), (iv), (vi), and (vii)
of this APPENDIX are changes from one
permissible method of accounting to an-
other permissible method of accounting,
these changes are made with a § 481(a)
adjustment. For the changes in methods of
accounting specified in section
6.28(3)(b)(iii), (iv), (vi), and (vii) of this
APPENDIX, the § 481(a) adjustment
should be zero unless § 1.168(i)–1T(e)(3)
or Prop. Reg. § 1.168(i)–1(e)(3), as appli-
cable, applies to the asset subject to the
change.
(d) 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 (“qualifying taxpayer”) is re-
quired to complete only the following in-
formation 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, line 1(a);
(iv) Part II, all lines except lines 11, 13,
14, 15, and 17;
(v) Part IV, lines 24, 25, and 26; and
(vi) Schedule E, lines 3, 4a, 4b, and 4c.
(e) If any asset subject to this change is
public utility property within the meaning
of § 168(i)(10), a taxpayer (including a
qualifying 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 account-
ing (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 de-
ferred tax reserve account or similar ac-
count 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
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666

a change in method of accounting speci-
fied in section 6.28(3)(a)(iv), (v), (vii), or
(viii) or section 6.28(3)(b)(iii), (iv), (vi),
or (vii) of this APPENDIX 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 application to any
regulatory body having jurisdiction over
the public utility property subject to the
change.
(5)Concurrent automatic change.
(a) A taxpayer that wants to make a
change under section 6.28 of this Appen-
dix 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 6.28(3)(a)(iv),
(v), (vii), or (viii) or section 6.28(3)(b)(iii),
(iv), (vi), or (vii) of this APPENDIX, the
single Form 3115 also should provide a
single net § 481(a) adjustment for all such
changes. If one or more of the changes
specified in section 6.28(3)(a)(iv), (v),
(vii), or (viii) or section 6.28(3)(b)(iii),
(iv), (vi), or (vii) of this APPENDIX in
that single Form 3115 generate a negative
§ 481(a) adjustment and other changes
specified in section 6.28(3)(a)(iv), (v),
(vii), or (viii) or section 6.28(3)(b)(iii),
(iv), (vi), or (vii) of this APPENDIX in
that same Form 3115 generate a positive
§ 481(a) adjustment, the taxpayer may
provide a single negative § 481(a) adjust-
ment for all such changes that are in-
cluded 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 gen-
erating such positive adjustment.
(b) For a building, condominium unit,
cooperative unit, structural component, or
an improvement or addition thereto, a tax-
payer that wants to make a change under
section 6.28(3)(a)(iii), (iv), (v), (vi), (vii),
(viii), (ix), or (x) of this APPENDIX, a
change under section 6.29 of this APPEN-
DIX, and/or a change under section 6.01
of this APPENDIX for the same year of
change should file a single Form 3115 for
all such changes and must enter the des-
ignated automatic accounting method
change numbers for the changes on the
appropriate line on the Form 3115. For
guidance on filing a single application
for two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(c) For section 1245 property or a de-
preciable land improvement, a taxpayer
that wants to make a change under section
6.28(3)(a)(iii), (iv), (v), (vi), (vii), (viii),
(ix), or (x) of this APPENDIX, a change
under section 6.30 of this APPENDIX,
and/or a change under section 6.01 of this
APPENDIX 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 appropri-
ate line on the Form 3115. For guidance
on filing a single application for two or
more changes, see section 6.02(1)(b)(ii) of
this revenue procedure.
(d) A taxpayer that wants to make a
change under section 6.28(3)(b)(ii), (iii),
(iv), (v), (vi), (vii), or (viii) of this AP-
PENDIX, a change under section 6.31 of
this APPENDIX, and/or a change under
section 6.01 of this APPENDIX 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.
For guidance on filing a single application
for two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(e) A taxpayer that wants to make a
change under section 6.28(3)(b)(ii), (iii),
(iv), (v), (vi), (vii), or (viii) of this AP-
PENDIX, a change under section
6.32(1)(a)(ii), (iii), (iv), or (v) of this AP-
PENDIX, and/or a change under section
6.01 of this APPENDIX 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. This
section 6.28(5)(e) applies only if all of
these changes are made for any taxable
year beginning on or after January 1,
2012, and beginning before January 1,
2014. For guidance on filing a single ap-
plication for two or more changes, see
section 6.02(1)(b)(ii) of this revenue pro-
cedure.
(f) A taxpayer that wants to make a
change under section 6.28(3)(b)(ii), (iii),
(iv), (v), (vi), (vii), or (viii) of this AP-
PENDIX, a change under section 6.31 of
this APPENDIX, a change under section
6.32(1)(a)(ii), (iii), (iv), or (v) of this AP-
PENDIX, and/or a change under section
6.01 of this APPENDIX 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. This
section 6.28(5)(f) applies only if all of
these changes are made for any taxable
year beginning on or after January 1,
2012, and beginning before January 1,
2014. For guidance on filing a single ap-
plication for two or more changes, see
section 6.02(1)(b)(ii) of this revenue
procedure.
(g) A taxpayer that wants to make both
this change and a change under section
6.01 of this APPENDIX for the same year
of change should file a single Form 3115
for both changes and must enter the des-
ignated automatic accounting method
change numbers for both changes on the
appropriate line on the Form 3115. For
guidance on filing a single application
for two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(6)Ogden copy of Form 3115 required
in lieu of national office copy. A taxpayer
changing its method of accounting under
this section 6.28 of the APPENDIX must
file a signed copy of its completed Form
3115 with the IRS in Ogden, UT (Ogden
copy), in lieu of filing the national office
copy, no earlier than the first day of the
year of change and no later than the date
the taxpayer files the original Form 3115
with its federal income tax return for
the year of change.Seesections
6.02(3)(a)(ii)(B) (providing the general
rules) and 6.02(7)(b) (providing the mail-
ing address) of this revenue procedure.
(7)Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to the method of
accounting under section 6.28 of this AP-
PENDIX is “176.”Seesection 6.02(4) of
this revenue procedure.
(8)Contact information. For further in-
formation regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free call).
(6) Section 6.29 of the APPENDIX of
Rev. Proc. 2011–14 is modified to read as
follows:
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667

6.29Disposition of a building or
structural component (section 168;
§ 1.168(i)– 8T, and Prop. Reg.
§ 1.168(i)– 8).
(1)Description of change.
(a)Applicability. This change applies
to a taxpayer that wants to make a change
in method of accounting that is specified
in section 6.29(3) of this APPENDIX per-
taining to the disposition of a building or
a structural component or the disposition
of a portion of a building (including its
structural components) towhich the partial
disposition rule in Prop. Reg. § 1.168(i)–
8(d)(1) applies. These specified changes are
consistent with §§ 1.168(i)–8T(b)(1),
1.168(i)–8T(c)(4)(ii)(A),(B), (C), (E), and
(F), and 1.168(i)–8T(f), or Prop. Reg.
§§ 1.168(i)–8(b)(2), 1.168(i)–8(c)(4)(ii)(A),
(B), and (D), and 1.168(i)–8(g), as appli-
cable. This change also affects the deter-
mination of gain or loss from the disposi-
tion of the building, the structural
component, or the portion of the building
(including its structural components) and
may affect whether the taxpayer must cap-
italize amounts paid to restore a unit of
property (as determined under § 1.263(a)–
3T(e) or (f), or § 1.263(a)–3(e) or (f), as
applicable) under § 1.263(a)–3T(i) or
§ 1.263(a)–3(k), as applicable.
(b)Inapplicability. This change does
not apply to the following:
(i) A taxpayer that wants to make this
change for any taxable year beginning be-
fore January 1, 2012, or beginning on or
after January 1, 2014;
(ii) Any property (or if applicable, a
portion thereof) 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;
(iii) Any property subject to a general
asset account election under § 168(i)(4)
and the regulations thereunder (but see
section 6.31 of this APPENDIX for mak-
ing a change for dispositions of tangible
depreciable assets subject to a general as-
set account election);
(iv) Any multiple buildings, condomin-
ium units, or cooperative units that are
treated as a single building under the tax-
payer’s present method of accounting, or
will be treated as a single building under
the taxpayer’s proposed method of ac-
counting, pursuant to § 1.1250–
1(a)(2)(ii); or
(v) Any disposition of a portion of an
asset for which a partial disposition elec-
tion under Prop. Reg. § 1.168(i)–8(d)(2)
is required but for which the taxpayer did
not make such election in accordance with
Prop. Reg. § 1.168(i)–8(d)(2)(ii) or (iii),
as applicable (but see section 6.33 of this
APPENDIX for making a late partial dis-
position election and section 6.35 of this
APPENDIX for making a partial disposi-
tion election pursuant to Prop. Reg.
§ 1.168(i)–8(d)(2)(iii)).
(2)Certain scope limitations inappli-
cable. The scope limitations in section
4.02 of this revenue procedure do not ap-
ply to a taxpayer that makes this change
for any taxable year beginning on or after
January 1, 2012, and beginning before
January 1, 2014.
(3)Covered changes. Section 6.29 of
this APPENDIX only applies to the fol-
lowing changes in methods of accounting
for a building, condominium unit, cooper-
ative unit, structural component, or an im-
provement or addition thereto:
(a) For purposes of applying
§ 1.168(i)–8T(c)(4) (determination of as-
set disposed of), a change to the appropri-
ate asset as determined under § 1.168(i)–
8T(c)(4)(ii)(A), (B), (C), (E), or (F), as
applicable;
(b) If the taxpayer makes the change
specified in section 6.29(3)(a) of this AP-
PENDIX, and if the taxpayer disposed of
the asset as determined under section
6.29(3)(a) of this APPENDIX in a taxable
year prior to the year of change but con-
tinues to deduct depreciation for such dis-
posed asset under the taxpayer’s present
method of accounting, a change from de-
preciating the disposed asset to recogniz-
ing gain or loss upon disposition;
(c) If the taxpayer’s present method of
accounting is in accord with § 1.168(i)–
8T(c)(4)(ii)(A), (B), (C), (E), and (F), and
if the taxpayer disposed of a building,
condominium unit, cooperative unit,
structural component, or an improvement
or addition thereto in a taxable year prior
to the year of change but continues to
deduct depreciation for such disposed as-
set under the taxpayer’s present method of
accounting, a change from depreciating
the disposed asset to recognizing gain or
loss upon disposition;
(d) For buildings, condominium units,
cooperative units, structural components,
or improvements or additions thereto ac-
counted for in multiple asset accounts, a
change in the method of identifying which
assets have been disposed of from a
method of accounting not specified in
§ 1.168(i)–8T(f)(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)–
8T(f)(1) or (2)(i), (ii), or (iii), as applica-
ble;
(e) For purposes of applying Prop.
Reg. § 1.168(i)–8(c)(4) (determination of
asset disposed of), a change to the appro-
priate asset as determined under Prop.
Reg. § 1.168(i)–8(c)(4)(ii)(A), (B), or
(D), as applicable;
(f) If the taxpayer makes the change
specified in section 6.29(3)(e) of this AP-
PENDIX, and if the taxpayer disposed of
the asset as determined under section
6.29(3)(e) of this APPENDIX or disposed
of a portion of such asset in a taxable year
prior to the year of change but continues
to deduct depreciation for such disposed
asset or such disposed portion under the
taxpayer’s present method of accounting,
a change from depreciating the disposed
asset or disposed portion to recognizing
gain or loss upon disposition;
(g) If the taxpayer’s present method of
accounting is in accord with Prop. Reg.
§ 1.168(i)–8(c)(4)(ii)(A), (B), and (D),
and if the taxpayer disposed of an asset as
determined under Prop. Reg. § 1.168(i)–
8(c)(4)(ii)(A), (B), or (D), as applicable,
or disposed of a portion of such asset in a
taxable year prior to the year of change
but continues to deduct depreciation for
such disposed asset or such disposed por-
tion under the taxpayer’s present method
of accounting, a change from depreciating
the disposed asset or disposed portion to
recognizing gain or loss upon disposition;
(h) For buildings (including their struc-
tural components), condominium units
(including their structural components),
cooperative units (including their struc-
tural components), or improvements or
additions thereto accounted for in multiple
asset accounts, a change in the method of
identifying which assets have been dis-
posed of from a method of accounting not
specified in Prop. Reg. § 1.168(i)–8(g)(1)
or (2)(i), (ii), or (iii) (for example, the
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668

last-in, first-out (LIFO) method of ac-
counting) to a method of accounting spec-
ified in Prop. Reg. § 1.168(i)–8(g)(1) or
(2)(i), (ii), or (iii), as applicable; or
(i) If the taxpayer makes the change
specified in section 6.34 of this APPEN-
DIX (revocation of a general asset ac-
count election), the taxpayer made a qual-
ifying disposition election under
§ 1.168(i)–1T(e)(3)(iii) in a taxable year
prior to the year of change for the dispo-
sition of an asset (as determined under
Prop. Reg. § 1.168(i)–8(c)(4)(ii)(A), (B),
or (D), as applicable) included in a general
asset account, the taxpayer’s present
method of accounting for such asset is in
accord with Prop. Reg. § 1.168(i)–
8(c)(4)(ii)(A), (B), or (D), as applicable,
and 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, a change from recognizing
gain or loss upon the disposition of that
asset under § 1.168(i)–8T to recognizing
gain or loss upon the disposition of the
same asset under Prop. Reg. § 1.168(i)–8.
(4)Examples. The following examples
illustrate the covered changes specified in
section 6.29(3) of this APPENDIX.
(a)Example 1. X, a calendar year taxpayer, ac-
quired and placed in service a building and its struc-
tural components in 1990. X depreciates this build-
ing and its structural components under § 168. In
2000, X replaced the entire roof of the building. 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 2000. A change by X to treating the building as
an asset and each structural component of the build-
ing as a separate asset for disposition purposes and
also to change from depreciating the original roof to
recognizing a loss upon its retirement is a covered
change described in section 6.29(3)(a) and (b) of this
APPENDIX solely for purposes of § 1.168(i)–
8T(c)(4).
(b)Example 2. Y, a calendar-year taxpayer, ac-
quired and placed in service a building and its struc-
tural components in 2000. In 2005, Y constructed
and placed in service an addition to this building. Y
depreciates the building, the addition, and their
structural components under § 168. A change by Y
to treating the original building as an asset, the
addition to the building as a separate asset, and each
structural component of the original building and the
addition as a separate asset for disposition purposes
is a change described in section 6.29(3)(a) of this
APPENDIX solely for purposes of § 1.168(i)–
8T(c)(4).
(c)Example 3. Z, a calendar-year taxpayer, ac-
quired and placed in service a building and its struc-
tural components in 2000. In 2005, Z constructed
and placed in service an addition to this building. Z
depreciates the building, the addition, and their
structural components under § 168. A change by Z to
treating 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 6.29(3)(e)
of this APPENDIX solely for purposes of Prop. Reg.
§ 1.168(i)–8(c)(4).
(5)Manner of making change.
(a) A taxpayer (including a qualifying
taxpayer as defined in section 6.29(5)(b))
making this change must attach to its
Form 3115 a statement with the follow-
ing:
(i) A description of the assets to which
this change applies;
(ii) If the taxpayer is making a change
specified in section 6.29(3)(a) or section
6.29(3)(e) of this APPENDIX, a descrip-
tion of the assets disposed of under the
taxpayer’s present and proposed methods
of accounting;
(iii) If the taxpayer is making the
change specified in section 6.29(3)(d) or
section 6.29(3)(h) of this APPENDIX, a
description of the method of identifying
which assets have been disposed of under
the taxpayer’s present and proposed meth-
ods of accounting; and
(iv) If any asset is public utility prop-
erty 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 ac-
counting (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 de-
ferred tax reserve account or similar ac-
count 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 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 (“qualifying taxpayer”) is re-
quired to complete only the following in-
formation 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, line 1(a);
(iv) Part II, all lines except lines 11, 13,
14, 15, and 17;
(v) Part IV, lines 25 and 26; and
(vi) Schedule E, line 3.
(6)No ruling on asset. The consent
granted under this revenue procedure for a
change specified in section 6.29(3)(a) of
this APPENDIX is not a determination by
the Commissioner that the taxpayer is us-
ing the appropriate asset under § 1.168(i)–
8T(c)(4) for determining what asset is dis-
posed of by the taxpayer and does not
create any presumption that the proposed
asset is permissible under § 1.168(i)–
8T(c)(4). Further, the consent granted un-
der this revenue procedure for a change
specified in section 6.29(3)(e) of this AP-
PENDIX is not a determination by the
Commissioner that the taxpayer is using
the appropriate asset under Prop. Reg.
§ 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 Prop.
Reg. § 1.168(i)–8(c)(4). The director will
ascertain whether the taxpayer’s determi-
nation of its asset under § 1.168(i)–
8T(c)(4) or Prop. Reg. § 1.168(i)–8(c)(4),
as applicable, is permissible.
(7)Section 481(a) adjustment. A tax-
payer changing its method of accounting
under section 6.29 of the APPENDIX 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.
(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 6.29(3)(e) of this AP-
PENDIX 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; or
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(ii) If the taxpayer is making the
change specified in section 6.29(3)(i) of
this APPENDIX.
(b) For a change not described in sec-
tion 6.29(8)(a) of this APPENDIX, see
section 5.04 of this revenue procedure for
the § 481(a) adjustment period.
(c)Example. Y, a calendar year taxpayer, ac-
quired and placed in service a building and its struc-
tural components in 2000. Y depreciates this build-
ing and its structural components under § 168. The
roof is a structural component of the building. Y
replaced the entire roof in 2010. On its federal tax
return for the taxable year ended December 31,
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 re-
placement roof and has been depreciating this roof
under § 168 since June 2010. 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 December 31,
2012, 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 recog-
nizing a loss upon its retirement. The amount of the
net negative § 481(a) adjustment on this Form 3115
is $10,000, which is the amount of the loss recog-
nized upon the retirement of the original roof. Y
decides to apply Prop. Reg. § 1.168(i)–8 for its
taxable year ending December 31, 2013, but decides
not to make any late partial disposition election
under section 6.33 of this APPENDIX. In accor-
dance with section 6.29(3)(e) of this APPENDIX, Y
files a Form 3115 with its 2013 federal income tax
return to change to treating the original building
(including its original roof and other original struc-
tural components) as an asset and the replacement
roof as a separate asset for disposition purposes.
Because Y is not making a late partial disposition
election for the original roof, Y does not recognize
the loss of $10,000 upon the retirement of the orig-
inal roof under Prop. Reg. § 1.168(i)–8 and Y will
continue to depreciate the original roof. Assume the
depreciation deduction for the original roof is $500
for the 2012 taxable year. Thus, the net positive
§ 481(a) adjustment for this change is $9,500 (loss of
$10,000 claimed on the 2012 return for the retire-
ment of the original roof less depreciation of $500
for the original roof for 2012) and is included in Y’s
taxable income for 2013.
(9)Concurrent automatic change.
(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 negative adjustment
and a single positive § 481(a) adjustment
for all the changes that are included in that
Form 3115 generating such positive ad-
justment.
(b) For a building, condominium unit,
cooperative unit, structural component, or
an improvement or addition thereto, a tax-
payer that wants to make this change, a
change under section 6.28(3)(a)(iii), (iv),
(v), (vi), (vii), (viii), (ix), or (x) of this
APPENDIX, and/or a change under sec-
tion 6.01 of this APPENDIX 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.
For guidance on filing a single application
for two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(c) A taxpayer that wants to make a
change under section 6.29(3)(e), (f), (g),
(h), or (i) of this APPENDIX, a change
under section 6.01 of this APPENDIX,
and/or a change under section 6.34 of this
APPENDIX 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 appropri-
ate line on the Form 3115. This section
6.29(9)(c) applies only if all of these
changes are made for any taxable year
beginning on or after January 1, 2012, and
beginning before January 1, 2014. For
guidance on filing a single application for
two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(d) A taxpayer that wants to make both
this change and a change under section
6.01 of this APPENDIX for the same year
of change should file a single Form 3115
for both changes and must enter the des-
ignated automatic accounting method
change numbers for both changes on the
appropriate line on the Form 3115. For
guidance on filing a single application for
two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(10)Ogden copy of Form 3115 re-
quired in lieu of national office copy.A
taxpayer changing its method of account-
ing under this section 6.29 of the APPEN-
DIX must file a signed copy of its com-
pleted Form 3115 with the IRS in Ogden,
UT (Ogden copy), in lieu of filing the
national office copy, no earlier than the
first day of the year of change and no later
than the date the taxpayer files the original
Form 3115 with its federal income tax
return for the year of change.Seesections
6.02(3)(a)(ii)(B) (providing the general
rules) and 6.02(7)(b) (providing the mail-
ing address) of this revenue procedure.
(11)Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to the method of
accounting under section 6.29 of this AP-
PENDIX is “177.”Seesection 6.02(4) of
this revenue procedure.
(12)Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free call).
(7) Section 6.30 of the APPENDIX of
Rev. Proc. 2011–14 is modified to read as
follows:
6.30Dispositions of tangible depreciable
assets (other than a building or its
structural components) (section 168;
§ 1.168(i)– 8T and Prop. Reg.
§ 1.168(i)– 8).
(1)Description of change.
(a)Applicability. This change applies
to a taxpayer that wants to make a change
in method of accounting that is specified
in section 6.30(3) of this APPENDIX per-
taining to the disposition of section 1245
property or a depreciable land improve-
ment or the disposition of a portion of
section 1245 property or a depreciable
land improvement to which the partial dis-
position rule in Prop. Reg. § 1.168(i)–
8(d)(1) applies. These specified changes
are consistent with §§ 1.168(i)–
8T(c)(4)(i), 1.168(i)–8T(c)(4)(ii)(D), (E),
and (F), and 1.168(i)–8T(f), or Prop. Reg.
§§ 1.168(i)–8(c)(4)(i), 1.168(i)–8(c)(4)(ii)(C)
and (D), and 1.168(i)–8(g), as applicable.
This change also affects the determination
of gain or loss from the disposition of the
section 1245 property, the depreciable
land improvement, or a portion of the
section 1245 property or depreciable land
improvement, and may affect whether the
taxpayer must capitalize amounts paid to
restore a unit of property (as determined
March 17, 2014Bulletin No. 2014–12
670

under § 1.263(a)–3T(e) or (f) , or
§ 1.263(a)–3(e) or (f), as applicable) un-
der § 1.263(a)–3T(i) or § 1.263(a)–3(k),
as applicable.
(b)Inapplicability. This change does
not apply to the following:
(i) A taxpayer that wants to make this
change for any taxable year beginning be-
fore January 1, 2012, or beginning on or
after January 1, 2014;
(ii) Any property (or if applicable, a
portion thereof) 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;
(iii) Any building, condominium unit,
cooperative unit, structural component, or
improvement or addition thereto (but see
section 6.29 of this APPENDIX for mak-
ing this change);
(iv) Any property subject to a general
asset account election under § 168(i)(4)
and the regulations thereunder (but see
section 6.31 of this APPENDIX for mak-
ing a change for dispositions of tangible
depreciable assets subject to a general as-
set account election); or
(v) Any disposition of a portion of an
asset for which a partial disposition elec-
tion under Prop. Reg. § 1.168(i)–8(d)(2)
is required but for which the taxpayer did
not make such election in accordance with
Prop. Reg. § 1.168(i)–8(d)(2)(ii) or (iii),
as applicable (but see section 6.33 of this
APPENDIX for making a late partial dis-
position election and section 6.35 of this
APPENDIX for making a partial disposi-
tion election pursuant to Prop. Reg.
§ 1.168(i)–8(d)(2)(iii)).
(2)Certain scope limitations inappli-
cable. The scope limitations in section
4.02 of this revenue procedure do not ap-
ply to a taxpayer that makes this change
for any taxable year beginning on or after
January 1, 2012, and beginning before
January 1, 2014.
(3)Covered changes. Section 6.30 of
this APPENDIX only applies to the fol-
lowing changes in methods of accounting
for a section 1245 property, a depreciable
land improvement, or an improvement or
addition thereto:
(a) For purposes of applying § 1.168(i)–
8T(c)(4) (determination of asset disposed
of), a change to the appropriate asset as
determined under § 1.168(i)–8T(c)(4)(i),
(ii)(D), (ii)(E), or (ii)(F), as applicable;
(b) If the taxpayer makes the change
specified in section 6.30(3)(a) of this AP-
PENDIX, and if the taxpayer disposed of
the asset as determined under section
6.30(3)(a) of this APPENDIX in a taxable
year prior to the year of change but con-
tinues to deduct depreciation for such dis-
posed asset under the taxpayer’s present
method of accounting, a change from de-
preciating the disposed asset to recogniz-
ing gain or loss upon disposition;
(c) If the taxpayer’s present method of
accounting is in accord with § 1.168(i)–
8T(c)(4)(i) or (ii), as applicable, for the
section 1245 property, the depreciable
land improvement, or the improvement or
addition thereto, and if the taxpayer dis-
posed of such asset in a taxable year prior
to the year of change but continues to
deduct depreciation for this disposed asset
under the taxpayer’s present method of
accounting, a change from depreciating
the disposed asset to recognizing gain or
loss upon disposition;
(d) For section 1245 property, depre-
ciable land improvements, or improve-
ments or additions thereto accounted for
in multiple asset accounts, a change in the
method of identifying which assets have
been disposed of from a method of ac-
counting not specified in § 1.168(i)–
8T(f)(1) or (2)(i), (ii), or (iii) (for exam-
ple, the last-in, first-out (LIFO) method of
accounting) to a method of accounting
specified in § 1.168(i)–8T(f)(1) or (2)(i),
(ii), or (iii), as applicable;
(e) For purposes of applying Prop.
Reg. § 1.168(i)–8(c)(4) (determination of
asset disposed of), a change to the appro-
priate asset as determined under Prop.
Reg. § 1.168(i)–8(c)(4)(i), (ii)(C), or
(ii)(D), as applicable;
(f) If the taxpayer makes the change
specified in section 6.30(3)(e) of this AP-
PENDIX, and if the taxpayer disposed of
the asset as determined under section
6.30(3)(e) of this APPENDIX or disposed
of a portion of such asset in a taxable year
prior to the year of change but continues
to deduct depreciation for such disposed
asset or such disposed portion, as applica-
ble, under the taxpayer’s present method
of accounting, a change from depreciating
the disposed asset or disposed portion, as
applicable, to recognizing gain or loss
upon disposition;
(g) If the taxpayer’s present method of
accounting is in accord with Prop. Reg.
§ 1.168(i)–8(c)(4)(i) or (ii), as applicable,
for the section 1245 property, the depre-
ciable land improvement, or the improve-
ment or addition thereto and if the tax-
payer disposed of such asset or a portion
of such asset in a taxable year prior to the
year of change but continues to deduct
depreciation for this disposed asset or dis-
posed portion, as applicable, under the
taxpayer’s present method of accounting,
a change from depreciating the disposed
asset or disposed portion, as applicable, to
recognizing gain or loss upon disposition;
(h) For section 1245 property, deprecia-
ble land improvements, or improvements or
additions thereto accounted for in multiple
asset accounts, a change in the method of
identifying which assets have been disposed
of from a method of accounting not speci-
fied in Prop. Reg. § 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 Prop.
Reg. § 1.168(i)–8(g)(1) or (2)(i), (ii), or (iii),
as applicable; or
(i) If the taxpayer makes the change
specified in section 6.34 of this APPEN-
DIX (revocation of a general asset ac-
count election), the taxpayer made a qual-
ifying disposition election under
§ 1.168(i)–1T(e)(3)(iii) in a taxable year
prior to the year of change for the dispo-
sition of a section 1245 property, depre-
ciable land improvement, or improvement
or addition thereto included in a general
asset account, the taxpayer’s present
method of accounting for such asset is in
accord with Prop. Reg. § 1.168(i)–
8(c)(4)(i) or (ii), as applicable, and 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, a change from recognizing gain or
loss upon the disposition of that asset un-
der § 1.168(i)–8T to recognizing gain or
loss upon the disposition of the same asset
under Prop. Reg. § 1.168(i)–8.
(4)Manner of making change.
(a) A taxpayer (including a qualifying
taxpayer as defined in section 6.30(4)(b))
making this change must attach to its
Form 3115 a statement with the follow-
ing:
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671

(i) A description of the assets to which
this change applies;
(ii) If the taxpayer is making a change
specified in section 6.30(3)(a) of this AP-
PENDIX, a description of the assets dis-
posed of under the taxpayer’s present and
proposed methods of accounting and a
statement as to whether or not the tax-
payer, under its proposed method of ac-
counting, is treating each of an asset’s
components as the asset in accordance
with § 1.168(i)–8T(c)(4)(ii)(F);
(iii) If the taxpayer is making a change
specified in section 6.30(3)(e) of this AP-
PENDIX, a description of the assets dis-
posed of under the taxpayer’s present and
proposed methods of accounting;
(iv) If the taxpayer is making the
change specified in section 6.30(3)(d) or
section 6.30(3)(h) of this APPENDIX, a
description of the method of identifying
which assets have been disposed of under
the taxpayer’s present and proposed meth-
ods 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 account-
ing (within the meaning of § 168(i)(9)) will
be used for the public utility property sub-
ject to the application;
(B) As of the beginning of the year of
change, the taxpayer will adjust its de-
ferred tax reserve account or similar ac-
count 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 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 (“qualifying taxpayer”) is re-
quired to complete only the following in-
formation 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, line 1(a);
(iv) Part II, all lines except lines 11, 13,
14, 15, and 17;
(v) Part IV, lines 25 and 26; and
(vi) Schedule E, line 3.
(5)No ruling on asset. The consent
granted under this revenue procedure for a
change specified in section 6.30(3)(a) of
this APPENDIX is not a determination by
the Commissioner that the taxpayer is us-
ing the appropriate asset under § 1.168(i)–
8T(c)(4) for determining what asset is dis-
posed of by the taxpayer and does not
create any presumption that the proposed
asset is permissible under § 1.168(i)–
8T(c)(4). Further, the consent granted un-
der this revenue procedure for a change
specified in section 6.30(3)(e) of this AP-
PENDIX is not a determination by the
Commissioner that the taxpayer is using
the appropriate asset under Prop. Reg.
§ 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 Prop.
Reg. § 1.168(i)–8(c)(4). The director will
ascertain whether the taxpayer’s determi-
nation of its asset under § 1.168(i)–
8T(c)(4) or Prop. Reg. § 1.168(i)–8(c)(4),
as applicable, is permissible.
(6)Section 481(a) adjustment. A tax-
payer changing its method of accounting
under section 6.30 of the APPENDIX 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.
(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:
(i) If the taxpayer is making the change
specified in section 6.30(3)(e) of this AP-
PENDIX and if the taxpayer recognized a
gain or loss under § 1.168(i)–8T on the
disposition of the section 1245 property,
depreciable land improvement, or im-
provement or addition thereto (or if appli-
cable, 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 6.30(3)(i) of
this APPENDIX.
(b) For a change not described in sec-
tion 6.30(7)(a) of this APPENDIX, see
section 5.04 of this revenue procedure for
the § 481(a) adjustment period.
(8)Concurrent automatic change.
(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 gen-
erate 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 pos-
itive § 481(a) adjustment for all the changes
that are included in that Form 3115 gener-
ating such positive adjustment. For guid-
ance on filing a single application for two or
more changes, see section 6.02(1)(b)(ii) of
Rev. Proc. 2011–14.
(b) For a section 1245 property or a
depreciable land improvement that is de-
preciated under § 168, a taxpayer that
wants to make this change, a change under
section 6.28(3)(a)(iii), (iv), (v), (vi), (vii),
(viii), (ix), or (x) of this APPENDIX,
and/or a change under section 6.01 of this
APPENDIX 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 appropri-
ate line on the Form 3115. For guidance
on filing a single application for two or
more changes, see section 6.02(1)(b)(ii) of
this revenue procedure.
(c) A taxpayer that wants to make a
change under section 6.30(3)(e), (f), (g),
(h), or (i) of this APPENDIX, a change
under section 6.01 of this APPENDIX,
and/or a change under section 6.34 of this
APPENDIX 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 appropri-
ate line on the Form 3115. This section
6.30(8)(c) applies only if all of these
changes are made for any taxable year
March 17, 2014Bulletin No. 2014–12
672

beginning on or after January 1, 2012, and
beginning before January 1, 2014. For
guidance on filing a single application for
two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(d) A taxpayer that wants to make both
this change and a change under section
6.01 of this APPENDIX for the same year
of change should file a single Form 3115
for both changes and must enter the des-
ignated automatic accounting method
change numbers for both changes on the
appropriate line on the Form 3115. For
guidance on filing a single application for
two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(9)Ogden copy of Form 3115 required
in lieu of national office copy. A taxpayer
changing its method of accounting under
this section 6.30 of the APPENDIX must
file a signed copy of its completed Form
3115 with the IRS in Ogden, UT (Ogden
copy), in lieu of filing the national office
copy, no earlier than the first day of the year
of change and no later than the date the
taxpayer files the original Form 3115 with
its federal income tax return for the year of
change.Seesections 6.02(3)(a)(ii)(B) (pro-
viding the general rules) and 6.02(7)(b)
(providing the mailing address) of this rev-
enue procedure.
(10)Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to the method of
accounting under section 6.30 of this AP-
PENDIX is “178.”Seesection 6.02(4) of
this revenue procedure.
(11)Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free call).
(8) Section 6.31 of the APPENDIX of
Rev. Proc. 2011–14 is modified to read as
follows:
6.31Dispositions of tangible depreciable
assets in a general asset account
(section 168(i)(4); § 1.168(i)–1T and
Prop. Reg. § 1.168(i)–1).
(1)Description of change.
(a)Applicability. This change applies
to a taxpayer that wants to make a change
in method of accounting that is specified
in section 6.31(3) of this APPENDIX per-
taining to the disposition of an asset sub-
ject to a general asset account election
under § 168(i)(4) and the regulations
thereunder. These specified changes are
consistent with §§ 1.168(i)–1T(e)(1),
1.168(i)–1T(e)(2)(viii), and 1.168(i)–
1T(j), or Prop. Reg. §§ 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 the
disposition 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)–3T(e) or
(f), or § 1.263(a)–3(e) or (f), as applica-
ble) under § 1.263(a)–3T(i) or § 1.263(a)–
3(k), as applicable.
(b)Inapplicability. This change does
not apply to the following:
(i) A taxpayer that wants to make this
change for any taxable year beginning be-
fore January 1, 2012, or beginning on or
after January 1, 2014;
(ii) Any property that is not depreci-
ated under § 168 under the taxpayer’s
present method of accounting and, if ap-
plicable, proposed method of accounting;
or
(iii) Any property not subject to a gen-
eral asset account election under
§ 168(i)(4) and the regulations thereunder
(but see sections 6.29 and 6.30 of this
APPENDIX for making a change for dis-
positions of tangible depreciable assets
not subject to a general asset account elec-
tion).
(2)Certain scope limitations inappli-
cable. The scope limitations in section
4.02 of this revenue procedure do not ap-
ply to a taxpayer that makes this change
for any taxable year beginning on or after
January 1, 2012, and beginning before
January 1, 2014.
(3)Covered changes. Section 6.31 of
this APPENDIX only applies to the fol-
lowing 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)–1T(e)(2)(viii) (determination
of asset disposed of), a change to the
appropriate asset as determined under
§ 1.168(i)–1T(e)(2)(viii)(A) or (B), as ap-
plicable;
(b) A change in the method of identi-
fying which assets have been disposed of
from a method of accounting not specified
in § 1.168(i)–1T(j)(2)(i), (ii), (iii), or (iv)
(for example, the last-in, first-out (LIFO)
method of accounting) to a method of
accounting specified in § 1.168(i)–
1T(j)(2)(i), (ii), (iii), or (iv), as applicable;
(c) For purposes of applying Prop.
Reg. § 1.168(i)–1(e)(2)(viii) (determina-
tion of asset disposed of), a change to the
appropriate asset as determined under
Prop. Reg. § 1.168(i)–1(e)(2)(viii)(A) or
(B), as applicable; or
(d) A change in the method of identi-
fying which assets have been disposed of
from a method of accounting not specified
in Prop. Reg. § 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 Prop.
Reg. § 1.168(i)–1(j)(2)(i)(A), (B), (C), or
(D), as applicable.
(4)Manner of making change.
(a) A taxpayer (including a qualifying
taxpayer as defined in section 6.31(4)(b))
making this change must attach to its
Form 3115 a statement with the follow-
ing:
(i) A description of the assets to which
this change applies;
(ii) If the taxpayer is making the
change specified in section 6.31(3)(a) of
this APPENDIX, a description of the as-
sets disposed of by the taxpayer under the
taxpayer’s present and proposed methods
of accounting and a statement as to
whether or not the taxpayer, under its pro-
posed method of accounting, is treating
each of an asset’s components as the asset
in accordance with § 1.168(i)–
1T(e)(2)(viii)(B)(6);
(iii) If the taxpayer is making the
change specified in section 6.31(3)(c) of
this APPENDIX, a description of the as-
sets disposed of by the taxpayer under the
taxpayer’s present and proposed methods
of accounting;
(iv) If the taxpayer is making the
change specified in section 6.31(3)(b) or
section 6.31(3)(d) of this APPENDIX, a
description of the method of identifying
which assets have been disposed of under
the taxpayer’s present and proposed meth-
ods 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:
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673

(A) A normalization method of ac-
counting (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 de-
ferred tax reserve account or similar ac-
count 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 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 (“qualifying taxpayer”) is re-
quired to complete only the following in-
formation 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, line 1(a);
(iv) Part II, all lines except lines 11, 13,
14, 15, and 17;
(v) Part IV, lines 25 and 26; and
(vi) Schedule E, line 3.
(5)No ruling on asset. The consent
granted under this revenue procedure for a
change specified in section 6.31(3)(a) of
this APPENDIX is not a determination by
the Commissioner that the taxpayer is us-
ing the appropriate asset under § 1.168(i)–
1T(e)(2)(viii) for determining what asset
is disposed of by the taxpayer and does
not create any presumption that the pro-
posed asset is permissible under
§ 1.168(i)–1T(e)(2)(viii). Further, the
consent granted under this revenue proce-
dure for a change specified in section
6.31(3)(c) of this APPENDIX is not a
determination by the Commissioner that
the taxpayer is using the appropriate asset
under Prop. Reg. § 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 Prop. Reg. § 1.168(i)–
1(e)(2)(viii). The director will ascertain
whether the taxpayer’s determination of
its asset under § 1.168(i)–1T(e)(2)(viii) or
Prop. Reg. § 1.168(i)–1(e)(2)(viii), as ap-
plicable, is permissible.
(6)Section 481(a) adjustment period.
(a) If a taxpayer makes the change
specified in section 6.31(3)(c) of this AP-
PENDIX and if the taxpayer recognized a
gain or loss under § 1.168(i)–1T or
§ 1.168(i)–8T, as applicable, on the dis-
position of a portion of the asset in a
taxable year prior to the year of change,
the taxpayer must take the entire amount
of the § 481(a) adjustment into account in
computing taxable income for the year of
change.
(b) For a change not described in sec-
tion 6.31(6)(a) of this APPENDIX, see
section 5.04 of this revenue procedure for
the § 481(a) adjustment period.
(c)Example. (i) X, a calendar year taxpayer,
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 2010. On its federal tax
return for the taxable year ended December 31,
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 re-
placement roof and has been depreciating this roof
under § 168 since June 2010.
(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 December 31, 2012, 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 ac-
count and the replacement roof in a separate general
asset account; and (2) make a late qualifying dispo-
sition 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, which is the loss recognized upon the re-
tirement of the original roof.
(iii) X decides to apply Prop. Reg. § 1.168(i)–1
for its taxable year ending December 31, 2013. In
accordance with section 6.31(3)(c) of this APPEN-
DIX, X files a Form 3115 with its 2013 federal
income tax return to change to treating the building
(including its original roof and other original struc-
tural 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. Assume the depreciation for this orig-
inal roof is $500 for the 2012 taxable year. Thus, the
net positive § 481(a) adjustment for this change is
$9,500 (loss of $10,000 claimed on the 2012 return
for the retirement of the original roof less deprecia-
tion of $500 for the original roof for 2012) and is
included in X’s taxable income for 2013.
(7)Concurrent automatic change.
(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 negative adjustment
and a single positive § 481(a) adjustment
for all the changes that are included in that
Form 3115 generating such positive ad-
justment.
(b) A taxpayer that wants to make
this change, a change under section
6.28(3)(b)(ii), (iii), (iv), (v), (vi), (vii),
or (viii) of this APPENDIX, and/or a
change under section 6.01 of this AP-
PENDIX for the same year of change
should file a single Form 3115 for all
such changes and must enter the desig-
nated automatic accounting method
change numbers for the changes on the
appropriate line on the Form 3115. For
guidance on filing a single application
for two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(c) A taxpayer that wants to make
this change, a change under section
6.32(1)(a)(ii),(iii), (iv), or (v) of this
APPENDIX and/or a change under sec-
tion 6.01 of this APPENDIX 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.
This section 6.31(8)(c) applies only if
both changes are made for any taxable
year beginning on or after January 1,
2012, and beginning before January 1,
2014. For guidance on filing a single ap-
plication for two or more changes, see
section 6.02(1)(b)(ii) of this revenue pro-
cedure.
(d) A taxpayer that wants to make
this change, a change under section
6.28(3)(b)(ii),(iii), (iv), (v), (vi), (vii), or
(viii) of this APPENDIX, a change under
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section 6.32(1)(a)(ii), (iii), (iv), or (v) of
this APPENDIX, and/or a change under
section 6.01 of this APPENDIX 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.
This section 6.31(8)(d) applies only if all
of these changes are made for any taxable
year beginning on or after January 1,
2012, and beginning before January 1,
2014. For guidance on filing a single ap-
plication for two or more changes, see
section 6.02(1)(b)(ii) of this revenue pro-
cedure.
(e) A taxpayer that wants to make both
this change and a change under section
6.01 of this APPENDIX for the same year
of change should file a single Form 3115
for both changes and must enter the des-
ignated automatic accounting method
change numbers for both changes on the
appropriate line on the Form 3115. For
guidance on filing a single application for
two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(8)Ogden copy of Form 3115 required
in lieu of national office copy. A taxpayer
changing its method of accounting under
this section 6.31 of the APPENDIX must
file a signed copy of its completed Form
3115 with the IRS in Ogden, UT (Ogden
copy), in lieu of filing the national office
copy, no earlier than the first day of the
year of change and no later than the date
the taxpayer files the original Form 3115
with its federal income tax return for the
year of change.Seesections 6.02(3)(a)(ii)(B)
(providing the general rules) and 6.02(7)(b)
(providing the mailing address) of this
revenue procedure.
(9)Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to the method of
accounting under section 6.31 of this AP-
PENDIX is “179.”Seesection 6.02(4) of
this revenue procedure.
(10)Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free call).
(9) Section 6.32 of the APPENDIX of
Rev. Proc. 2011–14 is modified to read as
follows:
6.32General asset account elections
(section 168(i)(4); § 1.168(i)–1T, and
Prop. Reg. § 1.168(i)–1).
(1)Description of change.
(a)Applicability. This change applies
to a taxpayer that wants to make:
(i) A late general asset account election
under §§ 168(i)(4), 1.168(i)–1T, or Prop.
Reg. § 1.168(i)–1, for one or more items
of MACRS property that is placed in ser-
vice by the taxpayer in a taxable year
beginning before January 1, 2012, and
owned by the taxpayer at the beginning of
the year of change. This change also may
affect whether the taxpayer must capital-
ize amounts paid to restore a unit of prop-
erty (as determined under § 1.263(a)–
3T(e) or (f), or § 1.263(a)–3(e) or (f), as
applicable) under §1.263(a)–3T(i) or
§ 1.263(a)–3(k), as applicable;
(ii) A late election to recognize gain or
loss upon the disposition of all of the
assets, or the last asset, in a general asset
account in accordance with § 1.168(i)–
1T(e)(3)(ii). This change also may affect
whether the taxpayer must capitalize
amounts paid to restore a unit of property
(as determined under § 1.263(a)–3T(e) or
(f), or § 1.263(a)–3(e) or (f), as applica-
ble) under §1.263(a)–3T(i) or § 1.263(a)–
3(k), as applicable;
(iii) A late election to recognize gain or
loss upon the disposition of all of the
assets, the last asset, or the last portion of
the last asset, in a general asset account in
accordance with Prop. Reg. § 1.168(i)–
1(e)(3)(ii). This change also may affect
whether the taxpayer must capitalize
amounts paid to restore a unit of property
(as determined under § 1.263(a)–3T(e) or
(f), or § 1.263(a)–3(e) or (f), as applica-
ble) under §1.263(a)–3T(i) or § 1.263(a)–
3(k), as applicable;
(iv) For an item of MACRS property
subject to a general asset account election,
a late election to recognize gain or loss
upon the disposition of that item in a
qualifying disposition (as defined in
§ 1.168(i)–1T(e)(3)(iii)(B)) in accordance
with § 1.168(i)–1T(e)(3)(iii). This change
also may affect whether the taxpayer must
capitalize amounts paid to restore a unit of
property (as determined under § 1.263(a)–
3T(e) or (f), or § 1.263(a)–3(e) or (f), as
applicable) under § 1.263(a)–3T(i) or
§ 1.263(a)–3(k), as applicable; or
(v) For an item of MACRS property
subject to a general asset account election,
a late election to recognize gain or loss
upon the disposition of that item in a
qualifying disposition (as defined in Prop.
Reg. § 1.168(i)–1(e)(3)(iii)(B)) in accor-
dance with Prop. Reg. § 1.168(i)–
1(e)(3)(iii). This change also may affect
whether the taxpayer must capitalize
amounts paid to restore a unit of property
(as determined under § 1.263(a)–3T(e) or
(f), or § 1.263(a)–3(e) or (f), as applica-
ble) under § 1.263(a)–3T(i) or § 1.263(a)–
3(k), as applicable.
(b)Inapplicability. Because of the
changes made to the existing general asset
account regulations by § 1.168(i)–1T and
Prop. Reg. § 1.168(i)–1, the IRS will treat
the making of the late elections specified
in section 6.32(1)(a) of this APPENDIX
as a change in method of accounting only
for the time specified in section 6.32(2) of
this APPENDIX. Accordingly, this treat-
ment does not apply to a taxpayer that
makes any late election specified in sec-
tion 6.32(1)(a) of this APPENDIX after
the time specified in section 6.32(2) of this
APPENDIX, and any such late election 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 section 6.32 of this APPEN-
DIX must be made for any taxable year
beginning on or after January 1, 2012, and
beginning before January 1, 2014.
(3)Scope limitations inapplicable. The
scope limitations in section 4.02 of this
revenue procedure do not apply to this
change.
(4)Manner of making change.
(a) The change specified in section
6.32(1)(a)(i) of this APPENDIX 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. This change requires the gen-
eral asset account to include a beginning
balance for both the unadjusted deprecia-
ble basis and the depreciation reserve. The
beginning balance for the unadjusted de-
preciable basis of each general asset ac-
count 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 begin-
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675

ning balance of the depreciation reserve of
each general asset account is equal to the
sum of the greater of the depreciation al-
lowed or allowable as of the beginning of
the year of change for all assets included
in that general asset account.
(b) The change specified in section
6.32(1)(a)(ii), (iii), (iv), or (v) of this AP-
PENDIX is made with a § 481(a) adjust-
ment.
(c) 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 (“qualifying taxpayer”) is re-
quired to complete only the following in-
formation 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, line 1(a);
(iv) Part II, all lines except lines 11, 13,
14, 15, and 17;
(v) Part IV, lines 24, 25, and 26; and
(vi) Schedule E, lines 3, 4a, 4b, and 4c.
(d) A taxpayer (including a qualifying
taxpayer) making the change specified in
section 6.32(1)(a)(i), (iv), or (v) of this
APPENDIX must attach to its Form 3115
a statement with a description of the as-
set(s) to which this change applies (for
example, all 5-year property placed in ser-
vice in 2009 in Holmdel, New Jersey fa-
cility (for a change specified in section
6.32(1)(a)(i) of this APPENDIX); one
desk costing $2,000 in 2007 General As-
set Account #1 (for a change specified in
section 6.32(1)(a)(iv) of this APPEN-
DIX)).
(e) A taxpayer (including a qualifying
taxpayer) making the change specified in
section 6.32(1)(a)(ii) or (iii) of this AP-
PENDIX must attach to its Form 3115 a
statement with a description of the general
asset account(s) to which this change ap-
plies (for example, General Asset Account
#2 – all 2008 5-year property additions).
(f) A taxpayer (including a qualifying
taxpayer) making the change specified in
section 6.32(1)(a)(i) of this APPENDIX
must attach to its Form 3115 a statement
providing that the taxpayer agrees to the
following additional terms and conditions:
(i) The taxpayer consents to, and
agrees to apply, all of the provisions of
§ 1.168(i)–1 and [Insert, as appropriate,
either: § 1.168(i)–1T, or Prop. Reg.
§ 1.168(i)–1] to the assets that are subject
to the election specified in section
6.32(1)(a)(i) of this APPENDIX; and
(ii) Except as provided in [Insert, as
appropriate,either:§1.168(i)–
1T(c)(1)(ii)(A), (e)(3), (g), or (h), or Prop.
Reg. § 1.168(i)–1(c)(1)(iii)(A), (e)(3), (g),
or (h)], the election made by the taxpayer
under section 6.32(1)(a)(i) of this AP-
PENDIX is irrevocable and will be bind-
ing on the 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.
(g) If any asset is public utility property
within the meaning of § 168(i)(10), a tax-
payer (including a qualifying taxpayer)
making this change must attach to its
Form 3115 a statement providing that the
taxpayer agrees to the following addi-
tional terms and conditions:
(i) A normalization method of account-
ing (within the meaning of § 168(i)(9))
will be used for the public utility property
subject to the application;
(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 application to any
regulatory body having jurisdiction over
the public utility property subject to the
application; and
(iii) As of the beginning of the year of
change, the taxpayer will adjust its de-
ferred tax reserve account or similar ac-
count 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. This additional term and con-
dition only has to be included in the state-
ment by a taxpayer making the change
specified in section 6.32(1)(a)(ii), (iii),
(iv), or (v) of this APPENDIX.
(5)Concurrent automatic change.
(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. If the
change for more than one asset included
in that Form 3115 is specified in section
6.32(1)(a) of this APPENDIX, 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 6.32(1)(a) of this APPENDIX in
that single Form 3115 generate a negative
§ 481(a) adjustment and other changes
specified in section 6.32(1)(a) of this AP-
PENDIX in that same Form 3115 generate
a positive § 481(a) adjustment, the tax-
payer may provide a single negative
§ 481(a) adjustment for all such changes
that are included in that Form 3115 gen-
erating such negative adjustment and a
single positive § 481(a) adjustment for all
such changes that are included in that
Form 3115 generating such positive ad-
justment.
(b) A taxpayer that wants to make a
change under section 6.32(1)(a)(ii), (iii),
(iv), or (v) of this APPENDIX, a change
under section 6.28(3)(b)(ii), (iii), (iv), (v),
(vi), (vii), or (viii) of this APPENDIX,
and/or a change under section 6.01 of this
APPENDIX 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 appropri-
ate line on the Form 3115. This section
6.32(5)(b) applies only if all of these
changes are made for any taxable year
beginning on or after January 1, 2012, and
beginning before January 1, 2014. For
guidance on filing a single application
for two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(c) A taxpayer that wants to make a
change under section 6.32(1)(a)(ii), (iii),
(iv), or (v) of this APPENDIX, a change
under section 6.31 of this APPENDIX,
and/or a change under section 6.01 of this
APPENDIX 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 appropri-
ate line on the Form 3115. This section
6.32(5)(c) applies only if all of these
changes are made for any taxable year
beginning on or after January 1, 2012, and
beginning before January 1, 2014. For
guidance on filing a single application for
two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(d) A taxpayer that wants to make a
change under section 6.32(1)(a)(ii), (iii),
(iv), or (v) of this APPENDIX, a change
under section 6.28(3)(b)(ii), (iii), (iv), (v),
(vi), (vii), or (viii) of this APPENDIX, a
change under section 6.31 of this
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676

APPENDIX, and/or a change under sec-
tion 6.01 of this APPENDIX 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.
This section 6.32(5)(d) applies only if all
of these changes are made for any taxable
year beginning on or after January 1,
2012, and beginning before January 1,
2014. For guidance on filing a single ap-
plication for two or more changes, see
section 6.02(1)(b)(ii) of this revenue pro-
cedure.
(e) A taxpayer that wants to make both
this change and a change under section
6.01 of this APPENDIX for the same year
of change should file a single Form 3115
for both changes and must enter the des-
ignated automatic accounting method
change numbers for both changes on the
appropriate line on the Form 3115. This
section 6.32(5)(e) applies only if both
changes are made for any taxable year
beginning on or after January 1, 2012, and
beginning before January 1, 2014.
For guidance on filing a single application
for two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(6)Ogden copy of Form 3115 required
in lieu of national office copy. A taxpayer
changing its method of accounting under
this section 6.32 of the APPENDIX must
file a signed copy of its completed Form
3115 with the IRS in Ogden, UT (Ogden
copy), in lieu of filing the national office
copy, no earlier than the first day of the
year of change and no later than the date
the taxpayer files the original Form 3115
with its federal income tax return for
the year of change.Seesections
6.02(3)(a)(ii)(B) (providing the general
rules) and 6.02(7)(b) (providing the mail-
ing address) of this revenue procedure.
(7)Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to the method of
accounting under section 6.32 of this AP-
PENDIX is “180.”Seesection 6.02(4) of
this revenue procedure.
(8)Contact information. For further in-
formation regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free call).
(10) Section 10.07(1)(b) of the AP-
PENDIX of Rev. Proc. 2011–14 is modi-
fied to read as follows:
(b)Inapplicability. This change does
not apply to:
(i) A taxpayer that is currently capital-
izing and depreciating the cost of its re-
pairable and reusable spare parts, or that is
currently capitalizing the cost of its repair-
able and reusable spare parts and treating
these parts as nondepreciable property
(but see section 6.01 of this APPENDIX
for making a change from an impermissi-
ble to a permissible method of accounting
for depreciation);
(ii) A taxpayer that is using an imper-
missible method of accounting for depre-
ciation 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 de-
preciation under section 6 of this APPEN-
DIX;
(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 in-
curred in those taxable years), and for
which the taxpayer did not make the elec-
tion 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 ro-
table 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 reus-
able spare part.
.03New automatic changes.
(1) Rev. Proc. 2011–14 is modified to
add new section 6.33 to the APPENDIX
to read as follows:
6.33Late partial disposition election
(section 168; Prop. Reg. § 1.168(i)– 8).
(1)Description of change.
(a)Applicability. This change applies
to a taxpayer that wants to make a late
partial disposition election under Prop.
Reg. § 1.168(i)–8(d)(2)(i) for the disposi-
tion of a portion of an asset (as determined
under Prop. Reg. § 1.168(i)–8(c)(4)) by
the taxpayer. This change includes the late
partial disposition election specified in
Prop. Reg. § 1.168(i)–8(d)(2)(i) that is
made pursuant to Prop. Reg. § 1.168(i)–
8(d)(2)(iv)(B). This change also may af-
fect whether the taxpayer must capitalize
amounts paid to restore a unit of property
(as determined under § 1.263(a)–3T(e) or
(f), or § 1.263(a)–3(e) or (f), as applica-
ble) under §1.263(a)–3T(i) or § 1.263(a)–
3(k), as applicable.
(b)Inapplicability. This change does
not apply to the following:
(i) A taxpayer that does not apply the
provisions of Prop. Reg. § 1.168(i)–8;
(ii) 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;
(iii) A taxpayer that makes any late
election specified in section 6.33(1)(a) of
this APPENDIX after the time specified in
section 6.33(3) of this APPENDIX, and
any such late election is not a change in
method of accounting pursuant to
§ 1.446–1(e)(2)(ii)(d)(3)(iii); or
(iv) The partial disposition election
specified in Prop. Reg. § 1.168(i)–
8(d)(2)(i) that is made pursuant to Prop.
Reg. § 1.168(i)–8(d)(2)(iii) (but see sec-
tion 6.35 of this APPENDIX for making
this change).
(2)Change in method of accounting.
The IRS will treat the making of the late
election specified in section 6.33(1)(a) of
this APPENDIX as a change in method of
accounting only for the time specified in
section 6.33(3) of this APPENDIX.
(3)Time for making the change. The
change under this section 6.33 of the AP-
PENDIX must be made for any taxable
year beginning on or after January 1,
2012, and beginning before January 1,
2014. However, if the change under this
section 6.33 of the APPENDIX is made
pursuant to Prop. Reg. § 1.168(i)–
8(d)(2)(iv)(B), this change must be made
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677

for the first or second taxable year suc-
ceeding the applicable taxable year (as
defined in Prop. Reg. § 1.168(i)–
8(d)(2)(iv)), pursuant to Prop. Reg.
§ 1.168(i)–8(d)(2)(iv)(B).
(4)Scope limitations inapplicable. The
scope limitations in section 4.02 of this
revenue procedure do not apply to this
change.
(5)Manner of making change.
(a) 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 (“qualifying taxpayer”) is re-
quired to complete only the following in-
formation 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, line 1(a);
(iv) Part II, all lines except lines 11, 13,
14, 15, and 17;
(v) Part IV, lines 25 and 26; and
(vi) Schedule E, line 3.
(b) A taxpayer (including a qualifying
taxpayer) making this change must:
(i) Apply Prop. Reg. § 1.168(i)–8(h)(1)
and (3);
(ii) If the asset (as determined under
Prop. Reg. § 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,
198713–2 C.B. 674, classify the replace-
ment 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 Prop.
Reg. § 1.168(i)–8(c)(4) (determination of
asset disposed of), change to the appropri-
ate asset as determined under Prop. Reg.
§ 1.168(i)–8(c)(4);
(iv) If the taxpayer continues to deduct
depreciation for the disposed portion of
the asset (as determined under Prop. Reg.
§ 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 dis-
posed portion;
(v) If the taxpayer recognized a gain or
loss under § 1.168(i)–1T or § 1.168(i)–8T
for the disposed portion of the asset in a
taxable year prior to the year of change,
recognize gain or loss for such disposed
portion under Prop. Reg. § 1.168(i)–8;
and
(vi) If any asset is public utility prop-
erty within the meaning of § 168(i)(10),
attach to its Form 3115 a statement pro-
viding that the taxpayer agrees to the fol-
lowing additional terms and conditions:
(A) A normalization method of ac-
counting (within the meaning of
§ 168(i)(9)) will be used for the public
utility property subject to the application;
(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 application to any
regulatory body having jurisdiction over
the public utility property subject to the
application; and
(C) As of the beginning of the year of
change, the taxpayer will adjust its de-
ferred tax reserve account or similar ac-
count 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.
(6)Concurrent automatic change.
(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. If the
change for more than one asset included
in that Form 3115 is specified in section
6.33(1)(a) of this APPENDIX, 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 6.33(1)(a) of this APPENDIX in
that single Form 3115 generate a negative
§ 481(a) adjustment and other changes
specified in section 6.33(1)(a) of this AP-
PENDIX in that same Form 3115 generate
a positive § 481(a) adjustment, the tax-
payer may provide a single negative
§ 481(a) adjustment for all such changes
that are included in that Form 3115 gen-
erating such negative adjustment and a
single positive § 481(a) adjustment for all
such changes that are included in that
Form 3115 generating such positive ad-
justment.
(b) A taxpayer that wants to make this
change, a change under section 6.34 of
this APPENDIX, and/or a change under
section 6.01 of this APPENDIX 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.
This section 6.33(6)(b) applies only if all
of these changes are made for any taxable
year beginning on or after January 1,
2012, and beginning before January 1,
2014. For guidance on filing a single ap-
plication for two or more changes, see
section 6.02(1)(b)(ii) of this revenue pro-
cedure.
(c) A taxpayer that wants to make both
this change and a change under section
6.01 of this APPENDIX for the same year
of change should file a single Form 3115
for both changes and must enter the des-
ignated automatic accounting method
change numbers for both changes on the
appropriate line on the Form 3115. This
section 6.33(6)(c) applies only if both
changes are made for any taxable year
beginning on or after January 1, 2012, and
beginning before January 1, 2014. For
guidance on filing a single application for
two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(7)Examples. The following examples
illustrate the changes that may made be
under this section 6.33.
(a)Example 1. (i) X, a calendar year taxpayer,
acquired and placed in service a truck in 2009. The
truck is described in asset class 00.242 of Rev. Proc.
87–56. X depreciates the truck under § 168. X does
not reasonably expect to replace the engine of the
truck more than once during its class life of 6 years.
The engine is a major component of the truck under
§ 1.263(a)–3T(i)(1)(vi).
(ii) In 2012, X replaced the engine of the truck.
X applied § 1.168(i)–8T and § 1.263(a)–3T for its
taxable year ended December 31, 2012. Because the
truck is the asset for disposition purposes, X did not
recognize a loss on the retirement of the engine
under § 1.168(i)–8T and continues to depreciate the
original engine. Further, X capitalized the new en-
gine as an improvement, classified the new engine
under asset class 00.242 of Rev. Proc. 87–56, and
depreciates the new engine under § 168.
(iii) X decides to apply Prop. Reg. § 1.168(i)–8
for its taxable year ending December 31, 2013. X
also decides to make the late partial disposition elec-
tion under this section 6.33 for the truck’s original
engine that X retired in 2012. Although the truck is
the asset for disposition purposes under Prop. Reg.
§ 1.168(i)–8(c)(4)(ii)(C), the partial disposition rule
under Prop. Reg. § 1.168(i)–8(d)(2)(i) results in the
retirement of the engine being a disposition under
Prop. Reg. § 1.168(i)–8(b)(2). Thus, in accordance
with section 6.33 of this APPENDIX, X may file a
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678

Form 3115 with its 2013 federal income tax return to
make the late disposition election for the engine
thereby resulting in X changing from depreciating
the original engine to recognizing a loss upon its
retirement.
(b)Example 2. (i) Y, a calendar year taxpayer,
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 2010. On its federal in-
come tax return for the taxable year ended December
31, 2010, Y did not recognize a loss on the retire-
ment of the original roof and continued 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. 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 December 31,
2012, 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 recog-
nizing a loss upon its retirement. The amount of the
net negative § 481(a) adjustment on this Form 3115
is $10,000, which is the amount of the loss recog-
nized upon the retirement of the original roof.
(ii) Y decides to apply Prop. Reg. § 1.168(i)–8
for its taxable year ending December 31, 2013. Y
also decides to make the late partial disposition elec-
tion under this section 6.33 for the building’s origi-
nal roof that Y retired in 2010. Although the original
building (including its original roof and other origi-
nal structural components) is the asset for disposition
purposes under Prop. Reg. § 1.168(i)–8(c)(4)(ii)(A),
the partial disposition rule under Prop. Reg.
§ 1.168(i)–8(d)(2)(i) results in the retirement of the
original roof being a disposition under Prop. Reg.
§ 1.168(i)–8(b)(2). Thus, in accordance with section
6.33 of this APPENDIX, Y may file a Form 3115
with its 2013 federal income tax return to make a late
partial disposition election for the original roof
thereby resulting in Y treating the original building
(including its original roof and other original struc-
tural components) as an asset and the replacement
roof to the building as a separate asset for disposition
purposes and recognizing a loss upon the retirement
of the original roof under Prop. Reg. § 1.168(i)–8.
(iii) The computation of the net § 481 adjustment
for this change is computed as follows:
Loss on retirement of
original roof on 2012
return under § 1.168(i)–8T
$10,000
Loss on retirement of
original roof under
Prop. Reg. § 1.168(i)–8
(10,000)
Net § 481(a) adjustment
for the roof
$0
(8)Ogden copy of Form 3115 required
in lieu of national office copy. A taxpayer
changing its method of accounting under
this section 6.33 of the APPENDIX must
file a signed copy of its completed Form
3115 with the IRS in Ogden, UT (Ogden
copy), in lieu of filing the national office
copy, no earlier than the first day of the
year of change and no later than the date
the taxpayer files the original Form 3115
with its federal income tax return for the
year of change.Seesections
6.02(3)(a)(ii)(B) (providing the general
rules) and 6.02(7)(b) (providing the mail-
ing address) of this revenue procedure.
(9)Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to the method of
accounting under section 6.33 of this AP-
PENDIX is “196.”Seesection 6.02(4) of
this revenue procedure.
(10)Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free call).
(2) Rev. Proc. 2011–14 is modified to
add new section 6.34 to the APPENDIX
to read as follows:
6.34Revocation of a general asset
account election (section 168;
§ 1.168(i)–1T and Prop. Reg.
§ 1.168(i)–1).
(1)Description of change.
(a)Applicability. This change applies
to a taxpayer that wants to revoke its
general asset account election:
(i) Made under section 6.32(1)(a)(i) of
this APPENDIX for one or more items of
MACRS property included in the general
asset account. This change also may affect
whether the taxpayer must capitalize
amounts paid to restore a unit of property
(as determined under § 1.263(a)–3T(e) or
(f), or § 1.263(a)–3(e) or (f), as applica-
ble) under §1.263(a)–3T(i) or § 1.263(a)–
3(k), as applicable; or
(ii) Made under § 1.168(i)–1T or Prop.
Reg. § 1.168(i)–1 for one or more items of
MACRS property placed in service by the
taxpayer in a taxable year beginning on or
after January 1, 2012, and before January
1, 2014. This change also may affect
whether the taxpayer must capitalize
amounts paid to restore a unit of property
(as determined under § 1.263(a)–3T(e) or
(f), or § 1.263(a)–3(e) or (f), as applica-
ble) under §1.263(a)–3T(i) or § 1.263(a)–
3(k), as applicable.
(b)Inapplicability. Because of the
changes made to the existing general asset
account regulations by Prop. Reg.
§ 1.168(i)–1, the IRS will treat the revo-
cation of the elections specified in section
6.34(1)(a) of this APPENDIX as a change
in method of accounting only for the time
specified in section 6.34(2) of this AP-
PENDIX. Accordingly, this treatment
does not apply to a taxpayer that makes
any revocation specified in section
6.34(1)(a) of this APPENDIX after the
time specified in section 6.34(2) of this
APPENDIX. Any revocation of such elec-
tion is not a change in method of account-
ingpursuantto§1.446–
1(e)(2)(ii)(d)(3)(iii), and the elections
specified in section 6.34(1)(a) of this AP-
PENDIX are irrevocable except as pro-
vided in § 1.168(i)–1T(c)(1)(ii)(A), (e)(3),
(g), or (h), or Prop. Reg. § 1.168(i)–
1(c)(1)(ii)(A), (e)(3), (g), or (h), as appli-
cable.
(2)Time for making the change. The
change under section 6.34 of this APPEN-
DIX must be made for any taxable year
beginning on or after January 1, 2012, and
beginning before January 1, 2015.
(3)Scope limitations inapplicable. The
scope limitations in section 4.02 of this
revenue procedure do not apply to this
change.
(4)Section 481(a) adjustment period.
A taxpayer making this change must take
the entire amount of the § 481(a) adjust-
ment into account in computing taxable
income for the year of change.
(5)Manner of making change.
(a) 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 (“qualifying taxpayer”) is re-
quired to complete only the following in-
formation 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, line 1(a);
(iv) Part II, all lines except lines 11, 13,
14, 15, and 17;
(v) Part IV, lines 25 and 26; and
(vi) Schedule E, lines 3, 4a, 4b, and 4c.
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679

(b) A taxpayer (including a qualifying
taxpayer) making this change must:
(i) Attach to its Form 3115 a statement
with a description of the asset(s) to which
this change applies (for example, all gen-
eral asset accounts established pursuant to
a Form 3115 filed under section
6.32(1)(a)(i) of this APPENDIX for the
year of change beginning January 1, 2012
(for a change specified in section
6.34(1)(a)(i) of this APPENDIX); one
desk costing $2,000 in 2012 General As-
set Account #1 (for a change specified in
section 6.34(1)(a)(ii) of this APPENDIX));
(ii) Include the asset(s) that were in the
general asset account(s) at the end of the
taxable year immediately preceding the
year of change in a single asset account or
a multiple asset account in accordance
with § 1.168(i)–7. If the asset is included
in a single asset account, the account must
include a beginning balance for both the
unadjusted depreciable basis and the de-
preciation reserve of the asset included in
that single asset account. If two or more
assets are included in a multiple asset ac-
count, the account must include a begin-
ning balance for both the unadjusted de-
preciable basis and the depreciation
reserve. The beginning balance for the
unadjusted depreciable basis of each mul-
tiple 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 ac-
count. The beginning balance of the de-
preciation 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; and
(iii) If any asset is public utility prop-
erty within the meaning of § 168(i)(10),
attach to its Form 3115 a statement pro-
viding that the taxpayer agrees to the fol-
lowing additional terms and conditions:
(A) A normalization method of ac-
counting (within the meaning of
§ 168(i)(9)) will be used for the public
utility property subject to the application;
(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 application to any
regulatory body having jurisdiction over
the public utility property subject to the
application; and
(C) As of the beginning of the year of
change, the taxpayer will adjust its de-
ferred tax reserve account or similar ac-
count 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.
(6)Concurrent automatic change.
(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. If the
change for more than one asset included
in that Form 3115 is specified in section
6.34(1)(a) of this APPENDIX, the single
Form 3115 must provide a single net
§ 481(a) adjustment for all such changes.
(b) A taxpayer that wants to make this
change, a change under section 6.29(3)(e),
(f), (g), (h), or (i) of this APPENDIX
and/or under section 6.30(3)(e), (f), (g),
(h), or (i) of this APPENDIX, a change
under section 6.33 of this APPENDIX,
and/or a change under section 6.01 of this
APPENDIX 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 appropri-
ate line on the Form 3115. This section
6.34(6)(b) applies only if all of these
changes are made for any taxable year
beginning on or after January 1, 2012, and
beginning before January 1, 2014. For
guidance on filing a single application for
two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(c) A taxpayer that wants to make this
change, a change under section 6.33 of
this APPENDIX, and/or a change under
section 6.01 of this APPENDIX 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.
This section 6.34(6)(c) applies only if all
of these changes are made for any taxable
year beginning on or after January 1,
2012, and beginning before January 1,
2014. For guidance on filing a single ap-
plication for two or more changes, see
section 6.02(1)(b)(ii) of this revenue pro-
cedure.
(d) A taxpayer that wants to make both
this change and a change under section
6.01 of this APPENDIX for the same year
of change should file a single Form 3115
for both changes and must enter the des-
ignated automatic accounting method
change numbers for both changes on the
appropriate line on the Form 3115. This
section 6.34(6)(d) applies only if both
changes are made for any taxable year
beginning on or after January 1, 2012, and
beginning before January 1, 2015. For
guidance on filing a single application
for two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(7)Examples. The following examples
illustrate the changes that may made be
under this section 6.34.
(a)Example 1. (i) On its federal tax return for the
taxable year ended December 31, 2012, X made a
general asset account election under § 1.168(i)–1T to
apply § 1.168(i)–1T to all of its assets placed in
service during 2012. No such assets were disposed of
during 2012. X decides to apply Prop. Reg.
§§ 1.168(i)–1 and 1.168(i)–8 for its taxable year
ending December 31, 2013. Because of the change in
the definition of a qualifying disposition under Prop.
Reg. § 1.168(i)–1(e)(3)(iii), X does not want its
assets placed in service during 2012 in general asset
accounts. In accordance with this section 6.34, X
files with its federal tax return for the taxable year
ending December 31, 2013, a Form 3115 to revoke
the general asset account election for all assets
placed in service during 2012. Because the adjusted
depreciable basis of the assets is not changed as a
result of this change, a § 481(a) adjustment is neither
required nor permitted.
(b)Example 2. (i) Y, a calendar year taxpayer,
acquired and placed in service three used trucks in
2011. The trucks are described in asset class 00.242
of Rev. Proc. 87–56, 1987–2 C.B. 674. Of the three
trucks, one truck costs $20,000 and the other two
trucks cost a total of $30,000. Y depreciates the
trucks under § 168. In 2012, Y sold the truck that
cost $20,000 to an unrelated party for $12,000.
(ii) In accordance with § 1.168(i)–1T and section
6.32(1)(a)(i) 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 tax return for the taxable
year ended December 31, 2012, a Form 3115 to make
a late general asset account election to include the three
trucks in one general asset account. Because a sales
transaction is a qualifying disposition under § 1.168(i)–
1T(e)(3)(iii)(B), Y also elected to apply § 1.168(i)–
1T(e)(3)(iii) for the sale of the truck in 2012. As a
result, Y removed this truck from the general asset
account and, on its 2012 federal tax return, recognized
a loss of $800 under § 1.168(i)–8T (sales proceeds of
$12,000 less the adjusted depreciable basis of $12,800
for the truck (cost of $20,000 less depreciation of
$7,200 for 2011 and 2012)).
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(iii) Y decides to apply Prop. Reg. §§ 1.168(i)–1
and 1.168(i)–8 for its taxable year ending December
31, 2013. Because a sales transaction is not a qualifying
disposition under Prop. Reg. § 1.168(i)–1(e)(3)(iii)(B),
Y should have recognized all of the sales proceeds of
$12,000 from the sale of the truck in 2012 as ordinary
income and continued to deduct depreciation for this
truck in the general asset account. As a result and in
accordance with sections 6.34 and 6.29(3)(i) of this
APPENDIX, Y files with its 2013 federal tax return a
Form 3115 to revoke the general asset account for the
three trucks placed in service in 2011, include the two
unsold trucks in one multiple asset account in accor-
dance with § 1.168(i)–7, and recognize the loss of $800
upon the sale of the truck in 2012 under Prop. Reg.
§ 1.168(i)–8.
(iv) The computation of the § 481 adjustment for
this change is computed as follows:
Loss on sale of truck on 2012
return under § 1.168(i)–8T
$ 800
Loss on sale of truck under
Prop. Reg. § 1.168(i)–8
(800)
Net § 481(a) adjustment for the asset $0
(c)Example 3. (i) Z, a calendar year taxpayer,
acquired and placed in service a building and its
structural components in 2000. Z depreciates this
building and its structural components under § 168.
The roof is a structural component of the building. Z
replaced the entire roof in 2010. On its federal tax
return for the taxable year ended December 31,
2010, Z did not recognize a loss on the retirement of
the original roof and continued to depreciate the
original roof. Z also capitalized the cost of the re-
placement roof and has been depreciating this roof
under § 168 since June 2010.
(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, Z filed with its federal tax return for the taxable
year ended December 31, 2012, 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 ac-
count and the replacement roof in a separate general
asset account; and (2) make a late qualifying dispo-
sition election for the retirement of the original roof
in 2010. As a result, Z removed the original roof
from the general asset account and reported a net
negative § 481(a) adjustment on this Form 3115 of
$10,000, which is the loss recognized upon the re-
tirement of the original roof.
(iii) Z decides to apply Prop. Reg. §§ 1.168(i)–1
and 1.168(i)–8 for its taxable year ending December
31, 2013, but decides not to make any late partial
disposition election under section 6.33 of this AP-
PENDIX. In accordance with sections 6.34 and
6.29(3)(e) of this APPENDIX, Z files a Form 3115
with its 2013 federal income tax return to revoke the
general asset account election for the building (in-
cluding its structural components) placed in service
in 2000 and for the replacement roof, and 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. Assume
the depreciation for the original roof is $500 for the
2012 taxable year. The net positive § 481(a) adjust-
ment for this change is $9,500 (loss of $10,000
claimed on the 2012 return for the retirement of the
original roof less depreciation of $500 for the orig-
inal roof for 2012) and is included in Z’s taxable
income for 2013.
(8)Ogden copy of Form 3115 required
in lieu of national office copy. A taxpayer
changing its method of accounting under
this section 6.34 of the APPENDIX must
file a signed copy of its completed Form
3115 with the IRS in Ogden, UT (Ogden
copy), in lieu of filing the national office
copy, no earlier than the first day of the
year of change and no later than the date
the taxpayer files the original Form 3115
with its federal income tax return for the
year of change.Seesections
6.02(3)(a)(ii)(B) (providing the general
rules) and 6.02(7)(b) (providing the mail-
ing address) of this revenue procedure.
(9)Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to the method of
accounting under section 6.34 of this AP-
PENDIX is “197.”Seesection 6.02(4) of
this revenue procedure.
(10)Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free call).
(3) Rev. Proc. 2011–14 is modified to
add new section 6.35 to the APPENDIX
to read as follows:
6.35Partial dispositions of tangible
depreciable assets to which the IRS’s
adjustment pertains (section 168; Prop.
Reg. § 1.168(i)– 8).
(1)Description of change.
(a)Applicability. This change applies
to a taxpayer that is described in Prop.
Reg. § 1.168(i)–8(d)(2)(iii) and, pursuant
to Prop. Reg. § 1.168(i)–8(d)(2)(iii), that
wants to make the partial disposition elec-
tion specified in Prop. Reg. § 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 Prop. Reg. § 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) The partial disposition election
specified in Prop. Reg. § 1.168(i)–
8(d)(2)(i) that is made pursuant to Prop.
Reg. § 1.168(i)–8(d)(2)(iv) (but see sec-
tion 6.33 of this APPENDIX for making
this change).
(2)Change in method of accounting.
The IRS will treat the making of the late
election specified in section 6.35(1) of this
APPENDIX as a change in method of
accounting.
(3)Scope limitations inapplicable. The
scope limitations in section 4.02 of this
revenue procedure do not apply to this
change.
(4)Manner of making change.
(a) 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 (“qualifying taxpayer”) is re-
quired to complete only the following in-
formation 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, line 1(a);
(iv) Part II, all lines except lines 11, 13,
14, 15, and 17;
(v) Part IV, lines 25 and 26; and
(vi) Schedule E, line 3.
(b) A taxpayer (including a qualifying
taxpayer) making this change must:
(i) Apply Prop. Reg. § 1.168(i)–8(h)(1)
and (3);
(ii) If the asset (as determined under
Prop. Reg. § 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 tax-
payer;
(iii) If the taxpayer’s present method of
accounting is not in accord with Prop.
Reg. § 1.168(i)–8(c)(4) (determination of
asset disposed of), change to the appropri-
ate asset as determined under Prop. Reg.
§ 1.168(i)–8(c)(4);
(iv) If the taxpayer continues to deduct
depreciation for the disposed portion of
the asset (as determined under Prop. Reg.
§ 1.168(i)–8(c)(4)) under the taxpayer’s
Bulletin No. 2014–12March 17, 2014
681

present method of accounting, change
from depreciating such disposed portion
to recognizing gain or loss for the dis-
posed portion; 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 ac-
counting (within the meaning of
§ 168(i)(9)) will be used for the public
utility property subject to the application;
(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 application to any
regulatory body having jurisdiction over
the public utility property subject to the
application; and
(C) As of the beginning of the year of
change, the taxpayer will adjust its de-
ferred tax reserve account or similar ac-
count 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.
(5)Concurrent automatic change.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. If the change for more
than one asset included in that Form 3115
is specified in section 6.35(1)(a) of this
APPENDIX, 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 6.35(1)(a) of
this APPENDIX in that single Form 3115
generate a negative § 481(a) adjustment
and other changes specified in section
6.35(1)(a) of this APPENDIX 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 ad-
justment and a single positive § 481(a)
adjustment for all such changes that are
included in that Form 3115 generating
such positive adjustment.
(6)Ogden copy of Form 3115 required
in lieu of national office copy. A taxpayer
changing its method of accounting under
this section 6.34 of the APPENDIX must
file a signed copy of its completed Form
3115 with the IRS in Ogden, UT (Ogden
copy), in lieu of filing the national office
copy, no earlier than the first day of the
year of change and no later than the date
the taxpayer files the original Form 3115
with its federal income tax return for the
year of change.Seesections
6.02(3)(a)(ii)(B) (providing the general
rules) and 6.02(7)(b) (providing the mail-
ing address) of this revenue procedure.
(7)Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to the method of
accounting under section 6.35 of this AP-
PENDIX is “198.”Seesection 6.02(4) of
this revenue procedure.
(8)Contact information. For further in-
formation regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free call).
(4) Rev. Proc. 2011–14 is modified to
add new section 6.36 to the APPENDIX
to read as follows:
6.36Depreciation of leasehold
improvements (sections 167, 168, and
197; § 1.167(a)– 4).
(1)Description of change. This change
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 (includ-
ing renewals, if applicable) to properly
depreciating these improvements under
§ 168;
(b) From improperly amortizing lease-
hold improvements to which § 197 applies
over the term of the lease (including re-
newals, if applicable) to properly amortiz-
ing these improvements under § 197; or
(c) From improperly amortizing lease-
hold improvements to which § 167(f)(1)
applies over the term of the lease (includ-
ing renewals, if applicable) to properly
amortizing these improvements under
§ 167(f)(1).
(2)Certain scope limitations inappli-
cable.
(a) The scope limitations in section
4.02 of this revenue procedure do not ap-
ply to a taxpayer that makes this change
for its first taxable year beginning after
December 31, 2013, and beginning before
January 1, 2015. In addition, if a taxpayer
chooses to make this change for any tax-
able year beginning on or after January 1,
2012, and beginning before January 1,
2014, the scope limitations in section 4.02
of this revenue procedure do not apply.
(b) The scope limitation in section
4.02(5) of this revenue procedure does not
apply to a taxpayer that makes this
change.
(3)Manner of making change.
(a) 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 (“qualifying taxpayer”) is re-
quired to complete only the following in-
formation 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, line 1(a);
(iv) Part II, all lines except lines 11, 14,
15, and 17;
(v) Part IV, lines 25 and 26; 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 qualifying taxpayer)
making this change must attach to its
Form 3115 a statement providing that the
taxpayer agrees to the following addi-
tional terms and conditions:
(i) A normalization method of account-
ing (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 de-
ferred tax reserve account or similar ac-
count 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
March 17, 2014Bulletin No. 2014–12
682

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 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 11.01, 11.02, or
11.09 of this APPENDIX (as applicable)
for the same year of change should file a
single Form 3115 for all such changes and
must enter the designated automatic ac-
counting method change numbers for the
changes on the appropriate line on the
Form 3115. For guidance on filing a single
application for two or more changes, see
section 6.02(1)(b)(ii) of this revenue pro-
cedure.
(5)Ogden copy of Form 3115 required
in lieu of national office copy. A taxpayer
changing its method of accounting under
this section 6.36 of the APPENDIX must
file a signed copy of its completed Form
3115 with the IRS in Ogden, UT (Ogden
copy), in lieu of filing the national office
copy, no earlier than the first day of the
year of change and no later than the date
the taxpayer files the original Form 3115
with its federal income tax return for the
year of change. If a taxpayer makes both
this change and a change to a UNICAP
method under section 11.01, 11.02, or
11.09 of this APPENDIX (as applicable)
on a single Form 3115 for the same year
of change in accordance with section
6.36(4)(b) of this APPENDIX, the tax-
payer must file a signed copy of that com-
pleted Form 3115 with the IRS in Ogden,
UT (Ogden copy), in lieu of filing the
national office copy, no earlier than the
first day of the year of change and no later
than the date the taxpayer files the original
Form 3115 with its federal income tax
return for the year of change.Seesections
6.02(3)(a)(ii)(B) (providing the general
rules) and 6.02(7)(b) (providing the mail-
ing address) of this revenue procedure.
(6)Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to a method of ac-
counting under section 6.36 of this AP-
PENDIX is “199.”Seesection 6.02(4) of
this revenue procedure.
(7)Contact information. For further in-
formation regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free call).
(5) Rev. Proc. 2011–14 is modified to
add new section 6.37 to the APPENDIX
to read as follows:
6.37Permissible to permissible method
of accounting for depreciation of
MACRS property (section 168;
§ 1.168(i)–7).
(1)Description of change.
(a)Applicability. This change applies
to a taxpayer that wants to make a change
in method of accounting for depreciation
that is specified in section 6.37(3) of this
APPENDIX for an asset:
(i) To which § 168 applies (MACRS
property);
(ii) For which the present and proposed
methods of accounting are permissible
methodsofaccountingunder
§ 1.168(i)–7; 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 de-
preciated under § 168 under the taxpay-
er’s present and proposed methods of ac-
counting.
(2)Certain scope limitations inappli-
cable.
(a) The scope limitations in section
4.02 of this revenue procedure do not ap-
ply to a taxpayer that makes this change
for its first taxable year beginning after
December 31, 2013, and beginning before
January 1, 2015.
(b) If a taxpayer chooses to make this
change for any taxable year beginning on
or after January 1, 2012, and beginning
before January 1, 2014, the scope limita-
tions in section 4.02 of this revenue pro-
cedure do not apply.
(c) The scope limitation in section
4.02(5) of this revenue procedure does not
apply to a taxpayer that makes this
change.
(3)Changes covered. Section 6.37 of
this APPENDIX only applies to the fol-
lowing changes in methods of accounting
for depreciation of MACRS property for
the items of MACRS property not subject
to a general asset account election under
§ 168(i)(4) and the regulations thereun-
der—
(a) A change from single asset ac-
counts (or item accounts) for specific
items of MACRS property to multiple as-
set accounts (or pools) for the same assets,
or vice versa, in accordance with
§ 1.168(i)–7; or
(b) A change from grouping specific
items of MACRS property in multiple as-
set accounts to a different grouping of the
same assets in multiple asset accounts in
accordance with § 1.168(i)–7(c).
(4)Manner of making change.
(a) The changes in methods of account-
ing specified in section 6.37(3)(a) and (b)
of this APPENDIX are made using a mod-
ified cut-off method under which the un-
adjusted depreciable basis and the depre-
ciation reserve of the asset as of the
beginning of the year of change are ac-
counted for using the new method of ac-
counting.
(b) If the change specified in section
6.37(3)(a) of this APPENDIX is a change
to a single asset account, the new single
asset account must include a beginning
balance for both the unadjusted deprecia-
ble basis and the depreciation reserve of
the asset included in that single asset
account.
(c) If the change specified in section
6.37(3)(a) or (b) of this APPENDIX is a
change to a multiple asset account (either
a new one or a different grouping), the
multiple asset account must include a be-
ginning balance for both the unadjusted
depreciable basis and the depreciation re-
serve. The beginning balance for the un-
adjusted depreciable basis of each multi-
ple asset account is equal to the sum of the
unadjusted depreciable bases as of the be-
ginning of the year of change for all assets
included in that multiple asset account.
Bulletin No. 2014–12March 17, 2014
683

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 ac-
count.
(d) 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 (“qualifying taxpayer”) is re-
quired to complete only the following in-
formation 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, line 1(a);
(iv) Part II, all lines except lines 11, 13,
14, 15, and 17;
(v) Part IV, lines 24, 25, and 26; and
(vi) Schedule E, lines 3, 4a, 4b, and 4c.
(e) If any asset subject to this change is
public utility property within the meaning
of § 168(i)(10), a taxpayer (including a
qualifying 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 account-
ing (within the meaning of § 168(i)(9))
will be used for the public utility property
subject to the change;
(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 application to any
regulatory body having jurisdiction over
the public utility property subject to the
change.
(5)Concurrent automatic change.
(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.
(b) A taxpayer that wants to make both
this change and a change under section
6.01 of this APPENDIX for the same year
of change should file a single Form 3115
for both changes and must enter the des-
ignated automatic accounting method
change numbers for both changes on the
appropriate line on the Form 3115. For
guidance on filing a single application for
two or more changes, see section
6.02(1)(b)(ii) of this revenue procedure.
(6)Ogden copy of Form 3115 required
in lieu of national office copy. A taxpayer
changing its method of accounting under
this section 6.37 of the APPENDIX must
file a signed copy of its completed Form
3115 with the IRS in Ogden, UT (Ogden
copy), in lieu of filing the national office
copy, no earlier than the first day of the
year of change and no later than the date
the taxpayer files the original Form 3115
with its federal income tax return for the
year of change.Seesections 6.02(3)(a)(ii)(B)
(providing the general rules) and
6.02(7)(b) (providing the mailing address)
of this revenue procedure.
(7)Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to a method of ac-
counting under section 6.37 of this AP-
PENDIX is “200.”Seesection 6.02(4) of
this revenue procedure.
(8)Contact information. For further in-
formation regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free call).
SECTION 4. EFFECT ON OTHER
DOCUMENTS
.01 Rev. Proc. 2011–14, 2011–4 I.R.B.
330, is modified and clarified.
.02 Rev. Proc. 2012–20, 2012–14
I.R.B. 700, is modified and superseded.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective
February 28, 2014.
SECTION 6. PAPERWORK
REDUCTION ACT
The collection of information con-
tained in this revenue procedure has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act (44
U.S.C. 3507) under control number 1545-
1551. 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 dis-
plays a valid OMB control number.
The collections of information in this
revenue procedure are in section 3.03.
This information is necessary and will be
used to determine whether the taxpayer
properly changed to a permitted method
of accounting. The collections of informa-
tion are required for a taxpayer to obtain
consent to change its method of account-
ing. The likely respondents are the follow-
ing: individuals, farms, business or other
for-profit institutions, nonprofit institu-
tions, and small businesses or organiza-
tions.
The estimated total annual reporting
and/or recordkeeping burden is 1,200
hours.
The estimated annual burden per re-
spondent/recordkeeper varies from ¼ hour
to 1.5 hours, depending on individual cir-
cumstances, with an estimated average of
¾ hour. The estimated number of respon-
dents is 1,600. The estimated annual fre-
quency of responses is on occasion.
SECTION 7. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Kathleen Reed of the Office
of Associate Chief Counsel (Income Tax
& Accounting). For further information
regarding this revenue procedure, contact
Patrick Clinton of the Office of Associate
Chief Counsel (Income Tax & Account-
ing) at (202) 317-7005 (not a toll free
number).
26 CFR 601.601:Rules and Regulations.
(Also Part I, §§ 25, 103, 143; 1.25– 4T, 1.103–1,
6a.103A–2.)
Rev. Proc. 2014–23
SECTION 1. PURPOSE
This revenue procedure provides guid-
ance with respect to the United States and
area median gross income figures that are
to be used by issuers of qualified mort-
gage bonds, as defined in § 143(a) of the
Internal Revenue Code, and issuers of
mortgage credit certificates, as defined in
§ 25(c), in computing the income require-
ments described in § 143(f).
SECTION 2. BACKGROUND
.01 Section 103(a) provides that, ex-
cept as provided in § 103(b), gross income
does not include interest on any state or
local bond. Section 103(b)(1) provides
that § 103(a) shall not apply to any private
activity bond that is not a qualified bond
March 17, 2014Bulletin No. 2014–12
684

(within the meaning of § 141). Section
141(e) provides that the term “qualified
bond” includes any private activity bond
that (1) is a qualified mortgage bond, (2)
meets the applicable volume cap require-
ments under § 146, and (3) meets the
applicable requirements under § 147.
.02 Section 143(a)(1) provides that the
term “qualified mortgage bond” means a
bond that is issued as part of a “qualified
mortgage issue”. Section 143(a)(2)(A)
provides that the term “qualified mortgage
issue” means an issue of one or more
bonds by a state or political subdivision
thereof, but only if (i) all proceeds of the
issue (exclusive of issuance costs and a
reasonably required reserve) are to be
used to finance owner-occupied residenc-
es; (ii) the issue meets the requirements of
subsections (c), (d), (e), (f), (g), (h), (i),
and (m)(7) of § 143; (iii) the issue does
not meet the private business tests of para-
graphs (1) and (2) of § 141(b); and (iv)
with respect to amounts received more
than 10 years after the date of issuance,
repayments of $250,000 or more of prin-
cipal on financing provided by the issue
are used not later than the close of the first
semi-annual period beginning after the
date the prepayment (or complete repay-
ment) is received to redeem bonds that are
part of the issue.
.03 Section 143(f) imposes eligibility
requirements concerning the maximum
income of mortgagors for whom financing
may be provided by qualified mortgage
bonds. Section 25(c)(2)(A)(iii)(IV) pro-
vides that recipients of mortgage credit
certificates must meet the income require-
ments of § 143(f). Generally, under
§§ 143(f)(1) and 25(c)(2)(A)(iii)(IV),
these income requirements are met only if
all owner-financing under a qualified
mortgage bond and all certified indebted-
ness amounts under a mortgage credit cer-
tificate program are provided to mortgag-
ors whose family income is 115 percent or
less of the applicable median family in-
come. Under § 143(f)(6), the income lim-
itation is reduced to 100 percent of the
applicable median family income if there
are fewer than three individuals in the
family of the mortgagor.
.04 Section 143(f)(4) provides that the
term “applicable median family income”
means the greater of (A) the area median
gross income for the area in which the
residence is located, or (B) the statewide
median gross income for the state in
which the residence is located.
.05 Section 143(f)(5) provides for an
upward adjustment of the income limita-
tions in certain high housing cost areas.
Under § 143(f)(5)(C), a high housing cost
area is a statistical area for which the
housing cost/income ratio is greater than
1.2. The housing cost/income ratio is de-
termined under § 143(f)(5)(D) by dividing
(a) the applicable housing price ratio by
(b) the ratio that the area median gross
income bears to the median gross income
for the United States. The applicable
housing price ratio is the new housing
price ratio (new housing average purchase
price for the area divided by the new
housing average purchase price for the
United States) or the existing housing
price ratio (existing housing average area
purchase price divided by the existing
housing average purchase price for the
United States), whichever results in the
housing cost/income ratio being closer to
1. This income adjustment applies only to
bonds issued, and nonissued bond
amounts elected, after December 31,
1988.See§ 4005(h) of the Technical and
Miscellaneous Revenue Act of 1988,
1988-3 C.B. 1, 311 (1988).
.06 The Department of Housing and
Urban Development (HUD) has computed
the median gross income for the United
States, the states, and statistical areas
within the states. The income information
was released to the HUD regional offices
on December 18, 2013, and may be ob-
tained by calling the HUD reference ser-
vice at 1-800-245-2691. The income in-
formation is also available at HUD’s
World Wide Web site,http://www.hudu-
ser.org/portal/datasets/il.html, which pro-
vides a menu from which you may select
the year and type of data of interest.
.07 The most recent nationwide aver-
age purchase prices and average area pur-
chase price safe harbor limitations were
published on July 1, 2013, in Rev. Proc.
2013–28, 2013–27 I.R.B. 28.
SECTION 3. APPLICATION
.01 When computing the income re-
quirements of § 143(f), issuers of qualified
mortgage bonds and mortgage credit cer-
tificates must use either (1) the median
gross income for the United States, the
states, and statistical areas within the
states, as released to the HUD regional
offices on December 11, 2012, or (2) the
median gross income for the United
States, the states, and statistical areas
within the states, as released to the HUD
regional offices on December 18, 2013.
.02 If an issuer uses the median gross
income for the United States, the states,
and statistical areas within the states, as
released to the HUD regional offices on
December 11, 2012, to compute the hous-
ing cost/income ratio under § 143(f)(5),
the issuer must use the median gross in-
come for the United States, the states, and
statistical areas within the states, as re-
leased to the HUD regional offices on
December 11, 2012, for all purposes un-
der § 143(f). Likewise, if an issuer uses
the median gross income for the United
States, the states, and statistical areas
within the states, as released to the HUD
regional offices on December 18, 2013, to
compute the housing cost/income ratio
under § 143(f)(5), the issuer must use the
median gross income for the United
States, the states, and statistical areas
within the states, as released to the HUD
regional offices on December 18, 2013,
for all purposes under § 143(f).
SECTION 4. EFFECT ON OTHER
REVENUE PROCEDURES
.01 Rev. Proc. 2013–27, 2013–24
I.R.B. 1243, is obsolete except as pro-
vided in §§ 3.01, 3.02, or 5.01 of this
revenue procedure.
.02 This revenue procedure does not
affect the effective date provisions of Rev.
Rul. 86–124, 1986–2 C.B. 27. Those ef-
fective date provisions will remain opera-
tive at least until the Service publishes a
new revenue ruling that conforms the ap-
proach to effective dates set forth in Rev.
Rul. 86–124 to the general approach
taken in this revenue procedure.
SECTION 5. EFFECTIVE DATES
.01 Issuers must use the United States
and area median gross income figures
specified in § 3.01 of this revenue proce-
dure for commitments to provide financ-
ing that are made, or (if the purchase
precedes the financing commitment) for
residences that are purchased, in the pe-
riod that begins on December 18, 2013,
Bulletin No. 2014–12March 17, 2014
685

and ends on the date when these United
States and area median gross income fig-
ures are rendered obsolete by a new rev-
enue procedure.
DRAFTING INFORMATION
The principal authors of this revenue
procedure are David White and James
Polfer of the Office of Associate Chief
Counsel (Financial Institutions & Prod-
ucts). For further information regarding
this revenue procedure contact Mr. White
or Mr. Polfer at (202) 317-6980 (not a
toll-free number).
March 17, 2014Bulletin No. 2014–12
686

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:
Amplifieddescribes 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).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis 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 andclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings 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.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Supersededdescribes 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 pe-
riod 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
supersededdescribes 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 previously
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.
Supplementedis 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.
Suspendedis 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
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in ma-
terial 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.
Bulletin No. 2014–12March 17, 2014
i

Numerical Finding List
1
Bulletins 2014–1 through 2014–12
Announcements
2014-1, 2014-2 I.R.B.393
2014-2, 2014-4 I.R.B.448
2014-4, 2014-7 I.R.B.523
2014-05, 2014-6 I.R.B.507
2014-06, 2014-6 I.R.B.508
2014-07, 2014-6 I.R.B.508
2014-08, 2014-6 I.R.B.508
2014-09, 2014-6 I.R.B.508
2014-10, 2014-6 I.R.B.508
2014-11, 2014-6 I.R.B.508
2014-12, 2014-6 I.R.B.509
2014-13, 2014-10 I.R.B.620
Notices
2014-1, 2014-2 I.R.B.270
2014-2, 2014-3 I.R.B.407
2014-3, 2014-3 I.R.B.408
2014-4, 2014-2 I.R.B.274
2014-5, 2014-2 I.R.B.276
2014-6, 2014-2 I.R.B.279
2014-7, 2014-4 I.R.B.445
2014-8, 2014-5 I.R.B.452
2014-9, 2014-5 I.R.B.455
2014-10, 2014-9 I.R.B.605
2014-12, 2014-9 I.R.B.606
2014-13, 2014-10 I.R.B.616
2014-15, 2014-12 I.R.B.661
Proposed Regulations
REG-154890-03, 2014-6 I.R.B.504
REG-159420-04, 2014-2 I.R.B.374
REG-144468-05, 2014-6 I.R.B.474
REG-119305-11, 2014-8 I.R.B.524
REG-140974-11, 2014-3 I.R.B.438
REG-121534-12, 2014-6 I.R.B.473
REG-122706-12, 2014-11 I.R.B.647
REG-136984-12, 2014-2 I.R.B.378
REG-113350-13, 2014-3 I.R.B.440
REG-141036-13, 2014-7 I.R.B.516
REG-143172-13, 2014-2 I.R.B.383
Revenue Procedures
2014-1, 2014-1 I.R.B.1
2014-2, 2014-1 I.R.B.90
2014-3, 2014-1 I.R.B.111
2014-4, 2014-1 I.R.B.125
2014-5, 2014-1 I.R.B.169
2014-6, 2014-1 I.R.B.198
2014-7, 2014-1 I.R.B.238
2014-8, 2014-1 I.R.B.242
2014-9, 2014-2 I.R.B.281
2014-10, 2014-2 I.R.B.293
Revenue Procedures—Continued
2014-11, 2014-3 I.R.B.411
2014-12, 2014-3 I.R.B.415
2014-13, 2014-3 I.R.B.419
2014-14, 2014-2 I.R.B.295
2014-15, 2014-5 I.R.B.456
2014-16, 2014-9 I.R.B.606
2014-17, 2014-12 I.R.B.661
2014-18, 2014-7 I.R.B.513
2014-19, 2014-10 I.R.B.619
2014-20, 2014-9 I.R.B.614
2014-21, 2014-11 I.R.B.641
2014-22, 2014-11 I.R.B.646
2014-23, 2014-12 I.R.B.684
Revenue Rulings
2014-1, 2014-2 I.R.B.263
2014-2, 2014-2 I.R.B.255
2014-3, 2014-2 I.R.B.259
2014-4, 2014-5 I.R.B.449
2014-6, 2014-7 I.R.B.510
2014-8, 2014-11 I.R.B.624
Treasury Decisions
9649, 2014-2 I.R.B.265
9650, 2014-3 I.R.B.394
9651, 2014-4 I.R.B.441
9652, 2014-12 I.R.B.655
9653, 2014-6 I.R.B.460
9654, 2014-6 I.R.B.461
9655, 2014-9 I.R.B.541
9656, 2014-11 I.R.B.626
9659, 2014-12 I.R.B.653
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2013–27 through 2013–52 is in Internal Revenue Bulletin
2013–52, dated December 23, 2013.
March 17, 2014Bulletin No. 2014–12
ii

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2014–1 through 2014–12
Announcements:
2007-44
Modified by
Ann. 2014-4, 2014-7 I.R.B.523
2011-49
Modified by
Ann. 2014-4, 2014-7 I.R.B.523
Notices:
2006-109
Modified by
Notice 2014-4, 2014-2 I.R.B.274
2009-78
Superseded by
T.D. 9654 2014-6 I.R.B.461
2012-18
Amplified by
Notice 2014-15, 2014-12 I.R.B.661
2013-17
Amplified by
Notice 2014-1, 2014-2 I.R.B.270
Revenue Procedures:
2003-49
Modified and superseded by
Rev. Proc. 2014-14, 2014-2 I.R.B.295
2011-4
Modified by
Rev. Proc. 2014-17, 2014-12 I.R.B.661
2011-14
Modified by
Rev. Proc. 2014-16, 2014-9 I.R.B.606
2011-14
Clarified by
Rev. Proc. 2014-16, 2014-9 I.R.B.606
2011-14
Modified by
Rev. Proc. 2014-17, 2014-12 I.R.B.661
2011-44
Modified and Superseded by
Rev. Proc. 2014-11, 2014-3 I.R.B.411
2011-49
Modified by
Rev. Proc. 2014-6, 2014-1 I.R.B.198
Revenue Procedures—Continued:
2012-14
Modified by
Rev. Proc. 2014-17, 2014-12 I.R.B.661
2012-19
Modified by
Rev. Proc. 2014-16, 2014-9 I.R.B.606
2012-19
Superseded by
Rev. Proc. 2014-16, 2014-9 I.R.B.606
2012-20
Modified by
Rev. Proc. 2014-17, 2014-12 I.R.B.661
2012-20
Superseded by
Rev. Proc. 2014-17, 2014-12 I.R.B.661
2013-1
Superseded by
Rev. Proc. 2014-1, 2014-1 I.R.B.1
2013-2
Superseded by
Rev. Proc. 2014-2, 2014-1 I.R.B.90
2013-3
Superseded by
Rev. Proc. 2014-3, 2014-1 I.R.B.111
2013-4
Superseded by
Rev. Proc. 2014-4, 2014-1 I.R.B.125
2013-5
Superseded by
Rev. Proc. 2014-5, 2014-1 I.R.B.169
2013-6
Superseded by
Rev. Proc. 2014-6, 2014-1 I.R.B.198
2013-7
Superseded by
Rev. Proc. 2014-7, 2014-1 I.R.B.238
2013-8
Superseded by
Rev. Proc. 2014-8, 2014-1 I.R.B.242
2013-9
Superseded by
Rev. Proc. 2014-9, 2014-2 I.R.B.281
2013-10
Superseded by
Rev. Proc. 2014-10, 2014-2 I.R.B.293
Revenue Procedures—Continued:
2013-24
Obsoleted by
Rev. Proc. 2014-23, 2014-12 I.R.B.684
2013-27
Obsoleted by
Rev. Proc. 2014-23, 2014-12 I.R.B.684
2013-32
Superseded in part by
Rev. Proc. 2014-1, 2014-1 I.R.B.1, and
Rev. Proc. 2014-3, 2014-1 I.R.B.111
2014-1
Amplified by
Rev. Proc. 2014-18, 2014-7 I.R.B.513
2014-3
Amplified by
Rev. Proc. 2014-18, 2014-7 I.R.B.513
2014-4
Modified by
Rev. Proc. 2014-19, 2014-10 I.R.B.619
Proposed Regulations:
209054-87
A portion withdrawn by
REG-113350-13 2014-3 I.R.B.440
Revenue Rulings:
2005-48 (2005-2 CB 259)
Obsoleted by
T.D. 9659 2014-12 I.R.B.653
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2013–27 through 2013–52 is in Internal Revenue Bulletin 2013–52, dated December 23,
2013.
Bulletin No. 2014–12March 17, 2014
iii

INDEX
Internal Revenue Bulletins 2014–1 through
2014–12
The abbreviation and number in parenthesis following the index
entry refer to the specific item; numbers in roman and italic type
following the parentheses refer to the Internal Revenue Bulletin in
which the item may be found and the page number on which it
appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
ADMINISTRATIVE
Extension of time to file estate tax return to elect portability of a
deceased spousal unused exclusion amount under section
2010(c)(5)(A). (RP 18) 7,513
Method change procedures for dispositions of tangible deprecia-
ble property (RP 17) 12,661
EMPLOYEE PLANS
Definition of a substantial risk of forfeiture (TD 9659) 12,653
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Excepted benefits (REG–143172–13) 2,383
Final rules to implement the 90-day waiting period limitation
(TD 9656) 11,626
Letter rulings:
And determination letters:
Areas which will not be issued from Associate Chief
Counsel and Division counsel (TE/GE) (RP 3) 1,111
Exemption application determination letter rulings under
sections 501 and 521 (RP 9) 2,281
And general information letters; procedures (RP 4) 1,125
User fees, request for letter rulings (RP 8) 1,242
Letter rulings and general information letters (RP 4) 1,125
Letter rulings or determination letters (RP 1) 1,1
Proposed rules to clarify length of reasonable and bona fide
employment-based orientation period, consistent with the 90-
day waiting period limitation (REG–122706–12) 11,647
Qualification, determination letters (RP 6) 1,198
Qualified plans:
Discrimination (Notice 5) 2,276
Opinion letters (Ann 4) 7,523
Determination Letters (RP 19) 10,619
EMPLOYEE PLANS—Cont.
Qualified retirement plans covered compensation, permitted dis-
parity (RR 3) 2,259
Regulations:
26 CFR 54.9815–2708, amended; (REG–122706–12) 11,647
Rulings and determination letters, user fees (RP 8) 1,242
Technical advice memorandum or TAM (RP 2) 1,90
Technical advice procedures (RP 5) 1,169
Full funding limitations, weighted average interest rates, segment
rates for:
January 2014 (Notice 8) 5,452
Weighted average interest rates
Segment rates for February 2014 (Notice 13) 10,616
EMPLOYMENT TAX
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Employment tax liability of agents authorized under section 3504
(TD 9649) 2,265
Letter rulings or determination letters (RP 1) 1,1
Regulations:
26 CFR 1.83–3 is revised; definition of a substantial risk of
forfeiture (TD 9659) 12,653
26 CFR 54.9815–2708, amended; (REG–122706–12) 11,647
26 CFR 54,9801–1, thru–6, amended; 26 CFR 54.9802–1,
amended; 26 CFR 54.9815–2708, added; 26 CFR
54.9831–1, amended (TD 9656) 11,626
Technical Advice Memorandum (TAM) (RP 2) 1,90
ESTATE TAX
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Extension of time to file estate tax return to elect portability of a
deceased spousal unused exclusion amount under section
2010(c)(5)(A) (RP 18) 7,513
Letter rulings or determination letters (RP 1) 1,1
Technical Advice Memorandum (TAM) (RP 2) 1,90
EXCISE TAX
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Final rules to implement the 90-day waiting period limitation
(TD 9656) 11,626
Interim guidance regarding supporting organizations (Notice 4)
2,274
Letter rulings or determination letters (RP 1) 1,1
Proposed rules to clarify length of reasonable and bona fide
employment-based orientation period, consistent with the 90-
day waiting period limitation (REG–122706–12) 11,647
Regulations:
26 CFR 54.9815–2708, amended; (REG–122706–12) 11,647
26 CFR 54,9801–1, thru–6, amended; 26 CFR 54.9802–1,
amended; 26 CFR 54.9815–2708, added; 26 CFR
54.9831–1, amended (TD 9656) 11,626
Technical Advice Memorandum (TAM) (RP 2) 1,90
March 17, 2014Bulletin No. 2014–12
iv

EXEMPT ORGANIZATIONS
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Form 990 Revenue Procedure update to revoke Revenue Proce-
dure 79–6 (RP 22) 11,646
Interim guidance regarding supporting organizations (Notice 4)
2,274
Letter rulings:
And determination letters:
Areas which will not be issued from Associate Chief
Counsel and Division counsel (TE/GE) (RP 3) 1,111
Exemption application determination letter rulings under
sections 501 and 521 (RP 9) 2,281
And general information letters; procedures (RP 4) 1,125
User fees, request for letter rulings (RP 8) 1,242
Letter rulings (RP 10) 2,293; (RP 9) 2,281
Letter rulings or determination letters (RP 1) 1,1
Proposed procedures for charitable hospitals to correct and dis-
close failures to meet section 501(r) (Notice 3) 3,408
Reliance on proposed regulations for tax-exempt hospitals (No-
tice 2) 3,407
Rulings and determination letters, user fees (RP 8) 1,242
Technical Advice Memorandum (TAM) (RP 2) 1,90
Technical advice procedures (RP 5) 1,169
INCOME TAX
Adequate disclosure revenue procedure (RP 15) 5,456
Allocation of section 47 credits by a partnership to its partners
(RP 12) 3,415
Allocation of section 752 recourse liabilities among related par-
ties (REG–136984–12) 2,378
Amount of the life insurance reserves taken into account under
§ 807 of the Internal Revenue Code for variable contracts (RR
7) 9,539
Areas in which rulings will not be issued; Associate Chief
Counsel (International) (RP 7) 1,238
Basis in assets of tax exempt trusts (REG–154890–03) 6,504
Bond premium carryforward (TD 9653) 6,460
Cafeteria plans, FSA reimbursements, and HSA contribution
limits for same-sex spouses (Notice 1) 2,270
2014 Census Count (Notice 12) 9,606
Current refunding of Recovery Zone facility bonds (Notice 9) 5,
455
Declaratory judgement suits (Ann 5) 6,507; (Ann 6) 6,508;
(Ann 7) 6,508; (Ann 8) 6,508; (Ann 9) 6,508; (Ann 10) 6,
508; (Ann 12) 6,509
Definition of a substantial risk of forfeiture (TD 9659) 12,653
Definitions applicable to U.S. persons owning interests in passive
foreign investment companies (REG–113350–13) 3,440
Depreciation deduction, limitations on certain automobiles (RP
21) 11,641
Determination of ownership in a passive foreign investment
company; annual filing requirements for shareholders of pas-
sive foreign investment companies; filing requirements for
constructive owners in certain foreign corporations (REG–
140974–11) 3,438; (TD 9650) 3,394
INCOME TAX—Cont.
Determining stock ownership for purposes of whether an entity is
a surrogate foreign corporation (TD 9654) 6,461; (REG–
121534–12) 6,473
Discharge of indebtedness secured by real property (RP 20) 9,
614
Disciplinary actions involving attorneys, certified public accoun-
tants, enrolled agents, and enrolled actuaries (Ann 13) 10,620
Contribution of built-in lost property to a partnership; mandatory
basis adjustments in the event of a substantial built-in loss or
substantial basis reduction; modification of basis allocation
rules (REG–144468–05) 6,474
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
FATCA financial institution registration update (Ann 1) 2,393
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
January 2014 (RR 1) 2,263
February 2014 (RR 6) 7,510
March 2014 (RR 8) 11,624
Final FFI agreement for participating FFI and reporting Model 2
FFI (RP 13) 3,419
Guidance regarding resinstatement following auto revocation of
tax-exempt status under section 6033(j) (RP 11) 3,411
Intra-group gross receipts (REG–159420–04) 2,374
Insurance tax, insurance companies, interest rate tables (RR 4) 5,
449
Letter rulings or determination letters (RP 1) 1,1
Low-Income Housing Credit (Notice 15) 12,661
Method change procedures for dispositions of tangible deprecia-
ble proerty (RP 17) 12,661
Principal residence, treatment of National Mortgage Settlement
payments (RR 2) 2,255
Qualified census tracts (RP 14) 2,295
Regarding disguised sales, generally (REG–119305–11) 8,524
Regulations:
26 CFR 1.83–3 is revised; definition of a substantial risk of
forfeiture (TD 9659) 12,653
26 CFR 1.263A–0, thru–3, amended; 1.471–3 amended; (TD
9652) 12,655
Revocations, exempt organization (Ann 11) 6,508
Sales-bases royalties and vendor allowances (TD 9652) 12,655
Shared responsibility for employers regarding health coverage
(TD 9655) 9,541
Shared responsibility payment for not maintaining minimum
essential coverage (REG–141036–13) 7,516
Tangible property regulations method change guidance (RP 16)
9,606
Technical Advice Memorandum (TAM) (RP 2) 1,90
Transition relief for the tax credit for employee health insurance
expenses of certain small employers (Notice 6) 2,279
Transition relief under section 5000A for certain individuals
without minimum essential coverage (Notice 10) 9,605
Bulletin No. 2014–12March 17, 2014
v

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