rp-22-23.pdf

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26 CFR 1.181-2: Election to deduct production costs.
(Also Part I, §§ 168, 181, 446; 1.181, 1.446-1)

Rev. Proc. 2022-23

SECTION 1. PURPOSE

This revenue procedure provides guidance allowing a taxpayer to make late
elections under §§ 168(j)(8) and 168(l)(3)(D) of the Internal Revenue Code (Code) for
the taxpayer’s taxable year ending in 2018 or in 2019 for certain property placed in
service by the taxpayer after December 31, 2017. This revenue procedure also
provides guidance allowing a taxpayer to make a late election under § 181(a)(1) of the
Code for the taxpayer’s taxable year ending in 2018 or in 2019 for certain film,
television, or live theatrical productions commenced by the taxpayer after December 31,
2017.
SECTION 2. BACKGROUND
.01 Amendments to §§ 168(j), 168(l), and 181
.
(1) Section 168(j). Section 168(j)(1) provides that for purposes of § 168(a), the
applicable recovery period for qualified Indian reservation property, as defined in
§ 168(j)(4), is determined in accordance with the table contained in § 168(j)(2), instead
of the table contained in § 168(c). Prior to amendment by § 116 of the Taxpayer

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Certainty and Disaster Tax Relief Act of 2019 (2019 Act), enacted as Division Q of the
Further Consolidated Appropriations Act, 2020, Pub. L. No. 116-94, 133 Stat. 2534,
3229 (December 20, 2019), § 168(j)(9) provided that § 168(j) did not apply to property
placed in service after December 31, 2017. Section 116(a) of the 2019 Act amended
§ 168(j)(9) to provide that § 168(j) does not apply to property placed in service after
December 31, 2020, which made § 168(j) applicable to property placed in service after
December 31, 2017, and on or before December 31, 2020. Subsequent legislation
further amended § 168(j)(9) to provide that § 168(j) does not apply to property placed in
service after December 31, 2021, which made § 168(j) applicable to property placed in
service after December 31, 2020, and on or before December 31, 2021. See § 138 of
the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (2020 Act), enacted as
Division EE of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, 134
Stat. 1182, 3054 (December 27, 2020).
(2) Section 168(l)
. Section 168(l)(1) allows a 50-percent additional first year
depreciation deduction (also sometimes referred to as a “special depreciation
allowance”) for qualified second generation biofuel plant property, as defined in
§ 168(l)(2) and (3), for the taxable year in which the qualified second generation biofuel
plant property is placed in service by the taxpayer. Prior to amendment by § 130 of the
2019 Act, § 168(l)(2)(D) defined qualified second generation biofuel plant property, in
part, as property placed in service by the taxpayer before January 1, 2018. Section
130(a) of the 2019 Act amended § 168(l)(2)(D) by inserting “January 1, 2021” in place

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of “January 1, 2018,” which made § 168(l)(1) applicable to property placed in service
after December 31, 2017, and before January 1, 2021.
(3) Section 181
. Section 181(a)(1) allows a taxpayer to elect to treat the cost of
any qualified film, television, or live theatrical production, subject to the dollar limitations
in § 181(a)(2), as an expense that is not chargeable to capital account (§ 181 election).
Prior to amendment by § 117 of the 2019 Act, § 181(g) provided that § 181 did not
apply to qualified film, television, or live theatrical productions commencing after
December 31, 2017. Section 117(a) of the 2019 Act amended § 181(g) to provide that
§ 181 does not apply to qualified film, television, or live theatrical productions
commencing after December 31, 2020, which made § 181 applicable to qualified film,
television, or live theatrical productions commencing after December 31, 2017, and on
or before December 31, 2020. Subsequent legislation further amended § 181(g) to
provide that § 181 does not apply to qualified film, television, or live theatrical
productions commencing after December 31, 2025, which made § 181 applicable to
qualified film, television, or live theatrical productions commencing after December 31,
2020, and on or before December 31, 2025. See § 116 of the 2020 Act.
(4) In sum, the 2019 Act retroactively extended the application of §§ 168(j) and
168(l) to certain property placed in service by the taxpayer after December 31, 2017,
and before January 1, 2021, and § 181 to a qualified film, television, or live theatrical
production commencing after December 31, 2017, and before January 1, 2021. Unless
otherwise provided, all references hereinafter in this revenue procedure to §§ 168(j),

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168(l), and 181 are references to §§ 168(j), 168(l), and 181 as in effect on the day
before the enactment date of the 2020 Act.
.02 Elections
.
(1) Section 168(j)(8) election. Section 168(j)(8) allows a taxpayer to make an
election not to apply § 168(j) for all property that is in the same class of property and
placed in service by the taxpayer in the same taxable year (§ 168(j)(8) election). For
purposes of § 168(j), the term “class of property” means each class of property
described in the table contained in § 168(j)(2) (for example, 3-year property). As set
forth in Rev. Proc. 2017-33, 2017-19 I.R.B. 1236, the § 168(j)(8) election generally must
be made by the due date, including extensions, of the Federal tax return for the taxable
year in which the taxpayer places in service the qualified Indian reservation property.
Rev. Proc. 2017-33 further provides that the § 168(j)(8) election generally must be
made in the manner prescribed in the instructions for Form 4562, Depreciation and
Amortization. The instructions for Form 4562 for the 2018 taxable year and the 2019
taxable year provide that the § 168(j)(8) election is made by attaching a statement to
the taxpayer’s timely filed tax return, including extensions, indicating the class of
property for which the taxpayer is making the § 168(j)(8) election and, for such class,
that the taxpayer is electing not to apply § 168(j).
(2) Section 168(l)(3)(D) election. Section 168(l)(3)(D) allows a taxpayer to elect
not to apply § 168(l) for all property that is in the same class of property and placed in
service in the same taxable year (§ 168(l)(3)(D) election). The procedures for making
the § 168(l)(3)(D) election are provided in the instructions for Form 4562. The

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instructions for Form 4562 for the 2018 taxable year and the 2019 taxable year provide
that any election not to deduct the additional first year depreciation for any class of
property, which includes the § 168(l)(3)(D) election, is made by attaching a statement to
the taxpayer’s timely filed tax return, including extensions, indicating the class of
property for which the taxpayer is making the § 168(l)(3)(D) election and, for such class,
that the taxpayer is not claiming the additional first year depreciation.
(3) Section 181 election
. Section 181(c)(1) provides that the § 181 election for any
qualified film, television, or live theatrical production is made in such manner as
prescribed by the Secretary of the Treasury or her delegate and by the due date,
including extensions, for filing the taxpayer’s return of tax under chapter 1 of the Code
for the taxable year in which costs of the production are first incurred.
(a) Last updated in 2012, the rules and procedures concerning a § 181 election
for qualified film and television productions are set forth in § 1.181-0 through § 1.181-6
(§ 181 regulations). Congress added “qualified live theatrical production” to § 181 of the
Code in 2015. As of the date of issuance of this revenue procedure, the § 181
regulations have not been updated to incorporate rules and procedures for qualified live
theatrical productions.
(b) Section 1.181-2(a) provides that an owner, as defined in § 1.181-1(a)(2),
generally makes the § 181 election to deduct production costs, as defined in § 1.181-
1(a)(3), of a production only if that owner has not deducted in a previous taxable year
any production costs for that production under any provision of the Code other than
§ 181. Pursuant to § 1.181-2(b)(1), the § 181 election generally must be made by the

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due date, including any extension, for filing the owner’s Federal income tax return for
the first taxable year in which (i) any aggregate production costs, as defined in § 1.181-
1(a)(4), have been paid or incurred, and (ii) the owner reasonably expects, based on all
of the facts and circumstances, that the production will be set for production and will,
upon completion, be a qualified production. Pursuant to § 1.181-2(c)(1), an owner must
make the § 181 election separately for each production. Further, for each production to
which the § 181 election applies, § 1.181-2(c)(2)(i) provides that the owner must attach
a statement to the owner’s Federal income tax return for the taxable year of the § 181
election stating that the owner is making the § 181 election and providing the
information specified in § 1.181-2(c)(2)(i)(A) through (H). If the owner pays or incurs
additional production costs in any taxable year subsequent to the taxable year for which
production costs are first deducted under § 181, § 1.181-2(c)(2)(ii) provides that the
owner must attach a statement to the owner’s Federal income tax return for that
subsequent taxable year providing the information specified in § 1.181-2(c)(2)(ii)(A)
through (H).
.03 Method of accounting
.
(1) Section 446(e) of the Code and § 1.446-1(e)(2) of the Income Tax Regulations
require a taxpayer to secure the consent of the Commissioner of Internal Revenue
(Commissioner) before changing a method of accounting for Federal income tax
purposes. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe
administrative procedures setting forth the limitations, terms, and conditions necessary
to permit a taxpayer to obtain consent to change a method of accounting.

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(2) Section 1.446-1(e)(2)(ii)(d)(3)(iii) provides that the making of a late depreciation
election or the revocation of a timely valid depreciation election is not a change in
method of accounting, except as otherwise expressly provided by the Code, the
regulations under the Code, or other guidance published in the Internal Revenue
Bulletin. Section 1.446-1(e)(2)(ii)(d)(5)(
iii) provides that except as otherwise expressly
provided by the Code, the regulations under the Code, or other guidance published in
the Internal Revenue Bulletin, no § 481 adjustment is required or permitted for a change
from one permissible method of computing depreciation to another permissible method
of computing depreciation.
(3) Because of the retroactive extension of the application of §§ 168(j), 168(l), and
181, guidance is needed for taxpayers that want to make late elections under
§§ 168(j)(8), 168(l)(3)(D), and 181(a)(1). The Department of the Treasury (Treasury
Department) and the Internal Revenue Service (IRS) have determined it appropriate to
treat the making of late elections under §§ 168(j)(8), 168(l)(3)(D), and 181(a)(1) for
certain property and certain film, television, or live theatrical productions as a change in
method of accounting with a § 481(a) adjustment for a limited period of time.
Accordingly, this revenue procedure permits taxpayers to make these late elections by
filing an amended return or an administrative adjustment request under § 6227 of the
Code (AAR), as applicable, or a Form 3115, Application for Change in Accounting
Method. See sections 4 and 6 of this revenue procedure for the procedures to make
these late elections.
SECTION 3. SCOPE

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.01 This revenue procedure applies to a taxpayer that:
(1) Placed in service (a) qualified Indian reservation property after December 31,
2017, during the taxpayer’s taxable year ending in 2018 (2018 taxable year) or in 2019
(2019 taxable year), or (b) qualified second generation biofuel plant property after
December 31, 2017, during the taxpayer’s 2018 taxable year or 2019 taxable year;
(2) Timely filed the taxpayer’s Federal income tax return or Form 1065, U.S.
Return of Partnership, for the placed-in-service year of such property; and
(3) Wants to make a (a) late § 168(j)(8) election to not apply § 168(j) for the
placed-in-service year for one or more classes of qualified Indian reservation property,
or (b) late § 168(l)(3)(D) election not to apply § 168(l) for the placed-in-service year for
one or more classes of qualified second generation biofuel plant property.
.02 This revenue procedure also applies to a taxpayer that:
(1) Is the owner, as defined in § 1.181-1(a)(2), of a qualified film, television, or live
theatrical production commencing after December 31, 2017;
(2) Wants to make a late § 181 election for the production costs of such qualified
film, television, or live theatrical production for the taxpayer’s 2018 taxable year or 2019
taxable year, as applicable; and
(3) Timely filed the taxpayer’s Federal income tax return or Form 1065 for the
taxpayer’s 2018 taxable year or 2019 taxable year, as applicable.
SECTION 4. AUTOMATIC EXTENSION OF TIME TO FILE ELECTIONS UNDER
SECTIONS 168(j)(8), 168(l)(3)(D), and 181(a)(1)

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.01 Time and manner of making a late § 168(j)(8) election or late § 168(l)(3)(D)
election. A taxpayer within the scope of section 3.01 of this revenue procedure may
make a late § 168(j)(8) election or late § 168(l)(3)(D) election by filing either:
(1) An amended Federal income tax return or amended Form 1065 for the placed-
in-service year of the property on or before December 31, 2022, but in no event later
than the applicable period of limitations on assessment for the taxable year for which
the amended return is being filed. A partnership subject to the centralized partnership
audit regime enacted as part of the Bipartisan Budget Act of 2015 (BBA partnership)
may file an AAR for the placed-in-service year of the property on or before December
31, 2022, but in no event later than the applicable period of limitations on making
adjustments under § 6235 of the Code for the reviewed year as defined in § 301.6241-
1(a)(8) of the Procedure and Administration Regulations. This amended return or AAR
must include the adjustment to taxable income for the late election and any collateral
adjustments to taxable income or to tax liability. Such collateral adjustments also must
be made on original or amended Federal returns or AARs for any affected succeeding
taxable years; or
(2) A Form 3115 with the taxpayer’s first or second timely filed original Federal
income tax return or Form 1065 that is filed after April 19, 2022. A late § 168(j)(8)
election or late § 168(l)(3)(D) election made pursuant to this section 4.01(2) will be
treated as a change in method of accounting with a § 481(a) adjustment. The
procedures for making this change in method of accounting are described in section 6
of this revenue procedure.

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.02 Time and manner of making a late § 181 election. A taxpayer within the scope of
section 3.02 of this revenue procedure may make the late § 181 election by filing either:
(1) An amended Federal income tax return or amended Form 1065 for the
taxpayer’s 2018 taxable year or 2019 taxable year, as applicable, on or before
December 31, 2022, but in no event later than the applicable period of limitations on
assessment for the taxable year for which the amended return is being filed. A BBA
partnership may file an AAR for the taxpayer’s 2018 taxable year or 2019 taxable year,
as applicable, on or before December 31, 2022, but in no event later than the
applicable period of limitations on making adjustments under § 6235 for the reviewed
year as defined in § 301.6241-1(a)(8). This amended return or AAR must include the
adjustment to taxable income for the late election, any collateral adjustments to taxable
income or to tax liability, and the statement required under § 1.181-2(c)(2)(i). Such
collateral adjustments also must be made on, and the statement required under
§ 1.181-2(c)(2)(ii) must be included with, original or amended Federal returns or AARs
for any affected succeeding taxable years; or
(2) A Form 3115 with the taxpayer’s first or second timely filed original Federal
income tax return or Form 1065 that is filed after April 19, 2022. A late § 181 election
made pursuant to this section 4.02(2) will be treated as a change in method of
accounting with a § 481(a) adjustment. The procedures for making this change in
method of accounting are described in section 6 of this revenue procedure.
SECTION 5. APPLICATION OF THE § 181 REGULATIONS TO QUALIFIED LIVE
THEATRICAL PRODUCTIONS FOR 2018 AND 2019

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A taxpayer within the scope of this revenue procedure may treat the § 181
regulations (as described in section 2.02(3) of this revenue procedure) as if such
regulations were amended to apply to the production costs of qualified live theatrical
productions for purposes of making the late § 181 election under section 4.02 of this
revenue procedure for the taxpayer’s 2018 taxable year or 2019 taxable year.
SECTION 6. CHANGE IN METHOD OF ACCOUNTING
.01 In general
. The making of a late election under section 4.01(2) or 4.02(2) of this
revenue procedure is treated as a change in method of accounting to which §§ 446(e)
and 481, and the corresponding regulations, apply. A taxpayer that wants to make a
late election under section 4.01(2) or 4.02(2) of this revenue procedure must use the
automatic change procedures in Rev. Proc. 2015-13, 2015-5 I.R.B. 419, or its
successor.
.02 New automatic change. Rev. Proc. 2022-14, 2022-7 I.R.B. 502, is modified to
add new section 6.23 to read as follows:
6.23 Late elections under § 168(j)(8), § 168(l)(3)(D), and § 181(a)(1).
(1) Description of Change.
(a) Applicability. This change applies to:
(i) A taxpayer within the scope of section 3.01 of Rev. Proc. 2022-23, 2022-18
I.R.B. XXX, that wants to make the late election provided in section 4.01(2) of Rev.
Proc. 2022-23 under § 168(j)(8) or § 168(l)(3)(D); or

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(ii) A taxpayer within the scope of section 3.02 of Rev. Proc. 2022-23 that
wants to make the late election provided in section 4.02(2) of Rev. Proc. 2022-23
under § 181(a)(1).
(b) Inapplicability
. The IRS will treat the making of a late election provided in
section 4 of Rev. Proc. 2022-23 under §§ 168(j)(8), 168(l)(3)(D), and 181(a)(1) as a
change in method of accounting with a § 481(a) adjustment only for the taxable years
specified in section 6.23(2) of this revenue procedure. This treatment does not apply
to a taxpayer that makes these late elections before or after the time specified in
section 6.23(2) of this revenue procedure, and any such late election is not a change in
method of accounting.
(2) Time for making the change. The change under section 6.23(1)(a)(i) or (ii) of
this revenue procedure must be made with the taxpayer’s first or second timely filed
original Federal income tax return or Form 1065, as applicable, that is filed after April
19, 2022.
(3) Certain eligibility rules inapplicable. The eligibility rules in section 5.01(1)(d)
and (f) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to a change under
section 6.23(1)(a)(i) or (ii) of this revenue procedure.
(4) Certain audit protection exception temporarily inapplicable. Sections 8.02(1)
and (7) of Rev. Proc. 2015-13 do not apply to a change in method of accounting made
under section 6.23(1)(a)(i) or (ii) of this revenue procedure. However,
sections 8.02(1)
and (7) of Rev. Proc. 2015-13 continue to apply for purposes of determining the § 481(a)
adjustment period provided in section 7.03(3)(b) of Rev. Proc. 2015-13.

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(5) Short Form 3115.
(a) A taxpayer making a change under section 6.23(1)(a)(i) of this revenue
procedure is required to complete only the following information on Form 3115 (Rev.
December 2018):
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, lines 6, 7, 8, 9, 14, and 18;
(v) Part IV, all lines except line 25; and
(vi) Schedule E, all lines except lines 1, 4b, 5, and 6.
(b) A taxpayer making the change under section 6.23(1)(a)(ii) of this revenue
procedure is required to attach to the taxpayer’s Form 3115 the statement required
under § 1.181-2(c)(2)(i) and, if applicable, the statement required under § 1.181-
2(c)(2)(ii), and to complete only the following information on Form 3115 (Rev.
December 2018):
(i) The identification section of page 1 (above Part I);
(ii) The signature section at the bottom of page 1;
(iii) Part I;
(iv) Part II, lines 6, 7, 8, 9, 14, and 18; and
(v) Part IV, all lines except line 25.

(6) Concurrent automatic change. A taxpayer making one or more late elections
under section 4.01(2) or 4.02(2) of Rev. Proc. 2022-23 for the same year of change

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should file a single Form 3115 for all such changes. The single Form 3115 must
provide a single net § 481(a) adjustment for all such changes. See section 6.03(1)(b) of
Rev. Proc. 2015-13 for information on making concurrent changes.
(7) Designated automatic accounting method change number
. The designated
automatic accounting method change number for a change to the method of accounting
under this section 6.23 is “264.”
(8) Contact information. For further information regarding a change under this
section 6.23, contact James Liechty at (202) 317-7005 (not a toll-free number).
SECTION 7. EFFECT ON OTHER DOCUMENTS
Section 6 of Rev. Proc. 2022-14 is modified to include the accounting method
change provided in section 6.02 of this revenue procedure.
SECTION 8. EFFECTIVE DATE
This revenue procedure is effective April 19, 2022.
SECTION 9. DRAFTING INFORMATION
The principal authors of this revenue procedure are Kathleen Reed and James
Liechty of the Office of Associate Chief Counsel (Income Tax & Accounting). For
further information regarding this revenue procedure, contact Mr. Liechty at (202) 317-
7005 (not a toll-free number).