Internal Revenue Bulletin 2017-18 (PDF rendition): IRS Revenue Procedures

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

# INTERNAL REVENUE BULLETIN

A

IRS

Bulletin No. 2017-18
May 1, 2017

## 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

Rev. Proc. 2017-30, page 1131.

This revenue procedure provides the List of Automatic
Changes to which the automatic change procedures in Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, as clarified and modified
by Rev. Proc. 2015-33, 2015-24 I.R.B. 1067, and as modi-
fied by Rev. Proc. 2016-1, 2016-1 I.R.B. 1, (or successor)
apply.

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## 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.

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# Part III. Administrative, Procedural, and Miscellaneous

26 CFR 601.204: Changes in accounting periods and in methods of accounting.

(Also Part I, §§ 56, 61, 77, 118, 162, 163, 166, 167, 168, 171, 174, 179D, 194, 195, 197, 248, 263, 263A, 267, 280F, 404, 446, 447, 448, 451, 454, 455, 461, 467,
471, 472, 475, 481, 585, 709, 816, 832, 833, 846, 860A-860G, 861, 904, 953, 985, 1272, 1273, 1278, 1281, 1363, 14001, 1400L, 1400N; 1.61-1, 1.61-4, 1.61-8,
1.77-1, 1.77-2, 1.118-2, 1.162-1, 1.162-3, 1.162-4, 1.162-11, 1.162-12, 1.166-1, 1.166-2, 1.166-4, 1.167(a)-2, 1.167(a)-3(b), 1.167(a)-4, 1.167(a)-7,
1.167(a)-8, 1.167(a)-11, 1.167(a)-14, 1.167(e)-1, 1.168(d)-1, 1.168(i)-1, 1.168(i)-4, 1.168(i)-6, 1.168(i)-7, 1.168(i)-8, 1.168(k)-1, 1.171-4, 1.174-1, 1.174-3,
1.174-4, 1.179-5, 1.194-1, 1.195-1, 1.197-2, 1.248-1, 1.263(a)-1, 1.263(a)-2, 1.263(a)-3, 1.263(a)-4, 1.263(a)-5, 1.263A-1, 1.263A-2, 1.263A-3, 1.263A-4,
1.263A-7, 1.267(a)-1, 1.280F-6, 1.404(b)-1T, 1.446-1, 1.446-1T, 1.446-2, 1.446-5, 1.446-6, 1.446-7, 1.448-1T, 1.448-2, 1.451-1, 1.451-5, 1.454-1, 1.455-6,
1.461-1, 1.461-4, 1.461-5, 1.467-1, 1.471-1, 1.471-2, 1.471-3, 1.471-4, 1.471-5, 1.471-8, 1.472-1, 1.472-2, 1.472-6, 1.472-8, 1.481-1, 1.481-4, 1.709-1,
1.709-2, 1.832-4, 1.832-5, 1.860A-6, 1.861-18, 1.985-5, 1.985-8, 1.1016-3, 1.1245-3, 1.1272-1, 1.1273-1, 1.1273-2, 1.1363-2, 1.1374-4, 1.1400L(b)-1.)

Rev. Proc. 2017-30

LIST OF AUTOMATIC CHANGES

1135

SECTION 1. GROSS INCOME (§ 61)

1135

.01 Up-front Payments for Network Upgrades received by Utilities

1135

SECTION 2. COMMODITY CREDIT LOANS (§ 77)

1136

.01 Treating amounts received as loans

1136

SECTION 3. TRADE OR BUSINESS EXPENSES (§ 162)

1136

.01 Advances made by a lawyer on behalf of clients

1136

.02 ISO 9000 Costs

1136

.03 Restaurant or tavern smallwares packages.

1136

.04 Timber grower fertilization costs

1136

.05 Materials and supplies

1136

.06 Repair and maintenance costs

1136

.07 Wireline network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011-27

1136

.08 Wireless network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011-28

1137

.09 Method of accounting under Rev. Proc. 2011-43 for taxpayers in the business of transporting, delivering, or selling electricity

1137

.10 Method of accounting under Rev. Proc. 2013-24 for taxpayers in the business of generating steam or electric power.

1137

.11 Cable network asset capitalization methods of accounting under Rev. Proc. 2015-12

1137

SECTION 4. BAD DEBTS (§ 166)

1138

.01 Change from reserve method to specific charge-off method

1138

.02 Conformity election by bank after previous election automatically revoked

1138

SECTION 5. INTEREST EXPENSE (§ 163) AND AMORTIZABLE BOND PREMIUM (§ 171)

1138

.01 Revocation of § 171(c) election

1138

.02 Change to comply with § 163(e)(3)

1139

SECTION 6. DEPRECIATION OR AMORTIZATION (§ 56(a)(1), 56(g)(4)(A), 167, 168, 197, 280F(a), 1400I, 1400L, or 1400N(d), OR FORMER § 168)

1139

.01 Impermissible to permissible method of accounting for depreciation or amortization

1139

.02 Permissible to permissible method of accounting for depreciation

1143

.03 Sale, lease, or financing transactions

1145

.04 Change in general asset account treatment due to a change in the use of MACRS property

1146

.05 Change in method of accounting for depreciation due to a change in the use of MACRS property

1146

.06 Depreciation of qualified non-personal use vans and light trucks

1146

.07 Impermissible to permissible method of accounting for depreciation or amortization for disposed depreciable or amortizable property

1147

.08 Tenant construction allowances.

1148

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.09 Safe harbor method of accounting for determining the depreciation of certain tangible assets used by wireless telecommunications carriers under Rev. Proc. 2011-22

1149

.10 Partial dispositions of tangible depreciable assets to which the IRS's adjustment pertains (§ 168; § 1.168(i)-8)

1149

.11 Depreciation of leasehold improvements (§§ 167, 168, and 197; § 1.167(a)-4).

1150

.12 Permissible to permissible method of accounting for depreciation of MACRS property (§ 168; §§ 1.168(i)-1, 1.168(i)-7, and 1.168(i)-8)

1151

.13 Disposition of a building or structural component (§ 168; § 1.168(i)-8)

1154

.14 Dispositions of tangible depreciable assets (other than a building or its structural components) (§ 168; § 1.168(i)-8)

1157

.15 Dispositions of tangible depreciable assets in a general asset account (§ 168(i)(4); § 1.168(i)-1)

1160

.16 Summary of certain changes in methods of accounting related to dispositions of MACRS property

1162

.17 Depreciation of fiber optic transfer node and fiber optic cable used by a cable system operator (§§ 167 and 168)

1163

.18 Revocation of partial disposition election under the remodel-refresh safe harbor described in Rev. Proc. 2015-56

1164

SECTION 7. RESEARCH AND EXPERIMENTAL EXPENDITURES (§ 174)

1164

.01 Changes to a different method or different amortization period

1164

SECTION 8. ELECTIVE EXPENSING PROVISIONS (§ 179D)

1165

.01 Deduction for Energy Efficient Commercial Buildings (§ 179D)

1165

SECTION 9. COMPUTER SOFTWARE EXPENDITURES (§§ 162, 167, and 197)

1166

.01 Computer software expenditures

1166

SECTION 10. START-UP EXPENDITURES AND ORGANIZATIONAL FEES (§§ 195, 248 AND 709)

1166

.01 Start-up expenditures

1166

.02 Organizational expenditures under § 248

1166

.03 Organization fees under § 709

1167

SECTION 11. CAPITAL EXPENDITURES (§ 263)

1167

.01 Package design costs.

1167

.02 Line pack gas or cushion gas

1167

.03 Removal costs

1168

.04 Distributor commissions

1168

.05 Intangibles

1168

.06 Rotable spare parts safe harbor method.

1168

.07 Repairable and reusable spare parts

1169

.08 Tangible property

1170

.09 Railroad track structure expenditures

1172

.10 Remodel-refresh safe harbor method

1173

SECTION 12. UNIFORM CAPITALIZATION (UNICAP) METHODS (§ 263A)

1174

.01 Certain uniform capitalization (UNICAP) methods used by resellers and reseller-producers

1174

.02 Certain uniform capitalization (UNICAP) methods used by producers and reseller-producers

1179

.03 Impact fees

1179

.04 Change to capitalizing environmental remediation costs under § 263A

1179

.05 Change in allocating environmental remediation costs under § 263A

1179

.06 Safe harbor methods under § 263A for certain dealerships of motor vehicles

1180

.07 Change to not apply § 263A to one or more plants removed from the list of plants that have a preproductive period in excess of 2 years.

1180

.08 Change to a reasonable allocation method described in § 1.263A-1(f)(4) for self-constructed assets.

1181

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.09 Real property acquired through foreclosure.

1181

.10 Sales-Based Royalties

1181

.11 Treatment of Sales-Based Vendor Chargebacks under a Simplified Method

1182

.12 U.S. ratio method

1182

.13 Depletion

1184

.14 Interest capitalization

1184

SECTION 13. LOSSES, EXPENSES AND INTEREST WITH RESPECT TO TRANSACTIONS BETWEEN RELATED TAXPAYERS (§ 267)

1184

.01 Change to comply with § 267

1184

SECTION 14. DEFERRED COMPENSATION (§ 404)

1185

.01 Deferred compensation

1185

.02 Grace period contributions

1185

SECTION 15. METHODS OF ACCOUNTING (§ 446)

1185

.01 Change in overall method from the cash method to an accrual method

1185

.02 Multi-year insurance policies for multi-year service warranty contracts

1187

.03 Taxpayers changing to overall cash method.

1188

.04 Nonaccrual-experience method

1188

.05 Interest accruals on short-term consumer loans-Rule of 78's method

1189

.06 Film producer's treatment of certain creative property costs

1189

.07 Deduction of incentive payments to health care providers

1190

.08 Change by bank for uncollected interest.

1190

.09 Change from the cash method to an accrual method for specific items

1190

.10 Multi-year service warranty contracts

1191

.11 Overall cash method for specified transportation industry taxpayers

1191

.12 Change to overall cash/hybrid method for certain banks.

1192

.13 Change to overall cash method for farmers

1193

.14 Nonshareholder contributions to capital under § 118

1194

.15 Debt issuance costs

1194

.16 Transfers of interties under the safe harbor described in Notice 2016-36 (§ 118).

1194

.17 Change to or from the net asset value (NAV) method.

1195

SECTION 16. TAXABLE YEAR OF INCLUSION (§ 451)

1196

.01 Accrual of interest on nonperforming loans

1196

.02 Advance rentals

1196

.03 State or local income or franchise tax refunds

1196

.04 Capital Cost Reduction Payments

1196

.05 Credit card annual fees

1196

.06 Credit card late fees

1197

.07 Advance payments

1197

.08 Credit card cash advance fees

1197

.09 Retainages

1198

.10 Advance payments - change in applicable financial statements (AFS)

1198

SECTION 17. OBLIGATIONS ISSUED AT DISCOUNT (§ 454)

1199

.01 Series E, EE or I U.S. savings bonds

1199

SECTION 18. PREPAID SUBSCRIPTION INCOME (§ 455)

1200

.01 Prepaid subscription income

1200

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SECTION 19. TAXABLE YEAR INCURRED (§ 461)

1200

.01 Timing of incurring liabilities for employee compensation

1200

(1) Self-insured employee medical benefits

1200

(2) Bonuses

1201

(3) Vacation pay, sick pay, and severance pay

1201

.02 Timing of incurring liabilities for real property taxes, personal property taxes, state income taxes, and state franchise taxes

1201

.03 Timing of incurring liabilities under a workers' compensation act, tort, breach of contract, or violation of law

1202

.04 Timing of incurring certain liabilities for payroll taxes

1202

.05 Cooperative advertising

1203

.06 Timing of incurring certain liabilities for services or insurance.

1203

.07 Rebates and allowances

1203

.08 Ratable accrual of real property taxes

1204

.09 California Franchise Taxes

1204

.10 Gift cards issued as a refund for returned goods

1204

.11 Timing of incurring liabilities under the recurring item exception to the economic performance rules

1204

.12 Economic performance safe harbor for ratable service contracts

1205

SECTION 20. RENT (§ 467)

1205

.01 Change from an improper method of inclusion of rental income or expense to inclusion in accordance with the rent allocation

1205

SECTION 21. INVENTORIES (§ 471)

1205

.01 Cash discounts.

1205

.02 Estimating inventory "shrinkage"

1206

.03 Small taxpayer exception from requirement to account for inventories under § 471

1206

.04 Qualifying volume-related trade discounts

1206

.05 Impermissible methods of identification and valuation of inventories.

1207

.06 Core Alternative Valuation Method

1207

.07 Replacement cost for automobile dealers' parts inventory

1207

.08 Replacement cost for heavy equipment dealers' parts inventory

1208

.09 Rotable spare parts

1208

.10 Advance Trade Discount Method

1208

.11 Permissible methods of identification and valuation of inventories.

1208

.12 Change in the official used vehicle guide utilized in valuing used vehicles

1209

.13 Invoiced advertising association costs for new vehicle retail dealerships

1209

.14 Rolling-average method of accounting for inventories

1209

.15 Sales-Based Vendor Chargebacks

1209

.16 Certain changes to the cost complement of the retail inventory method

1210

.17 Certain changes within the retail inventory method

1210

.18 Change from currently deducting inventories to permissible methods of identification and valuation of inventories.

1210

SECTION 22. LAST-IN, FIRST-OUT (LIFO) INVENTORIES (§ 472)

1210

.01 Change from the LIFO inventory method

1210

.02 Determining current-year cost under the LIFO inventory method

1211

.03 Alternative LIFO inventory method for retail automobile dealers

1212

.04 Used vehicle alternative LIFO method

1212

.05 Determining the cost of used vehicles purchased or taken as a trade-in

1213

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.06 Change to the inventory price index computation (IPIC) method

1213

.07 Changes within the inventory price index computation (IPIC) method

1214

.08 Changes to the Vehicle-Pool Method

1215

.09 Changes within the used vehicle alternative LIFO method

1215

.10 Changes to dollar-value pools of manufacturers

1215

SECTION 23. MARK-TO-MARKET ACCOUNTING METHOD (§ 475)

1216

.01 Commodities dealers, securities traders, and commodities traders electing to use the mark-to-market method of accounting under § 475(e) or (f)

1216

.02 Taxpayers requesting to change their method of accounting from the mark-to-market method of accounting described in § 475 to a realization method

1216

SECTION 24. BANK RESERVES FOR BAD DEBTS (§ 585)

1217

.01 Changing from the § 585 reserve method to the § 166 specific charge-off method

1217

SECTION 25. INSURANCE COMPANIES (§§ 816, 832, 833)

1219

.01 Safe harbor method of accounting for premium acquisition expenses

1219

.02 Certain changes in method of accounting for organizations to which § 833 applies

1219

.03 Change in qualification as life/nonlife insurance company under § 816

1219

SECTION 26. DISCOUNTED UNPAID LOSSES (§ 846)

1219

.01 Composite method for discounting unpaid losses

1219

SECTION 27. REAL ESTATE MORTGAGE INVESTMENT CONDUIT (REMIC) (§§ 860A-860G)

1220

.01 REMIC Inducement Fees

1220

SECTION 28. FUNCTIONAL CURRENCY (§ 985)

1220

.01 Change in functional currency

1220

SECTION 29. ORIGINAL ISSUE DISCOUNT (§§ 1272, 1273)

1220

.01 De minimis original issue discount (OID)

1220

.02 Proportional method of accounting for OID on a pool of credit card receivables

1221

SECTION 30. MARKET DISCOUNT BONDS (§ 1278)

1221

.01 Revocation of § 1278(b) election

1221

SECTION 31. SHORT-TERM OBLIGATIONS (§ 1281)

1221

.01 Interest income on short obligations

1221

.02 Stated interest on short-term loans of cash method banks

1222

EFFECTIVE DATE

1222

EFFECT ON OTHER DOCUMENTS

1223

PAPERWORK REDUCTION ACT

1224

SIGNIFICANT CHANGES

1224

DRAFTING INFORMATION

1225

LIST OF AUTOMATIC CHANGES CONTACT LIST

1226

This revenue procedure provides the
List of Automatic Changes to which the
automatic change procedures in Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, as
clarified and modified by Rev. Proc.
2015-33, 2015-24 I.R.B. 1067, and as
modified by Rev. Proc. 2016-1, 2016-1
I.R.B. 1, (or successor) apply. The defini-
tions in section 3 of Rev. Proc. 2015-13
apply to this revenue procedure.

## LIST OF AUTOMATIC CHANGES SECTION 1. GROSS INCOME (§ 61)

### .01 Up-front Payments for Network Upgrades received by Utilities.

(1) Description of change. This change
applies to a Utility that wants to change its
method of accounting for Up-front Pay-
ments to the safe harbor method described

in Rev. Proc. 2005-35, 2005-2 C.B. 76.
In general, this change applies to a Utility
that receives an Up-front Payment from a
Generator to finance Network Upgrades to
the Utility's Transmission System. For
federal income tax purposes, if an Up-
front Payment is made pursuant to an In-
terconnection Agreement that satisfies all
of the conditions of section 5.02 of Rev.
Proc. 2005-35, a Utility may treat that

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Up-front Payment as not being taxable
income under § 61 when received (the
safe harbor method). In addition, a Utility
that uses the safe harbor method is not
entitled to any deduction for its reim-
bursements of the Up-front Payment. To
the extent that Federal Energy Regulatory
Commission (FERC) interest is deduct-
ible, it must be properly allocated to the
periods in which it accrues. A Utility us-
ing the safe harbor method must comply
with all other applicable provisions
of Rev. Proc. 2005-35. See Rev. Proc.
2005-35 for the definitions of certain
terms for purposes of this change.

(2) Designated automatic accounting
method change number. The designated au-
tomatic accounting method change number
for a change under this section 1.01 is "91."

(3) Contact information. For further in-
formation regarding a change under this
section, contact William E. Blanchard at
(202) 317-3900 (not a toll-free number).

## SECTION 2. COMMODITY CREDIT LOANS (§ 77)

.01 Treating amounts received as loans.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for loans re-
ceived from the Commodity Credit Cor-
poration from including the loan amount
in gross income for the taxable year in
which each loan is received to treating
each loan amount as a loan.

(2) Certain eligibility rule inapplicable.
The eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
does not apply to this change.

(3) Manner of making change. This
change is made on a cut-off basis and
applies only to loans received from the
Commodity Credit Corporation on or after
the beginning of the year of change. Ac-
cordingly, a § 481(a) adjustment is neither
permitted nor required.

(4) Designated automatic accounting
method change number. The designated au-
tomatic accounting method change number
for a change under this section 2.01 is "1."

(5) Contact information. For further in-
formation regarding a change under this
section, contact William Ruane at (202)
317-4718 (not a toll-free number).

## SECTION 3. TRADE OR BUSINESS EXPENSES (§ 162)

.01 Advances made by a lawyer on
behalf of clients.

(1) Description of change. This change
applies to a lawyer who advances money
to pay for costs of litigation or for other
expenses on behalf of clients, and who
wants to change the method of accounting
for such advances from treating them as
deductible business expenses to treating
them as loans to clients. This change ap-
plies to cases handled either on a non-
contingent or a contingent fee basis. See
Pelton & Gunther, P.C. v. Commissioner,
T.C. Memo. 1999-339 (non-contingent
fee); Canelo v. Commissioner, 53 T.C.
217 (1969), aff'd per curiam, 447 F.2d
484 (9th Cir. 1971) (contingent fee).

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.01 is "2."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Peter Ford at (202) 317-
7011(not a toll-free number).

.02 ISO 9000 costs.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for costs in-
curred to obtain, maintain, and renew ISO
9000 certification to conform with Rev.
Rul. 2000-4, 2000-1 C.B. 331, as mod-
ified by this revenue procedure.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.02 is "3."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Peter Ford at (202) 317-
7011 (not a toll-free number).

.03 Restaurant or tavern smallwares
packages.

(1) Description of change. This change
applies to a taxpayer engaged in the trade
or business of operating a restaurant or
tavern (within the meaning of section 4.01
of Rev. Proc. 2002-12, 2002-1 C.B. 374)
that wants to change its method of ac-

counting for the costs of smallwares to the
smallwares method described in Rev.
Proc. 2002-12, as modified by this reve-
nue procedure.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.03 is "4."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Peter Ford at (202) 317-
7011 (not a toll-free number).

.04 Timber grower fertilization costs.

(1) Description of change. This change
applies to a timber grower that wants to
change its method of accounting to treat
post-establishment fertilization costs of an
established timber stand as ordinary and
necessary business expenses deductible
under § 162. See Rev. Rul. 2004-62,
2004-1 C.B. 1072, as modified by this
revenue procedure.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.04 is "86."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Peter Ford at (202) 317-
7011 (not a toll-free number).

.05 Materials and supplies. See section
11.08 of this revenue procedure.

.06 Repair and maintenance costs. See
section 11.08 of this revenue procedure.

.07 Wireline network asset maintenance
allowance and units of property methods
of accounting under Rev. Proc. 2011-27.

(1) Description of change. This change
applies to a wireline telecommunications
carrier that is within the scope of Rev.
Proc. 2011-27, 2011-18 I.R.B. 740, and
wants to change its treatment of wireline
network asset expenditures to use either
(a) the wireline network asset mainte-
nance allowance method of accounting, or
(b) all or some of the units of property
described in Rev. Proc. 2011-27.

(2) Section 481(a) adjustment. In gen-
eral, a change to the wireline network
asset maintenance allowance method of
accounting or to use all or some of the units
of property specified in Rev. Proc. 2011-27

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requires an adjustment under § 481(a). The
§ 481(a) adjustment shall not include any
amount attributable to property for which
the taxpayer elected to apply the repair al-
lowance under § 1.167(a)-11(d)(2).

(3) Designated automatic accounting
method change number. The designated au-
tomatic accounting method change number
for a change under this section 3.07 is
"158."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Lewis Saideman at (202)
317-5100 (not a toll-free number).

.08 Wireless network asset maintenance
allowance and units of property methods
of accounting under Rev. Proc. 2011-28.

(1) Description of change. This change
applies to a wireless telecommunications
carrier that is within the scope of Rev.
Proc. 2011-28, 2011-18 I.R.B. 743, and
wants to change its treatment of wireless
network asset expenditures to use either
(a) the wireless network asset mainte-
nance allowance method of accounting, or
(b) all or some of the units of property
described in Rev. Proc. 2011-28.

(2) Section 481(a) adjustment. In gen-
eral, a change to the wireless network asset
maintenance allowance method of account-
ing or to use all or some of the units of
property specified in Rev. Proc. 2011-28
requires an adjustment under § 481(a). The
§ 481(a) adjustment does not include any
amount attributable to property for which
the taxpayer elected to apply the repair al-
lowance under § 1.167(a)-11(d)(2).

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.08 is "159."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Lewis Saideman at (202)
317-5100 (not a toll-free number).

.09 Method of accounting under Rev.
Proc. 2011-43 for taxpayers in the
business of transporting, delivering, or
selling electricity.

(1) Description of change. This change
applies to a taxpayer that is within the
scope of Rev. Proc. 2011-43, 2011-37
I.R.B. 326, and wants to change its treat-

ment of transmission and distribution
property expenditures to use the method
of accounting described in Rev. Proc.
2011-43.

(2) Section 481(a) adjustment. A tax-
payer must take the entire net § 481(a)
adjustment into account (whether posi-
tive or negative) in computing taxable in-
come for the year of change. The § 481(a)
adjustment does not include any amount
attributable to property for which the tax-
payer elected to apply the repair allowance
under § 1.167(a)-11(d)(2) for any taxable
year in which the election was made. For
guidance regarding permissible § 481(a)
calculation methodologies, see section 7.02
and Appendix A of Rev. Proc. 2011-43.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.09 is "160."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Lewis Saideman at (202)
317-5100 (not a toll-free number).

.10 Method of accounting under Rev.
Proc. 2013-24 for taxpayers in the
business of generating steam or electric
power.

(1) Description of change. This change
applies to a taxpayer that is within the
scope of Rev. Proc. 2013-24, 2013-22
I.R.B. 1142, and wants to change its treat-
ment of generation property expenditures
to use all or some of the unit of property
definitions and the corresponding major
component definitions described in Rev.
Proc. 2013-24.

(2) Section 481(a) adjustment.

(a) A taxpayer must take the entire net
§ 481(a) adjustment into account (whether
positive or negative) in computing taxable
income for the year of change. For guid-
ance regarding the use of extrapolation in
computing a § 481(a) adjustment, see sec-
tions 6.02 and Appendix B of Rev. Proc.
2013-24.

(b) A taxpayer changing to this method
of accounting must not include in the
§ 481(a) adjustment any amount attribut-
able to property for which the taxpayer
elected to apply the repair allowance un-
der § 1.167(a)-11(d)(2) for any taxable
year in which the repair allowance elec-
tion was made.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.10 is "182."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Lewis Saideman at (202)
317-5100 (not a toll-free number).

.11 Cable network asset capitalization
methods of accounting under Rev. Proc.
2015-12.

(1) Description of change. This change
applies to a cable system operator that is
within the scope of Rev. Proc. 2015-12,
2015-2 I.R.B. 266, and wants to make one
or more of the of the following changes in
method of accounting:

(a) Change its treatment of cable net-
work asset expenditures to the cable
network asset maintenance allowance
method of accounting provided in sec-
tion 5 of Rev. Proc. 2015-12;

(b) Change to use any of the unit of
property definitions provided in section 6
of Rev. Proc. 2015-12;

(c) Change to use the specific identifi-
cation method for installations and cus-
tomer drop costs described in section
7.01(1) of Rev. Proc. 2015-12;

(d) Change to use the safe harbor allo-
cation method for installations and cus-
tomer drop costs described in section
7.01(2) of Rev. Proc. 2015-12; or

(e) Change to deduct the labor costs
associated with installing customer prem-
ises equipment under section 7.02 of Rev.
Proc. 2015-12.

(2) Concurrent automatic change. A
taxpayer that wants to make both one or
more changes in method of accounting
pursuant to this section 3.11 and a change
to a UNICAP method under section 12 of
this revenue procedure for the same year
of change should file a single Form 3115
that includes all of these changes and must
enter the designated automatic accounting
method change numbers for all of these
changes on the appropriate line on the
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes.

(3) Section 481(a) adjustment.

(a) In general, a change to one or
more of the of the changes in method of
accounting described in section 3.11(1) of

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this revenue procedure requires an adjust-
ment under § 481(a). The § 481(a) adjust-
ment shall not include any amount attrib-
utable to property for which the taxpayer
elected to apply the repair allowance un-
der § 1.167(a)-11(d)(2).

(b) Itemized listing on Form 3115. The
taxpayer must include on Form 3115 (Rev.
December 2015), Part IV, line 26, the total
§ 481(a) adjustment for all changes in meth-
ods of accounting being made. If the tax-
payer is making more than one change in
method of accounting under Rev. Proc.
2015-12, the taxpayer must include on an
attachment to Form 3115:

(i) the information required by Part IV,
line 26 for each change in method of
accounting (including the amount of the
§ 481(a) adjustment for each change in
method of accounting, which includes the
portion of the § 481(a) adjustment attrib-
utable to UNICAP);

(ii) the information required by Part II,
line 14 of Form 3115 that is associated
with each change; and

(iii) the citation to the paragraph of
Rev. Proc. 2015-12 that provides for each
proposed method of accounting.

(4) Designated automatic accounting
method change number. The designated au-
tomatic accounting method change number
for a change to a method of accounting
provided in section 5 or 6 of Rev. Proc.
2015-12 is "208." The designated auto-
matic accounting method change number
for a change to a method of accounting
provided in section 7 of Rev. Proc. 2015-12
is "209."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Merrill Feldstein at (202)
317-5100 (not a toll-free number).

## SECTION 4. BAD DEBTS (§ 166)

.01 Change from reserve method to
specific charge-off method.

(1) Description of change. This change
applies to a taxpayer (other than a bank as
defined in § 585(a)(2)) that wants to
change its method of accounting for bad
debts from a reserve method (or other
improper method) to a specific charge-off
method that complies with § 166. For
procedures applicable to banks, see
§ 585(c) and the regulations thereunder
and section 24 of this revenue procedure.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
4.01 is "5."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

.02 Conformity election by bank after
previous election automatically revoked.

(1) Description of change. This change
applies to a bank that wants to change its
method of accounting for bad debts by
making the conformity election under
§ 1.166-2(d)(3)(iii)(C)(3).

(2) Applicability. This change only ap-
plies to a bank (as defined in § 1.166-
2(d)(4)(i)) that:

(a) is subject to supervision by Federal
authorities, or by state authorities main-
taining substantially equivalent standards;

(b) has previously adopted or elected to
change to the method of accounting for bad
debts described in § 1.166-2(d)(3);

(c) has had that previous election
automatically revoked under § 1.166-
2(d)(3)(iv)(C);

(d) meets the express determination re-
quirement of § 1.166-2(d)(3)(iii)(D) for
the year of change; and

(e) now seeks the consent of the Com-
missioner to make an election under
§ 1.166-2(d)(3)(iii)(C)(3).

(3) Certain eligibility rule inapplica-
ble. The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not apply to this change.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
4.02 is "211."

(5) Contact information. For further in-
formation regarding a change under this
section, contact K. Scott Brown at (202)
317-6945 (not a toll-free number).

## SECTION 5. INTEREST EXPENSE (§ 163) AND AMORTIZABLE BOND PREMIUM (§ 171)

.01 Revocation of § 171(c) election.

(1) Description of change. This change
applies to a taxpayer that wants to change its
method of accounting for amortizable bond

premium by revoking its § 171(c) election.
Under § 171(c), a taxpayer that holds certain
taxable bonds may elect to amortize any
bond premium on the bonds in accordance
with regulations prescribed by the Secre-
tary. Sections 1.171-1 through 1.171-5 pro-
vide rules relating to the amortization of
bond premium by a taxpayer. Section
1.171-4 provides the procedures to make a
§ 171(c) election to amortize bond pre-
mium.

(2) Revocation of election. The revoca-
tion of a § 171(c) election applies to all
taxable bonds that are held by the tax-
payer on the first day of the first taxable
year for which the revocation is effective
(year of change), and to all taxable bonds
that are subsequently acquired by the tax-
payer.

(3) Manner of making change. This
change is made using a cut-off basis and
applies only to taxable bonds held on or
after the beginning of the year of change.
Accordingly, a § 481(a) adjustment is nei-
ther permitted nor required.

Under the cut-off basis, for taxable
bonds held at the beginning of the year of
change, the taxpayer may not amortize
any remaining bond premium on the
bonds. Because the cut-off basis is pre-
scribed for this change, the basis of any
bond, adjusted for amounts previously
amortized during the period of the elec-
tion, is not affected by the revocation.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
5.01 is "16."

(5) Additional requirements. On a
statement attached to the Form 3115, the
taxpayer must provide:

(a) the reason(s) for revoking the elec-
tion; and

(b) a description of the method by
which, and the date on which, the tax-
payer made the § 171(c) election that is
proposed to be revoked.

(6) Audit protection. Any audit protec-
tion applicable to this change under sec-
tion 8 of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not preclude the Com-
missioner from examining the method
used by the taxpayer to determine the
amount of amortizable bond premium un-
der § 171(b) for a taxable year prior to the
year of change.

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(7) Contact information. For further in-
formation regarding a change under this
section, contact William E. Blanchard at
(202) 317-3900 (not a toll-free number).

.02 Change to comply with § 163(e)(3).

(1) Description of change. This
change applies to a taxpayer that wants
to change its method or methods of ac-
counting to comply with the require-
ments of § 163(e)(3), which defers cer-
tain deductions attributable to original
issue discount debt instruments held by
related foreign persons. Any portion of
the original issue discount will not be
allowable as a deduction to the U.S.
person issuer until paid.

(2) Accelerated § 481(a) adjustment
period in certain situations. In addition to
the circumstances set forth in section
7.03(4) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, the § 481 adjustment period
provided in section 7.03 of Rev. Proc.
2015-13 will be accelerated for a U.S.
person with a remaining balance of a
§ 481(a) adjustment that arose by reason
of a change in method of accounting de-
scribed in this section 5.02 if a debt in-
strument subject to the change is paid off,
retired, or significantly modified within
the meaning of § 1.1001-3 prior to the end
of the § 481(a) adjustment period. The
portion of the remaining § 481(a) adjust-
ment attributable to the debt instrument
must be taken into account in the taxable
year the debt instrument is paid off, re-
tired, or significantly modified within the
meaning of § 1.1001-3.

(3) Designated automatic accounting
method change number. The designated auto-
matic accounting method change number for a
change under this section 5.02 is "212."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Joseph Vetting at (202)
317-4960 (not a toll-free number).

## SECTION 6. DEPRECIATION OR AMORTIZATION (§ 56(a)(1), 56(g)(4)(A), 167, 168, 197, 280F(a), 1400I, 1400L, or 1400N(d), OR FORMER § 168)

.01 Impermissible to permissible method
of accounting for depreciation or
amortization.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that wants to change from an
impermissible to a permissible method of
accounting for depreciation or amortiza-
tion (depreciation) for any item of depre-
ciable or amortizable property under the
taxpayer's present or proposed method of
accounting:

(i) for which the taxpayer used the im-
permissible method of accounting in at
least two taxable years immediately pre-
ceding the year of change (but see section
6.01(1)(b) of this revenue procedure for
property placed in service in the taxable
year immediately preceding the year of
change);

(ii) for which the taxpayer is making a
change in method of accounting under
§ 1.446-1(e)(2)(ii)(d);

(iii) for which depreciation is deter-
mined under § 56(a)(1), § 56(g)(4)(A),
§ 167, § 168, § 197, § 1400I, or § 1400L(c),
under § 168 prior to its amendment in 1986
(former § 168), or under any additional first
year depreciation deduction provision of the
Code (for example, § 168(k), § 168(l),
§ 1400L(b), or § 1400N(d)); and

(iv) that is owned by the taxpayer at the
beginning of the year of change (but see
section 6.07 of this revenue procedure for
property disposed of before the year of
change).

(b) Taxpayer has not adopted a method
of accounting for the item of property. If a
taxpayer does not satisfy section 6.01(1)
(a)(i) of this revenue procedure for an item
of depreciable or amortizable property be-
cause this item of property is placed in ser-
vice by the taxpayer in the taxable year
immediately preceding the year of change
("1-year depreciable property"), the tax-
payer may change from the impermissible
method of determining depreciation to the
permissible method of determining depreci-
ation for the 1-year depreciable property by
filing a Form 3115 for this change, provided
the § 481(a) adjustment reported on the
Form 3115 includes the amount of any ad-
justment that is attributable to all property
(including the 1-year depreciable property)
subject to the Form 3115. Alternatively, the
taxpayer may change from the impermissi-
ble method of determining depreciation to
the permissible method of determining de-
preciation for a 1-year depreciable property
by filing an amended federal tax return for
the property's placed-in-service year prior

to the date the taxpayer files its federal tax
return for the taxable year succeeding the
placed-in-service year.

(c) Inapplicability. This change does
not apply to:

(i) any property to which § 1016(a)
(3) (regarding property held by a tax-
exempt organization) applies;

(ii) a taxpayer that is required under
§ 263A and the regulations thereunder to
capitalize the costs with respect to which
the taxpayer wants to change its method
of accounting under this section 6.01 if the
taxpayer is not capitalizing these costs,
unless the taxpayer concurrently changes
its method to capitalize these costs in con-
junction with a change to a UNICAP
method under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable);

(iii) any property for which a taxpayer
is making a change in depreciation under
§ 1.446-1(e)(2)(ii)(d)(2)(vi) or (vii);

(iv) any property subject to § 167(g)
regarding property depreciated under the
income forecast method;

(v) any § 1250 property that a taxpayer
is reclassifying to an asset class of Rev.
Proc. 87-56, 1987-2 C.B. 674 (as clari-
fied and modified by Rev. Proc. 88-22,
1988-1 C.B. 785), or Rev. Proc. 83-35,
1983-1 C.B. 745, as appropriate, that does
not explicitly include § 1250 property (for
example, asset class 57.0, Distributive
Trades and Services);

(vi) any property for which a taxpayer
is revoking a timely valid election, or
making a late election, under § 167, § 168,
§ 179, § 1400I, § 1400L(c), former § 168,
§ 13261(g)(2) or (3) of the Revenue Rec-
onciliation Act of 1993 (1993 Act),
1993-3 C.B. 1, 128 (relating to amortiz-
able § 197 intangibles), or any additional
first year depreciation deduction provision
of the Code (for example, § 168(k),
§ 168(l), § 1400L(b), or § 1400N(d)). A
taxpayer may request consent to revoke or
make the election by submitting a request
for a letter ruling under Rev. Proc.
2017-1, 2017-1 I.R.B. 1 (or successor).
However, if a taxpayer is revoking or
making an election under § 179, see
§ 179(c) and § 1.179-5. See § 1.446-
1(e)(2)(ii)(d)(3)(iii);

(vii) any property for which depreci-
ation is determined under § 56(g)(4)(A) or
§ 167 (other than under § 168, § 1400I,

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§ 1400L(c), former § 168, or any addi-
tional first year depreciation deduction
provision of the Code (for example,
§ 168(k), § 168(l), § 1400L(b), or
§ 1400N(d))) and a taxpayer is changing
the useful life of the property. A change in
the useful life of property is corrected by
adjustments in the applicable taxable year
provided under § 1.446-1(e)(2)(ii)(d)
(5)(iv). However, this section 6.01(1)(c)
(vii) does not apply if the taxpayer is
changing to or from a useful life, recovery
period, or amortization period that is spe-
cifically assigned by the Code (for exam-
ple, § 167(f)(1), § 168(c)), the regulations
thereunder, or other guidance published in
the Internal Revenue Bulletin and, there-
fore, this change is a change in method of
accounting (unless section 6.01(1)(c)(xv)
of this revenue procedure applies). See
§ 1.446-1(e)(2)(ii)(d)(3)(i);

(viii) any depreciable property for
which the use changes in the hands of the
same taxpayer. See § 1.446-1(e)(2)(ii)
(d)(3)(ii);

(ix) any property for which deprecia-
tion is determined in accordance with
§ 1.167(a)-11 (regarding the Class Life As-
set Depreciation Range System (ADR));

(x) any change in method of account-
ing involving a change from deducting the
cost or other basis of any property as an
expense to capitalizing and depreciating
the cost or other basis, or vice versa (but
see section 11.08 of this revenue proce-
dure for making such a change in method
of accounting under the final tangible
property regulations);

(xi) any change in method of ac-
counting involving a change from one
permissible method of accounting for the
property to another permissible method of
accounting for the property. For example:

(A) a change from the straight-line
method of depreciation to the income
forecast method of depreciating for video-
cassettes. See Rev. Rul. 89-62, 1989-1
C.B. 78; or

(B) a change from charging the
depreciation reserve with costs of removal
and crediting the depreciation reserve
with salvage proceeds to deducting costs
of removal as an expense (provided the
costs of removal are not required to be
capitalized under any provision of the
Code, such as § 263(a)) and including
salvage proceeds in taxable income (see

section 6.02 of this revenue procedure for
making this change for property for which
depreciation is determined under § 167);

(xii) any change in method of ac-
counting involving both a change from
treating the cost or other basis of the prop-
erty as nondepreciable or nonamortizable
property to treating the cost or other basis
of the property as depreciable or amortiz-
able property and the adoption of a
method of accounting for depreciation re-
quiring an election under § 167, § 168,
§ 1400I, § 1400L(c), former § 168,
§ 13261(g)(2) or (3) of the 1993 Act, or
any additional first year depreciation de-
duction provision of the Code (for exam-
ple, § 168(k), § 168(l), § 1400L(b), or
§ 1400N(d)) (for example, a change in the
treatment of the space consumed in land-
fills placed in service in 2006 from non-
depreciable to depreciable property (as-
suming section 6.01(1)(c)(xiii) of this
revenue procedure does not apply) and the
making of an election under § 168(f)(1) to
depreciate this property under the unit-of-
production method of depreciation under
§ 167);

(xiii) any change in method of ac-
counting for any item of income or deduc-
tion other than depreciation, even if the
change results in a change in computing
depreciation under § 1.446-1(e)(2)(ii)
(d)(2)(i), (ii), (iii), (iv), (v), (vi), (vii), or
(viii). For example, a change in method of
accounting involving:

(A) a change in inventory costs (for
example, when property is reclassified
from inventory property to depreciable
property, or vice versa) (but see section
11.02 of this revenue procedure for mak-
ing a change in method of accounting
from inventory property to depreciable
property for unrecoverable line pack gas
or unrecoverable cushion gas, and section
11.06 of this revenue procedure for mak-
ing a change in method of accounting
from inventory property to depreciable
property for rotable spare parts); or

(B) a change in the character of a
transaction from sale to lease, or vice
versa (but see section 6.03 of this revenue
procedure for making this change);

(xiv) a change from determining de-
preciation under § 168 to determining de-
preciation under former § 168 for any
property subject to the transition rules in
§ 203(b) or § 204(a) of the Tax Reform

Act of 1986, 1986-3 (Vol. 1) C.B. 1,
60-80;

(xv) any change in the placed-in-
service date of a depreciable or amortiz-
able property. This change is corrected by
adjustments in the applicable taxable year
provided under § 1.446-1(e)(2)(ii)(d)
(5)(v); or

(xvi) any property for which the tax-
payer has claimed a federal income tax
credit (e.g., the rehabilitation credit under
§ 47).

(2) Certain eligibility rules inapplicable.
The eligibility rule in section 5.01(1)(d) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
does not apply to this change. If during any
of the five taxable years ending with the
year of change, a taxpayer requested or
made a change in method of accounting
from expensing to capitalizing, or vice
versa, the cost or other basis of an asset, the
eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 is not applicable to a change
under this section 6.01 for that same asset.

(3) Additional requirements. A tax-
payer also must comply with the follow-
ing:

(a) Permissible method of accounting
for depreciation. A taxpayer must change
to a permissible method of accounting for
depreciation for the item of depreciable or
amortizable property. The permissible
method of accounting is the same method
that determines the depreciation allowable
for the item of property (as provided in
section 6.01(7) of this revenue procedure).

(b) Statements required. A taxpayer
(including a qualified small taxpayer as
defined in section 6.01(4)(b) of this reve-
nue procedure) must provide the follow-
ing statements, if applicable, and attach
them to the completed Form 3115:

(i) a detailed description of the present
and proposed methods of accounting. A
general description of these methods of
accounting is unacceptable (for example,
MACRS to MACRS, erroneous method to
proper method, claiming less than the de-
preciation allowable to claiming the de-
preciation allowable);

(ii) to the extent not provided else-
where on the Form 3115, a statement
describing the taxpayer's business or
income-producing activities. Also, if the
taxpayer has more than one business or
income-producing activity, a statement
describing the taxpayer's business or

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income-producing activity in which the
item of property at issue is primarily
used by the taxpayer;

(iii) to the extent not provided else-
where on the Form 3115, a statement of
the facts and law supporting the proposed
method of accounting, new classification
of the item of property, and new asset
class in, as appropriate, Rev. Proc. 87-56
or Rev. Proc. 83-35. If the taxpayer is the
owner and lessor of the item of property
at issue, the statement of the facts and
law supporting the new asset class also
must describe the business or income-
producing activity in which that item of
property is primarily used by the lessee;

(iv) to the extent not provided else-
where on the Form 3115, a statement
identifying the year in which the item of
property was placed in service by the tax-
payer;

(v) if any item of property is public
utility property within the meaning of
§ 168(i)(10) or former § 167(I)(3)(A), as
applicable, a statement providing that the
taxpayer agrees to the following addi-
tional terms and conditions:

(A) a normalization method of ac-
counting (within the meaning of former
§ 167(I)(3)(G), former § 168(e)(3)(B), or
§ 168(i)(9), as applicable) will be used for
the public utility property subject to the
Form 3115;

(B) as of the beginning of the year of
change, the taxpayer will adjust its de-
ferred tax reserve account or similar re-
serve account in the taxpayer's regulatory
books of account by the amount of the
deferral of federal income tax liability as-
sociated with the § 481(a) adjustment ap-
plicable to the public utility property sub-
ject to the Form 3115; and

(C) within 30 calendar days of filing
the federal income tax return for the year
of change, the taxpayer will provide a
copy of the completed Form 3115 to any
regulatory body having jurisdiction over
the public utility property subject to the
Form 3115;

(vi) if the taxpayer is changing the clas-
sification of an item of § 1250 property
placed in service after August 19, 1996, to
a retail motor fuels outlet under
§ 168(e)(3)(E)(iii), a statement containing
the following representation: "For pur-
poses of § 168(e)(3)(E)(iii) of the Internal
Revenue Code, the taxpayer represents

that (A) 50 percent or more of the gross
revenue generated from the item of § 1250
property is from the sale of petroleum
products (not including gross revenue
from related services, such as the labor
cost of oil changes and gross revenue
from the sale of nonpetroleum products
such as tires and oil filters), (B) 50 percent
or more of the floor space in the item of
property is devoted to the sale of petro-

leum products (not including floor space
devoted to related services, such as oil
changes and floor space devoted to non-
petroleum products such as tires and oil
filters), or (C) the item of § 1250 property
is 1,400 square feet or less."; and

(vii) if the taxpayer is changing the
classification of an item of property from
§ 1250 property to § 1245 property under
§ 168 or former § 168, a statement of the
facts and law supporting the new § 1245
property classification, and a statement
containing the following representation:
"Each item of depreciable property that is
the subject of the Form 3115 filed under
section 6.01 of Rev. Proc. 2017-30 for the
year of change beginning [Insert the
date], and that is reclassified from [Insert,
as appropriate: nonresidential real prop-
erty, residential rental property, qualified
leasehold improvement property, quali-
fied restaurant property, qualified retail
improvement property, 19-year real prop-
erty, 18-year real property, or 15-year
real property] to an asset class of [Insert,
as appropriate, either: Rev. Proc. 87-56,
1987-2 C.B. 674, or Rev. Proc. 83-35,
1983-1 C.B. 745] that does not explicitly
include § 1250 property, is § 1245 prop-
erty for depreciation purposes."

(4) Reduced filing requirement for
qualified small taxpayers.

(a) In general. A qualified small tax-
payer, as defined in section 6.01(4)(b) of
this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2015) to
make this change:

(a) The identification section of page
1 (above Part I);

(b) The signature section at the bot-
tom of page 1;

(c) Part I;

(d) Part II, all lines except lines 13,
15b, 16c, 17, and 19;

(e) Part IV, all lines except line 25;
and

(f) Schedule E.

(b) Definition of qualified small tax-
payer. A "qualified small taxpayer" is a
taxpayer whose average annual gross re-
ceipts, as determined under § 1.263(a)-
3(h)(3), for the three preceding taxable
years is less than or equal to $10,000,000.

(5) Section 481(a) adjustment. Because
the adjusted basis of the property is
changed as a result of a method change
made under this section 6.01 (see section
6.01(6) of this revenue procedure), items
are duplicated or omitted. Accordingly,
this change is made with a § 481(a) ad-
justment. This adjustment may result in
either a negative § 481(a) adjustment (a
decrease in taxable income) or a positive
§ 481(a) adjustment (an increase in tax-
able income) and may be a different
amount for regular tax, alternative mini-
mum tax, and adjusted current earnings
purposes. This § 481(a) adjustment equals
the difference between the total amount of
depreciation taken into account in com-
puting taxable income for the property
under the taxpayer's present method of
accounting (including the amount attribut-
able to any property described in section
6.01(1)(b) of this revenue procedure that
is included in the taxpayer's Form 3115),
and the total amount of depreciation al-
lowable for the property under the taxpay-
er's proposed method of accounting (as
determined under section 6.01(7) of this
revenue procedure, and including the
amount attributable to any property de-
scribed in section 6.01(1)(b) of this reve-
nue procedure that is included in the tax-
payer's Form 3115), for open and closed
years prior to the year of change. How-
ever, the amount of the § 481(a) adjust-
ment must be adjusted to account for the
proper amount of the depreciation allow-
able that is required to be capitalized un-
der any provision of the Code (for exam-
ple, § 263A) at the beginning of the year
of change.

(6) Basis adjustment. As of the begin-
ning of the year of change, the basis of
depreciable property to which this section
6.01 applies must reflect the reductions
required by § 1016(a)(2) for the depreci-
ation allowable for the property (as deter-
mined under section 6.01(7) of this reve-
nue procedure).

(7) Meaning of depreciation allowable.

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(a) In general. Section 6.01(7) of this
revenue procedure provides the amount of
the depreciation allowable determined un-
der § 56(a)(1), § 56(g)(4)(A), § 167,
§ 168, § 197, § 1400I, or § 1400L(c), or
former § 168. This amount, however, may
be limited by other provisions of the Code
(for example, § 280F).

(b) Section 56(a)(1) property. The de-
preciation allowable for any taxable year
for property for which depreciation is de-
termined under § 56(a)(1) is determined
by using the depreciation method, recov-
ery period, and convention provided for
under § 56(a)(1) that applies for the prop-
erty's placed-in-service date.

(c) Section 56(g)(4)(A) property. The
depreciation allowable for any taxable
year for property for which depreciation is
determined under § 56(g)(4)(A) is deter-
mined by using the depreciation method,
recovery period or useful life, as applica-
ble, and convention provided for under
§ 56(g)(4)(A) that applies for the proper-
ty's placed-in-service date.

(d) Section 167 property. Generally,
for any taxable year, the depreciation al-
lowable for property for which deprecia-
tion is determined under § 167, is deter-
mined either:

(i) under the depreciation method ad-
opted by the taxpayer for the property; or

(ii) if that depreciation method does
not result in a reasonable allowance for
depreciation or the taxpayer has not ad-
opted a depreciation method for the prop-
erty, under the straight-line depreciation
method.

For determining the estimated useful
life and salvage value of the property, see
§ 1.167(a)-1(b) and (c), respectively.

The depreciation allowable for any tax-
able year for property subject to § 167(f)
(regarding certain property excluded from
§ 197) is determined by using the depre-
ciation method and useful life prescribed
in § 167(f). If computer software is depre-
ciated under § 167(f)(1) and is qualified
property (as defined in § 168(k)(2) and
§ 1.168(k)-1), 50-percent bonus depreci-
ation property (as defined in § 168(k)(4)
(as in effect on the day before the date of
enactment of the Economic Stimulus Act
of 2008, Pub. L. No. 110-185, 122 Stat.
613 (February 13, 2008)) and § 1.168(k)-
1), qualified disaster assistance property
(as defined in § 168(n)(2)), qualified New

York Liberty Zone (Liberty Zone) prop-
erty (as defined in § 1400L(b)(2) and
§ 1.1400L(b)-1), qualified Gulf Opportu-
nity Zone (GO Zone) property (as defined
in § 1400N(d)(2) and sections 2.02 and
2.03 of Notice 2006-77, 2006-2 C.B.
590, as clarified, modified, and amplified
by Notice 2007-36, 2007-1 C.B. 1000),
specified Gulf Opportunity Zone exten-
sion property (GO Zone extension prop-
erty) (as defined in § 1400N(d)(6) and
section 4 of Notice 2007-36), or qualified
Recovery Assistance (RA) property (as
defined in sections 2.02 and 2.03 of No-
tice 2008-67, 2008-32 I.R.B. 307), the
depreciation allowable for that computer
software under § 167(f)(1) is also deter-
mined by taking into account the additional
first year depreciation deduction provided
by § 168(k), § 168(n), § 1400L(b), or
§ 1400N(d), or by § 15345(a)(1) and (d)(1)
of the Food, Conservation, and Energy Act
of 2008, Pub. L. No. 110-246, 122 Stat.
1651 (June 18, 2008), as applicable, unless
the taxpayer made a timely valid election
not to deduct any additional first year depre-
ciation for the computer software.

(e) Section 168 property. The depreci-
ation allowable for any taxable year for
property for which depreciation is deter-
mined under § 168, is determined as fol-
lows:

(i) by using either:

(A) the general depreciation system in
§ 168(a); or

(B) the alternative depreciation system
in § 168(g) if the property is required to be
depreciated under the alternative depreci-
ation system pursuant to § 168(g)(1) or
other provisions of the Code (for example,
property described in § 263A(e)(2)(A) or
§ 280F(b)(1)). Property required to be de-
preciated under the alternative deprecia-
tion system pursuant to § 168(g)(1) in-
cludes property in a class (as set out in
§ 168(e)) for which the taxpayer made a
timely valid election under § 168(g)(7);

(ii) if the property is qualified property,
50-percent bonus depreciation property,
qualified disaster assistance property, Lib-
erty Zone property, GO Zone property, GO
Zone extension property, or RA property,
by also taking into account the additional
first year depreciation deduction provided
by § 168(k), § 168(n), § 1400L(b), or
§ 1400N(d), or by § 15345(a)(1) and (d)(1)
of the Food, Conservation, and Energy Act

of 2008, as applicable, unless the taxpayer
made a timely valid election not to deduct
the additional first year depreciation (or
made a deemed election not to deduct the
additional first year depreciation; for further
guidance, see, for example, Rev. Proc.
2002-33, 2002-1 C.B. 963, Rev. Proc.
2003-50, 2003-2 C.B. 119, Notice 2006-
77, Notice 2008-67, section 5 of Rev. Proc.
2011-26, 2011-16 I.R.B. 664, or Rev. Proc.
2015-48, 2015-40 I.R.B. 469) for the class
of property (as defined in § 1.168(k)-
1(e)(2), § 1.1400L(b)-1(e)(2), or section
4.02 of Notice 2006-77, as applicable) in
which that property is included;

(iii) if the property is qualified second
generation biofuel plant property (as de-
fined in § 168(l)(2) and (3)) or qualified
cellulosic biofuel plant property (as de-
fined in former § 168(l)(2) and (3)), by
also taking into account the additional first
year depreciation deduction provided by
§ 168(l)(1), unless the taxpayer made a
timely valid election not to deduct the
additional first year depreciation for the
property; and

(iv) if the property is qualified reuse
and recycling property (as defined in
§ 168(m)(2)), by also taking into account
the additional first year depreciation de-
duction provided by § 168(m)(1), unless
the taxpayer made a timely valid election
not to deduct the additional first year de-
preciation for the property.

(f) Section 197 property. The amorti-
zation allowable for any taxable year for
an amortizable § 197 intangible (including
any property for which a timely election
under § 13261(g)(2) of the 1993 Act was
made) is determined in accordance with
§ 1.197-2(f).

(g) Former § 168 property. The depre-
ciation allowable for any taxable year for
property subject to former § 168 is deter-
mined by using either:

(i) the accelerated method of cost re-
covery applicable to the property (for ex-
ample, for 5-year property, the recovery
method under former § 168(b)(1)); or

(ii) the straight-line method applicable
to the property if the property is required
to be depreciated under the straight-line
method (for example, property described in
former § 168(f)(2) or former § 280F(b)(2))
or if the taxpayer elected to determine the
depreciation allowance under the optional

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straight-line percentage (for example, the
straight-line method in former § 168(b)(3)).

(h) Qualified revitalization building.
The depreciation allowable for any tax-
able year for any qualified revitalization
building (as defined in § 1400I(b)(1)) for
which the taxpayer has made a timely
valid election under § 1400I(a) is deter-
mined as follows:

(i) if the taxpayer elected to deduct
one-half of any qualified revitalization ex-
penditures (as defined in § 1400I(b)(2)
and as limited by § 1400I(c)) chargeable
to a capital account with respect to the
qualified revitalization building for the
taxable year in which the building is
placed in service by the taxpayer, the de-
preciation allowable for the qualified re-
vitalization building's placed-in-service
year is equal to one-half of the qualified
revitalization expenditures for the build-
ing and the depreciation allowable for the
remaining depreciable basis of the quali-
fied revitalization building for its placed-
in-service year and subsequent taxable
years is determined using the general de-
preciation system of § 168(a) or the alter-
native depreciation system of § 168(g), as
applicable; or

(ii) if the taxpayer elected to amortize
all of the qualified revitalization expendi-
tures chargeable to a capital account with
respect to the qualified revitalization
building ratably over the 120-month pe-
riod beginning with the month in which
the building is placed in service, the de-
preciation allowable for the qualified re-
vitalization expenditures is determined in
accordance with this election and the de-
preciation allowable for the remaining de-
preciable basis of the qualified revitaliza-
tion building is determined using the
general depreciation system of § 168(a) or
the alternative depreciation system of
§ 168(g), as applicable.

(i) Qualified New York Liberty Zone
leasehold improvement property. The de-
preciation allowable for any taxable year
for qualified New York Liberty Zone
leasehold improvement property (as de-
fined in § 1400L(c)(2)) is determined by
using the depreciation method and recov-
ery period prescribed in § 1400L(c) unless
the taxpayer made a timely valid election
under § 1400L(c)(5) not to use that recov-
ery period.

(8) Concurrent automatic change.

(a) A taxpayer making this change for
more than one asset for the same year of
change should file a single Form 3115 for
all such assets and provide a single net
§ 481(a) adjustment for all the changes
included in that Form 3115. If one or more
of the changes in that single Form 3115
generate a negative § 481(a) adjustment
and other changes in that same Form 3115
generate a positive § 481(a) adjustment,
the taxpayer may provide a single nega-
tive § 481(a) adjustment for all the
changes that are included in that Form
3115 generating such adjustment and a
single positive § 481(a) adjustment for all
the changes that are included in that Form
3115 generating such adjustment. For ex-
ample, a taxpayer files a single Form 3115
to change the depreciation methods, re-
covery periods, and/or conventions under
§ 168(a) resulting from the reclassification
of two computers from nonresidential real
property to 5-year property, one office
desk from nonresidential real property to
7-year property, and two office desks from
5-year property to 7-year property. On
that Form 3115, the taxpayer must provide
either (i) a single net § 481(a) adjustment
that covers all the changes resulting from
all of these reclassifications, or (ii) a sin-
gle negative § 481(a) adjustment that cov-
ers the changes resulting from the reclas-
sifications of the two computers and one
office desk from nonresidential real prop-
erty to 5-year property and 7-year prop-
erty, respectively, and a single positive
§ 481(a) adjustment that covers the
changes resulting from the reclassifica-
tions of the two office desks from 5-year
property to 7-year property.

(b) A taxpayer making both this
change and a change to a UNICAP
method under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable) for the same year of change
should file a single Form 3115 for both
changes, in which case the taxpayer must
enter the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making con-
current changes. For example, a qualified
small taxpayer must include on the single
Form 3115 the information required by
section 6.01(4)(a) of this revenue proce-
dure for this change and the information

required by the lines on Form 3115 appli-
cable to the UNICAP method change, in-
cluding Part II line 14 and 15, Part IV, and
Schedule D, and must include a separate
response to each line on Form 3115 that is
applicable to both changes (such as Part II
lines 6b, 7, 8b, 14, and, as applicable for
this change, Part IV) for which the tax-
payer's response is different for this
change and the change to a UNICAP
method.

(9) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.01 is "7."

(10) Contact information. For further
information regarding a change under this
section, contact Charles Magee at (202)
317-7005 (not a toll-free number).

.02 Permissible to permissible method of
accounting for depreciation.

(1) Description of change. This change
applies to a taxpayer that wants to change
from a permissible method of accounting
for depreciation under § 56(g)(4)(A)(iv) or
§ 167 to another permissible method of ac-
counting for depreciation under § 56(g)(4)
(A)(iv) or § 167. Pursuant to § 1.167(a)-7(a)
and (c), a taxpayer may account for depre-
ciable property either by treating each indi-
vidual asset as an account or by combining
two or more assets in a single account and,
for each account, depreciation allowances
are computed separately.

(2) Applicability.

(a) In general. This change applies to
any taxpayer wanting to make a change in
method of accounting for depreciation
specified in section 6.02(4) of this revenue
procedure for the property in an account:

(i) for which the present and proposed
methods of accounting for depreciation
specified in section 6.02(4) of this revenue
procedure are permissible methods for the
property under § 56(g)(4)(A)(iv) or § 167;
and

(ii) that is owned by the taxpayer at the
beginning of the year of change.

(b) Inapplicability. This change does
not apply to:

(i) a taxpayer that is required under
§ 263A and the regulations thereunder to
capitalize the costs with respect to which
the taxpayer wants to change its method
of accounting under this section 6.02 if the

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taxpayer is not capitalizing these costs,
unless the taxpayer concurrently changes
its method to capitalize these costs in con-
junction with a change to a UNICAP
method under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable);

(ii) any property to which § 1016(a)(3)
(regarding property held by a tax-exempt
organization) applies;

(iii) any property described in § 167(f)
(regarding certain property excluded from
§ 197);

(iv) any property subject to § 167(g)
(regarding property depreciated under the
income forecast method);

(v) any property for which depreciation
is determined under § 56(a)(1), § 56(g)
(4)(A)(i), (ii), (iii), or (v), § 168, § 1400I,
§ 1400L(c), § 168 prior to its amendment
in 1986 (former § 168), or any additional
first year depreciation deduction provision
of the Code (for example, § 168(k),
§ 168(l), § 1400L(b), or § 1400N(d));

(vi) any property that the taxpayer
elected under § 168(f)(1) or former
§ 168(e)(2) to exclude from the applica-
tion of, respectively, § 168 or former
§ 168;

(vii) any property for which deprecia-
tion is determined in accordance with
§ 1.167(a)-11 (ADR);

(viii) any depreciable property for
which the taxpayer is changing the depre-
ciation method pursuant to § 1.167(e)-
1(b) (change from declining-balance
method to straight-line method), § 1.167(e)-
1(c) (certain changes for § 1245 property),
or § 1.167(e)-1(d) (certain changes for
§ 1250 property). These changes must be
made prospectively and are not permitted
under the cited regulations for property for
which the depreciation is determined under
§ 168, § 1400I, § 1400L(c), former § 168, or
any additional first year depreciation deduc-
tion provision of the Code (for example,
§ 168(k), § 168(l), § 1400L(b), or
§ 1400N(d)); or

(ix) any distributor commissions (as
defined by section 2 of Rev. Proc. 2000-
38, 2000-2 C.B. 310, as modified by Rev.
Proc. 2007-16, 2007-1 C.B. 358) for
which the taxpayer is changing the useful
life under the distribution fee period
method or the useful life method (both
described in Rev. Proc. 2000-38). A
change in this useful life is corrected by

adjustments in the applicable taxable
year provided under § 1.446-1(e)(2)(ii)
(d)(5)(iv).

(3) Certain eligibility rule inapplica-
ble. The eligibility rule in section
5.01(1)(d) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not apply to this change.

(4) Changes covered. This section 6.02
only applies to the following changes in
methods of accounting for depreciation:

(a) a change from the straight-line
method to the sum-of-the-years-digits
method, the sinking fund method, the unit-
of-production method, or the declining-
balance method using any proper percent-
age of the straight-line rate;

(b) a change from the declining-
balance method using any percentage of
the straight-line rate to the sum-of-the-
years-digits method, the sinking fund
method, or the declining-balance method
using a different proper percentage of the
straight-line rate;

(c) a change from the sum-of-the-
years-digits method to the sinking fund
method, the declining-balance method us-
ing any proper percentage of the straight-
line rate, or the straight-line method;

(d) a change from the unit-of-
production method to the straight-line
method;

(e) a change from the sinking fund
method to the straight-line method, the
unit-of-production method, the sum-of-
the-years-digits method, or the declining-
balance method using any proper percent-
age of the straight-line rate;

(f) a change in the interest factor used
in connection with a compound interest
method or sinking fund method;

(g) a change in averaging convention
as set forth in § 1.167(a)-10(b). However,
as specifically provided in § 1.167(a)-
10(b), in any taxable year in which an
averaging convention substantially dis-
torts the depreciation allowance for the
taxable year, it may not be used (see Rev.
Rul. 73-202, 1973-1 C.B. 81);

(h) a change from charging the depre-
ciation reserve with costs of removal and
crediting the depreciation reserve with
salvage proceeds to deducting costs of
removal as an expense and including sal-
vage proceeds in taxable income as set
forth in § 1.167(a)-8(e)(2). See Rev. Rul.
74-455, 1974-2 C.B. 63. This section

6.02 applies to this change, however, only
if:

(i) the change is applied to all items in
the account for which the change is being
made; and

(ii) the removal costs are not required
to be capitalized under any provision of
the Code (for example, § 263(a), 263A, or
280B);

(i) a change from crediting the depre-
ciation reserve with the salvage proceeds
realized on normal retirement sales to
computing and recognizing gains and
losses on the sales (see Rev. Rul. 70-165,
1970-1 C.B. 43);

(j) a change from crediting ordinary
income (including the combination
method of crediting the lesser of estimated
salvage value or actual salvage proceeds
to the depreciation reserve, with any ex-
cess of salvage proceeds over estimated
salvage value credited to ordinary in-
come) with the salvage proceeds realized
on normal retirement sales, to computing
and recognizing gains and losses on the
sales (see Rev. Rul. 70-166, 1970-1 C.B.
44);

(k) a change from item accounting for
specific assets to multiple asset account-
ing (pooling) for the same assets, or vice
versa;

(l) a change from one type of multiple
asset accounting (pooling) for specific as-
sets to a different type of multiple asset
accounting (pooling) for the same assets;

(m) a change from one method de-
scribed in Rev. Proc. 2000-38 for amor-
tizing distributor commissions (as defined
by section 2 of Rev. Proc. 2000-38) to
another method described in Rev. Proc.
2000-38 for amortizing distributor com-
missions; or

(n) a change from pooling to a single
asset, or vice versa, for distributor com-
missions (as defined by section 2 of Rev.
Proc. 2000-38) for which the taxpayer is
using the distribution fee period method
or the useful life method (both described
in Rev. Proc. 2000-38).

(5) Additional requirements. A tax-
payer also must comply with the follow-
ing:

(a) Basis for depreciation. At the be-
ginning of the year of change, the basis for
depreciation of property to which this
change applies is the adjusted basis of the
property as provided in § 1011 at the end

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of the taxable year immediately preceding
the year of change (determined under tax-
payer's present method of accounting for
depreciation). If applicable under the tax-
payer's proposed method of accounting
for depreciation, this adjusted basis is re-
duced by the estimated salvage value of
the property (for example, a change to the
straight-line method).

(b) Rate of depreciation. The rate of
depreciation for property changed to:

(i) the straight-line or the sum-of-the-
years-digits method of depreciation must
be based on the remaining useful life of
the property as of the beginning of the
year of change; or

(ii) the declining-balance method of
depreciation must be based on the useful
life of the property measured from the
placed-in-service date, and not the ex-
pected remaining life from the date the
change becomes effective.

(c) Regulatory requirements. For
changes in method of depreciation to
the sum-of-the-years-digits or declining-
balance method, the property must meet
the requirements of § 1.167(b)-0 or
1.167(c)-1, as appropriate.

(d) Public utility property. If any item of
property is public utility property within the
meaning of former § 167(l)(3)(A), the tax-
payer (including a qualified small taxpayer
as defined in section 6.01(4)(b) of this rev-
enue procedure) must attach to the Form
3115 a statement providing that the taxpayer
agrees to the following additional terms and
conditions:

(i) a normalization method of account-
ing within the meaning of former
§ 167(l)(3)(G) will be used for the public
utility property subject to the Form 3115;
and

(ii) within 30 calendar days of filing the
federal income tax return for the year of
change, the taxpayer will provide a copy
of the completed Form 3115 to any regu-
latory body having jurisdiction over the
public utility property subject to the Form
3115.

(6) Reduced filing requirement for
qualified small taxpayers. A qualified
small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, is
required to complete only the following
information on Form 3115 (Rev. Decem-
ber 2015) to make this change:

(a) The identification section of page 1
(above Part I);

(b) The signature section at the bottom
of page 1;

(c) Part I;

(d) Part II, all lines except lines 13, 15b,
16, 17, and 19;

(e) Part IV, line 25; and

(f) Schedule E.

(7) Section 481(a) adjustment. Because
the adjusted basis of the property is not
changed as a result of a method change
made under this section 6.02, no items are
being duplicated or omitted. Accordingly,
a § 481(a) adjustment is neither required
nor permitted.

(8) Concurrent automatic change.

(a) A taxpayer making this change
for more than one asset for the same year
of change should file a single Form 3115
for all such assets.

(b) A taxpayer making both this
change and a change to a UNICAP
method under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable) for the same year of change
should file a single Form 3115 for both
changes, in which case the taxpayer must
enter the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making con-
current changes. For example, a qualified
small taxpayer must include on the single
Form 3115 the information required by
section 6.02(6) of this revenue procedure
for this change and the information re-
quired by the lines on Form 3115 appli-
cable to the UNICAP method change, in-
cluding Part II line 14 and 15, Part IV, and
Schedule D, and must include a separate
response to each line on Form 3115 that is
applicable to both changes (such as Part II
lines 6b, 7, 8b, 14, and, as applicable for
this change, Part IV) for which the tax-
payer's response is different for this
change and the change to a UNICAP
method.

(9) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.02 is "8."

(10) Contact information. For further
information regarding a change under this

section, contact Charles Magee at (202)
317-7005 (not a toll-free number).

.03 Sale, lease, or financing
transactions.

(1) Description of change and scope.

(a) Applicability. This change applies
to a taxpayer that wants to change its
method of accounting from:

(i) improperly treating property as sold
by the taxpayer to properly treating prop-
erty as leased or financed by the taxpayer;

(ii) improperly treating property as
leased by the taxpayer to properly treating
property as sold or financed by the tax-
payer;

(iii) improperly treating property as fi-
nanced by the taxpayer to properly treat-
ing property as sold or leased by the tax-
payer;

(iv) improperly treating property as
purchased by the taxpayer to properly
treating property as leased by the tax-
payer; and

(v) improperly treating property as
leased by the taxpayer to properly treating
property as purchased by the taxpayer.

(b) Inapplicability. This change does
not apply to:

(i) a rent-to-own dealer that wants to
change its method of accounting for rent-
to-own contracts described in section 3 of
Rev. Proc. 95-38, 1995-2 C.B. 397; or

(ii) a taxpayer that holds assets for sale
or lease, if any asset so held is not the
subject of a sale or lease transaction as of
the beginning of the year of change.

(2) Manner of making change.

(a) The change in method of account-
ing under this section 6.03 is made using
a cut-off method and applies to transac-
tions entered into on or after the beginning
of the year of change. Accordingly, a
§ 481(a) adjustment is neither required
nor permitted.

(b) If a taxpayer wants to change its
method of accounting for sale, lease or
financing transactions entered into before
the beginning of the year of change, the
taxpayer must file a Form 3115 under the
non-automatic change procedures of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419. A
change involving sale, lease, or financing
transactions entered into before the begin-
ning of the year of change will require a
§ 481(a) adjustment. The IRS will gener-
ally not consider a taxpayer's request to

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change a method of accounting for a sale,
lease, or financing transaction entered into
before the beginning of the year of change
unless the taxpayer's proposed method of
accounting is consistent with the method
used by the counterparty to the agreement.
The following information should be sub-
mitted with Form 3115 to substantiate that
the taxpayer's proposed method is consis-
tent with the counterparty's method: (i)
the name of the counterparty to the trans-
action; and (ii) a representation, signed
under penalties of perjury, from the coun-
terparty that provides the method of ac-
counting for the agreement used by the
counterparty for federal income tax pur-
poses. If a taxpayer does not submit the
counterparty information, the taxpayer's
request to change a method of accounting
for a sale, lease, or financing transaction
entered into before the beginning of the
year of change will be considered only in
unusual and compelling circumstances.
The requirement to obtain counterparty
information from multiple counterparties
will not be considered unusual or compel-
ling.

(3) No audit protection. A taxpayer
does not receive audit protection under
section 8.01 of Rev. Proc. 2015-13 in
connection with this change. See section
8.02(2) of Rev. Proc. 2015-13.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.03 is "10."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Edward Schwartz at (202)
317-7006 (not a toll-free number).

.04 Change in general asset account
treatment due to a change in the use of
MACRS property.

(1) Description of change. This change
applies to a taxpayer that wants to change
the method of accounting for general asset
account treatment of MACRS property (as
defined in § 1.168(b)-1(a)(2)) to the
method of accounting provided in
§ 1.168(i)-1(c)(2)(ii)(I) or § 1.168(i)-
1(h)(2), which applies when there is a
change in the use of MACRS property
pursuant to § 1.168(i)-4(d).

(2) Manner of making change.

(a) The change is made on a modified
cut-off basis (as defined in § 1.446-
1(e)(2)(ii)(d)(5)(iii)) and, thus, the ad-
justed depreciable basis of the MACRS
property as of the beginning of the year of
change is recovered using the proposed
method of accounting for general asset
account treatment. Accordingly, a
§ 481(a) adjustment is neither permitted
nor required. See § 1.168(i)-1(h)(2)(ii)
and (iii) for more information regarding
how to establish the general asset account
when a change in the use of MACRS
property occurs pursuant to § 1.168(i)-
4(d).

(b) Reduced filing requirement for
qualified small taxpayers. A qualified
small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, is
required to complete only the following
information on Form 3115 (Rev. Decem-
ber 2015) to make this change:

(i) The identification section of page 1
(above Part I);

(ii) The signature section at the bottom
of page 1;

(iii) Part I;

(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19;

(v) Part IV, line 25; and

(vi) Schedule E.

(3) Concurrent automatic change. A
taxpayer making this change for more
than one asset for the same year of change
should file a single Form 3115 for all such
assets.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.04 is "87."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).

.05 Change in method of accounting for
depreciation due to a change in the use
of MACRS property.

(1) Description of change. This change
applies to a taxpayer that wants to (a)
change the method of accounting for de-
preciation of MACRS property (as de-
fined in § 1.168(b)-1(a)(2)) to the method
of accounting for depreciation provided in
§ 1.168(i)-4, which applies when there is
a change in the use of MACRS property,

or (b) revoke the election provided in
§ 1.168(i)-4(d)(3)(ii) to disregard a
change in the use of MACRS property.
See § 1.168(i)-4(g)(2).

(2) Reduced filing requirement for
qualified small taxpayers. A qualified
small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, is
required to complete only the following
information on Form 3115 (Rev. Decem-
ber 2015) to make this change:

(a) The identification section of page 1
(above Part I);

(b) The signature section at the bottom
of page 1;

(c) Part I;

(d) Part II, all lines except lines 13, 15b,
16, 17, and 19;

(e) Part IV, all lines except line 25; and
(f) Schedule E.

(3) Concurrent automatic change. A
taxpayer making this change for more
than one asset for the same year of change
should file a single Form 3115 for all such
assets and provide a single net § 481(a)
adjustment for all the changes included in
that Form 3115. If one or more of the
changes in that single Form 3115 generate
a negative § 481(a) adjustment and other
changes in that same Form 3115 generate
a positive § 481(a) adjustment, the tax-
payer may provide a single negative
§ 481(a) adjustment for all the changes
that are included in that Form 3115 gen-
erating such adjustment and a single pos-
itive § 481(a) adjustment for all the
changes that are included in that Form
3115 generating such adjustment.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.05 is "88."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).

.06 Depreciation of qualified non-
personal use vans and light trucks.

(1) Description of change. This change
applies to a taxpayer that wants to change
the method of accounting for depreciation
for certain vehicles in accordance with
§ 1.280F-6(f)(2)(iv). Section 1.280F-
6(f)(2)(iv) applies to a truck or van that is
a qualified nonpersonal use vehicle as de-

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fined under § 1.274-5T(k), was placed in
service by the taxpayer before July 7,
2003, and was treated by the taxpayer as a
passenger automobile under § 1.280F-6T
as in effect prior to July 7, 2003. If the
taxpayer files Form 3115, in accordance
with § 1.280F-6(f)(2)(iv), the treatment
of the truck or van will be changed from
property to which § 280F(a) applies to
property to which § 280F(a) does not ap-
ply.

(2) Reduced filing requirement for
qualified small taxpayers. A qualified
small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, is
required to complete only the following
information on Form 3115 (Rev. Decem-
ber 2015) to make this change:

(a) The identification section of page 1
(above Part I);

(b) The signature section at the bottom
of page 1;

(c) Part I;

(d) Part II, all lines except lines 13, 15b,
16, 17, and 19;

(e) Part IV, all lines except line 25; and

(f) Schedule E.

(3) Concurrent automatic change. A
taxpayer making this change for more
than one asset for the same year of change
should file a single Form 3115 for all such
assets and provide a single net § 481(a)
adjustment for all the changes included in
that Form 3115. If one or more of the
changes in that single Form 3115 generate
a negative § 481(a) adjustment and other
changes in that same Form 3115 generate
a positive § 481(a) adjustment, the tax-
payer may provide a single negative
§ 481(a) adjustment for all the changes
that are included in that Form 3115 gen-
erating such adjustment and a single pos-
itive § 481(a) adjustment for all the
changes that are included in that Form
3115 generating such adjustment.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.06 is "89."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Bernard Harvey at (202)
317-7005 (not a toll-free number).

.07 Impermissible to permissible method
of accounting for depreciation or
amortization for disposed depreciable or
amortizable property.

(1) Description of change. This change
applies to a taxpayer that wants to make
the change in method of accounting for
depreciation or amortization (deprecia-
tion) provided under section 3 of Rev.
Proc. 2007-16, 2007-1 C.B. 358, for an
item of depreciable or amortizable prop-
erty that has been disposed of by the tax-
payer. Section 3 of Rev. Proc. 2007-16
allows a taxpayer to make a change in
method of accounting for depreciation for
the disposed property if the taxpayer used
an impermissible method of accounting
for depreciation for the property under
which the taxpayer did not take into ac-
count any depreciation allowance, or did
take into account some depreciation but
less than the depreciation allowable, in the
year of change (as defined in section
6.07(4) of this revenue procedure) or any
prior taxable year.

(2) Applicability.

(a) In general. Except as provided in
section 6.07(2)(b) of this revenue procedure,
this section 6.07 applies to a taxpayer that is
changing from an impermissible method of
accounting for depreciation to a permissible
method of accounting for depreciation for
any item of depreciable or amortizable prop-
erty subject to §§ 167, 168, 197, 1400I, or
1400L(c), to former § 168, or to any addi-
tional first year depreciation deduction pro-
vision of the Code (for example, § 168(k),
§ 168(l), § 1400L(b), or § 1400N(d)):

(i) that has been disposed of by the
taxpayer during the year of change (as
defined in section 6.07(4) of this revenue
procedure); and

(ii) for which the taxpayer did not take
into account any depreciation allowance,
or did take into account some depreciation
but less than the depreciation allowable
(hereinafter, both are referred to as
"claimed less than the depreciation allow-
able"), in the year of change (as defined in
section 6.07(4) of this revenue procedure)
or any prior taxable year.

(b) Inapplicability. This section 6.07
does not apply to:

(i) any property to which § 1016(a)(3)
(regarding property held by a tax-exempt
organization) applies;

(ii) any property for which a taxpayer
is revoking a timely valid depreciation
election, or making a late depreciation
election, under the Code or regulations
thereunder, or under other guidance pub-
lished in the Internal Revenue Bulletin
(including under § 13261(g)(2) or (3) of
the Revenue Reconciliation Act of 1993
(1993 Act), 1993-3 C.B. 1, 128 (relating
to amortizable § 197 intangibles));

(iii) any property for which the tax-
payer deducted the cost or other basis of
the property as an expense; or

(iv) any property disposed of by the
taxpayer in a transaction to which a non-
recognition section of the Code applies
(for example, § 1031, transactions subject
to § 168(i)(7)(B)). However, this section
6.07(2)(b)(iv) does not apply to property
disposed of by the taxpayer in a § 1031 or
§ 1033 transaction if the taxpayer elects
under § 1.168(i)-6(i) and (j) to treat the
entire basis (that is, both the exchanged
and excess basis (as defined in § 1.168(i)-
6(b)(7) and (8), respectively) of the re-
placement MACRS property (as defined
in § 1.168(i)-6(b)(1)) as property placed
in service by the taxpayer at the time of
replacement and treat the adjusted depre-
ciable basis of the relinquished MACRS
property (as defined in § 1.168(i)-6(b)(2))
as being disposed of by the taxpayer at the
time of disposition.

(3) Manner of making the change.

(a) Change made on an original return
for the year of change. This change may
be made on a taxpayer's timely filed (in-
cluding any extension) original federal tax
return for the year of change (as defined in
section 6.07(4) of this revenue procedure),
provided the taxpayer files the original
Form 3115 in accordance with section
6.03(1)(a) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419.

(b) Change made on an amended re-
turn for the year of change. This change
may also be made on an amended federal
tax return for the year of change (as de-
fined in section 6.07(4) of this revenue
procedure), provided:

(i) the taxpayer files the original Form
3115 with the taxpayer's amended federal
tax return for the year of change (as de-
fined in section 6.07(4) of this revenue
procedure) prior to the expiration of the
period of limitation for assessment under
§ 6501(a) for the taxable year in which the

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item of depreciable or amortizable prop-
erty was disposed of by the taxpayer; and

(ii) the taxpayer's amended federal tax
return for the year of change (as defined in
section 6.07(4) of this revenue procedure)
includes the adjustments to taxable in-
come and any collateral adjustments to
taxable income or tax liability (for exam-
ple, adjustments to the amount or charac-
ter of the gain or loss of the disposed
depreciable or amortizable property) re-
sulting from the change in method of ac-
counting for depreciation made by the tax-
payer under this section 6.07.

(4) Year of change. The year of change
for this change is the taxable year in
which the item of depreciable or amortiz-
able property was disposed of by the tax-
payer.

(5) Certain eligibility rules inapplica-
ble. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13
do not apply to this change.

(6) Filing requirements.

(a) Notwithstanding section 6.03(1)(a)
of Rev. Proc. 2015-13, a taxpayer making
this change in accordance with section
6.07(3)(b) of this revenue procedure must
attach the original Form 3115 to the tax-
payer's timely filed amended federal tax
return for the year of change and must file
the required copy (with signature) of the
Form 3115 with the IRS in Covington,
KY, no later than when the original Form
3115 is filed with the amended federal tax
return for the year of change. If a taxpayer
is making this change in accordance with
section 6.07(3)(a) of this revenue proce-
dure, the filing requirements in section
6.03(1)(a) of Rev. Proc. 2015-13 apply.

(b) Reduced filing requirement for
qualified small taxpayers. A qualified
small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, is
required to complete only the following
information on Form 3115 (Rev. Decem-
ber 2015) to make this change:

(i) The identification section of page 1
(above Part I);

(ii) The signature section at the bottom
of page 1;

(iii) Part I;

(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19;

(v) Part IV, all lines except line 25; and
(vi) Schedule E.

(7) Section 481(a) adjustment period.
A taxpayer must take the entire § 481(a)
adjustment into account in computing tax-
able income for the year of change.

(8) Concurrent automatic change. A
taxpayer making this change for more
than one asset for the same year of change
should file a single Form 3115 for all such
assets.

(9) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.07 is "107."

(10) Contact information. For further
information regarding a change under this
section, contact Charles Magee at (202)
317-7005 (not a toll-free number).

.08 Tenant construction allowances.

(1) Description of change and scope.

(a) Applicability. This change applies
to a taxpayer that wants to change its
method of accounting for tenant construc-
tion allowances:

(i) from improperly treating the tax-
payer as having a depreciable interest in
the property subject to the tenant con-
struction allowances for federal income
tax purposes to properly treating the tax-
payer as not having a depreciable interest
in such property for federal income tax
purposes; or

(ii) from improperly treating the tax-
payer as not having a depreciable interest
in the property subject to the tenant con-
struction allowances for federal income
tax purposes to properly treating the tax-
payer as having a depreciable interest in
such property for federal income tax pur-
poses.

(b) Inapplicability. This change does
not apply to:

(i) any tenant construction allowance
that qualifies under § 110;

(ii) any portion of a tenant construction
allowance that is not expended on depre-
ciable property; or

(iii) any amount expended for depre-
ciable property in excess of the tenant
construction allowance.

(2) Definition. For purposes of this sec-
tion 6.08, the term "tenant construction
allowance(s)" means any amount received
by a lessee from a lessor to construct,
acquire, or improve property for use by
the lessee pursuant to a lease.

(3) Manner of making the change.

(a) The change in method of account-
ing under this section 6.08 is made using
a cut-off method and only applies to
leases entered into on or after the begin-
ning of the year of change. Accordingly, a
§ 481(a) adjustment is neither required
nor permitted.

(b) If a taxpayer wants to change its
method of accounting for tenant construc-
tion allowances under existing leases, the
taxpayer must file a Form 3115 with
the Commissioner in accordance with the
non-automatic change procedures of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419. A
change involving tenant construction al-
lowances under existing leases will re-
quire a § 481(a) adjustment. The Commis-
sioner may grant consent to change a
method of accounting for tenant construc-
tion allowances under existing leases only
if the taxpayer's treatment of the property
subject to the tenant construction allow-
ances is consistent with the treatment of
such property by the counterparty for fed-
eral income tax purposes. The taxpayer
must submit the following information
with a Form 3115 submitted under the
non-automatic change procedures of Rev.
Proc. 2015-13 and this section 6.08.

(i) If a lessee is filing the Form 3115,
the lessee must submit with the Form
3115: (A) a statement that provides the
amount of the tenant construction allow-
ance received by the lessee, the amount of
such tenant construction allowance ex-
pended by the lessee on property, and the
name of the lessor that provided the tenant
construction allowance; and (B) a repre-
sentation, signed under penalties of per-
jury, from such lessor that provides the
amount of the tenant construction allow-
ance provided to the lessee and an expla-
nation as to how the lessor is treating the
property subject to such tenant construc-
tion allowance for federal income tax pur-
poses. If the lessor capitalized the tenant
construction allowance (or any portion
thereof) provided to the lessee and depre-
ciated the property subject to such tenant
construction allowance, the representation
must also include the amount that was
capitalized by the lessor, the Internal Rev-
enue Code section under which the prop-
erty is depreciated by the lessor, and the
life over which the property is depreciated
by the lessor.

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(ii) If a lessor is filing the Form 3115,
the lessor must submit with the Form
3115: (A) a statement that provides the
amount of the tenant construction allow-
ance provided to a lessee and the name of
the lessee that received such tenant con-
struction allowance; and (B) a representa-
tion, signed under penalties of perjury,
from such lessee that provides the amount
of the tenant construction allowance re-
ceived from the lessor, the amount of such
tenant construction allowance recognized
as gross income by the lessee, the amount
of the tenant construction allowance ex-
pended by the lessee on property, and an
explanation as to how the lessee is treating
the property subject to the tenant con-
struction allowance for federal income tax
purposes. If the lessee capitalized the ten-
ant construction allowance (or any portion
thereof) received from the lessor and de-
preciated the property subject to such ten-
ant construction allowance, the represen-
tation must also include the amount that
was capitalized by the lessee, the Internal
Revenue Code section under which the
property is depreciated by the lessee, and
the life over which the property is depre-
ciated by the lessee.

(4) Reduced filing requirement for
qualified small taxpayers. A qualified
small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, is
required to complete only the following
information on Form 3115 (Rev. Decem-
ber 2015) to make this change in accor-
dance with section 6.08(3)(a) of this rev-
enue procedure:

(a) The identification section of page 1
(above Part I);

(b) The signature section at the bottom
of page 1;

(c) Part I;

(d) Part II, all lines except lines 13, 15b,
16, 17, and 19;

(e) Part IV, line 25; and

(f) Schedule E.

(5) No audit protection. A taxpayer
does not receive audit protection under
section 8.01 of Rev. Proc. 2015-13 in
connection with this change made in ac-
cordance with section 6.08(3)(a) of this
revenue procedure. See section 8.02(2) of
Rev. Proc. 2015-13.

(6) Concurrent automatic change. A
taxpayer making this change for more
than one asset for the same year of change

should file a single Form 3115 for all such
assets.

(7) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.08 is "145."

(8) Contact information. For further in-
formation regarding a change under this
section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).

.09 Safe harbor method of accounting
for determining the depreciation of
certain tangible assets used by wireless
telecommunications carriers under Rev.
Proc. 2011-22.

(1) Description of change. This change
applies to a taxpayer that is within the
scope of Rev. Proc. 2011-22, 2011-18
I.R.B. 737, and wants to change to the
recovery periods described in section 5 of
Rev. Proc. 2011-22 and any collateral
change to the depreciation methods for all,
or some of, the assets listed in that section.

(2) Reduced filing requirement for
qualified small taxpayers. A qualified
small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, is
required to complete only the following
information on Form 3115 (Rev. Decem-
ber 2015) to make this change:

(a) The identification section of page 1
(above Part I);

(b) The signature section at the bottom
of page 1;

(c) Part I;

(d) Part II, all lines except lines 13, 15b,
16, 17, and 19;

(e) Part IV, all lines except line 25; and
(f) Schedule E.

(3) Concurrent automatic change. A
taxpayer making this change for more
than one asset for the same year of change
should file a single Form 3115 for all such
assets and provide a single net § 481(a)
adjustment for all the changes included in
that Form 3115. If one or more of the
changes in that single Form 3115 generate
a negative § 481(a) adjustment and other
changes in that same Form 3115 generate
a positive § 481(a) adjustment, the tax-
payer may provide a single negative
§ 481(a) adjustment for all the changes
that are included in that Form 3115 gen-
erating such adjustment and a single pos-
itive § 481(a) adjustment for all the

changes that are included in that Form
3115 generating such adjustment.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.09 is "157."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Charles Magee at (202)
317-7005 (not a toll-free number).

.10 Partial dispositions of tangible
depreciable assets to which the IRS's
adjustment pertains (§ 168; § 1.168(i)-
8).

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that is described in
§ 1.168(i)-8(d)(2)(iii) and, pursuant to
§ 1.168(i)-8(d)(2)(iii), that wants to make
the partial disposition election specified in
§ 1.168(i)-8(d)(2)(i) to the disposition of
a portion of an asset to which the IRS's
adjustment (as described in § 1.168(i)-
8(d)(2)(iii)) pertains.

(b) Inapplicability. This change does
not apply to:

(i) Any asset of which the disposed
portion was a part that is not owned by the
taxpayer at the beginning of the year of
change; or

(ii) Any partial disposition election
specified in § 1.168(i)-8(d)(2)(i) that
is not made pursuant to § 1.168(i)-
8(d)(2)(iii) (for example, this change does
not apply to the partial disposition elec-
tion specified in § 1.168(i)-8(d)(2)(i)
that is made pursuant to § 1.168(i)-
8(d)(2)(iv)).

(2) Change in method of accounting.
The IRS will treat the making of the late
election specified in section 6.10(1) of this
revenue procedure as a change in method
of accounting.

(3) Certain eligibility rules inapplica-
ble. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, do not apply to this
change.

(4) Manner of making change.

(a) A qualified small taxpayer, as de-
fined in section 6.01(4)(b) of this revenue
procedure, is required to complete only
the following information on Form 3115
(Rev. December 2015) to make this
change:

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(i) The identification section of page 1
(above Part I);

(ii) The signature section at the bottom
of page 1;

(iii) Part I;

(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19;

(v) Part IV, all lines except line 25; and
(vi) Schedule E.

(b) A taxpayer (including a qualified
small taxpayer) making this change must:

(i) Apply § 1.168(i)-8(h)(1) and (3)
(accounting for asset disposed of);

(ii) If the asset (as determined under
§ 1.168(i)-8(c)(4)) of which the disposed
portion is a part is properly included in
one of the asset classes 00.11 through 00.4
of Rev. Proc. 87-56, 1987-2 C.B. 674,
classify the replacement portion of such
asset under the same asset class as the
disposed portion of the asset in the taxable
year in which the replacement portion is
placed in service by the taxpayer;

(iii) If the taxpayer's present method of
accounting is not in accord with
§ 1.168(i)-8(c)(4) (determination of asset
disposed of), change to the appropriate
asset as determined under § 1.168(i)-
8(c)(4);

(iv) If the taxpayer continues to deduct
depreciation for the disposed portion of
the asset (as determined under § 1.168(i)-
8(c)(4)) under the taxpayer's present
method of accounting, change from depre-
ciating such disposed portion to recogniz-
ing gain or loss for the disposed portion
or, if § 280B and § 1.280B-1 apply to the
disposition, change from depreciating
such disposed portion to capitalizing the
loss sustained on account of the demoli-
tion to the land on which the demolished
structure was located; and

(v) If any asset is public utility property
within the meaning of § 168(i)(10), attach
a statement to its Form 3115 providing
that the taxpayer agrees to the following
additional terms and conditions:

(A) A normalization method of ac-
counting (within the meaning of
§ 168(i)(9)) will be used for the public
utility property subject to the Form 3115;

(B) Within 30 calendar days of filing
the federal income tax return for the year
of change, the taxpayer will provide a
copy of the completed Form 3115 to any
regulatory body having jurisdiction over

the public utility property subject to the
Form 3115; and

(C) As of the beginning of the year of
change, the taxpayer will adjust its 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
Form 3115.

(5) Concurrent automatic change. A
taxpayer making this change for more
than one asset for the same year of change
should file a single Form 3115 for all such
assets. If the change for more than one
asset included in that Form 3115 is spec-
ified in section 6.10(1) of this revenue
procedure, the single Form 3115 should
provide a single net § 481(a) adjustment
for all such changes. If one or more of the
changes specified in section 6.10(1) of this
revenue procedure in that single Form
3115 generate a negative § 481(a) adjust-
ment and other changes specified in sec-
tion 6.10(1) of this revenue procedure in
that same Form 3115 generate a positive
§ 481(a) adjustment, the taxpayer may
provide a single negative § 481(a) 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.

(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 6.10 is
"198."

(7) Contact information. For further in-
formation regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).

.11 Depreciation of leasehold
improvements (§§ 167, 168, and 197;
§ 1.167(a)-4).

(1) Description of change. This
change, as described in Rev. Proc. 2014-
17, 2014-12 I.R.B. 661, applies to a tax-
payer 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 eligibility rules inapplica-
ble.

(a) In general. The eligibility rule in
section 5.01(1)(d) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a
taxpayer making this change.

(b) Special rule. The eligibility rule in
section 5.01(1)(f) of Rev. Proc. 2015-13
does not apply to a taxpayer making this
change for any taxable year beginning on
or after January 1, 2012, and beginning
before January 1, 2016.

(3) Manner of making change.

(a) A qualified small taxpayer, as de-
fined in section 6.01(4)(b) of this revenue
procedure, is required to complete only
the following information on Form 3115
(Rev. December 2015) to make this
change:

(i) The identification section of page 1
(above Part I);

(ii) The signature section at the bottom
of page 1;

(iii) Part I;

(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19;

(v) Part IV, all lines except line 25; and
(vi) Schedule E.

(b) If any leasehold improvement is
public utility property within the meaning
of § 168(i)(10) or former § 167(l)(3)(A), a
taxpayer (including a qualified small tax-
payer) 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

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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 making this change for
more than one asset for the same year of
change should file a single Form 3115 for
all such assets and provide a single net
§ 481(a) adjustment for all the changes
included in that Form 3115. If one or more
of the changes in that single Form 3115
generate a negative § 481(a) adjustment
and other changes in that same Form 3115
generate a positive § 481(a) adjustment,
the taxpayer may provide a single nega-
tive § 481(a) adjustment for all the
changes that are included in that Form
3115 generating such adjustment and a
single positive § 481(a) adjustment for all
the changes that are included in that Form
3115 generating such adjustment.

(b) A taxpayer making both this
change and a change to a UNICAP
method under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable) for the same year of change
should file a single Form 3115 for all such
changes and must enter the designated
automatic accounting method change
numbers for the changes on the appropri-
ate line on the Form 3115. See section
6.03(1)(b) of Rev. Proc. 2015-13 for in-
formation on making concurrent changes.
For example, a qualified small taxpayer
must include on the single Form 3115 the
information required by section 6.11(3)(a)
of this revenue procedure for this change
and the information required by the lines
on Form 3115 applicable to the UNICAP
method change, including Part II line 14
and 15, Part IV, and Schedule D, and must
include a separate response to each line on

Form 3115 that is applicable to both
changes (such as Part II lines 6b, 7, 8b, 14,
and, as applicable for this change, Part IV)
for which the taxpayer's response is dif-
ferent for this change and the change to a
UNICAP method.

(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to a method of ac-
counting under this section 6.11 is "199."

(6) Contact information. For further in-
formation regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).

.12 Permissible to permissible method of
accounting for depreciation of MACRS
property (§ 168; §§ 1.168(i)-1,
1.168(i)-7, and 1.168(i)-8).

(1) Description of change.

(a) Applicability. This change, as de-
scribed in Rev. Proc. 2014-54, 2014-41
I.R.B. 675, applies to a taxpayer that
wants to make a change in method of
accounting for depreciation that is speci-
fied in section 6.12(3) of this revenue pro-
cedure for an asset:

(i) to which § 168 applies (MACRS
property);

(ii) for which the present and proposed
methods of accounting are permissible
methods of accounting under § 1.168(i)-1,
§ 1.168(i)-7, or § 1.168(i)-8, as applicable;
and

(iii) that is owned by the taxpayer at the
beginning of the year of change.

(b) Inapplicability. This change does
not apply to any property that is not de-
preciated under § 168 under the taxpay-
er's present and proposed methods of ac-
counting.

(2) Certain eligibility rules inapplica-
ble.

(a) In general. The eligibility rule in
section 5.01(1)(d) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a
taxpayer making this change.

(b) Special rule.

(i) The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13 does not
apply to a taxpayer making this change for
any taxable year beginning on or after
January 1, 2012, and beginning before
January 1, 2017.

(ii) If a taxpayer makes both a change
under this section 6.12 and a change under

section 6.01 of this revenue procedure for
any taxable year beginning on or after
January 1, 2012, and beginning before
January 1, 2017, on a single Form 3115
for the same asset for the same year of
change in accordance with section
6.12(6)(b) of this revenue procedure, the
eligibility rules in sections 5.01(1)(d) and
(f) of Rev. Proc. 2015-13 do not apply to
the taxpayer for either change.

(3) Changes covered. This section 6.12
only applies to the following changes in
methods of accounting for depreciation of
MACRS property:

(a) For the items of MACRS property
not subject to a general asset account 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 accounts
(or pools) for the same assets, or vice versa,
in accordance with § 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)-7(c);

(iii) a change in the method of identi-
fying which assets in multiple asset ac-
counts or which portions of assets have
been disposed of by the taxpayer from the
specific identification method under
§ 1.168(i)-8(g)(1) to the first-in, first-out
(FIFO) method of accounting under
§ 1.168(i)-8(g)(2)(i) or the modified
FIFO method of accounting under
§ 1.168(i)-8(g)(2)(ii);

(iv) a change in the method of identify-
ing which assets in multiple asset accounts
or which portions of assets have been dis-
posed of by the taxpayer from the FIFO
method of accounting under § 1.168(i)-
8(g)(2)(i) or the modified FIFO method of
accounting under § 1.168(i)-(g)(2)(ii) to the
specific identification method under
§ 1.168(i)-8(g)(1);

(v) a change in the method of identifying
which assets in multiple asset accounts or
which portions of assets have been disposed
of by the taxpayer from the FIFO method of
accounting under § 1.168(i)-8(g)(2)(i) to
the modified FIFO method of accounting
under § 1.168(i)-8(g)(2)(ii), or vice versa;

(vi) a change in the method of identi-
fying which mass assets (as defined in
§ 1.168(i)-8(b)(3)) in multiple asset ac-

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counts or which portions of mass assets
have been disposed of by the taxpayer
from the specific identification method
under § 1.168(i)-8(g)(1) to a mortality
dispersion table in accordance with
§ 1.168(i)-8(g)(2)(iii);

(vii) a change in the method of identi-
fying which mass assets (as defined in
§ 1.168(i)-8(b)(3)) in multiple asset ac-
counts or which portions of mass assets
have been disposed of by the taxpayer from
the FIFO method of accounting under
§ 1.168(i)-8(g)(2)(i) or the modified FIFO
method of accounting under § 1.168(i)-
8(g)(2)(ii) to a mortality dispersion table in
accordance with § 1.168(i)-8(g)(2)(iii);

(viii) a change in the method of iden-
tifying which mass assets (as defined in
§ 1.168(i)-8(b)(3)) in multiple asset ac-
counts or which portions of mass assets
have been disposed of by the taxpayer
from a mortality dispersion table in accor-
dance with § 1.168(i)-8(g)(2)(iii) to
the specific identification method under
§ 1.168(i)-8(g)(1), the FIFO method of
accounting under § 1.168(i)-8(g)(2)(i), or
the modified FIFO method of accounting
under § 1.168(i)-8(g)(2)(ii);

(ix) if § 1.168(i)-8(f)(2) applies (dis-
position of an asset in a multiple asset
account) and it is impracticable from the
taxpayer's records to determine the unad-
justed depreciable basis of the asset dis-
posed of, a change in the method of
determining the unadjusted depreciable
basis of all assets in the same multiple
asset account from one reasonable method
to another reasonable method; or

(x) if § 1.168(i)-8(f)(3) applies (dispo-
sition of a portion of an asset) and it is
impracticable from the taxpayer's records
to determine the unadjusted depreciable
basis of the disposed portion of the asset,
a change in the method of determining the
unadjusted depreciable basis of all dis-
posed portions of the asset from one rea-
sonable method to another reasonable
method; and

(b) For the items of MACRS property
subject to a general asset account election
under § 168(i)(4) and the regulations
thereunder-

(i) a change from grouping specific
items of MACRS property in general asset
accounts to a different grouping of the
same assets in general asset accounts in
accordance with § 1.168(i)-1(c);

(ii) a change in the method of identi-
fying which assets or which portions of
assets have been disposed of by the tax-
payer from the specific identification
method under § 1.168(i)-1(j)(2)(i)(A) to
the FIFO method of accounting under
§ 1.168(i)-1(j)(2)(i)(B) or the modified
FIFO method of accounting under
§ 1.168(i)-1(j)(2)(i)(C);

(iii) a change in the method of identi-
fying which assets or which portions of
assets have been disposed of by the tax-
payer from the FIFO method of account-
ing under § 1.168(i)-1(j)(2)(i)(B) or the
modified FIFO method of accounting un-
der § 1.168(i)-1(j)(2)(i)(C) to the specific
identification method under § 1.168(i)-
1(j)(2)(i)(A);

(iv) a change in the method of identi-
fying which assets or which portions of
assets have been disposed of by the tax-
payer from the FIFO method of account-
ing under § 1.168(i)-1(j)(2)(i)(B) to the
modified FIFO method of accounting un-
der § 1.168(i)-1(j)(2)(i)(C), or vice versa;

(v) a change in the method of identify-
ing which mass assets (as defined in
§ 1.168(i)-1(b)(6)) or which portions of
mass assets that are in a separate general
asset account in accordance with § 1.168-
1(c)(2)(ii)(H), have been disposed of by
the taxpayer from the specific identifica-
tion method under § 1.168(i)-1(j)(2)(i)(A)
to a mortality dispersion table in accor-
dance with § 1.168(i)-1(j)(2)(i)(D);

(vi) a change in the method of identi-
fying which mass assets (as defined in
§ 1.168(i)-1(b)(6)) or which portions of
mass assets that are in a separate general
asset account in accordance with § 1.168-
1(c)(2)(ii)(H), have been disposed of by
the taxpayer from the FIFO method of
accounting under § 1.168(i)-1(j)(2)(i)(B)
or the modified FIFO method of account-
ing under § 1.168(i)-1(j)(2)(i)(C) to a
mortality dispersion table in accordance
with § 1.168(i)-1(j)(2)(i)(D);

(vii) a change in the method of identi-
fying which mass assets (as defined in
§ 1.168(i)-1(b)(6)), or which portions of
mass assets that are in a separate general
asset account in accordance with § 1.168-
1(c)(2)(ii)(H), have been disposed of by
the taxpayer from a mortality dispersion
table in accordance with § 1.168(i)-
1(j)(2)(i)(D) to the specific identification
method under § 1.168(i)-1(j)(2)(i)(A), the

FIFO method of accounting under
§ 1.168(i)-1(j)(2)(i)(B), or the modified
FIFO method of accounting under
§ 1.168(i)-1(j)(2)(i)(C); or

(viii) if § 1.168(i)-1(j)(3) applies (basis
of a disposed asset or a disposed portion
of an asset in a general asset account) and
it is impracticable from the taxpayer's re-
cords to determine the unadjusted depre-
ciable basis of the disposed asset or the
disposed portion of the asset, a change in
the method of determining the unadjusted
depreciable basis of all assets in the same
general asset account from one reasonable
method to another reasonable method.

(4) Manner of making change.

(a) The changes in methods of account-
ing specified in section 6.12(3)(a)(i) and
(ii) and section 6.12(3)(b)(i) of this reve-
nue procedure are made using a modified
cut-off method under which the unad-
justed depreciable basis and the deprecia-
tion reserve of the asset as of the begin-
ning of the year of change are accounted
for using the proposed method of account-
ing.

(i) If the change specified in section
6.12(3)(a)(i) of this revenue procedure is a
change to a single asset account, the new
single asset account must include a 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
6.12(3)(a)(i) or (ii) of this revenue proce-
dure is a change to a multiple asset ac-
count (either a new one or a different
grouping), the multiple asset account must
include a beginning balance for both the
unadjusted depreciable basis and the de-
preciation reserve. The beginning balance
for the unadjusted depreciable basis of
each multiple asset account is equal to the
sum of the unadjusted depreciable bases
as of the beginning of the year of change
for all assets included in that multiple
asset account. The beginning balance of
the depreciation reserve of each multiple
asset account is equal to the sum of the
greater of the depreciation allowed or al-
lowable as of the beginning of the year of
change for all assets included in that mul-
tiple asset account.

(iii) The change specified in section
6.12(3)(b)(i) of this revenue procedure re-
quires the general asset account to include

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a beginning balance for both the unad-
justed depreciable basis and the deprecia-
tion reserve. The beginning balance for
the unadjusted depreciable basis of each
general asset account is equal to the sum
of the unadjusted depreciable bases as of
the beginning of the year of change for all
assets included in that general asset ac-
count. The beginning balance of the de-
preciation reserve of each general asset
account is equal to the sum of the greater
of the depreciation allowed or allowable
as of the beginning of the year of change
for all assets included in that general asset
account.

(b) The changes in methods of account-
ing specified in section 6.12(3)(a)(iii), (vi),
(ix), and (x) and section 6.12(3)(b)(ii), (v),
and (viii) of this revenue procedure are
made using a cut-off method and apply to
dispositions occurring on or after the begin-
ning of the year of change.

(c) Even though the changes in meth-
ods of accounting specified in section
6.12(3)(a)(iv), (v), (vii), and (viii) and
section 6.12(3)(b)(iii), (iv), (vi), and (vii)
of this revenue procedure are changes
from one permissible method of account-
ing to another permissible method of ac-
counting, these changes are made with a
§ 481(a) adjustment. However, see section
6.12(4)(f) of this revenue procedure for an
exception. For the changes in methods of
accounting specified in section 6.12(3)
(b)(iii), (iv), (vi), and (vii) of this revenue
procedure, the § 481(a) adjustment should
be zero unless § 1.168(i)-1(e)(3) applies to
the asset subject to the change.

(d) A qualified small taxpayer, as de-
fined in section 6.01(4)(b) of this revenue
procedure, is required to complete only
the following information on Form 3115
(Rev. December 2015) to make this
change:

(i) The identification section of page 1
(above Part I);

(ii) The signature section at the bottom
of page 1;

(iii) Part I;

(iv) Part II, all lines except lines 13, 15b,
16, 17, and 19 if the qualified small taxpayer
is not making a change in method of ac-
counting specified in section 6.12(3)(a)(ix)
and (x) and section 6.12(3)(b)(viii) of this
revenue procedure;

(v) Part II, all lines except lines 13, 15b,
16c, 17, and 19 if the qualified small tax-

payer is making a change in method of
accounting specified in section 6.12(3)
(a)(ix) or (x) or section 6.12(3)(b)(viii) of
this revenue procedure;

(vi) Part IV; and

(vii) Schedule E.

(e) If any asset subject to this change is
public utility property within the meaning
of § 168(i)(10), a taxpayer (including a
qualified small taxpayer) making this
change must attach to its Form 3115 a
statement providing that the taxpayer
agrees to the following additional terms
and conditions:

(i) A normalization method of 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
a change in method of accounting speci-
fied in section 6.12(3)(a)(iv), (v), (vii), or
(viii) or section 6.12(3)(b)(iii), (iv), (vi),
or (vii) of this revenue procedure made for
the public utility property subject to the
change; and

(iii) Within 30 calendar days of filing
the federal income tax return for the year
of change, the taxpayer will provide a
copy of the completed Form 3115 to any
regulatory body having jurisdiction over
the public utility property subject to the
change.

(f) A taxpayer that met the scope re-
quirements of section 4 of Rev. Proc.
2015-20, 2015-9 I.R.B. 694, and that
changed its method of accounting under
section 6.37(3)(a)(iv), (a)(v), (a)(vii), or
(a)(viii) of Rev. Proc. 2015-14 (which is
now section 6.12(3)(a)(iv), (a)(v), (a)(vii),
or (a)(viii) of this revenue procedure) by
following section 5 of Rev. Proc. 2015-20
is required to calculate a § 481(a) adjust-
ment as of the first day of the year of
change that takes into account only dispo-
sitions in taxable years beginning on or
after January 1, 2014.

(5) No audit protection. A taxpayer
calculating a § 481(a) adjustment under
section 6.12(4)(f) of this revenue proce-
dure that takes into account only disposi-
tions in taxable years beginning on or

after January 1, 2014, does not receive
audit protection under section 8.01 of
Rev. Proc. 2015-13 for dispositions sub-
ject to a change under section 6.12(3)
(a)(iv), (a)(v), (a)(vii), or (a)(viii) of this
revenue procedure in taxable years begin-
ning before January 1, 2014. See section
5.03 of Rev. Proc. 2015-20.

(6) Concurrent change.

(a) A taxpayer making this change for
more than one asset for the same year of
change should file a single Form 3115 for
all such assets. If the change for more than
one asset included in that Form 3115 is
specified in section 6.12(3)(a)(iv), (v),
(vii), or (viii) or section 6.12(3)(b)(iii),
(iv), (vi), or (vii) of this revenue proce-
dure, the single Form 3115 also should
provide a single net § 481(a) adjustment
for all such changes. If one or more
changes specified in section 6.12(3)
(a)(iv), (v), (vii), or (viii) or section
6.12(3)(b)(iii), (iv), (vi), or (vii) of this
revenue procedure in that single Form
3115 generate a negative § 481(a) adjust-
ment and other changes specified in sec-
tion 6.12(3)(a)(iv), (v), (vii), or (viii) or
section 6.12(3)(b)(iii), (iv), (vi), or (vii) of
this revenue procedure in that same Form
3115 generate a positive § 481(a) adjust-
ment, the taxpayer may provide a single
negative § 481(a) adjustment for all such
changes that are included in that Form
3115 generating such negative adjustment
and a single positive § 481(a) adjustment
for all such changes that are included in
that Form 3115 generating such positive
adjustment.

(b) A taxpayer making this change and
any change listed in section 6.12(6)(b)(i)-
(iv) of this revenue procedure for the same
year of change should file a single Form
3115 for all such changes and must enter
the designated automatic accounting
method change numbers for the changes
on the appropriate line on the Form 3115.
See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making con-
current changes. For example, a qualified
small taxpayer must include on the single
Form 3115 the information required to be
completed on Form 3115 by a qualified
small taxpayer under this revenue proce-
dure for each change in method of ac-
counting included on that Form 3115. The
listed changes are:

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(i) A change under section 6.01 of this
revenue procedure;

(ii) A change under section 6.13 of this
revenue procedure;

(iii) A change under section 6.14 of this
revenue procedure;

(iv) A change under section 6.15 of this
revenue procedure; and

(v) A change under section 11.07(3)(c)
of this revenue procedure.

(7) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to a method of ac-
counting under this section 6.12 is "200."

(8) Contact information. For further in-
formation regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).

.13 Disposition of a building or
structural component (§ 168; § 1.168(i)-
8).

(1) Description of change.

(a) Applicability. This change, as de-
scribed in Rev. Proc. 2014-54, 2014-41
I.R.B. 675, applies to a taxpayer that
wants to make a change in method of
accounting that is specified in section
6.13(3) of this revenue procedure for dis-
posing of a building or a structural com-
ponent or disposing of a portion of a
building (including its structural compo-
nents) to which the partial disposition rule
in § 1.168(i)-8(d)(1) applies. These spec-
ified changes are consistent with
§§ 1.168(i)-8(b)(2), 1.168(i)-8(c)(4)(ii)
(A), (B), and (D), 1.168(i)-8(f), and
1.168(i)-8(g), as applicable. This change
also affects the determination of gain or
loss from disposing of the building, the
structural component, or the portion of the
building (including its structural compo-
nents) and may affect whether the tax-
payer must capitalize amounts paid to re-
store a unit of property (as determined
under § 1.263(a)-3(e) or (f)) under
§ 1.263(a)-3(k).

(b) Inapplicability. This change does
not apply to the following:

(i) Any asset (as determined under
§ 1.168(i)-8(c)(4)) that is not depreciated
under § 168 under the taxpayer's present
method of accounting and, if applicable,
under the taxpayer's proposed method of
accounting;

(ii) Any asset subject to a general asset
account election under § 168(i)(4) and the
regulations thereunder (but see section
6.15 of this revenue procedure for making
a change in method of accounting for dis-
positions of tangible depreciable assets
subject to a general asset account elec-
tion);

(iii) 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 accounting,
pursuant to § 1.1250-1(a)(2)(ii);

(iv) Any disposition of a portion of an
asset in a transaction described in the last
sentence in § 1.168(i)-8(d)(1) for which
the taxpayer did not make a partial dis-
position election in accordance with
§ 1.168(i)-8(d)(2)(ii), (iii), or (iv), as ap-
plicable (but see section 6.10 of this rev-
enue procedure for making a partial dis-
position election pursuant to § 1.168(i)-
8(d)(2)(iii)); or

(v) Any demolition of a structure to
which § 280B and § 1.280B-1 apply.

(2) Certain eligibility rules inapplica-
ble.

(a) In general. The eligibility rule in
section 5.01(1)(d) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a
taxpayer making this change.

(b) Special rule.

(i) The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13 does not
apply to a taxpayer making this change for
any taxable year beginning on or after
January 1, 2012, and beginning before
January 1, 2017.

(ii) If a taxpayer makes both a change
under this section 6.13 and a change under
section 6.01 of this revenue procedure for
any taxable year beginning on or after
January 1, 2012, and beginning before
January 1, 2017, on a single Form 3115
for the same asset for the same year of
change in accordance with section
6.13(10)(b) or (c) of this revenue proce-
dure, the eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13
do not apply to the taxpayer for either
change.

(3) Covered changes. This section 6.13
only applies to the following changes in
methods of accounting for a building (in-
cluding its structural components), condo-

minium unit (including its structural com-
ponents), cooperative unit (including its
structural components), or an improve-
ment or addition (including its structural
components) thereto:

(a) For purposes of applying
§ 1.168(i)-8(c)(4) (determination of asset
disposed of), a change to the appropriate
asset as determined under § 1.168(i)-
8(c)(4)(ii)(A), (B), or (D), as applicable;

(b) If the taxpayer makes the change
specified in section 6.13(3)(a) of this rev-
enue procedure, and if the taxpayer dis-
posed of the asset as determined under
section 6.13(3)(a) of this revenue proce-
dure in a taxable year prior to the year of
change but under its present method of
accounting continues to deduct deprecia-
tion for such disposed asset, a change
from depreciating the disposed asset to
recognizing gain or loss upon disposition
or, if § 280B and § 1.280B-1 apply to the
disposition, change from depreciating
such disposed asset to capitalizing the loss
sustained on account of the demolition to
the land on which the demolished struc-
ture was located;

(c) If the taxpayer makes the change
specified in section 6.13(3)(a) of this rev-
enue procedure, and if the taxpayer dis-
posed of a portion of the asset as deter-
mined under section 6.13(3)(a) of this
revenue procedure in a transaction de-
scribed in the first sentence in § 1.168(i)-
8(d)(1) in a taxable year prior to the year
of change but under its present method of
accounting continues to deduct deprecia-
tion for such disposed portion, a change
from depreciating the disposed portion to
recognizing gain or loss upon disposition
or, if § 280B and § 1.280B-1 apply to the
disposition, change from depreciating
such disposed portion to capitalizing the
loss sustained on account of the demoli-
tion to the land on which the demolished
structure was located;

(d) If the taxpayer's present method of
accounting for its buildings (including
their structural components), condomin-
ium units (including their structural com-
ponents), cooperative units (including
their structural components), and im-
provements or additions (including its
structural components) thereto that are de-
preciated under § 168 is in accord with
§ 1.168(i)-8(c)(4)(ii)(A), (B), and (D),
and if the taxpayer disposed of an asset as

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determined under § 1.168(i)-8(c)(4)
(ii)(A), (B), or (D), as applicable, in a
taxable year prior to the year of change
but under its present method of account-
ing continues to deduct depreciation for
such disposed asset, a change from depre-
ciating the disposed asset to recognizing
gain or loss upon disposition or, if § 280B
and § 1.280B-1 apply to the disposition,
change from depreciating such disposed
asset to capitalizing the loss sustained on
account of the demolition to the land on
which the demolished structure was lo-
cated;

(e) If the taxpayer's present method of
accounting for its buildings (including
their structural components), condomin-
ium units (including their structural com-
ponents), cooperative units (including
their structural components), and im-
provements or additions (including its
structural components) thereto that are de-
preciated under § 168 is in accord with
§ 1.168(i)-8(c)(4)(ii)(A), (B), and (D),
and if the taxpayer disposed of a portion
of an asset as determined under
§ 1.168(i)-8(c)(4)(ii)(A), (B), or (D), as
applicable, in a transaction described in
the first sentence in § 1.168(i)-8(d)(1) in
a taxable year prior to the year of change
but under its present method of account-
ing continues to deduct depreciation for
such disposed portion, a change from de-
preciating the disposed portion to recog-
nizing gain or loss upon disposition or, if
§ 280B and § 1.280B-1 apply to the dis-
position, change from depreciating such
disposed portion to capitalizing the loss
sustained on account of the demolition to
the land on which the demolished struc-
ture was located;

(f) A change in the method of identi-
fying which assets in multiple asset ac-
counts or which portions of assets have
been disposed of from a method of ac-
counting not specified in § 1.168(i)-
8(g)(1) or (2)(i), (ii), or (iii) (for example,
the last-in, first-out (LIFO) method of ac-
counting) to a method of accounting spec-
ified in § 1.168(i)-8(g)(1) or (2)(i), (ii), or
(iii), as applicable;

(g) If § 1.168(i)-8(f)(2) applies (dispo-
sition of an asset in a multiple asset ac-
count) and it is practicable from the
taxpayer's records to determine the unad-
justed depreciable basis of the disposed
asset, a change in the method of determin-

ing the unadjusted depreciable basis of the
disposed asset from a method of not using
the taxpayer's records to a method of us-
ing the taxpayer's records;

(h) If § 1.168(i)-8(f)(2) applies (dispo-
sition of an asset in a multiple asset ac-
count) and it is impracticable from the
taxpayer's records to determine the unad-
justed depreciable basis of the disposed
asset, a change in the method of determin-
ing the unadjusted depreciable basis of all
assets in the same multiple asset account
from an unreasonable method (for exam-
ple, discounting the cost of the replace-
ment asset to its placed-in-service year
cost using the Consumer Price Index) to a
reasonable method;

(i) If § 1.168(i)-8(f)(3) applies (dispo-
sition of a portion of an asset) and it is
practicable from the taxpayer's records to
determine the unadjusted depreciable ba-
sis of the disposed portion of the asset, a
change in the method of determining the
unadjusted depreciable basis of the dis-
posed portion of the asset from a method
of not using the taxpayer's records to a
method of using the taxpayer's records;

(j) If § 1.168(i)-8(f)(3) applies (dispo-
sition of a portion of an asset) and it is
impracticable from the taxpayer's records
to determine the unadjusted depreciable
basis of the disposed portion of the asset,
a change in the method of determining the
unadjusted depreciable basis of the dis-
posed portion of the asset from an unrea-
sonable method (for example, discounting
the cost of the replacement portion of the
asset to its placed-in-service year cost us-
ing the Consumer Price Index) to a rea-
sonable method; or

(k) A change from recognizing gain or
loss under § 1.168(i)-8T upon the dispo-
sition of an asset (as determined under
§ 1.168(i)-8(c)(4)(ii)(A), (B), or (D), as
applicable) included in a general asset ac-
count to recognizing gain or loss upon the
disposition of the same asset under
§ 1.168(i)-8 if: (A) the taxpayer made the
change specified in section 6.11 of Rev.
Proc. 2016-29, 2016-21 I.R.B. 880, sec-
tion 6.34 of Rev. Proc. 2015-14, 2015-5
I.R.B. 450, or section 6.34 of the APPEN-
DIX to Rev. Proc. 2011-14, 2011-4
I.R.B. 330, as clarified and modified by
Rev. Proc. 2012-39, 2012-41 I.R.B. 470,
Rev. Proc. 2014-17, 2014-12 I.R.B. 661,
and Rev. Proc. 2014-54, 2014-41 I.R.B.

675 (revocation of a general asset account
election); (B) the taxpayer made a
qualifying disposition election under
§ 1.168(i)-1T(e)(3)(iii) in a taxable year
prior to the year of change for the dispo-
sition of such asset; (C) the taxpayer's
present method of accounting for such
asset is in accord with § 1.168(i)-
8(c)(4)(ii)(A), (B), or (D), as applicable;
and (D) the taxpayer recognized a gain or
loss under § 1.168(i)-8T upon the dispo-
sition of such asset in a taxable year prior
to the year of change.

(4) Examples. The following examples
illustrate the covered changes specified in
section 6.13(3) of this revenue procedure.

(a) Example 1. X, a calendar-year taxpayer, ac-
quired and placed in service a building and its struc-
tural components in 2000. In 2005, X constructed
and placed in service an addition to this building. X
depreciates the building, the addition, and their
structural components under § 168. A change by X
to treating the original building (including its struc-
tural components) as an asset and the addition to the
building (including the structural components of
such addition) as a separate asset for disposition
purposes is a change described in section 6.13(3)(a)
of this revenue procedure solely for purposes of
§ 1.168(i)-8(c)(4).

(b) Example 2. Y, a calendar-year taxpayer, ac-
quired and placed in service a building and its struc-
tural components in 1990. Y depreciates this build-
ing and its structural components under § 168. In
2000, a tornado damaged the roof and, as a result, Y
replaced the entire roof of the building. Y did not
recognize a loss on the retirement of the original roof
and continues to depreciate the original roof. Y also
capitalized the cost of the replacement roof and has
been depreciating this roof under § 168 since 2000.
Because the original roof was disposed of as a result
of a casualty event described in § 165, a change by
Y from depreciating the original roof to recognizing
a loss upon its retirement is a covered change de-
scribed in section 6.13(3)(e) of this revenue proce-
dure solely for purposes of § 1.168(i)-8.

(c) Example 3. The facts are the same as in
Example 2, except a tornado did not occur, but Y still
replaced the entire roof of the building in 2000.
Because the original roof was not disposed of as a
result of any of the events described in the first
sentence in § 1.168(i)-8(d)(1) that require a partial
disposition, a partial disposition election must be
made to change from depreciating the original roof
to recognizing a loss upon its retirement. Pursuant to
section 6.13(1)(b)(iv) of this revenue procedure, sec-
tion 6.13 does not apply to the disposition of the
original roof in 2000.

(5) Manner of making change.

(a) A taxpayer (including a qualified
small taxpayer as defined in section
6.01(4)(b) of this revenue procedure)
making this change must attach to its
Form 3115 a statement with the follow-
ing:

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(i) A description of the assets to which
this change applies;

(ii) If the taxpayer is making a change
specified in section 6.13(3)(a) of this rev-
enue procedure, a description of the assets
for disposition purposes under the taxpay-
er's present and proposed methods of ac-
counting;

(iii) If the taxpayer is making the
change specified in section 6.13(3)(f) of
this revenue procedure, a description of
the methods of identifying which assets
have been disposed of under the taxpay-
er's present and proposed methods of ac-
counting;

(iv) If the taxpayer is making the
change specified in section 6.13(3)(h) or
(j) of this revenue procedure, a description
of the methods of determining the unad-
justed depreciable basis of the disposed
asset or disposed portion of the asset, as
applicable, under the taxpayer's present
and proposed methods of accounting; and

(v) If any asset is public utility property
within the meaning of § 168(i)(10), a
statement providing that the taxpayer
agrees to the following additional terms
and conditions:

(A) A normalization method of 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 qualified small taxpayer, as de-
fined in section 6.01(4)(b) of this revenue
procedure, is required to complete only
the following information on Form 3115
(Rev. December 2015) to make this
change:

(i) The identification section of page 1
(above Part I);

(ii) The signature section at the bottom
of page 1;

(iii) Part I;

(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19 if the qualified small
taxpayer is not making a change in
method of accounting specified in section
6.13(3)(h) and (j) of this revenue proce-
dure;

(v) Part II, all lines except lines 13, 15b,
16c, 17, and 19 if the qualified small tax-
payer is making a change in method of
accounting specified in section 6.13(3)(h)
or (j) of this revenue procedure;

(v) Part IV, all lines except line 25; and
(vi) Schedule E.

(6) No ruling on asset. The consent
granted under section 9 of Rev. Proc.
2015-13 for a change specified in section
6.13(3)(a) of this revenue procedure is not
a determination by the Commissioner that
the taxpayer is using the appropriate asset
under § 1.168(i)-8(c)(4) for determining
what asset is disposed of by the taxpayer
and does not create any presumption that
the proposed asset is permissible under
§ 1.168(i)-8(c)(4). The director will as-
certain whether the taxpayer's determina-
tion of its asset under § 1.168(i)-8(c)(4) is
permissible.

(7) Section 481(a) adjustment.

(a) A taxpayer changing its method of
accounting under this section 6.13 may
use statistical sampling in determining the
§ 481(a) adjustment by following the
guidance provided in Rev. Proc. 2011-42,
2011-37 I.R.B. 318.

(b) A taxpayer that met the scope re-
quirements of section 4 of Rev. Proc.
2015-20, 2015-9 I.R.B. 694, and that
changed its method of accounting under
section 6.38 of Rev. Proc. 2015-14
(which is now this section 6.13) by fol-
lowing section 5 of Rev. Proc. 2015-20 is
required to calculate a section § 481(a)
adjustment as of the first day of the year of
change that takes into account only dispo-
sitions in taxable years beginning on or
after January 1, 2014.

(8) Section 481(a) adjustment period.

(a) A taxpayer must take the entire
amount of the § 481(a) adjustment into
account in computing taxable income for
the year of change:

(i) If the taxpayer is making the change
specified in section 6.13(3)(a) of this rev-
enue procedure and if the taxpayer recog-

nized a gain or loss under § 1.168(i)-8T
on the disposition of the asset (or if appli-
cable, a portion thereof) in a taxable year
prior to the year of change;

(ii) If the taxpayer is making the
change specified in section 6.13(3)(k) of
this revenue procedure; or

(iii) If the taxpayer is a qualified tax-
payer as defined in section 4.01 of Rev.
Proc. 2015-56, 2015-49 I.R.B. 827, and
that is within the scope of section 3 of
Rev. Proc. 2015-56, and is making the
change specified in section 5.02(5)(b) of
Rev. Proc. 2015-56 on or before the first
taxable year that the qualified taxpayer
uses the remodel-refresh safe harbor pro-
vided in section 5.02 of Rev. Proc. 2015-
56.

(b) If section 6.13(8)(a) of this revenue
procedure does not apply, see section 7.03
of Rev. Proc. 2015-13 for the § 481(a)
adjustment period.

(c) Example. (i) Y, a fiscal year taxpayer with a
taxable year beginning December 1 and ending No-
vember 30, acquired and placed in service a building
and its structural components in 2000. Y depreciates
this building and its structural components under
§ 168. The roof is a structural component of the
building. Y replaced the entire roof in June 2010. On
its federal tax return for the taxable year ended
November 30, 2010, Y did not recognize a loss on
the retirement of the original roof and continues to
depreciate the original roof. Y also capitalized the
cost of the replacement roof and has been depreci-
ating this roof under § 168 since June 2010. The
adjusted depreciable basis of the original roof at the
time of its retirement in 2010 (taking into account
the applicable convention) is $11,000, and Y
claimed depreciation of $1,000 for such roof after its
retirement (taking into account the applicable con-
vention) and before the taxable year ended Novem-
ber 30, 2013 (2012 taxable year). Also the 12-month
allowable depreciation deduction for the original
roof is $500 for the 2012 taxable year, $500 for the
taxable year ended November 30, 2014 (2013 tax-
able year), and $500 for the taxable year ended
November 30, 2015 (2014 taxable year).

(ii) In accordance with § 1.168(i)-8T(c)(4)
(ii)(A) and (B) and section 6.29(3)(a) and (b) of the
APPENDIX to Rev. Proc. 2011-14, as modified by
Rev. Proc. 2012-20, 2012-14 I.R.B. 700, Y filed
with its federal income tax return for the taxable year
ended November 30, 2013, a Form 3115 to treat the
building as an asset and each structural component
of the building as a separate asset for disposition
purposes and also to change from depreciating the
original roof to recognizing a loss upon its retire-
ment. The amount of the net negative § 481(a) ad-
justment on this Form 3115 is $10,000 (adjusted
depreciable basis of $11,000 for the original roof at
the time of its retirement (taking into account the
applicable convention) less depreciation of $1,000
claimed for such roof after its retirement (taking into

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account the applicable convention) and before the
2012 taxable year).

(iii) Y complies with § 1.168(i)-8 beginning
with its taxable year ended November 30, 2016
(2015 taxable year). For Y's 2015 taxable year, the
late partial disposition election under section 6.10 of
Rev. Proc. 2016-29 does not apply. Y also decides
not to file a private letter ruling requesting an exten-
sion of time under § 301.9100-3 of the Procedure
and Administration Regulations to make a partial
disposition election for the original roof. In accor-
dance with section 6.13(3)(a) of this revenue proce-
dure, Y files a Form 3115 with its federal income tax
return for the 2015 taxable year to change to treating
the original building (including its original roof and
other original structural components) as an asset and
the replacement roof as a separate asset for disposi-
tion purposes. Because the late partial disposition
election under section 6.10 of Rev. Proc. 2016-29
does not apply for Y's 2015 taxable year and Y did
not receive a private letter ruling granting an exten-
sion of time under § 301.9100-3 to make a partial
disposition election for the original roof, Y does not
recognize the net loss of $10,000 upon the retirement
of the original roof under § 1.168(i)-8 and Y will
continue to depreciate the original roof. Thus, the net
positive § 481(a) adjustment for this change is
$8,500 (net loss of $10,000 claimed on the 2012
return for the retirement of the original roof less
depreciation of $1,500 for the original roof for the
2012, 2013, and 2014 taxable years) and is included
in Y's taxable income for the 2015 taxable year.

(9) No audit protection. A taxpayer
calculating a § 481(a) adjustment under
section 6.13(7)(b) of this revenue proce-
dure that takes into account only disposi-
tions in taxable years beginning on or
after January 1, 2014, does not receive
audit protection under section 8.01 of
Rev. Proc. 2015-13 for dispositions sub-
ject to a change under this section 6.13 in
taxable years beginning before January 1,
2014. See section 5.04 of Rev. Proc.
2015-20.

(10) Concurrent automatic change.

(a) A taxpayer making this change for
more than one asset for the same year of
change should file a single Form 3115 for
all such assets and provide a single net
§ 481(a) adjustment for all the changes
included in that Form 3115. If one or more
of the changes in that single Form 3115
generate a negative § 481(a) adjustment
and other changes in that same Form 3115
generate a positive § 481(a) adjustment,
the taxpayer may provide a single nega-
tive § 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 making this change and
any change listed in section 6.13(10)
(b)(i)-(iv) of this revenue procedure for
the same year of change should file a
single Form 3115 for all of such changes
and must enter the designated automatic
accounting method change numbers for
the changes on the appropriate line on the
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes. For example, a qual-
ified small taxpayer must include on the
single Form 3115 the information re-
quired to be completed on Form 3115 by
a qualified small taxpayer under this rev-
enue procedure for each change in method
of accounting included on that Form 3115.
The listed changes are:

(i) A change under section 6.01 of this
revenue procedure;

(ii) A change under section 6.12 of this
revenue procedure;

(iii) A change under section 6.14 of this
revenue procedure; and

(iv) A change under section 6.15 of this
revenue procedure.

(11) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 6.13 is
"205."

(12) Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).

.14 Dispositions of tangible depreciable
assets (other than a building or its
structural components) (§ 168;
§ 1.168(i)-8).

(1) Description of change.

(a) Applicability. This change, as de-
scribed in Rev. Proc. 2014-54, 2014-41
I.R.B. 675, applies to a taxpayer that
wants to make a change in method of
accounting that is specified in section
6.14(3) of this revenue procedure for dis-
posing of § 1245 property or a depreciable
land improvement or disposing of a por-
tion of § 1245 property or a depreciable
land improvement to which the partial dis-
position rule in § 1.168(i)-8(d)(1) applies.
These specified changes are consistent
with §§ 1.168(i)-8(c)(4)(i), 1.168(i)-

8(c)(4)(ii)(C) and (D), 1.168(i)-8(f), and
1.168(i)-8(g), as applicable. This change
also affects the determination of gain or
loss from disposing of the § 1245 prop-
erty, the depreciable land improvement, or
a portion of the § 1245 property or depre-
ciable land improvement, and may affect
whether the taxpayer must capitalize
amounts paid to restore a unit of property
(as determined under § 1.263(a)-3(e) or
(f)) under § 1.263(a)-3(k).

(b) Inapplicability. This change does
not apply to the following:

(i) Any asset (as determined under
§ 1.168(i)-8(c)(4)) that is not depreciated
under § 168 under the taxpayer's present
method of accounting and, if applicable,
under the taxpayer's proposed method of
accounting;

(ii) Any building (including its struc-
tural components), condominium unit (in-
cluding its structural components), coop-
erative unit (including its structural
components), or an improvement or addi-
tion (including its structural components)
thereto (but see section 6.13 of this reve-
nue procedure for making this change);

(iii) Any asset subject to a general asset
account election under § 168(i)(4) and the
regulations thereunder (but see section
6.15 of this revenue procedure for making
a change for dispositions of tangible de-
preciable assets subject to a general asset
account election); or

(iv) Any disposition of a portion of an
asset in a transaction described in the last
sentence in § 1.168(i)-8(d)(1) for which
the taxpayer did not make a partial dispo-
sition election in accordance with
§ 1.168(i)-8(d)(2)(ii), (iii), or (iv), as ap-
plicable (but see section 6.10 of this rev-
enue procedure for making a partial dis-
position election pursuant to § 1.168(i)-
8(d)(2)(iii)).

(2) Certain eligibility rules inapplica-
ble.

(a) In general. The eligibility rule in
section 5.01(1)(d) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a
taxpayer making this change.

(b) Special rule.

(i) The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13 does not
apply to a taxpayer making this change for
any taxable year beginning on or after
January 1, 2012, and beginning before
January 1, 2017.

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(ii) If a taxpayer makes both a change
under this section 6.14 and a change under
section 6.01 of this revenue procedure for
any taxable year beginning on or after Jan-
uary 1, 2012, and beginning before January
1, 2017, on a single Form 3115 for the same
asset for the same year of change in accor-
dance with section 6.14(9)(b) or (c) of this
revenue procedure, the eligibility rules in
sections 5.01(1)(d) and (f) of Rev. Proc.
2015-13 do not apply to the taxpayer for
either change.

(3) Covered changes. This section 6.14
only applies to the following changes in
methods of accounting for a § 1245 prop-
erty, a depreciable land improvement, or
an improvement or addition thereto:

(a) For purposes of applying
§ 1.168(i)-8(c)(4) (determination of asset
disposed of), a change to the appropriate
asset as determined under § 1.168(i)-
8(c)(4)(i), (ii)(C), or (ii)(D), as applicable;

(b) If the taxpayer makes the change
specified in section 6.14(3)(a) of this rev-
enue procedure, and if the taxpayer dis-
posed of the asset as determined under
section 6.14(3)(a) of this revenue proce-
dure in a taxable year prior to the year of
change but continues to deduct deprecia-
tion for such disposed asset under the tax-
payer's present method of accounting, a
change from depreciating the disposed as-
set to recognizing gain or loss upon dis-
position;

(c) If the taxpayer makes the change
specified in section 6.14(3)(a) of this rev-
enue procedure, and if the taxpayer dis-
posed of a portion of the asset as deter-
mined under section 6.14(3)(a) of this
revenue procedure in a transaction de-
scribed in the first sentence in § 1.168(i)-
8(d)(1) in a taxable year prior to the year
of change but under its present method of
accounting continues to deduct deprecia-
tion for such disposed portion, a change
from depreciating the disposed portion to
recognizing gain or loss upon disposition;

(d) If the taxpayer's present method of
accounting for its § 1245 property, depre-
ciable land improvements, or improve-
ments or additions thereto is in accord
with § 1.168(i)-8(c)(4)(i) or (ii), as appli-
cable, and if the taxpayer disposed of an
asset as determined under § 1.168(i)-
8(c)(4)(i) or (ii), as applicable, in a taxable
year prior to the year of change but under
its present method of accounting contin-

ues to deduct depreciation for this dis-
posed asset, a change from depreciating
the disposed asset to recognizing gain or
loss upon disposition;

(e) If the taxpayer's present method of
accounting for its § 1245 property, depre-
ciable land improvements, or improve-
ments or additions thereto is in accord
with § 1.168(i)-8(c)(4)(i) or (ii), as appli-
cable, and if the taxpayer disposed of a
portion of an asset as determined under
§ 1.168(i)-8(c)(4)(i) or (ii), as applicable,
in a transaction described in the first sen-
tence in § 1.168(i)-8(d)(1) in a taxable
year prior to the year of change but under
its present method of accounting contin-
ues to deduct depreciation for such dis-
posed portion, a change from depreciating
the disposed portion to recognizing gain
or loss upon disposition;

(f) A change in the method of identi-
fying which assets in multiple asset ac-
counts or which portions of assets have
been disposed of from a method of ac-
counting not specified in § 1.168(i)-
8(g)(1) or (2)(i), (ii), or (iii) (for example,
the last-in, first-out (LIFO) method of ac-
counting) to a method of accounting spec-
ified in § 1.168(i)-8(g)(1) or (2)(i), (ii), or
(iii), as applicable;

(g) If § 1.168(i)-8(f)(2) applies (dispo-
sition of an asset in a multiple asset ac-
count) and it is practicable from the
taxpayer's records to determine the unad-
justed depreciable basis of the disposed
asset, a change in the method of determin-
ing the unadjusted depreciable basis of the
disposed asset from a method of not using
the taxpayer's records to a method of us-
ing the taxpayer's records;

(h) If § 1.168(i)-8(f)(2) applies (dispo-
sition of an asset in a multiple asset ac-
count) and it is impracticable from the
taxpayer's records to determine the unad-
justed depreciable basis of the disposed
asset, a change in the method of determin-
ing the unadjusted depreciable basis of all
assets in the same multiple asset account
from an unreasonable method (for exam-
ple, discounting the cost of the replace-
ment asset to its placed-in-service year
cost using the Consumer Price Index) to a
reasonable method;

(i) If § 1.168(i)-8(f)(3) applies (dispo-
sition of a portion of an asset) and it is
practicable from the taxpayer's records to
determine the unadjusted depreciable ba-

sis of the disposed portion of the asset, a
change in the method of determining the
unadjusted depreciable basis of the dis-
posed portion of the asset from a method
of not using the taxpayer's records to a
method of using the taxpayer's records;

(j) If § 1.168(i)-8(f)(3) applies (dispo-
sition of a portion of an asset) and it is
impracticable from the taxpayer's records
to determine the unadjusted depreciable
basis of the disposed portion of the asset,
a change in the method of determining the
unadjusted depreciable basis of the dis-
posed portion of the asset from an unrea-
sonable method (for example, discounting
the cost of the replacement portion of the
asset to its placed-in-service year cost us-
ing the Consumer Price Index) to a rea-
sonable method; or

(k) A change from recognizing gain or
loss under § 1.168(i)-8T upon the dispo-
sition of a section 1245 property, depre-
ciable land improvement, or improvement
or addition thereto included in a general
asset account to recognizing gain or loss
upon the disposition of the same asset
under § 1.168(i)-8 if: (A) the taxpayer
made the change specified in section 6.11
of Rev. Proc. 2016-29, section 6.34 of
Rev. Proc. 2015-14, or section 6.34 of the
APPENDIX to Rev. Proc. 2011-14 (revo-
cation of a general asset account election);
(B) the taxpayer made a qualifying dispo-
sition election under § 1.168(i)-1T(e)
(3)(iii) in a taxable year prior to the year
of change for the disposition of such asset;
(C) the taxpayer's present method of ac-
counting for such asset is in accord with
§ 1.168(i)-8(c)(4)(i) or (ii), as applicable;
and (D) the taxpayer recognized a gain or
loss under § 1.168(i)-8T on the disposi-
tion of such asset in a taxable year prior to
the year of change.

(4) Manner of making change.

(a) A taxpayer (including a qualified
small taxpayer as defined in section
6.01(4)(b) of this revenue procedure)
making this change must attach to its
Form 3115 a statement with the follow-
ing:

(i) A description of the assets to which
this change applies;

(ii) If the taxpayer is making a change
specified in section 6.14(3)(a) of this rev-
enue procedure, a description of the assets
for disposition purposes under the taxpay-

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er's present and proposed methods of ac-
counting;

(iii) If the taxpayer is making the
change specified in section 6.14(3)(f) of
this revenue procedure, a description of
the methods of identifying which assets
have been disposed of under the taxpay-
er's present and proposed methods of ac-
counting;

(iv) If the taxpayer is making the
change specified in section 6.14(3)(h) or
(j) of this revenue procedure, a description
of the methods of determining the unad-
justed depreciable basis of the disposed
asset or disposed portion of the asset, as
applicable, under the taxpayer's present
and proposed methods of accounting; and

(v) If any asset is public utility property
within the meaning of § 168(i)(10), a
statement providing that the taxpayer
agrees to the following additional terms
and conditions:

(A) A normalization method of
accounting (within the meaning of
§ 168(i)(9)) will be used for the public
utility property subject to the applica-
tion;

(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 qualified small taxpayer, as de-
fined in section 6.01(4)(b) of this revenue
procedure, is required to complete only
the following information on Form 3115
(Rev. December 2015) to make this
change:

(i) The identification section of page 1
(above Part I);

(ii) The signature section at the bottom
of page 1;

(iii) Part I;

(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19 if the qualified small
taxpayer is not making a change in

method of accounting specified in section
6.14(3)(h) and (j) of this revenue proce-
dure;

(v) Part II, all lines except lines 13, 15b,
16c, 17, and 19 if the qualified small tax-
payer is making a change in method of
accounting specified in section 6.14(3)(h)
or (j) of this revenue procedure;

(v) Part IV, all lines except line 25; and
(vi) Schedule E.

(5) No ruling on asset. The consent
granted under section 9 of Rev. Proc.
2015-13 for a change specified in section
6.14(3)(a) of this revenue procedure is not
a determination by the Commissioner that
the taxpayer is using the appropriate asset
under § 1.168(i)-8(c)(4) for determining
what asset is disposed of by the taxpayer
and does not create any presumption that
the proposed asset is permissible under
§ 1.168(i)-8(c)(4). The director will as-
certain whether the taxpayer's determina-
tion of its asset under § 1.168(i)-8(c)(4) is
permissible.

(6) Section 481(a) adjustment.

(a) A taxpayer changing its method of
accounting under section 6.14 of the rev-
enue procedure may use statistical sam-
pling in determining the § 481(a) adjust-
ment by following the guidance provided
in Rev. Proc. 2011-42, 2011-37 I.R.B.
318.

(b) A taxpayer that met the scope re-
quirements of section 4 of Rev. Proc.
2015-20, 2015-9 I.R.B. 694, and that
changed its method of accounting under
section 6.39 of Rev. Proc. 2015-14
(which is now this section 6.14) by fol-
lowing section 5 of Rev. Proc. 2015-20 is
required to calculate a section § 481(a)
adjustment as of the first day of the year of
change that takes into account only dispo-
sitions in taxable years beginning on or
after January 1, 2014.

(7) Section 481(a) adjustment period.

(a) A taxpayer must take the entire
amount of the § 481(a) adjustment into
account in computing taxable income for
the year of change:

(i) If the taxpayer is making the change
specified in section 6.14(3)(a) of this rev-
enue procedure and if the taxpayer recog-
nized a gain or loss under § 1.168(i)-8T
on the disposition of the § 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 6.14(3)(k) of
this revenue procedure.

(b) If section 6.14(7)(a) of this revenue
procedure does not apply, see section 7.03
of Rev. Proc. 2015-13 for the § 481(a)
adjustment period.

(8) No audit protection. A taxpayer
calculating a § 481(a) adjustment under
section 6.14(6)(b) of this revenue proce-
dure that takes into account only disposi-
tions in taxable years beginning on or
after January 1, 2014, does not receive
audit protection under section 8.01 of
Rev. Proc. 2015-13 for dispositions sub-
ject to a change under this section 6.14 in
taxable years beginning before January 1,
2014. See section 5.05 of Rev. Proc.
2015-20.

(9) Concurrent automatic change.

(a) A taxpayer making this change for
more than one asset for the same year of
change should file a single Form 3115 for
all such assets and provide a single net
§ 481(a) adjustment for all the changes
included in that Form 3115. If one or more
of the changes in that single Form 3115
generate a negative § 481(a) adjustment
and other changes in that same Form 3115
generate a positive § 481(a) adjustment,
the taxpayer may provide a single nega-
tive § 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 making this change and
any change listed in section 6.14(9)(b)(i)-
(iv) of this revenue procedure for the same
year of change should file a single Form
3115 for all of such changes and must
enter the designated automatic accounting
method change numbers for the changes
on the appropriate line on the Form 3115.
See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making con-
current changes. For example, a qualified
small taxpayer must include on the single
Form 3115 the information required to be
completed on Form 3115 by a qualified
small taxpayer under this revenue proce-
dure for each change in method of ac-

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counting included on that Form 3115. The
listed changes are:

(i) A change under section 6.01 of this
revenue procedure;

(ii) A change under section 6.12 of this
revenue procedure;

(iii) A change under section 6.13 of this
revenue procedure; and

(iv) A change under section 6.15 of this
revenue procedure.

(10) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 6.14 is
"206."

(11) Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).

.15 Dispositions of tangible depreciable
assets in a general asset account
(§ 168(i)(4); § 1.168(i)-1).

(1) Description of change.

(a) Applicability. This change, as de-
scribed in Rev. Proc. 2014-54, 2014-41
I.R.B. 675, applies to a taxpayer that
wants to make a change in method of
accounting that is specified in section
6.15(3) of this revenue procedure for dis-
posing of an asset subject to a general
asset account election under § 168(i)(4)
and the regulations thereunder. These
specified changes are consistent with
§§ 1.168(i)-1(e)(1), 1.168(i)-1(e)(2)(viii),
and 1.168(i)-1(j), as applicable. This
change also may affect the determination
of gain or loss from disposing of the asset
and may affect whether the taxpayer must
capitalize amounts paid to restore a unit of
property (as determined under § 1.263(a)-
3(e) or (f)) under § 1.263(a)-3(k).

(b) Inapplicability. This change does
not apply to the following:

(i) Any asset (as determined under
§ 1.168(i)-1(e)(2)(viii)) that is not depre-
ciated under § 168 under the taxpayer's
present method of accounting and, if ap-
plicable, proposed method of accounting;
or

(ii) Any asset not subject to a general
asset account election under § 168(i)(4)
and the regulations thereunder (but see
sections 6.13 and 6.14 of this revenue
procedure for making a change for dispo-
sitions of tangible depreciable assets not

subject to a general asset account elec-
tion).

(2) Certain eligibility rules inapplica-
ble.

(a) In general. The eligibility rule in
section 5.01(1)(d) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a
taxpayer making this change.

(b) Special rule.

(i) The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13 does not
apply to a taxpayer making this change for
any taxable year beginning on or after
January 1, 2012, and beginning before
January 1, 2017.

(ii) If a taxpayer makes both a change
under this section 6.15 and a change under
section 6.01 of this revenue procedure for
any taxable year beginning on or after
January 1, 2012, and beginning before
January 1, 2017, on a single Form 3115
for the same asset for the same year of
change in accordance with section
6.15(7)(b) of this revenue procedure, the
eligibility rules in sections 5.01(1)(d) and
(f) of Rev. Proc. 2015-13 do not apply to
the taxpayer for either change.

(3) Covered changes. This section
6.15 only applies to the following
changes in methods of accounting for an
asset subject to a general asset account
election under § 168(i)(4) and the regu-
lations thereunder:

(a) For purposes of applying § 1.168(i)-
1(e)(2)(viii) (determination of asset dis-
posed of), a change to the appropriate
asset as determined under § 1.168(i)-
1(e)(2)(viii)(A) or (B), as applicable;

(b) A change in the method of identi-
fying which assets or which portions of
assets have been disposed of from a
method of accounting not specified in
§ 1.168(i)-1(j)(2)(i)(A), (B), (C), or (D)
(for example, the last-in, first-out (LIFO)
method of accounting) to a method of
accounting specified in § 1.168(i)-
1(j)(2)(i)(A), (B), (C), or (D), as applica-
ble;

(c) If § 1.168(i)-1(j)(3) applies (basis
of disposed asset or disposed portion of an
asset) and it is practicable from the tax-
payer's records to determine the unad-
justed depreciable basis of the disposed
asset or the disposed portion of an asset,
as applicable, a change in the method of
determining the unadjusted depreciable
basis of the disposed asset or the disposed

portion of an asset, as applicable, from a
method of not using the taxpayer's re-
cords to a method of using the taxpayer's
records; or

(d) If § 1.168(i)-1(j)(3) applies (basis
of disposed asset or disposed portion of an
asset) and it is impracticable from the
taxpayer's records to determine the unad-
justed depreciable basis of the disposed
asset or the disposed portion of an asset,
as applicable, a change in the method of
determining the unadjusted depreciable
basis of all assets in the same general asset
account from an unreasonable method (for
example, discounting the cost of the re-
placement asset to its placed-in-service
year cost using the Consumer Price Index)
to a reasonable method.

(4) Manner of making change.

(a) A taxpayer (including a qualified
small taxpayer as defined in section
6.01(4)(b) of this revenue procedure)
making this change must attach to its
Form 3115 a statement with the follow-
ing:

(i) A description of the assets to which
this change applies;

(ii) If the taxpayer is making the
change specified in section 6.15(3)(a) of
this revenue procedure, a description of
the assets for disposition purposes under
the taxpayer's present and proposed meth-
ods of accounting;

(iii) If the taxpayer is making the
change specified in section 6.15(3)(b) of
this revenue procedure, a description of
the methods of identifying which assets
have been disposed of under the taxpay-
er's present and proposed methods of ac-
counting;

(iv) If the taxpayer is making the
change specified in section 6.15(3)(d) of
this revenue procedure, a description of
the methods of determining the unad-
justed depreciable basis of the disposed
asset or disposed portion of the asset, as
applicable, under the taxpayer's present
and proposed methods of accounting; and

(v) If any asset is public utility property
within the meaning of § 168(i)(10), a
statement providing that the taxpayer
agrees to the following additional terms
and conditions:

(A) A normalization method of ac-
counting (within the meaning of
§ 168(i)(9)) will be used for the public

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utility property subject to the applica-
tion;

(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 qualified small taxpayer, as de-
fined in section 6.01(4)(b) of this revenue
procedure, is required to complete only
the following information on Form 3115
(Rev. December 2015) to make this
change:

(i) The identification section of page 1
(above Part I);

(ii) The signature section at the bottom
of page 1;

(iii) Part I;

(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19 if the qualified small
taxpayer is not making a change in
method of accounting specified in sec-
tion 6.15(3)(a) and (d) of this revenue
procedure;

(v) Part II, all lines except lines 13, 15b,
16c, 17, and 19 if the qualified small tax-
payer is making a change in method of
accounting specified in section 6.15(3)(a)
or (d) of this revenue procedure;

(v) Part IV, all lines except line 25; and
(vi) Schedule E.

(5) No ruling on asset. The consent
granted under section 9 of Rev. Proc.
2015-13 for a change specified in section
6.15(3)(a) of this revenue procedure is not
a determination by the Commissioner that
the taxpayer is using the appropriate asset
under § 1.168(i)-1(e)(2)(viii) for deter-
mining what asset is disposed of by the
taxpayer and does not create any pre-
sumption that the proposed asset is per-
missible under § 1.168(i)-1(e)(2)(viii).
The director will ascertain whether the
taxpayer's determination of its asset under
§ 1.168(i)-1(e)(2)(viii) is permissible.

(6) Section 481(a) adjustment period.

(a) A taxpayer must take the entire
amount of the § 481(a) adjustment into
account in computing taxable income for
the year of change:

(i) If the taxpayer makes the change
specified in section 6.15(3)(a) of this rev-
enue procedure and if the taxpayer recog-
nized 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; or

(iii) If the taxpayer is a qualified tax-
payer as defined in section 4.01 of Rev.
Proc. 2015-56, 2015-49 I.R.B. 827, and
that is within the scope of section 3 of
Rev. Proc. 2015-56, and is making the
change specified in section 5.02(5)(b) of
Rev. Proc. 2015-56 on or before the first
taxable year that the qualified taxpayer
uses the remodel-refresh safe harbor pro-
vided in section 5.02 of Rev. Proc. 2015-
56.

(b) If section 6.15(6)(a) of this revenue
procedure does not apply, see section 7.03
of Rev. Proc. 2015-13 for the § 481(a)
adjustment period.

(c) Example. (i) X, a fiscal year taxpayer with a
taxable year beginning December 1 and ending No-
vember 30, acquired and placed in service a building
and its structural components in 2000. X depreciates
this building and its structural components under
§ 168. The roof is a structural component of the
building. X replaced the entire roof in June 2010. On
its federal tax return for the taxable year ended
November 30, 2010, X did not recognize a loss on
the retirement of the original roof and continues to
depreciate the original roof. X also capitalized the
cost of the replacement roof and has been depreci-
ating this roof under § 168 since June 2010. The
adjusted depreciable basis of the original roof at the
time of its retirement in 2010 (taking into account
the applicable convention) is $11,000, and X
claimed depreciation of $1,000 for such roof after its
retirement (taking into account the applicable con-
vention) and before the taxable year ended Novem-
ber 30, 2013 (2012 taxable year). Also the 12-month
allowable depreciation deduction for the original
roof is $500 for the 2012 taxable year, $500 for the
taxable year ended November 30, 2014 (2013 tax-
able year), and $500 for the taxable year ended
November 30, 2015 (2014 taxable year).

(ii) In accordance with § 1.168(i)-1T and section
6.32(1)(a) of the APPENDIX to Rev. Proc. 2011-14,
as modified by Rev. Proc. 2012-20, 2012-14 I.R.B.
700, X filed with its federal tax return for the taxable
year ended November 30, 2013, a Form 3115 to: (1)
make a late general asset account election to include
the building (including its structural components)
placed in service in 2000 in one general asset 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 (adjusted depreciable basis of $11,000 for
the original roof at the time of its retirement (taking
into account the applicable convention) less depre-
ciation of $1,000 claimed for such roof after its
retirement (taking into account the applicable con-
vention) and before the 2012 taxable year).

(iii) X complies with § 1.168(i)-1 beginning with
its taxable year ended November 30, 2016 (2015
taxable year). In accordance with section 6.15(3)(a)
of this revenue procedure, X files a Form 3115 with
its federal income tax return for the 2015 taxable
year to change to treating the building (including its
original roof and other original structural compo-
nents) placed in service in 2000 as an asset and the
replacement roof as a separate asset for disposition
purposes. As a result, X must include the original
roof that X retired in 2010 in the general asset
account. Thus, the net positive § 481(a) adjustment
for this change is $8,500 (net loss of $10,000
claimed on the 2012 return for the retirement of the
original roof less depreciation of $1,500 for the
original roof for the 2012, 2013, and 2014 taxable
years) and is included in X's taxable income for the
2015 taxable year.

(7) Concurrent automatic change.

(a) A taxpayer making this change for
more than one asset for the same year of
change should file a single Form 3115 for
all such assets and provide a single net
§ 481(a) adjustment for all the changes
included in that Form 3115. If one or more
of the changes in that single Form 3115
generate a negative § 481(a) adjustment
and other changes in that same Form 3115
generate a positive § 481(a) adjustment,
the taxpayer may provide a single nega-
tive § 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 making this change and
any change listed in section 6.15(7)(b)(i)-
(iv) of this revenue procedure for the same
year of change should file a single Form
3115 for all of such changes and must
enter the designated automatic accounting
method change numbers for the changes
on the appropriate line on the Form 3115.
See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making con-
current changes. For example, a qualified
small taxpayer must include on the single
Form 3115 the information required to be
completed on Form 3115 by a qualified
small taxpayer under this revenue proce-
dure for each change in method of ac-

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counting included on that Form 3115. The
listed changes are:

(i) A change under section 6.01 of this
revenue procedure;

(ii) A change under section 6.12 of this
revenue procedure;

(iii) A change under section 6.13 of this
revenue procedure; and

(iv) A change under section 6.14 of this
revenue procedure.

(8) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 6.15 is
"207."

(9) Contact information. For further in-
formation regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).

.16 Summary of certain changes in
methods of accounting related to
dispositions of MACRS property.

(1) Final regulations. The following
chart summarizes the changes in meth-
ods of accounting under § 1.167(a)-4,
§ 1.168(i)-1, § 1.168(i)-7, and
§ 1.168(i)-8 that a taxpayer may make
under this revenue procedure.

FINAL REGULATION SECTION

SECTION # in in REV. PROC. 2017-30

DESIGNATED CHANGE NUMBER (DCN)

§ 1.167(a)-4, Depreciation of leasehold improvements

6.11

199

General Asset Accounts:

a. § 1.168(i)-1(c), Change in grouping assets

6.12

200

b. § 1.168(i)-1(e)(2)(viii), Change in determining asset disposed of

6.15

207

c. § 1.168(i)-1(j)(2), Change in method of identifying which assets or por- tions of assets have been disposed of from one method to another method specified in § 1.168(i)-1(j)(2)

6.12

200

d. § 1.168(i)-1(j)(2), Change in method of identifying which assets or portions of assets have been disposed of from a method not specified in § 1.168(i)-1(j)(2) to a method specified in § 1.168(i)-1(j)(2) e. § 1.168(i)-1(j)(3), Change in determining unadjusted depreciable basis of disposed asset or disposed portion of an asset from one reasonable method to another reasonable method when it is impracticable from the taxpayer's records to determine the unadjusted depreciable basis of dis- posed asset or disposed portion of asset

6.15

207

6.12

200

f. § 1.168(i)-1(j)(3), Change in determining unadjusted depreciable basis of disposed asset or disposed portion of an asset from not using to using the taxpayer's records when it is practicable from the taxpayer's records to determine the unadjusted depreciable basis of disposed asset or dis- posed portion of asset

6.15

207

g. § 1.168(i)-1(j)(3), Change in determining unadjusted depreciable basis of disposed asset or disposed portion of an asset from an unreasonable method to a reasonable method when it is impracticable from the taxpay- er's records to determine the unadjusted depreciable basis of disposed as- set or disposed portion of asset

6.15

207

Single Asset Accounts or Multiple Asset Accounts for MACRS Property: a. § 1.168(i)-7, Change from single asset accounts to multiple asset ac- counts, or vice versa

6.12

200

b. § 1.168(i)-7(c), Change in grouping assets in multiple asset accounts

6.12

200

Dispositions of MACRS Property (not in a general asset account):

a. § 1.168(i)-8(c)(4), Change in determining asset disposed of

6.13 (Building or struc- tural component) 6.14 (Property other than a building or structural component)

205 206

b. § 1.168(i)-8(f)(2) or (3), Change in determining unadjusted depreciable basis of disposed asset in a multiple asset account or disposed portion of an asset from one reasonable method to another reasonable method when it is impracticable from the taxpayer's records to determine the unadjusted depreciable basis of disposed asset or disposed portion of asset

6.12

200

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FINAL REGULATION SECTION

SECTION # in in REV. PROC. 2017-30

DESIGNATED CHANGE NUMBER (DCN)

c. § 1.168(i)-8(f)(2) or (3), Change in determining unadjusted depreciable basis of disposed asset in a multiple asset account or disposed portion of an asset from not using to using the taxpayer's records when it is practi- cable from the taxpayer's records to determine the unadjusted depreciable basis of disposed asset or disposed portion of asset

6.13 (Building or struc- tural component) 6.14 (Property other than a building or structural component)

205 206

d. § 1.168(i)-8(f)(2) or (3), Change in determining unadjusted depreciable basis of disposed asset in a multiple asset account or disposed portion of an asset from an unreasonable method to a reasonable method when it is impracticable from the taxpayer's records to determine the unadjusted de- preciable basis of disposed asset or disposed portion of asset

6.13 (Building or struc- tural component) 6.14 (Property other than a building or structural component)

205 206

e. § 1.168(i)-8(g), Change in method of identifying which assets in a mul- tiple asset account or portions of assets have been disposed of from one method to another method specified in § 1.168(i)-8(g)(1) or (2)

6.12

200

f. § 1.168(i)-8(g), Change in method of identifying which assets in a mul- tiple asset account or portions of assets have been disposed of from a method not specified in § 1.168(i)-8(g)(1) or (2) to a method specified in § 1.168(i)-8(g)(1) or (2)

6.13 (Building or struc- tural component) 6.14 (Property other than a building or structural component)

205 206

g. § 1.168(i)-8(h)(1), Change from depreciating a disposed asset or dis- posed portion of an asset to recognizing gain or loss upon disposition when a taxpayer continues to depreciate the asset or portion that the tax- payer disposed of prior to the year of change

6.13 (Building or struc- tural component) 6.14 (Property other than a building or structural component)

205 206

h. § 1.168(i)-8(d)(2)(iii), Partial disposition election for the disposition of a portion of an asset to which the IRS's adjustment pertains

6.10

198

.17 Depreciation of fiber optic transfer
node and fiber optic cable used by a
cable system operator (§§ 167 and 168).

(1) Description of change.

(a) Applicability. This change applies
to a cable system operator that is within
the scope of Rev. Proc. 2015-12, 2015-2
I.R.B. 266, and wants to change to the
safe harbor method of accounting pro-
vided in section 8.03 of Rev. Proc.
2015-12 for determining depreciation un-
der §§ 167 and 168 of a fiber optic transfer
node and trunk line consisting of fiber
optic cable used in a cable distribution
network providing one-way and two-way
communication services. The safe harbor
method provided by section 8.03 of Rev.
Proc. 2015-12 determines the asset for
purposes of §§ 167 and 168.

(b) Inapplicability. This change does
not apply to the following:

(i) any property that is not depreciated
under § 168 under the taxpayer's present
and proposed methods of accounting; or

(ii) any property that is not owned by
the taxpayer at the beginning of the year
of change.

(2) Certain eligibility rule inapplicable.
The eligibility rule in section 5.01(1)(d) of
Rev. Proc. 2015-13 does not apply to a
taxpayer that makes this change.

(3) Concurrent automatic change.

(a) A taxpayer that wants to make this
change for more than one asset for the
same year of change should file a single
Form 3115 for all such assets and provide
a single net § 481(a) adjustment for all
the changes included in that Form 3115. If
one or more of the changes in that single
Form 3115 generate a negative § 481(a)
adjustment and other changes in that same
Form 3115 generate a positive § 481(a)
adjustment, the taxpayer may provide a
single negative § 481(a) adjustment for all
the changes that are included in that Form

3115 generating such adjustment and a
single positive § 481(a) adjustment for all
the changes that are included in that Form
3115 generating such adjustment.

(b) A taxpayer that wants to make both
this change and a change to a UNICAP
method under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure, as
applicable, for the same year of change
should file a single Form 3115 for all such
changes and must enter the designated
automatic accounting method change
numbers for the changes on the appropri-
ate line on the Form 3115. See section
6.03(1)(b) of Rev. Proc. 2015-13 for in-
formation on making concurrent changes.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 6.17 is
"210."

(5) Contact information. For further in-
formation regarding a change under this

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section, contact Charles Magee at (202)
317-7005 (not a toll-free number).

.18 Revocation of partial disposition
election under the remodel-refresh safe
harbor described in Rev. Proc. 2015-56.

(1) Description of change.

(a) Applicability. This change applies
to a qualified taxpayer as defined in sec-
tion 4.01 of Rev. Proc. 2015-56, 2015-49
I.R.B. 827, and that is within the scope of
Rev. Proc. 2015-56 and wants to revoke a
partial disposition election, as provided in
section 5.02(4)(b)(ii)(B) of Rev. Proc.
2015-56, related to a qualified building,
as defined in section 4.02 of Rev. Proc.
2015-56, for which the qualified taxpayer
uses the remodel-refresh safe harbor
method of accounting provided in section
5.02 of Rev. Proc. 2015-56. See section
11.10 of this revenue procedure for mak-
ing a change to this safe harbor method of
accounting.

(b) Inapplicability. This change does
not apply to a qualified taxpayer, as de-
scribed in section 6.18(1)(a) of this reve-
nue procedure, that makes the revocation
of the partial disposition specified in sec-
tion 6.18(1)(a) of this revenue procedure
before or after the time specified in sec-
tion 6.18(3) of this revenue procedure.
Any such revocation is not a change in
method of accounting pursuant to
§ 1.446-1(e)(2)(ii)(d)(3)(iii).

(2) Change in method of accounting.
The IRS will treat the revocation of the
partial disposition election specified in
section 6.18(1)(a) of this revenue proce-
dure as a change in method of accounting
only for the time specified in section
6.18(3) of this revenue procedure.

(3) Time for making the change. The
change under this section 6.18 must be
made by a qualified taxpayer for any tax-
able year beginning after December 31,
2013, and ending before December 31,
2016.

(4) Certain eligibility rules inapplica-
ble.

(a) In general. The eligibility rules in
sections 5.01(1)(d) and (f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, do not apply
to a qualified taxpayer making this change
for any taxable year beginning after De-
cember 31, 2013, and ending before De-
cember 31, 2016.

(b) Concurrent automatic change. If a
qualified taxpayer makes both a change
under this section 6.18 and a change under
section 11.10 of this revenue procedure
for any taxable year beginning after De-
cember 31, 2013, and ending before De-
cember 31, 2016, on a single Form 3115
for the same asset for the same year
of change in accordance with section
6.18(7)(b), the eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13
do not apply to the qualified taxpayer for
either change.

(5) Section 481(a) adjustment period.
A qualified taxpayer making this change
must take the entire § 481(a) adjustment
into account in computing taxable income
for the year of change.

(6) Reduced filing requirement for
qualified small taxpayers. A qualified
small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, may
complete only the following information
on Form 3115 (Rev. December 2015):

(a) The identification section of page 1
(above Part I);

(b) The signature section at the bottom
of page 1;

(c) Part I, line 1(a);

(d) Part II, all lines except lines 5, 13,
15, 16, 17, and 19;

(e) Part IV, lines 25, 26, and 27; and

(f) Schedule E.

(7) Concurrent automatic change.

(a) A qualified taxpayer making this
change for more than one asset for the
same year of change should file a single
Form 3115 for all such assets. The single
Form 3115 must provide a single net
§ 481(a) adjustment for all such changes.

(b) A qualified taxpayer making this
change and a change under section 11.10 of
this revenue procedure for the same year of
change should file a single Form 3115 for
both changes and must enter the designated
automatic accounting method change num-
bers for the changes on the appropriate line
on the Form 3115. See section 6.03(1)(b) of
Rev. Proc. 2015-13 for information on
making concurrent changes.

(8) Designated automatic accounting
method change number. The designated au-
tomatic accounting method change number
for a change to the method of accounting
under this section 6.18 is "221."

(9) Contact information. For further in-
formation regarding a change under this

section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).

SECTION 7. RESEARCH AND
EXPERIMENTAL EXPENDITURES
(§ 174)

.01 Changes to a different method or
different amortization period.

(1) Description of change.

(a) This change applies to a taxpayer
that wants to change the treatment of ex-
penditures that qualify as research and
experimental expenditures under § 174.

(b) Section 174 and the regulations
thereunder provide the specific rules for
changing a method of accounting under
§ 174 for research and experimental ex-
penditures. Under § 174, a taxpayer may
treat research and experimental expendi-
tures that are paid or incurred by the tax-
payer during the taxable year in connec-
tion with the taxpayer's trade or business
as expenses under § 174(a) or as deferred
expenses amortizable ratably over a pe-
riod of not less than 60 months under
§ 174(b). Pursuant to § 1.174-1, research
and experimental expenditures that are not
treated as expenses or deferred expenses
under § 174 must be treated as a charge to
capital account. Further, § 1.174-1 pro-
vides that the expenditures to which § 174
applies may relate either to a general re-
search program or to a particular project.
Finally, §§ 1.174-3(a) and 1.174-4(a)(5)
provide that in no event will a taxpayer be
permitted to apply one method as to part
of the expenditures relative to a particular
project and apply a different method to the
balance of the expenditures relating to the
same project for the same taxable year.

(c) If a taxpayer has not treated re-
search and experimental expenditures as
expenses under § 174(a), § 174(a)(2)(B)
and § 1.174-3(b)(2) provide that the tax-
payer may, with consent, adopt the ex-
pense method at any time.

(d) If a taxpayer has treated research
and experimental expenditures as ex-
penses under § 174(a), § 174(a)(3) and
§ 1.174-3(b)(3) provide that the taxpayer
may, with consent, change to a different
method of treating research and experi-
mental expenditures.

(e) If a taxpayer has treated research
and experimental expenditures as deferred
expenses under § 174(b), § 174(b)(2) and

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§ 1.174-4(b)(2) provide that the taxpayer
may, with consent, change to a different
method of treating research or experimen-
tal expenditures or to a different period of
amortization for deferred expenses.

(2) Applicability.

(a) In general. This change applies to
any taxpayer that is changing:

(i) from treating research and experi-
mental expenditures for a particular proj-
ect or projects as expenses under § 174(a)
to treating such expenditures as deferred
expenses under § 174(b), or vice versa;

(ii) to a different period of amortization
for research and experimental expendi-
tures for a particular project or projects
that are being treated as deferred expenses
under § 174(b);

(iii) from treating research and experi-
mental expenditures for a particular proj-
ect or projects as expenses under § 174(a)
or deferred expenses under § 174(b) to
treating such expenditures as a charge to
capital account, or vice versa; or

(iv) from treating research and experi-
mental expenditures under any provision
of the Code other than § 174 to treating
such expenditures under § 174 and the
regulations thereunder.

(b) Inapplicability. This change does
not apply to:

(i) a change in the treatment of com-
puter software costs under Rev. Proc.
2000-50, 2000-1 C.B. 601, as modified
by Rev. Proc. 2007-16, 2007-1 C.B. 358
(but see section 9 of this revenue proce-
dure for making that change); or

(ii) a change in the treatment of Year
2000 costs under Rev. Proc. 97-50,
1997-2 C.B. 525.

(3) Certain eligibility rule inapplicable.
The eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, is
not applicable to this change.

(4) Manner of making change.

(a) This change is made on a cut-off
basis and applies to all research and ex-
perimental expenditures paid or incurred
for a particular project or projects on or
after the beginning of the year of change.
See § 174(b)(2), and §§ 1.174-3(a),
1.174-3(b)(2), and 1.174-4(a)(5) for
more information regarding a cut-off ba-
sis. Accordingly, a § 481(a) adjustment is
neither permitted nor required.

(b) The requirement under §§ 1.174-
3(b)(2), 1.174-3(b)(3), and 1.174-

4(b)(2) to file an application (that is, a
Form 3115) no later than the end of the
first taxable year in which the different
method or different amortization period
is to be used is waived for this change.
However, see section 6.03 of Rev.
Proc. 2015-13 for filing requirements
applicable to a change under this section
7.01.

(c) The consent granted under section 9
of Rev. Proc. 2015-13 satisfies the consent
required under §§ 174(a)(2)(B), 174(a)(3),
and 174(b)(2), and §§ 1.174-3(b)(2),
1.174-3(b)(3), and 1.174-4(b)(2).

(5) Additional requirement. A taxpayer
must attach to its Form 3115 a written
statement providing:

(a) the information required in § 1.174-
3(b)(2) if the taxpayer is changing to treat-
ing research and experimental expenditures
as expenses under § 174(a);

(b) the information required in § 1.174-
3(b)(3) if the taxpayer is changing from
treating research and experimental expendi-
tures as expenses under § 174(a); or

(c) the information required in § 1.174-
4(b)(2) if the taxpayer is changing from
treating research and experimental expendi-
tures as deferred expenses under § 174(b) or
is changing to a different period of amorti-
zation for research and experimental expen-
ditures being treated as deferred expenses
under § 174(b).

(6) No audit protection. A taxpayer
does not receive audit protection under
section 8.01 of Rev. Proc. 2015-13 in
connection with this change. See section
8.02(2) of Rev. Proc. 2015-13.

(7) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
7.01 is "17."

(8) Contact information. For further in-
formation regarding a change under this
section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).

### SECTION 8. ELECTIVE EXPENSING PROVISIONS (§ 179D)

#### .01 Deduction for Energy Efficient Commercial Buildings (§ 179D).

(1) Description of change. This
change, as described in Rev. Proc. 2012-
39, 2012-41 I.R.B. 470, applies to a tax-
payer that wants to change its method of

accounting to deduct under § 179D
amounts paid or incurred for the installa-
tion of energy efficient commercial build-
ing property, as defined in § 179D(c)(1).
The deduction for energy efficient com-
mercial building property is subject to the
limits of § 179D(b) and must be claimed
in the taxable year in which the property is
placed in service. The basis of the energy
efficient commercial building property is
reduced by the amount of the § 179D
deduction taken and the remaining basis
of the energy efficient commercial build-
ing property is depreciated over its recov-
ery period.

(2) Applicability. This change applies
to a taxpayer that places in service prop-
erty for which a deduction is allowed un-
der § 179D(a).

(3) Inapplicability. This change does
not apply to a designer to whom the owner
of a government building allocates the
§ 179D deduction.

(4) Manner of making change. A tax-
payer making this change must attach to
its Form 3115 (the original, the copy filed
at Covington, KY, and any additional cop-
ies) a statement with a detailed description
of the tax treatment of the property under
the taxpayer's present and proposed meth-
ods of accounting.

(5) Certification requirement. In addi-
tion to the statement required by section
8.01(4) of this revenue procedure, a tax-
payer making this change must attach to
its Form 3115 a certification as required
by section 4 of Notice 2006-52, 2006-1
C.B. 1175, or section 5 of Notice 2008-
40, 2008-1 C.B. 725, to demonstrate that
the energy efficient commercial building
property has achieved the reduction in en-
ergy and power costs or in lighting power
density necessary to qualify for the § 179D
deduction.

(6) No ruling on qualification. The
consent granted under section 9 of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, for a
change provided in this section 8.01 is not
a determination by the Commissioner that
the taxpayer qualifies for a deduction un-
der section 179D. The director will ascer-
tain whether the taxpayer qualifies for a
deduction under section 179D (including
a review of the required certifications).
See section 12 of Rev. Proc. 2015-13.

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(7) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
8.01 is "152."

(8) Contact information. For further in-
formation regarding a change under this
section, contact Jennifer Bernardini at
(202) 317-6853 (not a toll-free number).

### SECTION 9. COMPUTER SOFTWARE EXPENDITURES (§§ 162, 167, and 197)

#### .01 Computer software expenditures.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for the costs of
computer software to a method described
in Rev. Proc. 2000-50, 2000-1 C.B. 601,
as modified by Rev. Proc. 2007-16,
2007-1 C.B. 358. Section 5 of Rev.
Proc. 2000-50 describes the methods
applicable to the costs of developing
computer software. Section 6 of Rev.
Proc. 2000-50 describes the method ap-
plicable to the costs of acquired com-
puter software. Section 7 of Rev. Proc.
2000-50 describes the method applica-
ble to leased or licensed computer soft-
ware.

(2) Scope. This change applies to all
costs of computer software as defined in
section 2 of Rev. Proc. 2000-50. How-
ever, this change does not apply to any
computer software that is subject to amor-
tization as an "amortizable section 197
intangible" as defined in § 197(c) and the
regulations thereunder, or to costs that a
taxpayer has treated as research and ex-
perimentation expenditures under § 174.

(3) Statement required. If a taxpayer is
changing to the method described in sec-
tion 5.01(2) of Rev. Proc. 2000-50, the
taxpayer must attach to its Form 3115 a
statement providing the information re-
quired in section 8.02(2) of Rev. Proc.
2000-50.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
9.01 is "18."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Charles Magee at (202)
317-7005 (not a toll-free number).

## SECTION 10. START-UP EXPENDITURES AND ORGANIZATIONAL FEES (§§ 195, 248, AND 709)

.01 Start-up expenditures.

(1) Description of change and scope.

(a) Applicability. This change applies
to a taxpayer that wants to change its
method of accounting under § 195 to
change:

(i) the characterization of an item as a
start-up expenditure;

(ii) the determination of the taxable year
in which the taxpayer begins the active
trade or business to which the start-up
expenditures relate; or

(iii) the amortization period of a start-up
expenditure to 180 months.

(b) Inapplicability. This change does
not apply to:

(i) start-up expenditures paid or in-
curred before October 23, 2004; or

(ii) start-up expenditures paid or in-
curred after October 22, 2004, and before
August 17, 2011, if the period of limita-
tions on assessment of tax for the taxable
year the election under § 1.195-1(b) is
deemed made has expired.

(2) No rulings.

(a) Characterization of item. The con-
sent granted under section 9 of Rev. Proc.
2015-13 for a change specified in section
10.01(1)(a)(i) of this revenue procedure is
not a determination by the Commissioner
that the taxpayer has properly character-
ized an item as a start-up expenditure and
does not create any presumption that the
proposed characterization of an item as a
start-up expenditure is permissible under
§ 195(c)(1). The director will ascertain
whether the taxpayer's characterization of
an item as a start-up expenditure is per-
missible.

(b) When active trade or business be-
gins. The consent granted under section 9
of Rev. Proc. 2015-13 for a change spec-
ified in section 10.01(1)(a)(ii) of this rev-
enue procedure is not a determination by
the Commissioner that the taxpayer has
properly determined the taxable year in
which the taxpayer begins the active trade
or business to which the start-up expendi-
tures relate and does not create any pre-
sumption that the proposed taxable year in
which the taxpayer begins the active trade or
business to which the start-up expenditures

relate is permissible under § 195(c)(2). The
director will ascertain whether the taxpay-
er's determination of the taxable year in
which the taxpayer begins the active trade or
business to which the start-up expenditures
relate is permissible.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to a method of ac-
counting under this section 10.01 is
"223."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).

### .02 Organizational expenditures under § 248.

(1) Description of change and scope.

(a) Applicability. This change applies
to a corporation that wants to change its
method of accounting under § 248 to
change:

(i) the characterization of an item as an
organizational expenditure;

(ii) the determination of the taxable
year in which the corporation begins busi-
ness to which the organizational expendi-
tures relate; or

(iii) the amortization period of an or-
ganizational expenditure to 180 months.

(b) Inapplicability. This change does
not apply to:

(i) organizational expenditures paid or
incurred before October 23, 2004; or

(ii) organizational expenditures paid or
incurred after October 22, 2004, and be-
fore August 17, 2011, if the period of
limitations on assessment of tax for the
taxable year the election under § 1.248-
1(c) is deemed made has expired.

(2) No rulings.

(a) Characterization of items. The con-
sent granted under section 9 of Rev. Proc.
2015-13 for a change specified in section
10.02(1)(a)(i) of this revenue procedure is
not a determination by the Commissioner
that the corporation has properly charac-
terized an item as an organizational
expenditure and does not create any pre-
sumption that the proposed characteriza-
tion of an item as an organizational ex-
penditure is permissible under § 248(b)
and § 1.248-1(b). The director will ascer-
tain whether the corporation's character-

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ization of an item as an organizational
expenditure is permissible.

(b) When the corporation begins busi-
ness. The consent granted under section 9
of Rev. Proc. 2015-13 for a change spec-
ified in section 10.02(1)(a)(ii) of this rev-
enue procedure is not a determination by
the Commissioner that the corporation has
properly determined the taxable year in
which the corporation begins business to
which the organizational expenditures re-
late and does not create any presumption
that the proposed taxable year in which
the corporation begins business to which
the organizational expenditures relate is
permissible under § 1.248-1(d). The di-
rector will ascertain whether the corpora-
tion's determination of the taxable year in
which the corporation begins business to
which the organizational expenditures re-
late is permissible.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
10.02 is "228."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

.03 Organization fees under § 709.

(1) Description of change and scope.

(a) Applicability. This change applies
to a partnership that wants to change its
method of accounting under § 709 to
change:

(i) the characterization of an item as an
organizational expense;

(ii) the determination of the taxable
year in which the partnership begins busi-
ness to which the organizational expenses
relate; or

(iii) the amortization period of an or-
ganizational expense to 180 months.

(b) Inapplicability. This change does
not apply to:

(i) organizational expenses paid or in-
curred before October 23, 2004; or

(ii) organizational expenses paid or in-
curred after October 22, 2004, and before
August 17, 2011, if the period of limita-
tions on assessment of tax for the taxable
year the election under § 1.709-1(b) is
deemed made has expired.

(2) No rulings.

(a) Characterization of items. The con-
sent granted under section 9 of Rev. Proc.
2015-13 for a change specified in section
10.03(1)(a)(i) of this revenue procedure is
not a determination by the Commissioner
that the partnership has properly charac-
terized an item as an organizational ex-
pense and does not create any presump-
tion that the proposed characterization of
an item as an organizational expense is
permissible under § 709(b)(3). The direc-
tor will ascertain whether the partner-
ship's characterization of an item as an
organizational expense is permissible.

(b) When the partnership begins busi-
ness. The consent granted under section 9
of Rev. Proc. 2015-13 for a change spec-
ified in section 10.03(1)(a)(ii) of this rev-
enue procedure is not a determination by
the Commissioner that the partnership has
properly determined the taxable year in
which the partnership begins business to
which the organizational expenses relate
and does not create any presumption that
the proposed taxable year in which the
partnership begins business to which the
organizational expenses relate is permis-
sible under § 1.709-2(c). The director
will ascertain whether the partnership's
determination of the taxable year in which
the partnership begins business to which
the organizational expenses relate is per-
missible.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
10.03 is "229."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Meghan Howard at (202)
317-5055 (not a toll-free number).

## SECTION 11. CAPITAL EXPENDITURES (§ 263)

.01 Package design costs.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that wants to change its
method of accounting for package design
costs that are within the scope of Rev.
Proc. 97-35, 1997-2 C.B. 448, as modi-
fied by Rev. Proc. 98-39, 1998-1 C.B.
1320, to one of the three alternative meth-
ods of accounting for package design
costs described in section 5 of Rev. Proc.

97-35, which are: (i) the capitalization
method, (ii) the design-by-design capitaliza-
tion and 60-month amortization method,
and (iii) the pool-of-cost capitalization and
48-month amortization method.

(b) Inapplicability. This change does
not apply to a taxpayer that wants to
change to the capitalization method for
costs of developing or modifying any
package design that has an ascertainable
useful life.

(2) Additional requirements. If a tax-
payer is changing its method of account-
ing for package design costs to the capi-
talization method or the design-by-design
capitalization and 60-month amortization
method, the taxpayer must attach a state-
ment to its timely filed Form 3115. The
statement must provide a description of
each package design, the date on which
each was placed in service, and the cost
basis of each (as determined under sec-
tions 5.01(2) or 5.02(2) of Rev. Proc. 97-
35).

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.01 is "19."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

.02 Line pack gas or cushion gas.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for line pack gas
or cushion gas to a method consistent with
the holding in Rev. Rul. 97-54, 1997-2
C.B. 23. Rev. Rul. 97-54 holds that the
cost of line pack gas or cushion gas is a
capital expenditure under § 263, the cost
of recoverable line pack gas or recover-
able cushion gas is not depreciable, and
the cost of unrecoverable line pack gas or
unrecoverable cushion gas is depreciable
under §§ 167 and 168.

(2) Additional requirements. A tax-
payer that changes its method of account-
ing for unrecoverable line pack gas or
unrecoverable cushion gas under this sec-
tion 11.02 must change to a permissible
method of accounting for depreciation for
the cost of that gas as part of this change.

(3) Designated automatic accounting
method change number. The designated

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automatic accounting method change
number for a change under this section
11.02 is "20."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

.03 Removal costs.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that wants to change its
method of accounting for certain costs in
the retirement and removal of a deprecia-
ble asset to conform with Rev. Rul.
2000-7, 2000-1 C.B. 712, as modified by
this revenue procedure, or for removal
costs in disposal of a depreciable asset,
including a partial disposition, as de-
scribed under § 1.263(a)-3(g)(2)(i).

(b) Inapplicability. This change does
not apply to a taxpayer that wants to change
its method of accounting for removal costs
in the disposal of a component of a unit of
property where the disposal of the compo-
nent is not a disposition for federal tax pur-
poses. To make that change, see section
11.08 of this revenue procedure.

(c) Manner of making change. A qual-
ified small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, is
required to complete only the following
information on Form 3115 (Rev. Decem-
ber 2015):

(i) The identification section of page 1
(above Part I);

(ii) The signature section at the bottom
of page 1;

(iii) Part I, line 1(a);

(iv) Part II, all lines except lines 13, 15,
16, 17, and 19, if the change is not to
depreciating property;

(v) Part II, all lines except lines 13, 15b,
16, 17, and 19, if the change is to depre-
ciating property;

(vi) Part IV, lines 26 and 27; and

(vii) Schedule E, if applicable.

(2) Additional requirements.

(a) Except for assets for which depre-
ciation is determined in accordance with
§ 1.167(a)-11 (ADR), the taxpayer's pro-
posed method of treating removal costs
for assets accounted for in a multiple asset
account must be consistent with the tax-
payer's method of treating salvage pro-
ceeds. See Rev. Rul. 74-455, 1974-2
C.B. 63. (See section 6.02 of this revenue

procedure for changing a taxpayer's pres-
ent method of treating salvage proceeds.)

(b) If this change involves assets that
are public utility property within the
meaning of § 168(i)(10) or former
§ 167(l)(3)(A), the taxpayer must comply
with the terms and conditions in section
6.01(3)(b)(v) of this revenue procedure.

(3) Certain eligibility rule inapplica-
ble. The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not apply to this change.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.03 is "21."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

.04 Distributor commissions.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that wants to change from
currently deducting distributor commis-
sions (as defined by section 2 of Rev.
Proc. 2000-38, 2002-2 C.B. 310, as mod-
ified by Rev. Proc. 2007-16, 2007-1 C.B.
358) to a method of capitalizing and am-
ortizing distributor commissions using the
distribution fee period method, the 5-year
method, or the useful life method (all de-
scribed in Rev. Proc. 2000-38).

(b) Inapplicability. This change does not
apply to an amortizable section 197 intangi-
ble (including any property for which a
timely election under § 13261(g)(2) of the
Revenue Reconciliation Act of 1993,
1993-3 C.B. 1, 128, was made).

(2) Manner of making change. This
change is made on a cut-off basis and
applies only to distributor commissions
paid or incurred on or after the beginning
of the year of change. Accordingly, a
§ 481(a) adjustment is neither permitted
nor required.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.04 is "47."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

.05 Intangibles.

(1) Description of change. This change
applies to a taxpayer that wants to change
its treatment of an item to a method of
accounting permitted by §§ 1.263(a)-4,
1.263(a)-5, and 1.167(a)-3(b). See Rev.
Proc. 2006-12, 2006-1 C.B. 310, as
modified by Rev. Proc. 2006-37, 2006-2
C.B. 499, for the specific requirements,
information, and documentation required
for this change.

(2) Section 481(a) adjustment. In com-
puting the § 481(a) adjustment for this
change, the taxpayer takes into account
only amounts paid or incurred in taxable
years ending on or after January 24, 2002.
See section 5 of Rev. Proc. 2006-12 for
detailed rules for computing the § 481(a)
adjustment and reporting it on Form 3115.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.05 is "78."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

### .06 Rotable spare parts safe harbor method.

(1) Description of change. This change
applies to a taxpayer that maintains a pool
or pools of rotable spare parts that are
primarily used to repair customer-owned
(or customer-leased) equipment under
warranty or maintenance agreements, and
wants to change its method of accounting
for the rotable spare parts to the safe har-
bor method of accounting provided in
Rev. Proc. 2007-48, 2007-2 C.B. 110.
The taxpayer must meet the requirements
in section 4.01 of Rev. Proc. 2007-48 to
use this safe harbor method of accounting.

(2) Change from safe harbor method.
A taxpayer that is required to change its
method of accounting from the safe har-
bor method under section 5.06 of Rev.
Proc. 2007-48, must make the change
under section 21.09 of this revenue pro-
cedure.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.06 is "109."

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(4) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

.07 Repairable and reusable spare parts.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that wants to change its
method of accounting to treat repairable
and reusable spare parts as depreciable
property to conform with the holdings in
Rev. Rul. 69-200, 1969-1 C.B. 60, and
Rev. Rul. 69-201, 1969-1 C.B. 60. This
change applies to repairable and reusable
spare parts that: are owned by the tax-
payer at the beginning of the year of
change; are used to repair equipment
owned by the taxpayer; are acquired by
the taxpayer for a specific type of equip-
ment at the time that the related equip-
ment is acquired; usually have the same
useful life as the related equipment; and
have been placed in service by the tax-
payer after 1986. A taxpayer making a
change in method of accounting under this
section 11.07 may treat its repairable and
reusable spare parts as tangible property
for which depreciation is allowable at the
time that the related equipment is placed
in service by the taxpayer. The method of
computing depreciation for the repairable
and reusable spare parts is the same
method of computing depreciation for the
related equipment.

(b) Inapplicability. This change does
not apply to:

(i) A taxpayer that is currently 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 revenue pro-
cedure for making a change from an im-
permissible 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 revenue
procedure;

(iii) A repairable and reusable spare
part that meets the definition of rotable
spare parts, temporary spare parts, or
standby emergency spare parts in § 1.162-
3(c)(2) or (3), for which the cost was paid
or incurred by the taxpayer in a taxable
year beginning on or after January 1, 2014
(or in a taxable year beginning on or after
January 1, 2012, if the taxpayer chooses to
apply § 1.162-3 to amounts paid or 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.

(2) Additional requirements.

(a) To change a method of accounting
under this section 11.07, a taxpayer (in-
cluding a qualified small taxpayer as de-
fined in section 6.01(4)(b) of this revenue
procedure) must complete Schedule E of
Form 3115 for the repairable and reusable
spare parts and also attach the following
information to the completed Form 3115:

(i) A description of the repairable and
reusable spare parts;

(ii) A list of related equipment for
which the repairable and reusable spare
parts are acquired; and

(iii) A complete description of the
method of computing depreciation (for
example, depreciation method, recovery
period, convention, and applicable asset
class under Rev. Proc. 87-56, 1987-2
C.B. 674, as clarified and modified by
Rev. Proc. 88-22, 1988-1 C.B. 785) that
the taxpayer uses for the related equip-
ment for which the repairable and reus-
able spare parts are acquired.

(b) Reduced filing requirement for
qualified small taxpayers. A qualified
small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, is
required to complete only the following

information on Form 3115 (Rev. Decem-
ber 2015):

(i) The identification section of page 1
(above Part I);

(ii) The signature section at the bottom
of page 1;

(iii) Part I;

(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19; and

(v) Part IV, all lines except line 25.

(3) Concurrent automatic change.

(a) A taxpayer making both this change
and a change to a UNICAP method under
section 12.01, 12.02, 12.08, or 12.12 of
this revenue procedure (as applicable) for
the same year of change should file a
single Form 3115 for both changes, in
which case the taxpayer must enter the
designated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, for information on
making concurrent changes. For example,
a qualified small taxpayer, as defined in
section 6.01(4)(b) of this revenue proce-
dure, must include on the single Form
3115 the information required by section
11.07(2)(b) of this revenue procedure and
the information required by the lines on
Form 3115, applicable to the UNICAP
method change, including Part II line 14
and 15, Part IV, and Schedule D, and must
include a separate response to each line on
Form 3115 that is applicable to both
changes (such as Part II lines 6b, 7, 8b, 14,
and, as applicable for this change, Part IV)
for which the taxpayer's response is dif-
ferent for this change and the change to a
UNICAP method.

(b) A taxpayer making both this
change and a change to a permissible
method of accounting for depreciation for
repairable and reusable spare parts, or for
the related equipment for which the re-
pairable and reusable spare parts are ac-
quired, under section 6 of this revenue
procedure (as applicable) for the same
year of change should file a single Form
3115 for both changes, in which case the
taxpayer must enter the designated auto-
matic accounting method change numbers
for both changes on the appropriate line
on that Form 3115. See section 6.03(1)(b)
of Rev. Proc. 2015-13 for information on
making concurrent changes. For example,
a qualified small taxpayer must include on

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the single Form 3115 the information re-
quired to be completed on Form 3115 by
a qualified small taxpayer under this rev-
enue procedure for each change in method
of accounting included on that Form 3115.

(c) A taxpayer making this change also
may establish pools for the repairable and
reusable spare parts or may identify dis-
posed repairable and reusable spare parts
in accordance with section 6.12 of this
revenue procedure. A taxpayer making
both this change and the change under
section 6.12 of this revenue procedure for
the same year of change should file a
single Form 3115 for both changes, in
which case the taxpayer must enter the
designated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes. For example, a qualified small
taxpayer must include on the single Form
3115 the information required to be com-
pleted on Form 3115 by a qualified small
taxpayer under this revenue procedure for
each change in method of accounting in-
cluded on that Form 3115.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.07 is "121".

(5) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

.08 Tangible property.

(1) Description of change.

(a) Applicability. This change, as de-
scribed in Rev. Proc. 2014-16, 2014-9
I.R.B. 606, applies to a taxpayer that wants
to make a change to a method of accounting
specified in section 11.08(3) of this revenue
procedure and permitted under:

(i) Section 1.162-3, § 1.162-4,
§ 1.263(a)-1, § 1.263(a)-2, or § 1.263(a)-3
(the final tangible property regulations) for
taxable years beginning on or after January
1, 2012; or

(ii) Section 1.446-1(e)(2)(ii)(d)(2) if
the property for which the taxpayer is
otherwise changing its method of account-
ing under this section is depreciable under
either the present or the proposed method
of accounting.

(b) Inapplicability. This change does
not apply to:

(i) A taxpayer that wants to change its
method of accounting for dispositions of
depreciable property, including a change
in the asset disposed of (but see sections
6.10, 6.13, 6.14, and 6.15 of this revenue
procedure);

(ii) Amounts paid or incurred for cer-
tain materials and supplies that the tax-
payer has elected to capitalize and depre-
ciate under § 1.162-3(d);

(iii) Amounts paid or incurred to which
the taxpayer has elected to apply the de
minimis safe harbor under § 1.263(a)-
1(f);

(iv) Amounts paid or incurred for em-
ployee compensation or overhead that the
taxpayer has elected to capitalize under
§ 1.263(a)-2(f)(2)(iv)(B);

(v) Amounts paid or incurred to
which the taxpayer has elected to apply
the safe harbor for small taxpayers un-
der § 1.263(a)-3(h);

(vi) Amounts paid or incurred for re-
pair and maintenance costs that the tax-
payer has elected to capitalize under
§ 1.263(a)-3(n);

(vii) Amounts paid or incurred to facil-
itate the acquisition or disposition of as-
sets that constitute a trade or business (but
see section 10.05 of this revenue proce-
dure); or

(viii) Amounts paid or incurred for re-
pair and maintenance costs that the tax-
payer is changing from capitalizing to de-
ducting and for which the taxpayer has
(A) claimed a federal income tax credit,
(B) elected to apply § 168(k)(4), or (C)
received a payment for specified energy
property in lieu of tax credits under sec-
tion 1603 of the American Recovery and
Reinvestment Tax Act of 2009, Div. B of
Pub. L. No. 111-5, 123 Stat. 115 (Febru-
ary 17, 2009), as amended by section 707
of the Tax Relief, Unemployment Insur-
ance Reauthorization, and Job Creation
Act of 2010, Pub. L. No. 111-312, 124
Stat. 3296 (December 17, 2010).

(2) Certain eligibility rules temporarily
inapplicable.

(a) In general. The eligibility rules in
sections 5.01(1)(d) and (f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, do not apply
to a taxpayer that makes one or more
changes in method of accounting under

this section for any taxable year beginning
before January 1, 2017.

(b) Concurrent automatic change. If
the taxpayer makes both a change under
this section 11.08 and a change to a UNI-
CAP method under section 12.01, 12.02,
12.08, or 12.12 of this revenue procedure
(as applicable) for any taxable year begin-
ning before January 1, 2017, on a single
Form 3115 for the same year of change in
accordance with section 11.08(5) of this
revenue procedure, the eligibility rules in
sections 5.01(1)(d) and (f) of Rev. Proc.
2015-13 do not apply to the taxpayer for
either change. See section 6.03(1)(b) of
Rev. Proc. 2015-13 for information on
making concurrent changes.

(3) Covered changes. This section
11.08 only applies to the following
changes in methods of accounting:

(a) A change to deducting amounts
paid or incurred to acquire or produce
non-incidental materials and supplies in
the taxable year in which they are first
used in the taxpayer's operations or con-
sumed in the taxpayer's operations in ac-
cordance with §§ 1.162-3(a)(1) and
1.162-3(c)(1);

(b) A change to deducting amounts to
acquire or produce incidental materials
and supplies in the taxable year in which
paid or incurred in accordance with
§§ 1.162-3(a)(2) and 1.162-3(c)(1);

(c) A change to deducting amounts
paid or incurred to acquire or produce
non-incidental rotable and temporary
spare parts in the taxable year which the
taxpayer disposes of the parts in accor-
dance with §§ 1.162-3(a)(3) and 1.162-
3(c)(2);

(d) A change to the optional method of
accounting for rotable and temporary
spare parts in accordance with § 1.162-
3(e);

(e) A change to deducting amounts
paid or incurred for repair and mainte-
nance in accordance with § 1.162-4, in-
cluding a change, if any, in identifying the
unit of property under § 1.263(a)-3(e) or,
in the case of a building, identifying the
building structure or building systems un-
der § 1.263(a)-3(e)(2) for purposes of
making the change to deducting the
amounts;

(f) A change to capitalizing amounts
paid or incurred for improvements to
tangible property in accordance with

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§ 1.263(a)-3 and, if depreciable, to de-
preciating such property under § 167 or
§ 168, including a change, if any, in
identifying the unit of property under
§ 1.263(a)-3(e) or, in the case of a build-
ing, identifying the building structure or
building systems under § 1.263(a)-3(e)(2)
for purposes of making the change to capi-
talizing the amounts;

(g) A change by a dealer in property to
deduct amounts paid or incurred for com-
missions and other costs that facilitate the
sale of property in accordance with
§ 1.263(a)-1(e)(2);

(h) A change by a non-dealer in prop-
erty to capitalizing amounts paid or in-
curred for commissions and other costs
that facilitate the sale of property in ac-
cordance with § 1.263(a)-1(e);

(i) A change to capitalizing amounts
paid or incurred to acquire or produce
property in accordance with § 1.263(a)-2,
and if depreciable, to depreciating such
property under § 167 or § 168;

(j) A change to deducting amounts paid
or incurred in the process of investigating
or otherwise pursuing the acquisition of
real property if the amounts meet the re-
quirements of § 1.263(a)-2(f)(2)(iii); and

(k) A change to the optional regulatory
accounting method in accordance with
§ 1.263(a)-3(m) to determine whether
amounts paid or incurred to repair, main-
tain, or improve tangible property are
treated as deductible expenses or capital
expenditures.

(4) Manner of making change.

(a) Form 3115. In addition to the other
information required on line 14 of Form
3115, the taxpayer must include the fol-
lowing:

(i) The citation to the paragraph of the
final tangible property regulations that
provides for the proposed method, or
methods, of accounting to which the tax-
payer is changing (for example, § 1.162-
3(a), § 1.263(a)-3(i), § 1.263(a)-3(k));
and

(ii) If the taxpayer is changing any
unit(s) of property under § 1.263(a)-3(e)
or, in the case of a building, is changing
the identification of any building struc-
ture(s) or building system(s) under
§ 1.263-3(e)(2) for purposes of determin-
ing whether amounts are deducted as re-
pair and maintenance costs under section
§ 1.162-4 or capitalized as improvement

costs under § 1.263(a)-3, the taxpayer
must include a detailed description of the
unit(s) of property, building structure(s),
or buildings system(s) used under its pres-
ent method of accounting and a detailed
description of the unit(s) of property,
building structure(s), and building sys-
tem(s) under its proposed method of ac-
counting, together with a citation to the
paragraph of the final tangible property
regulations under which the unit of prop-
erty is permitted.

(iii) A taxpayer changing its method of
accounting under this section 11.08 to
capitalizing amounts paid or incurred and
to depreciating such property under § 167
or § 168, as applicable, must complete
Schedule E of Form 3115.

(b) Reduced filing requirement for
qualified small taxpayers. A qualified
small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, is
required to complete only the following
information on Form 3115 (Rev. Decem-
ber 2015):

(i) The identification section of page 1
(above Part I);

(ii) The signature section at the bottom
of page 1;

(iii) Part I, line 1(a);

(iv) Part II, all lines except lines 13, 15,
16, 17, and 19, if the change is to not
depreciating property;

(v) Part II, all lines except line 13, line
15b, 16, 17, and 19, if the change is to
depreciating property;

(vi) Part IV, lines 26 and 27; and

(vii) Schedule E, if applicable.

(5) Concurrent automatic change.

(a) A taxpayer making two or more
changes in method of accounting pursuant
to this section 11.08 should file a single
Form 3115 for all of these changes and
must enter the designated automatic ac-
counting method change numbers for all
of these changes on the appropriate line
on the Form 3115.

(b) A taxpayer making both one or
more changes in method of accounting
pursuant to this section 11.08 and a
change to a UNICAP method under sec-
tion 12 of this revenue procedure (as ap-
plicable) for the same year of change
should file a single Form 3115 that in-
cludes all of these changes and must enter
the designated automatic accounting
method change numbers for all of these

changes on the appropriate line on that
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes. For example, a qual-
ified small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, must
include on the single Form 3115 the in-
formation required by section 11.08(4)(b)
of this revenue procedure for this change
and the information required by the lines
on Form 3115, applicable to the UNICAP
method change, including Part II lines 14
and 15, Part IV, and Schedule D, and must
include a separate response to each line on
Form 3115 that is applicable to both
changes (such as Part II lines 6b, 7, 8b, 14,
and, as applicable for this change, Part IV)
for which the taxpayer's response is dif-
ferent for this change and the change to a
UNICAP method.

(6) Section 481(a) adjustment.

(a) In general. Except as provided in
section 11.08(6)(b) of this revenue proce-
dure, a taxpayer changing to a method of
accounting provided in this section 11.08
must apply § 481(a) and take into account
any applicable § 481(a) adjustment in the
manner provided in section 7.03 of Rev.
Proc. 2015-13.

(b) Limited adjustment for certain
changes.

(i) Final tangible property regulations.
A taxpayer changing to a method of
accounting under § 1.162-3 (except
§ 1.162-3(e)), § 1.263(a)-2(f)(2)(iii),
§ 1.263(a)-2(f)(3)(ii), § 1.263(a)-3(m),
§ 1.263A-1(e)(2)(i)(A), and § 1.263A-
1(e)(3)(ii)(E) is required to calculate a
§ 481(a) adjustment as of the first day of
the taxpayer's taxable year of change that
takes into account only amounts paid or
incurred in taxable years beginning on or
after January 1, 2014. Optionally, a tax-
payer may take into account amounts paid
or incurred in taxable years beginning on
or after January 1, 2012.

(ii) Small business exception. A tax-
payer that met the scope requirements of
section 4 of Rev. Proc. 2015-20, 2015-9
I.R.B. 694, and that changed its method of
accounting under section 10.11(3)(a) of
Rev. Proc. 2015-14 (which is now section
11.08(3) of this revenue procedure) by
following section 5 of Rev. Proc. 2015-20
is required to calculate a § 481(a) adjust-
ment as of the first day of the year of
change that takes into account only

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amounts paid or incurred in taxable years
beginning on or after January 1, 2014.

(c) Itemized listing on Form 3115. A
taxpayer changing to a method of ac-
counting provided in this section 11.08
must include on Form 3115 (Rev. Decem-
ber 2015), Part IV, line 26, the total
§ 481(a) adjustment for each change in
method of accounting being made. If the
taxpayer is making more than one change
in method of accounting under the final
tangible property regulations, the taxpayer
(including a qualified small taxpayer)
must include on an attachment to Form
3115:

(i) The information required by Part
IV, line 26 of Form 3115 (Rev. December
2015) for each change in method of ac-
counting (including the amount of the
§ 481(a) adjustment for each change in
method of accounting, which includes the
portion of the § 481(a) adjustment attrib-
utable to UNICAP);

(ii) The information required by Part II,
line 14 of Form 3115 (Rev. December
2015) for each change; and

(iii) The citation to the paragraph of the
final tangible property regulations that
provides for each proposed method of ac-
counting.

(d) Repair allowance property. A tax-
payer changing to a method of accounting
provided by § 1.263(a)-3 under this sec-
tion 11.08 must not include in the § 481(a)
adjustment any amount attributable to
property for which the taxpayer elected to
apply the repair allowance under
§ 1.167(a)-11(d)(2) for any taxable year
in which the repair allowance election was
made.

(e) Statistical Sampling. Except for any
change in accounting method for which a
taxpayer is required to compute a § 481(a)
adjustment under section 11.08(6)(b) of
this revenue procedure, a taxpayer chang-
ing its method of accounting under this
section 11.08 may use statistical sampling

in determining the § 481(a) adjustment by
following the guidance provided in Rev.
Proc. 2011-42, 2011-37 I.R.B. 318.

(7) No audit protection. A taxpayer
calculating a § 481(a) adjustment under
section 11.08(6)(b)(ii) of this revenue pro-
cedure that takes into account only
amounts paid or incurred in taxable years
beginning on or after January 1, 2014,
does not receive audit protection under
section 8.01 of Rev. Proc. 2015-13 for
amounts subject to a change under this
section 11.08 that are paid or incurred in
taxable years beginning before January 1,
2014. See section 5.02 of Rev. Proc.
2015-20.

(8) Designated automatic accounting
method change number. See the following
table for the designated automatic ac-
counting method change numbers (DCN)
for the changes in method of accounting
under this section 11.08.

(a) Changes under the final tangible
property regulations.

#### Description of Change

A change to deducting amounts paid or incurred for repair and maintenance or a
change to capitalizing amounts paid or incurred for improvements to tangible
property and, if depreciable, to depreciating such property under § 167 or § 168.
Includes a change, if any, in the method of identifying the unit of property, or in
the case of a building, identifying the building structure or building systems for
the purpose of making this change.

Change to the regulatory accounting method.

Change to deducting non-incidental materials and supplies when used or con-
sumed.

Change to deducting incidental materials and supplies when paid or incurred.

Change to deducting non-incidental rotable and temporary spare parts when dis-
posed of.

Change to the optional method for rotable and temporary spare parts.

Change by a dealer in property to deduct commissions and other costs that facili-
tate the sale of property.

Change by a non-dealer in property to capitalizing commissions and other costs
that facilitate the sale of property.

Change to capitalizing acquisition or production costs and, if depreciable, to de-
preciating such property under § 167 or § 168.

Change to deducting certain costs for investigating or pursuing the acquisition of
real property (whether and which).

(9) Contact information. For further in-
formation regarding a change under this
section, contact Lewis Saideman at (202)
317-5100 (not a toll-free number).

.09 Railroad track structure
expenditures.

(1) Description of change. This change
applies to a taxpayer that wants to change

DCN

Citation

184

§§ 1.162-4, 1.263(a)-3

185

§ 1.263(a)-3(m)

186

§§ 1.162-3(a)(1), (c)(1)

187

§§ 1.162-3(a)(2), (c)(1)

188

§ 1.162-3(a)(3), (c)(2)

189

§ 1.162-3(e)

190

§ 1.263(a)-1(e)(2)

191

§ 1.263(a)-1(e)(1)

192

§ 1.263(a)-2

193

§ 1.263(a)- 2(f)(2)(iii)

its method of accounting for railroad track
structures to:

(a) the safe harbor method provided in
Rev. Proc. 2002-65, 2002-2 C.B. 700; or

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(b) the safe harbor method provided in
Rev. Proc. 2001-46, 2001-2 C.B. 263.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.09 is "213."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

.10 Remodel-refresh safe harbor method.

(1) Description of change.

(a) Applicability. This change applies
to a qualified taxpayer as defined in sec-
tion 4.01 of Rev. Proc. 2015-56, 2015-49
I.R.B. 827, and within the scope of Rev.
Proc. 2015-56 that wants to change to the
remodel-refresh safe harbor method of ac-
counting provided in section 5.02 of Rev.
Proc. 2015-56 for its qualified costs, in-
cluding the making of a late general asset
account election as provided under section
5.02(6)(d) of Rev. Proc. 2015-56.

(b) Inapplicability. This change does
not apply to the following:

(i) The revocation of a partial disposi-
tion election that is made pursuant to
section 5.02(4)(b)(ii)(B) of Rev. Proc.
2015-56 (but see section 6.18 of this rev-
enue procedure for making this revoca-
tion);

(ii) A change in determination of the
asset disposed of described in section
5.02(5) of Rev. Proc. 2015-56 (which is
made under section 6.13(3)(a) or 6.15(3)(a)
of this revenue procedure, as applicable).
See section 11.10(6)(b) of this revenue pro-
cedure for making the change under section
6.13(3)(a) or 6.15(3)(a) of this revenue pro-
cedure as a concurrent change;

(iii) The making of a late general asset
account election not provided under sec-
tion 5.02(6)(d) of Rev. Proc. 2015-56;

(iv) If section 5.02(4)(c) of Rev. Proc.
2015-56 applies to a qualified building
(partial disposition election made in a
prior year and the qualified taxpayer did
not revoke such election within the time
and in the manner provided in section
5.02(4)(b)(ii) of Rev. Proc. 2015-56), any
qualified costs paid for that qualified
building prior to the year of change for a
Form 3115 filed to make the change to the
remodel-refresh safe harbor method of ac-
counting under this section 11.10; or

(v) If section 5.02(5)(b) of Rev. Proc.
2015-56 applies to a qualified building (rec-
ognized gain or loss under § 1.168(i)-1T or
§ 1.168(i)-8T, or in a taxable year begin-
ning before January 1, 2012, for disposition
of a component of a qualified building) and
the qualified taxpayer did not make the re-
quired change in method of accounting to be
in accord with § 1.168(i)-1(e)(2)(viii) or
§ 1.168-8(c)(4), as applicable, on or before
the first taxable year that the qualified tax-
payer uses the remodel-refresh safe harbor
and take the entire amount of the § 481(a)
adjustment into account in computing the
qualified taxpayer's taxable income for that
year of change, any qualified costs paid for
that qualified building prior to the first tax-
able year that the qualified taxpayer or the
IRS makes the change specified in section
6.13(3)(a) or 6.15(3)(a) of this revenue pro-
cedure, as applicable, for that qualified
building and takes into account the entire
amount of the § 481(a) adjustment in com-
puting taxable income for the year of
change.

(2) Certain eligibility rules inapplica-
ble.

(a) In general. The eligibility rules in
sections 5.01(1)(d) and (f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, do not apply
to a qualified taxpayer that changes to a
method of accounting provided under this
section 11.10 for any taxable year begin-
ning after December 31, 2013, and ending
before December 31, 2016.

(b) Concurrent automatic change. If a
qualified taxpayer makes both a change
under this section 11.10 and a change
under section 6.12(3)(b), 6.13(3)(a),
and/or 6.15 of this revenue procedure for
any taxable year beginning after Decem-
ber 31, 2013, and ending before Decem-
ber 31, 2016, on a single Form 3115 for
the same asset for the same year of change
in accordance with section 11.10(7)(b) of
this revenue procedure, the eligibility
rules in sections 5.01(1)(d) and (f) of Rev.
Proc. 2015-13 do not apply to the quali-
fied taxpayer for either change.

(3) No audit protection. If section
5.02(4)(c) or 5.02(5)(b) of Rev. Proc.
2015-56 applies to a qualified building
(and, in the case of section 5.02(5)(b), the
qualified taxpayer does not make the re-
quired change on or before the first tax-
able year that the qualified taxpayer uses
the remodel-refresh safe harbor), the qual-

ified taxpayer does not receive audit pro-
tection under section 8.01 of Rev. Proc.
2015-13 in connection with this change
for that qualified building. See section
8.02(2) of Rev. Proc. 2015-13.

(4) Manner of making change.

(a) Reduced filing requirement for
qualified small taxpayers. A qualified
small taxpayer, as defined in section
6.01(4)(b) of this revenue procedure, may
complete only the following information
on Form 3115 (Rev. December 2015):

(i) The identification section of page 1
(above Part I);

(ii) The signature section at the bottom
of page 1;

(iii) Part I, line 1(a);

(iv) Part II, all lines except lines 5, 13,
15, 16, 17, and 19;

(v) Part IV, lines 25, 26, and 27;

(vi) Schedule E; and

(vii) If applicable, the election statement
described in section 11.10(4)(b)(ii).

(b) Late general asset account election.

(i) In general. If under section
5.02(6)(d) of Rev. Proc. 2015-56 the
qualified taxpayer is required to make a
late general asset account election, the late
general asset account election change is
made using a modified cut-off method un-
der which the unadjusted depreciable ba-
sis and the depreciation reserve of the
asset as of the beginning of the year of
change are accounted for using the new
method of accounting. The late general
asset account election change requires the
general asset account to include a begin-
ning balance for both the unadjusted de-
preciable basis and the depreciation re-
serve. The beginning balance for the
unadjusted depreciable basis of each gen-
eral asset account is equal to the sum of
the unadjusted depreciable bases as of the
beginning of the year of change for all
assets included in that general asset ac-
count. The beginning balance of the de-
preciation reserve of each general asset
account is equal to the sum of the greater
of the depreciation allowed or allowable
as of the beginning of the year of change
for all assets included in that general asset
account.

(ii) Election statement. The qualified
taxpayer (including a qualified small tax-
payer) must attach to its Form 3115 a
statement providing that the qualified tax-

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payer agrees to the following additional
terms and conditions:

(A) The qualified taxpayer consents to,
and agrees to apply, all of the provisions
of § 1.168(i)-1 to the assets that are sub-
ject to the election specified in section
5.02(6)(d) of Rev. Proc. 2015-56; and

(B) Except as provided in § 1.168(i)-
1(c)(1)(iii)(A),(e)(3), (g), or (h), the elec-
tion made by the qualified taxpayer under
section 5.02(6)(d) of Rev. Proc. 2015-56
is irrevocable and will be binding on the
qualified taxpayer for computing taxable
income for the year of change and for all
subsequent taxable years with respect to
the assets that are subject to this election.

(c) Cut-off method required for certain
changes.

(i) If section 5.02(4)(c) of Rev. Proc.
2015-56 applies to a qualified building,
the change to the remodel-refresh safe
harbor method of accounting for that qual-
ified building, and any improvements to
that qualified building, is made using a
cut-off method and applies only to quali-
fied costs paid or incurred for that quali-
fied building, and any improvements to
that qualified building, beginning in the
year of change for the change made to the
remodel-refresh safe harbor method of ac-
counting.

(ii) If section 5.02(5)(b) of Rev. Proc.
2015-56 applies to a qualified building
and the qualified taxpayer does not change
its present method of accounting to be in
accord with § 1.168(i)-1(e)(2)(viii) or
§ 1.168(i)-8(c)(4), as applicable, on or
before the first taxable year that the qual-
ified taxpayer used the remodel-refresh
safe harbor and take the entire amount of
the § 481(a) adjustment into account in
computing the qualified taxpayer's tax-
able income for that year of change, the
change to the remodel-refresh safe harbor
method of accounting for that qualified
building, and any improvements to that
qualified building, is made using a cut-off
method and applies only to qualified costs
paid or incurred for that qualified build-
ing, and any improvements to that quali-
fied building, beginning in the year of
change for the change made to comply
with § 1.168(i)-1(e)(2)(viii) or § 1.168(i)-
8(c)(4), as applicable. See section
6.13(3)(a) and section 6.15(3)(a) of this
revenue procedure, as applicable.

(5) Section 481(a) adjustment.

(a) In general. A qualified taxpayer
changing its method of accounting under
this section 11.10 must apply § 481(a) and
take into account any applicable § 481(a)
adjustment in the manner provided in sec-
tion 7.03 of Rev. Proc. 2015-13. How-
ever, a § 481(a) adjustment is neither re-
quired nor permitted for the late general
asset account election under section
5.02(6)(d) of Rev. Proc. 2015-56 or, if
section 5.02(4)(c) or 5.02(5)(b) of Rev.
Proc. 2015-56 applies to a qualified build-
ing, and an improvement to a qualified
building (and, in the case of section
5.02(5)(b) of Rev. Proc. 2015-56, the
qualified taxpayer did not make the re-
quired change on or before the first tax-
able year that the qualified taxpayer uses
the remodel-refresh safe harbor), for the
change to the remodel-refresh safe harbor
method of accounting for that qualified
building and an improvement to that qual-
ified building.

(b) Repair allowance property. A qual-
ified taxpayer changing to the method of
accounting provided under this section
11.10 must not include in the § 481(a)
adjustment any amount attributable to
property for which the qualified taxpayer
elected to apply the repair allowance un-
der § 1.167(a)-11(d)(2) for any taxable
year in which the repair allowance elec-
tion was made.

(c) Statistical sampling. A qualified
taxpayer changing its method of account-
ing under this section 11.10 may use sta-
tistical sampling in determining the
§ 481(a) adjustment only by following the
sampling procedures provided in Rev.
Proc. 2011-42, 2011-37 I.R.B. 318.

(6) Concurrent automatic change.

(a) A qualified taxpayer making this
change for more than one asset for the
same year of change should file a single
Form 3115 for all such assets. The single
Form 3115 must provide a single net
§ 481(a) adjustment for all such changes.

(b) A qualified taxpayer making this
change, a change under section 6.13(3)(a)
or 6.18 of this revenue procedure, and any
change listed in section 6.12(3)(b) or sec-
tion 6.15 of this revenue procedure for the
same year of change should file a single
Form 3115 for all such changes and must
enter the designated automatic accounting
method change numbers for the changes
on the appropriate line on the Form 3115.

See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making con-
current 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 11.10 is
"222."

(8) Contact information. For further in-
formation regarding a change under this
section, contact Merrill Feldstein at (202)
317-5100 (not a toll-free number).

## SECTION 12. UNIFORM CAPITALIZATION (UNICAP) METHODS (§ 263A)

.01 Certain uniform capitalization
(UNICAP) methods used by resellers
and reseller-producers.

(1) Description of change.

(a) Applicability. This change applies
to:

(i) a small reseller of personal property
that wants to change from a permissible
UNICAP method to a permissible non-
UNICAP inventory capitalization method
in any taxable year that it qualifies as a
small reseller;

(ii) a formerly small reseller that wants
to change from a permissible non-
UNICAP inventory capitalization method
to a permissible UNICAP method in the
first taxable year that it does not qualify as
a small reseller;

(iii) a reseller-producer that wants to
change from a permissible UNICAP
method for both its production and resale
activities to a permissible simplified resale
method described in § 1.263A-3(d)(3) in
any taxable year that it qualifies to use a
simplified resale method for both its pro-
duction and resale activities under
§ 1.263A-3(a)(4) (resellers with de mini-
mis production activities);

(iv) a reseller-producer that wants to
change from a permissible simplified re-
sale method described in § 1.263A-
3(d)(3) for both its production and resale
activities to a permissible UNICAP
method for both its production and resale
activities in the first taxable year that it
does not qualify to use a simplified resale
method for both its production and resale
activities under § 1.263A-3(a)(4);

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(v) a reseller that wants to change its
permissible UNICAP method to include a
special reseller cost allocation rule;

(vi) a reseller or reseller-producer that
wants to change to a UNICAP method (or
methods) specifically described in the reg-
ulations and includes any necessary
changes in the identification of costs sub-
ject to § 263A that will be accounted for
using the proposed method in any taxable
year, other than the first taxable year, that
it does not qualify as a small reseller; or

(vii) a reseller or reseller-producer that
wants to change from not capitalizing a
cost subject to § 263A to capitalizing that
cost under a UNICAP method (or meth-
ods) specifically described in the regula-
tions that the reseller or reseller-producer
is already using.

(b) Inapplicability.

(i) Self-constructed assets. This change
does not apply to a taxpayer that wants to
use either the simplified service cost
method or the simplified production
method for self-constructed assets under
§§ 1.263A-1(h)(2)(i)(D) and 1.263A-
2(b)(2)(i)(D).

(ii) Historic absorption ratio. This
change does not apply to a taxpayer that
wants to make an historic absorption ratio
election under §§ 1.263A-2(b)(4) or
1.263A-3(d)(4), or to a taxpayer that
wants to revoke an election to use the
historic absorption ratio with the simpli-
fied resale method (see § 1.263A-
3(d)(4)(iii)(B)), including a taxpayer us-
ing the simplified resale method with an
historic absorption ratio that wants to
change to a UNICAP method specifically
described in the regulations that does not
include the historic absorption ratio. How-
ever, this change applies to a small re-
seller that wants to change from the his-
toric absorption ratio with the simplified
resale method to a permissible non-
UNICAP inventory capitalization method
under section 12.01(1)(a)(i) of this reve-
nue procedure.

(iii) Interest capitalization. This
change does not apply to a change in
method of accounting for interest capital-
ization (but see section 12.14 of this rev-
enue procedure for making this change).

(iv) Recharacterizing costs under the
simplified resale method. This change
does not include a change for purposes of
recharacterizing "section 471 costs" as

"additional § 263A costs" (or vice versa)
under the simplified resale method.

(2) Certain eligibility rule inapplica-
ble. The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not apply to the changes
described in section 12.01(1)(a)(i) and (ii)
of this revenue procedure.

(3) Definitions.

(a) "Reseller" means a taxpayer that
acquires real or personal property de-
scribed in § 1221(a)(1) for resale.

(b) "Small reseller" means a reseller
whose average annual gross receipts for
the three immediately preceding taxable
years (or fewer, if the taxpayer has not
been in existence for the three preceding
taxable years) do not exceed $10,000,000.
See § 263A(b)(2)(B).

(c) "Formerly small reseller" means a
reseller that no longer qualifies as a small
reseller.

(d) "Producer" means a taxpayer that
produces real or tangible personal prop-
erty.

(e) "Reseller-producer" means a tax-
payer that is both a producer and a re-
seller.

(f) "Permissible UNICAP method"
means a method of capitalizing costs that
is permissible under § 263A.

(g) "A UNICAP method specifically
described in the regulations" includes the
90-10 de minimis rule to allocate a mixed
service department's costs to resale activ-
ities (§ 1.263A-1(g)(4)(ii)), the 1/3-2/3
rule to allocate labor costs of personnel to
purchasing activities (§ 1.263A-3(c)(3)
(ii)(A)), the 90-10 de minimis rule to al-
locate a dual-function storage facility's
costs to property acquired for resale
(§ 1.263A-3(c)(5)(iii)(C)), the specific iden-
tification method (§ 1.263A-1(f)(2)), the
burden rate method (§ 1.263A-1(f)(3)), the
standard cost method (§ 1.263A-1(f)(3)),
the direct reallocation method (§ 1.263A-
1(g)(4)(iii)(A)), the step-allocation method
(§ 1.263A-1(g)(4)(iii)(B)), the simplified
service cost method (§ 1.263A-1(h)) (with a
labor-based allocation ratio), and the simpli-
fied resale method without the historic ab-
sorption ratio election (§ 1.263A-3(d)), but
does not include any other reasonable allo-
cation method within the meaning of
§ 1.263A-1(f)(4).

(h) "Special reseller cost allocation
rule" means the 90-10 de minimis rule to

allocate a mixed service department's
costs to property acquired for resale
(§ 1.263A-1(g)(4)(ii)), the 1/3 - 2/3 rule
to allocate labor costs of personnel to pur-
chasing activities (§ 1.263A-3(c)(3)(ii)
(A)), and the 90-10 de minimis rule to
allocate a dual-function storage facility's
costs to property acquired for resale
(§ 1.263A-3(c)(5)(iii)(C)).

(i) "Permissible non-UNICAP inven-
tory capitalization method" means a
method of capitalizing inventory costs
that is permissible under § 471.

(4) Section 481(a) adjustment period.
Beginning with the year of change, a tax-
payer changing its method of accounting for
costs pursuant to section 12.01(1)(a)(i),
12.01(1)(a)(iii), or 12.01(1)(a)(iv) of this
revenue procedure generally must take any
applicable net positive § 481(a) adjustment
for such change into account ratably over
the same number of taxable years, not to
exceed four, that the taxpayer used its for-
mer method of accounting. A taxpayer
changing its method of accounting for costs
pursuant to section 12.01(1)(a)(ii), 12.01(1)
(a)(v), or 12.01(1)(a)(vi) of this revenue pro-
cedure must take any applicable net positive
§ 481(a) adjustment for such change into
account as provided in section 7.03 of Rev.
Proc. 2015-13.

(5) Multiple changes. A taxpayer mak-
ing both this change and another change
in method of accounting for the same year
of change must comply with the ordering
rules of § 1.263A-7(b)(2).

(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.01 is "22."

(7) Example. The following example
illustrates the principles of this section
12.01 for small resellers and formerly
small resellers.

Assume X, a corporate reseller of per-
sonal property, incorporated January 2,
2005, adopted a taxable year ending De-
cember 31. In determining whether X is a
small reseller, as provided in section
12.01(3)(b) of this revenue procedure, X
calculates its average annual gross re-
ceipts for the three taxable years (or
fewer, if applicable) immediately preced-
ing the taxable year being analyzed. For
each of the taxable years 2005 through
2014, X calculates the corresponding av-

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erage annual gross receipts for the three
immediately preceding taxable years (or

fewer, if applicable). The results are
shown in the table below:

Current

Average Annual Gross Receipts for the Three Taxable

Taxable

Years Immediately Preceding the

Year

Current Taxable Year

2005

$ 0

2006

5,000,000

2007

6,000,000

2008

7,000,000

2009

11,000,000

2010

11,000,000

2011

9,000,000

2012

8,000,000

2013

11,000,000

2014

12,000,000

Furthermore, X which adopted the dollar-value LIFO inventory method, has the following LIFO inventory balances determined
without considering the effects of the UNICAP method:

Beginning

Ending

2009

$1,000,000

$1,100,000

2010

1,100,000

1,200,000

2011

1,200,000

1,300,000

2012

1,300,000

1,400,000

2013

1,400,000

1,500,000

2014

1,500,000

1,600,000

X was required by § 263A to change to
the UNICAP method for 2009 because its
average annual gross receipts for the three
taxable years immediately preceding 2009
were $11,000,000, which exceeded the
$10,000,000 ceiling permitted by the
small reseller exception. Assume that X
was required to capitalize $80,000 of "ad-
ditional § 263A costs" to the cost of its
2009 beginning inventory because of this

change in inventory method. In addition,
X was required to include one-fourth of
the § 481(a) adjustment when computing
taxable income for each of the four tax-
able years beginning with 2009. Thus, X
was required to include a $20,000 positive
§ 481(a) adjustment in its 2009 taxable
income.

X elected to use the simplified resale
method without an historic absorption ra-

tio election under § 1.263A-3(d)(3) for
determining the amount of additional
§ 263A costs to be capitalized to each
LIFO layer. Assume that X was required
to add $10,000 of additional § 263A costs
to the cost of its 2009 ending inventory
because of the $100,000 increment for
2009.

X's 2009 Ending Inventory:

Beginning Inventory (Without UNICAP costs)

$1,000,000

2009 Increment

100,000

Additional § 263A Costs in Beginning Inventory

80,000

Additional § 263A Costs in 2009 Increment

10,000

Total 2009 Ending Inventory

$1,190,000

X's Unamortized 2009 § 481(a) Adjustment:

2009 § 481(a) Adjustment

$80,000

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Amount included in 2009 Taxable Income

&lt;20,000&gt;

Unamortized 2009 § 481(a) Adjustment-12/31/09

$60,000

Because X failed to satisfy the small reseller exception for 2010, X was required to continue using the UNICAP method for its
inventory costs. Furthermore, X was required to include $20,000 of the unamortized 2009 positive § 481(a) adjustment in 2010
taxable income. Assume that X was required to add $10,000 of additional § 263A costs to the cost of its 2010 ending inventory
because of the $100,000 increment for 2010.

X's 2010 Ending Inventory:

Beginning Inventory (With UNICAP costs)

$1,190,000

2010 Increment

100,000

Additional § 263A Costs in 2010 Increment

10,000

Total 2010 Ending Inventory

$1,300,000

X's Unamortized 2009 § 481(a) Adjustment:

Unamortized 2009 § 481(a) Adjustment-12/31/09

$60,000

Amount Included in 2010 Taxable Income

&lt;20,000&gt;

Unamortized 2009 § 481(a) Adjustment-12/31/10

$40,000

Because X satisfied the small reseller exception for 2011, X may change voluntarily from the UNICAP method to a permissible
non-UNICAP inventory capitalization method (such a change for a current taxable year is provided in section 12.01 of this revenue
procedure). To reflect the removal of the additional § 263A costs from the cost of its 2011 beginning inventory, X must compute a
corresponding § 481(a) adjustment, which is a negative $100,000 ($1,200,000 - $1,300,000). The entire amount of this negative
§ 481(a) adjustment is included in the computation of X's taxable income for 2011. In addition, X must include $20,000 of the
unamortized 2009 § 481(a) adjustment in 2011 taxable income.

X's 2011 Ending Inventory:

Beginning Inventory (With UNICAP costs)

$1,300,000

2011 Increment

100,000

2011 § 481(a) Adjustment &lt;Negative&gt;

&lt;100,000&gt;

Total 2011 Ending Inventory

$1,300,000

X's Unamortized 2009 § 481(a) Adjustment:

Unamortized 2009 § 481(a) Adjustment-12/31/10

$40,000

Amount included in 2011 Taxable Income

&lt;20,000&gt;

Unamortized 2009 § 481(a) Adjustment-12/31/11

$20,000

X's Unamortized 2011 § 481(a) Adjustment:

2011 § 481(a) Adjustment &lt;Negative&gt;

$&lt;100,000&gt;

Amount included in 2011 Taxable Income

100,000

Unamortized 2011 § 481(a) Adjustment-12/31/11

$ 0

X also satisfies the small reseller exception for 2012 and, therefore, is not required to return to the UNICAP method for 2012. X,
however, must include $20,000 of the unamortized 2009 positive § 481(a) adjustment in its 2012 taxable income.

X's 2012 Ending Inventory:

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Beginning Inventory (Without UNICAP costs)

$1,300,000

2012 Increment

100,000

Total 2012 Ending Inventory

$1,400,000

X's Unamortized 2009 § 481(a) Adjustment:

Unamortized 2009 § 481(a) Adjustment-12/31/11

$20,000

Amount in 2012 Taxable Income

&lt;20,000&gt;

Unamortized 2009 § 481(a) Adjustment-12/31/12

$ 0

In 2013, X fails to satisfy the small reseller exception and, therefore, must return to the UNICAP method (such a change for a
current taxable year is provided in section 12.01 of this revenue procedure). X changes to the simplified resale method without a
historic absorption ratio election under § 1.263A-3(d)(3). Assume that X must capitalize $120,000 of additional § 263A costs to the
cost of its 2013 beginning inventory because of this change in inventory method. Because X used a non-UNICAP method for two
taxable years prior to 2013, the § 481 spread period for the positive § 481(a) adjustment is two years. Therefore, X must include
one-half of the § 481(a) adjustment ($60,000) when computing taxable income for 2013 and 2014. Assume that X must add $10,000
of additional § 263A costs to the cost of its 2013 ending inventory because of the $100,000 increment for 2013.

X's 2013 Ending Inventory:

Beginning Inventory (Without UNICAP costs)

$1,400,000

2013 Increment

100,000

Additional § 263A costs in Beginning Inventory

120,000

Additional § 263A costs in 2013 Increment

10,000

Total 2013 Ending Inventory

$1,630,000

X's Unamortized 2013 § 481(a) Adjustment:

2013 § 481 Adjustment

$ 120,000

Amount included in 2013 Taxable Income

&lt;60,000&gt;

Unamortized 2013 § 481(a) Adjustment-12/31/13

$ 60,000

Because X fails to satisfy the small reseller exception for 2014, X must continue using the UNICAP method for its inventory costs.
Furthermore, X is required to include $60,000 of the unamortized 2013 positive § 481(a) adjustment in 2014 taxable income. Assume
that X is required to add $10,000 of additional § 263A costs to the cost of its 2014 ending inventory because of the $100,000
increment for 2014.

X's 2014 Ending Inventory:

Beginning Inventory (With UNICAP costs)

$1,630,000

2014 Increment

100,000

Additional § 263A Costs in 2014 Increment

10,000

Total 2014 Ending Inventory

$1,740,000

X's Unamortized 2013 § 481(a) Adjustment:

Unamortized 2013 § 481(a) Adjustment-12/31/13

$ 60,000

Amount included in 2014 Taxable Income

&lt;60,000&gt;

Unamortized 2013 § 481(a) Adjustment-12/31/14

$ 0

(8) Contact information. For further in-
formation regarding a change under this
section, contact Natasha Mulleneaux at
(202) 317-7007 (not a toll-free number).

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.02 Certain uniform capitalization
(UNICAP) methods used by producers
and reseller-producers.

(1) Description of change.

(a) Applicability. This change applies
to a producer (as defined in section
12.01(3)(d) of this revenue procedure) or
a reseller-producer (as defined in section
12.01(3)(e) of this revenue procedure) that
wants to change to a UNICAP method (or
methods) specifically described in the reg-
ulations, including any necessary changes
in the identification of costs subject to
§ 263A that will be accounted for using
the proposed method. This change also
includes a change from not capitalizing a
cost subject to § 263A to capitalizing that
cost for a producer or a reseller-producer
under a UNICAP method (or methods)
specifically described in the regulations
that the producer or reseller-producer is
already using.

(b) Inapplicability.

(i) Self-constructed assets. This change
does not apply to a taxpayer that wants to
use either the simplified service cost
method or the simplified production
method for self-constructed assets under
§§ 1.263A-1(h)(2)(i)(D) and 1.263A-
2(b)(2)(i)(D).

(ii) Historic absorption ratio. This
change does not apply to a taxpayer that
wants to make an historic absorption ratio
election under §§ 1.263A-2(b)(4) or
1.263A-3(d)(4), or to a taxpayer that
wants to revoke an election to use the
historic absorption ratio with the simpli-
fied production method (see § 1.263A-
2(b)(4)(iii)(B)), including a taxpayer us-
ing the simplified production method with
an historic absorption ratio changing to a
UNICAP method specifically described in
the regulations that does not include the
historic absorption ratio.

(iii) Interest capitalization. This
change does not apply to a change in
method of accounting for interest capital-
ization (but see section 12.14 of this rev-
enue procedure for making this change).

(iv) Recharacterizing costs under the
simplified production method. This
change does not include a change for pur-
poses of recharacterizing "section 471
costs" as "additional § 263A costs" (or
vice versa) under the simplified produc-
tion method.

(2) Definition. A "UNICAP method
specifically described in the regulations"
includes the 90-10 de minimis rule to
allocate a mixed service department's
costs to production or resale activities
(§ 1.263A-1(g)(4)(ii)), the 1/3 - 2/3 rule
to allocate labor costs of personnel to
purchasing activities (§ 1.263A-3(c)(3)
(ii)(A)), the 90-10 de minimis rule to al-
locate a dual-function storage facility's
costs to property acquired for resale
(§ 1.263A-3(c)(5)(iii)(C)), the specific
identification method (§ 1.263A-1(f)(2)),
the burden rate method (§ 1.263A-
1(f)(3)), the standard cost method
(§ 1.263A-1(f)(3)), the direct reallocation
method (§ 1.263A-1(g)(4)(iii)(A)), the
step-allocation method (§ 1.263A-1(g)(4)
(iii)(B)), the simplified service cost
method (§ 1.263-1(h)) (with either a
labor-based allocation ratio or a produc-
tion cost allocation ratio), and the simpli-
fied production method without the his-
toric absorption ratio election (§ 1.263A-
2(b)), but does not include any other
reasonable allocation method within the
meaning of § 1.263A-1(f)(4).

(3) Multiple changes. A taxpayer mak-
ing both this change and another change
in method of accounting in the same year
of change must comply with the ordering
rules of § 1.263A-7(b)(2).

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.02 is "23."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Natasha Mulleneaux at
(202) 317-7007 (not a toll-free number).

.03 Impact fees.

(1) Description of change. This change
applies to a taxpayer that incurs impact
fees as defined in Rev. Rul. 2002-9,
2002-1 C.B. 614, in connection with the
construction of a new residential rental
building that wants to capitalize the costs
to the building under §§ 263(a) and 263A.
See Rev. Rul. 2002-9 for further informa-
tion.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.03 is "25."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Natasha Mulleneaux at
(202) 317-7007 (not a toll-free number).

.04 Change to capitalizing
environmental remediation costs under
§ 263A.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for environmen-
tal remediation costs from a method that
does not comply with the holding in Rev.
Rul. 2004-18, 2004-1 C.B. 509, to cap-
italizing them to inventory under § 263A.

(2) Concurrent automatic changes. A
taxpayer making both this change and an-
other automatic change under § 263A for
the same year of change may file a single
Form 3115 for both changes, provided the
taxpayer enters the designated automatic
change numbers for both changes on the
appropriate line on that Form 3115, and
complies with the ordering rules of
§ 1.263A-7(b)(2). See section 6.03(1)(b)
of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, for information on making concur-
rent changes.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.04 is "77."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Sean Dwyer at (202) 317-
7005 (not a toll-free number).

.05 Change in allocating environmental
remediation costs under § 263A.

(1) Description of change. This change
applies to a taxpayer that capitalizes envi-
ronmental remediation costs to inventory
under § 263A, but allocates these costs to
inventory using a method of accounting
that does not comply with the holding in
Rev. Rul. 2005-42, 2005-2 C.B. 67, and
wants to change to allocating these costs
to inventory produced during the taxable
year in which the costs are incurred under
§ 263A. See Rev. Rul. 2005-42 for fur-
ther information.

(2) Concurrent automatic changes. A
taxpayer making both this change and an-
other automatic change under § 263A for
the same year of change may file a single

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Form 3115 for both changes, provided the
taxpayer enters the designated automatic
accounting method change numbers for
both changes on the appropriate line on
that Form 3115, and complies with the
ordering rules of § 1.263A-7(b)(2). See
section 6.03(1)(b) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, for information on
making concurrent changes.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.05 is "92."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Sean Dwyer at (202) 317-
7005 (not a toll-free number).

.06 Safe harbor methods under § 263A
for certain dealerships of motor
vehicles.

(1) Description of change. This change
applies to a motor vehicle dealership, as
defined in section 4 of Rev. Proc. 2010-
44, 2010-49 I.R.B. 811, that is within the
scope of section 3 of Rev. Proc. 2010-44
and wants to change its method of ac-
counting to (1) treat its sales facility as a
retail sales facility or (2) be treated as a
reseller without production activities, as
described in section 5 of Rev. Proc. 2010-
44. A motor vehicle dealership that wants
to make an automatic change in method of
accounting to use one or both safe harbor
methods described in section 5 of Rev.
Proc. 2010-44 may make any corre-
sponding changes in the identification of
costs subject to § 263A that will be ac-
counted for using the proposed method
(for example, to remove internal profit
from inventory costs) or to no longer in-
clude negative amounts as additional
§ 263A costs in the numerator of the sim-
plified resale method formula or the sim-
plified production method formula. How-
ever, except as provided in the preceding
sentence, a change under this section does
not include a change for purposes of re-
characterizing "§ 471 costs" as "addi-
tional § 263A costs" (or vice versa) under
the simplified resale method or the sim-
plified production method.

(2) Concurrent automatic changes. A
motor vehicle dealership making an auto-
matic change to one or both safe harbor
methods described in section 5 of Rev.

Proc. 2010-44 and another automatic
change under § 263A for the same taxable
year may file one Form 3115 to make both
changes, provided the dealership enters
the designated automatic change numbers
for all such changes in Part I on that Form
3115, and complies with the ordering
rules of § 1.263A-7(b)(2). See section
6.03(1)(b) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, for information on making
concurrent changes.

(3) Multiple adjustments. In the event
that a motor vehicle dealership is taking
into account a § 481(a) adjustment from
another accounting method change in ad-
dition to the § 481(a) adjustment required
by a change to a safe harbor method de-
scribed in section 5 of Rev. Proc. 2010-
44, the § 481(a) adjustments must be
taken into account separately. For exam-
ple, a motor vehicle dealership that
changed to comply with § 263A in 2009
and was required to take its § 481(a) ad-
justment into account over four years
must continue to take into account that
adjustment over the remainder of that four
year § 481(a) adjustment period even
though the dealership changed to a safe
harbor method described in section 5 of
Rev. Proc. 2010-44 in 2010 and has an
additional § 481(a) adjustment required
by that change.

(4) Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to treat certain sales
facilities as retail sales facilities as de-
scribed in section 5.01 of Rev. Proc.
2010-44 is "150." The designated auto-
matic accounting method change number
for a change to be treated as a reseller
without production activities as described
in section 5.02 of Rev. Proc. 2010-44 is
"151."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Natasha Mulleneaux at
(202) 317-7007 (not a toll-free number).

.07 Change to not apply § 263A to one
or more plants removed from the list of
plants that have a preproductive period
in excess of 2 years.

(1) Description of change. This
change, as described in Rev. Proc. 2013-
20, 2013-14 I.R.B. 744, applies to a tax-
payer that is not a corporation, partner-

ship, or tax shelter required to use an
accrual method of accounting under § 447
or § 448(a)(3), and either (a) wants to not
apply § 263A, pursuant to § 263A(d)(1)
and § 1.263A-4(a)(2), to the production
of one or more plants that the IRS and the
Treasury Department have removed from
the list of plants that have a nationwide
weighted average preproductive period in
excess of 2 years, or (b) properly elected,
pursuant to § 263A(d)(3) and § 1.263A-
4(d), to not apply § 263A to the produc-
tion of a plant or plants that have been
removed from the list of plants that have a
nationwide weighted average preproduc-
tive period in excess of 2 years, and
wishes to revoke its § 263A(d)(3) election
with respect to those plants. See Notice
2013-18, 2013-14 I.R.B. 742, or its suc-
cessor.

(2) Audit protection. If a taxpayer cur-
rently does not apply § 263A to its black-
berry, raspberry, or papaya plants in a
manner that complies with the require-
ments of § 263A(d)(1) and § 1.263A-
4(a)(2), the IRS will not raise such method
of accounting for a taxable year that ends
on or before February 15, 2013. Also, if
the use of such a method of accounting by
a taxpayer is an issue under consideration
(within the meaning of section 3.08 of
Rev. Proc. 2015-13) for taxable years in
examination, before an Appeals office, or
before the U.S. Tax Court in a taxable
year that ends on or before February 15,
2013, the IRS will not further pursue that
issue.

(3) Manner of making change. A
change under this section 12.07 is made
with any necessary adjustments under
§ 481(a). For example, the revocation of
an election under § 263A(d)(3) results in a
§ 481(a) adjustment that must take into
account the change in depreciation from
the alternative depreciation system to the
general depreciation system included
within such revocation.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.07 is "181."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).

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.08 Change to a reasonable allocation
method described in § 1.263A-1(f)(4)
for self-constructed assets.

(1) Description of change.

(a) Applicability. This change, as de-
scribed in Rev. Proc. 2014-16, 2014-9
I.R.B. 606, applies to a producer (as de-
fined in section 12.01(3)(d) of this reve-
nue procedure) or a reseller-producer (as
defined in section 12.01(3)(e) of this rev-
enue procedure) that wants to change to a
reasonable allocation method within the
meaning of § 1.263A-1(f)(4), other than
the methods specifically described in
§ 1.263A-1(f)(2) or (3), for self-
constructed assets produced during the
taxable year, including any necessary
changes in the identification of costs sub-
ject to § 263A that will be accounted for
using the proposed method. This section
12.08 also includes a change from not
capitalizing a cost subject to § 263A to
capitalizing that cost for a producer or
reseller-producer under a reasonable allo-
cation method within the meaning of
§ 1.263A-1(f)(4) that the producer or
reseller-producer is already using for self-
constructed assets, other than the methods
specifically described in § 1.263A-1(f)(2)
or (3). See section 12.02 of this revenue
procedure for a producer or reseller-
producer that wants to change to a method
described in § 1.263A-1(f)(2) or (3).

(b) Inapplicability. This change does
not apply to an allocation method based
on the number of units produced or an
allocation method that does not allocate
costs to the units of property produced.
This change does not apply to a change
described in another section of this reve-
nue procedure or in other guidance pub-
lished in the Internal Revenue Bulletin.
For example, this change does not apply
to a change described in section 12.01 or
12.02 of this revenue procedure.

(2) No ruling on reasonableness of
method. The consent granted in section 9
of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, for this change is not a determination
by the Commissioner that the taxpayer is
using a reasonable allocation method for
costs subject to § 263A and does not cre-
ate any presumption that the proposed al-
location method is permissible. The direc-
tor will ascertain whether the taxpayer's

allocation method is reasonable within the
meaning of § 1.263A-1(f)(4).

(3) Multiple changes. A taxpayer mak-
ing both this change and another change
in method of accounting under section
11.08 of this revenue procedure for the
same year of change must comply with
the ordering rules of § 1.263A-7(b)(2).

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.08 is "194."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Natasha Mulleneaux at
(202) 317-7007 (not a toll-free number).

.09 Real property acquired through
foreclosure.

(1) Applicability. This change, as de-
scribed in Rev. Proc. 2014-16, 2014-9
I.R.B. 606, applies to a taxpayer that cap-
italizes costs under § 263A(b)(2) and
§ 1.263A-3(a)(1) to real property ac-
quired through foreclosure, or similar
transaction, where the taxpayer wants to
change its method of accounting to an oth-
erwise permissible method of accounting
under which the acquisition and holding
costs for real property acquired through
foreclosure, or similar transaction, are not
capitalized under § 263A(b)(2) and
§ 1.263A-3(a)(1). To qualify for this change
in method of accounting, a taxpayer must:

(a) originate, or acquire and hold for
investment, loans that are secured by real
property; and

(b) acquire the real property that se-
cures the loans at a foreclosure sale, by
deed in lieu of foreclosure, or in another
similar transaction.

(2) Inapplicability. This change does
not apply to costs capitalized under
§ 263A(b)(1) and § 1.263A-2(a)(1) by the
taxpayer to the acquired real property as a
result of production activities.

(3) Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change under this section
12.09 is "195."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Sue-Jean Kim at (202)
317-7007 (not a toll-free number).

.10 Sales-Based Royalties.

(1) Description of change. This
change, as described in Rev. Proc. 2014-
33, 2014-22 I.R.B. 1060, applies to a
taxpayer that wants to change its method
of accounting for sales-based royalties (as
described in § 1.263A-1(e)(3)(ii)(U)(2))
that are properly allocable to inventory
property:

(a) From not capitalizing sales-based
royalties to capitalizing these costs and
allocating them entirely to cost of goods
sold under a taxpayer's method of ac-
counting;

(b) From not capitalizing sales-based
royalties to capitalizing these costs and
allocating them to inventory property un-
der a taxpayer's method of accounting;

(c) From capitalizing sales-based roy-
alties and allocating these costs to inven-
tory property to allocating them entirely to
cost of goods sold; or

(d) From capitalizing sales-based roy-
alties and allocating these costs entirely to
cost of goods sold to allocating them to
inventory property.

(2) Limitations.

(a) A taxpayer may not make a change
in method of accounting under this section
12.10 if the taxpayer wants to change to
capitalizing sales-based royalties and allo-
cating them to inventory property using an
other reasonable allocation method within
the meaning of § 1.263A-1(f)(4).

(b) A taxpayer making the changes
described in section 12.10(1)(a) or
12.10(1)(c) of this revenue procedure that
uses a simplified method to determine the
additional § 263A costs allocable to in-
ventory property on hand at year end must
remove sales-based royalties allocated to
cost of goods sold from the formulas used
to allocate additional § 263A costs to end-
ing inventory in the same manner that the
taxpayer included these amounts in the
formulas.

(c) A taxpayer making a change in
method of accounting under this section
12.10 that uses a simplified method with
an historic absorption ratio election (see
§§ 1.263A-2(b)(4) and 1.263A-3(d)(4))
and currently includes, or is changing its
method to include, sales-based royalties in
any part of its historic absorption ratio
must revise its previous and current his-
toric absorption ratios. To revise its his-

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toric absorption ratios, the taxpayer must
apply its proposed method of accounting
during the test period, during all recom-
putation years, and during all updated test
periods to determine the § 471 costs and
additional § 263A costs that were in-
curred. The revised historic absorption ra-
tios must be used to revalue beginning
inventory and must be accounted for in
the taxpayer's § 481(a) adjustment. The
taxpayer must use a method described in
§ 1.263A-7(c) to revalue beginning in-
ventory.

(3) Concurrent automatic changes. A
taxpayer making a change under this sec-
tion 12.10 and one or more automatic
changes in method of accounting under
§ 263A for the same year of change may
file a single Form 3115 for all changes,
provided the taxpayer enters the desig-
nated automatic change numbers for all
changes on the appropriate line on the
Form 3115 and complies with the order-
ing rules of § 1.263A-7(b)(2). See section
6.03(1)(b) of Rev. Proc. 2015-13 for in-
formation on making concurrent changes.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for changes in method of account-
ing under this section 12.10 is "201."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Sean Dwyer at (202) 317-
7005 (not a toll-free number).

.11 Treatment of Sales-Based Vendor
Chargebacks under a Simplified Method.

(1) Description of change. This
change, as described in Rev. Proc. 2014-
33, 2014-22 I.R.B. 1060, applies to a
taxpayer that wants to change its method
of accounting to no longer include cost
adjustments for sales-based vendor
chargebacks described in § 1.471-3(e)(1)
in the formulas used to allocate additional
§ 263A costs to ending inventory under a
simplified method.

(2) Limitations.

(a) A taxpayer making this change that
uses a simplified method to determine the
additional § 263A costs allocable to in-
ventory property on hand at year end must
remove sales-based vendor chargebacks
from the formulas used to allocate addi-
tional § 263A costs to ending inventory in

the same manner that the taxpayer in-
cluded these amounts in the formulas.

(b) A taxpayer making a change in
method of accounting under this section
12.11 that uses a simplified method with
an historic absorption ratio election (see
§§ 1.263A-2(b)(4) and 1.263A-3(d)(4))
and currently includes sales-based vendor
chargebacks in any part of its historic ab-
sorption ratio must revise its previous and
current historic absorption ratio(s). To re-
vise its historic absorption ratios, the tax-
payer must apply its proposed method of
accounting during the test period, during
all recomputation years, and during all
updated test periods to determine the
§ 471 costs and additional § 263A costs
that were incurred. The revised historic
absorption ratios must be used to revalue
beginning inventory and must be ac-
counted for in the taxpayer's § 481(a)
adjustment. The taxpayer must use a
method described in § 1.263A-7(c) to re-
value beginning inventory.

(3) Concurrent automatic changes. A
taxpayer making both this change and one
or more automatic changes under § 263A,
or both this change and the change de-
scribed in section 21.15 of this revenue
procedure for the same taxable year of
change may file a single Form 3115 for
both changes, provided the taxpayer en-
ters the designated automatic change
numbers for all changes on the appropri-
ate line on the Form 3115 and complies
with the ordering rules of § 1.263A-
7(b)(2). See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for changes in method of account-
ing under this section 12.11 is "202".

(5) Contact information. For further in-
formation regarding a change under this
section, contact Sean Dwyer at (202) 317-
7005 (not a toll-free number).

.12 U.S. ratio method.

(1) Change to the U.S. ratio method.

(a) Description of change. This change
applies to a foreign person, as defined in
Notice 88-104, 1988-2 C.B. 443, as
modified by Notice 89-67, 1989-1 C.B.
723, that is required to capitalize costs
under § 263A and wants to change its

method of accounting to the U.S. ratio
method, as described in Notice 88-104.

(b) Manner of making change. A tax-
payer requesting a change on behalf of a
foreign person under section 12.12(1) of
this revenue procedure must attach a state-
ment to the Form 3115 providing the fol-
lowing information:

(i) Foreign person requirement. A rep-
resentation that the foreign person is a
qualified business unit (QBU), as defined
in § 1.989(a)-1(b), of a foreign person, or
the foreign branch of a U.S. person that
constitutes a separate QBU, within the
meaning of Notice 88-104. If the tax-
payer is requesting a change in method of
accounting on behalf of multiple foreign
persons, please provide a representation
that each foreign person is a QBU, as
defined in § 1.989(a)-1(b), of a foreign
person or the foreign branch of a U.S.
person that constitutes a separate QBU,
within the meaning of Notice 88-104;

(ii) Description of trade or business.
The name and employer identification
number (if applicable) for each foreign
person and an explanation of each trade or
business, as defined in § 1.446-1(d), for
which a request to change to the U.S. ratio
method is being made under this section
12.12(1);

(iii) Applicable U.S. trade or business
requirement. The identity of the "applica-
ble U.S. trade or business," as defined in
Notice 88-104, that the foreign person
wishes to use and an explanation of how
this U.S. trade or business is "the same as,
or most similar to" the trade or business
conducted by the foreign person. If the
taxpayer is requesting a change in method
of accounting for multiple foreign per-
sons, the taxpayer must identify the "ap-
plicable U.S. trade or business" for each
foreign person, and explain how the re-
spective U.S. trade or business is "the
same as, or most similar to" the trade or
business conducted by the foreign person;
and

(iv) Relationship requirement. An ex-
planation of how the "applicable U.S.
trade or business" identified in section
12.12(1)(b)(iii) of this revenue procedure
is a trade or business conducted in the
United States by a "related person," as
defined in Notice 88-104, with respect to
the foreign person requesting a change
under this section. If the taxpayer is re-

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questing a change in method of account-
ing for multiple foreign persons, the tax-
payer must explain how the "applicable
U.S. trade or business" identified in sec-
tion 12.12(1)(b)(iii) of this revenue proce-
dure is a trade or business conducted in
the United States by "related person" for
purposes of Notice 88-104 for each for-
eign person requesting a change in
method of accounting. Use §§ 267(b) or
707(b), as applicable, to explain the rela-
tionship.

(c) Additional requirements.

(i) A foreign person must continue to
use the U.S. ratio of the applicable U.S.
trade or business identified in section
12.12(1)(b)(iii) of this revenue procedure
unless consent of the Commissioner is
obtained to use the U.S. ratio of a different
applicable U.S. trade or business under
§ 446(e) (see section 12.12(2) of this rev-
enue procedure);

(ii) In the case of a controlled foreign
corporation, the controlling U.S. share-
holder, or in the case of a foreign branch
of a U.S. person, the U.S. person, must
maintain records of the U.S. ratio used by
each foreign person to calculate the addi-
tional § 263A costs capitalized to property
produced and property acquired for resale
for the year of change and for subsequent
taxable years for each foreign person re-
questing a change in method of account-
ing under this section 12.12. In the case of
a controlled foreign partnership, the U.S.
partner must maintain records of the U.S.
ratio used by each foreign person to cal-
culate the additional § 263A costs capital-
ized to property produced and property
acquired for resale for the year of change
and for subsequent taxable years for each
foreign person requesting a change in
method of accounting under this section
12.12.

(iii) The § 481(a) adjustment is com-
puted in the manner provided in Notice
88-104;

(iv) The U.S. ratio is determined, and
the ratio is applied to the costs of property
produced or property acquired for resale
incurred by the foreign person, in accor-
dance with Notice 88-104; and

(v) If any foreign person is unable to
obtain a U.S. ratio from the applicable
U.S. trade or business identified in section
12.12(2)(b)(iii) of this revenue procedure,
or is otherwise no longer eligible to use

the U.S. ratio method, the foreign person
is no longer permitted to use the U.S. ratio
method. However, the foreign person is
not ineligible to use the U.S. ratio method
if the foreign person is able to obtain a
U.S. ratio from a different applicable U.S.
trade or business, and changes the appli-
cable U.S. trade or business pursuant to
section 12.12(2) of this revenue procedure
or under the non-automatic change proce-
dures of this revenue procedure, as appli-
cable. If a foreign person is no longer
eligible to use the U.S. ratio method, it is
required to change its method of account-
ing to a method that complies with
§§ 263A and 471 using either the auto-
matic change procedures of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, and sections
12.01, 12.02, or 12.08, as applicable, of
this revenue procedure or the non-
automatic change procedures of Rev.
Proc. 2015-13.

(2) Change within U.S. ratio method.
This change applies to a foreign person
currently using the U.S. ratio method that
wants to use the U.S. ratio of a different
applicable U.S. trade or business for pur-
poses of applying the U.S. ratio method as
described in section 12.12(2)(a) or
12.12(2)(b) of this revenue procedure.

(a) Required change in the applicable
U.S. trade or business.

(i) In general. A foreign person is per-
mitted to change its method of accounting
under this section 12.12(2)(a) to use the
U.S. ratio of a different applicable U.S.
trade or business, as defined in Notice
88-104, if the foreign person is no longer
able to obtain the U.S. ratio from the
applicable U.S. trade or business previ-
ously identified and if: (A) the U.S. person
or related person in which the applicable
U.S. trade or business is conducted termi-
nates its existence; (B) the foreign person
is no longer related, within the meaning of
§ 267(b) or § 707(b), to the U.S. person or
related person in which the applicable
U.S. trade or business is conducted; or (C)
the U.S. person or related person ceases to
conduct the applicable U.S. trade or busi-
ness.

(ii) Certain eligibility rule inapplica-
ble. The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13 does not
apply to the change described in section
12.12(2)(a) of this revenue procedure.

(iii) Manner of making change. A for-
eign person making a change in method of
accounting under this section 12.12(2)(a)
must make the change in accordance with
the requirement set forth in section
12.12(2)(c) of this revenue procedure.

(b) Other changes in the applicable
U.S. trade or business.

(i) In general. If the foreign person
cannot make the change in method of ac-
counting described in section 12.12(2)(a)
of this revenue procedure, or there is more
than one U.S. trade or business that can
reasonably be considered the "same as, or
most similar to" the foreign person's trade
or business, the foreign person is permit-
ted to change its method of accounting
under this section 12.12(2)(b) to use the
U.S. ratio of a different applicable U.S.
trade or business.

(ii) Manner of making change. A for-
eign person making a change in method of
accounting under this section 12.12(2)(b)
must make the change in accordance with
the requirement set forth in section
12.12(2)(c) of this revenue procedure.

(c) Short Form 3115 in lieu of a Form
3115. In accordance with § 1.446-
1(e)(3)(ii), the requirement of § 1.446-
1(e)(3)(i) to file a Form 3115 is waived
and pursuant to section 6.02(2) of Rev.
Proc. 2015-13, a short Form 3115 is au-
thorized for a change described in section
12.12(2)(a) or 12.12(2)(b) of this revenue
procedure. The short Form 3115 (Rev.
December 2015) must include the follow-
ing information:

(i) the identification section of page 1
(above Part I);

(ii) the signature section at the bottom of
page 1;

(iii) Part I, line 1(a);

(iv) the information required under sec-
tion 12.12(1)(b) of this revenue proce-
dure; and

(v) a statement that the change in
method of accounting is made under sec-
tion 12.12(2)(a) or 12.12(2)(b) of Rev.
Proc. 2017-30, as applicable.

(3) Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change under this section
12.12 is "214."

(4) Contact information. For further in-
formation regarding a change under this

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section, contact Sean Dwyer at (202) 317-
7005 (not a toll-free number).

.13 Depletion.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for depletion to
treat these amounts as an indirect cost that
is only properly allocable to property that
has been sold (that is, for purposes of
determining gain or loss on the sale of the
property) under § 1.263A-1(e)(3)(ii)(J).

(2) Limitation.

(a) A taxpayer making this change in
method of accounting that uses a simpli-
fied method to determine the additional
§ 263A costs allocable to inventory prop-
erty on hand at year end must remove
depletion allocated to cost of goods sold
from the formulas used to allocate addi-
tional § 263A costs to ending inventory in
the same manner that the taxpayer in-
cluded these amounts in the formulas.

(b) A taxpayer making this change in
method of accounting that uses a simpli-
fied method with an historic absorption
ratio election (see §§ 1.263A-2(b)(4) and
1.263A-3(d)(4)) and currently includes
depletion in any part of its historic absorp-
tion ratio must revise its previous and
current historic absorption ratios. To re-
vise its historic absorption ratios, the tax-
payer must apply its proposed method of
accounting during the test period, during
all recomputation years, and during all
updated test periods to determine the
§ 471 costs and additional § 263A costs
that were incurred. The revised historic
absorption ratios must be used to revalue
beginning inventory and must be ac-
counted for in the taxpayer's § 481(a)
adjustment. The taxpayer must use a
method described in § 1.263A-7(c) to re-
value beginning inventory

(3) Certain eligibility rule inapplica-
ble. The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not apply to this change.

(4) Concurrent automatic changes. A
taxpayer making both this change and an-
other automatic change under § 263A for
the same year of change may file a single
Form 3115 for both changes, provided the
taxpayer enters the designated automatic
change numbers for both changes on the
appropriate line on that Form 3115 and
complies with the ordering rules of

§ 1.263A-7(b)(2). See section 6.03(1)(b)
of Rev. Proc. 2015-13 for information on
making concurrent changes.

(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change in method of ac-
counting under this section 12.13 is
"215."

(6) Contact information. For further in-
formation regarding a change under this
section, contact Sean Dwyer at (202) 317-
7005 (not a toll-free number).

.14 Interest capitalization.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for interest from
not capitalizing any interest, capitalizing
interest in accordance with its method of
accounting for financial reporting pur-
poses, or applying an improper method of
capitalizing interest under §§ 1.263A-8
through 14, with respect to the production
of designated property, to capitalizing in-
terest with respect to the production of
designated property in accordance with
§§ 1.263A-8 through 14.

(2) Manner of making change. A tax-
payer requesting a change under this sec-
tion 12.14 must attach a statement to the
Form 3115 with the following informa-
tion:

(a) Representations as to the following:

(i) The taxpayer's method is in accor-
dance with the avoided cost method under
§ 1.263A-9; and

(ii) The taxpayer will comply with
§ 1.263A-14 and Notice 88-89, 1988-2
C.B. 422, should the taxpayer incur aver-
age excess expenditures allocable to re-
lated persons; and

(b) Details with respect to the taxpay-
er's sub-methods of accounting for deter-
mining capitalizable interest in accor-
dance with §§ 1.263A-8 through 14 (for
example, whether the taxpayer elects to
not trace debt under § 1.263A-9(d); the
computation period(s) used under the new
method; and whether the taxpayer will
suspend the capitalization of interest for
units of property for which production has
ceased for at least 120 consecutive days as
determined under § 1.263A-12(g)).

(3) Concurrent automatic changes. A
taxpayer making a change under this sec-
tion 12.14 and one or more automatic

changes in method of accounting under
§ 263A for the same year of change may
file a single Form 3115 for all changes,
provided the taxpayer enters the desig-
nated automatic change numbers for all
changes on the appropriate line on the
Form 3115 and complies with the order-
ing rules of § 1.263A-7(b)(2). See section
6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change in method of ac-
counting under this section 12.14 is
"224."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Steven Gee at (202) 317-
7007 (not a toll-free number).

SECTION 13. LOSSES, EXPENSES
AND INTEREST WITH RESPECT
TO TRANSACTIONS BETWEEN
RELATED TAXPAYERS (§ 267)

.01 Change to comply with § 267.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method or methods of accounting to
comply with the requirements of § 267,
which disallows or defers certain deduc-
tions attributable to transactions between
related taxpayers. However, this change
does not apply to a change for original
issue discount (OID), including stated in-
terest that is OID because it is not quali-
fied stated interest (as defined in
§ 1.1273-1(c)). See section 5.02 of this
revenue procedure for a change to comply
with § 163(e)(3) for OID on an obligation
held by a related foreign person.

(2) Certain eligibility rules inapplica-
ble. The eligibility rules in sections
5.01(1)(e) and (f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, do not apply to this
change to comply with § 267(a)(3).

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
13.01 is "26."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Steven Gee at (202) 317-
7007 (not a toll-free number). For further

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information regarding a change to comply
with § 267(a)(3), contact Joseph Vetting
at (202) 317-4960 (not a toll-free num-
ber).

## SECTION 14. DEFERRED COMPENSATION (§ 404)

.01 Deferred compensation.

(1) Description of change. This change
applies to a taxpayer using an overall ac-
crual method of accounting that wants to
change its method of accounting to treat
bonuses or vacation pay as follows (see
§ 404(a)(5) and § 1.404(b)-1T, Q&A 2):
(a) Applicability.

(i) Bonuses.

(A) Bonuses not subject to capitaliza-
tion under § 263A. If by the end of the
taxable year all the events have occurred
that establish the fact of the liability to pay
a bonus and the amount of the liability can
be determined with reasonable accuracy
(see § 1.446-1(c)(1)(ii)), and the bonus is
otherwise deductible, but the bonus is re-
ceived by the employee after the 15th day
of the 3rd calendar month after the end of
that taxable year, to treat the bonus as
deductible in the taxable year of the em-
ployer in which or with which ends the
taxable year of the employee in which the
bonus is includible in the gross income of
the employee; or

(B) Bonuses that are subject to capi-
talization under § 263A. If by the end of
the taxable year all the events have oc-
curred that establish the fact of the liabil-
ity to pay a bonus and the amount of the
liability can be determined with reason-
able accuracy (see § 1.446-1(c)(1)(ii)),
and the bonus is otherwise deductible
(without regard to § 263A), but the bonus
is received by the employee after the 15th
day of the 3rd calendar month after the end
of that taxable year, to treat the bonus as
capitalizable (within the meaning of
§ 1.263A-1(c)(3)) in the taxable year of
the employer in which or with which ends
the taxable year of the employee in which
the bonus is includible in the gross income
of the employee.

(ii) Vacation pay.

(A) Vacation pay not subject to capi-
talization under § 263A. If by the end of
the taxable year all the events have oc-
curred that establish the fact of the liabil-
ity to pay vacation pay and the amount of

the liability can be determined with rea-
sonable accuracy (see § 1.446-
1(c)(1)(ii)), and the vacation pay is other-
wise deductible but the vacation pay is
received by the employee after the 15th
day of the 3rd calendar month after the end
of that taxable year, to treat the vacation
pay as deductible in the taxable year of the
employer in which the vacation pay is
paid to the employee; or

(B) Vacation pay that is subject to cap-
italization under § 263A. If by the end of
the taxable year all the events have oc-
curred that establish the fact of the liabil-
ity to pay vacation pay and the amount
of the liability can be determined with
reasonable accuracy (see § 1.446-
1(c)(1)(ii)), and the vacation pay is other-
wise deductible (without regard to
§ 263A), but the vacation pay is received
by the employee after the 15th day of the
3rd calendar month after the end of that
taxable year, to treat the vacation pay as
capitalizable (within the meaning of
§ 1.263A-1(c)(3)) in the taxable year of
the employer in which the vacation pay is
paid to the employee.

(b) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations there-
under to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
14.01 if the taxpayer is not capitalizing
these costs, unless the taxpayer concur-
rently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
14.01 is "28."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Thomas Scholz at (202)
317-5600 (not a toll-free number).

.02 Grace period contributions.

(1) Description of change. This change
applies to a taxpayer that wants to cease
deducting contributions made during the
§ 404(a)(6) grace period to a qualified
cash or deferred arrangement within the
meaning of § 401(k) or to a defined con-

tribution plan as matching contributions
with the meaning of § 401(m) when the
contributions are attributable to compen-
sation earned by plan participants after the
end of a taxable year as required by Rev.
Rul. 2002-46, 2002-2 C.B. 117, as mod-
ified by Rev. Rul. 2002-73, 2002-2 C.B.
805.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
14.02 is "29."

(3) Contact information. For further in-
formation regarding a change under this
section, contact John Ricotta at (202) 317-
4102 or Joyce Kahn at (202) 317-4148
(not toll-free numbers).

## SECTION 15. METHODS OF ACCOUNTING (§ 446)

.01 Change in overall method from
the cash method to an accrual method.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that wants to change its
overall method of accounting from the
cash receipts and disbursements method
(cash method) (as defined in section
15.01(2)(a) of this revenue procedure) to
an accrual method (as defined in section
15.01(2)(b) of this revenue procedure). A
change under this section 15.01 applies to
(1) a taxpayer required to make this
change by § 448, any other section of the
Code or regulations, or in other guidance
published in the Internal Revenue Bulletin
(IRB), as well as (2) a taxpayer that wants
to make this change but is not required to
do so by § 448, any other section of the
Code or regulations, or in other guidance
published in the IRB. A taxpayer chang-
ing to an overall accrual method because
it is prohibited from using the overall cash
method under § 448 may use this section
15.01 regardless of whether the year of
change is the first taxable year that the
taxpayer is required by § 448 to change
from the cash method ("the first § 448
year"), or is a taxable year other than the
taxpayer's first § 448 year.

Additionally, a taxpayer qualifies to
change its overall method of accounting
from the cash method to an accrual
method using this section 15.01 even if
the taxpayer is also making one or more of

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the following changes in method of ac-
counting for the same year of change:

(i) adopting the recurring item excep-
tion (as defined in section 15.01(2)(c) of
this revenue procedure) for one or more
types of recurring items (see § 1.461-
5(d));

(ii) adopting or changing to a permis-
sible inventory method of accounting and
is either adopting this inventory method or
qualifies to change to this inventory
method using the automatic change pro-
cedures of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, and a section of this revenue
procedure, or the change can be made
automatically under any section of the
Code or regulations, or other guidance
published in the IRB (see Rev. Rul. 90-
38, 1990-1 C.B. 57 (regarding when a
taxpayer may adopt a method of account-
ing));

(iii) adopting or changing to a permis-
sible § 263A method of accounting and is
either adopting this § 263A method or
qualifies to change to this § 263A method
using the automatic change procedures of
Rev. Proc. 2015-13 and a section of this
revenue procedure, or the change can be
made automatically under any section of
the Code or regulations, or other guidance
published in the IRB (see Rev. Rul. 90-38
(regarding when a taxpayer may adopt a
method of accounting)); or

(iv) adopting or changing to any other
special method of accounting (as defined
in section 15.01(2)(d) of this revenue pro-
cedure) and is either adopting this special
method or qualifies to change to this spe-
cial method using the automatic change
procedures of Rev. Proc. 2015-13 and a
section of this revenue procedure, or the
change can be made automatically under
any section of the Code or regulations, or
other guidance published in the IRB (see
Rev. Rul. 90-38 (regarding when a tax-
payer may adopt a method of account-
ing));

Also, a taxpayer qualifies to use this
section 15.01 when that taxpayer, in the
taxable year immediately preceding the
year of change, has used a permissible
inventory method for that year, and, if that
taxpayer was subject to § 263A for that
year, has also used a permissible § 263A
method for that year, and the method(s)
continue to be used for the year of change.

(b) Inapplicability. This change does
not apply to:

(i) a taxpayer that is making a change
from a hybrid method of accounting (as
defined in section 15.01(2)(e) of this rev-
enue procedure);

(ii) a taxpayer that is changing its
method of accounting for one or more
items of income or expense, but not its
overall method of accounting. See section
15.09 of this revenue procedure for a de-
scription of accounting method changes
from the cash method to an accrual
method for specific items that are to be
made using the automatic change proce-
dures of Rev. Proc. 2015-13 and that sec-
tion 15.09;

(iii) a taxpayer that is required by the
Code, regulations, or other guidance pub-
lished in the IRB to use a special method
(for example, an inventory method, a
§ 263A method, or a long-term contract
method) in the year of change and fails to
adopt or change to that method;

(iv) a taxpayer that has included in its
§ 481(a) adjustment any amount of de-
ferred compensation that is described un-
der § 457A(d)(3) that is attributable to
services performed before January 1,
2009;

(v) a taxpayer that is engaged in two or
more trades or businesses, unless that tax-
payer makes this change for each trade or
business so that the identical accrual
method is used for each trade or business
beginning with the year of change;

(vi) a taxpayer that is required by § 447
to change to an accrual method when the
year of change is the first taxable year that
taxpayer is required by § 447 to change to
that method;

(vii) a cooperative organization de-
scribed in §§ 501(c)(12), 521, or 1381; or

(viii) an individual taxpayer, except for
activities conducted as a sole proprietor-
ship.

(2) Definitions.

(a) Cash method of accounting is the
method identified by § 446(c)(1) and
§§ 1.446-1(c)(1)(i), 1.451-1(a), and
1.461-1(a)(1). For purposes of this sec-
tion 15.01, the cash method also includes
the overall cash method with inventori-
able items treated as either inventory or as
non-incidental materials and supplies un-
der § 1.162-3 as permitted by Rev. Proc.
2001-10, 2001-1 C.B. 272, as modified

by Rev. Proc. 2011-14, 2011-4 I.R.B.
330, or Rev. Proc. 2002-28, 2002-1 C.B.
815, as modified by Rev. Proc. 2011-14.

(b) Accrual method of accounting is a
method identified by § 446(c)(2) and
§§ 1.446-1(c)(1)(ii), 1.451-1(a), and
1.461-1(a)(2).

(c) Recurring item exception is the
method described in § 461(h)(3) and
§ 1.461-5.

(d) Special method of accounting
within the meaning of this section 15.01 is
a method of accounting, other than the
cash method, expressly permitted or re-
quired by the Code, regulations, or in
other guidance published in the IRB that
deviates from the tax accrual accounting
rules of §§ 446, 451 and 461 and the
regulations thereunder. For example, the
installment method of accounting under
§ 453, the mark-to-market method under
§ 475, a long-term contract method such
as the percentage of completion method
under § 460, and the deferral method of
Rev. Proc. 2004-34, 2004-1 C.B. 991, as
clarified and modified by Rev. Proc.
2011-18, 2011-5 I.R.B. 443, and Rev.
Proc. 2013-29, 2013-33 I.R.B. 141, and
as modified by Rev. Proc. 2011-14, are
special methods of accounting. In con-
trast, application of the all-events test un-
der a specific set of facts is not a special
method of accounting. See, for example,
Rev. Rul. 69-314, 1969-1 C.B. 139 (con-
cerning the treatment of retainages).

(e) Hybrid method of accounting is a
combination of the cash and accrual meth-
ods under which one or more items of
income or expense are reported on the
cash method and one or more items of
income or expense are reported on an ac-
crual method. For purposes of this section
15.01, a hybrid method of accounting in-
cludes, for example, a taxpayer that uses
an accrual method with respect to pur-
chases and sales of inventories and uses
the cash method in computing all other
items of income and expense.

(3) Manner of making change.

(a) Section 481(a) adjustment. A tax-
payer changing its method of accounting
under this section 15.01 must compute a
§ 481(a) adjustment. This adjustment
must reflect the account receivables, ac-
count payables, inventory, and any other
item determined to be necessary in order
to prevent items from being duplicated or

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omitted. However, the adjustment does
not include any item of income accrued
but not received that was worthless or
partially worthless (within the meaning of
§ 166(a)) on the last day of the year im-
mediately prior to the year of change.

(b) Prior change eligibility rule inap-
plicable. Any prior change to the overall
cash method that the taxpayer imple-
mented using the provisions of Rev. Proc.
2001-10, as modified by Rev. Proc. 2011-
14, or Rev. Proc. 2002-28, as modified by
Rev. Proc. 2011-14, is disregarded for
purposes of section 5.01(1)(e) of Rev.
Proc. 2015-13.

(c) Adoption of recurring item excep-
tion. The taxpayer must attach to its Form
3115 a statement describing the types of
liabilities for which the recurring item ex-
ception will be used.

(d) Concurrent automatic change to a
special method.

(i) Generally only one Form 3115 re-
quired. Except as provided in section
15.01(3)(d)(ii) of this revenue procedure,
a taxpayer that is changing from the over-
all cash method to an overall accrual
method under this section 15.01 and
changing to a special method, as permitted
under section 15.01(1)(a)(ii), (iii), or (iv),
must timely file a single Form 3115 for
both changes and must enter the desig-
nated automatic accounting method
change numbers for both changes on the
appropriate line of that Form 3115. For
example, a taxpayer making both a change
from the overall cash method to an overall
accrual method under this section 15.01
and an automatic change to the deferral
method for advance payments under Rev.
Proc. 2004-34 (see section 16.07 of this
revenue procedure) must timely file a sin-
gle Form 3115 for both changes and enter
the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making con-
current changes.

(ii) Two Forms 3115 required when a
concurrent change is being implemented
under section 31.01 of this revenue pro-
cedure for short-term obligations. When a
taxpayer subject to § 1281 is changing its
method of accounting for interest income
on short-term obligations as part of the
change to an overall accrual method under

this section 15.01, that taxpayer must re-
quest the change for the interest income
under section 31.01 of this revenue pro-
cedure. The taxpayer must timely file in-
dividual Forms 3115 for each change re-
quested. This section 15.01 will govern
the change to an overall accrual method.

(e) Concurrent change in accounting
method not permitted to be implemented
using the automatic change procedures of
Rev. Proc. 2015-13 and a section of this
revenue procedure, any section of the
Code or regulations, or other guidance
published in the IRB. A taxpayer that does
not qualify to change from the overall
cash method to an overall accrual method
under this section 15.01 because that tax-
payer is concurrently changing to a
method of accounting that may not be
implemented using the automatic change
procedures of Rev. Proc. 2015-13 and a
section of this revenue procedure, any sec-
tion of the Code or regulations, or other
guidance published in the IRB, must
timely request both changes using the
non-automatic change procedures in Rev.
Proc. 2015-13. See Rev. Proc. 2017-1,
2017-1 I.R.B. 1 (or successor), for more
information on whether one Form 3115 is
required to implement the changes, and
for information on the appropriate user
fee.

(4) Change made in the first § 448
year.

(a) In general. If the year of change is
the first § 448 year for a taxpayer and that
taxpayer qualifies to make the change
from the cash method under the provi-
sions of §§ 1.448-1(g) and (h) as well as
this section 15.01, that taxpayer may
choose to make the change using this sec-
tion 15.01. However, that taxpayer must
still comply with the requirements and
provisions of §§ 1.448-1(g) and (h) in
addition to the requirements and provi-
sions of this section 15.01. For example, if
the taxpayer is a hospital, defined in
§ 1.448-1(g)(2)(ii)(B), and that taxpayer
chooses to make its change from the cash
method for the first § 448 year using this
section 15.01, the applicable § 481(a) ad-
justment period is provided by § 1.448-
1(g)(2)(ii). If a taxpayer chooses not to
implement its change from the cash
method using this section 15.01, that tax-
payer must make the change under the
provisions of §§ 1.448-1(g) and (h).

(b) Prior change eligibility rule inap-
plicable. For a taxpayer making a change
from the cash method in the first § 448
year, any prior change to the overall cash
method is disregarded for purposes of sec-
tion 5.01(1)(e) of Rev. Proc. 2015-13.

(5) Designated automatic accounting
method change number.

(a) Change made in the first § 448
year. The designated automatic account-
ing method change number for a change
from the cash method in the first § 448
year is "123." Entering designated auto-
matic accounting method change number
"123" on the appropriate line on the Form
3115 fulfills the requirement of § 1.448-
1(h)(2)(i) to type or print "Automatic
Change to Accrual Method - Section 448"
at the top of page 1 of the Form 3115.

(b) All other changes from the cash
method to an overall accrual method. The
designated automatic accounting method
change number for all other changes from
the cash method under this section 15.01
is "122."

(6) Contact information. For further in-
formation regarding a change under this
section, contact Evan Hewitt at (202) 317-
7007 (not a toll-free number).

.02 Multi-year insurance policies for
multi-year service warranty contracts.

(1) Description of change.

(a) Applicability. This change applies
to a manufacturer, wholesaler, or retailer
of motor vehicles or other durable con-
sumer goods that wants to change its
method of accounting for insurance costs
paid or incurred to insure its risks under
multi-year service warranty contracts to
the method described in section 15.02(2)
of this revenue procedure. Multi-year ser-
vice warranty contracts to which this
change applies include only those sepa-
rately priced contracts sold by a manufac-
turer, wholesaler, or retailer also selling
the motor vehicles or other durable con-
sumer goods underlying the contracts (to
the ultimate customer or to an intermedi-
ary). The classification of goods as "dura-
ble consumer goods" for purposes of this
change depends on the common usage of
the goods, rather than the purchaser's ac-
tual intended use of the goods.

(b) Inapplicability. This change does
not apply to a taxpayer that covers its risks
under its multi-year service warranty con-

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tracts through arrangements not constitut-
ing insurance.

(2) Description of method. If a tax-
payer purchases a multi-year service war-
ranty insurance policy (in connection with
its sale of multi-year service warranty
contracts to customers) by paying a lump-
sum premium in advance, the taxpayer
must capitalize the amount paid or in-
curred and may only obtain deductions for
that amount by prorating (or amortizing) it
over the life of the insurance policy
(whether the cash method or an accrual
method of accounting is used to account
for service warranty transactions).

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.02 is "31."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Timothy Azarchs at (202)
317-5100 (not a toll-free number).

.03 Taxpayers changing to overall cash
method.

(1) Description of change. This change
applies to either:

(a) a "qualifying taxpayer" that quali-
fies to make the change to the overall cash
receipts and disbursements (cash) method
under Rev. Proc. 2001-10, 2001-1 C.B.
272, (other than a taxpayer described in
§ 448(a)(3) or a bank described in section
14.12(2)(a) of this revenue procedure)
with "average annual gross receipts" (as
defined in section 5.01 of Rev. Proc.
2001-10) of $1,000,000 or less that wants
to change to the overall cash method of
accounting as provided in Rev. Proc.
2001-10, as modified by Announcement
2004-16, 2004-1 C.B. 668 (regarding
placement of § 481(a) adjustment on the
Form 3115), and Rev. Proc. 2011-14,
2011-4 I.R.B. 330 (removing § 6.02(1)(a)
of Rev. Proc. 2001-10); or

(b) a "qualifying small business tax-
payer" that qualifies to make a change to
the overall cash receipts and disburse-
ments (cash) method under Rev. Proc.
2002-28, 2002-1 C.B. 815, (other than a
taxpayer prohibited from using the cash
method under § 448 or a bank described in
section 15.12(2)(a) of this revenue proce-
dure) with "average annual gross receipts"
(as defined in section 5.02 of Rev. Proc.

2002-28) of $10,000,000 or less that
wants to change the overall method of
accounting for an "eligible trade or busi-
ness" (as defined in section 4.01 of
Rev. Proc. 2002-28) to the overall cash
method of accounting as provided in Rev.
Proc. 2002-28, as modified by Announce-
ment 2004-16 (regarding placement of
§ 481(a) adjustment on the Form 3115),
and Rev. Proc. 2011-14 (removing
§ 7.02(1)(a) of Rev. Proc. 2002-28).

(2) Manner of making change. See ei-
ther Rev. Proc. 2001-10 or Rev. Proc.
2002-28 for additional guidance on the
computation of the § 481(a) adjustment
and the completion of the Form 3115.

(3) Concurrent automatic change to
treat inventoriable items as nonincidental
materials and supplies under Rev. Proc.
2001-10 or Rev. Proc. 2002-28. A tax-
payer making both a change to the overall
cash method under this section 15.03 and
a change to treat inventoriable items as
materials and supplies that are not inci-
dental pursuant to § 1.162-3 under section
22.03 of this revenue procedure for the
same year of change may file a single
Form 3115 for both changes, provided the
taxpayer enters the designated automatic
accounting method change numbers for
both changes on the appropriate line on
that Form 3115. See section 6.03(1)(b) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
for information on making concurrent
changes.

(4) Banks changing to overall cash/
hybrid method. This change does not ap-
ply to a bank described in section
15.12(2)(a) of this revenue procedure.
However, such a bank may be eligible to
change to the overall cash/hybrid method
under section 15.12 of this revenue pro-
cedure if it meets the requirements of that
section.

(5) Farming businesses changing to
overall cash method. A farming business
may be eligible to make this change under
section 15.03(1)(a) of this revenue proce-
dure. However, a farming business is not
eligible to make this change under section
15.03(1)(b) of this revenue procedure. A
farming business that is not eligible under
this section 15.03 may still be eligible to
change to the overall cash method under
section 15.13 of this revenue procedure if
it meets the requirements of that section.

(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under section
15.03(1)(a) of this revenue procedure is
"32." The designated automatic account-
ing method change number for a change
under section 15.03(1)(b) of this revenue
procedure is "33."

(7) Contact information. For further in-
formation regarding a change under this
section, contact Evan Hewitt at (202) 317-
7007 (not a toll-free number).

.04 Nonaccrual-experience method.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that wants to make one or
more of the changes in method of ac-
counting to, from, or within a nonaccrual-
experience (NAE) method of accounting
that are described in sections 3.01(1)
through (5) of Rev. Proc. 2006-56,
2006-2 C.B. 1169, as modified by Rev.
Proc. 2011-14, 2011-4 I.R.B. 330, and as
modified and amplified by Rev. Proc.
2011-46, 2011-42 I.R.B. 518.

(b) Inapplicability. This change does
not apply to a taxpayer within the scope of
sections 3.01(6) through 3.01(8) of Rev.
Proc. 2006-56, as modified and amplified
by Rev. Proc. 2011-46.

(2) Manner of making the change.

(a) Changes made with a § 481(a) ad-
justment. A change in method of account-
ing described in section 3.01(1), (2), (3),
or (5) of Rev. Proc. 2006-56, as modified
and amplified by Rev. Proc. 2011-46, is
made with a § 481(a) adjustment.

(b) Changes made on a cut-off basis.

(i) In general. A change described in
section 3.01(4) of Rev. Proc. 2006-56 is
made on a cut-off basis and the new ap-
plicable period applies only to the taxpay-
er's NAE calculation of its uncollectible
amount for the year of change and for
subsequent years. Moreover, a change de-
scribed in sections 5.02 and 5.03 of Rev.
Proc. 2011-46 is made on a cut-off basis
and the proposed method applies only to
accounts receivable earned on or after the
first day of the year of change. Accord-
ingly, a § 481(a) adjustment is neither
permitted nor required for a change de-
scribed in section 3.01(4) of Rev. Proc.
2006-56 or in section 5.02 or 5.03 of Rev.
Proc. 2011-46.

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(ii) Special filing rules for changes
made under section 5.02 and 5.03 of Rev.
Proc. 2011-46, as modified by this reve-
nue procedure.

(A) Certain eligibility rule inapplica-
ble. The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not apply to a change in
method of accounting made under section
5.02 or 5.03 of Rev. Proc. 2011-46, as
modified by this revenue procedure.

(B) Filing rules. In accordance with
§ 1.446-1(e)(3)(ii), the requirement of
§ 1.446-1(e)(3)(i) to file a Form 3115 is
waived and a statement in lieu of a Form
3115 is authorized for this change. Not-
withstanding the definition of Form 3115
in section 3.07 of Rev. Proc. 2015-13, the
statement in lieu of a Form 3115 that is
permitted under section 5.02 or 5.03 of
Rev. Proc. 2011-46 and this section 15.04
is considered a Form 3115 for purposes of
the automatic consent procedures of Rev.
Proc. 2015-13. However, the requirement
to file the Duplicate copy, under section
6.03(1)(a) of Rev. Proc. 2015-13, is
waived. See section 5.02 or 5.03 of Rev.
Proc. 2011-46, as applicable, for what
information is required to be provided on
the statement.

(3) Concurrent change to overall ac-
crual method and a NAE method of ac-
counting. A taxpayer making both an au-
tomatic change to, from, or within a NAE
method of accounting under this section
15.04 and an automatic change to an over-
all accrual method under section 15.01 of
this revenue procedure (whether or not it
is the taxpayer's first § 448 year), must file
a single Form 3115 for both changes. The
taxpayer must complete all applicable sec-
tions of Form 3115, including sections
that apply to the change to an overall
accrual method and to the change to a
NAE method, and must enter the auto-
matic accounting method change numbers
for both changes on Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.

A taxpayer making both an automatic
change to, from, or within a NAE method
of accounting under this section 15.04 and
a required change to an overall accrual
method under § 448 (the taxpayer's first
§ 448 year), and is either not eligible to
make the change to an overall accrual

method under section 15.01 of this reve-
nue procedure or chooses to make the
change to an overall accrual method using
the procedures of § 1.448-1(h)(2), must
make both changes (change to, from, or
within a NAE method and change to an
overall accrual method) on a single Form
3115. The taxpayer must follow the auto-
matic change procedures of Rev. Proc.
2015-13 and this section 15.04 for the
NAE change, and the procedures of
§ 1.448-1(h)(2) for the change to an over-
all accrual method (except that entering
the designated automatic accounting
method change number "34" on the Form
3115 fulfills the requirement of § 1.448-
1(h)(2) to type or print "Automatic
Change to Accrual - Section 448" at the
top of page 1 of the Form 3115). The
taxpayer must complete all applicable sec-
tions of Form 3115, including sections
that apply to the change to an overall
accrual method and to the change to the
NAE method and must enter the desig-
nated automatic accounting method
change numbers for both changes on
Form 3115.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to, from, or within a
NAE method of accounting under this
section 15.04 is "35."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Sean Dwyer at (202) 317-
7005 (not a toll-free number).

.05 Interest accruals on short-term
consumer loans-Rule of 78's method.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting from the Rule of
78's method to the constant yield method
for stated interest (including stated inter-
est that is original issue discount) on
short-term consumer loans described in
Rev. Proc. 83-40, 1983-1 C.B. 774,
which was obsoleted by Rev. Proc. 97-37,
1997-2 C.B. 455.

(2) Background.

(a) A short-term consumer loan is de-
scribed in Rev. Proc. 83-40, provided:

(i) the loan is a self-amortizing loan
that requires level payments, at regular
intervals at least annually, over a period
not in excess of five years (with no bal-

loon payment at the end of the loan term);
and

(ii) the loan agreement between the
borrower and the lender provides that in-
terest is earned, or upon the prepayment of
the loan interest is treated as earned, in
accordance with the Rule of 78's method.

(b) In general, the Rule of 78's method
allocates interest over the term of a loan
based, in part, on the sum of the periods'
digits for the term of the loan. See Rev.
Rul. 83-84, 1983-1 C.B. 97, for a de-
scription of the Rule of 78's method.

(c) In general, the constant yield
method allocates interest and original is-
sue discount over the term of a loan based
on a constant yield. See § 1.1272-1(b) for
a description of the constant yield method.
The Rule of 78's method generally front-
loads interest as compared to the constant
yield method.

(d) Rev. Proc. 83-40 was obsoleted
because, under §§ 1.446-2 and 1.1272-1
(which were effective for debt instruments
issued on or after April 4, 1994), taxpay-
ers generally must account for stated in-
terest and original issue discount on a debt
instrument (loan) by using a constant
yield method. As a result, the Rule of 78's
method is no longer an acceptable method
of accounting for federal income tax pur-
poses.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.05 is "71."

(4) Contact information. For further in-
formation regarding a change under this
section, contact William E. Blanchard at
(202) 317-3900 (not a toll-free number).

.06 Film producer's treatment of certain
creative property costs.

(1) Description of change. This change
applies to a taxpayer that wants to change
the method of accounting for creative
property costs to the safe harbor method
provided by section 5 of Rev. Proc. 2004-
36, 2004-1 C.B. 1063. This safe harbor
method of accounting applies to a tax-
payer engaged in the trade of business of
film production and to creative property
costs (as defined in section 2.01 of Rev.
Proc. 2004-36) properly written off by
the taxpayer under The American Institute
of Certified Public Accountants Statement

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of Position (SOP) 00-2, "Accounting for
Producers or Distributors of Film."

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.06 is "85."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Bernard Harvey at (202)
317-7005 (not a toll-free number).

.07 Deduction of incentive payments to
health care providers.

(1) Description of change. This change
applies to a taxpayer that wants to change
to the method of accounting for provider
incentive payments under which those
payments are included in discounted un-
paid losses without regard to § 404, as
provided in Rev. Proc. 2004-41, 2004-2
C.B. 90. A payment by a taxpayer to a
health care provider is a "provider incen-
tive payment," and thus eligible for this
treatment, if (a) the taxpayer is taxable as
an insurance company under Part II of
subchapter L; (b) the payment is made
pursuant to a written agreement the pur-
pose of which is to encourage participat-
ing health care providers to provide
quality health care to the taxpayer's sub-
scribers in a cost-efficient manner; (c) the
taxpayer's liability for the payment is de-
pendent on the attainment of one or more
preestablished goals during a performance
period consisting of not more than 12 con-
secutive months; (d) the terms of the ar-
rangement pursuant to which the payment
is made are established unilaterally by the
taxpayer, and are not negotiated with the
health care providers; (e) the taxpayer
normally makes payments to health care
providers under the arrangement within
12 months after the close of the perfor-
mance period; (f) deferring the receipt of
income by the health care provider or oth-
erwise providing a tax benefit to the pro-
vider is not a principal purpose of the
arrangement; (g) the taxpayer records a
liability for the payment on its annual
statement filed for state regulatory pur-
poses, and includes this liability in the
determination of discounted unpaid losses
under § 846; and (h) the health care pro-
vider is not an employee, and is not pro-
viding health care as an agent, of the tax-
payer. See Rev. Proc. 2004-41.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.07 is "90."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Rebecca L. Baxter at
(202) 317-6995 (not a toll-free number).

.08 Change by bank for uncollected
interest.

(1) Description of change. This change
applies to a "bank" as defined in § 1.166-
2(d)(4)(i) that: (a) uses an overall accrual
method of accounting to determine its tax-
able income for federal income tax pur-
poses; (b) is subject to supervision by
Federal authorities, or by state authorities
maintaining substantially equivalent stan-
dards; (c) has uncollected interest other
than interest described in § 1.446-2(a)(2);
and (d) has six or more years of collection
experience. Under the safe harbor method
of accounting provided by section 4 of
Rev. Proc. 2007-33, 2007-1 C.B. 1289, a
bank determines for each taxable year the
amount of uncollected interest (other than
interest described in § 1.446-2(a)(2)) for
which it is considered to have a reason-
able expectancy of payment by multiply-
ing: (a) the total accrued (determined un-
der § 1.446-2) but uncollected interest for
the year, by (b) the bank's "recovery per-
centage" (determined under section 4.02
of Rev. Proc. 2007-33) for that year.
Solely for purposes of this safe harbor, the
bank is not considered to have a reason-
able expectancy of payment for the ex-
cess, if any, of the accrued but uncollected
interest over the expected collection
amount determined using the bank's re-
covery percentage. The bank includes in
gross income the portion of accrued but
uncollected interest for which it has a rea-
sonable expectancy of payment. The bank
excludes from income the portion of ac-
crued but uncollected interest for which it
has no reasonable expectancy of payment.

(2) Recovery percentage. Subject to the
limitations and conditions in Rev. Proc.
2007-33, sections 4.02(2), (3), and (4), a
bank determines its recovery percentage
for each taxable year by dividing: (a) total
payments that the bank received on loans
(including principal and interest) during
the 5 taxable years immediately preceding

the taxable year, by (b) total amounts that
were due and payable to the bank on loans
during the same 5 taxable years. The re-
covery percentage cannot exceed 100 per-
cent and must be calculated to at least four
decimal places. The data used in the re-
covery percentage must take into account
acquisitions and dispositions. If a bank
acquires the major portion of a trade or
business of another person (predecessor)
or the major portion of a separate unit of a
trade or business of a predecessor, then in
applying Rev. Proc. 2007-33 for any tax-
able year ending on or after the acquisi-
tion, the data from preceding taxable years
of the predecessor attributable to the por-
tion of the trade or business acquired, if
available, must be used in determining the
bank's recovery percentage. If a bank dis-
poses of a major portion of a trade or
business or the major portion of a separate
unit of a trade or business, and the bank
furnished the acquiring person the infor-
mation necessary for the computations re-
quired by Rev. Proc. 2007-33, then in
applying the revenue procedure for any
taxable year ending on or after the dispo-
sition, the data from preceding taxable
years attributable to the disposed portion
of the trade or business may not be used in
determining the bank's recovery percent-
age.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.08 is "108."

(4) Contact information. For further in-
formation regarding a change under this
section, contact K. Scott Brown at (202)
317-6945 (not a toll-free number).

.09 Change from the cash method to an
accrual method for specific items.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that uses an overall accrual
method of accounting but has identified a
specific item or items of income or ex-
pense (or both) that are being accounted
for on the cash method of accounting.
This change does not apply to a taxpayer
that is changing its overall method of ac-
counting from cash to accrual. Such a
taxpayer may be eligible to change to an
overall accrual method using section
15.01 of this revenue procedure.

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(b) Inapplicability. This change does
not apply to:

(i) a taxpayer that will not have all
items of income and expense on an ac-
crual method subsequent to the change
under this section 15.09;

(ii) a cooperative organization de-
scribed in § 501(c)(12), 521, or 1381;

(iii) an individual taxpayer, except for
activities conducted as a sole proprietor-
ship;

(iv) a taxpayer engaged in two or more
trades or businesses, unless the taxpayer
makes this change so that the identical
accrual method is used for each such trade
or business beginning with the year of
change;

(v) a change in method of accounting
for any payment liability described in
§ 1.461-4(g);

(vi) a change in the method of account-
ing for interest that is not taken into ac-
count under § 1.446-2;

(vii) a taxpayer that has included in its
§ 481(a) adjustment any amount of de-
ferred compensation that is described un-
der § 457A(d)(3) that is attributable to
services performed before January 1,
2009; and

(viii) any change that is specifically
provided in another section of this reve-
nue procedure.

(2) Definitions.

(a) "Cash method of accounting" is the
method identified by § 446(c)(1) and
§§ 1.446-1(c)(1)(i), 1.451-1(a), and
1.461-1(a)(1).

(b) "Accrual method of accounting" is
the method identified by § 446(c)(2) and
§§ 1.446-1(c)(1)(ii), 1.451-1(a), and
1.461-1(a)(2).

(3) Additional requirements. To
change a method of accounting under this
section 15.09, a taxpayer must attach to its
completed Form 3115 a full and complete
description of each specific item for which
the change in method of accounting is
being made and how the accrual method
of accounting applies to each item, and list
the § 481(a) adjustment, if any, for each
item associated with the change. The
change is fully and completely described
if each income and expense item is de-
scribed with specificity and how the all-
events test (and the economic perfor-
mance requirement, if applicable) applies
to each item is described under the facts

and circumstances of the taxpayer's trade
or business. For example, a taxpayer that
merely states that it is changing its ac-
counting method for advertising expenses
from the cash method to an accrual
method, recites the regulations under
§ 1.461-1(a)(2), and enters the associated
§ 481(a) adjustment has failed to describe
fully and completely the specific item for
which the change in method of accounting
is being made. In contrast, a taxpayer that
states that it is changing its method of
accounting for print advertising expenses
from the cash method of accounting to an
accrual method of accounting, describes
all of the relevant facts related to the print
advertising expenses, and explains how
the all-events test applies to those facts
and when economic performance occurs
has fully and completely described the
item and the change. See section 6.03 of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
for additional filing requirements.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.09 is "124."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Douglas Kim at (202)
317-7003 (not a toll-free number).

.10 Multi-year service warranty
contracts.

(1) Description of change.

(a) Applicability. This change applies
to a manufacturer, wholesaler, or retailer
of motor vehicles or other durable con-
sumer goods that uses an overall accrual
method of accounting, and wants to
change to the service warranty income
method described in section 5 of Rev.
Proc. 97-38, 1997-2 C.B. 479. Under the
service warranty income method, a quali-
fying taxpayer may, in certain specified
and limited circumstances, include a por-
tion of an advance payment related to the
sale of a multi-year service warranty con-
tract in gross income generally over the
life of the service warranty obligation.

(b) Inapplicability. This change does
not apply to a taxpayer not within the
scope of Rev. Proc. 97-38.

(2) Manner of making change and des-
ignated automatic accounting method
change number.

(a) This change is made on a cut-off
basis and applies only to qualified ad-
vance payments for multi-year service
warranty contracts on or after the begin-
ning of the year of change. Accordingly, a
§ 481(a) adjustment is neither permitted
nor required.

(b) In accordance with § 1.446-
1(e)(3)(ii), the requirement of § 1.446-
1(e)(3)(i) to file a Form 3115 is waived
and pursuant to section 6.02(2) of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, a short
Form 3115 is authorized for this change.
The short Form must include the follow-
ing information:

(i) the identification section of page 1
(above Part I);

(ii) the signature section at the bottom of
page 1;

(iii) Part I, line 1(a); and

(iv) the information required under sec-
tion 6.03 of Rev. Proc. 97-38, except that
the statement under section 6.03(2) (that
the taxpayer agrees to all of the terms and
conditions of the revenue procedure) also
should refer to Rev. Proc. 2015-13.

(3) Additional requirement. A taxpayer
changing to the service warranty income
method of accounting under this section
15.10 must satisfy the annual reporting
requirement set forth in section 6.04 of
Rev. Proc. 97-38.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.10 is "125."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Timothy Azarchs at (202)
317-5100 (not a toll-free number).

.11 Overall cash method for specified
transportation industry taxpayers.

(1) Description of change. This change
applies to a "specified transportation in-
dustry taxpayer" with "average annual
gross receipts" of more than $10,000,000
and not in excess of $50,000,000 that
wants to change to the overall cash re-
ceipts and disbursement (cash) method.

(2) Definitions. For purposes of this
section 15.11 the following definitions ap-
ply:

(a) Specified transportation industry
taxpayer. A specified transportation in-
dustry taxpayer is a taxpayer that satisfies

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the following criteria for the year of
change:

(i) The taxpayer reasonably identifies
its "business" (as defined in section
15.11(2)(b) below) as being described in
one of the following NAICS subsector
codes (first three digits of the six-digit
NAICS codes):

(A) Air Transportation, Rail Transpor-
tation, Water Transportation, Truck
Transportation, Transit and Ground Pas-
senger Transportation, or Scenic and
Sightseeing Transportation, within the
meaning of NAICS subsector codes 481-
485 and 487; or

(B) Support Activities for Transporta-
tion within the meaning of NAICS sub-
sector code 488.

(ii) The taxpayer is not prohibited from
using the overall cash method under
§ 448.

(b) Business. A taxpayer may use any
reasonable method of applying the rele-
vant facts and circumstances to determine
its business. A business may consist of
several activities, which may or may not
be related. For example, a taxpayer en-
gaged in transportation activities may pro-
vide various services such as transporting
air cargo and then subsequently trucking
the cargo throughout a metropolitan area
to warehouses and wholesale/retail stores.
However, each activity within a taxpay-
er's business must individually satisfy the
description of a NAICS subsector code in
section 15.11(2)(a)(i)(A) or (B) of this
revenue procedure. For example, a sight-
seeing bus operator that sells box lunches
in connection with its tours is not a "spec-
ified transportation industry taxpayer" be-
cause one of the two activities of its busi-
ness (food sales) does not satisfy the
description of a NAICS subsector code in
section 15.11(2)(a)(i)(A) or (B) of this
revenue procedure. While the sightseeing
transportation activity satisfies the de-
scription of the NAICS subsector code in
section 15.11(2)(a)(i)(A) of this revenue
procedure, the food sales activity does not
satisfy the description of any NAICS sub-
sector code in section 15.11(2)(a)(i)(A) or
(B) of this revenue procedure, and thus,
the taxpayer's business fails to meet the
criteria of section 15.11(2)(a)(i). Simi-
larly, a train operator who operates a din-
ing car where meals are served is not a
"specified transportation industry tax-

payer" because one of the two activities of
its business (food service) does not satisfy
the description of a NAICS subsector
code in section 15.11(2)(a)(i)(A) or (B) of
this revenue procedure. While the rail
transportation activity satisfies the de-
scription of a NAICS subsector code in
section 15.11(2)(a)(i)(A) of this revenue
procedure, the food service activity does
not satisfy the description of any NAICS
subsector code in section 15.11(2)(a)
(i)(A) or (B) of this revenue procedure,
and thus, the taxpayer's business fails to
meet the criteria of section 15.11(2)(a)(i).

(c) Average annual gross receipts. A
taxpayer has average annual gross receipts
of more than $10,000,000 and not in ex-
cess of $50,000,000 if, for each prior tax-
able year ending on or after December 31,
2006, the taxpayer's average annual gross
receipts for the three prior taxable-year
period ending with the applicable prior
taxable year are more than $10,000,000
and do not exceed $50,000,000. If a tax-
payer has not been in existence for three
prior taxable years, the taxpayer must de-
termine its average annual gross receipts
for the number of years (including short
taxable years) that the taxpayer has been
in existence. See § 448(c)(3)(A).

(d) Gross receipts. Gross receipts is
defined consistent with § 1.448-1T(f)
(2)(iv). Thus, gross receipts for a taxable
year equal all receipts that must be recog-
nized under the method of accounting ac-
tually used by the taxpayer for that taxable
year for federal income tax purposes. See
also § 448(c)(3)(C).

(e) Aggregation of gross receipts. For
purposes of computing gross receipts un-
der section 15.11(2)(d) of this revenue
procedure, all taxpayers treated as a single
employer under § 52(a) or (b) or § 414(m)
or (o) (or that would be treated as a single
employer under these sections if the tax-
payers had employees) will be treated as a
single taxpayer. However, when transac-
tions occur between taxpayers that are
treated as a single taxpayer by the previ-
ous sentence, gross receipts arising from
these transactions will not be treated as
gross receipts for purposes of the average
annual gross receipts limitation. See
§ 448(c)(2) and § 1.448-1T(f)(2)(ii).

(f) Treatment of short taxable year. In
the case of a short taxable year, a taxpay-
er's gross receipts must be annualized by

multiplying the gross receipts for the short
taxable year by 12 and then dividing the
result by the number of months in the
short taxable year. See § 448(c)(3)(B) and
§ 1.448-1T(f)(2)(iii).

(g) Treatment of predecessors. Any ref-
erence to a taxpayer in this section 15.11
includes a reference to any predecessor of
that taxpayer. See § 448(c)(3)(D).

(h) Cash method. The "cash method" is
the method identified by § 446(c)(1) and
§§ 1.446-1(c)(1)(i), 1.451-1(a), and
1.461-1(a)(1).

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.11 is "126."

(4) Example. Taxpayer X is an LLC and taxed for
federal income tax purposes as a partnership. Tax-
payer X does not have any C corporations as partners
and Taxpayer X is not a tax shelter within the mean-
ing of § 448(d)(3). Taxpayer X's business consists of
short-haul trucking among various cities within State
Y, which satisfies the description of the NAICS sub-
sector code 484. Taxpayer X determines that its
3-year average annual gross receipts for each prior
taxable year ending on or after December 31, 2006,
have been more than $10,000,000 and not in excess
of $50,000,000. Taxpayer X qualifies to change to
the overall cash method using this section 15.11.

(5) Contact information. For further in-
formation regarding a change under this
section, contact Evan Hewitt at (202) 317-
7007 (not a toll-free number).

### .12 Change to overall cash/hybrid method for certain banks.

(1) Description of change.

(a) Applicability. This change applies
to a bank described in section 15.12(2)(a)
of this revenue procedure that wants to
change to an overall cash/hybrid method
described in section 15.12(2)(b) of this
revenue procedure.

(b) Inapplicability. A bank's change to
an overall cash/hybrid method under this
section 15.12 does not include any change
in the accounting treatment of an item for
which the bank uses a special method (as
described in section 15.12(2)(b) of this
revenue procedure) before the change, or
is required to use a special method, or will
use a special method after the change. A
bank may not change the accounting treat-
ment of such an item under this section
15.12. Any change in the accounting treat-
ment of such an item must be made under
an applicable section of this revenue pro-

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cedure, under the non-automatic change
procedures of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, or under another guid-
ance published in the Internal Revenue
Bulletin, as appropriate.

(2) Definitions. The following defini-
tions apply for purposes of this section
15.12.

(a) Bank. A bank is described in this
section 15.12(2)(a) if the bank:

(i) is a bank as defined in § 581;

(ii) is an S corporation as defined in
§ 1361(a)(1), or a qualified subchapter S
subsidiary as defined in § 1361(b)(3)(B);
and

(iii) has average annual gross receipts
(computed as described in section
15.12(5) of this revenue procedure) not
in excess of $50,000,000.

(b) Overall cash/hybrid method. An
overall cash/hybrid method is the use of a
combination of accounting methods under
which some items of income or expense
are reported on the cash receipts and dis-
bursements method (cash method) and
other items of income or expense are re-
ported on methods permitted or required
for the accounting treatment of special
items (special methods).

(i) Cash method. The cash method is
the method identified by § 446(c)(1) and
§§ 1.446-1(c)(1)(i), 1.451-1(a), and
1.461-1(a)(1).

(ii) Special methods. A few of the spe-
cial methods typically used by banks in-
clude those provided for the accounting
treatment of the following items: securi-
ties held by a dealer in securities as de-
fined in § 475(c)(1) (the mark-to-market
method of § 475); securities held by a
dealer in securities as defined in § 1.471-5
(inventories maintained under § 471 and
§ 1.446-1(c)(2)(i)); hedging transactions
(§ 1.446-4); contracts to which § 1256
applies (§ 1256); original issue discount
on debt instruments (§§ 163(e) and 1271-
1275); interest income (including acquisi-
tion discount and original issue discount)
on short-term obligations (§§ 1281-
1283); and stripped debt instruments
(§ 1286). For example, a bank that regu-
larly purchases or originates mortgages in
the ordinary course of its business and
engages in more than negligible sales of
those mortgages generally is a dealer
in securities under § 475(c)(1) and
§ 1.475(c)-1(c) and thus must use the

mark-to-market method of § 475 for mort-
gages and any other securities (as defined
in § 475(c)(2)) held by the bank.

(3) Additional condition of change. To
change to an overall cash/hybrid method
under this section 15.12, a bank must
comply with the following additional con-
dition. In addition to complying with the
terms and conditions set forth in section 7
of Rev. Proc. 2015-13, the bank must
keep its books and records for the year of
change and for subsequent taxable years
on an overall cash/hybrid method allowed
by this section 15.12. This condition is
considered satisfied if the bank reconciles
the results obtained under the method
used in keeping its books and records and
those obtained under the method used for
federal income tax purposes pursuant to
this section 15.12 and the bank maintains
sufficient records to support such recon-
ciliation. See also § 1.446-1(a)(4).

(4) Additional filing requirement. To
change to an overall cash/hybrid method
under this section 15.12, a bank must in-
clude with its completed Form 3115 a
description of each specific item of the
bank's income or expense that is affected
by the change under this section 15.12
and, for each such item, identify the fol-
lowing: the method of accounting under
which the bank reports that item for fed-
eral income tax purposes immediately be-
fore the change; and the amount of the
§ 481(a) adjustment associated with
changing that item to the cash method
under this section 15.12.

(5) Computation of average annual
gross receipts. For purposes of section
15.12(2)(a)(iii) of this revenue procedure,
a bank's average annual gross receipts are
computed as described in this section
15.12(5).

(a) Average annual gross receipts. A
bank has average annual gross receipts not
in excess of $50,000,000 if, for each prior
taxable year ending on or after December
31, 2006, the bank's average annual gross
receipts for the three prior taxable-year
period ending with the applicable prior
taxable year do not exceed $50,000,000. If
a bank has not been in existence for three
prior taxable years, the bank must deter-
mine its average annual gross receipts for
the number of years (including short tax-
able years) that the bank has been in ex-
istence. See § 448(c)(3)(A).

(b) Gross receipts. Gross receipts is
defined consistent with § 1.448-1T(f)
(2)(iv). Thus, gross receipts for a taxable
year equal all receipts that must be recog-
nized under the method of accounting ac-
tually used by the bank for that taxable
year for federal income tax purposes. See
also § 448(c)(3)(C).

(c) Aggregation of gross receipts. For
purposes of computing gross receipts un-
der section 15.12(5)(b) of this revenue
procedure, all taxpayers treated as a single
employer under § 52(a) or (b) or § 414(m)
or (o) (or that would be treated as a single
employer under these sections if the tax-
payers had employees) will be treated as a
single taxpayer (that is, a single bank).
However, when transactions occur be-
tween taxpayers that are treated as a single
taxpayer by the previous sentence, gross
receipts arising from these transactions
will not be treated as gross receipts for
purposes of the average annual gross re-
ceipts limitation. See § 448(c)(2) and
§ 1.448-1T(f)(2)(ii).

(d) Treatment of short taxable year. In
the case of a short taxable year, a bank's
gross receipts must be annualized by mul-
tiplying the gross receipts for the short
taxable year by 12 and then dividing the
result by the number of months in the
short taxable year. See § 448(c)(3)(B) and
§ 1.448-1T(f)(2)(iii).

(e) Treatment of predecessors. Any
reference to a bank or taxpayer in section
15.12(5) of this revenue procedure in-
cludes a reference to any predecessor of
that bank or taxpayer. See § 448(c)(3)(D).

(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.12 is "127."

(7) Contact information. For further in-
formation regarding a change under this
section, contact K. Scott Brown at (202)
317-6945 (not a toll-free number).

.13 Change to overall cash method for
farmers.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer engaged in the trade or busi-
ness of farming that wants to change to
the overall cash receipts and disbursement
(cash) method. If a taxpayer is engaged in
more than one trade or business, this

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change applies only to the taxpayer's
trade or business of farming.

(b) Inapplicability. This change does
not apply to a taxpayer that is required to
use an accrual method pursuant to § 447,
or prohibited from using the cash method
by § 448.

(2) Definitions.

(a) Cash method of accounting is the
method defined by § 446(c)(1) and
§§ 1.446-1(c)(1)(i), 1.451-1(a), and
1.461-1(a)(1). See also §§ 1.61-4
and 1.162-12 for specific rules relating
to farmers.

(b) The trade or business of farming is
a farming business as defined by
§ 263A(e)(4) and the regulations thereun-
der.

(3) Manner of making change. Gener-
ally, a taxpayer changing its method of
accounting under this section 15.13 must
compute a § 481(a) adjustment. However,
if the taxpayer is changing from the crop
method, that portion of the change is made
using a cut-off basis under which ex-
penses reported on the crop method and
not deducted prior to the year of change
are deducted in the year the related crop is
sold.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.13 is "128."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Maxine Woo-Garcia at
(202) 317-7011 or Charles Gorham at
(202) 317-7003 (not a toll-free number).

.14 Nonshareholder contributions to
capital under § 118.

(1) Description of change.

(a) Water and sewerage disposal utili-
ties.

(i) This change applies to a regulated
public utility described in § 118(c) that
wants to change its method of accounting
for payments received from customers as
customer connection fees, which are not
contributions to the capital of the regu-
lated public utility within the meaning of
§ 118(c), from excluding the payments
from gross income as nontaxable contri-
butions to capital under § 118 to including
the payments in gross income under § 61.

See Rev. Rul. 2008-30, 2008-1 C.B.
1156.

(ii) This change applies to a regulated
public utility described in § 118(c) that
wants to change its method of accounting
for payments or property received that are
contributions in aid of construction under
§ 118(c) and § 1.118-2 and that meet the
requirements of §§ 118(c)(1)(B) and
118(c)(1)(C) from including the payments
or the fair market value of the property in
gross income under § 61 to excluding the
payments or the fair market value of the
property from income as nontaxable con-
tributions to capital under § 118(a).

(b) Other payments or property re-
ceived. This change applies to a taxpayer
that wants to change its method of ac-
counting for payments or property re-
ceived (other than the payments received
by a public utility described in § 118(c)
that are addressed in section 15.14(1)(a)(i)
of this revenue procedure) that do not
constitute contributions to the capital of
the taxpayer within the meaning of § 118
and the regulations thereunder, from ex-
cluding the payments or the fair market
value of the property from gross income
as nontaxable contributions to capital un-
der § 118 to including the payments or the
fair market value of the property in gross
income under § 61.

(2) Additional requirement. A taxpayer
that is making a change described in sec-
tion 15.14(1)(a)(i) or (1)(b) must complete
Schedule E of Form 3115 for the depre-
ciable property to which the change re-
lates (as well as all other relevant portions
of the Form 3115).

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.14 is "129."

(4) Contact information. For further in-
formation regarding a change under this
section, contact David H. McDonnell at
(202) 317-4137 (not a toll-free number).

.15 Debt issuance costs.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for capitalized
debt issuance costs to comply with
§ 1.446-5, which provides rules for allo-
cating the costs over the term of the debt.
This change also applies to a taxpayer that

wants to change its method of accounting
for capitalized debt issuance costs from
one permissible method to another per-
missible method under the last sentence in
§ 1.446-5(b)(2) if the total original issue
discount determined for purposes of
§ 1.446-5 is de minimis.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.15 is "148."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Charles W. Culmer at
(202) 317-6945 (not a toll-free number).

.16 Transfers of interties under the safe
harbor described in Notice 2016-36
(§ 118).

(1) Description of change.

(a) Safe harbor applicable. This
change, as described in Notice 2016-36,
2016-25 I.R.B. 1029, applies to a utility
that wants to change to the safe harbor
method of accounting provided in section
III.C of Notice 2016-36 for the treatment
under § 118 of a transfer of an intertie,
including a dual-use intertie, by a gener-
ator to a utility. Under this safe harbor
method of accounting, such a transfer will
not be treated as gross income under
§ 118(a) or a contribution in aid of con-
struction (CIAC) under § 118(b) if all of
the conditions specified in section III.C of
Notice 2016-36 are met.

(b) Safe harbor terminates. This
change, as described in Notice 2016-36,
applies to a utility that is using the safe
harbor method of accounting provided in
section III.C of Notice 2016-36 and is
required to terminate that safe harbor
method of accounting because of the oc-
currence of an event specified in section
IV of Notice 2016-36. The occurrence of
such event will require the utility to rec-
ognize income as a consequence of the
transfer of an intertie, including a dual-use
intertie, to the utility by a generator.

(2) Definitions. For purposes of this
section 15.16, the terms "utility," "in-
tertie," "dual-use intertie," and "genera-
tor" are defined in section III.B of Notice
2016-36.

(3) Certain eligibility rules inapplica-
ble. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13,

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2015-5 I.R.B. 419, do not apply to a util-
ity making a change under this section
15.16.

(4) Manner of making change.

(a) The change in method of account-
ing under section 15.16(1)(a) of this rev-
enue procedure is made with a § 481 (a)
adjustment.

(b) The change in method of account-
ing under section 15.16(1)(b) of this rev-
enue procedure is made using a cut-off
method and applies to a transfer of an
intertie, including a dual-use intertie, by a
generator to a utility made on or after the
beginning of the taxable year in which the
safe harbor method of accounting termi-
nates.

(5) Concurrent automatic change. A
utility making a change under this section
15.16 for more than one transfer of an
intertie, including a dual-use intertie, for
the same year of change should file a
single Form 3115 for all such transfers.
The single Form 3115 must provide a
single net § 481(a) adjustment for all
changes under section 15.16(1)(a) of this
revenue procedure.

(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the methods of
accounting under this section 15.16 is
"226."

(7) Contact information. For further in-
formation regarding a change under this
section 15.16, contact Barbara Campbell
at (202) 317-4137 (not a toll-free num-
ber).

.17 Change to or from the net asset
value (NAV) method.

(1) Description of change. This
change, as described in Rev. Proc. 2016-
39, 2016-30 I.R.B. 164, applies to a tax-
payer that holds shares in a money market
fund (MMF) as defined in § 1.446-
7(b)(4) (giving effect to § 1.446-7(c)(5),
under which MMF holdings in different
accounts are treated as different MMFs)
and that wants to change its method of
accounting for gain or loss on the shares
from a realization method to the NAV
method described in § 1.446-7 or from
the NAV method to a realization method.

(2) Certain eligibility requirements in-
applicable. The eligibility rules in sec-

tions 5.01(1)(c), (d), and (f) of Rev. Proc.
2015-13 do not apply to this change.

(3) Definitions.

(a) "Rule 2a-7" means Rule 2a-7 (17
CFR 270.2a-7) under the Investment
Company Act of 1940.

(b) "Floating-NAV MMF" means an
MMF that is required to value its assets
using market factors and to round its price
per share to the nearest basis point (the
fourth decimal place, in the case of a fund
with a $1.0000 share price) under Rule
2a-7.

(c) "Stable-NAV MMF" means an
MMF that is not a floating-NAV MMF.

(4) Manner of making change.

(a) A change to or from the NAV
method is made on a cut-off basis. See
§ 1.446-7(c)(8). Accordingly, a § 481(a)
adjustment is neither permitted nor re-
quired. A taxpayer making a change to or
from the NAV method for shares in an
MMF applies the new method only to the
computation of gain or loss on the shares
beginning with the year of change. Under
§ 1.446-7(b)(7)(ii), a taxpayer changing
to the NAV method takes a starting basis
(as defined in § 1.446-7(b)(7)) in those
shares for the year of change equal to the
aggregate adjusted basis of the taxpayer's
shares in the MMF at the end of the im-
mediately preceding taxable year. A tax-
payer changing from the NAV method to
a realization method for shares in an
MMF must adjust the basis in the shares
beginning on the first day of the year of
change to account for gain or loss previ-
ously recognized under the NAV method.
Accordingly, the taxpayer generally takes
a basis in each MMF share at the begin-
ning of the year of change equal to the fair
market value of that share under § 1.446-
7(b)(3) used in computing the ending
value (as defined in § 1.446-7(b)(2)) of
the shares in that MMF for the final com-
putation period (as defined in § 1.446-
7(b)(1)) of the taxable year prior to the
year of change.

(b) Short Form 3115 in lieu of a Form
3115. In accordance with § 1.446-
1(e)(3)(ii), the requirement of § 1.446-
1(e)(3)(i) to file a Form 3115 is waived
and, pursuant to section 6.02(2) of Rev.
Proc. 2015-13, a short Form 3115 is au-
thorized for a taxpayer changing from a
realization method to the NAV method, or
changing from the NAV method to a re-

alization method, for shares in an MMF.
Unless the change meets the requirements
of section 15.17(4)(c) of this revenue pro-
cedure, the taxpayer must file a short
Form 3115 that includes the following
information:

(i) the identification section of page 1
(above Part I);

(ii) the signature section at the bottom of
page 1;

(iii) Part I, line 1(a);

(iv) a statement specifying whether the
taxpayer is changing from a realization
method to the NAV method or from the
NAV method to a realization method; and

(v) a statement specifying the MMF or
MMFs to which the change applies, if the
change does not apply to all MMFs in
which the taxpayer holds shares (and, to
the extent applicable, whether the change
applies only to shares of the MMF or
MMFs held in a particular account).

(c) No Form 3115 Required. In accor-
dance with § 1.446-1(e)(3)(ii), a taxpayer
changing to the NAV method for shares in
a stable-NAV MMF may change to the
NAV method on a federal tax return with-
out filing a Form 3115 if the following
requirements are satisfied:

(i) the taxpayer has not used the NAV
method for shares in the MMF for any
taxable year prior to the year of change;
and

(ii) prior to the year of change, either

(A) the taxpayer's basis in each share
of the MMF has been at all times equal to
the MMF's target share price, or

(B) the taxpayer has not realized any
gain or loss with respect to shares in the
MMF.

(5) Multiple changes. A taxpayer mak-
ing multiple changes under this section
15.17 for the same year of change on a
short Form 3115 should file a single short
Form 3115. The short Form 3115 will be
treated as applying to all shares that the
taxpayer holds in any MMF unless the
taxpayer specifies the MMFs to which
the change applies. If the taxpayer speci-
fies an MMF, the short Form 3115 will be
treated as applying to all shares in that
MMF held in any account by the taxpayer,
unless the short Form 3115 specifies the
accounts to which the change applies.

(6) Designated automatic accounting
method change number. The designated
automatic accounting method change

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number for a change under this section
15.17 is "227."

(7) Contact Information. For further
information regarding a change under this
section 15.17, contact Jason Kurth at
(202) 317-6842 (not a toll-free number).

## SECTION 16. TAXABLE YEAR OF INCLUSION (§ 451)

.01 Accrual of interest on nonperforming
loans.

(1) Description of change.

(a) This change applies to a taxpayer
using an overall accrual method of ac-
counting that is a bank as defined in § 581
(or whose primary business is making or
managing loans) and wants to change its
method of accounting to comply with
§ 451 and § 1.451-1(a) for qualified stated
interest (as defined in § 1.1273-1(c)) on
nonperforming loans.

(b) Section 1.451-1(a) requires income
to be accrued when all the events have
occurred that fix the right to receive the
income and the amount thereof can be
determined with reasonable accuracy. A
taxpayer may not stop accruing qualified
stated interest on a nonperforming loan
for federal income tax purposes merely
because payments on the loan are overdue
by a certain length of time, such as 90
days, even if a federal, state, or other
regulatory authority having jurisdiction
over the taxpayer permits or requires that
the overdue interest not be accrued for
regulatory purposes.

(c) Under § 451 and § 1.451-1(a), a
taxpayer must continue accruing qualified
stated interest on any nonperforming loan
until either (i) the loan is worthless under
§ 166 and charged off as a bad debt, or (ii)
the interest is determined to be uncollect-
ible. In order for interest to be determined
uncollectible, the taxpayer must substan-
tiate, taking into account all the facts and
circumstances, that it has no reasonable
expectation of payment of the interest.
This substantiation requirement is applied
on a loan by loan basis.

(d) A taxpayer that changes its method
of accounting under this section 16.01
must do so for all of its loans.

(2) Section 481(a) adjustment. In gen-
eral, the § 481(a) adjustment for a method
change under this section 16.01 represents
the amount of qualified stated interest on

the taxpayer's nonperforming loans out-
standing as of the beginning of the year of
change that should have been accrued un-
der § 451 and § 1.451-1(a) and was not
accrued. Interest for which the taxpayer,
as of the beginning of the year of change,
has no reasonable expectation of payment
is not taken into account in determining
the amount of the § 481(a) adjustment.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.01 is "36."

(4) Contact information. For further in-
formation regarding a change under this
section, contact K. Scott Brown at (202)
317-6945 (not a toll-free number).

.02 Advance rentals.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for advance rent-
als (other than advance rentals subject to
§ 467 and the regulations thereunder) to
include such advance rentals in gross in-
come in the taxable year received. See
§ 1.61-8(b).

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.02 is "37."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Daniel Cassano at (202)
317-7011 (not a toll-free number).

.03 State or local income or franchise
tax refunds.

(1) Description of change. This change
applies to a taxpayer using an overall ac-
crual method of accounting that receives a
state or local income or franchise tax re-
fund and wants to accrue the refund in the
taxable year the taxpayer receives pay-
ment or notice that the claim has been
approved, whichever is earlier, as pro-
vided in Rev. Rul. 2003-3, 2003-1 C.B.
252.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.03 is "38."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Helen Rogers at (202)
317-7011 (not a toll-free number).

.04 Capital Cost Reduction Payments.

(1) Description of change. This change
applies to a taxpayer that purchases motor
vehicles subject to leases and assumes the
associated leases from the vehicles' deal-
ers and wants to use the safe harbor
method of accounting for capital cost re-
duction (CCR) payments specified in Rev.
Proc. 2002-36, 2002-1 C.B. 993.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.04 is "39."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Bill Ruane at (202) 317-
4718 (not a toll-free number).

.05 Credit card annual fees.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for credit card
annual fees as described in Rev. Rul.
2004-52, 2004-1 C.B. 973, either to a
method that satisfies the all events test in
accordance with Rev. Rul. 2004-52 or to
the Ratable Inclusion Method for Credit
Card Annual Fees that is described in sec-
tion 4 of Rev. Proc. 2004-32, 2004-1
C.B. 988. Rev. Rul. 2004-52 holds that
credit card annual fees are not interest for
federal income tax purposes and that such
fees are includible in income by the card
issuer when the all events test under § 451
is satisfied. Rev. Proc. 2004-32 provides
additional guidance for taxpayers seeking
to change their methods of accounting for
such fees, including guidance with respect
to the Ratable Inclusion Method for Credit
Card Annual Fees. However, a taxpayer
may make either change under this reve-
nue procedure only if the taxpayer uses an
overall accrual method of accounting for
federal income tax purposes and issues
credit cards to, and receives annual fees
from, cardholders under agreements that
allow each cardholder to use a credit card
to access a revolving line of credit to
make purchases of goods and services

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and, if so authorized, to obtain cash ad-
vances.

(2) Manner of making change. In com-
pleting its Form 3115 to make this change,
a taxpayer must identify the specific
method to which the taxpayer is changing.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.05 to a method that satisfies the all
events test in accordance with Rev. Rul.
2004-52 is "80." The designated auto-
matic accounting method change number
for a change under this section 16.05 to
the Ratable Inclusion Method for Credit
Card Annual Fees is "81."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Kate Sleeth at (202) 317-
7053 (not a toll-free number).

.06 Credit card late fees.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for credit card
late fees to a method that treats these fees
as interest income that creates or increases
the amount of original issue discount
(OID) on the pool of credit card loans to
which the fees relate. This change is avail-
able only to a taxpayer that issues credit
cards allowing cardholders to access a re-
volving line of credit established by the
taxpayer and that, for federal income tax
purposes, does not treat the credit card
purchase transactions of its cardholders as
creating either debt that is given in con-
sideration for the sale or exchange of
property (within the meaning of § 1274)
or debt that is deferred payment for prop-
erty (within the meaning of § 483). See
Rev. Proc. 2004-33, 2004-1 C.B. 989,
for additional guidance relating to this
change.

(2) Additional requirements. A tax-
payer making this change must be able to
demonstrate both of the following:

(a) the amount of any credit card late
fee charged to each cardholder by the tax-
payer is separately stated on the cardhold-
er's account when that fee is imposed; and

(b) under the applicable credit card
agreement governing each cardholder's
use of the credit card, no amount identi-
fied as a credit card late fee is charged for
property or for specific services per-

formed by the taxpayer for the benefit of
the cardholder.

(3) Audit protection. Any audit pro-
tection provided in connection with this
change is not a determination by the
Commissioner that the taxpayer is prop-
erly accounting for any OID income on
that pool of credit card loans. Thus, for
example, the IRS is not precluded from
pursuing the issue of whether a taxpayer
is properly accounting for its OID in-
come (including any OID income attrib-
utable to credit card late fees) on its pool
of credit card loans in accordance with
§ 1272(a)(6).

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.06 is "82."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Kate Sleeth at (202) 317-
7053 (not a toll-free number).

.07 Advance payments.

(1) Description of change.

(a) Applicability. This change applies
to:

(i) a taxpayer using or changing to an
overall accrual method of accounting that
receives advance payments, as defined in
Rev. Proc. 2004-34, 2004-1 C.B. 991, as
modified and clarified by Rev. Proc.
2011-18, 2011-5 I.R.B. 443, and Rev.
Proc. 2013-29, 2013-33 I.R.B. 141, and
as modified by Rev. Proc. 2011-14,
2011-4 I.R.B. 330, and wants to change
to either the full inclusion or deferral
method, as described in Rev. Proc. 2004-
34, other than a taxpayer changing to a
method described in section 15.11 of this
revenue procedure. See also Announce-
ment 2004-48, 2004-1 C.B. 998.

(ii) a taxpayer using an overall accrual
method of accounting that receives ad-
vance payments, as defined in § 1.451-
5(a)(1), and wants to change to the
method of including advance payments in
income in the taxable year of receipt. See
§ 1.451-5(b)(1).

(b) Inapplicability. This change does
not apply to a taxpayer that wants to use
the Deferral Method for payments de-
scribed in section 5.02(4)(a) of Rev. Proc.
2004-34 (other than allocable payments
described in section 5.02(4)(c) of Rev.

Proc. 2004-34) or for payments for which
a method under section 5.02(3)(b)(i) or
(iii) of Rev. Proc. 2004-34 applies. The
taxpayer must request any such change in
method of accounting using the non-
automatic change procedures in Rev.
Proc. 2015-13, 2015-5 I.R.B. 419. See
section 8.03 of Rev. Proc. 2004-34.

(2) Concurrent automatic change to an
overall accrual method. A taxpayer mak-
ing both a change to its method of ac-
counting for advance payments under this
section 16.07 and a change to an overall
accrual method under section 15.01 of this
revenue procedure for the same year of
change must file a single Form 3115 for
both changes and enter the designated au-
tomatic accounting method change num-
bers for both changes on the appropriate
line on that Form 3115. See section
6.03(1)(b) of Rev. Proc. 2015-13 for in-
formation on making concurrent changes.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under section
16.07(1)(a)(i) of this revenue procedure to
use the full-inclusion method is "83." The
designated automatic accounting method
change number for a change under section
16.07(1)(a)(i) of this revenue procedure to
use the deferral method is "84." The des-
ignated automatic accounting method
change number for a change under section
16.07(1)(a)(ii) of this revenue procedure
is "216."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Peter Ford at (202) 317-
7011 (not a toll-free number).

.08 Credit card cash advance fees.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for credit card
cash advance fees to a method that treats
these fees as creating or increasing origi-
nal issue discount (OID) on a pool of
credit card loans that includes the cash
advances that give rise to the fees. This
change is available only to a taxpayer that
issues credit cards allowing cardholders to
access a revolving line of credit estab-
lished by the taxpayer both to make credit
card purchase transactions and to obtain
cash advances and that, for federal income
tax purposes, does not treat the credit card

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purchase transactions of its cardholders as
creating debt that is given in consideration
for the sale or exchange of property. See
Rev. Proc. 2005-47, 2005-2 C.B. 269,
for additional guidance relating to this
change.

(2) Other requirements. A taxpayer
making this change must be able to dem-
onstrate both of the following:

(a) the amount of any credit card cash
advance fee charged to a cardholder by
the taxpayer is separately stated on the
cardholder's account when that fee is im-
posed; and

(b) under the credit card agreement
with the cardholder, no amount identified
as a credit card cash advance fee is
charged for property or for specific ser-
vices performed by the taxpayer for the
benefit of the cardholder.

(3) Audit protection. Any audit protec-
tion applicable to this change under sec-
tion 8 of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, is not a determination by the
Commissioner that the taxpayer is prop-
erly accounting for any OID income on
that pool of credit card loans. Thus, for
example, the IRS is not precluded from
pursuing the issue of whether, under
§ 1272(a)(6), a taxpayer is correctly ac-
counting for its OID income (including
any OID income attributable to credit card
cash advance fees) on its pool of credit
card loans.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under section 16.08
is "94."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Kate Sleeth at (202) 317-
7053 (not a toll-free number).

.09 Retainages.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer using an overall accrual
method of accounting that wants to
change its method of accounting for treat-
ing retainages to a method consistent with
the holding in Rev. Rul. 69-314, 1969-1
C.B. 139. A taxpayer changing its method
of accounting for retainages under this
section 16.09 must treat all retainages,
that is both receivables and payables, in
the same manner.

(b) Inapplicability. This change does
not apply to retainages (receivables and
payables) for long-term contracts that
must be accounted for under the
percentage-of-completion method (PCM)
under § 460. Nor does this change apply
to long-term contracts otherwise ac-
counted for under the PCM or long-term
contracts accounted for under exempt
percentage-of-completion method or the
completed contract method. For the treat-
ment of retainages under such methods,
see Treas. Reg. §§ 1.460-4(b)(4)(i)(A)
and 1.460-4(d)(3).

(2) Manner of making change.

(a) Except as provided in section
16.09(2)(b) of this revenue procedure, a
taxpayer changing its method of account-
ing under this section 16.09 must take into
account a § 481(a) adjustment.

(b) For retainages received and paid in
connection with long term contracts that
are exempt construction contracts (as de-
fined in § 1.460-3(b)(1)) accounted for
using the taxpayer's overall accrual
method of accounting, this change is made
on a cut-off basis and applies only to
long-term contracts entered into on or af-
ter the beginning of the year of change.
See § 1.460-1(c)(2) for a description of
when a contract is treated as "entered
into." Accordingly, a § 481(a) adjustment
is neither permitted nor required.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.09 for retainages not received under
long-term contracts is "130." The desig-
nated automatic method change number
for a change under this section 16.09 for
retainages received under long-term con-
tracts is "217." A taxpayer making a
change under this section 16.09 that has
both types of retainages must file a single
Form 3115 and enter both change num-
bers on the appropriate line on Form 3115.

(4) Contact information. For further in-
formation regarding a change under this
section, contact Peter Cohn at (202) 317-
7011 (not a toll-free number).

.10 Advance payments - change in
applicable financial statements (AFS).

(1) Description of change.

(a) Applicability.

(i) This change applies to a taxpayer
that: (A) receives advance payments, as
defined in Rev. Proc. 2004-34, 2004-1
C.B. 991, as modified and clarified by
Rev. Proc. 2011-18, 2011-5 I.R.B. 443,
and Rev. Proc. 2013-29, 2013-33 I.R.B.
141, and as modified by Rev. Proc. 2011-
14, 2011-4 I.R.B. 330, (B) uses the de-
ferral method described in section
5.02(3)(a) of Rev. Proc. 2004-34 for in-
cluding those advance payments in gross
income in accordance with its applicable
financial statement (AFS), (C) changes the
manner in which it recognizes advance
payments in revenues in its AFS, and (D)
wants to change its method of accounting
to use its proposed method of recognizing
advance payments in revenues in its AFS
for determining the extent to which ad-
vance payments are included in gross in-
come under Rev. Proc. 2004-34.

(ii) A taxpayer's restatement of its AFS
for financial accounting presentation does
not affect the propriety of the taxpayer's
method of accounting for advance pay-
ments in the prior taxable year(s). Thus, if
the taxpayer uses the deferral method de-
scribed in section 5.02(3)(a) of Rev. Proc.
2004-34 for including advance payments
in gross income in accordance with its
AFS (even if the AFS for that taxable year
is later restated), the taxpayer satisfies the
requirement of section 16.10(1)(a)(i)(B)
of this revenue procedure and may change
its method of accounting under this sec-
tion if it is otherwise eligible.

(b) Inapplicability. This change does
not apply to:

(i) a taxpayer that uses a present
method of accounting for advance pay-
ments that is not the deferral method de-
scribed in section 5.02(3)(a) of Rev. Proc.
2004-34. For example, this change does
not apply to a taxpayer that uses the full
inclusion method under section 5.01 of
Rev. Proc. 2004-34;

(ii) a taxpayer that wants to change its
method for allocating payments under
section 5.02(4) of Rev. Proc. 2004-34.

(2) Manner of making change and des-
ignated automatic accounting method
change number.

(a) This change is made on a cut-off
basis and applies only to advance pay-
ments received on or after the beginning
of the year of change. Any advance pay-
ments received prior to the year of change

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are accounted for under the taxpayer's
former method of accounting (that is, ac-
cording to its former AFS). Accordingly,
a § 481(a) adjustment is neither permitted
nor required.

(b) In accordance with § 1.446-
1(e)(3)(ii), the requirement of § 1.446-
1(e)(3)(i) to file a Form 3115 is waived
and a statement in lieu of a Form 3115 is
authorized for this change. Notwithstand-
ing the definition of Form 3115 in section
3.07 of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, the statement in lieu of a Form
3115 that is permitted under this section
16.10 is considered a Form 3115 for pur-
poses of the automatic consent procedures
of Rev. Proc. 2015-13. However, the re-
quirement to file the Duplicate copy, un-
der section 6.03(1)(a) of Rev. Proc. 2015-
13, is waived. The statement attached to
the taxpayer's return for the year of
change must include the following infor-
mation:

(i) the designated automatic accounting
change number for this change, which is
"153;"

(ii) the taxpayer's name and employer
identification (or social security number in
the case of an individual) for each appli-
cant as would be provided had a Form
3115 been required;

(iii) the year of change (both the be-
ginning and ending dates);

(iv) for each applicant, identify the
type of applicable financial statement (as
defined in section 4.06 of Rev. Proc.
2004-34) used by the taxpayer;

(v) a detailed and complete description
of each type of item affected by the
change in revenue recognition and the line
number (or schedule) where the affected
item is reflected on the federal tax return
for the year of change; and

(vi) a detailed description of the basis
used for deferral (that is, the method the
taxpayer uses in its applicable financial
statement or how the taxpayer determines
amounts earned, as applicable) both be-
fore and after the change in the revenue
recognition policy for the applicable fi-
nancial statement.

(3) Certain eligibility rule inapplica-
ble. The eligibility rule in section
5.01(1)(f) Rev. Proc. 2015-13 does not
apply to this change.

(4) No audit protection. A taxpayer
does not receive audit protection under

section 8.01 of Rev. Proc. 2015-13 in
connection with this change. See section
8.02(2) of Rev. Proc. 2015-13.

(5) Special rule.

(a) Background. Under § 446(e), a tax-
payer that changes its book method of
accounting must secure the Commission-
er's consent before applying its new book
method of accounting for tax purposes.
See also § 1.446-1(e)(2)(i). Accordingly,
a taxpayer that previously elected to defer
advance payments under Rev. Proc.
2004-34 is required to obtain consent un-
der § 446(e) if the taxpayer subsequently
changes its book method for the deferred
advance payments and wants to use its
new AFS in determining the extent to
which advance payments are included in
gross income under Rev. Proc. 2004-34.
The IRS recognizes that some taxpayers
took the position that consent under
§ 446(e) was not required in these circum-
stances and changed their method of ac-
counting without properly obtaining con-
sent. The safe harbor described below in
section 16.10(5)(b) of this revenue proce-
dure is provided to reduce controversy in
this area.

(b) Safe harbor. If before January 10,
2011, a taxpayer: (i) received advance
payments, as defined in Rev. Proc. 2004-
34; (ii) used the deferral method described
in section 5.02(3)(a) of Rev. Proc.
2004-34 for including those advance pay-
ments in gross income in accordance with
its AFS; (iii) changed the manner in which
advance payments are recognized in rev-
enues in its AFS; and (iv) used its new
AFS method with respect to a timely filed
original federal income tax return in de-
termining the amount of advance pay-
ments included in gross income under the
deferral method of Rev. Proc. 2004-34
without securing the consent of the Com-
missioner to that change in accordance
with § 446(e) and § 1.446-1(e)(2)(i), the
IRS will not assert that the taxpayer's
present method of accounting for advance
payments is not a proper deferral method
described in section 5.02(3)(a) of Rev.
Proc. 2004-34 solely on the ground that
the taxpayer failed to obtain the consent of
the Commissioner for that change.

(6) Designated automatic accounting
method change number. The designated
automatic accounting method change

number for a change under this section
16.10 is "153."

(7) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

## SECTION 17. OBLIGATIONS ISSUED AT DISCOUNT (§ 454)

### .01 Series E, EE or I U.S. savings bonds.

(1) Description of change. This change
applies to a taxpayer that uses the overall
cash receipts and disbursements (cash)
method of accounting and that wants to
change its method of accounting for inter-
est income on Series E, EE, or I U.S.
savings bonds. However, this change only
applies to a taxpayer that previously made
an election under § 454 to report as inter-
est income the increase in redemption
price on a bond occurring in a taxable
year, and that now wants to report this
income in the taxable year in which the
bond is redeemed, disposed of, or finally
matures, whichever is earliest.

(2) Manner of making change and des-
ignated automatic accounting method
change number.

(a) This change is made on a cut-off
basis and is effective for any increase in
redemption price occurring after the be-
ginning of the year of change for all Series
E, EE and I U.S. savings bonds held by
the taxpayer on or after the beginning of
the year of change. Accordingly, a
§ 481(a) adjustment is neither permitted
nor required.

(b) In accordance with § 1.446-
1(e)(3)(ii), the requirement of § 1.446-
1(e)(3)(i) to file a Form 3115 is waived
and a statement in lieu of a Form 3115 is
authorized for this change. Notwithstand-
ing the definition of Form 3115 in section
3.07 of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, the statement in lieu of a Form
3115 that is permitted under this section
17.01 is considered a Form 3115 for pur-
poses of the automatic consent procedures
of Rev. Proc. 2015-13. However, the re-
quirement to file the Duplicate copy, un-
der section 6.03(1)(a) of Rev. Proc. 2015-
13, is waived. The statement must include
the following information:

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(i) the designated automatic accounting
method change number for this change,
which is "131";

(ii) the taxpayer's name and employer
identification number or social security
number, as applicable;

(iii) the year of change (both the begin-
ning and ending dates);

(iv) the Series E, EE or I U.S. savings
bonds for which this change in accounting
method is requested;

(v) a statement that the taxpayer will
report all interest on any U.S. savings
bonds acquired during or after the year of
change when the interest is realized upon
disposition, redemption, or final maturity,
whichever is earliest; and

(vi) a statement that the taxpayer will
report all interest on the U.S. savings
bonds acquired before the year of change
when the interest is realized upon dispo-
sition, redemption, or final maturity,
whichever is earliest, with the exception
of any interest income previously reported
in prior taxable years.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
17.01 is "131."

(4) Contact information. For further in-
formation regarding a change under this
section, contact William E. Blanchard at
(202) 317-3900 (not a toll-free number).

## SECTION 18. PREPAID SUB- SCRIPTION INCOME (§ 455)

.01 Prepaid subscription income.

(1) Description of change. This change
applies to a taxpayer using an overall ac-
crual method of accounting that wants to
change its method of accounting for pre-
paid subscription income to the method
described in § 455 and the regulations
thereunder, including an eligible taxpayer
that wants to make the "within 12
months" election under § 1.455-2.

(2) Manner of making change and des-
ignated automatic accounting method
change number.

(a) This change is made on a cut-off
basis and applies only to prepaid subscrip-
tion income received on or after the be-
ginning of the year of change. The tax-
payer must continue to account for
prepaid subscription income received

prior to the year of change under the tax-
payer's present method of accounting. Ac-
cordingly, a § 481(a) adjustment is neither
permitted nor required.

(b) In accordance with § 1.446- efits.
1(e)(3)(ii), the requirement in § 1.455-6
to file a statement requesting consent is
satisfied by filing a short Form 3115 for a
change under this section 18.01. The short
Form 3115 must include the following
information:

(i) the identification section of page 1
(above Part I);

(ii) the signature section at the bottom
of page 1;

(iii) Part I, line 1(a);

(iv) the information described in
§ 1.455-6(a), as required by § 1.455-
6(b); and

(v) if the taxpayer wants to make a
"within 12 months" election under
§ 1.455-6(c), the information described in
section § 1.455-6(c)(2).

(c) The consent granted in section 9 of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
satisfies the consent required under
§ 455(c)(3) and § 1.455-6(b).

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
18.01 is "132."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).

## SECTION 19. TAXABLE YEAR INCURRED (§ 461)

In general. Applicable provisions of
the Code, regulations and other guidance
published in the Internal Revenue Bulletin
may prescribe the manner in which a tax-
payer takes into account a liability that has
been incurred. For example, for a taxpayer
with inventories and subject to § 263A,
the taxpayer must include direct and indi-
rect costs in inventory costs, which may
be recovered through cost of goods sold.
See § 1.263A-1(e)(2)(i)(B). A taxpayer
may not rely on any provision in this
section 19 to take a current year deduction
if another applicable provision requires
the taxpayer to take the liability into ac-
count in a year other than the year in-
curred.

.01 Timing of incurring liabilities for
employee compensation.

(1) Self-insured employee medical ben-

(a) Description of change.

(i) Applicability. This change applies to
a taxpayer using an overall accrual
method of accounting that wants to
change its method of accounting for self-
insured liabilities (including any amounts
not covered by insurance, such as a "de-
ductible" amount under an insurance pol-
icy) relating to employee medical ex-
penses (including liabilities resulting from
medical services provided to retirees and
to employees who have filed claims under
a workers' compensation act) that are not
paid from a welfare benefit fund within
the meaning of § 419(e) to a method as
follows:

(A) If the taxpayer has a liability to pay
an employee for medical expenses in-
curred by the employee, the taxpayer will
treat the liability as incurred in the taxable
year in which the employee files the claim
with the employer. See United States v.
General Dynamics Corp., 481 U.S. 239
(1987), 1987-2 C.B. 134.

(B) If the taxpayer has a liability to pay
a 3rd party for medical services provided
to its employees, the taxpayer will treat
the liability as incurred in the taxable year
in which the services are provided.

(ii) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations there-
under to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
19.01(1) if the taxpayer is not capitalizing
these costs, unless the taxpayer concur-
rently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).

(b) Concurrent automatic change. A
taxpayer making both this change and a
change to a UNICAP method described in
section 19.01(1)(a)(ii) of this revenue pro-
cedure under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable) for the same year of change
should file a single Form 3115 for both
changes, in which case the taxpayer must
enter the designated automatic accounting

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method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, for informa-
tion on making concurrent changes.

(c) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
19.01(1) is "42."

(2) Bonuses.

(a) Description of change.

(i) Applicability. This change applies to
a taxpayer using an overall accrual
method of accounting that wants to
change its method of accounting to treat
bonuses as incurred in the taxable year in
which all events have occurred that estab-
lish the fact of the liability to pay a bonus
and the amount of the liability can be
determined with reasonable accuracy (see
§ 1.446-1(c)(1)(ii)). Specifically, a tax-
payer may change its method of account-
ing under this section 19.01(2) to one of
the following methods:

(A) If all the events that establish the
fact of the liability to pay a bonus have
occurred by the end of the taxable year in
which the related services are provided,
and the bonus is received by the employee
no later than the 15th day of the 3rd calen-
dar month after the end of the taxable year
in which the related services are provided,
the taxpayer will treat the bonus liability
as incurred in that taxable year. See Rev.
Rul. 55-446, 1955-2 C.B. 531, as modi-
fied by Rev. Rul. 61-127, 1961-2 C.B.
36.

(B) If all the events that establish the
fact of the liability to pay a bonus occur in
the taxable year subsequent to the taxable
year in which the related services are pro-
vided, the taxpayer will treat the bonus
liability as incurred in such subsequent
taxable year.

(ii) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations there-
under to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
19.01(2) if the taxpayer is not capitalizing
these costs, unless the taxpayer concur-
rently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,

12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).

(b) Concurrent automatic change. A
taxpayer making both this change and a
change to a UNICAP method described in
section 19.01(2)(a)(ii) of this revenue pro-
cedure under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable) for the same year of change
should file a single Form 3115 for both
changes, in which case the taxpayer must
enter the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making con-
current changes.

(c) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
19.01(2) is "133."

(3) Vacation pay, sick pay, and sever-
ance pay.

(a) Description of change.

(i) Applicability. This change applies to
a taxpayer using an overall accrual
method of accounting that wants to
change its method of accounting to treat
vacation pay, sick pay, and severance pay
as incurred in the taxable year in which all
events have occurred that establish the
fact of the liability to pay vacation pay,
sick pay, and severance pay and the
amount of the liability can be determined
with reasonable accuracy (see § 1.446-
1(c)(1)(ii)). Specifically, a taxpayer may
change its method of accounting under
this section 19.01(3) to one of the follow-
ing methods:

(A) If all the events that establish the
fact of the liability to pay vacation pay,
sick pay, and severance pay have occurred
by the end of the taxable year in which the
related services are provided, the vacation
pay, sick pay, and severance pay vests in
the taxable year the related services are
provided, and the vacation pay, sick pay,
and severance pay is received by the em-
ployee no later than the 15th day of the 3rd
calendar month after the end of the tax-
able year in which the related services are
provided, the taxpayer will treat the vaca-
tion pay, sick pay, and severance pay lia-
bility as incurred in the taxable year in
which the related services are provided.

(B) If all the events that establish the
fact of the liability to pay vacation pay,
sick pay, and severance pay occur in the
taxable year subsequent to the taxable
year in which the related services are pro-
vided, the taxpayer will treat the vacation
pay, sick pay, and severance pay liability
as incurred in such subsequent taxable
year.

(ii) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations there-
under to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
19.01(3) if the taxpayer is not capitalizing
these costs, unless the taxpayer concur-
rently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).

(b) Concurrent automatic change. A
taxpayer making both this change and a
change to a UNICAP method described in
section 19.01(3)(a)(ii) of this revenue pro-
cedure under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable) for the same year of change
should file a single Form 3115 for both
changes, in which case the taxpayer must
enter the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making con-
current changes.

(c) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
19.01(3) is "134."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Peter Ford at (202) 317-
7011 (not a toll-free number).

.02 Timing of incurring liabilities for
real property taxes, personal property
taxes, state income taxes, and state
franchise taxes.

(1) Background. A taxpayer using an
overall accrual method of accounting gen-
erally incurs a liability in the taxable year
that all the events have occurred that es-
tablish the fact of the liability, the amount
of the liability can be determined with

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reasonable accuracy, and economic per-
formance has occurred with respect to the
liability. See § 1.446-1(c)(1)(ii). Under
§ 1.461-4(g)(6), if the liability of the tax-
payer is to pay a tax, economic perfor-
mance occurs as the tax is paid to the
government authority that imposed the
tax.

(2) Description of change.

(a) Applicability. This change applies
to a taxpayer using an overall accrual
method of accounting that wants to
change its method of accounting to:

(i) treat liabilities (for which the all
events test of § 461(h)(4) is otherwise
met) for real property taxes, personal
property taxes, state income taxes, or state
franchise taxes as incurred in the taxable
year in which the taxes are paid, under
§ 461 and § 1.461-4(g)(6);

(ii) account for real property taxes, per-
sonal property taxes, state income taxes,
or state franchise taxes under the recurring
item exception method under § 461(h)(3)
and § 1.461-5(b)(1); or

(iii) revoke an election under § 461(c)
(ratable accrual election).

(b) Inapplicability. This change does
not apply to:

(i) a taxpayer's liability for a tax sub-
ject to the limitation on acceleration of
accrual of taxes under § 461(d); or

(ii) a taxpayer that is required under
§ 263A and the regulations thereunder to
capitalize the costs with respect to which
the taxpayer wants to change its method
of accounting under this section 19.02 if
the taxpayer is not capitalizing these costs,
unless the taxpayer concurrently changes
its method to capitalize these costs in con-
junction with a change to a UNICAP
method under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable).

(3) Concurrent automatic change. A
taxpayer making both this change and a
change to a UNICAP method described in
section 19.02(2)(b)(ii) of this revenue pro-
cedure under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable) for the same year of change
should file a single Form 3115 for both
changes, in which case the taxpayer must
enter the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc.

2015-13, 2015-5 I.R.B. 419, for informa-
tion on making concurrent changes.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
19.02 is "43."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Kari Fisher at (202) 317-
5100 (not a toll-free number).

.03 Timing of incurring liabilities under
a workers' compensation act, tort,
breach of contract, or violation of law.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer using an overall accrual
method of accounting that wants to
change its method of accounting for self-
insured liabilities (including any amounts
not covered by insurance, such as a "de-
ductible" amount under an insurance pol-
icy) arising under any workers' compen-
sation act or out of any tort, breach of
contract, or violation of law, to treating
the liability for the workers' compensa-
tion, tort, breach of contract, or violation
of law as being incurred in the taxable
year in which all the events have occurred
that establish the fact of the liability, the
amount of the liability can be determined
with reasonable accuracy, and payment is
made to the person to which the liability is
owed. See § 461 and § 1.461-4(g)(1) and
(2). If the taxpayer has self-insured liabil-
ities resulting from medical services pro-
vided to employees who have filed claims
under a workers compensation act, the
taxpayer may change its method of ac-
counting for those liabilities under section
19.01(1) of this revenue procedure (if the
taxpayer is otherwise eligible).

(b) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations there-
under to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
19.03 if the taxpayer is not capitalizing
these costs, unless the taxpayer concur-
rently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).

(2) Concurrent automatic change. A
taxpayer making both this change and
change to either a method provided in
section 19.01(1) of this revenue procedure
for self-insured employee medical ex-
penses or a UNICAP method described in
section 19.03(1)(b) of this revenue proce-
dure under section 12.01, 12.02, 12.08, or
12.12 of this revenue procedure (as appli-
cable) for the same year of change should
file a single Form 3115, in which case the
taxpayer must enter the designated auto-
matic accounting method change numbers
for each change on the appropriate line on
that Form 3115. See section 6.03(1)(b) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
for information on making concurrent
changes.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
19.03 is "44."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Kari Fisher at (202) 317-
5100 (not a toll-free number).

.04 Timing of incurring certain
liabilities for payroll taxes.

(1) Description of change.

(a) Applicability. This change applies
to:

(i) an employer using an overall ac-
crual method of accounting that wants to
change its method of accounting for:

(A) FICA and FUTA taxes to a method
consistent with the holding in Rev. Rul.
96-51, 1996-2 C.B. 36. Rev. Rul. 96-51
permits an accrual method employer to
take into account in Year 1, under the all
events test of § 461, its otherwise deduct-
ible FICA and FUTA taxes imposed with
respect to year-end wages properly ac-
crued in Year 1, but paid in Year 2, if the
requirements of the recurring item excep-
tion are met; and

(B) state unemployment taxes and, in
the event the taxpayer is an employer
within the meaning of the Railroad Retire-
ment Tax Act (RRTA) (see § 3231(a)),
RRTA taxes to a method under which the
taxpayer may take into account in Year 1
its otherwise deductible state unemploy-
ment taxes and railroad retirement taxes
(if applicable) imposed with respect to
year-end wages properly accrued in Year

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1, but paid in Year 2, if the requirements
of the recurring item exception are met
(including the requirement that, as of the
end of the taxable year, all events have
occurred that establish the fact of the lia-
bility and the amount of the liability can
be determined with reasonable accuracy,
see § 1.461-5(b));

(ii) an accrual method employer that
utilizes a method of accounting for FICA
and FUTA taxes that is consistent with the
holding in Rev. Rul. 96-51 and wants to
change its method of accounting for state
unemployment taxes and, in the event the
employer is an employer within the mean-
ing of RRTA (see § 3231(a)), RRTA taxes
to a method under which the taxpayer may
take into account in Year 1 its otherwise
deductible state unemployment taxes and
railroad retirement taxes (if applicable)
imposed with respect to year-end wages
properly accrued in Year 1, but paid in
Year 2, if the requirements of the recur-
ring item exception are met (including the
requirement that, as of the end of the
taxable year, all events have occurred that
establish the fact of the liability and the
amount of the liability can be determined
with reasonable accuracy, see § 1.461-
5(b)); or

(iii) a taxpayer using an overall accrual
method of accounting that wants to
change its method of accounting for FICA
and FUTA taxes to the safe harbor method
provided in Rev. Proc. 2008-25, 2008-1
C.B. 686. Rev. Proc. 2008-25 provides
that for purposes of the recurring item
exception, a taxpayer will be treated as
satisfying the requirement in § 1.461-
5(b)(1)(i) for its payroll tax liability in the
same taxable year in which all events have
occurred that establish the fact of the re-
lated compensation liability and the
amount of the related compensation liabil-
ity can be determined with reasonable ac-
curacy.

(b) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations there-
under to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
19.04 if the taxpayer is not capitalizing
these costs, unless the taxpayer concur-
rently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,

12.02, 12.08, or 12.12 of this revenue
procedure (as applicable).

(2) Recurring item exception. A tax-
payer that previously has not changed to
or adopted the recurring item exception
for FICA taxes, FUTA taxes, state unem-
ployment taxes, and RRTA taxes (if ap-
plicable) must change to the recurring
item exception method for FICA taxes,
FUTA taxes, state unemployment taxes,
and RRTA taxes (if applicable) as speci-
fied in § 461(h)(3) as part of this change.

(3) Concurrent automatic change. A
taxpayer making both this change and a
change to a UNICAP method described in
section 19.04(1)(b) of this revenue proce-
dure under section 12.01, 12.02, 12.08, or
12.12 of this revenue procedure (as appli-
cable) for the same year of change should
file a single Form 3115 for both changes,
in which case the taxpayer must enter the
designated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, for information on
making concurrent changes.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under section
19.04(1)(a)(i) or (ii) of this revenue pro-
cedure is "45." The designated automatic
accounting method change number for a
change under section 19.04(1)(a)(iii) of
this revenue procedure is "113."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Mon Lam at (202) 317-
5100 (not a toll-free number).

.05 Cooperative advertising.

(1) Description of change. This change
applies to a taxpayer using an overall ac-
crual method of accounting that wants to
change its method of accounting for co-
operative advertising costs to a method
consistent with the holding in Rev. Rul.
98-39, 1998-2 C.B. 198. Rev. Rul.
98-39 generally provides that, under the
all events test of § 461, an accrual method
manufacturer's liability to pay a retailer
for cooperative advertising services is in-
curred in the year in which the services
are performed, provided the manufacturer
is able to reasonably estimate this liability,
and even though the retailer does not sub-

mit the required claim form until the fol-
lowing year.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
19.05 is "46."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Mon Lam at (202) 317-
5100 (not a toll-free number).

.06 Timing of incurring certain
liabilities for services or insurance.

(1) Description of change. This change
applies to a taxpayer using an overall ac-
crual method of accounting that is cur-
rently treating the mere execution of a
contract for services or insurance as estab-
lishing the fact of the liability under § 461
and wants to change from that method of
accounting for liabilities for services or
insurance to comply with Rev. Rul.
2007-3, 2007-1 C.B. 350, that is, all the
events needed to establish the fact of the
liability occur when (a) the event fixing
the liability, whether that be the required
performance or other event occurs or (b)
payment is due, whichever happens earli-
est.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
19.06 is "106."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

.07 Rebates and allowances.

(1) Description of change.

(a) Applicability. This change applies
to taxpayer using an overall accrual
method of accounting that wants to
change its method of accounting for treat-
ing its liability for rebates and allowances
to the recurring item exception method
under § 461(h)(3) and § 1.461-5.

(b) Inapplicability. This change does
not apply to a taxpayer's liability to pay a
refund.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change

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number for a change under this section
19.07 is "135."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Mon Lam at (202) 317-
5100 (not a toll-free number).

.08 Ratable accrual of real property
taxes.

(1) Description of change. This change
applies to a taxpayer using an overall ac-
crual method of accounting that wants to
change its method of accounting for real
property taxes to the method described in
§ 461(c) and § 1.461-1(c)(1) (ratable ac-
crual election). This change applies to real
property taxes that relate to a definite pe-
riod of time. This change does not apply
to a taxpayer's first taxable year in which
the taxpayer incurs real property taxes, in
which case the change is made using the
provisions of § 1.461-1(c)(3)(i).

(2) Manner of making change and des-
ignated automatic accounting method
change number.

(a) This change is made on a cut-off
basis and applies only to real property
taxes accrued on or after the beginning of
the year of change. Any real property
taxes accrued prior to the year of change
are accounted for under the taxpayer's
former method of accounting. See
§ 1.461-1(c)(6), Examples (2) - (5). Ac-
cordingly, a § 481(a) adjustment is neither
permitted nor required.

(b) In accordance with § 1.446-
1(e)(3)(ii), the requirement in § 1.461-
1(c)(3)(ii) for requesting consent is satis-
fied by filing a short Form 3115 for this
change. The taxpayer's short Form 3115
must include all of the following informa-
tion:

(i) the identification section of page 1
(above Part I);

(ii) the signature section at the bottom of
page 1;

(iii) Part I, line 1(a); and

(iv) the information described in § 1.461-
1(c)(3)(ii)(a) through (f).

(c) The consent granted under section 9
of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, satisfies the consent required under
§ 461(c)(2)(B) and § 1.461-1(c)(3)(ii).

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change

number for a change under this section
19.08 is "149."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Daniel Cassano at (202)
317-7011 (not a toll-free number).

.09 California Franchise Taxes.

(1) Description of change. This change
applies to a taxpayer using an overall ac-
crual method of accounting that wants to
change its method of accounting for Cal-
ifornia franchise taxes to a method con-
sistent with the holding in Rev. Rul.
2003-90, 2003-2 C.B. 353. Rev. Rul.
2003-90 provides that for taxable years
beginning on or after January 1, 2000, a
taxpayer that uses an accrual method of
accounting incurs a liability for California
franchise tax for federal income tax pur-
poses in the taxable year following the
taxable year in which the California fran-
chise tax is incurred under the Cal. Rev. &
Tax Code, as amended.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
19.09 is "154."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003.

.10 Gift cards issued as a refund for
returned goods.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer using an overall accrual
method of accounting that sells goods at
retail and that wants to change its method
of accounting for gift cards (as defined by
section 4.02 of Rev. Proc. 2011-17,
2011-5 I.R.B. 441) issued as a refund for
returned goods to treat the transaction as
(1) the payment of a cash refund in the
amount of the gift card, and (2) the sale of
a gift card in the amount of the gift card.

(b) Treatment of proceeds of the
deemed sale. A taxpayer must treat the
proceeds of the deemed sale of a gift card
in accordance with the method of account-
ing it otherwise employs for sales of gift
cards.

(2) Concurrent automatic change. A
taxpayer making both this change and an

automatic change to the deferral method
for advance payments under Rev. Proc.
2004-34 (see section 16.07 of this reve-
nue procedure) for the same taxable year
of change must file a single Form 3115 for
both changes and enter the designated au-
tomatic accounting method change num-
bers for both changes on the appropriate
line on that Form 3115. See section
6.03(1)(b) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, for information on making
concurrent changes.

(3) Concurrent non-automatic change.
A taxpayer making both this change and
change to a permissible method of ac-
counting under § 1.451-5 for the same
taxable year of change on a single Form
3115 must request this change in method
of accounting using the non-automatic
procedures in Rev. Proc. 2015-13 (or any
successor).

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
19.10 is "156."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

.11 Timing of incurring liabilities under
the recurring item exception to the
economic performance rules.

(1) Description of change. This change
applies to a taxpayer using an overall ac-
crual method of accounting that wants to
conform to any of the holdings in Rev.
Rul. 2012-1, 2012-2 I.R.B. 255, which
clarifies the treatment of certain liabilities
under the recurring item exception to the
economic performance requirement under
§ 461(h)(3) by addressing the application
of the "not material" and "better match-
ing" requirements, and distinguishes con-
tracts for the provision of services from
insurance and warranty contracts.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
19.11 is "161."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

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### .12 Economic performance safe harbor for ratable service contracts.

(1) Description of change. This change
applies to an accrual method taxpayer that
wants to change its treatment of Ratable
Service Contracts to conform to the safe
harbor method provided by Rev. Proc.
2015-39, 2015-33 I.R.B. 195.

(2) Certain eligibility rules temporarily
inapplicable. The eligibility rule in sec-
tion 5.01(1)(f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a
taxpayer that wants to make a change un-
der this section 19.12 for the taxpayer's
first, second, or third taxable year ending
on or after July 30, 2015.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for changes in methods of ac-
counting under this section 19.12 is
"220."

(4) Contact information. For further in-
formation regarding a change under this
section, contact David Christensen or Pe-
ter Ford at (202) 317-7011 (not a toll-free
number).

## SECTION 20. RENT (§ 467)

.01 Change from an improper method of
inclusion of rental income or expense to
inclusion in accordance with the rent
allocation.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that:

(i) is a party to § 467 rental agreements
(within the meaning of § 1.467-1(c)(1) for
rental agreements entered into after May
18, 1999, and § 467(d) for all other agree-
ments); and

(ii) except as provided in section
20.01(1)(b)(ii) of this revenue procedure,
wants to change its method of accounting
for its fixed rent (as defined in § 1.467-
1(d)(2)) to the rent allocation method pro-
vided in § 1.467-1(d)(2)(iii).

(b) Inapplicability. This change does
not apply to:

(i) rental agreements for which taxpay-
ers are required to use the constant rental
accrual method described in § 1.467-
(3)(a) or the proportional rental accrual
method described in § 1.467-(2)(a) for
their fixed rent; and

(ii) rental agreements that provide a
specific allocation of fixed rent as de-
scribed in § 1.467-1(c)(2)(ii)(A)(2) that
allocate rent to periods other than when
such rents are payable.

(2) Additional requirements. The tax-
payer must attach to its Form 3115 a copy
of one of its § 467 rental agreements to be
covered by this automatic change (or at
least the pages of the agreement relating
to the manner in which rent is allocated).

(3) Audit protection limited. Any audit
protection under section 8 of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not ap-
ply to this change for any § 467 rental
agreement determined by the Commis-
sioner to be a disqualified leaseback
or long-term agreement described in
§ 1.467-(3)(b).

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.01 is "136."

(5) Contact information. For further in-
formation regarding a change under this
section, contact William Ruane at (202)
317-4718 (not a toll-free number).

## SECTION 21. INVENTORIES (§ 471)

.01 Cash discounts.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for cash dis-
counts (that is, discounts granted for
timely payment) when they approximate a
fair interest rate, from a method of con-
sistently including the price of the goods
before discount in the cost of the goods
and including in gross income any
discounts taken (the "gross invoice
method"), to a method of reducing the
cost of the goods by the cash discounts
and deducting as an expense any dis-
counts not taken (the "net invoice
method"), or vice versa. See Rev. Rul.
73-65, 1973-1 C.B. 216.

(2) Computation of § 481(a) adjust-
ment for changes to net invoice method. In
the case of a taxpayer changing from the
gross invoice method to the net invoice
method, a negative § 481(a) adjustment is
required to prevent duplications arising
from the fact that the gross invoice
method reported income upon timely pay-
ment for some or all of the goods that

remain in inventory, and a positive
§ 481(a) adjustment is required to prevent
omissions arising from the fact that the
gross invoice method included the invoice
price, unadjusted for the cash discounts,
of some or all goods in cost of goods sold
and the discount will be earned by pay-
ment in a subsequent taxable year. The net
§ 481(a) adjustment is computed by de-
ducting the "Applicable Discount" at the
beginning of the year of change from the
"Available Discount" at the beginning of
the year of change. The Available Dis-
count is equal to the difference between
the accounts payable balance under the
gross invoice method and the net invoice
method. The Applicable Discount is equal
to the difference between the beginning
inventory value under the gross invoice
method and the net invoice method.

Example. Taxpayer's accounts payable balance
at the beginning of the year of change was $1,000
under the gross invoice method and $980 under the
net invoice method. Taxpayer's inventory value was
$3,000 under the gross invoice method and $2,955
under the net invoice method. The Available Dis-
count is $20 ($1,000 - $980) and the Applicable
Discount is $45 ($3,000 - $2,955). Thus, Taxpayer's
net § 481(a) adjustment is a negative $25 ($20 -
$45).

(3) Computation of § 481(a) adjust-
ment for changes to gross invoice method.
In the case of a taxpayer changing from
the net invoice method to the gross in-
voice method, a positive § 481(a) adjust-
ment is required to prevent omissions aris-
ing from the fact that the net invoice
method did not report income upon timely
payment for some or all of the goods that
remain in inventory, and a negative
§ 481(a) adjustment is required to prevent
duplications arising from the fact that the
net invoice method included the invoice
price, adjusted for the cash discounts, of
some or all goods in cost of goods sold
and the discount will be earned by pay-
ment in a subsequent taxable year. The net
§ 481(a) adjustment can be computed by
deducting the "Available Discount" at the
beginning of the year of change from the
"Applicable Discount" at the beginning of
the year of change. The Available Dis-
count is equal to the difference between
the accounts payable balance under the
gross invoice method and the net invoice
method. The Applicable Discount is equal
to the difference between the beginning
inventory value under the gross invoice
method and the net invoice method.

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Example. Taxpayer's accounts payable balance
at the beginning of the year of change was $980
under the net invoice method and $1,000 under the
gross invoice method. Taxpayer's inventory value
was $2,955 under the net invoice method and $3,000
under the gross invoice method. The Applicable
Discount is $45 ($3,000 - $2,955) and the Available
Discount is $20 ($1,000 - $980). Thus, Taxpayer's
net § 481(a) adjustment is a positive $25 ($45 - $20).

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.01 is "48."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Steven Gee at (202) 317-
7007 (not a toll-free number).

.02 Estimating inventory "shrinkage".

(1) Description of change. This change
applies to a taxpayer that wants to change
to a method of accounting for estimating
inventory shrinkage in computing ending
inventory, using:

(a) the "retail safe harbor method" de-
scribed in section 4 of Rev. Proc. 98-29,
1998-1 C.B. 857, as modified by this
revenue procedure; or

(b) a method other than the retail safe
harbor method, provided (i) the taxpayer's
present method of accounting does not
estimate inventory shrinkage, and (ii) the
taxpayer's proposed method of account-
ing (that estimates inventory shrinkage)
clearly reflects income under § 446(b).

(2) Additional requirements. If the tax-
payer wants to change to a method of
accounting for inventory shrinkage other
than the retail safe harbor method, the
taxpayer must attach to its Form 3115 a
statement setting forth a detailed descrip-
tion of all aspects of the proposed method
of estimating inventory shrinkage (includ-
ing, for last-in, first-out (LIFO) taxpayers,
the method of determining inventory
shrinkage for, or allocating inventory
shrinkage to, each LIFO pool). The direc-
tor or national office subsequently may
review whether the proposed method
clearly reflects the taxpayer's income un-
der § 446(b), notwithstanding any provi-
sion of Rev. Proc. 2015-13, 2015-5
I.R.B. 419 (or successor). If the director or
the national office determines that the pro-
posed method of accounting does not
clearly reflect the taxpayer's income, the
taxpayer will be treated as having made a

change in method of accounting without
obtaining the consent of the Commis-
sioner as required by § 446(e). See sec-
tions 2.01(3) and 2.03 of Rev. Proc. 2015-
13.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.02 is "49."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Steven Gee at (202) 317-
7007 (not a toll-free number).

.03 Small taxpayer exception from
requirement to account for inventories
under § 471.

(1) Description of change. This change
applies to either a taxpayer (other than a
taxpayer described § 448(a)(3)) with “av-
erage annual gross receipts" (as defined in
section 5.01 of Rev. Proc. 2001-10, as
modified by Announcement 2004-16 (re-
garding placement of § 481(a) adjustment
on the Form 3115), and Rev. Proc.
2011-14 (removing § 6.02(1)(a) of Rev.
Proc. 2001-10)) of $1,000,000 or less or a
qualifying taxpayer (other than a taxpayer
described in § 448) with "average annual
gross receipts" (as defined in section 5.02
of Rev. Proc. 2002-28, as modified by
Announcement 2004-16 (regarding
placement of § 481(a) adjustment on the
Form 3115), and Rev. Proc. 2011-14 (re-
moving § 7.02(1)(a) of Rev. Proc. 2002-
28)) of $10,000,000 or less that wants to
change from a method of accounting for
inventoriable items (including, if applica-
ble, from the method of capitalizing costs
under § 263A) to the method described in
Rev. Proc. 2001-10 and Rev. Proc. 2002-
28, for treating inventoriable items in the
same manner as materials and supplies
that are not incidental under § 1.162-3.

(2) Manner of making change. See
Rev. Proc. 2001-10 or Rev. Proc.
2002-28 (as applicable) for additional
guidance on the computation of the
§ 481(a) adjustment and the completion of
the Form 3115.

(3) Concurrent automatic change to
the overall cash method under Rev. Proc.
2001-10 or Rev. Proc. 2002-28. A tax-
payer making both this change and a
change to the overall cash method under
Rev. Proc. 2001-10 or Rev. Proc.

2002-28 (see section 15.03 of this reve-
nue procedure) for the same year of
change may file a single Form 3115 for
both changes, provided the taxpayer en-
ters the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, for informa-
tion on making concurrent changes.

(4) Designated automatic accounting
method change number. The designated au-
tomatic accounting method change number
for a change under this section 21.03 for the
small taxpayer ($1,000,000) inventory
exception contained in Rev. Proc.
2001-10 is "50." The designated auto-
matic accounting method change num-
ber for a change under this section 21.03
for the small taxpayer ($10,000,000) in-
ventory exception contained in Rev.
Proc. 2002-28 is "51."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Natasha Mulleneaux at
(202) 317-7007 (not a toll-free number).

.04 Qualifying volume-related trade
discounts.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting to treat qualify-
ing volume-related trade discounts as a
reduction in the cost of merchandise pur-
chased at the time the discount is recog-
nized in accordance with § 1.471-3(b). A
"qualifying volume-related trade dis-
count" means a discount satisfying the
following criteria:

(a) the taxpayer receives or earns the
discount based solely upon the purchase
of a particular volume of the merchandise
to which the discount relates;

(b) the taxpayer is neither obligated nor
expected to perform or provide any ser-
vices in exchange for the discount; and

(c) the discount is not a reimbursement
of any expenditure incurred or to be in-
curred by the taxpayer.

(2) Section 481(a) adjustment. The net
§ 481(a) adjustment attributable to the
change is computed in a manner similar to
the computation of a net § 481(a) adjust-
ment in the case of a change to the net
invoice method of accounting for cash
discounts. See section 21.01(2) of this rev-
enue procedure.

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(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.04 is "53."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Steven Gee at (202) 317-
7007 (not a toll-free number).

.05 Impermissible methods of
identification and valuation of
inventories.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that wants to change from an
impermissible method of identifying or
valuing inventories to a permissible
method of identifying or valuing invento-
ries. For example, a taxpayer:

(i) using last-in, first-out (LIFO) as
its inventory-identification method may
change its inventory-valuation method
from below cost to cost;

(ii) using an impermissible method of
accounting described in §§ 1.471-2(f)(1)
through (5) may change to a permissible
method of accounting that corrects
the impermissible method described in
§§ 1.471-2(f)(1) through (5);

(iii) using a method that is not in ac-
cordance with § 1.471-2(c) may change to
a permissible method of valuing "subnor-
mal goods" under § 1.471-2(c);

(iv) changing from a gross profit
method. For this purpose, a gross profit
method is a method in which the taxpayer
estimates the cost of goods sold by reduc-
ing its gross sales by a percentage "mark-
up" from cost. The estimated cost of
goods sold is subtracted from the sum of
the beginning inventory and purchases
and the result is used as the ending inven-
tory; or

(v) changing from a method of deter-
mining market that is not in accordance
with § 1.471-4. For this purpose, an ex-
ample of a method of determining market
that is not in accordance with § 1.471-4 is
where a taxpayer, under ordinary circum-
stances, determines the market value of
purchased merchandise using judgment
factors, and not using the prevailing cur-
rent bid price on the inventory date for the
particular merchandise in the volume in
which it is usually purchased by the tax-
payer.

(b) Inapplicability. This change does
not apply to:

(i) any change for real property or im-
provements to the real property because
real property is not inventoriable property
under § 1.471-1;

(ii) a taxpayer who meets the definition
of a "dealer in securities" under both
§ 1.471-5 and § 475 because such dealer
is required to account for securities, as
defined in § 475, under § 475 and may not
use the rules described in § 1.471-5 for
those securities;

(iii) any change described in another
section of this revenue procedure or in
other guidance published in the Internal
Revenue Bulletin, or to any change within
the last-in, first-out (LIFO) inventory
method. For example, this change does
not apply to a taxpayer that wants to
change to a rolling-average method (but
see section 21.14 of this revenue proce-
dure);

(iv) any change to a method of allocat-
ing costs to inventory under § 471 or any
change to a method under § 263A (but see
sections 12.01 and 12.02 of this revenue
procedure); or

(v) a taxpayer that is currently deduct-
ing inventories (but see section 21.18 of
this revenue procedure).

(c) Permissible method defined. For
purposes of this change, a permissible
method is an inventory method of identi-
fication or valuation, or both, specifically
permitted by the Code, the regulations, or
other guidance published in the Internal
Revenue Bulletin, or a decision of the
United States Supreme Court. However, an
otherwise permissible inventory method is
not permissible under this section 21.05 for
a specific taxpayer if that taxpayer is pro-
hibited from using that method or if that
taxpayer is required to use a different
method.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.05 is "54."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Natasha Mulleneaux at
(202) 317-7007 (not a toll-free number).
.06 Core Alternative Valuation Method.

(1) Description of change.

(a) Applicability. This change applies
to a remanufacturer and rebuilder of mo-
tor vehicle parts and a reseller of reman-
ufactured and rebuilt motor vehicle parts
that use the cost or market, whichever is
lower, (LCM) inventory valuation method
to value their inventory of cores held for
remanufacturing or sale and wants to use
the Core Alternative Valuation (CAV)
method specified in Rev. Proc. 2003-20,
2003-1 C.B. 445.

(b) Inapplicability. This change does
not apply to a taxpayer that values its
inventory of cores at cost (including a
taxpayer using the LIFO inventory
method) unless the taxpayer concurrently
changes (under section 6.02 of Rev. Proc.
2003-20) from cost to the LCM method
for its cores (including labor and overhead
related to the cores in raw materials,
work-in-process, and finished goods).

(2) Concurrent automatic change. A
taxpayer making both this change and (i) a
change from the cost method to the LCM
method under section 21.11 of this reve-
nue procedure, or (ii) a change from the
LIFO inventory method to a permitted
method for identification under (and as
determined and defined in) section
22.01(1)(b) of this revenue procedure for
the same year of change, should file a
single Form 3115 for both changes, pro-
vided the taxpayer enters the designated
automatic accounting method change
numbers for both changes on the appro-
priate line on that Form 3115. See section
6.03(1)(b) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, for information on making
concurrent changes.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.06 is "55."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.07 Replacement cost for automobile
dealers' parts inventory.

(1) Description of change. This change
applies to a taxpayer that is engaged in the
trade or business of selling vehicle parts at
retail, that is authorized under an agree-
ment with one or more vehicle manufac-
turers or distributors to sell new automo-

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biles or new light, medium, or heavy-duty
trucks, and that wants to use the replace-
ment cost method described in section 4
of Rev. Proc. 2002-17, 2002-1 C.B. 676,
as modified by Rev. Proc. 2006-14,
2006-1 C.B. 350, for its vehicle parts
inventory. See Rev. Proc. 2002-17 for
further information regarding this change.

(2) Manner of making change. This
change is made on a cut-off basis and
applies only to the computation of ending
inventories on or after the beginning of
the year of change. Accordingly, a
§ 481(a) adjustment is neither permitted
nor required.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.07 is "63."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.08 Replacement cost for heavy
equipment dealers' parts inventory.

(1) Description of change. This change
applies to a heavy equipment dealer that is
engaged in the trade or business of selling
heavy equipment parts at retail, that is
authorized under an agreement with one
or more heavy equipment manufacturers
or distributors to sell new heavy equip-
ment, and that wants to use the replace-
ment cost method described in section 4
of Rev. Proc. 2006-14, 2006-1 C.B. 350,
for its heavy equipment parts inventory.

(2) Manner of making the change. This
change is made on a cut-off basis and
applies only to the computation of ending
inventories after the beginning of the year
of change. Accordingly, a § 481(a) adjust-
ment is neither permitted nor required.

(3) Concurrent automatic change. A
taxpayer making both this change and an-
other automatic change in method of ac-
counting under § 263A (see section 12 of
this revenue procedure) for the same year
of change may file a single Form 3115 for
both changes, provided the taxpayer en-
ters the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115,
and complies with the ordering rules of
§ 1.263A-7(b)(2).

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.08 is "96."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.09 Rotable spare parts.

(1) Description of change. This change
applies to a taxpayer that is using the safe
harbor method of accounting to treat its
rotable spare parts as depreciable assets in
accordance with Rev. Proc. 2007-48,
2007-2 C.B. 110, as modified by this rev-
enue procedure, and wants to change its
method of accounting to treat its rotable
spare parts as inventoriable items. This
change also applies to a taxpayer who is
treating its rotable spare parts as deprecia-
ble assets in a manner similar to the safe
harbor method described in Rev. Proc.
2007-48, and wants to change its method
of accounting to treat its rotable spare
parts as inventoriable items. A taxpayer
changing its method of accounting for ro-
table spare parts under this section 21.09,
must use a proper inventory method to
identify and value its rotable spare parts.

(2) Eligibility rule inapplicable. The
eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
does not apply to a taxpayer that is re-
quired to make the change in method of
accounting pursuant to section 5.06 of
Rev. Proc. 2007-48.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.09 is "110."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Charles Gorham at (202)
317-7003 (not a toll-free number).

.10 Advance Trade Discount Method.

(1) Description of change. This change
applies to a taxpayer that wants to use the
Advance Trade Discount Method de-
scribed in Rev. Proc. 2007-53, 2007-2
C.B. 233.

(2) Applicability. This change in
method of accounting applies to a tax-

payer using an overall accrual method of
accounting that is required to use an in-
ventory method of accounting, that main-
tains inventories as provided in § 471 and
the regulations thereunder, and that re-
ceives advance trade discounts as defined
in section 4.03 of Rev. Proc. 2007-53.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.10 is "111."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Steven Gee at (202) 317-
7007 (not a toll-free number).

.11 Permissible methods of identification
and valuation of inventories.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that wants to change from
one permissible method of identifying or
valuing inventories to another permissible
method of identifying or valuing invento-
ries. For example, a taxpayer using the
first-in, first-out (FIFO) method as
its inventory-identification method may
change its inventory-valuation method
from cost to cost or market, whichever is
lower (LCM), or a taxpayer valuing “sub-
normal" goods at cost may change its val-
uation method to another permissible
method of valuing "subnormal goods" un-
der § 1.471-2(c).

(b) Inapplicability. This change does
not apply to:

(i) any change for real property or im-
provements to the real property because
real property is not inventoriable property
under § 1.471-1:

(ii) a taxpayer who meets the definition
of a "dealer in securities" under both
§ 1.471-5 and § 475 because such dealer
is required to account for securities, as
defined in § 475, under § 475 and may not
use the rules described in § 1.471-5 for
those securities;

(iii) any change described in another
section of this revenue procedure or in
other guidance published in the Internal
Revenue Bulletin, or to any change within
the last-in, first-out (LIFO) inventory
method. For example, this change does not
apply to a taxpayer that wants to change to
a rolling-average method (but see section
21.14 of this revenue procedure); or

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(iv) any change to a method of allocating
costs to inventory under § 471 or any
change to a method under § 263A (but see
sections 12.01 and 12.02 of this revenue
procedure).

(c) Permissible method defined. For
purposes of this change, a permissible
method is an inventory method of identi-
fication or valuation, or both, specifically
permitted for inventories by the Code, the
regulations, or other guidance published
in the Internal Revenue Bulletin, or a de-
cision of the United States Supreme
Court. However, an otherwise permissible
inventory method is not permissible under
this section 21.11 for a specific taxpayer if
that taxpayer is prohibited from using that
method or if that taxpayer is required to
use a different method.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.11 is "137."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Steven Gee at (202) 317-
7007 (not a toll-free number).

.12 Change in the official used vehicle
guide utilized in valuing used vehicles.

(1) Description of change. Used vehi-
cles taken in trade as part payment on the
sale of vehicles by a dealer may be valued
for inventory purposes at valuations com-
parable to those listed in an official used
vehicle guide as the average wholesale
prices for comparable vehicles. See Rev.
Rul. 67-107, 1967-1 C.B. 115. This
change applies to:

(a) a taxpayer that wants to change
from not using an official used vehicle
guide to using an official used vehicle
guide for valuing used vehicles; or

(b) a taxpayer that wants to change to a
different official used vehicle guide for
valuing used vehicles.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.12 is "138."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.13 Invoiced advertising association
costs for new vehicle retail dealerships.

(1) Description of change. This change
applies to a taxpayer that is engaged in the
trade or business of retail sales of new
automobiles or new light-duty trucks
("dealership") that wants to discontinue
capitalizing certain advertising costs as
acquisition costs under § 1.471-3(b). The
change applies to advertising costs that
meet the following criteria: (a) the dealer-
ship must pay this advertising fee when
acquiring vehicles from the manufacturer;
(b) the advertising costs are separately
coded and included in the manufacturer's

invoice cost of the new vehicle; (c) the
advertising cost is a flat fee per vehicle or
a fixed percentage of the invoice price;
and (d) the fees collected by the manufac-
turer are paid to local advertising associ-
ations that promote and advertise the man-
ufacturer's products in the dealership's
market area. Under the proposed method,
the dealership will exclude advertising
costs that meet the above criteria from the
cost of new vehicles and deduct the ad-
vertising costs under § 162 as the adver-
tising services are provided to the dealer-
ship. See § 1.461-4(d)(2)(i).

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.13 is "139."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

### .14 Rolling-average method of accounting for inventories.

(1) Description of change. This change
applies to a taxpayer that uses a rolling-
average method to value inventories for
financial accounting purposes and wants
to use the same rolling-average method to
value inventories for federal income tax
purposes in accordance with Rev. Proc.
2008-43, 2008-30 C.B. 186, as modified
by Rev. Proc. 2008-52, 2008-2 C.B. 587
(see section 13).

(2) Manner of making change. This
change is made on a cut-off basis and is
applied only to the computation of ending
inventories after the beginning of the year
of change. However, if the taxpayer's

books and records contain sufficient infor-
mation to compute a § 481(a) adjustment,
the taxpayer may choose to implement the
change with a § 481(a) adjustment as pro-
vided in sections 7.02 and 7.03 of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
21.14 is "114."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.15 Sales-Based Vendor Chargebacks.

(1) Description of change. This
change, as described in Rev. Proc. 2014-
33, 2014-22 I.R.B. 1060, applies to a
taxpayer that wants to change its method
of accounting to treat sales-based vendor
chargebacks as a reduction in cost of
goods sold in accordance with § 1.471-
3(e)(1).

(2) Certain eligibility rule temporarily
inapplicable. The eligibility rule in sec-
tion 5.01(1)(f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to this
change for a taxpayer's first and second
taxable years ending on or after January
13, 2014.

(3) Concurrent automatic changes. A
taxpayer making both this change and the
change described in section 12.11 of this
revenue procedure for the same taxable
year of change may file a single Form
3115 for both changes, provided the tax-
payer enters the designated automatic
change numbers for both changes on the
appropriate line on the Form 3115, and
complies with the ordering rules of
§ 1.263A-7(b)(2). See section 6.03(1)(b)
of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, for information on making concur-
rent changes.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for changes in methods of ac-
counting under this section 21.15 is
"203."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Sean Dwyer at (202) 317-
7005 (not a toll-free number).

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.16 Certain changes to the cost
complement of the retail inventory
method.

(1) Description of change. This
change, as described in Rev. Proc. 2014-
48, 2014-36 I.R.B. 527, applies to a tax-
payer using the retail inventory method
that wants to make one of the following
changes:

(a) From adjusting to not adjusting the
numerator of the cost complement by the
amount of an allowance, discount, or price
rebate that is required under § 1.471-3(e)
to reduce only cost of goods sold;

(b) From adjusting to not adjusting the
denominator of the cost complement for
temporary markups and markdowns;

(c) In the case of a retail LCM tax-
payer, to computing the cost complement
using a method described in § 1.471-
8(b)(3), including changes from a method
described in § 1.471-8(b)(3) to another
method described in § 1.471-8(b)(3); or

(d) In the case of a retail cost taxpayer,
from not adjusting to adjusting the de-
nominator of the cost complement for per-
manent markups and markdowns.

(2) Effective date and certain eligibility
rule temporarily inapplicable. This sec-
tion 21.16 is effective for taxable years
beginning after December 31, 2014. The
eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
does not apply for a taxpayer's first or
second taxable years beginning after De-
cember 31, 2014.

(3) Multiple changes. A taxpayer mak-
ing multiple changes under this section
21.16 for the same year of change should
file a single Form 3115.

(4) Manner of making change. A tax-
payer making a change under this section
21.16 for its first or second taxable year
beginning after December 31, 2014, may
use either a § 481(a) adjustment as pro-
vided in sections 7.02 and 7.03 of Rev.
Proc. 2015-13 or implement the change
on a cut-off basis. If the taxpayer uses a
cut-off basis, the change applies only to
the computation of ending inventories af-
ter the beginning of the year of change,
and a § 481(a) adjustment is neither per-
mitted nor required if a change is made on
a cut-off basis.

(5) Designated automatic accounting
method change number. The designated

automatic accounting method change
number for changes in methods of ac-
counting under this section 21.16 is
"204."

(6) Contact information. For further in-
formation regarding a change under this
section, contact Natasha M. Mulleneaux
at (202) 317-7007 (not a toll-free num-
ber).

.17 Certain changes within the retail
inventory method.

(1) Description of change. This change
applies to a taxpayer using the retail in-
ventory method that wants to change from
including to not including temporary
markups and markdowns in determining
the retail selling prices of goods on hand
at the end of the taxable year.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for changes in methods of ac-
counting under this section 21.17 is
"225."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Natasha M. Mulleneaux
at (202) 317-7007 (not a toll-free num-
ber).

.18 Change from currently deducting
inventories to permissible methods of
identification and valuation of
inventories.

#### (1) Description of change.

(a) Applicability. This change applies
to a taxpayer that wants to change from
currently deducting inventories to a per-
missible method of identifying and valuing
inventories. For example, a taxpayer cur-
rently deducting inventories may change to
using the first-in, first-out (FIFO) method as
its inventory-identification method and cost
or market, whichever is lower (LCM), as its
inventory-valuation method.

(b) Inapplicability. This change does
not apply to:

(i) any change for real property or im-
provements to the real property because
real property is not inventoriable property
under § 1.471-1;

(ii) a taxpayer who meets the definition
of a "dealer in securities" under both
§ 1.471-5 and § 475 because such dealer
is required to account for securities, as

defined in § 475, under § 475 and may not
use the rules described in § 1.471-5 for
those securities;

(iii) any change described in another
section of this revenue procedure or in
other guidance published in the Internal
Revenue Bulletin, or to any change within
the last-in, first-out (LIFO) inventory
method. For example, this change does
not apply to a taxpayer that wants to
change to a rolling-average method (but
see section 21.14 of this revenue proce-
dure); or

(iv) any change to a method of allocat-
ing costs to inventory under § 471 or any
change to a method under § 263A (but see
sections 12.01 and 12.02 of this revenue
procedure).

(c) Permissible method defined. For
purposes of this change, a permissible
method is an inventory method of identi-
fication or valuation, or both, specifically
permitted for inventories by the Code, the
regulations, or other guidance published
in the Internal Revenue Bulletin, or a de-
cision of the United States Supreme
Court. However, an otherwise permissible
inventory method is not permissible under
this section 21.18 for a specific taxpayer if
that taxpayer is prohibited from using that
method or if that taxpayer is required to
use a different method.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for changes in methods of ac-
counting under this section 21.18 is
"230."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Natasha M. Mulleneaux
at (202) 317-7007 (not a toll-free num-
ber).

## SECTION 22. LAST-IN, FIRST-OUT (LIFO) INVENTORIES (§ 472)

.01 Change from the LIFO inventory
method.

(1) Description of change.

(a) In general. This change applies to a
taxpayer that wants to:

(i) change from the LIFO inventory
method for all its LIFO inventory or for
the entire content of one or more dollar-
value pools; and

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(ii) change to a permitted method or
methods as determined in section
22.01(1)(b) of this revenue procedure.
(b) Method to be used.

(i) Determining the permitted method
to be used. A taxpayer may change to one
or more non-LIFO inventory methods for
the LIFO inventories that are the subject
of this accounting method change, but
only if the selected non-LIFO method is a
permitted method for the inventory goods
to which it will be applied. For example, a
heavy equipment dealer may change to
the specific identification method for new
heavy equipment inventories and the re-
placement cost method, as described in
Rev. Proc. 2006-14, 2006-1 C.B. 350,
for heavy equipment parts inventories.

(ii) Permitted method defined. For pur-
poses of this section 22.01, an inventory
method (identification or valuation, or
both) is a permitted method if it is specif-
ically permitted for the inventory goods
by the Code, the regulations, or other
guidance published in the Internal Reve-
nue Bulletin, or a decision of the United
States Supreme Court and if the taxpayer
is neither prohibited from using that
method nor required to use a different
inventory method for those inventory
goods.

(iii) Determining permitted method.
Whether an inventory method is a permit-
ted method is determined without regard
to the types and amounts of costs capital-
ized under the taxpayer's method of com-
puting inventory cost. See § 263A and the
regulations thereunder, which govern the
types and amounts of costs required to be
included in inventory cost for taxpayers
subject to those provisions.

(2) Certain eligibility rule inapplica-
ble. The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not apply for the first
taxable year that the taxpayer does not or
will not comply with the requirements of
§ 472(e)(2) because the taxpayer has ap-
plied or will apply International Financial
Reporting Standards in its financial state-
ments or because the taxpayer has been
acquired by an entity that has not or will
not use the LIFO method in its financial
statements.

(3) Limitation on LIFO election. The
taxpayer may not re-elect the LIFO inven-
tory method for a period of at least five

taxable years beginning with the year of
change unless, based on a showing of
unusual and compelling circumstances,
consent is specifically granted by the
Commissioner to change the method of
accounting at an earlier time. A taxpayer
that wants to re-elect the LIFO inventory
method within a period of five taxable
years (beginning with the year of change)
must file a Form 3115 in accordance with
the non-automatic change procedures in
Rev. Proc. 2015-13. A taxpayer that
wants to re-elect the LIFO inventory
method after a period of five taxable years
(beginning with the year of change) does
not file a Form 3115 using the non-
automatic change procedures in Rev.
Proc. 2015-13, but, rather, must file a
Form 970, Application To Use LIFO In-
ventory Method, in accordance with
§ 1.472-3.

(4) Effect of subchapter S election by
corporation. See section 7.03(4)(b) and
(c) of Rev. Proc. 2015-13.

(5) Additional requirements. The tax-
payer must complete the following state-
ments and attach them to its Form 3115. If
the taxpayer will use different methods for
different inventory goods to which the
change applies, the taxpayer must com-
plete the statements for each of those dif-
ferent types of inventory goods.

(a) "The proposed method of identify-
ing [Insert description of inventory goods]
is the [Insert method, as appropriate; that
is, specific identification; FIFO; retail;
etc.] method."

(b) "The proposed method of valuing
[Insert description of inventory goods] is
[Insert method, as appropriate; that is,
cost; LCM; etc.]."

(6) Pool split and partial termination.
If a taxpayer must remove goods from a
LIFO inventory pool because those goods
are not within the scope of that pool (for
example, removing resale goods from a
manufacturing pool), and if the taxpayer
wants to change from the LIFO inventory
method for those removed goods, the tax-
payer may split the pool pursuant to sec-
tion 22.10 of this revenue procedure and
then may change from the LIFO method
pursuant to this section 22.01. See section
22.10(2) of this revenue procedure. The
taxpayer must file a separate Form 3115
for each such change.

(7) Section 481(a) adjustment re-
quired.

(a) General rule. A taxpayer changing
from a LIFO inventory method must com-
pute a § 481(a) adjustment for the year of
change. See section 7.02 of Rev. Proc.
2015-13.

(b) Special rule for changes that would
otherwise be implemented on a cut-off ba-
sis. If a taxpayer is changing from the
LIFO inventory method to a method of
accounting that is implemented on a cut-
off basis under another section of this
revenue procedure (see, for example, sec-
tions 21.07, 21.08, and 21.14 of this rev-
enue procedure), the taxpayer's § 481(a)
adjustment is "the LIFO recapture
amount" as defined in § 312(n)(4)(B) and
(C). A taxpayer computing the § 481(a)
adjustment under this special rule must
then compute its ending inventory value
for the year of change using the proposed
method (that is, treat the deemed change
from the first-in, first-out (FIFO) method
to the proposed method on a cut-off ba-
sis).

(8) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.01 is "56."

(9) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.02 Determining current-year cost under
the LIFO inventory method.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer using the LIFO inventory
method that wants to change its method of
determining current-year cost to:

(i) the actual cost of the goods most
recently purchased or produced (most-
recent-acquisitions method);

(ii) the actual cost of the goods pur-
chased or produced during the taxable
year in the order of acquisition (earliest-
acquisitions method);

(iii) the average unit cost equal to the
aggregate actual cost of all the goods pur-
chased or produced throughout the taxable
year divided by the total number of units
so purchased or produced. See § 1.472-
8(e)(2)(ii);

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(iv) the specific identification method;
or

(v) a rolling-average method if the tax-
payer uses that rolling-average method in
accordance with Rev. Proc. 2008-43,
2008-30 I.R.B. 186, as modified by Rev.
Proc. 2008-52, 2008-36 I.R.B. 587 (see
section 13).

(b) Inapplicability. This change does
not apply to a taxpayer using the lower of
cost or market method to determine
current-year cost. A taxpayer using the
lower of cost or market method that val-
ued inventory below cost may not change
to a proper cost valuation under this sec-
tion 22.02.

(2) Manner of making change. This
change is made using a cut-off basis and
applies only to the computations of
current-year cost after the beginning of
the year of change. Accordingly, a
§ 481(a) adjustment is neither permitted
nor required.

(3) Concurrent change to a rolling-
average method. A taxpayer making both
a change to a rolling-average method of
determining current-year cost for its LIFO
inventory under this section 22.02 and a
change to a rolling-average method of ac-
counting for non-LIFO inventories under
Rev. Proc. 2008-43 (see section 21.14 of
this revenue procedure) should file a sin-
gle Form 3115 for both changes, in which
case the taxpayer must enter the desig-
nated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, for information on
making concurrent changes.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.02 is "57."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.03 Alternative LIFO inventory method
for retail automobile dealers.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer engaged in the trade or busi-
ness of retail sales of new automobiles
or new light-duty trucks ("automobile

dealer") that wants to change to the "Al-
ternative LIFO method" described in sec-
tion 4 of Rev. Proc. 97-36, 1997-2 C.B.
450, as modified by Rev. Proc. 2008-23,
2008-1 C.B. 664, for its LIFO inventories
of new automobiles and new light-duty
trucks. Light-duty trucks are trucks with a
gross vehicle weight of 14,000 pounds or
less, which also are referred to as class 1,
2, or 3 trucks.

(b) Inapplicability. This change does
not apply to an automobile dealer that
uses the inventory price index computa-
tion (IPIC) method for goods other than
new automobiles, new light-duty trucks,
parts and accessories, used automobiles,
and used trucks.

(2) Manner of making change.

(a) Cut-off basis. This change is made
using a cut-off basis and applies only to
the computation of ending inventories af-
ter the beginning of the year of change.
See section 5.03(6) of Rev. Proc. 97-36
for more information regarding a cut-off
basis. Accordingly, a § 481(a) adjustment
is neither permitted nor required.

(b) Concurrent change from IPIC
method. An automobile dealer using the
IPIC method that also has parts and ac-
cessories, used automobiles, or used light-
duty trucks (other goods) inventory may
incorporate a change, using a cut-off ba-
sis, from IPIC to another acceptable LIFO
method for those other goods into this
change. When changing from IPIC to a
dollar-value LIFO method for its other
goods, the automobile dealer must estab-
lish separate inventory pools for new au-
tomobiles and new light-duty trucks,
unless the automobile dealer also concur-
rently changes to the Vehicle-Pool
Method (see section 22.08 of this revenue
procedure). Further, the automobile dealer
must establish a separate inventory pool
for the parts and accessories. See section
6.03(1)(b) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, for information on making
concurrent changes.

(c) Additional requirements. An auto-
mobile dealer also must comply with the
following:

(i) the conditions in section 5.03 of
Rev. Proc. 97-36; and

(ii) for an automobile dealer changing
from the IPIC method under this section
22.03, the automobile dealer also must
attach to its Form 3115 a schedule setting

forth the classes of goods for which the
automobile dealer has elected to use the
LIFO method and the accounting method
changes being made under this section
22.03 for each class of goods.

(3) Concurrent change to the Vehicle-
Pool Method. A taxpayer making both a
change to the Alternative LIFO Method
under this section 22.03 and a change to
the Vehicle-Pool Method under Rev.
Proc. 2008-23 (see section 22.08 of this
revenue procedure) should file a single
Form 3115 for both changes, in which
case the taxpayer must enter the desig-
nated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.03 is "58."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.04 Used vehicle alternative LIFO
method.

(1) Description of change. This change
applies to a taxpayer that sells used auto-
mobiles and used light-duty trucks ("used
vehicle dealers") that wants to change to
the "Used Vehicle Alternative LIFO
Method" as described in Rev. Proc. 2001-
23, 2001-1 C.B. 784, as modified by An-
nouncement 2004-16, 2004-1 C.B. 668,
and Rev. Proc. 2008-23, 2008-1 C.B.
664.

(2) Additional requirements. A tax-
payer making this change must comply
with the additional conditions set forth in
section 5.04 of Rev. Proc. 2001-23.

(3) Manner of making change.

(a) Cut-off basis. This change is made
on a cut-off basis, which requires that the
value of the taxpayer's used automobile
and used light-duty truck inventory at the
beginning of the year of change must be
the same as the value of that inventory at
the end of the preceding taxable year, plus
cost restorations, if any, required by sec-
tion 5.04(5) of Rev. Proc. 2001-23. Ac-

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cordingly, a § 481(a) adjustment is neither
permitted nor required.

(b) Bargain purchase. If the taxpayer
has previously improperly accounted for a
bulk bargain purchase, the taxpayer must,
as part of this change, first change its
method of accounting to comply with
Hamilton Industries, Inc. v. Commis-
sioner, 97 T.C. 120 (1991), and compute a
§ 481(a) adjustment for that part of the
change. See Announcement 91-173,
1991-47 I.R.B. 29. Upon examination, if
a taxpayer has properly changed under
this section 22.04 except for complying
with this section 22.04(3)(b), an examin-
ing agent may not deny the taxpayer the
change. However, the taxpayer does not
receive audit protection under section 8.01
of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, with respect to the improper method
of accounting for the bargain purchase.
See section 8.02(2) of Rev. Proc. 2015-
13. Accordingly, the examining agent
may make any necessary adjustments in
any year for which the period of limita-
tions on assessment and collection of tax
is open to effect compliance with Hamil-
ton Industries, Inc.

(c) New base year. In effecting a
change to the Used Vehicle Alternative
LIFO Method under this revenue proce-
dure, the taxpayer must retain any LIFO
inventory cost increments previously de-
termined and the value of those incre-
ments. Instead of using the earliest taxable
year for which the taxpayer adopted LIFO
as the base year, the taxpayer must use the
year of change as the new base year in
determining the value of all existing LIFO
cost increments for the year of change and
later taxable years. (The cumulative index
at the beginning of the year of change is
1.00). The taxpayer must restate the base-
year cost of all LIFO cost increments at
the beginning of the year of change in
terms of new base-year costs, using the
year of change as the new base year, and
must recompute the indexes for previ-
ously determined inventory increments
accordingly. The new base-year cost of a
pool is equal to the total current-year cost
of all the vehicles in the pool.

(d) Form 3115. A completed Form
3115 includes the completion of Part I of
Schedule C.

(4) Concurrent change from IPIC
method. A used vehicle dealer using the

IPIC method that also has parts and ac-
cessories, new automobiles, or new light-
duty trucks (other goods) inventory may
incorporate a change, using a cut-off ba-
sis, from IPIC to another acceptable LIFO
method for those other goods into this
change. When changing from IPIC to a
dollar-value LIFO method for its other
goods, the used vehicle dealer must estab-
lish separate inventory pools for new au-
tomobiles and new light-duty trucks,
unless the used vehicle dealer also con-
currently changes to the Vehicle-Pool
Method (see section 22.08 of this revenue
procedure). Further, the used vehicle
dealer must establish a separate inventory
pool for the parts and accessories. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.

(5) Concurrent change to the Vehicle-
Pool Method. A taxpayer making both a
change to the Used Vehicle Alternative
LIFO Method under this section 22.04 and
a change to the Vehicle-Pool Method un-
der Rev. Proc. 2008-23 (see section 22.08
of this revenue procedure) should file a
single Form 3115 for both changes, in
which case the taxpayer must enter the
designated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.

(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.04 is "59."

(7) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.05 Determining the cost of used
vehicles purchased or taken as a trade-
in.

(1) Description of change.

(a) Applicability. This change applies
to a taxpayer using the LIFO inventory
method that wants to:

(i) determine the cost of used vehicles
acquired by trade-in using the average
wholesale price listed by an official used
vehicle guide on the date of the trade-in.
See Rev. Rul. 67-107, 1967-1 C.B. 115.

The taxpayer must consistently use the
official used vehicle guide selected unless
the taxpayer receives permission to use a
different guide;

(ii) use a different official used vehicle
guide for determining the cost of used
vehicles acquired by trade-in;

(iii) determine the cost of used vehicles
purchased for cash using the actual pur-
chase price of the vehicle; or

(iv) reconstruct the beginning-of-the-
year cost of used vehicles purchased for
cash using values computed by national
auto auction companies based on vehicles
purchased for cash. The national auto auc-
tion company selected must be consis-
tently used.

(b) Inapplicability. This change does
not apply to a taxpayer that adopted or
changed to the Used Vehicle Alternative
LIFO Method (see section 22.04 of this
revenue procedure).

(2) Manner of making change. This
change is made on a cut-off basis and
applies only to used vehicles acquired on
or after the beginning of the year of
change. Accordingly, a § 481(a) adjust-
ment is neither permitted nor required.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.05 is "60."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.06 Change to the inventory price index
computation (IPIC) method.

(1) Description of change. This change
applies to a taxpayer that wants to change:

(a) from a non-IPIC LIFO inventory
method to the IPIC method in accordance
with all relevant provisions of § 1.472-
8(e)(3); or

(b) from the IPIC method as described
in T.D. 7814, 1982-1 C.B. 84, (March 15,
1982) (the old IPIC method) to the IPIC
method as described in § 1.472-8(e)(3)
(see T.D. 8976, 2002-1 C.B. 421, (Janu-
ary 8, 2002)) (the new IPIC method),
which includes the following required
changes (if applicable):

(i) from using 80% of the inventory
price index (IPI) to using 100% of the IPI

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to determine the base-year cost and dollar-
value of a LIFO pool(s);

(ii) from using a weighted arithmetic
mean to using a weighted harmonic mean
to compute an IPI for a dollar-value
pool(s); and

(iii) from using a components-of-cost
method to define inventory items to using
a total-product-cost method to define in-
ventory items.

(2) Manner of making change. This
change is made on a cut-off basis and
applies only to the computation of ending
inventories after the beginning of the year
of change. Accordingly, a § 481(a) adjust-
ment is neither permitted nor required.

(3) Bargain purchase. If the taxpayer
has previously improperly accounted for a
bulk bargain purchase, the taxpayer must,
as part of this change, first change its
method of accounting to comply with
Hamilton Industries, Inc. v. Commis-
sioner, 97 T.C. 120 (1991), and compute a
§ 481(a) adjustment for that part of the
change. See Announcement 91-173,
1991-47 I.R.B. 29. Upon examination, if
a taxpayer has properly changed under
this section 22.06 except for complying
with section 22.06(3) of this revenue pro-
cedure, an examining agent may not deny
the taxpayer the change. However, the
taxpayer does not receive audit protection
under section 8.01 of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, with respect to the
improper method of accounting for the
bargain purchase. See section 8.02(2) of
Rev. Proc. 2015-13. Accordingly, the ex-
amining agent may make any necessary
adjustments in any year for which the
period of limitations on assessment and
collection of tax is open to effect compli-
ance with Hamilton Industries, Inc.

(4) Concurrent automatic changes.

(a) A taxpayer making this change and
to change its method of determining
current-year cost under section 22.02 of
this revenue procedure for the same year
of change may file a single Form 3115 for
both changes, provided the taxpayer en-
ters the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making con-
current changes.

(b) A taxpayer making this change and
to change its method of pooling to IPIC-

method pools described in § 1.472-
8(b)(4) or § 1.472-8(c)(2) under section
22.07 of this revenue procedure for the
same year of change may file a single
Form 3115, provided the taxpayer enters
the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making con-
current changes.

(c) A taxpayer making this change and
to change its method of pooling under
section 22.10 of this revenue procedure
for the same year of change may file a
single Form 3115, provided the taxpayer
enters the designated automatic account-
ing method change numbers for both
changes on the appropriate line on that
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes.

(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.06 is "61."

(6) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.07 Changes within the inventory price
index computation (IPIC) method.

(1) Description of change. This change
applies to a taxpayer using the IPIC
method described in § 1.472-8(e)(3) as
revised by T.D. 8976, 2002-1 C.B. 421,
(new IPIC method) that wants to make
one or more of the following changes:

(a) change from the double-extension
IPIC method to the link-chain IPIC
method, or vice versa. See § 1.472-
8(e)(3)(iii)(E) for principles concerning
the computation of the inventory price
index under the double-extension IPIC
method and the link-chain IPIC method;

(b) change to or from the 10 percent
method. See § 1.472-8(e)(3)(iii)(C) for
principles concerning the assignment of
inventory items to Bureau of Labor Sta-
tistics (BLS) categories under the IPIC
method;

(c) change to IPIC-method pools de-
scribed in § 1.472-8(b)(4) or § 1.472-
8(c)(2), including a change to begin or

discontinue applying one or both of the 5
percent pooling rules;

(d) change to combine or separate
pools as a result of the application of a 5
percent pooling rule described in § 1.472-
8(b)(4) or § 1.472-8(c)(2);

(e) change its selection of BLS table
from Table 3 (Consumer Price Index for
All Urban Consumers (CPI-U): U.S. city
average, detailed expenditure categories)
of the monthly CPI Detailed Report to
Table 9 (Producer price indexes (PPI) and
percent changes for commodity and ser-
vice groupings and individual items, not
seasonally adjusted) of the monthly PPI
Detailed Report (formerly, Table 6), or
vice versa. See § 1.472-8(e)(3)(iii)(B)(2)
for principles concerning the selection of
a BLS table under the IPIC method;

(f) change the assignment of one or
more inventory items to BLS categories
under either Table 3 (CPI-U): U.S. City
average, detailed expenditure categories)
of the monthly CPI Detailed Report or
Table 9 (PPI and percent changes for
commodity and service groupings and in-
dividual items, not seasonally adjusted)
of the monthly PPI Detailed Report
(formerly, Table 6). See § 1.472-8(e)
(3)(iii)(C) for principles concerning the
assignment of inventory items to BLS cat-
egories under the IPIC method. As part of
this change, a taxpayer may separate a
reassigned item from an inappropriate
pool and combine the reassigned item
with items in an appropriate pool. See
§ 1.472-8(g)(2) for principles concerning
the manner of combining and separating
dollar-value pools;

(g) change the representative month
when necessitated because of a change in
taxable year or a change in method of
determining current-year cost made pur-
suant to section 22.02 of this revenue pro-
cedure. See § 1.472-8(e)(3)(iii)(B) for
principles concerning the determination of
a representative month under the IPIC
method. A change in method of determin-
ing current-year cost and a change of the
representative month may be made using
a single Form 3115, provided the taxpayer
enters the designated automatic account-
ing method change numbers for both
changes on the appropriate line on that
Form 3115;

(h) change from using preliminary
BLS price indexes to using final BLS

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price indexes to compute an inventory
price index, or vice versa. See § 1.472-
8(e)(3)(iii)(D)(2) for principles concern-
ing the selection of BLS price indexes
under the IPIC method; and

(i) change from using a representative
appropriate month to using an appropriate
month. See § 1.472-8(e)(3)(iii)(B)(3) for
principles concerning the selection of an
appropriate month.

(2) Certain eligibility rule inapplica-
ble. The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not apply to the changes
described in sections 22.07(1)(d), (f) in
the case of a taxpayer using the 10 percent
method described in § 1.472-
8(e)(3)(iii)(C)(2), and (g) of this revenue
procedure.

(3) Manner of making change.

(a) Cut-off basis. These changes are
made on a cut-off basis and apply only to
the computation of ending inventories af-
ter the beginning of the year of change.
Accordingly, a § 481(a) adjustment is nei-
ther permitted nor required.

(b) New base year. A taxpayer that
changes pursuant to sections 22.07(1)(a),
(b), and (e) of this revenue procedure must
establish a new base year in the year of
change.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.07 is "62."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.08 Changes to the Vehicle-Pool
Method.

(1) Description of change. This change
applies to a retail dealer or wholesale dis-
tributor ("reseller") of cars and light-duty
trucks that wants to change to the
"Vehicle-Pool Method" as described in
Rev. Proc. 2008-23, 2008-1 C.B. 664.

(2) Manner of making change.

(a) Cut-off basis. This change is made
on a cut-off basis and applies only to the
computation of ending inventories after
the beginning of the year of change. Ac-
cordingly, a § 481(a) adjustment is neither
permitted nor required. A reseller that
changes its method of pooling under Rev.

Proc. 2008-23 and this section 22.08
must comply with § 1.472-8(g).

(b) New base year. Instead of using the
earliest taxable year for which the reseller
adopted the LIFO method for any items in
a pool, the reseller must use the year of
change as the base year when determining
the LIFO value of that pool for the year of
change and subsequent taxable years (that
is, the cumulative index at the beginning
of the year of change is 1.00). The reseller
must restate the base-year cost of all lay-
ers of increment in a pool at the beginning
of the year of change in terms of new
base-year cost. For an example of estab-
lishing a new base year, see § 1.472-
8(e)(3)(iv)(B)(1)(ii).

(3) Concurrent change to the Alterna-
tive LIFO Method or the Used Vehicle
Alternative LIFO Method. A reseller mak-
ing both a change to the Vehicle-Pool
Method under this section 22.08 and a
change to the Alternative LIFO Method
under Rev. Proc. 97-36 (see section 22.03
of this revenue procedure) or the Used
Vehicle Alternative LIFO Method under
Rev. Proc. 2001-23 (see section 22.04 of
this revenue procedure) should file a sin-
gle Form 3115 for both changes, in which
case the taxpayer must enter the desig-
nated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, for information on
making concurrent changes.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.08 is "112."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.09 Changes within the used vehicle
alternative LIFO method.

(1) Description of change. This change
applies to a taxpayer using the "Used Ve-
hicle Alternative LIFO Method" as de-
scribed in Rev. Proc. 2001-23, 2001-1
C.B. 784, as modified by Announcement
2004-16, 2004-1 C.B. 668, and Rev.
Proc. 2008-23, 2008-1 C.B. 664, that
wants to change the particular "official
used vehicle guide" utilized by the tax-

payer in connection with the Used Vehicle
Alternative LIFO Method or any change
in the precise manner of its utilization (for
example, a change in the specific guide
category that a taxpayer uses to represent
vehicles of average condition for purposes
of section 4.02(5)(a) of Rev. Proc. 2001-
23).

(2) Manner of making change.

(a) Cut-off basis. This change is made
on a cut-off basis and applies only to the
computation of ending inventories after
the beginning of the year of change. Ac-
cordingly, a § 481(a) adjustment is neither
permitted nor required.

(b) New base year. A taxpayer that
changes its method pursuant to this sec-
tion 22.09 must establish a new base year
in the year of change.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.09 is "140."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

.10 Changes to dollar-value pools of
manufacturers.

(1) Description of change. This change
applies to a manufacturer that:

(a) purchases goods for resale (resale
goods) and, thus, must reassign resale
goods from the pool(s) it maintains for the
goods it manufactures to one or more re-
sale pools;

(b) wants to change from using multi-
ple pools described in § 1.472-8(b)(3) to
using natural business unit (NBU) pools
described in § 1.472-8(b)(1), or vice ver-
sa; or

(c) wants to reassign items in NBU
pools described in § 1.472-8(b)(1) into
the same number or a greater number of
NBU pools.

(2) Manner of making change. This
change is made on a cut-off basis and
applies only to the computation of ending
inventories after the beginning of the year
of change. Accordingly, a § 481(a) adjust-
ment is neither permitted nor required. A
taxpayer that changes its method of pool-
ing pursuant to this section 22.10 must
combine or separate pools as required by
§ 1.472-8(g). If a taxpayer splits a pool

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into two or more permissible pools pursu-
ant to this section 22.10, which must be
implemented on a cut-off basis, the tax-
payer then may file a separate Form 3115
to change from the LIFO inventory
method for one or more of the resulting
pools pursuant to section 22.01 of this
revenue procedure, which must be imple-
mented with a § 481(a) adjustment.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.10 is "141."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Andrew Braden at (202)
317-7007 (not a toll-free number).

## SECTION 23. MARK-TO-MARKET ACCOUNTING METHOD (§ 475)

.01 Commodities dealers, securities
traders, and commodities traders
electing to use the mark-to-market
method of accounting under § 475(e) or
(f).

(1) Description of change. This change
applies to certain taxpayers that have
elected to use the mark-to-market method
of accounting under § 475(e) or (f). Under
§ 475(e) and (f) and Rev. Proc. 99-17,
1999-1 C.B. 503, if a taxpayer makes an
election under § 475(e) or (f), then begin-
ning with the first taxable year for which
the election is effective (election year),
mark to market is the only permissible
method of accounting for securities or
commodities subject to the election. Thus,
if the electing taxpayer's method of ac-
counting for its taxable year immediately
preceding the election year is inconsistent
with § 475, the taxpayer is required to
change its method of accounting to com-
ply with the election. A taxpayer that
makes a § 475(e) or (f) election but fails to
change its method of accounting to com-
ply with that election is using an imper-
missible method. See section 4 of Rev.
Proc. 99-17.

(2) Applicability. This change applies
to a taxpayer if all of the following con-
ditions are satisfied:

(a) the taxpayer is a commodities
dealer, securities trader, or commodities
trader that has made a valid election under
§ 475(e) or (f) (see section 5.03(1) of Rev.

Proc. 99-17) and that is required to
change its method of accounting to com-
ply with the election;

(b) the method of accounting to which
the taxpayer changes is in accordance
with its election under § 475(e) or (f); and

(c) the year of change is the election
year.

(3) Certain eligibility rules inapplica-
ble. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, do not apply to this
change.

(4) Election under Rev. Proc. 99-17.
In accordance with section 5.03(1) of Rev.
Proc. 99-17, to make a § 475(e) or (f)
election, a taxpayer must file a statement
satisfying the requirements in section 5.04
of Rev. Proc. 99-17. The taxpayer must
file the statement not later than the due
date (without regard to any extension) of
the original federal income tax return
for the taxable year immediately preced-
ing the election year and must attach the
statement either to that return or, if appli-
cable, to a request for an extension of time
to file that return. For example, if a cal-
endar year individual taxpayer wants to
make a § 475(e) or (f) election for 2017
(the election year), the taxpayer must file
the statement on or before April 15, 2017,
with the taxpayer's timely filed (without
regard to any extension) federal income
tax return for 2016 or the taxpayer's
timely filed request for an extension of
time to file the 2016 federal income tax
return. On the Form 3115 filed for the year
of change, a taxpayer should indicate that
the taxpayer has filed the statement in
compliance with section 5.03(1) of Rev.
Proc. 99-17.

(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
23.01 is "64."

(6) Contact information. For further in-
formation regarding a change under this
section, contact Eric E. Boody at (202)
317-6945 (not a toll-free number).

.02 Taxpayers requesting to change their
method of accounting from the mark-to-
market method of accounting described
in § 475 to a realization method.

(1) Description of change. This change
applies to any taxpayer requesting permis-

sion to change its method of accounting
for securities or commodities as defined in
§ 475 from the mark-to-market method of
accounting described in § 475 to a real-
ization method of accounting. For exam-
ple, this section 23.02 applies when a tax-
payer is required to change its method of
accounting to a realization method after
revoking an election under § 475(e),
(f)(1), or (f)(2). This change is not limited
to a change required by § 475 (for exam-
ple, this section 23.02 applies to a change
from a mark-to-market method of ac-
counting for notional principal contracts
providing for nonperiodic payments even
if the taxpayer is not subject to § 475).

(2) Exclusive procedure. The proce-
dure set forth in this section 23.02 is the
exclusive procedure for changing a tax-
payer's method of accounting from the
mark-to-market method described in
§ 475 to a realization method. Thus, filing
the Notification Statement described in
section 23.02(6) of this revenue procedure
is the exclusive manner of revoking a
§ 475(e), (f)(1), or (f)(2) election. More-
over, any taxpayer requesting permission
to change to a realization method must
follow the procedures described in this
section 23.02 and other applicable provi-
sions of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, to request consent to change
its method of accounting for securities
described in § 475(c)(2) (Section 475
Securities), commodities described in
§ 475(e)(2) (Section 475 Commodities),
or both.

(3) Applicability. This change applies
to a taxpayer if all of the following con-
ditions in paragraphs (a) through (c) be-
low are satisfied:

(a) the taxpayer is using, properly or
improperly, the mark-to-market method
of accounting described in § 475;

(b) the taxpayer is requesting permis-
sion to change to a realization method of
accounting and report gains or losses from
the disposition of Section 475 Securities,
Section 475 Commodities, or both, under
§ 1001; and

(c) the taxpayer meets the requirements
of this section 23.02, including the re-
quirement that it timely file the Notifica-
tion Statement described in section
23.02(6) of this revenue procedure.

(4) Certain eligibility rules inapplica-
ble. The eligibility rules in sections

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5.01(1)(d) and (f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, do not apply to this
change.

(5) Manner of making change. This
change is made using a cut-off basis and
applies only to Section 475 Securities,
Section 475 Commodities, or both, that
are accounted for using the mark-to-
market method of accounting described in
§ 475 and for which a change in method is
requested under this section 23.02. Ac-
cordingly, a § 481(a) adjustment is neither
permitted nor required.

Under the cut-off basis, a taxpayer
must make a final mark of all Section 475
Securities, Section 475 Commodities, or
both, that are being marked to market and
that are the subject of the accounting
method change being requested, on the
last business day of the year preceding the
year of change. As a result of the final
mark, gain or loss attributable to those
securities and commodities is also recog-
nized on the last business day of the year
preceding the year of change. In the case
of any Section 475 Security or Section
475 Commodity that a taxpayer holds on
the first day of the year of change, the
taxpayer must make proper adjustment in
the amount of any subsequently realized
gain or loss to take into account adjust-
ments for the gain or loss recognized prior
to the first day of the year of change
pursuant to the use of the mark-to-market
method of accounting described in § 475
in order to prevent amounts from being
duplicated or omitted. Any change in
value on or after the first day of the year of
change will be taken into account using a
realization method of accounting unless
section 23.02(7) of this revenue procedure
permits the taxpayer to resume a mark-to-
market method and the taxpayer resumes
a mark-to-market method.

(6) Notification Statement required. In
addition to filing the Form 3115 required
under section 6.03(1) of Rev. Proc. 2015-
13, to change to a realization method of
accounting under this section 23.02, a tax-
payer must also file a Notification State-
ment that satisfies the requirements in sec-
tion 23.02(6) of this revenue procedure.
The Notification Statement must be filed
not later than the due date (without regard
to any extension) of the original federal
income tax return for the taxable year
immediately preceding the year of change

and must be attached either to that return
or, if applicable, to a request for an exten-
sion of time to file that return.

(a) Notification Statement contents.
The Notification Statement must contain
(1) the name of the taxpayer that will
change its method of accounting (that is,
the applicant), and, if applicable, the filer
(for example, its parent corporation); (2) a
statement that the taxpayer is requesting
to change its method of accounting from
the mark-to-market method of accounting
described in § 475 to a realization method;
(3) the year of change (both the beginning
and ending dates); and (4) the types of
instruments subject to the method change,
that is, Section 475 Securities, Section
475 Commodities, or both. If a taxpayer
has made an election under § 475(e),
(f)(1), or (f)(2), the taxpayer must also
include a statement revoking the taxpay-
er's section 475 election or elections for
the Section 475 Securities, Section 475
Commodities, or both, for which a change
in accounting method is sought.

(b) Effect of filing Notification State-
ment. Once the taxpayer files a Notifica-
tion Statement for the year of change, a
realization method of accounting is the
only permissible method of accounting for
Section 475 Securities, Section 475 Com-
modities, or both, described in the Notifi-
cation Statement for the entire year of
change and all subsequent years (unless
section 23.02(7)(a) of this revenue proce-
dure applies). A taxpayer that files the
Notification Statement described in this
section 23.02 but fails to change its
method of accounting using the proce-
dures described in Rev. Proc. 2015-13
and this section 23.02 is using an imper-
missible method.

(c) Limited § 301.9100 relief. Section
301.9100 relief for failure to comply with
the requirements of this section 23.02(6)
will be granted only in unusual and com-
pelling circumstances.

(7) Additional requirements.

(a) Resuming the mark-to-market
method of accounting. A taxpayer may not
use the automatic change procedures in
Rev. Proc. 2015-13 and section 23.01 of
this revenue procedure to resume using
the mark-to-market method of accounting
described in § 475 for the Section 475
Securities, Section 475 Commodities, or
both, that are the subject of the method

change being requested using this section
23.02 during any of the five taxable years
beginning with the year of change. To
resume using the mark-to-market method
of accounting described in § 475 during
this 5-year period, a taxpayer must: (i)
request the change using the non-
automatic change procedures in Rev.
Proc. 2015-13, (ii) request the change by
the date an election for the year of change
would be due under section 5.03 of Rev.
Proc. 99-17, 1999-1 C.B. 503, and (iii)
include a statement that satisfies all appli-
cable requirements of section 5.04 of Rev.
Proc. 99-17.

(b) Copy of Notification Statement. A
taxpayer must attach a copy of the Noti-
fication Statement required in section
23.02(6) of this revenue procedure to its
Form 3115 filed under this section 23.02.

(c) No audit protection for valuation. A
taxpayer does not receive audit protection
under section 8.01 of Rev. Proc. 2015-13
for the method of valuation used by the
taxpayer to determine the fair market
value of the taxpayer's Section 475 Secu-
rities, Section 475 Commodities, or both,
for a taxable year prior to the year of
change, or for a failure to comply with the
requirements in Rev. Proc. 99-17 to prop-
erly elect the mark-to-market method. See
section 8.02(2) of Rev. Proc. 2015-13.

(8) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
23.02 is "218".

(9) Contact information. For further in-
formation regarding a change under this
section, contact Eric E. Boody at (202)
317-6945 (not a toll-free number).

## SECTION 24. BANK RESERVES FOR BAD DEBTS (§ 585)

.01 Changing from the § 585 reserve
method to the § 166 specific charge-off
method.

(1) Description of change.

(a) Applicability. This change applies
to a bank (as defined in § 581, including a
bank for which a qualified subchapter S
subsidiary (Qsub) election is filed) that
wants to change its method of accounting
for bad debts from the § 585 reserve
method to the § 166 specific charge-off
method.

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(b) Inapplicability. This change does
not apply to a large bank as defined in
§ 585(c)(2).

(2) Certain eligibility rule inapplica-
ble. A bank that changed from the § 593
reserve method under § 593(g) to the
§ 585 reserve method is not prohibited
under section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, from chang-
ing its method of accounting for bad debts
under this section 24.01 solely because of
the § 593(g) change. A bank for which a
Qsub election is filed will not be prohib-
ited under section 5.01(1)(f) of Rev. Proc.
2015-13 from changing its method of ac-
counting for bad debts under this section
24.01 solely because of the deemed liqui-
dation of the bank arising from a Qsub
election.

(3) Section 481(a) adjustment. Gener-
ally, the amount of the § 481(a) adjust-
ment for a change in method of account-
ing under this section 24.01 is the amount
of the bank's reserve for bad debts as of
the close of the taxable year immediately
before the year of change. However, the
amount of the § 481(a) adjustment does
not include the amount of a bank's
pre-1988 reserves (as described in
§ 593(g)(2)(A)(ii), without taking into ac-
count § 593(g)(2)(B)) if the bank changed
in a prior year from the § 593 reserve
method to the § 585 reserve method and
§ 593(g) applied to that change. The
deemed liquidation of a bank occurring
solely because its parent makes a Qsub
election does not accelerate the § 481(a)
adjustment. In accordance with section
7.03(4)(a) of Rev. Proc. 2015-13, a bank
that ceases to be a bank under § 581 must
accelerate its § 481(a) adjustment.

(4) Change from § 585 required when
electing S corporation status.

(a) General rule. A bank electing S
corporation status (or a bank for which a
Qsub election is filed) cannot use the
§ 585 reserve method. The filing by a
bank of a Form 2553, Election by a Small
Business Corporation, or the filing by a
bank's parent of Form 8869, Qualified
Subchapter S Subsidiary Election, with
respect to the bank will constitute an
agreement by the bank to change its
method of accounting for bad debts from
the § 585 reserve method to the § 166
specific charge-off method effective as of
the taxable year for which the S corpora-

tion election or Qsub election is effective
(year of change) in accordance with all of
the automatic change procedures of Rev.
Proc. 2015-13 and this section 24.01. The
resulting § 481(a) adjustment is recog-
nized built-in gain under § 1374, unless
the bank elects under § 1361(g) and sec-
tion 24.01(4)(b) of this revenue procedure
to take the § 481(a) adjustment into ac-
count in determining taxable income for
the taxable year immediately preceding
the year of change. See § 1.1374-4(d).

(b) Election to include § 481(a) adjust-
ment in taxable year immediately preced-
ing the year of change.

(i) Election requirements. A bank that
changes its method of accounting for bad
debts under this section 24.01, from the
§ 585 reserve method to the § 166 specific
charge-off method for the first taxable
year for which the bank's S corporation
election is effective (year of change) may
elect under § 1361(g) to take into account
the amount of the resulting § 481(a) ad-
justment in determining taxable income
for the taxable year immediately preced-
ing the year of change. To make this elec-
tion, a bank must (1) file an original and
copy of Form 3115 under section 6.03(1)
of Rev. Proc. 2015-13 (and any other
copy required under section 6.03) for the
year of change, (2) file an additional copy
of the Form 3115 with its original (or
amended) federal income tax return for
the taxable year immediately preceding
the year of change filed no later than the
date the original Form 3115 is properly
filed under section 6.03(1) of Rev. Proc.
2015-13 (and any other copy required un-
der section 6.03) and (3) include the
amount of the § 481(a) adjustment in
gross income for the taxable year imme-
diately preceding the year of change. The
bank must attach a statement to the orig-
inal and both copies of Form 3115 stating
that the bank elects under § 1361(g) to
take the § 481(a) adjustment into account
in determining taxable income for the tax-
able year immediately preceding the year
of change.

(ii) Special rule for Qsub banks. In the
case of a Qsub bank, the S corporation
parent must file an original and copy of
Form 3115 under section 6.03(1) of Rev.
Proc. 2015-13 for the year of change. The
Qsub bank must file an additional copy of
the Form 3115 with its original (or

amended) federal income tax return for
the taxable year immediately preceding
the year of change filed no later than the
date the original Form 3115 is properly
filed under section 6.03(1) of Rev. Proc.
2015-13, and include the amount of the
§ 481(a) adjustment in gross income for
the taxable year immediately preceding
the year of change. In the case of a Qsub
bank, the Form 3115 should indicate that
the "filer" is the S corporation parent and
the "applicant" is the Qsub bank.

(iii) The following example illustrates
the principles of section 24.01(4)(b) of
this revenue procedure.

Example. X, a calendar-year taxpayer, is a
calendar-year bank as defined in § 581 and is not a
large bank as defined in § 585(c)(2). For taxable
years before 2015, X accounted for its bad debts
under the § 585 reserve method. By March 15, 2015,
X properly filed a Form 2553 electing to be an S
corporation effective January 1, 2015. Pursuant to
section 24.01(4)(a) of this revenue procedure, the
filing of the Form 2553 constituted an agreement by
X to change from the § 585 reserve method to the
§ 166 specific charge-off method for 2015 in accor-
dance with all of the automatic change procedures of
Rev. Proc. 2015-13, and the applicable provisions of
this section 24.01. Thus, for example, X must file a
Form 3115 for this 2015 change in duplicate, in
accordance with section 6.03(1) of Rev. Proc. 2015-
13, by attaching the original Form 3115 to X's timely
filed (including any extension) original federal in-
come tax return for 2015 and filing a copy of the
Form 3115 with the Covington, KY, office. The
amount of X's § 481(a) adjustment for the change is
the amount of X's bad debt reserve as of the close of
December 31, 2014. X wishes to elect under
§ 1361(g) to include the § 481(a) adjustment in
income in the taxable year ending December 31,
2014, the taxable year immediately preceding the
year of change. To make this election, X must (1) file
an original and copy of Form 3115 for the 2015
change under section 6.03(1) of Rev. Proc. 2015-13,
(2) file an additional copy of that Form 3115 with its
original (or amended) federal income tax return for
2014 filed no later than the date the original Form
3115 is properly filed under section 6.03(1) of Rev.
Proc. 2015-13, and (3) include the amount of its
§ 481(a) adjustment in gross income in its return for
2014. X must attach a statement to the original and
both copies of Form 3115 stating that X elects under
§ 1361(g) to take the § 481(a) adjustment into ac-
count in determining taxable income for 2014, the
taxable year immediately preceding the year of
change.

(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
24.01 is "66."

(6) Contact information. For further in-
formation regarding a change under this
section, contact K. Scott Brown at (202)

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317-6945, Laura Fields at (202) 317-
6850, or Adrienne Mikolashek at (202)
317-6850 (not a toll-free number).

## SECTION 25. INSURANCE COMPANIES (§§ 816, 832, 833)

.01 Safe harbor method of accounting
for premium acquisition expenses.

(1) Description of change. Rev. Proc.
2002-46, 2002-2 C.B. 105, sets forth a
safe harbor method of accounting for pre-
mium acquisition expenses of certain non-
life insurance companies. Under this
method, an insurance company is permit-
ted to treat as premium acquisition ex-
penses incurred for the taxable year an
amount equal to the sum of (a) the amount
of premium acquisition expenses paid
during the taxable year; (b) the difference
between the unpaid premium acquisition
expenses shown on the company's annual
statement for the taxable year and the un-
paid premium acquisition expenses shown
on the company's annual statement for the
preceding taxable year; and (c) the differ-
ence between the amount of the insurance
company's pro forma premium acquisi-
tion expenses at the end of the taxable
year and the company's pro forma pre-
mium acquisition expenses at the end of
the preceding taxable year. The amount
taken into account as a net increase in the
pro forma premium acquisition expenses,
however, cannot exceed the insurance
company's unearned premium reserve
offset amount for that year. A special rule
applies to premium acquisition expenses
with respect to certain contracts with in-
stallment premiums. See Rev. Proc. 2002-
46.

(2) Applicability. The automatic
change in this section 25.01 applies to
any insurance company that is subject to
tax under § 831(a) and determines its
premiums earned for insurance contracts
during the taxable year under § 832(b)
(4) in accordance with the provisions of
§ 1.832-4. The automatic change does
not apply to an existing Blue Cross or
Blue Shield organization or any other
organization to which § 833 applies.

(3) Certain eligibility rules inapplica-
ble. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, do not apply to this
change.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
25.01 is "67."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Rebecca L. Baxter at
(202) 317-6995 (not a toll-free number).

.02 Certain changes in method of
accounting for organizations to which
§ 833 applies

(1) Description of change. This change
applies to an existing Blue Cross or Blue
Shield organization within the meaning of
§ 833(c)(2), or an organization described
in § 833(c)(3), that is required to change
its method of accounting for unearned
premiums by reason of failing to meet the
Medical Loss Ratio (MLR) requirements
of § 833(c)(5), or by reason of meeting the
MLR requirements of § 833(c)(5) after
failing to meet those requirements in a
prior year. See Notice 2011-4, 2011-2
I.R.B. 282.

(2) Certain eligibility rules inapplica-
ble. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, do not apply to this
change.

(3) Accelerated § 481(a) adjustment
period in certain situations. In addition to
the circumstances set forth in section
7.03(4) of Rev. Proc. 2015-13, the § 481
adjustment period provided in section
7.03 of Rev. Proc. 2015-13 will be accel-
erated in the event a taxpayer with a re-
maining balance of a § 481(a) adjustment
that arose by reason of a change in method
of accounting described in this section
25.02 is required to effect another change
in method of accounting described in this
section 25.02. Thus, for example, a tax-
payer that fails to satisfy the requirements
of § 833(c)(5) and as a result has a posi-
tive § 481(a) adjustment, is required to
accelerate the remaining balance, if any,
of that adjustment in a subsequent taxable
year in which the taxpayer meets the re-
quirements of § 833(c)(5).

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
25.02 is "155."

(5) Contact information. For further in-
formation regarding this section, contact
Rebecca L. Baxter at (202) 317-6995 (not
a toll-free number).

.03 Change in qualification as
life/nonlife insurance company under
§ 816.

(1) Description of change. This change
applies to an insurance company that
changes from being taxed as a life insur-
ance company under part I of subchapter
L to being taxed as a non-life insurance
company under part II of subchapter L, or
vice versa. Whether an insurance com-
pany is taxed under § 801 as a life insur-
ance company under part I of subchapter
L is determined under § 816.

(2) Certain eligibility rules inapplica-
ble. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, do not apply to this
change.

(3) No audit protection or ruling on
qualification as a life insurance company.
The taxpayer does not receive either: (a)
any audit protection under section 8.01 of
Rev. Proc. 2015-13 or (b) ruling reliance
under section 10 of Rev. Proc. 2015-13 in
connection with the consent granted under
section 9 of Rev. Proc. 2015-13 for a
change under this section 25.03 regarding
whether the taxpayer qualifies as a life
insurance company. The director will as-
certain whether the taxpayer qualifies as a
life insurance company.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
25.03 is "219."

(5) Contact information. For further in-
formation regarding a change under this
section, contact Rebecca L. Baxter at
(202) 317-6995 (not a toll-free number).

## SECTION 26. DISCOUNTED UNPAID LOSSES (§ 846)

.01 Composite method for discounting
unpaid losses.

(1) Description of change. Section 846
defines "discounted unpaid losses" for
purposes of computing the insurance com-
pany taxable income of certain insurance
companies. Notice 88-100, 1988-2 C.B.
439, section V, sets forth a composite

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method for computing unpaid losses with
respect to accident years not separately
stated on the NAIC annual statement.
Rev. Proc. 2002-74, 2002-2 C.B. 980,
section 3.01, clarifies that the composite
method of Notice 88-100, section V, is
permitted, but not required; section 3.02
sets forth an alternative method for those
taxpayers that do not use the composite
method of section 3.01. An insurance
company using a method provided in sec-
tion 3.01 or 3.02 of Rev. Proc. 2002-74 to
compute discounted unpaid losses, must
use the same method to compute dis-
counted estimated salvage recoverable.
An insurance company that currently uses
a permissible method of accounting for
discounted unpaid losses may change its
method of accounting to or from the com-
posite method of Notice 88-100, section
V, without the consent of the Commis-
sioner. This change applies to insurance
companies that are required to discount
unpaid losses under § 846. See Rev. Proc.
2002-74.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
26.01 is "68."

(3) Contact information. For further in-
formation regarding a change under this
section, contact Rebecca L. Baxter at
(202) 317-6995 (not a toll-free number).

## SECTION 27. REAL ESTATE MORTGAGE INVESTMENT CONDUIT (REMIC) (§§ 860A-860G)

.01 REMIC inducement fees.

(1) Description of change. A taxpayer
that receives an inducement fee in connec-
tion with becoming the holder of a non-
economic residual interest in a REMIC
must take that fee into account over the
remaining expected life of the applicable
REMIC in accordance with § 1.446-6.
This change applies to a taxpayer that
seeks to change from any method of ac-
counting for such inducement fees to one
of the safe harbor methods provided under
§ 1.446-6(e)(1)-(2). See Rev. Proc.
2004-30, 2004-1 C.B. 950, for additional
guidance relating to this change.

(2) Manner of making change. A tax-
payer making this change must identify
the specific safe harbor method under

§ 1.446-6(e) to which the taxpayer is
changing.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
27.01 is "79."

(4) Contact information. For further in-
formation regarding a change under this
section, contact John W. Rogers, III at
(202) 317-6895 (not a toll-free number).

## SECTION 28. FUNCTIONAL CURRENCY (§ 985)

### .01 Change in functional currency.

(1) Description of change. This change
applies to a taxpayer that wants to change
its functional currency or the functional
currency of a qualified business unit
(QBU) of the taxpayer. The preceding
sentence does not apply to a QBU of a
taxpayer described in § 1.985-1(b)(1)(iii).

(2) Manner of making change. A tax-
payer making this change must make all
necessary adjustments required by such
change. See §§ 1.985-5, 1.985-8(c). A
taxpayer must attach a statement to the
Form 3115 representing that it has made
the adjustments set forth in § 1.985-5 or
§ 1.985-8(c). The statement must also
provide the amount of any unrealized ex-
change gain or loss required to be taken
into account pursuant to § 1.985-5 or
§ 1.985-8(c) and the date on which a
taxpayer took such amount into account.
Finally, the statement must provide a de-
tailed and complete description of any
other adjustments required pursuant to
§ 1.985-5 or § 1.985-8(c).

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
28.01 is "70."

(4) Contact information. For further in-
formation regarding a change under this
section, contact Peter Merkel at (202)
317-4919 (not a toll-free number).

## SECTION 29. ORIGINAL ISSUE DISCOUNT (§§ 1272, 1273)

.01 De minimis original issue discount
(OID).

(1) Description of change. This change
applies to a taxpayer that wants to change

to the principal-reduction method of ac-
counting described in section 5 of Rev.
Proc. 97-39, 1997-2 C.B. 485. The
principal-reduction method of accounting
is an aggregate method of accounting for
de minimis OID (discount) on certain
loans originated by the taxpayer.

(2) Certain eligibility rule inapplica-
ble. The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not apply to this change.

(3) Description. The principal-
reduction method of accounting is a per-
missible method for use by taxpayers to
account for discount on one or more cat-
egories of loans described in section 4.02
or 4.03 of Rev. Proc. 97-39. If the
principal-reduction method is used to ac-
count for any loans in a category of loans,
the method must be used for the entire
category of loans. The principal-reduction
method applies only to loans described in
section 3 of Rev. Proc. 97-39.

(4) Manner of making change.

(a) This change is made on a cut-off
basis and applies only to loans described
in section 3 of Rev. Proc. 97-39 that were
acquired on or after the beginning of the
year of change. Accordingly, a § 481(a)
adjustment is neither permitted nor re-
quired.

(b) The taxpayer must maintain books
and records sufficient to satisfy the direc-
tor that old and new loans have been ad-
equately segregated.

(5) Additional requirements. On a
statement attached to the Form 3115, the
taxpayer must:

(a) identify the categories of loans to
which the proposed method will apply;
and

(b) describe any "additional catego-
ries" permitted under section 4.03 of Rev.
Proc. 97-39.

(6) No audit protection. A taxpayer
does not receive audit protection under
section 8.01 of Rev. Proc. 2015-13 in
connection with this change. See section
8.02(2) of Rev. Proc. 2015-13.

(7) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
29.01 is "72."

(8) Contact information. For further in-
formation regarding a change under this

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section, contact William E. Blanchard at
(202) 317-3900 (not a toll-free number).

.02 Proportional method of accounting
for OID on a pool of credit card
receivables.

(1) Description of change. This change
applies to a taxpayer that wants to change
to the proportional method of accounting
for OID on a pool of credit card receiv-
ables as described in Rev. Proc. 2013-26,
2013-22 I.R.B. 1160.

(2) Manner of making change. This
change is made on a cut-off basis. Accord-
ingly, a § 481(a) adjustment is neither
required nor permitted. The unaccrued
OID for the pool as of the beginning of the
first period in the year of change is equal
to the unaccrued OID for the pool as of
the end of the preceding year under the
taxpayer's previous method of accounting
for the pool.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
29.02 is "183."

(4) Contact information. For further in-
formation regarding this section, please
contact Charles W. Culmer at (202) 317-
6945 (not a toll-free number).

## SECTION 30. MARKET DISCOUNT BONDS (§ 1278)

.01 Revocation of § 1278(b) election.

(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for market dis-
count bonds by revoking its § 1278(b)
election. Under § 1278(b), a taxpayer may
elect a method of accounting under which
market discount is currently included in
gross income for the taxable years to
which the discount is attributable. See
Rev. Proc. 92-67, 1992-2 C.B. 429, for
the procedures to make a § 1278(b) elec-
tion (including a deemed § 1278(b) elec-
tion for certain taxable years). For pur-
poses of this section 30.01, a taxpayer also
is treated as having made a deemed
§ 1278(b) election for a taxable year if, for
one or more market discount bonds that
were acquired by the taxpayer during that
taxable year, the taxpayer includes in
gross income on the tax return for that
taxable year and on the tax return for the

following taxable year the market dis-
count attributable to each taxable year,
other than as a result of a disposition of
the bond or a partial principal payment on
the bond. The procedures for revoking a
§ 1278 election were formerly provided in
section 7 of Rev. Proc. 92-67.

(2) Revocation of election. The revoca-
tion of a § 1278(b) election (or a deemed
§ 1278(b) election) applies to all market
discount bonds that are held by the tax-
payer on the first day of the first taxable
year for which the revocation is effective
(year of change), and to all market dis-
count bonds that are subsequently ac-
quired by the taxpayer. If a § 1278(b)
election (or a deemed § 1278(b) election)
is revoked, then for purposes of § 1278(a),
accrued market discount with respect to
any bond previously subject to the elec-
tion means accrued market discount as
defined in § 1276(b) less any market dis-
count included in income while the bond
was subject to the § 1278(b) election (or
the deemed § 1278(b) election).

(3) Manner of making change. This
change is made on a cut-off basis and
applies only to market discount accruing
on or after the beginning of the year of
change. Accordingly, a § 481(a) adjust-
ment is neither permitted nor required.
Market discount accruing on a bond prior
to the year of change was currently in-
cluded in income and market discount ac-
cruing on the bond on and after the first
day of the year of change is included in
income generally upon disposition of the
bond. See § 1276(a). Because a cut-off
basis is prescribed for this change, the
basis of any bond, adjusted for amounts
previously included in income during the
period of the election, is not affected by
the revocation.

(4) Additional requirements. On a
statement attached to the Form 3115, the
taxpayer must provide:

(a) the reason(s) for revoking the
§ 1278(b) election (or deemed § 1278(b)
election);

(b) a description of the method by
which, and the date on which, the tax-
payer made the § 1278(b) election (or
deemed § 1278(b) election) that is being
revoked; and

(c) a statement that, after the revoca-
tion, the taxpayer will not make a constant
interest rate election for any bond that has

been subject to the § 1278(b) election (or
deemed § 1278(b) election) being revoked
and for which a constant interest rate elec-
tion was not effective in the year of ac-
quisition.

(5) Audit protection. A taxpayer may
receive audit protection, as provided in
section 8.01 of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, in connection with this
change. Any audit protection applicable to
this change under section 8.01 of
Rev. Proc. 2015-13 does not preclude
the Commissioner from examining the
method used by the taxpayer to determine
the amount of accrued market discount
under § 1276(b) for a taxable year prior to
the year of change.

(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
30.01 is "73."

(7) Contact information. For further in-
formation regarding a change under this
section, contact William E. Blanchard at
(202) 317-3900 (not a toll-free number).

## SECTION 31. SHORT-TERM OBLIGATIONS (§ 1281)

.01 Interest income on short obligations.

(1) Description of change.

(a) This change applies to a taxpayer
that wants to change its method of ac-
counting to comply with § 1281 for inter-
est income on short-term obligations.

(b) Under § 1281, a holder of certain
short-term obligations, including a bank
as defined in § 581, must include in gross
income any accrued interest income on
such obligations, regardless of the hold-
er's overall method of accounting. Section
1281 applies to all types of interest in-
come, including acquisition discount,
original issue discount (OID), and stated
interest. See S. Rep. No. 99-313, 99th
Cong., 2d Sess. 903 (1986), 1986-3 (Vol.
3) C.B. 903.

(c) Section 1283(a)(1) generally de-
fines a short-term obligation as any bond,
debenture, note, certificate, or other evi-
dence of indebtedness that matures in one
year or less from its issue date.

(d) Under §§ 1281(a) and 1283(c), a
holder of a short-term obligation subject
to § 1281 must include in gross income an
amount equal to the sum of the daily por-

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tions of the acquisition discount or OID,
whichever is applicable, on the obligation
for each day during the taxable year that
the obligation is held by the holder. See
§ 1283(b), as modified by § 1283(c), to
determine the daily portions of acquisition
discount or OID. In addition, § 1281(a)
requires the holder to include in gross
income any stated interest that is payable
on the short-term obligation (other than
stated interest taken into account to deter-
mine the amount of the acquisition dis-
count or OID) as it accrues.

(2) Section 481(a) adjustment period.
A taxpayer must take the entire § 481(a)
adjustment into account in computing tax-
able income for the year of change.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
31.01 is "74."

(4) Contact information. For further in-
formation regarding a change under this
section, contact William E. Blanchard at
(202) 317-3900 (not a toll-free number).

.02 Stated interest on short-term loans
of cash method banks.

(1) Description of change. This change
applies to a bank that uses the cash re-
ceipts and disbursements (cash) method of
accounting as its overall accounting
method and that wants to change its
method of accounting from accruing
stated interest on short-term loans made in
the ordinary course of business to using
the cash method for that interest. For ex-
ample, see Security State Bank v. Com-
missioner, 214 F.3d 1254 (10th Cir. 2000),
aff'g 111 T.C. 210 (1998), acq., 2001-1
C.B. xix; and Security Bank Minnesota v.
Commissioner, 994 F.2d 432 (8th Cir.
1993), aff'g 98 T.C. 33 (1992), in which
the courts held that § 1281 does not apply
to short-term loans made by a cash
method bank in the ordinary course of its
business.

(2) Certain eligibility rule inapplica-
ble. The eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not apply to this change.

(3) Section 481(a) adjustment period.
A taxpayer making this change must take
the entire § 481(a) adjustment into ac-
count in computing taxable income for the
year of change.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
31.02 is "75."

(5) Contact information. For further in-
formation regarding a change under this
section, contact William E. Blanchard at
(202) 317-3900 (not a toll-free number).

## EFFECTIVE DATE

.01 In general. Except as otherwise
provided under this EFFECTIVE DATE
section, this revenue procedure is effec-
tive for a Form 3115 filed on or after April
19, 2017, for a year of change ending on
or after August 31, 2016, that is filed
under the automatic change procedures of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
as clarified and modified by Rev. Proc.
2015-33, 2015-24 I.R.B. 1067, and as
modified by Rev. Proc. 2016-1, 2016-1
I.R.B. 1.

.02 Transition rules. The following
transition rules apply:

(1) Limited time period to convert a
Form 3115 filed under the non-automatic
change procedures in Rev. Proc. 2015-
13. If before April 19, 2017, a taxpayer
properly filed a Form 3115 under the non-
automatic change procedures in Rev.
Proc. 2015-13 requesting the Commis-
sioner's consent for a change in method of
accounting described in this revenue pro-
cedure, and the Form 3115 is pending
with the national office on April 19, 2017,
the taxpayer may choose to make the
change in method of accounting under the
automatic change procedures in Rev.
Proc. 2015-13 if the taxpayer is otherwise
eligible to use this revenue procedure and
the automatic change procedures in Rev.
Proc. 2015-13. The taxpayer must notify
the national office contact person (if un-
known, see section 9.08(6) of Rev. Proc.
2017-1, 2017-1 I.R.B. 1, 49 (or succes-
sor)) for the Form 3115 of the taxpayer's
intent to make the change in method of
accounting under the automatic change
procedures in Rev. Proc. 2015-13 before
the later of (a) May 19, 2017, or (b) the
issuance of a letter ruling granting or de-
nying consent for the change. The notifi-
cation should indicate that the taxpayer
chooses to convert the Form 3115 to the
automatic change procedures in Rev.
Proc. 2015-13. If the taxpayer timely no-

tifies the national office that it chooses to
convert the Form 3115 to the automatic
change procedures in Rev. Proc. 2015-13,
the national office will send a letter to the
taxpayer acknowledging its request and
will return the user fee submitted with the
Form 3115.

A taxpayer converting a Form 3115 to
the automatic change procedures in Rev.
Proc. 2015-13 for a change in method of
accounting described in this revenue pro-
cedure must resubmit a Form 3115 that
conforms to the automatic change proce-
dures, with a copy of the national office
letter sent acknowledging the taxpayer's
request attached, to the IRS in Covington,
KY by the earlier of (a) the 30th calendar
day after the date of the national office's
letter acknowledging the taxpayer's re-
quest, or (b) the date the taxpayer is re-
quired to file the Duplicate copy of the
Form 3115 under SECTION 6.03(1)(a)
(i)(B) of Rev. Proc. 2015-13. See SEC-
TION 6.03(3) of Rev. Proc. 2015-13 re-
garding additional required copies of
Form 3115.

For purposes of the eligibility rules in
SECTION 5 of Rev. Proc. 2015-13, the
Duplicate copy of the timely resubmitted
Form 3115 will be considered filed as of
the date the taxpayer originally filed the
converted Form 3115 under the non-
automatic change procedures in Rev.
Proc. 2015-13. This paragraph (1) does
not extend the date the taxpayer must file
the original (converted) Form 3115 under
SECTION 6.03(1)(a)(i)(A) of Rev. Proc.
2015-13.

A Form 3115 filed under the non-
automatic change procedures in Rev.
Proc. 2015-13 before April 19, 2017, for
a change in method of accounting de-
scribed in this revenue procedure, will be
disregarded for purposes of the prior five
year change rules in SECTIONS 5.04 and
5.05 of Rev. Proc. 2015-13 if the taxpayer
converts the Form 3115 pursuant to this
paragraph (1).

(2) Forms 3115 for changes in methods
of accounting that can no longer be filed
under the automatic change procedures.
The following transition rules apply to the
changes in methods of accounting that can
no longer be filed under the automatic
change procedures in Rev. Proc. 2015-13
because of changes made in this revenue
procedure. Examples of such changes in

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methods of accounting are described in
subsection .01(5) and (8) of the SIGNIF-
ICANT CHANGES section of this reve-
nue procedure.

(a) If before April 19, 2017, a taxpayer
properly filed the original, or the Dupli-
cate copy, of a Form 3115 under the au-
tomatic change procedures in Rev. Proc.
2015-13 for a change in method of ac-
counting that can no longer be filed under
the automatic change procedures in Rev.
Proc. 2015-13, the taxpayer may make
that change in method of accounting un-
der the automatic change procedures in
Rev. Proc. 2015-13 for the year of
change.

(b) If before April 19, 2017, a taxpayer
did not properly file the original, or the
Duplicate copy, of a Form 3115 under the
automatic change procedures in Rev.
Proc. 2015-13 for a change in method of
accounting that can no longer be filed
under the automatic change procedures in
Rev. Proc. 2015-13, the taxpayer must
make that change in method of accounting
under the non-automatic change proce-
dures in Rev. Proc. 2015-13. Notwith-
standing § 1.446-1(e)(3)(i), the taxpayer
may file a Form 3115 to request the Com-
missioner's consent to change the method
of accounting under the non-automatic
change procedures in Rev. Proc. 2015-13
for the taxpayer's last taxable year ending
before April 19, 2017, on or before the
due date of the federal income tax return
for that taxable year. Solely for purposes
of this paragraph (2)(b), the due date of
the taxpayer's federal income tax return
includes extensions, notwithstanding that
the taxpayer may not have extended the
due date.

## EFFECT ON OTHER DOCUMENTS

.01 This revenue procedure amplifies
and modifies Rev. Proc. 2016-29,
2016-21 I.R.B. 880, as modified by No-
tice 2016-36, 2016-25 I.R.B. 1029, Rev.
Proc. 2016-39, 2016-30 I.R.B. 164, and
Notice 2017-6, 2017-3 I.R.B. 422. Rev.
Proc. 2016-29, as amplified and modified
is superseded in part. The third sentence in
the subsection .01 under the EFFECT ON
OTHER DOCUMENTS section of Rev.
Proc. 2016-29 remains in effect (that is,
the second sentences in sections 14.01 and
14.02, and sections 14.04, 14.05, 14.06,
and 14.07 of Rev. Proc. 2011-14, 2011-4

I.R.B. 330, remain in effect). All other
sections of Rev. Proc. 2016-29 are super-
seded.

.02 Rev. Proc. 2011-46, 2011-42
I.R.B. 518, is modified as follows:

(1) Section 5.02(3)(a) is modified to
remove the first two sentences in the Man-
ner of Making Change section and to sub-
stitute the following three new sentences
in its place:

(a) In accordance with § 1.446-
1(e)(3)(ii), the requirement under § 1.446-
1(e)(3)(i) to file a Form 3115 is waived and
a statement in lieu of a Form 3115 is autho-
rized for this change. Notwithstanding the
definition of Form 3115 in section 3.07 of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, the
statement in lieu of a Form 3115 that is
permitted under this paragraph 5.02(3)(a) is
considered a Form 3115 for purposes of the
automatic consent procedures in Rev. Proc.
2015-13. However, the requirement to file
the Duplicate copy, under section 6.03(1)(a)
of Rev. Proc. 2015-13, is waived.

(2) Section 5.03(2)(a) is modified to
remove the first two sentences in the Man-
ner of Making Change section and to sub-
stitute the following three new sentences
in its place:

(a) In accordance with § 1.446-
1(e)(3)(ii), the requirement under § 1.446-
1(e)(3)(i) to file a Form 3115 is waived and
a statement in lieu of a Form 3115 is autho-
rized for this change. Notwithstanding the
definition of Form 3115 in section 3.07 of
Rev. Proc. 2015-13, the statement in lieu of
a Form 3115 that is permitted under this
paragraph 5.03(2)(a) is considered a Form
3115 for purposes of the automatic consent
procedures in Rev. Proc. 2015-13. How-
ever, the requirement to file the Duplicate
copy, under section 6.03(1)(a) of Rev. Proc.
2015-13, is waived.

.03 Rev. Rul. 2004-62, 2004-1 C.B.
1072, is modified to remove the second
sentence in the CHANGE IN METHOD
OF ACCOUNTING section and to substi-
tute the following new two sentences in its
place:

A taxpayer that wants to change its
method of accounting to comply with this
revenue ruling must follow the automatic
change procedures in Rev. Proc. 2015-13,
2015-5 I.R.B. 419, (or successor) if the
taxpayer is eligible to request such con-
sent under the automatic change proce-
dures therein. The eligibility rules in sec-

tion 5.01(1) of Rev. Proc. 2015-13 (or
successor) apply to a change in method of
accounting described in section 3.04 of
Rev. Proc. 2017-30, 2017-18 I.R.B. 1131
(or successor).

.04 Rev. Rul. 2000-7, 2000-9 C.B.
712, is modified to remove the fourth sen-
tence of the paragraph in the APPLICA-
TION section and to substitute the follow-
ing new fourth sentence:

A taxpayer that wants to change its
method of accounting to conform with the
holding in this revenue ruling must follow
the automatic change procedures in Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, (or
successor) if the taxpayer is eligible to
request such consent under the automatic
change procedures therein, except that the
eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13 (or successor) does
not apply to a change described in section
11.03 of Rev. Proc. 2017-30, 2017-18
I.R.B. 1131 (or successor).

.05 Rev. Rul. 2000-4, 2000-1 C.B.
331, is modified to remove the second
sentence of the paragraph in the APPLI-
CATION section, and to substitute the
following two new sentences in that para-
graph in its place:

A taxpayer that wants to change its
method of accounting to conform with the
holding in this revenue ruling must follow
the automatic change procedures in Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, (or
successor) if the taxpayer is eligible to
request such consent under the automatic
change procedures therein. The eligibility
rules in section 5.01(1) of Rev. Proc.
2015-13 (or successor) apply to a change
in method of accounting under section
3.02 of Rev. Proc. 2017-30, 2017-18
I.R.B. 1131 (or successor).

.06 Rev. Proc. 2007-48, 2007-2 C.B.
110, is modified to remove section 5.06(1)
and to substitute it with the following sen-
tence:

The eligibility rule in section 5.01(1)(f)
of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, (or successor) does not apply to a
change in method of accounting described
in section 5.06 of Rev. Proc. 2007-48,
and made under section 21.09 of Rev.
Proc. 2017-30, 2017-18 I.R.B. 1131 (or
successor).

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## 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 sections 3, 5, 6,
7, 8, 9, 11, 12, 15, 16, 17, 18, 19, 20, 21,
22, 23, 24, 28, 29, and 30. This informa-
tion is necessary and will be used to de-
termine whether the taxpayer properly
changed to a permitted method of ac-
counting. The collections of information
are required for the 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 30,580
hours.

The estimated annual burden per re-
spondent/recordkeeper varies from 1/6
hour to 8 1/2 hours, depending on individ-
ual circumstances, with an estimated av-
erage of 1 1/4 hours. The estimated number
of respondents is 27,336. The estimated
annual frequency of responses is on occa-
sion.

## SIGNIFICANT CHANGES

.01 Significant changes made by this
revenue procedure to the List of Auto-
matic Changes in Rev. Proc. 2016-29 in-
clude:

(1) The following sections are modi-
fied to remove paragraph (2), certain eli-
gibility rule(s) temporarily inapplicable,
because the paragraph is obsolete:

(a) Section 3.10, relating to a change in
the treatment of generation property ex-
penditures to use all or some of the unit of
property definitions and the corresponding
major component definitions described in
Rev. Proc. 2013-24;

(b) Section 3.11, relating to several
changes described in Rev. Proc. 2015-12

by a cable system operator that is within
the scope of Rev. Proc. 2015-12; and

(c) Section 12.07, relating to a change
to not apply § 263A to one or more plants
removed from the list of plants that have a
preproductive period in excess of 2 years;

(2) The following sections of Rev.
Proc. 2016-29 are obsolete and are re-
moved from the revenue procedure in
their entirety:

(a) Section 6.10, relating to late partial
disposition elections under § 1.168(i)-
8(d)(2) for the disposition of a portion of
an asset; and

(b) Section 6.11, relating to the revo-
cation of the taxpayer's general asset ac-
count election made under section
6.32(1)(a)(i) of Rev. Proc. 2015-14,
2015-5 I.R.B. 450, or section 6.32(1)(a)(i)
of the APPENDIX to Rev. Proc. 2011-14,
or made under § 1.168(i)-1, § 1.168(i)-
1T, or Prop. Reg. § 1.168(i)-1;

(3) Section 6.12 (now section 6.10 of
this revenue procedure), relating to partial
dispositions of tangible depreciable assets
to which the IRS's adjustment pertains, is
modified to provide that this section does
not apply to any partial disposition elec-
tion specified in § 1.168(i)-8(d)(2)(i) that
is not made pursuant to § 1.168(i)-
8(d)(2)(iii);

(4) Section 6.15(10)(c) (now section
6.13 of this revenue procedure), relating
to the disposition of a building or struc-
tural component, applied to taxpayers
making concurrent automatic changes un-
der sections 6.11 and 6.15 of Rev. Proc.
2016-29. Similarly, section 6.16(9)(c)
(now section 6.14 of this revenue proce-
dure), relating to dispositions of other tan-
gible depreciable assets, applied to tax-
payers making concurrent automatic
changes under sections 6.11 and 6.16 of
Rev. Proc. 2016-29. Because section 6.11
of Rev. Proc. 2016-29 is obsolete and
removed from the revenue procedure in its
entirety, sections 6.15(10)(c) and
6.16(9)(c) also are obsolete and are re-
moved;

(5) Sections 6.15(1)(b)(iv) (now sec-
tion 6.13 of this revenue procedure) and
6.16(1)(b)(iv) (now section 6.14 of this
revenue procedure) provided that these
sections do not apply to any disposition of
a portion of an asset in a transaction de-
scribed in the last sentence in § 1.168(i)-
8(d)(1) for which the taxpayer did not

make a partial disposition election in ac-
cordance with § 1.168(i)-2(d)(ii) or (iii),
as applicable. Sections 6.15(1)(b)(iv) and
6.16(1)(b)(iv) are modified to provide that
these sections also do not apply to any
disposition of a portion of an asset in a
transaction described in the last sentence
in § 1.168(i)-8(d)(1) for which the tax-
payer did not make a partial disposition
election in accordance with § 1.168(i)-
2(d)(iv);

(6) Section 6.19 (now section 6.17 of
this revenue procedure), relating to a
change to the safe harbor method of ac-
counting provided in section 8.03 of Rev.
Proc. 2015-12 for determining deprecia-
tion under §§ 167 and 168 of a fiber optic
transfer node and fiber optic cable used by
a cable system operator, is modified to
remove paragraph (2)(a), relating to the
temporary waiver of the eligibility rule in
section 5.01(1)(f) of Rev. Proc. 2015-13,
because it is obsolete. The waiver of the
eligibility rule in section 5.01(1)(d) of
Rev. Proc. 2015-13 continues to apply to
this change;

(7) Section 10.01, relating to start-up
expenditures, is modified to include also a
change in the amortization period of a
start-up expenditure to 180 months;

(8) Section 11.08, relating to changes
for tangible property, provided that this
section does not apply to amounts paid or
incurred for repair and maintenance costs
that the taxpayer is changing from capi-
talizing to deducting and for which the
taxpayer has claimed a federal income tax
credit or elected to apply § 168(k)(4).
Section 11.08 is modified to provide that
this section also does not apply to
amounts paid or incurred for repair and
maintenance costs that the taxpayer is
changing from capitalizing to deducting
and for which the taxpayer has received a
payment for specified energy property in
lieu of tax credits under section 1603 of
the American Recovery and Reinvestment
Tax Act of 2009, Div. B of Pub. L. No.
111-5, 123 Stat. 115 (February 17, 2009),
as amended by section 707 of the Tax
Relief, Unemployment Insurance Reau-
thorization, and Job Creation Act of 2010,
Pub. L. No. 111-312, 124 Stat. 3296 (De-
cember 17, 2010);

(9) The following sections are modi-
fied to remove paragraph (3), certain eli-

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gibility rule temporarily inapplicable, be-
cause the paragraph is obsolete:

(a) Section 12.09, relating to a change
in the treatment of acquisition and holding
costs for real property acquired through
foreclosure;

(b) Section 12.10, relating to a change
for sales-based royalties; and

(c) Section 12.11, relating to a change
in the treatment of sales-based vendor
chargebacks under a simplified method;

(10) Section 12.14, relating to capitaliz-
ing interest with respect to the production of
designated property under §§ 1.263A-8
through 14, is modified to include changes
from an improper method of capitalizing
interest under §§ 1.263A-8 through 14 to
capitalizing interest in accordance with
§§ 1.263A-8 through 14. Section 12.14 also
is modified to require the statement attached
to the Form 3115 to include details regard-
ing the taxpayer's sub-methods of account-
ing for determining capitalizable interest in
accordance with §§ 1.263A-8 through 14;

(11) Section 20.01(1)(b)(ii), relating to
a change from an improper method of
inclusion of rental income or expense to
inclusion in accordance with the rent al-
location, is modified to clarify that this
section does not apply to rental agree-
ments that provide a specific allocation of
fixed rent as described in § 1.467-
1(c)(2)(ii)(A)(2) that allocate rent to peri-
ods other than when such rents are pay-
able;

(12) Section 21.05, relating to imper-
missible methods of identification and
valuation of inventory, is modified to clar-
ify that: (a) a taxpayer can make a change
under this section if the taxpayer is chang-
ing from an impermissible method of
identifying or valuing inventories under
§ 471, and/or an impermissible method
described in §§ 1.471-2(f)(1) through (5);
(b) a taxpayer cannot make a change un-
der this section to allocate costs to inven-
tory under § 471 nor under § 263A; and
(c) a taxpayer cannot make a change un-

der this section if the taxpayer is currently
deducting inventories;

(13) Section 21.11, relating to permis-
sible methods of identification and valua-
tion of inventory, is modified to clarify
that a taxpayer cannot make a change un-
der this section to allocate costs to inven-
tory under § 471 nor under § 263A;

(14) Section 23.01, relating to certain
taxpayers that have elected to use the
mark-to-market method of accounting un-
der § 475(e) or (f), is modified to provide
that the eligibility rule in section
5.01(1)(d) of Rev. Proc. 2015-13 does not
apply to this change. The waiver of the
eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13 continues to apply to
this change;

(15) Section 23.02, relating to taxpay-
ers changing its method of accounting
from the mark-to-market method of ac-
counting described in § 475 to a realiza-
tion method of accounting, is modified to
clarify that a change under section 23.02
is not limited to a change required by
§ 475 (for example, section 23.02 applies
to a change from a mark-to-market
method of accounting for notional princi-
pal contracts providing for nonperiodic
payments even if the taxpayer is not sub-
ject to § 475);

(16) Section 25.03, relating to change
in qualification as life/nonlife insurance
company, is modified to clarify that this
change applies to an insurance company
that changes from being treated as a life
insurance company under part I of sub-
chapter L to being treated as a non-life
insurance company under part II of sub-
chapter L, or vice versa;

(17) Section 30.01, relating to the re-
vocation of the § 1278(b) election, is mod-
ified to provide that, for purposes of sec-
tion 30.01, a taxpayer also is treated as
having made a deemed § 1278(b) election
for a taxable year if, for one or more
market discount bonds that were acquired
by the taxpayer during that taxable year,

the taxpayer includes in gross income
on the tax return for that taxable year and
on the tax return for the following taxable
year the market discount attributable to
each taxable year, other than as a result of
a disposition of the bond or a partial prin-
cipal payment on the bond; and

(18) The following sections are added
to the List of Automatic Changes in this
revenue procedure to provide additional
changes in method of accounting to be
made under the automatic change proce-
dures:

(a) Section 10.02, relating to organiza-
tional expenditures under § 248;

(b) Section 10.03, relating to organiza-
tion fees under § 709; and

(c) Section 21.18, relating to changes
from currently deducting inventory to a
permissible method of identifying and
valuing inventories.

## DRAFTING INFORMATION

The principal author of this revenue
procedure is Charles Magee of the Office
of Associate Chief Counsel (Income Tax
and Accounting). For further information
regarding this revenue procedure, contact
Mr. Magee at (202) 317-7005 (not a toll-
free number).

For further information regarding a
specific change in method of accounting
in this revenue procedure, contact the in-
dividual listed in the "Contact Person(s)"
section located at the end of each section
of the revenue procedure (calls are not
toll-free) or see the CONTACT LIST at
the end of this revenue procedure. The
contact person is with one of the follow-
ing Offices of Associate Chief Counsel:
Corporate (CORP), Financial Institutions
and Products (FI&P), Income Tax & Ac-
counting (IT&A), International (INTL),
Passthroughs and Special Industries
(P&SI), or Tax Exempt and Government
Entities (TEGE).

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## LIST OF AUTOMATIC CHANGES CONTACT LIST

Section Number

Designated Automatic Accounting Change Number

Contact Name

Telephone Number

Office

1.01

91

William E. Blanchard

(202) 317-3900

FI&amp;P

2.01

1

William Ruane

(202) 317-4718

IT&amp;A

3.01

2

Peter Ford

(202) 317-7011

IT&amp;A

3.02

3

Peter Ford

(202) 317-7011

IT&amp;A

3.03

4

Peter Ford

(202) 317-7011

IT&amp;A

3.04

86

Peter Ford

(202) 317-7011

IT&amp;A

3.05

See § 11.08

See § 11.08

See § 11.08

IT&amp;A

3.06

See § 11.08

See § 11.08

See § 11.08

IT&amp;A

3.07

158

Lewis Saideman

(202) 317-5100

IT&amp;A

3.08

159

Lewis Saideman

(202) 317-5100

IT&amp;A

3.09

160

Lewis Saideman

(202) 317-5100

IT&amp;A

3.10

182

Lewis Saideman

(202) 317-5100

IT&amp;A

3.11

208, 209

Merrill Feldstein

(202) 317-5100

IT&amp;A

4.01

5

Charles Gorham

(202) 317-7003

IT&amp;A

4.02

211

K. Scott Brown

(202) 317-6945

FI&amp;P

5.01

16

William E. Blanchard

(202) 317-3900

FI&amp;P

5.02

212

Joseph Vetting

(202) 317-4960

INTL

6.01

7

Charles Magee

(202) 317-7005

IT&amp;A

6.02

8

Charles Magee

(202) 317-7005

IT&amp;A

6.03

10

Edward Schwartz

(202) 317-7006

IT&amp;A

6.04

87

Elizabeth Binder

(202) 317-7005

IT&amp;A

6.05

88

Elizabeth Binder

(202) 317-7005

IT&amp;A

6.06

89

Bernard Harvey

(202) 317-7005

IT&amp;A

6.07

107

Charles Magee

(202) 317-7005

IT&amp;A

6.08

145

Elizabeth Binder

(202) 317-7005

IT&amp;A

6.09

157

Charles Magee

(202) 317-7005

IT&amp;A

6.10

198

Patrick Clinton

(202) 317-7005

IT&amp;A

6.11

199

Patrick Clinton

(202) 317-7005

IT&amp;A

6.12

200

Patrick Clinton

(202) 317-7005

IT&amp;A

6.13

205

Patrick Clinton

(202) 317-7005

IT&amp;A

6.14

206

Patrick Clinton

(202) 317-7005

IT&amp;A

6.15

207

Patrick Clinton

(202) 317-7005

IT&amp;A

6.16

Summary of changes related to dispositions of MACRS property

6.17

210

Charles Magee

(202) 317-7005

IT&amp;A

6.18

221

Elizabeth Binder

(202) 317-7005

IT&amp;A

7.01

17

Elizabeth Binder

(202) 317-7005

IT&amp;A

8.01

152

Jennifer Bernardini

(202) 317-6853

P&amp;SI

9.01

18

Charles Magee

(202) 317-7005

IT&amp;A

10.01

223

Elizabeth Binder

(202) 317-7005

IT&amp;A

10.02

228

Charles Gorham

(202) 317-7003

IT&amp;A

10.03

229

Meghan Howard

(202) 317-5055

P&amp;SI

11.01

19

Charles Gorham

(202) 317-7003

IT&amp;A

11.02

20

Charles Gorham

(202) 317-7003

IT&amp;A

11.03

21

Charles Gorham

(202) 317-7003

IT&amp;A

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Section Number

Designated Automatic Accounting Change Number

Contact Name

Telephone Number

Office

11.04

47

Charles Gorham

(202) 317-7003

IT&amp;A

11.05

78

Charles Gorham

(202) 317-7003

IT&amp;A

11.06

109

Charles Gorham

(202) 317-7003

IT&amp;A

11.07

121

Charles Gorham

(202) 317-7003

IT&amp;A

11.08

184-193

Lewis Saideman

(202) 317-5100

IT&amp;A

11.09

213

Charles Gorham

(202) 317-7003

IT&amp;A

11.10

222

Merrill Feldstein

(202) 317-5100

IT&amp;A

12.01

22

Natasha Mulleneaux

(202) 317-7007

IT&amp;A

12.02

23

Natasha Mulleneaux

(202) 317-7007

IT&amp;A

12.03

25

Natasha Mulleneaux

(202) 317-7007

IT&amp;A

12.04

77

Sean Dwyer

(202) 317-7005

IT&amp;A

12.05

92

Sean Dwyer

(202) 317-7005

IT&amp;A

12.06

150, 151

Natasha Mulleneaux

(202) 317-7007

IT&amp;A

12.07

181

Patrick Clinton

(202) 317-7005

IT&amp;A

12.08

194

Natasha Mulleneaux

(202) 317-7007

IT&amp;A

12.09

195

Sue-Jean Kim

(202) 317-7007

IT&amp;A

12.10

201

Sean Dwyer

(202) 317-7005

IT&amp;A

12.11

202

Sean Dwyer

(202) 317-7005

IT&amp;A

12.12

214

Sean Dwyer

(202) 317-7005

IT&amp;A

12.13

215

Sean Dwyer

(202) 317-7005

IT&amp;A

12.14

224

Steven Gee

(202) 317-7007

IT&amp;A

13.01

26

Steven Gee

(202) 317-7007

IT&amp;A

Joseph Vetting

(202) 317-4960

INTL

14.01

28

Thomas Scholz

(202) 317-5600

TEGE

14.02

29

John Ricotta

(202) 317-4102

EP

Joyce Kahn

(202) 317-4148

EP

15.01

122, 123

Evan Hewitt

(202) 317-7007

IT&amp;A

15.02

31

Timothy Azarchs

(202) 317-5100

IT&amp;A

15.03

32,33

Evan Hewitt

(202) 317-7007

IT&amp;A

15.04

34, 35

Sean Dwyer

(202) 317-7005

IT&amp;A

15.05

71

William E. Blanchard

(202) 317-3900

FI&amp;P

15.06

85

Bernard Harvey

(202) 317-7005

IT&amp;A

15.07

90

Rebecca L. Baxter

(202) 317-6995

FI&amp;P

15.08

108

K. Scott Brown

(202) 317-6945

FI&amp;P

15.09

124

Douglas Kim

(202) 317-7003

IT&amp;A

15.10

125

Timothy Azarchs

(202) 317-5100

IT&amp;A

15.11

126

Evan Hewitt

(202) 317-7007

IT&amp;A

15.12

127

K. Scott Brown

(202) 317-6945

FI&amp;P

15.13

128

Maxine Woo-Garcia

(202) 317-7011

IT&amp;A

Charles Gorham

(202) 317-7003

IT&amp;A

15.14

129

David H. McDonnell

(202) 317-4137

P&amp;SI

15.15

148

Charles W. Culmer

(202) 317-6945

FI&amp;P

15.16

226

Barbara Campbell

(202) 317-4137

P&amp;SI

15.17

227

Jason Kurth

(202) 317-6842

FI&amp;P

16.01

36

K. Scott Brown

(202) 317-6945

FI&amp;P

16.02

37

Daniel Cassano

(202) 317-7011

IT&amp;A

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Section Number

Designated Automatic Accounting Change Number

Contact Name

Telephone Number

Office

16.03

38

Helen Rogers

(202) 317-7011

IT&amp;A

16.04

39

Bill Ruane

(202) 317-4718

IT&amp;A

16.05

80,81

Kate Sleeth

(202) 317-7053

FI&amp;P

16.06

82

Kate Sleeth

(202) 317-7053

FI&amp;P

16.07

83, 84, 216

Peter Ford

(202) 317-7011

IT&amp;A

16.08

94

Kate Sleeth

(202) 317-7053

FI&amp;P

16.09

130, 217

Peter Cohn

(202) 317-7011

IT&amp;A

16.10

153

Charles Gorham

(202) 317-7003

IT&amp;A

17.01

131

William E. Blanchard

(202) 317-3900

FI&amp;P

18.01

132

Patrick Clinton

(202) 317-7005

IT&amp;A

19.01

42, 133, 134

Peter Ford

(202) 317-7011

IT&amp;A

19.02

43

Kari Fisher

(202) 317-5100

IT&amp;A

19.03

44

Kari Fisher

(202) 317-5100

IT&amp;A

19.04

45,113

Mon Lam

(202) 317-5100

IT&amp;A

19.05

46

Mon Lam

(202) 317-5100

IT&amp;A

19.06

106

Charles Gorham

(202) 317-7003

IT&amp;A

19.07

135

Mon Lam

(202) 317-5100

IT&amp;A

19.08

149

Daniel Cassano

(202) 317-7011

IT&amp;A

19.09

154

Charles Gorham

(202) 317-7003

IT&amp;A

19.10

156

Charles Gorham

(202) 317-7003

IT&amp;A

19.11

161

Charles Gorham

(202) 317-7011

IT&amp;A

19.12

220

David Christensen

(202) 317-7011

IT&amp;A

20.01

136

William Ruane

(202) 317-4718

IT&amp;A

21.01

48

Steven Gee

(202) 317-7007

IT&amp;A

21.02

49

Steven Gee

(202) 317-7007

IT&amp;A

21.03

50, 51

Natasha Mulleneaux

(202) 317-7007

IT&amp;A

21.04

53

Steven Gee

(202) 317-7007

IT&amp;A

21.05

54

Natasha Mulleneaux

(202) 317-7007

IT&amp;A

21.06

55

Andrew Braden

(202) 317-7007

IT&amp;A

21.07

63

Andrew Braden

(202) 317-7007

IT&amp;A

21.08

96

Andrew Braden

(202) 317-7007

IT&amp;A

21.09

110

Charles Gorham

(202) 317-7003

IT&amp;A

21.10

111

Steven Gee

(202) 317-7007

IT&amp;A

21.11

137

Steven Gee

(202) 317-7007

IT&amp;A

21.12

138

Andrew Braden

(202) 317-7007

IT&amp;A

21.13

139

Andrew Braden

(202) 317-7007

IT&amp;A

21.14

114

Andrew Braden

(202) 317-7007

IT&amp;A

21.15

203

Sean Dwyer

(202) 317-7005

IT&amp;A

21.16

204

Natasha M. Mulleneaux

(202) 317-7007

IT&amp;A

21.17

225

Natasha M. Mulleneaux

(202) 317-7007

IT&amp;A

21.18

230

Natasha M. Mulleneaux

(202) 317-7007

IT&amp;A

22.01

56

Andrew Braden

(202) 317-7007

IT&amp;A

22.02

57

Andrew Braden

(202) 317-7007

IT&amp;A

22.03

58

Andrew Braden

(202) 317-7007

IT&amp;A

22.04

59

Andrew Braden

(202) 317-7007

IT&amp;A

22.05

60

Andrew Braden

(202) 317-7007

IT&amp;A

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Section Number

Designated Automatic Accounting Change Number

Contact Name

Telephone Number

Office

22.06

61

Andrew Braden

(202) 317-7007

IT&amp;A

22.07

62

Andrew Braden

(202) 317-7007

IT&amp;A

22.08

112

Andrew Braden

(202) 317-7007

IT&amp;A

22.09

140

Andrew Braden

(202) 317-7007

IT&amp;A

22.10

141

Andrew Braden

(202) 317-7007

IT&amp;A

23.01

64

Eric E. Boody

(202) 317-6945

FI&amp;P

23.02

218

Eric E. Boody

(202) 317-6945

FI&amp;P

24.01

66

K. Scott Brown

(202) 317-6945

FI&amp;P

Laura Fields

(202) 317-6850

P&amp;SI

Adrienne Mikolashek

(202) 317-6850

P&amp;SI

25.01

67

Rebecca L. Baxter

(202) 317-6995

FI&amp;P

25.02

155

Rebecca L. Baxter

(202) 317-6995

FI&amp;P

25.03

219

Rebecca L. Baxter

(202) 317-6995

FI&amp;P

26.01

68

Rebecca L. Baxter

(202) 317-6995

FI&amp;P

27.01

79

John W. Rogers, III

(202) 317-6895

FI&amp;P

28.01

70

Peter Merkel

(202) 317-4919

INTL

29.01

72

William E. Blanchard

(202) 317-3900

FI&amp;P

29.02

183

Charles W. Culmer

(202) 317-6945

FI&amp;P

30.01

73

William E. Blanchard

(202) 317-3900

FI&amp;P

31.01

74

William E. Blanchard

(202) 317-3900

FI&amp;P

31.02

75

William E. Blanchard

(202) 317-3900

FI&amp;P

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## Definition of Terms

Revenue rulings and revenue procedures
(hereinafter referred to as "rulings") that
have an effect on previous rulings use the
following defined terms to describe the
effect:

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).

Clarified is used in those instances
where the language in a prior ruling is
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.

Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.

Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A

and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).

Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future 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.

Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.

Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a 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
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the 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.

Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.

Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
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.

F.R .- Federal Register.

FUTA-Federal Unemployment Tax Act.

FX-Foreign corporation.

G.C.M .- Chief Counsel's Memorandum.

GE-Grantee.

GP-General Partner.

TFR-Transferor.

CI-City.

GR-Grantor.

T.I.R .- Technical Information Release.

TP-Taxpayer.

Ct.D .- Court Decision.

I.R.B .- Internal Revenue Bulletin.

TR-Trust.

CY-County.

LE-Lessee.

TT-Trustee.

D-Decedent.

LP-Limited Partner.

U.S.C .- United States Code.

DC-Dummy Corporation.

LR-Lessor.

X-Corporation.

DE-Donee.

Del. Order-Delegation Order.

Nonacq .- Nonacquiescence.

O Organization.

DR-Donor.

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.

BK-Bank.

B.T.A .- Board of Tax Appeals.

T.C .- Tax Court.

C-Individual.

T.D .- Treasury Decision.

C.B .- Cumulative Bulletin.

TFE-Transferee.

CFR-Code of Federal Regulations.

COOP-Cooperative.

IC-Insurance Company.

M-Minor.

Y-Corporation.

Z-Corporation.

DISC-Domestic International Sales Corporation.

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.

T-Target Corporation.

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Numerical Finding List1

Revenue Procedures:

Bulletin 2017-1 through 2017-18

2017-1, 2017-1 I.R.B. 1 2017-2, 2017-1 I.R.B. 106

Action on Decision:

2017-3, 2017-1 I.R.B. 130

2017-4, 2017-1 I.R.B. 146

2017-1, 2017-7 I.R.B. 868

2017-5, 2017-1 I.R.B. 230

2017-2, 2017-15 I.R.B. 1072

2017-7, 2017-1 I.R.B. 269

2017-3, 2017-15 I.R.B. 1072

2017-12, 2017-3 I.R.B. 424

2017-4, 2017-15 I.R.B. 1073

2017-13, 2017-6 I.R.B. 787

2017-14, 2017-3 I.R.B. 426

Announcements:

2017-15, 2017-3 I.R.B. 437

2017-16, 2017-3 I.R.B. 501

2017-01, 2017-08 I.R.B. 941

2017-18, 2017-5 I.R.B. 743

2017-02, 2017-10 I.R.B. 1007

2017-19, 2017-7 I.R.B. 913

2017-03, 2017-15 I.R.B. 1077

2017-21, 2017-6 I.R.B. 791

2017-04, 2017-16 I.R.B. 1106

2017-22, 2017-6 I.R.B. 863

2017-23, 2017-7 I.R.B. 915

Notices:

2017-24, 2017-7 I.R.B. 916

2017-1, 2017-2 I.R.B. 367

2017-25, 2017-14 I.R.B. 1039

2017-2, 2017-4 I.R.B. 539

2017-26, 2017-13 I.R.B. 1036

2017-3, 2017-2 I.R.B. 368

2017-27, 2017-14 I.R.B. 1042

2017-4, 2017-4 I.R.B. 541

2017-28, 2017-14 I.R.B. 1061

2017-5, 2017-6 I.R.B. 779

2017-29, 2017-14 I.R.B. 1065

2017-6, 2017-3 I.R.B. 422

2017-30, 2017-18 I.R.B. 1131

2017-7, 2017-3 I.R.B. 423

2017-31, 2017-16 I.R.B. 1104

2017-8, 2017-3 I.R.B. 423

2017-32, 2017-17 I.R.B. 1109

2017-9, 2017-4 I.R.B. 542

2017-10, 2017-4 I.R.B. 544

Revenue Rulings:

2017-12, 2017-5 I.R.B. 742

2017-1, 2017-3 I.R.B. 377

2017-13, 2017-6 I.R.B. 780

2017-2, 2017-2 I.R.B. 364

2017-14, 2017-6 I.R.B. 783

2017-3, 2017-4 I.R.B. 522

2017-15, 2017-6 I.R.B. 783

2017-4, 2017-6 I.R.B. 776

2017-16, 2017-7 I.R.B. 913

2017-5, 2017-9 I.R.B. 1000

2017-17, 2017-15 I.R.B. 1074

2017-6, 2017-12 I.R.B. 1011

2017-18, 2017-9 I.R.B. 997

2017-7, 2017-10 I.R.B. 1009

2017-19, 2017-9 I.R.B. 1000

2017-8, 2017-14 I.R.B. 1037

2017-20, 2017-11 I.R.B. 1010

2017-10, 2017-17 I.R.B. 1108

2017-21, 2017-13 I.R.B. 1026

2017-22, 2017-13 I.R.B. 1033

Treasury Decisions:

2017-23, 2017-16 I.R.B. 1100

2017-24, 2017-17 I.R.B. 1127

9794, 2017-2 I.R.B. 273

2017-25, 2017-17 I.R.B. 1127

9795, 2017-2 I.R.B. 326

2017-26, 2017-17 I.R.B. 1129

9796, 2017-3 I.R.B. 380

9801, 2017-2 I.R.B. 355

Proposed Regulations:

9802, 2017-2 I.R.B. 361

9803, 2017-3 I.R.B. 384

REG-137604-07, 2017-7 I.R.B. 923

9804, 2017-3 I.R.B. 406

REG-128276-12, 2017-2 I.R.B. 369

9806, 2017-4 I.R.B. 524

REG-103477-14, 2017-5 I.R.B. 746

9807, 2017-5 I.R.B. 573

REG-112324-15, 2017-4 I.R.B. 547

9808, 2017-5 I.R.B. 580

REG-127203-15, 2017-7 I.R.B. 918

9809, 2017-5 I.R.B. 664

REG-131643-15, 2017-6 I.R.B. 865

9810, 2017-6 I.R.B. 775

REG-134438-15, 2017-2 I.R.B. 373

9811, 2017-7 I.R.B. 869

REG-112800-16, 2017-4 I.R.B. 569

9814, 2017-7 I.R.B. 878

REG-123829-16, 2017-5 I.R.B. 764

9815, 2017-9 I.R.B. 944

REG-123841-16, 2017-5 I.R.B. 766

9817, 2017-9 I.R.B. 968

REG-133353-16, 2017-2 I.R.B. 372

REG-134247-16, 2017-5 I.R.B. 744

REG-135122-16, 2017-9 I.R.B. 1005

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016-27 through 2016-52 is in Internal Revenue Bulletin
2016-52, dated December 26, 2016.

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### Finding List of Current Actions on Previously Published Items1

Bulletin 2017-1 through 2017-18

Notices:

2002-1
Amplified by
Notice 2017-1, 2017-2 I.R.B. 367

2010-46
Obsoleted by
Notice 2017-1, 2017-2 I.R.B. 367

2016-29
Modified by
Notice 2017-6, 2017-3 I.R.B. 422

#### Revenue Procedures:

2013-22
Clarified by
Rev. Proc. 2017-18, 2017-05 I.R.B. 743

2015-57
Modified by
Rev. Proc. 2017-24, 2017-07 I.R.B. 916

#### Treasury Decisions:

2010-46
Obsoleted by
T.D. 9815 2017-09 I.R.B. 944

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# Internal Revenue Service Washington, DC 20224

Official Business
Penalty for Private Use, $300

# INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available at www.irs.gov/irb/.

# We Welcome Comments About the Internal Revenue Bulletin

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
(www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.
NW, IR-6230 Washington, DC 20224.