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Instructions for Form 3115
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Instructions for Form 3115
Department of the Treasury
Internal Revenue Service
(Rev. December 2009)
Application for Change in Accounting Method
For general rules on changing an accounting method under:
Section references are to the Internal Revenue Code unless
otherwise noted.
All references to Rev. Proc. 97-27 are to Rev. Proc. 97-27,
1997-1 C.B. 680 (as modified and amplified by Rev. Proc.
2002-19, 2002-1 C.B. 696, as amplified and clarified by Rev.
Proc. 2002-54, 2002-2 C.B. 432), as modified by Rev. Proc.
2007-67, 2007-48 I.R.B. 1072), and as clarified and modified by
Rev. Proc. 2009-39, 2009-38 I.R.B. 371, or its successor.
All references to Rev. Proc. 2008-52 are to Rev. Proc.
2008-52, 2008-36 I.R.B. 587 as amplified, clarified and modified
by Rev. Proc. 2009-39, 2009-38 I.R.B. 371, or its successor.
All references to Rev. Proc. 2010-1 are to Rev. Proc.
2010-1, 2010-1 I.R.B. 1, or its successor.
General Instructions
Automatic change
See Rev. Proc. 2008-52, as amplified,
request procedures . . . clarified and modified by Rev. Proc.
2009-39.
Advance consent
See Rev. Proc. 97-27, as amplified,
request procedures . . . clarified and modified by Rev. Proc.
2002-19, Rev. Proc. 2002-54, Rev. Proc.
2007-67, and Rev. Proc. 2009-39.
For more information, see Rev. Proc. 2010-1, particularly section 9.
When filing Form 3115, you must determine if the IRS
has published any new revenue procedure, revenue
CAUTION ruling, notice, regulation, or other published guidance
relating to the specific method the applicant is requesting to
change. This guidance is published in the Internal Revenue
Bulletin. For the latest information, visit www.irs.gov.
!
Who Must File
Purpose of Form
File Form 3115 to request a change in either an overall method
of accounting or the accounting treatment of any item.
Two procedures exist under which an applicant may request
a change in method of accounting.
Automatic change request procedures. Unless otherwise
provided in published guidance, you must file under the
automatic change request procedures if (a) the change in
method of accounting is included in those procedures for the
requested year of change, and (b) you are within the scope of
those procedures for the requested year of change. See
Automatic Change Request Scope Limitations on page 4. A
Form 3115 filed under these procedures may be reviewed by
the IRS and you will be notified if information in addition to that
requested on Form 3115 is required or if your request is denied.
No user fee is required. An applicant that timely files and
complies with an automatic change request procedure is
granted consent to change its accounting method, subject to
review by the IRS National Office and operating division
director. See the instructions for Part I on page 4 and the List of
Automatic Accounting Method Changes beginning on page 9.
Ordinarily, file a separate Form 3115 for each change in
method of accounting. However, in some cases you are
required or permitted to file a single Form 3115 for particular
changes in method of accounting. Further, in some cases you
are required or permitted to file a statement in lieu of a Form
3115 for particular changes in method of accounting. See
section 6.02(1)(a) and (b) of Rev. Proc. 2008-52, as modified by
Rev. Proc. 2009-39 for more information.
Advance consent request procedures. If you are not within
the scope of any automatic change request procedures for the
requested year of change or the accounting method change
you are requesting is not included in those procedures for the
requested year of change, you may be able to file under the
advance consent request procedures. See Advance Consent
Request Scope Limitations on page 6. If the requested change
is approved, the filer will receive a letter ruling on the requested
change. File a separate Form 3115 for each unrelated item or
submethod. A user fee is required. See the instructions for Part
III on page 6 for more information.
The entity or person required to file Form 3115, whether on its
own behalf or on behalf of another entity, is the filer. The entity
or person on whose behalf the change in method of accounting
is being requested is the applicant. For example, the common
parent corporation of a consolidated group is the filer when
requesting a change in method of accounting for another
member of that consolidated group, and the other member on
whose behalf the Form 3115 is filed is the applicant. For
information on the difference between a filer and an applicant,
see Name(s) and Signature(s) on page 2.
Generally, a Form 3115 must be filed by or on behalf of each
applicant seeking consent to change a method of accounting.
An applicant is a taxpayer, a controlled foreign corporation
(CFC) or 10/50 corporation not engaged in a U.S. trade or
business, or a separate and distinct trade or business of a
taxpayer (for purposes of Regulations section 1.446-1(d)),
including a qualified subchapter S subsidiary (QSub) or a
single-member limited liability company (single-member LLC),
whose method of accounting is being changed.
For a consolidated group of corporations, the common
parent corporation must file Form 3115 for a change in
accounting method for itself or any member of the consolidated
group.
For a CFC or 10/50 corporation without a U.S. trade or
business, Form 3115 must be filed by the designated
(controlling domestic) shareholder who retains the jointly
executed consent described in Regulations section
1.964-1(c)(3)(ii). If the controlling domestic shareholder is a
member of a consolidated group, the common parent
corporation must file Form 3115 for the controlling domestic
shareholder on behalf of the foreign corporation. The controlling
domestic shareholder(s) (or its common parent) must attach a
copy of the Form 3115 to its income tax return for its tax year
with or within which the CFC’s or 10/50 corporation’s year of
change tax year ends.
Generally, you must file a separate Form 3115 for each
applicant that is part of a related group of corporations or that is
a separate and distinct trade or business of a taxpayer,
including a QSub or single-member LLC. However, you may file
a single Form 3115 for multiple applicants in the following
situations.
• A taxpayer requesting an identical change in method of
accounting for two or more separate and distinct trades or
Cat. No. 63215H
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businesses (for purposes of Regulations section 1.446-1(d)) of
that taxpayer, including a QSub or single-member LLC.
• A common parent of a consolidated group requesting an
identical change in method of accounting on behalf of two or
more members of the consolidated group.
• A common parent of a consolidated group requesting an
identical change in method of accounting on behalf of two or
more CFCs that do not engage in a trade or business within the
United States where all controlling domestic shareholders of the
CFCs are members of the consolidated group.
• A taxpayer requesting an identical change in method of
accounting on behalf of two or more CFCs that do not engage
in a trade or business within the United States for which the
taxpayer is the sole controlling domestic shareholder of the
CFCs.
For information on what is an identical change in method of
accounting, see section 15.07(4) of Rev. Proc. 2010-1.
File Form 3115 at the applicable IRS address listed below.
For applicants (other than exempt organizations)
filing . . .
An advance consent
request
The National Office copy of an
automatic change request
Delivery Internal Revenue Service
by mail Attn: CC:PA:LPD:DRU
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
Internal Revenue Service
Automatic Rulings Branch
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
Delivery
by
private
delivery
service
Internal Revenue Service
Automatic Rulings Branch
Room 5336
1111 Constitution Ave., NW
Washington, DC 20224
Internal Revenue Service
Attn: CC:PA:LPD:DRU
Room 5336
1111 Constitution Ave., NW
Washington, DC 20224
When and Where To File
For exempt organizations filing an advance consent request or the
National Office copy of an automatic change request
Automatic change requests. You must file a Form 3115
under the automatic change request procedures in duplicate as
follows.
• Attach the original to the filer’s timely filed (including
extensions) federal income tax return for the year of change.
• Attach an original filed on behalf of a CFC or 10/50
corporation to the filer’s timely filed federal income tax return for
the tax year of the filer with or within which the CFC’s or 10/50
corporation’s year of change tax year ends.
• File a copy of the Form 3115 with the IRS National Office
(see below) no earlier than the first day of the year of change
and no later than when the original is filed with the federal
income tax return for the year of change (or if applicable, for the
tax year in which the CFC’s or 10/50 corporation’s year of
change tax year ends).
In specified circumstances you must send an additional
copy of the Form 3115 to another IRS address. See, for
example, sections 6.02(11) of Rev. Proc. 2008-52 and section
3.06 of the Appendix of Rev. Proc. 2008-52, as modified by
Rev. Proc. 2009-39. See also Late Application below and, if the
applicant is under examination for purposes of Rev. Proc.
2008-52, as modified by Rev. Proc. 2009-39, the instructions for
lines 4d and 4e on page 5.
Advance consent requests. You must file Form 3115 under
the advance consent request procedures during the tax year for
which the change is requested. If the tax year is a short period,
file Form 3115 by the last day of the short tax year. File the
Form 3115 with the IRS National Office (see below). File Form
3115 as early as possible during the year of change to provide
adequate time for the IRS to respond prior to the due date of
the filer’s return for the year of change (or if applicable, for the
tax year of the filer in which the CFC’s or 10/50 corporation’s
year of change tax year ends). See Late Application below and,
if the applicant is under examination for purposes of Rev. Proc.
97-27, as modified by Rev. Proc. 2009-39, the instructions for
Part II, lines 4d and 4e on page 5.
By mail
By private delivery service
Internal Revenue Service
Tax Exempt & Government Entities
P.O. Box 2508
Cincinnati, OH 45201
Internal Revenue Service
Tax Exempt & Government Entities
550 Main Street, Room 4024
Cincinnati, OH 45202
The IRS normally sends an acknowledgment of receipt
within 60 days after receiving a Form 3115 filed under the
advance consent request procedures of Rev. Proc. 97-27. If the
filer does not receive an acknowledgment of receipt for an
advance request within 60 days, the filer can inquire to:
Internal Revenue Service, Control Clerk, CC:IT&A, Room 4516,
1111 Constitution Ave., NW, Washington, DC 20224.
Note: The IRS does not send acknowledgments of receipt for
automatic change requests.
Late Application
In general, a taxpayer that fails to timely file a Form 3115 will
not be granted an extension of time to file except in unusual
and compelling circumstances. See Regulations section
301.9100-3 for the standards that must be met. For information
on the period of limitations, see section 5.03(2) of Rev. Proc.
2010-1.
However, a limited 6-month extension of time to file Form
3115 is sometimes available for automatic change requests.
For details, see section 6.02(3)(b) of Rev. Proc. 2008-52 and
Regulations section 301.9100-2.
A taxpayer submitting a ruling request for an extension of
time to file Form 3115 must pay a user fee for its extension
request and, in the case of an advance consent request, also a
separate user fee for its accounting method change request.
For the schedule of user fees, see (A)(3)(b) and (A)(5)(d) in
Appendix A of Rev. Proc. 2010-1.
Specific Instructions
Name(s) and Signature(s)
Enter the name of the filer on the first line of page 1 of Form
3115. For an advance consent request, the Form 3115 and any
attached statements required to be signed must be signed and
dated by, or on behalf of, the filer. For an automatic change
request, the filer must sign and date the copy of the Form 3115
that is sent to the IRS National Office and any additional copy
that is not attached to an income tax return. The Form 3115
attached to the income tax return (including any additional
statements) does not need to be signed. The name and
signature requirements are discussed below.
In general, the filer of the Form 3115 is the applicant.
However, for certain corporations discussed in the following
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paragraphs, Form 3115 is filed on behalf of the applicant. If
such an exception applies, enter the filer’s name and
identification number on the first line of Form 3115 and enter
the applicant’s name and identification number on the fourth
line. If Form 3115 is filed for multiple applicants in a
consolidated group of corporations, multiple CFCs, or multiple
separate and distinct trades or businesses of a taxpayer
(including QSubs, or single-member LLCs), attach a schedule
listing each applicant and its identification number (where
applicable). This schedule may be combined with the
information requested for Part III, line 23a (regarding the user
fee) and Part IV (section 481(a) adjustment). If multiple names
and signatures are required (for example, in the case of
CFCs — see instructions below), attach a schedule labeled
“SIGNATURE ATTACHMENT” to the Form 3115, signed under
penalties of perjury using the same language as in the
declaration on page 1 of Form 3115. Receivers, trustees, or
assignees must sign any Form 3115 they are required to file.
Individuals. If Form 3115 is filed for a husband and wife who
file a joint income tax return, enter the names of both spouses
on the first line and the signatures of both spouses on the
signature line.
Partnerships. Enter the name of the partnership on the first
line of Form 3115. In the signature section, enter the signature
of one of the general partners or limited liability company
members who has personal knowledge of the facts and who is
authorized to sign. Enter that person’s name and title below the
signature.
Corporations, personal service corporations, S
corporations, cooperatives, and insurance companies.
Enter the name of the filer on the first line of Form 3115. In the
signature section, enter the signature of the officer who has
personal knowledge of the facts and authority to bind the filer in
the matter. Enter that officer’s name and official title below the
signature.
Consolidated group of corporations. Enter the name of the
common parent corporation on the first line of Form 3115. Also
enter the name(s) of the applicant(s) on the fourth line if a
member of the consolidated group other than, or in addition to,
the parent corporation is requesting a change in method of
accounting. In the signature section, enter the signature of the
officer of the common parent corporation who has personal
knowledge of the facts and authority to bind the common parent
corporation in the matter, and that officer’s name and official
title below the signature.
CFC or 10/50 Corporation. For a CFC or 10/50 corporation
with a U.S. trade or business, follow the same rules as for other
corporations. For a CFC or 10/50 corporation that does not
have a U.S. trade or business, the Form 3115 filed on behalf of
its controlling domestic shareholder(s) (or common parent)
must be signed by an authorized officer of the designated
(controlling domestic) shareholder that retains the jointly
executed consent as provided for in Regulations section
1.964-1(c)(3)(ii). If there is more than one shareholder, the
statement described in Regulations section 1.964-1(c)(3)(ii)
must be attached to the application. Also, the controlling
domestic shareholder(s) must provide the written notice
required by Regulations section 1.964-1(c)(3)(iii). If the
designated (controlling domestic) shareholder is a member of a
consolidated group, then an authorized officer of the common
parent corporation must sign.
Estates or trusts. Enter the name of the estate or trust on the
first line of Form 3115. In the signature section, enter the
signature of the fiduciary, personal representative, executor,
administrator, etc., who has personal knowledge of the facts
and legal authority to bind the estate or trust in the matter, and
that person’s official title below the signature.
Exempt organizations. Enter the name of the organization on
the first line of Form 3115. In the signature section, enter the
signature of a principal officer or other person who has personal
knowledge of the facts and authority to bind the exempt
organization in the matter, and that person’s name and official
title below the signature.
Preparer (other than filer/applicant). If the individual
preparing the Form 3115 is not the filer or applicant, the
preparer also must sign. However, for an automatic change
request, the preparer need not sign the original Form 3115
attached to the income tax return.
Identification Number
Enter the filer’s taxpayer identification number on the first line of
Form 3115 as follows.
• Individuals enter their social security number (SSN) (or
individual taxpayer identification number (ITIN) for a resident or
nonresident alien). If the Form 3115 is for a husband and wife
who file a joint return, enter the identification numbers of both.
• All others, enter the employer identification number (EIN).
• For a consolidated group of corporations, enter the EIN of the
common parent corporation on the first line of Form 3115. Enter
the EIN of the applicant on the fourth line if a member of the
consolidated group other than, or in addition to, the parent
corporation is requesting the change in method of accounting.
• If the applicant is a foreign corporation that is not otherwise
required to have or obtain an EIN, enter “Not applicable” in the
space provided for the identifying number.
Principal Business Activity Code
If the filer is a business, enter the six-digit principal business
activity (PBA) code of the filer. The principal business activity of
the filer is the activity generating the largest percentage of its
total receipts. See the instructions for the filer’s income tax
return for the filer’s PBA code and definition of total receipts.
Note. An applicant requesting to change its accounting
method under designated automatic accounting method change
numbers 33 and/or 51 in the List of Automatic Accounting
Method Changes must also attach to Form 3115 a schedule to
the Form 3115 listing the detailed NAICS code associated with
the applicant’s principal business activity. See Rev. Proc.
2002-28, 2002-18 I.R.B. 815, for further guidance.
Address
Include the suite, room, or other unit number after the street
address. If the Post Office does not deliver mail to the street
address and the filer has a P.O. box, show the box number
instead of the street address.
Contact Person
The contact person must be an individual authorized to sign
Form 3115, or the filer’s authorized representative. If this
person is someone other than an individual authorized to sign
Form 3115, you must attach Form 2848, Power of Attorney and
Declaration of Representative.
Form 2848, Power of Attorney and Declaration
of Representative
An individual authorized to represent the filer before the IRS, to
receive a copy of the requested letter ruling, or to perform any
other act(s), must properly reflect the authorization on Form
2848. For further details for an authorized representative and a
power of attorney, see sections 9.03(8) and (9) of Rev. Proc.
2010-1.
A Form 2848 must be attached to Form 3115 in order for the
Service to discuss a Form 3115 with a taxpayer’s
representative, even if the taxpayer’s representative prepared
and/or signed the Form 3115.
Option to Receive Correspondence by Fax
A filer that wants to receive, or wants its authorized
representative to receive, correspondence regarding its Form
3115 (for example, additional information letters or the letter
ruling) by fax must attach to the Form 3115 a statement
requesting this service. The attachment must also list the
authorized name(s) and fax number(s) of the person(s) who are
to receive the fax. The listed person(s) must be either
authorized to sign Form 3115, or an authorized representative
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of the filer that is included on Form 2848. For further details on
the fax procedures, see section 9.04(3) of Rev. Proc. 2010-1.
shareholders is under examination for a taxable year(s) in
which it was a U.S. shareholder of the CFC or 10/50
corporation, except as provided in section 4.02(1) of Rev. Proc.
2008-52, as modified by Rev. Proc. 2009-39.
2. The applicant is (or was formerly) a member of a
consolidated group that is under examination for a tax year(s)
the applicant was a member of the group. For more information,
see section 4.02(2) of Rev. Proc. 2008-52.
3. The applicant is an entity treated as a partnership or S
corporation and the accounting method to be changed is an
issue under consideration in an examination with respect to a
partner, member, or shareholder of the applicant. For more
information, see section 4.02(3) of Rev. Proc. 2008-52.
4. The applicant engages in a transaction to which section
381(a) applies within the proposed tax year of change. For
more information, including exceptions to this limitation, see
section 4.02(4) of Rev. Proc. 2008-52, as modified by Rev.
Proc. 2009-39.
5. The applicant is in the final tax year of its trade or
business as described in sections 4.02(5) and 5.04(3)(c) of
Rev. Proc. 2008-52.
6. The applicant made or applied to make a change in
method of accounting for the same item (or for its overall
method) within the last 5 tax years, including the year of
change. For more information, see section 4.02(6) and 4.02(7)
of Rev. Proc. 2008-52.
Type of Accounting Method Change
Requested
Check the appropriate box described below indicating the type
of change being requested.
• Depreciation or amortization. Check this box for a change
in the (a) computation of depreciation or amortization (for
example, the depreciation method or recovery period), (b)
treatment of salvage proceeds or costs of removal, (c) method
of accounting for retirements of depreciable property, or (d)
treatment of depreciable property from a single asset account to
a multiple asset account (pooling), or vice versa.
• Financial products and/or financial activities of financial
institutions. Check this box for a change in the treatment of a
financial product (for example, accounting for debt instruments,
derivatives, mark-to-market accounting, etc.), or in the financial
activities of a financial institution (for example, a lending
institution, a regulated investment company, a real estate
investment trust, a real estate mortgage investment conduit,
etc.).
• Other. For advance consent requests, check this box if
neither of the above boxes applies to the requested change. In
the space provided, enter a short description of the change and
the most specific applicable Code section(s) for the requested
change (for example, change within section 263A costs;
deduction of warranty expenses, section 461; change to the
completed contract method for long-term contracts, section 460;
etc.). For automatic change requests, this informational
requirement is satisfied by properly completing Part I, line 1 of
Form 3115.
Automatic Change Request Scope Limitations
Line 1. Enter the designated automatic accounting method
change number on line 1(a). These numbers may be found in
the List of Automatic Accounting Method Changes beginning on
page 9, or in subsequently published guidance. In general,
enter a number for only one change. However, the numbers for
two or more changes may be entered on line 1(a) if specifically
permitted in applicable published guidance. See section
6.02(1)(b) of Rev. Proc. 2008-52, as clarified by Rev. Proc.
2009-39.
If the accounting method change is not included in the List of
Automatic Accounting Method Changes or assigned a number
in the published guidance providing the automatic accounting
method change, check the box for line 1(b) and identify the
revenue procedure or other published guidance under which
the accounting method change is being requested.
Line 2. Review the applicable accounting method change
section in the Appendix of Rev. Proc. 2008-52, or the
procedures in other published guidance, if applicable, to
determine whether the scope limitations of section 4.02 of Rev.
Proc. 2008-52, apply to the specific change in accounting
method requested. In general, the scope limitations of section
4.02 of Rev. Proc. 2008-52 apply to the requested change
unless the Appendix of Rev. Proc. 2008-52 or other applicable
published guidance specifically states that one or more scope
limitation(s) do not apply to the requested change.
If any of the scope limitations apply to the requested change
in method of accounting and apply to the applicant, automatic
consent is not available to the applicant for the requested
accounting method change. However, the applicant may be
eligible to request its change under the advance consent
request procedures. See Part III — Information For Advance
Consent Request on page 6 of these instructions to determine if
these procedures apply to the applicant.
An applicant is not eligible to use the automatic change request
procedures of Rev. Proc. 2008-52 (either in the Appendix or
included by reference in other published guidance) if any of the
following six scope limitations (section 4.02 of Rev. Proc.
2008-52) apply to the applicant at the time the copy of the Form
3115 would be filed with the IRS National Office, unless the
applicable section of the Appendix of Rev. Proc. 2008-52 or
other published guidance states that the particular scope
limitation does not apply to the applicant’s requested change.
1. The applicant is under examination, except as provided in
section 4.02(1) of Rev. Proc. 2008-52, as modified by Rev.
Proc. 2009-39. If the applicant is a CFC or 10/50 corporation
that is not required to file a federal income tax return, the
applicant is under examination if any of its controlling domestic
Line 3. Ordinarily, the IRS will not consent to a request for a
change in method of accounting for the applicant’s final tax
year. If the applicant ceases to engage in the trade or business
to which desired change in accounting method relates or
terminates its existence in the year of change, the applicant is
not eligible to make the change under automatic change
request procedures unless the applicable section of the
APPENDIX of Rev. Proc. 2008-52 or other applicable published
guidance states that section 4.02(5) of Rev. Proc. 2008-52 does
not apply to the requested change in method of accounting. If
the change is requested under the advance consent
procedures, the IRS National Office will consider the reasons
!
You must follow the instructions below to correctly
complete Form 3115.
CAUTION
• Applicants requesting a change in method of accounting
using the automatic change request procedures must complete
Parts I, II, and IV.
• Applicants requesting a change in method of accounting
using the advance consent request procedures must complete
Parts II, III, and IV.
• All applicants must complete Schedules A, B, C, D, and E, as
applicable, for the requested change in method of accounting.
• If more room is needed to respond to any line, attach a
schedule providing the applicable information and label it with
the line number.
• Attachments submitted with Form 3115 must show the filer’s
name and identification number. Also, indicate that the
information is an attachment to Form 3115.
• Report amounts in U.S. dollars, translated, if necessary,
from functional currency with a statement of exchange rates
used.
Part I—Information For Automatic
Change Request
Part II—Information For All Requests
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for the change in the applicant’s final year (see Part III, line 21)
in determining whether to approve the requested change.
Note: For lines 4a, 4b, 4c, 5a, 5c, and 6, the reference to
“applicant” includes the applicant and any present or former
consolidated group in which the applicant was a member during
the applicable tax year(s). A reference to “applicable tax years”
includes any tax years for which the applicant’s present or
former consolidated group is under examination, before an
Appeals office, and/or before a federal court if the applicant was
a member of the group in those tax years. For each of the
applicable lines (4a, 4b, 4c, 5a, 5c, and/or 6), attach to Form
3115 a list of the beginning and ending dates of the tax year(s)
that the applicant (including its present and former consolidated
group) is under examination, before an Appeals office, and/or
before a federal court. If the method of accounting the applicant
is requesting to change is an issue either under consideration,
placed in suspense, or pending for any tax year under
examination, or if the method of accounting the applicant is
requesting to change is an issue under consideration by an
Appeals office or by a federal court, indicate the applicable tax
year(s).
Line 4a. The applicant is under examination if it has a federal
income tax return under examination (including while the
taxpayer has a refund or credit under review by the Joint
Committee on Taxation, and while the taxpayer participates in
the Compliance Assurance Process) on the date the Form 3115
is filed. For more information, see sections 3.07 and 4.02(2) of
Rev. Proc. 97-27, as modified by Rev. Proc. 2002-19, and Rev.
Proc. 2009-39; or sections 3.08 and 4.02(1) of Rev. Proc.
2008-52, as modified by Rev. Proc. 2009-39, as applicable.
Line 4b. The applicant’s method of accounting is an issue
under consideration if the examining agent has given the
applicant written notification specifically citing the treatment of
the item as an issue under consideration (or for a CFC or 10/50
corporation, if any controlling domestic shareholder receives
notification that the treatment of a distribution or deemed
distribution from the foreign corporation, or the amount of its
earnings and profits or foreign taxes deemed paid is an issue
under consideration). For further details, see section 3.08 of
Rev. Proc. 97-27, as modified by Rev. Proc. 2009-39, or section
3.09 of Rev. Proc. 2008-52 as modified by Rev. Proc. 2009-39,
as applicable. The applicant’s method of accounting is an issue
placed in suspense if the examining agent has given the
applicant written notification that the issue is placed in
suspense. Answering Line 4b satisfies the requirement in
section 6.01(2)(b) or 6.01(3)(b) of Rev. Proc. 97-27, as modified
by Rev. Proc. 2009-39, if applicable, to attach a separate
statement.
Line 4c. The applicant’s method of accounting is an issue
pending if the IRS has given the applicant (or in the case of a
CFC or 10/50 corporation, any controlling domestic
shareholders of a CFC or 10/50 corporation) written notification
indicating that an adjustment is being made or will be proposed
with respect to the applicant’s method of accounting for the tax
year(s) under examination. See section 6.03(6) of Rev. Proc.
2008-52, as modified by Rev. Proc. 2009-39. Attach a copy of
this written notification to Form 3115. For further details, see
section 6.01(5) of Rev. Proc. 97-27, as modified by Rev. Proc.
2002-19, and Rev. Proc. 2009-39, or section 6.03(6) of Rev.
Proc. 2008-52, as modified by Rev. Proc. 2009-39, as
applicable.
Line 4d. A filer may request to change a method of accounting
for an applicant that is under examination if the director
consents to the filing of Form 3115. (See section 1.01(3) of
Rev. Proc. 2010-1 for the definition of director.) The director will
consent to the filing of Form 3115 unless, in the opinion of the
director, the method of accounting to be changed would
ordinarily be included as an item of adjustment in the year(s) for
which the applicant is under examination. Submit a request for
the consent of the director to the examining agent. If the
director consents to the filing of Form 3115, attach the consent
to the Form 3115 filed with the IRS National Office. Also, submit
the director copy of Form 3115 to the examining agent at the
same time Form 3115 is filed with the IRS National Office. For
applicants filing under the automatic change request
procedures, attach to the Form 3115 submitted with the filer’s
income tax return a written statement certifying that (a) the
written consent was obtained from the director and (b) the
applicant will retain a copy of the consent for inspection by the
IRS. For further details, see section 6.01(4) of Rev. Proc. 97-27,
as modified by Rev. Proc. 2009-39, or section 6.03(4) of Rev.
Proc. 2008-52, as modified by Rev. Proc. 2009-39, as
applicable.
Line 4e. The following exceptions apply to the under
examination scope limitations:
• 90-day window period. A Form 3115 may be filed under
Rev. Proc. 97-27 or Rev. Proc. 2008-52 for an applicant under
examination during the first 90 days of any tax year if the
applicant has been under examination for at least 12
consecutive months as of the first day of the tax year. The
90-day window period does not apply if the method the
applicant is requesting to change is an issue under
consideration or placed in suspense by the examining agent.
For further details, including special rules for CFCs and 10/50
corporations, see section 6.01(2) of Rev. Proc. 97-27, as
modified by Rev. Proc. 2009-39, or section 6.03(2) of Rev.
Proc. 2008-52, as modified by Rev. Proc. 2009-39, as
applicable.
• 120-day window period. A Form 3115 may be filed under
Rev. Proc. 97-27 or Rev. Proc. 2008-52 for an applicant under
examination during the 120-day period following the date an
examination ends regardless of whether a subsequent
examination has commenced. For the definition of when an
examination ends, see section 3.07 of Rev. Proc. 97-27, as
modified by Rev. Proc. 2009-39, or section 3.08 of Rev. Proc.
2008-52, as modified by Rev. Proc. 2009-39, as applicable. The
120-day window period does not apply if the method the
applicant is requesting to change is an issue under
consideration or placed in suspense by the examining agent.
Enter the ending date of the examination that qualifies the
applicant to file under the 120-day window. For further details,
including special rules for CFCs and 10/50 corporations, see
section 6.01(3) of Rev. Proc. 97-27, as modified by Rev. Proc.
2009-39, or section 6.03(3) of Rev. Proc. 2008-52, as modified
by Rev. Proc. 2009-39, as applicable.
Line 5a. If the applicant has any federal income tax return
before an Appeals office and/or a Federal court, refer to
sections 6.02 and 6.03 of Rev. Proc. 97-27, as modified by Rev.
Proc. 2002-19, and Rev. Proc. 2009-39, or sections 6.04 and
6.05 of Rev. Proc. 2008-52, as modified by Rev. Proc. 2009-39,
as applicable.
Line 5c. Except as otherwise provided in IRS published
guidance, an applicant that is requesting to change a method of
accounting that is an issue under consideration by an Appeals
office and/or a Federal court does not receive audit protection
for the requested change. For further details, see sections 6.02
and 6.03 of Rev. Proc. 97-27, as modified by Rev. Proc.
2002-19, and Rev. Proc. 2009-39, or sections 6.04 and 6.05 of
Rev. Proc. 2008-52, as modified by Rev. Proc. 2009-39, as
applicable.
Line 6. The information requested on line 6 may be provided
in an attachment that includes the information requested on line
4f and/or line 5a, as applicable.
Line 8. A taxpayer does not receive audit protection under
certain circumstances described in sections 6.01(5), 6.02, 6.03,
or 9.02 of Rev. Proc. 97-27, as modified by Rev. Proc. 2002-19,
and Rev. Proc. 2009-39, or in sections 4.02(7)(b), 6.03(6), 6.04,
6.05, or 7.02 of Rev. Proc. 2008-52, as modified by Rev. Proc.
2009-39. If filing under the automatic change request
procedures, also review the applicable accounting method
change section in the Appendix of Rev. Proc. 2008-52, or the
procedures in other IRS published guidance, if applicable, to
determine if the applicable section of the APPENDIX of Rev.
Proc. 2008-52 or other available IRS published guidance states
that the applicant does not receive audit protection with the
requested change. If “Yes” is answered to the question on line
8, attach an explanation, including the applicable provision of
Rev. Proc. 97-27, as modified by Rev. Proc. 2002-19, and Rev.
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Proc. 2009-39, or Rev. Proc. 2008-52, as modified by Rev.
Proc. 2009-39, that prevents audit protection.
Line 9. For further details, see section 9.03(6)(a) of Rev. Proc.
2010-1, and either section 8.05 of Rev. Proc. 97-27 or sections
4.02(6) and 4.02(7) of Rev. Proc. 2008-52, as applicable. See
also section 5.02(2) of Rev. Proc. 2009-39.
Line 10. For further details, see section 9.03(6)(b) of Rev.
Proc. 2010-1.
Line 12. A special method of accounting for an item is a
method of accounting, other than the cash method, expressly
permitted by the Code, regulations, or guidance published in
the IRB that deviates from the rules of sections 451 and 461
(and the regulations thereunder) that are applicable to the
taxpayer’s overall method of accounting (proposed over all
method if being changed). For example, the installment method
of accounting under section 453 is a special method of
accounting. See section 14.01(3)(e) of the Appendix of Rev.
Proc. 2008-52 for additional examples of special methods.
Line 13. For each applicant, including each member of a
consolidated group and each eligible CFC filing a single Form
3115 requesting the identical accounting method change,
attach (i) a schedule describing its trade(s) or business(es) for
each separate and distinct trade or business, including any
QSub or single-member LLC, and (ii) the Principal Business
Activity code. For guidance on what is a separate and distinct
trade or business, see Regulations section 1.446-1(d). For each
trade or business, use the most specific Principal Business
Activity code listed in the instructions for the applicant’s federal
tax return (or the filer’s federal tax return, if applicable).
Line 14. Insurance companies must also state whether the
proposed method of accounting will be used for annual
statement accounting purposes.
Line 16. For details on requesting and scheduling a
conference, see sections 9.04(4) and 10 of Rev. Proc. 2010-1.
Line 19. For further details on what is to be included in the
attachment, see sections 9.03(1) (facts and other information),
9.03(4) (analysis of material facts), 7.01(8) and 9.03(1)
(statement of supporting authorities), 9.03(2) (statement of
contrary authorities), and 9.03(7) (statement identifying pending
legislation) of Rev. Proc. 2010-1.
Line 20. Attach true copies of all contracts, agreements, and
other documents directly related to the proposed change in
method of accounting. See section 9.03(3) of Rev. Proc.
2010-1.
Line 21. For further details on what is to be included in the
attachment, see section 7.01(1)(d) and 9.03(1) of Rev. Proc.
2010-1.
Line 23. Taxpayers filing under the advance consent request
procedures must pay a user fee for each Form 3115. See
section 15 and Appendix A of Rev. Proc. 2010-1.
Note: Taxpayers filing under an automatic change request
procedure do not pay a user fee.
A separate user fee must be paid for each member of an
affiliated group, for each CFC or 10/50 corporation, and for
each separate and distinct trade or business of a taxpayer
(including a QSub or a single-member LLC) to which the
requested advance consent accounting method change applies.
If the filer is not requesting an advance consent accounting
method change for itself, a user fee for the filer is not required.
However, the lesser user fee in section (A)(5)(b) of Appendix
A of Rev. Proc. 2010-1 applies in the following situations.
1. A taxpayer requesting an identical change in method of
accounting on a single Form 3115 for two or more separate and
distinct trades or businesses (for purposes of Regulations
section 1.446-1(d)), including QSubs or single-member LLCs.
2. A common parent corporation requesting the identical
change in method of accounting on a single Form 3115 on
behalf of two or more members of the consolidated group.
3. A common parent requesting the identical change in
method of accounting on a single Form 3115 on behalf of two or
more CFCs that do not engage in a trade or business within the
United States where all controlling U.S. shareholders of the
CFCs are members of the consolidated group.
4. A taxpayer requesting an identical change in method of
accounting on a single Form 3115 on behalf of two or more
CFCs that do not engage in a trade or business within the
United States for which the taxpayer is the sole controlling U.S.
shareholder of the CFCs.
Part III—Information For Advance
Consent Request
Advance Consent Request Scope Limitations
An applicant may not use the advance consent request
procedures if any of the following four scope limitations apply at
the time the Form 3115 would be filed with the IRS National
Office. See Rev. Proc. 97-27, as modified by Rev. Proc.
2002-19, and Rev. Proc. 2009-39.
1. The change in accounting method is required to be made
according to a published automatic change procedure, such as
Rev. Proc. 2008-52, as modified by Rev. Proc. 2009-39. For
more information, see section 4.02(1) of Rev. Proc. 97-27.
2. The applicant is under examination, except as provided in
section 4.02(2) of Rev. Proc. 97-27, as modified by Rev. Proc.
2002-19, and Rev. Proc. 2009-39.
3. The applicant is (or was formerly) a member of a
consolidated group that is under examination, or before an
Appeals office, or before a federal court for the tax year(s) the
applicant was a member of the group. For more information,
see section 4.02(5) of Rev. Proc. 97-27, as modified by Rev.
Proc. 2009-39.
4. In the case of a partnership or S corporation, the
accounting method the applicant is requesting to change is an
issue under consideration in an examination, or by an Appeals
office, or before a federal court with respect to a partner,
member, or shareholder of the applicant. For more information,
see section 4.02(6) of Rev. Proc. 97-27, as modified by Rev.
Proc. 2009-39.
See section 15.07(4) of Rev. Proc. 2010-1 for what qualifies
as an identical change in method of accounting.
If any of the situations listed above apply, pay the user fee in
section (A)(3)(b)(i) or section (A)(4) of Appendix A of Rev. Proc.
2010-1, as applicable, for the first member of the consolidated
group, CFC, or separate and distinct trade or business; and the
lesser user fee in section (A)(5)(b) of Appendix A for each
additional member of the group, CFC, or separate and distinct
trade or business. If a filer qualifies for a lesser user fee under
section (A)(5)(b) of Appendix A, the filer must submit the
additional information required by section 15.07 of Rev. Proc.
2010-1.
Filers whose gross income is less than the amounts
specified in section (A)(4) in Appendix A of Rev. Proc. 2010-1
qualify for a reduced user fee. For the definition of gross
income, see sections (B)(2), (3), and (4) in Appendix A of Rev.
Proc. 2010-1. If the filer qualifies for the reduced user fee under
this provision, the filer must attach to the Form 3115 the
representation required by section (B)(1) in Appendix A of Rev.
Proc. 2010-1.
Line 18. If the requested change is covered by an automatic
change request procedure, and that procedure applies to the
applicant for the requested year of change, the applicant is not
eligible to file an advance consent request. If the requested
change is covered by an automatic change request procedure,
attach an explanation describing why the applicant is eligible to
file a request under advance consent request procedures.
For information on user fees for tax-exempt organizations,
see Rev. Proc. 2010-8, 2010-1 I.R.B. 234 (or its successor).
The user fee (check or money order payable to the Internal
Revenue Service) must be attached to any Form 3115 filed
under Rev. Proc. 97-27 that is filed with the IRS National Office.
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of accounting, do not include any amounts attributable to a
special method of accounting (as described in section
14.12(2)(b) of the Appendix of Rev. Proc. 2008-52 — automatic
change number 127).
Part IV—Section 481(a) Adjustment
Line 24. Ordinarily, an adjustment under section 481(a) is
required for changes in method of accounting. However, for
certain changes in method of accounting, the taxpayer must
make the change on a cut-off basis. In those cases, there is no
section 481(a) adjustment.
If the accounting method change is an automatic accounting
method change in functional currency under section 985 (see
section 29.01 of the Appendix to Rev. Proc. 2008-52), the
adjustments required under Regulations section 1.985-5 must
be made on the last day of the taxable year ending before the
year of change. Any gain or loss that is not required to be
recognized under Regulations section 1.985-5 is not subject to
section 481. Attach a schedule showing the adjustment
required under Regulations section 1.985-5. The schedule
should include the amount of the adjustment required pursuant
to Regulations section 1.985-5, a summary of the computation
of such adjustment, and an explanation of any other
adjustments required by Regulations section 1.985-5.
Line 25. Attach a schedule showing the section 481(a)
adjustment for each change in method of accounting for each
applicant included in the Form 3115. If the applicant is a CFC or
10/50 corporation, and if its functional currency is not the U.S.
dollar, the section 481(a) adjustment must be stated in that
functional currency. This schedule may be combined with the
information requested on the fourth line on page 1 (list of
applicants and their identification numbers) and on line 23 (user
fee). Include a summary of the computation of the section
481(a) adjustment and an explanation of the methodology used
to determine it. If the section 481(a) adjustment is based on
more than one component of the accounting method being
changed, include a summary of the computation for each
component. The summary of the computation and explanation
of the section 481(a) adjustment does not need to be extensive
but should be sufficient to demonstrate that the section 481(a)
adjustment is being computed correctly.
Example. Under its present method, XYZ Corporation is
deducting certain costs that are required to be capitalized into
inventory under section 263A. XYZ Corporation is proposing to
change its method of accounting to properly capitalize such
costs. The computation of the section 481(a) adjustment with
respect to the change in method of accounting may be
demonstrated as follows:
Line 1b. Enter amounts received or reported as income in a
prior year that were not earned as of the beginning of the year
of change. For example, an advance payment received in a
prior year for goods that were not delivered by the beginning of
the year of change may be reported upon delivery if the
taxpayer qualifies under Regulations section 1.451-5. If any
amounts entered on line 1b are for advance payments,
complete Schedule B.
Line 1h. Enter the net amount, which is the net section 481(a)
adjustment, on line 1h. Also, enter the net section 481(a)
adjustment on page 3, Part IV, line 25.
The following example illustrates how an applicant calculates
the section 481(a) adjustment when changing to an accrual
method, a nonaccrual-experience method, and the recurring
item exception.
Example. ABC Corporation, a calendar year taxpayer using
the cash method of accounting, has the following items of
unreported income and expense on December 31, 2008.
Accrued income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$250,000
Uncollectible amounts based on
the nonaccrual-experience method . . . . . . . . . . . . .
50,000
Accrued amounts properly
deductible (economic performance has occurred) . . . .
75,000
Expenses eligible for recurring item
exception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,000
ABC Corporation changes to an overall accrual method, a
nonaccrual-experience method, and the recurring item
exception for calendar year 2009. The section 481(a)
adjustment is calculated as of January 1, 2009, as follows.
Accrued income . . . . . . . . . . . . . . . .
Less:
Uncollectible amount . . . . . . . . . . . .
50,000
Net income accrued but not received . .
$200,000
Less:
Accrued expenses . . . . . . . . . . . . . .
Beginning inventory for year of change under
proposed method . . . . . . . . . . . . . . . . . . . . . . .
Beginning inventory for year of change under
present method . . . . . . . . . . . . . . . . . . . . . . . .
Difference (positive section 481(a) adjustment) . . . . .
$250,000
Expenses deducted as recurring item
$120,000
100,000
+$ 20,000
75,000
5,000
Total expenses accrued but not paid . .
80,000
Section 481(a) adjustment . . . . . . . .
$120,000
Line 26. See section 7.03(1) of Rev. Proc. 97-27, as modified
by Rev. Proc. 2002-19, or section 5.04(3)(a) of Rev. Proc.
2008-52, as applicable.
Line 2. If an applicant is requesting to use the recurring item
exception (section 461(h)(3)), the section 481(a) adjustment
must include the amount of the additional deduction that results
from using the recurring item exception.
Schedule A—Change in Overall Method
of Accounting
Part II—Change to the Cash Method For
Advance Consent Request
Limits on cash method use. Except as provided below, C
corporations and partnerships with a C corporation as a partner
may not use the cash method of accounting. Tax shelters, also,
are precluded from using the cash method. For this purpose, a
trust subject to tax on unrelated business income under section
511(b) is treated as a C corporation with respect to its unrelated
trade or business activities.
The limit on the use of the cash method under section 448
does not apply to:
1. Farming businesses as defined in section 448(d)(1).
2. Qualified personal service corporations as defined in
section 448(d)(2).
3. C corporations and partnerships with a C corporation as
a partner if the corporation or partnership has gross receipts of
$5 million or less. See section 448(b)(3) and (c) to determine if
the applicant qualifies for this exception.
Part I—Change in Overall Method
All applicants filing to change their overall method of accounting
must complete Schedule A, Part I, including applicants filing
under designated automatic accounting method change
numbers 32, 33, 34, 122, 123, 126, 127, and 128 in the List of
Automatic Accounting Method Changes. See the list beginning
on page 9.
Lines 1a through 1g. Enter the amounts requested on lines
1a through 1g, even though the calculation of some amounts
may not have been required in determining taxable income due
to the applicant’s present method of accounting.
Note: Do not include amounts that are not attributable to the
change in method of accounting, such as amounts that correct
a math or posting error or errors in calculating tax liability. In
addition, for a bank changing to an overall cash/hybrid method
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For farming corporations and partnerships with a C
corporation as a partner, see section 447 for limits on the use of
the cash method.
Use of the cash method is also limited under Regulations
sections 1.471-1 and 1.446-1(c)(2)(i) if the applicant purchases,
produces, or sells merchandise that is an income-producing
factor in its business. However, for exceptions to this limitation,
see section 14.03 in the Appendix of Rev. Proc. 2008 – 52.
1. A home construction contract as defined in section
460(e)(6)(A), or
2. Any other construction contract entered into by the
applicant if, at the time the contract is entered into, it is
expected to be completed within 2 years and the applicant’s
average annual gross receipts determined under section
460(e)(2) for the 3-year period preceding the tax year the
contract was entered into did not exceed $10 million.
Schedule B—Change to the Deferral
Method for Advance Payments
Line 4b. Under the simplified cost-to-cost method, only certain
costs are used in determining both (a) costs allocated to the
contract and incurred before the close of the tax year and
(b) estimated contract costs. These costs are: (1) direct material
costs; (2) direct labor costs; and (3) allowable deductions for
depreciation, amortization, and cost recovery allowances on
equipment and facilities directly used to construct or produce
the subject matter of the long-term contract. See Regulations
section 1.460-5(c).
In general, advance payments must be included in gross
income in the tax year of receipt for federal income tax
purposes. However, an applicant may be entitled to defer the
inclusion in income of certain advance payments, as defined in
section 4.01 of Rev. Proc. 2004-34, 2004-1 C.B. 991, or in
Regulations section 1.451-5(a)(1).
Line 1. Rev. Proc. 2004-34 allows applicants using an accrual
method, in certain circumstances, to defer the inclusion in
income of advance payments to the next tax year. Applicants
requesting to change to the Deferral Method for allocable
payments described 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,
must file under the advance consent procedures of Rev. Proc.
97-27. All other applicants generally must file under the
automatic change procedures of Rev. Proc. 2008-52.
Line 2. Regulations section 1.451-5 allows applicants using an
accrual method, in certain circumstances, to defer the inclusion
in income of advance payments for goods or items in
accordance with the applicants financial reports.
Part II—Change in Valuing Inventories Including
Cost Allocation Changes
If the applicant is currently using a LIFO inventory method or
submethod and is changing to another LIFO inventory method
or submethod, Schedule D, Part II is not applicable. Use
Schedule C, Changes Within the LIFO Inventory Method.
Line 3. If an applicant is subject to, but not in compliance with,
section 263A, generally on the same Form 3115 the applicant
must first comply with section 263A before changing an
inventory valuation method. The applicant must complete
Schedule D, Part III, Method of Cost Allocation. For exceptions,
see Regulations section 1.263A-7(b)(2).
Line 5a. If the applicant properly elected the LIFO inventory
method but is unable to furnish a copy of Form(s) 970,
Application to Use a LIFO Inventory Method, attach the
following statement to Form 3115:
“I certify that to the best of my knowledge and belief (name
of applicant) properly elected the LIFO inventory method by
filing Form 970 with its return for the tax year(s) ended (insert
date(s)) and otherwise complied with the provisions of section
472(d) and Regulations section 1.472-3.”
Line 5c. Attach the two statements required by section
22.01(5) in the Appendix of Rev. Proc. 2008 – 52.
Schedule C—Changes Within the LIFO
Inventory Method
Use this schedule to request a change from one LIFO inventory
method or submethod to another LIFO inventory method or
submethod. All applicants changing within the LIFO inventory
method or submethods must complete Part I. Complete Part II
only if applicable.
Part I—General LIFO Information
Part III—Method of Cost Allocation
Line 6. Applicants changing to the IPIC method must use this
method for all LIFO inventories. This includes applicants
requesting designated automatic accounting method change
numbers 61 or 62 in the List of Automatic Accounting Method
Changes, later.
Applicants requesting to change their method of accounting for
any property (produced or acquired for resale) subject to
section 263A or any long-term contracts as described in section
460 must complete this schedule.
If the change is for noninventory property that is subject to
section 263A, attach a detailed description of the types of
property involved.
There are several methods available for allocating and
capitalizing costs under section 263A, and for allocating and,
where appropriate, capitalizing costs properly allocable to
long-term contracts. A change to or from any of these methods
is a change in accounting method that requires IRS consent.
Using the applicable regulations and notice listed below, the
applicant should verify which methods are presently being used
and the proposed methods that will be used before completing
Schedule D, Part III. These methods are as follows:
Schedule D—Change in the Treatment of
Long-Term Contracts Under Section 460,
Inventories, or Other Section 263A
Assets
Part I—Change in Reporting Income
From Long-Term Contracts
Line 2a. Under section 460(f), the term long-term contract
means any contract for the manufacture, building, installation,
or construction of property that is not completed in the tax year
in which it is entered into. However, a manufacturing contract
will not qualify as long-term unless the contract involves the
manufacture of (a) a unique item not normally included in
finished goods inventory or (b) any item that normally requires
more than 12 calendar months to complete.
Generally, long-term contracts that do not meet the
exceptions under section 460(e) must be accounted for using
the percentage of completion method. See section 460 and the
related regulations.
Line 2b. To qualify for the contract exceptions under section
460(e), the contract must be:
1. Allocating Direct and Indirect Costs
• Specific identification method — Regulations sections
1.263A-1(f)(2) and 1.460-5.
• Burden rate method — Regulations sections 1.263A-1(f)(3)(i)
and 1.460-5.
• Standard cost method — Regulations sections
1.263A-1(f)(3)(ii) and 1.460-5.
• Any other reasonable allocation method — Regulations
sections 1.263A-1(f)(4) and 1.460-5.
2. Allocating Mixed Service Costs
• Direct reallocation method — Regulations section
1.263A-1(g)(4)(iii)(A).
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• Step-allocation method — Regulations section
list conflicts with published guidance, the published guidance
applies.
1.263A-1(g)(4)(iii)(B).
• Simplified service cost method:
Using the labor-based allocation ratio — Regulations section
1.263A-1(h)(4).
Using the production cost allocation ratio — Regulations
section 1.263A-1(h)(5).
• Any other reasonable allocation method — Regulations
section 1.263A-1(f)(4).
Each item in the list below:
• Designates an automatic accounting method change number
for each change for entry on line 1a of Form 3115.
• Briefly describes the accounting method change and its
primary Code section(s).
• Indicates in some cases which schedules of Form 3115 to
complete.
• Provides a reference to the basic published guidance (for
example, revenue procedure) that provides for the automatic
change, which filers should review prior to completing Part I,
Information For Automatic Change Request, on page 1 of Form
3115.
1. Commodity Credit Corporation loans (section
77) — for loans received from the Commodity Credit
Corporation, from including the loan amount in gross income
for the tax year in which the loan is received to treating the loan
amount as a loan. See section 2.01 in the Appendix of Rev.
Proc. 2008-52.
2. Lawyers handling cases on a contingent fee basis
(section 162) — from treating advances of money to their
clients for litigation costs as deductible business expenses to
treating those advances as loans. See section 3.01 in the
Appendix of Rev. Proc. 2008-52.
3. ISO 9000 costs (section 162) — to treating the costs as
deductible, except to the extent they result in the creation or
acquisition of an asset having a useful life substantially beyond
the tax year. See section 3.02 in the Appendix of Rev. Proc.
2008-52.
4. Restaurant smallwares costs (section 162) — to the
smallwares method described in Rev. Proc. 2002-12, 2002-1
C.B. 374 (that is, as materials and supplies that are not
incidental under Regulations section 1.162-3). See section 3.03
in the Appendix of Rev. Proc. 2008-52.
5. Bad debts (section 166) — for an applicant other than a
bank, from accounting for bad debts using a reserve or other
improper method to a specific charge-off method that complies
with section 166. See section 4.01 in the Appendix of Rev.
Proc. 2008-52.
6. Bad debt conformity for banks (section 166) — for
banks other than new banks, to the method that conforms to
Regulations section 1.166-2(d)(3) for the first time the bank
makes this change, or to involuntarily revoke this method. This
change does not fall under the procedures of Rev. Proc.
2008-52. Instead, see Regulations section 1.166-2(d)(3).
7. Depreciation or amortization (impermissible)
(sections 56, 167, 168, 197, 1400I, 1400L, 1400N, and former
section 168) — from an impermissible method to a permissible
method for changes allowed under Regulations section
1.446-1(e)(2)(ii)(d), and for depreciable property owned at the
beginning of the year of change. Complete Schedule E of Form
3115. An applicant changing its method of accounting for
depreciation because of a change described in designated
automatic accounting method change number 10 (sale or lease
transactions) must file Form 3115 according to the designated
automatic accounting method change number 10. See section
6.01 in the Appendix of Rev. Proc. 2008-52.
8. Depreciation (permissible) (sections 56 and
167) — from a permissible method to another permissible
method listed in section 6.02 in the Appendix of Rev. Proc.
2008-52. Complete Schedule E of Form 3115. See section 6.02
in the Appendix of Rev. Proc. 2008-52.
9. Obsolete.
10. Sale, lease or financing transactions (sections 61,
162, 167, 168, and 1012) — from treating property as sold,
leased or, financed to another permissible method described in
section 6.03 in the Appendix of Rev. Proc. 2008-52. See
section 6.03 in the Appendix of Rev. Proc. 2008-52.
11. Modern golf course greens (sections 167, 168, and
former section 168) — either to capitalization of land
preparation costs undertaken in the construction of modern golf
course greens that are closely associated with depreciable
assets or to the addition to basis of land for earth moving costs
3. Capitalizing Additional Section 263A Costs
• Simplified production method:
Without historic absorption ratio election — Regulations
section 1.263A-2(b)(3).
With historic absorption ratio election — Regulations section
1.263A-2(b)(4).
• Simplified resale method:
Without historic absorption ratio election — Regulations
section 1.263A-3(d)(3).
With historic absorption ratio election — Regulations section
1.263A-3(d)(4).
• U.S. ratio method — Notice 88-104, 1988-2 C.B. 443.
• Any other reasonable allocation method — Regulations
section 1.263A-1(f)(4) (including the methods listed on page 8
under Allocating Direct and Indirect Costs).
Schedule E—Change in Depreciation or
Amortization
All applicants requesting to change their method of depreciation
or amortization must complete Schedule E of Form 3115.
Applicants changing their method of accounting for depreciation
or amortization under the automatic change request procedures
should see the depreciation changes in the List of Automatic
Accounting Method Changes below.
Do not file Form 3115:
1. To make an election under sections 167, 168, 179, 1400I,
1400L(b), 1400L(c), or 1400N(d), or former section 168;
2. To revoke an election made under one of those sections;
3. To make or revoke an election under section 13261(g)(2)
or (3) of the Revenue Reconciliation Act of 1993 (relating to
section 197 intangibles);
4. To change the placed-in-service date;
5. To change the salvage value (except for a change in
salvage value to zero when the salvage value is expressly
treated as zero by the Code, the regulations, or other published
guidance); or
6. To change a useful life under section 167 (except for a
change to or from a useful life, recovery period, or amortization
period that is specifically assigned by the Code, the regulations,
or other published guidance).
List of Automatic Accounting Method
Changes
Listed below are automatic accounting method changes
providing for the filing of Form 3115. This list includes
regulatory automatic changes, changes provided for in the
Appendix of Rev. Proc. 2008-52, as modified by Rev. Proc.
2009-39, and automatic changes provided for in other
guidance. These automatic changes may be modified or
supplemented with additional automatic changes by
subsequently published guidance.
The list provides a brief description of the automatic changes
in method of accounting made using Form 3115. A
filer/applicant may not rely on the list or the descriptions of
accounting method changes in the list as authority for making
an accounting method change. A filer/applicant that is within the
scope of, and complies with, all the applicable provisions of the
published guidance that authorizes each listed change may rely
on the applicable published guidance as authority for its
automatic accounting method change. If any information in the
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inextricably associated with the land. Complete Schedule E of
Form 3115. See Rev. Rul. 2001-60, 2001-2 C.B. 587, and
section 6.04 in the Appendix of Rev. Proc. 2008-52.
12. Original and replacement tire costs (section 168) — for
qualifying vehicles, to the original tire capitalization method
provided in Rev. Proc. 2002-27, 2002-1 C.B. 802. Complete
Schedule E of Form 3115. See section 6.05 in the Appendix of
Rev. Proc. 2008-52.
13. Depreciation of gas pump canopies (sections 167,
168, and former section 168) — for depreciation of certain
stand-alone gasoline pump canopies and their supporting
concrete footings, to classifying the gasoline pump canopies in
asset class 57.0 of Rev. Proc. 87-56, 1987-2 C.B. 674, and to
classifying the supporting concrete footings in asset class 00.3
of Rev. Proc. 87-56. Complete Schedule E of Form 3115. See
section 6.06 in the Appendix of Rev. Proc. 2008-52.
14. Depreciation of utility assets (sections 167, 168, and
former section 168) — for depreciation of assets owned by a
utility used in general business operations, to classifying assets
under Rev. Proc. 87-56,1987-2 C.B. 674, to conform with Rev.
Rul. 2003-81, 2003-2 C.B. 126. Complete Schedule E of Form
3115. See section 6.07 in the Appendix of Rev. Proc. 2008-52.
15. Depreciation of cable TV fiber optics (sections 167
and 168) — for depreciation of fiber optic node and trunk line of
a cable television distribution system, to the safe harbor
method in Rev. Proc. 2003-63, 2003-2 C.B. 304, for classifying
the unit of property either as providing one-way communication
services or two-way communication services. Complete
Schedule E of Form 3115. See section 6.08 in the Appendix of
Rev. Proc. 2008-52.
16. Amortizable bond premium (section 171) — from
amortizing bond premium to not amortizing the premium
(revoking the section 171(c) election). See section 5.01 in the
Appendix of Rev. Proc. 2008-52.
17. Research and experimental expenditures (section
174) — from the capitalization method to another permissible
method, from the expense method to another permissible
method, from the deferred expense method to another
permissible method, or from the current period of amortization
to a different period of amortization under the deferred expense
method. See section 7.01 in the Appendix of Rev. Proc.
2008-52.
18. Computer software expenditures (sections 162 and
167) — for costs of developed, acquired, leased or licensed
computer software, to deductible expenses or capital
expenditures and amortization (for developed software), to
capital expenditures and depreciation or amortization (for
acquired computer software), or to deductible expenses under
Regulations section 1.162-11 (for leased or licensed computer
software). Complete Schedule E of Form 3115 for changes
relating to acquired computer software or developed computer
software if the change is to capital expenditures and
amortization. See section 9.01 in the Appendix of Rev. Proc.
2008-52.
19. Package design costs (section 263) — to the
capitalization method, to the design-by-design capitalization
and 60-month amortization method, or to the pool-of-cost
capitalization and 48-month amortization method. See section
10.01 in the Appendix of Rev. Proc. 2008-52.
20. Line pack gas or cushion gas costs (section 263) — to
treating the costs as capital expenditures, the costs of
recoverable amounts as not depreciable, and the costs of
unrecoverable amounts as depreciable. A taxpayer that
changes its method for the costs of unrecoverable amounts
also must change to a permissible method of depreciation for
those costs. Complete Schedule E of Form 3115 for changes
relating to the costs of unrecoverable amounts. See section
10.02 in the Appendix of Rev. Proc. 2008-52.
21. Removal costs (section 263) — for certain costs
incurred in the retirement and removal of depreciable assets, to
a method that conforms with Rev. Rul. 2000-7, 2000-1 C.B.
712. See section 10.03 in the Appendix of Rev. Proc. 2008-52.
22. Certain uniform capitalization methods used by
resellers, and reseller-producers (section 263A) — for
qualifying applicants, to a qualifying method or methods.
Complete Schedule D, Parts II and III, of Form 3115. See
section 11.01 in the Appendix of Rev. Proc. 2008-52, as
clarified and modified by Rev. Proc. 2009-39.
23. Certain uniform capitalization methods used by
producers and reseller-producers (section 263A) — for
qualifying applicants, to a qualifying method or methods.
Complete Schedule D, Parts II and III, of Form 3115. See
section 11.02 in the Appendix of Rev. Proc. 2008-52, as
clarified and modified by Rev. Proc. 2009-39.
24. Research and experimental expenditures under
uniform capitalization methods (section 263A) — from
capitalizing research and experimental expenditures to
inventory to no longer capitalizing these costs to inventory.
Complete Schedule D, Part II, of Form 3115, as applicable. See
section 11.03 in the Appendix of Rev. Proc. 2008-52.
25. Impact fees (section 263A) — for impact fees incurred in
connection with the new construction or expansion of a
residential building, to treating the costs as capital expenditures
allocable to the building. Complete Schedule E of Form 3115 if
the building is depreciable. See section 11.04 in the Appendix
of Rev. Proc. 2008-52.
26. Related party transactions (section 267) — for losses,
expenses, and qualified stated interest incurred in transactions
between related parties, to disallowing or deferring certain
deductions attributable to such transactions in accordance with
section 267. See section 12.01 in the Appendix of Rev. Proc.
2008-52.
27. Deferred compensation determination (section
404) — for determining whether an item of compensation is
deferred compensation or when the item is paid, from making
the determination by reference to when the item is secured to
making the determination by reference to when the item is
actually received. See section 13.01 in the Appendix of Rev.
Proc. 2008-52.
28. Bonus or vacation pay deferred compensation
(section 404) — for bonuses that are deferred compensation,
from treating as deductible or capitalizable when accrued, to
treating as deductible or capitalizable in the year in which
includible in the employee’s income, and for vacation pay that is
deferred compensation, from treating as deductible or
capitalizable when accrued to treating as deductible or
capitalizable in the year in which paid to the employee. See
section 13.02 in the Appendix of Rev. Proc. 2008-52.
29. Grace period contributions (section 404) — for
contributions made to a section 401(k) qualified cash or
deferred arrangement or matching contributions under section
401(m), from treating contributions made after the end of the
tax year but before the due date of the tax return as being on
account of the tax year without regard to when the underlying
compensation is earned to treating such contributions as not
being on account of the tax year if they are attributable to
compensation earned after the end of that tax year. See section
13.03 in the Appendix of Rev. Proc. 2008-52.
30. Obsolete.
31. Multi-year insurance policies for multi-year service
warranty contracts (section 446) — for a manufacturer,
wholesaler, or retailer of motor vehicles or other durable
consumer goods accounting for multi-year insurance policies for
multi-year service warranty contracts, to capitalizing and
amortizing the costs. See section 14.02 in the Appendix of Rev.
Proc. 2008-52.
32. Overall cash method ($1 million) (section 446) — for
qualifying applicants changing to the overall cash method.
Complete Schedule A, Part I, of Form 3115. Also, complete
Schedule D, Parts II and III, as applicable. See section 14.03 in
the Appendix of Rev. Proc. 2008-52.
33. Overall cash method ($10 million) (section 446) — for
qualifying applicants changing to the overall cash method.
Complete Schedule A, Part I, of Form 3115. Also, complete
Schedule D, Parts II and III, as applicable. See section 14.03 in
the Appendix of Rev. Proc. 2008-52.
34. Overall accrual method (section 448) — for an applicant
required by section 448 to change from the cash method for its
first section 448 year to an overall accrual method. Complete
Schedule A, Part I, of Form 3115. Also, complete Schedule D,
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Parts II and III, as applicable. This change does not fall under
the procedures of Rev. Proc. 2008-52 (but see section 14.04 in
the Appendix of Rev. Proc. 2008-52.) Instead, see Regulations
section 1.448-1. (Also see automatic method change 123.)
35. Nonaccrual-experience method (section 448) — for an
applicant changing: to a safe harbor method provided in section
1.448-2(f)(1) (the revenue-based moving average method),
(f)(2) (the actual experience method), (f)(3) (the modified Black
Motor method), (f)(4) (the modified moving average method), of
(f)(5) (the alternative nonaccrual-experience method); to a
periodic system; from a NAE method to a specific charge-off
method; from a sub-method of its current NAE method
provided in section 1.448-2 regarding applicable periods to
another sub-method regarding applicable periods that is
permitted under section 1.448-2, other than a change to
exclude tax years from an applicable period under section
1.448-2(d)(6); or, from a sub-method of its current NAE method
provided in section 1.448-2 regarding tracing of recoveries to
another sub-method regarding tracing of recoveries permitted
under section 1.448-2(f)(2)(iii). See section 14.04 in the
Appendix of Rev. Proc. 2008-52.
36. Interest accrual on non-performing loans (section
451) — for an accrual method bank accounting for qualified
stated interest on non-performing loans, to the method whereby
interest is accrued until either the loan is worthless under
section 166 and is charged off as a bad debt or the interest is
determined to be uncollectible. See section 15.01 in the
Appendix of Rev. Proc. 2008-52.
37. Advance rentals (section 451) — for advance rentals
other than advance rentals subject to section 467, to inclusion
in gross income in the tax year received. See section 15.02 in
the Appendix of Rev. Proc. 2008 – 52.
38. State or local income or franchise tax refunds
(section 451) — for an accrual method applicant with state or
local income or franchise tax refunds, to accrue these items in
the tax year the applicant receives payments or notice of
approval of its refund claim (whichever is earlier), according to
Rev. Rul. 2003-3, 2003-1 C.B. 252. See section 15.03 in the
Appendix of Rev. Proc. 2008-52.
39. Capital cost reduction (CCR) payments (section
451) — for CCR payments (as defined in Rev. Proc. 2002-36,
2002-1 C.B. 993) made by vehicle lessees, to the method that
excludes these payments from the applicant’s gross income
and from the applicant’s bases in the purchased vehicles. See
section 15.04 in the Appendix of Rev. Proc. 2008-52.
40. Exclusion for certain returned magazines,
paperbacks, or records (section 458) — for an accrual
method applicant electing to exclude from gross income some
or all of the income attributable to qualified sales during the tax
year of magazines, paperbacks, or records that are returned
before the close of the applicable merchandise return period for
that tax year. The applicant’s Form 3115 need contain only the
information listed in Regulations section 1.458-2(d). This
election does not fall under the procedures of Rev. Proc.
2008-52. Instead, see Regulations section 1.458-2.
41. Percentage-of-completion (section 460) — for an
applicant not required by section 460 to use the
percentage-of-completion method to account for its long-term
contracts, from an exempt-contract method properly applied to
the percentage-of-completion method. Complete Schedule D,
Parts I and III, of Form 3115. See section 18.01 in the Appendix
of Rev. Proc. 2008-52.
42. Timing of incurring employee medical benefits
liabilities (section 461) — for an applicant with an obligation to
pay an employee’s medical expenses (including medical
expenses for retirees and employees who filed claims under a
workers’ compensation act) that is neither insured nor paid from
a welfare benefit fund, to treatment as a liability incurred in the
tax year in which the applicant’s employee files the claim with
the applicant; or, if the applicant has a liability to pay a third
party for medical services to its employees, to treatment as a
liability as incurred in the tax year in which the services are
provided. See section 19.01(1) in the Appendix of Rev. Proc.
2008-52, as amplified and clarified by Rev. Proc. 2009-39.
43. Timing of incurring real property taxes, personal
property taxes, state income taxes, and state franchise
taxes (section 461) — for a qualifying applicant, to treating
these taxes as incurred in the tax year in which the taxes are
paid, or to account for these taxes under the recurring item
exception to the economic performance rules, or to revoke the
ratable accrual election under section 461(c). See section 19.02
in the Appendix of Rev. Proc. 2008-52.
44. Timing of incurring workers’ compensation act, tort,
breach of contract, or violation of law liabilities (section
461) — for a qualifying applicant accounting for self-insured
liabilities arising under any workers’ compensation act or out of
any tort, breach of contract, or violation of law, to treating the
liability as incurred in the tax year in which (a) all the events
have occurred establishing the fact of the liability, (b) the
amount of the liability can be determined with reasonable
accuracy, and (c) payment is made to the person to which the
liability is owed. See section 19.03 in the Appendix of Rev.
Proc. 2008-52, as amplified and clarified by Rev. Proc.
2009-39.
45. Timing of incurring certain payroll tax liabilities
(section 461) — for FICA and FUTA taxes, state unemployment
taxes, and railroad retirement taxes, to the method under which
the applicant may deduct in Year 1 its otherwise deductible
FICA and FUTA taxes, state unemployment taxes, and railroad
retirement taxes imposed with respect to year-end wages
properly accrued in Year 1, but paid in Year 2, if the
requirements of the recurring item exception are met; or, for
state unemployment taxes and railroad retirement taxes, to the
method stated above where the applicant already uses that
method of accounting for FICA and FUTA taxes; or for FICA
and FUTA taxes to the safe harbor method provided in Rev.
Proc. 2008-25, 2008-13 I.R.B. 686. See section 19.04 in the
Appendix of Rev. Proc. 2008-52.
46. Cooperative advertising (section 461) — to incurring a
liability in the tax year in which these services are performed,
provided the manufacturer is able to reasonably estimate this
liability even though the retailer does not submit the required
claim form until the following year. See section 19.05 in the
Appendix of Rev. Proc. 2008-52.
47. Distributor commissions (section 263) — from
deducting distributor commissions to capitalizing and
amortizing distributor commissions using the distribution fee
period method, the 5-year method, or the useful life method.
Complete Schedule E of Form 3115. See section 10.04 in the
Appendix of Rev. Proc. 2008-52.
48. Cash discounts (section 471) — for cash discounts
granted for timely payment, when such discounts approximate a
fair interest rate, from a method of consistently including the
price of the goods before discount in the cost of the goods and
including in gross income any discounts taken to a method of
reducing the cost of the goods by the cash discounts and
deducting as an expense any discounts not taken, or vice
versa. Complete Schedule D, Parts II and III, of Form 3115, as
applicable. See section 21.01 in the Appendix of Rev. Proc.
2008-52, as clarified by Rev. Proc. 2009-39.
49. Estimating inventory shrinkage (section 471) — from
the present method of estimating inventory shrinkage in
computing ending inventory to the retail safe harbor method in
section 4 of Rev. Proc. 98-29, 1998-15 I.R.B. 22, or to a
method other than the retail safe harbor method, provided
(a) the applicant’s present method of accounting does not
estimate inventory shrinkage and (b) the applicant’s new
method of accounting (that estimates inventory shrinkage)
clearly reflects income under section 446(b). Complete
Schedule D, Parts II and III, of Form 3115, as applicable. See
section 21.02 in the Appendix of Rev. Proc. 2008-52.
50. Small taxpayer ($1 million) inventory exception
(section 471) — for a qualifying applicant with average annual
gross receipts of $1,000,000 or less (see Rev. Proc. 2001-10,
2001-1 C.B. 272), from the present method of accounting for
inventoriable items (including, if applicable, the method of
capitalizing costs under section 263A) to treating inventoriable
items in the same manner as materials and supplies that are
not incidental under Regulations section 1.162-3. Complete
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Schedule A, Part I, and Schedule D, Parts II and III, of Form
3115, as applicable. See section 21.03 in the Appendix of Rev.
Proc. 2008-52.
51. Small taxpayer ($10 million) inventory exception
(section 471) — for a qualifying applicant with average annual
gross receipts of $10,000,000 or less (see Rev. Proc. 2002-28,
2002-1 C.B. 815), from the present method of accounting for
inventoriable items (including, if applicable, the method of
capitalizing costs under section 263A) to treating inventoriable
items in the same manner as materials and supplies that are
not incidental under Regulations section 1.162-3. Complete
Schedule D, Parts II and III, of Form 3115, as applicable. See
section 21.03 in the Appendix of Rev. Proc. 2008-52.
52. Obsolete.
53. Qualifying volume-related trade discounts (section
471) — to treating qualifying volume-related trade discounts as
a reduction in the cost of merchandise purchased at the time
the discount is recognized in accordance with Regulations
section 1.471-3(b). Complete Schedule D, Parts II and III, of
Form 3115, as applicable. See section 21.04 in the Appendix of
Rev. Proc. 2008-52.
54. Impermissible methods of inventory identification
and valuation (section 471) — from an impermissible method
described in Regulations sections 1.471-2(f)(1) through (5),
including a LIFO taxpayer restoring a write down of inventory
below cost or discontinuing maintaining an inventory reserve;
from a gross profit method; or from a method of determining
market that is not in accordance with section 1.471-4; or
changing from a method that is not in accordance with section
1.471-2(c) for determining the value of “subnormal goods;” to a
permitted inventory method (identification or valuation, or both).
Complete Schedule D, Parts II and III, of Form 3115, as
applicable. See section 21.05 in the Appendix of Rev. Proc.
2008-52, as modified by Rev. Proc. 2009-39.
55. Core Alternative Valuation Method for
remanufactured and rebuilt motor vehicle parts (section
471) — for remanufacturers and rebuilders of motor vehicle
parts and resellers of remanufactured and rebuilt motor vehicle
parts that use the lower of cost or market method to value their
inventory of cores, to the safe harbor method of accounting (the
Core Alternative Valuation method) to value inventories of cores
as provided for in Rev. Proc. 2003-20, 2003-1 C.B. 445.
Complete Schedule D, Parts II and III, of Form 3115, as
applicable. See section 21.06 in the Appendix of Rev. Proc.
2008-52.
56. Change from LIFO inventory method (section
472) — for an applicant changing from the LIFO inventory
method for its entire LIFO inventory, or for a pool or pools within
its LIFO inventory, to the permitted method as described in
section 22.01(1)(b) in the Appendix of Rev. Proc. 2008-52.
Complete Schedule D, Parts II and III, of Form 3115, as
applicable. See section 22.01 in the Appendix of Rev. Proc.
2008-52.
57. Determining current-year cost under the LIFO
inventory method (section 472) — for an applicant changing
its method of determining current-year cost: to: (a) the actual
cost of the goods most recently purchased or produced
(most-recent acquisitions method); (b) the actual cost of the
goods purchased or produced during the tax year in the order of
acquisition (earliest-acquisitions method); (c) the average unit
cost equal to the aggregate actual cost of all the goods
purchased or produced throughout the tax year divided by the
total number of units so purchased or produced; (d) the specific
identification method; or (e) a rolling-average method if the
applicant uses that rolling-average method in accordance with
Rev. Proc. 2008-43, 2008-30 I.R.B. 186. Complete Schedule C,
Part I, of Form 3115. See section 22.02 in the Appendix of Rev.
Proc. 2008-52.
58. Alternative LIFO inventory method (section 472) — for
a qualifying applicant that sells new automobiles or new
light-duty trucks, to the Alternative LIFO Method described in
Rev. Proc. 97-36, 1997-2 C.B. 450, as modified by Rev. Proc.
2008-23, 2008-12 I.R.B. 664. Complete Schedule C of Form
3115, as applicable. See section 22.03 in the Appendix of Rev.
Proc. 2008-52.
59. Used vehicle alternative LIFO method (section
472) — for a qualifying applicant that sells used automobiles and
used light-duty trucks, to the Used Vehicle Alternative LIFO
Method, as described 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, 2008-12 I.R.B. 664. Complete Schedule C,
Part I, of Form 3115. See section 22.04 in the Appendix of Rev.
Proc. 2008-52.
60. Determining the cost of used vehicles purchased or
taken as a trade-in (section 472) — for a qualifying applicant,
to a method of (a) determining the cost of used vehicles
acquired by trade-in using the average wholesale price listed by
a consistently used official used car guide on the date of the
trade-in; (b) using a different official used vehicle guide for
determining the cost of used vehicles acquired by trade-in; (c)
determining the cost of used vehicles purchased for cash using
the actual purchase price of the vehicle; or (d) reconstructing
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, where the
national auto auction company selected is consistently used.
Complete Schedule C, Part I, of Form 3115. See section 22.05
in the Appendix of Rev. Proc. 2008-52.
61. Change to IPIC inventory method (section 472) — for a
qualifying applicant, from a non-inventory price index
computation (IPIC) LIFO inventory method to the IPIC method
in accordance with all relevant provisions of Regulations section
1.472-8(e)(3); or, from the IPIC method as described in T.D.
7814, 1982-1 C.B. 84 (the old IPIC method) to the IPIC method
as described in T.D. 8976, 2002-1 C.B. 421 (the new IPIC
method), which includes the following required changes (if
applicable): from using 80% of the inventory price index (IPI) to
using 100% of the IPI to determine the base-year cost and
dollar-value of a LIFO pool(s); from using a weighted arithmetic
mean to using a weighted harmonic mean to compute an IPI for
a dollar-value pool(s); and from using a components-of-cost
method to define inventory items to using a total-product-cost
method to define inventory items. Complete Schedule C of
Form 3115, as applicable. See section 22.06 in the Appendix of
Rev. Proc. 2008-52.
62. Changes within IPIC inventory method (section
472) — for one or more of the following changes within IPIC:
(a) from the double-extension IPIC method to the link-chain
IPIC method, or vice versa; (b) to or from the 10 percent
method; (c) to a pooling method described in Regulations
section 1.472-8(b)(4) or Regulations section 1.472-8(c)(2),
including a change to begin or discontinue applying one or both
of the 5 percent pooling rules; (d) combine or separate pools as
a result of the application of a 5 percent pooling rule described
in Regulations section 1.472-8(b)(4) or Regulations section
1.472-8(c)(2); (e) change the selection of BLS tables 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 6 (Producer price
indexes and percent changes for commodity groupings and
individual items, not seasonally adjusted) of the monthly PPI
Detailed Report, or vice versa; or (f) change the assignment of
one or more inventory items to BLS categories under either
Table 3 of the monthly CPI Detailed Report or Table 6 of the
monthly PPI Detailed Report; (g) change the representative
month when necessitated because of a change in tax year or a
change in method of determining current-year cost made
pursuant to section 22.02 in the Appendix of Rev. Proc.
2008-52; or (h) change from using preliminary BLS price
indexes to using final BLS price indexes to compute an
inventory price index, or vice versa. Complete Schedule C of
Form 3115, as applicable. See section 22.07 in the Appendix of
Rev. Proc. 2008-52, as modified by Rev. Proc. 2009-39.
63. Replacement cost method for automobile dealers’
parts inventory (sections 471 and 472) — to the replacement
cost method for automobile dealers’ parts inventory described
in Rev. Proc. 2002-17, 2002-1 C.B. 676. Complete Schedule D,
Parts II and III, of Form 3115, as applicable. See section 21.07
in the Appendix of Rev. Proc. 2008-52.
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64. Mark-to-market (section 475) — for accounting for
securities or commodities by commodities dealers, securities
traders, and commodities traders, to the mark-to-market
method under section 475(e) or (f). An election statement must
be filed earlier than the due date of Form 3115. See Rev. Proc.
99-17, 1999-1 C.B. 503, for rules relating to this statement. See
section 23.01 in the Appendix of Rev. Proc. 2008-52.
65. Dealer status changes (section 475) — for an applicant
electing out of certain exemptions from securities dealer status,
to the mark-to-market method. This change does not fall under
the procedures of Rev. Proc. 2008-52. Instead, see Rev. Proc.
97-43, 1997-2 C.B. 494.
66. Bank reserves for bad debts (section 585) — for a bank
(as defined in section 581, including a bank for which a qualified
subchapter S subsidiary (QSub) election is filed) to change
from the section 585 reserve method to the section 166
specific charge-off method. See section 24.01 in the Appendix
to Rev. Proc. 2008-52.
67. Insurance company premium acquisition expenses
(section 832) — for certain insurance companies, to a safe
harbor method of accounting for premium acquisition expenses
set forth in Rev. Proc. 2002-46, 2002-2 C.B. 105. See section
25.01 in the Appendix of Rev. Proc. 2008-52.
68. Discounted unpaid losses (section 846) — for
insurance companies other than life insurance companies
computing discounted unpaid losses, to the composite method
or to alternative methods set forth in Notice 88-100, 1988-2
C.B. 439, and Rev. Proc. 2002-74, 2002-2 C.B. 980. See
section 26.01 in the Appendix of Rev. Proc. 2008-52.
69. Obsolete.
70. Functional currency (section 985) — to the use of
another functional currency for the applicant or its qualified
business unit (QBU), other than a QBU described in Regulation
section 1.985-1(b)(1)(iii). See section 29.01 in the Appendix of
Rev. Proc. 2008-52.
71. Rule of 78s (section 1272) — for stated interest on
certain short-term consumer loans, from the Rule of 78s
method to the constant yield method. See section 14.05 in the
Appendix of Rev. Proc. 2008-52.
72. Original issue discount (sections 1272 and 1273) — to
the principal-reduction method for de minimis original issue
discount (OID). See section 31.01 in the Appendix of Rev. Proc.
2008-52.
73. Market discount bonds (section 1278) — from
including market discount currently in income for the tax year to
which the discount is attributable to including market discount in
income for the tax year of disposition or partial principal
payment (revoking the section 1278(b) election). See section
32.01 in the Appendix of Rev. Proc. 2008-52.
74. Interest income on short-term obligations (section
1281) — to currently including accrued interest and discount in
income (to comply with section 1281). See section 33.01 in the
Appendix of Rev. Proc. 2008-52.
75. Stated interest on short-term loans (section
1281) — for a bank using the cash receipts and disbursements
method of accounting, from accruing stated interest on
short-term loans made in the ordinary course of business to
using the cash method to report such interest. See section
33.02 in the Appendix of Rev. Proc. 2008-52.
76. Sales of mortgage loans (section 1286) — for
accounting for certain sales of mortgage loans in which the
seller also enters into a contract to service the mortgages in
consideration for amounts received from interest payments,
from a method that is inconsistent with Rev. Rul. 91-46, 1991-2
C.B. 358, to a method that is consistent with Rev. Rul. 91-46.
However, the change is only an automatic accounting method
change for certain taxpayers who are under examination. This
change does not fall under the procedures of Rev. Proc.
2008-52. Instead, see Rev. Proc. 91-51, 1991-2 C.B. 779.
77. Environmental remediation costs (section 263A) — for
costs incurred to clean up land that a taxpayer contaminated
with hazardous waste from the taxpayer’s manufacturing
operations, to capitalizing such costs in inventory costs under
section 263A. See section 11.05 in the Appendix of Rev. Proc.
2008-52.
78. Costs of intangibles and certain transactions (section
263(a)) — for amounts paid or incurred to acquire or create
intangibles, or to facilitate an acquisition of a trade or business,
a change in the capital structure of a business entity, and
certain other transactions, to a method of accounting provided
in Regulations sections 1.263(a)-4, 1.263(a)-5, and
1.167(a)-3(b). Complete Schedule E of Form 3115 for changes
to a method of accounting provided in Regulations section
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 and section
10.05 in the Appendix of Rev. Proc. 2008-52.
79. REMIC inducement fees (sections 860A-860G) — for
an inducement fee received in connection with becoming the
holder of a noneconomic residual interest in a REMIC, to a safe
harbor method provided under Regulations section
1.446-6(e)(1) or (e)(2). See Rev. Proc. 2004-30, 2004-1 C.B.
950, and section 27.01 in the Appendix of Rev. Proc. 2008-52.
80. All events test method for credit card annual fees
(section 451) — to a method that satisfies the all events test in
accordance with Rev. Rul. 2004-52, 2004-1 C.B. 973. See
section 15.05 in the Appendix of Rev. Proc. 2008-52.
81. Ratable inclusion method for credit card annual fees
(section 446) — to the ratable inclusion method for credit card
annual fees. See section 15.05 in the Appendix of Rev. Proc.
2008-52.
82. Credit card late fees (section 451) — to a method that
treats credit card late fees as interest income that creates or
increases OID on the pool of credit card loans to which the fees
relate. See section 15.06 in the Appendix of Rev. Proc.
2008-52.
83. Full inclusion method for certain advance payments
(section 451) — to the full inclusion method as described in
section 5.01 of Rev. Proc. 2004-34, 2004-1 C.B. 991. The
applicant must be using, or changing to, an overall accrual
method of accounting. See section 15.07 in the Appendix of
Rev. Proc. 2008-52, as clarified and modified by Rev. Proc.
2009-39.
84. Deferral method for certain advance payments
(section 451) — to the deferral method as described in section
5.02 of Rev. Proc. 2004-34, 2004-1 C.B. 991 (except as
provided in section 8.03 and 8.04(2) of Rev. Proc. 2004-34).
The applicant must be using, or changing to, an overall accrual
method of accounting. See section 15.07 in the Appendix of
Rev. Proc. 2008-52, as clarified and modified by Rev. Proc.
2009-39.
85. Film producer’s treatment of certain creative property
costs (section 446) — to account for creative property costs
under the safe harbor method provided in Rev. Proc. 2004-36,
2004-1 C.B. 1063. See section 14.06 in the Appendix of Rev.
Proc. 2008-52.
86. Timber fertilization costs (section 162) — for costs
incurred by a timber grower for the post-establishment
fertilization of an established timber stand, to treat such costs
as ordinary and necessary business expenses deductible under
section 162. See section 3.04 in the Appendix of Rev. Proc.
2008-52.
87. Change in general asset account treatment due to a
change in the use of MACRS property (section 168) — to the
method of accounting provided in Regulations sections
1.168(i)-1(c)(2)(ii)(E) and 1.168(i)-1(h)(2). Complete Schedule E
of Form 3115. See Regulations section 1.168(i)-1(1)(2)(ii) and
section 6.09 in the Appendix of Rev. Proc. 2008-52.
88. Change in method of accounting for depreciation due
to a change in the use of MACRS property (section
168) — to the method of accounting provided in Regulations
section 1.168(i)-4 or revoke the election provided in Regulations
section 1.168(i)-4(d)(3)(ii) to disregard a change in use of
MACRS property. Complete Schedule E of Form 3115. See
Regulations section 1.168(i)-4(g)(2) and section 6.10 in the
Appendix of Rev. Proc. 2008-52.
89. Depreciation of qualified non-personal use vans and
light trucks (section 280F) — for certain vehicles placed in
service before July 7, 2003, to a method of accounting in
accordance with Regulations section 1.280F-6(f)(2)(iv).
Complete Schedule E of Form 3115. See Regulations section
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1.280F-6(f)(2)(iv) and section 6.11 in the Appendix of Rev.
Proc. 2008-52.
90. Insurance companies’ incentive payments to health
care providers (section 446) — for deducting provider
incentive payments, to the method of including those payments
in discounted unpaid losses without regard to section 404. See
section 14.07 in the Appendix of Rev. Proc. 2008-52.
91. Up-front network upgrade payments received by
utilities (section 61) — to a safe harbor method provided in
Rev. Proc. 2005-35, 2005-2 C.B. 76. See section 1.01 in the
Appendix of Rev. Proc. 2008-52.
92. Allocation of environmental remediation costs to
production (section 263A) — to a method that allocates under
section 263A environmental remediation costs to the inventory
produced during the tax year such costs are incurred. See Rev.
Rul. 2005-42, 2005-2 C.B. 67, and section 11.06 in the
Appendix of Rev. Proc. 2008-52.
93. Obsolete.
94. Credit card cash advance fees (section 451) — to a
method that treats credit card cash advance fees as creating or
increasing original issue discount (OID) on a pool of credit card
loans that includes the cash advances that give rise to the fees.
See section 15.08 in the Appendix of Rev. Proc. 2008-52.
95. Obsolete.
96. Replacement cost method for heavy equipment
dealers’ parts inventory (sections 471 and 472) — to the
replacement cost method for heavy equipment dealers’ parts
inventory described in Rev. Proc. 2006-14, 2006-1 C.B. 350.
Complete Schedule D, Parts II and III, of Form 3115, as
applicable. See section 21.08 in the Appendix of Rev. Proc.
2008-52.
97. Depreciation of qualified revitalization building in the
expanded area of a renewal community (section 1400I) — for
a qualified revitalization building that is placed in service by the
applicant after December 31, 2001, in the area of a renewal
community that was expanded by the U.S. Department of
Housing and Urban Development and for which the applicant
receives a retroactive commercial revitalization expenditure
allocation. This change applies only if the applicant filed the
federal tax return for the placed-in-service year of that building
on or before the date the applicant received the retroactive
commercial revitalization expenditure allocation. Complete
Schedule E of Form 3115. See section 6.12 in the Appendix of
Rev. Proc. 2008-52.
98. Insurance contracts acquired in an assumption
reinsurance transaction (section 197) — for an applicant’s
first tax year ending after April 10, 2006, for certain insurance
contracts acquired in an assumption reinsurance transaction, to
comply with Regulations section 1.197-2(g)(5). See Regulations
section 1.197-2(g)(5) and section 6.13 in the Appendix or Rev.
Proc. 2008-52.
99. Elections to treat participations and residuals under
the income forecast method (section 167(g)) — for certain
property subject to the income forecast method under section
167(g) to elect either to include in the adjusted basis of the
property, participations and residuals expected to be paid
before the end of the tenth tax year following the tax year in
which the property is placed in service, or to exclude
participations and residuals from the adjusted basis of the
property and deduct the participations and residuals in the tax
year that the participations and residuals are paid. This change
must be filed with the applicant’s federal tax return for the first
or second tax year ending on or after December 31, 2005.
Complete Schedule E of Form 3115. See section 6.14 in the
Appendix of Rev. Proc. 2008-52.
100. Election to treat the cost of any qualified film or
television production as an expense (section 181) — for any
qualified film or television production subject to section 181 for
which the applicant begins principal photography after October
22, 2004, and before January 1, 2009, to elect to treat the costs
of the production as an expense, as provided for in section 181.
This change must be filed with the applicant’s federal tax return
for the first or second tax year ending on or after December 31,
2005. See section 8.01 in the Appendix of Rev. Proc. 2008-52.
101. Election to treat certain reforestation expenditures as
expenses (section 194) — for an applicant’s first or second tax
year ending on or after December 31, 2005, to elect to deduct
reforestation expenditures with respect to any qualified timber
property paid or incurred after October 22, 2004, as provided in
section 194(b). See section 8.02 in the Appendix of Rev. Proc.
2008-52.
102. Election to treat certain desulfurization costs as
expenses (section 179B) — for a small business refiner (as
defined in section 45H(c)(1)) for its first or second tax year
ending on or after December 31, 2005, to elect to deduct 75
percent of qualified capital costs (as defined in section
45H(c)(2)) paid or incurred after December 31, 2002, in tax
years ending after that date. See section 8.03 in the Appendix
of Rev. Proc. 2008-52.
103. Qualifying electric transmission transactions (section
451(i)) — for an applicant’s first or second tax year ending on or
after December 31, 2005, for qualified gain from a qualifying
electric transmission transaction, to recognizing all or part of
the qualified gain ratably over the 8-year period beginning with
the year that includes the date of the transaction, as provided in
section 451(i). See section 15.09 in the Appendix of Rev. Proc.
2008-52.
104. GO Zone additional first year depreciation deduction
(section 1400N(d)) — for qualified GO Zone property placed in
service by the taxpayer on or after August 28, 2005, during tax
year beginning in 2004 or 2005, to claiming the GO Zone
additional first year depreciation deduction for a class of
property for which the taxpayer did not claim the GO Zone
additional first year depreciation deduction on the taxpayer’s
2004 or 2005 federal tax return. This change in method of
accounting must be timely filed with the taxpayer’s federal tax
return for the first tax year succeeding the 2004 or 2005 tax
year, as applicable. Complete Schedule E of Form 3115. See
section 6.15 in the Appendix of Rev. Proc. 2008-52.
105. Additional first year depreciation deduction (sections
168 and 1400L) — for a change for depreciation under section
168(k) or 1400L(b) to comply with Regulation section
1.168(k)-1 or 1.1400L(b)-1 because of revisions made to
Regulation section 1.168(k)-1T or 1.1400L(b)-1T by the final
regulations. This change in method of accounting must be
made for either (i) the applicant’s last tax year ending before
October 1, 2006, if the applicant’s federal income tax return is
timely filed (including an extension) after October 18, 2006, for
that last tax year; or (ii) the applicant’s first tax year ending on
or after October 18, 2006. Complete Schedule E of Form 3115.
See section 6.16 in the Appendix of Rev. Proc. 2008-52.
106. Timing of incurring certain liabilities for services or
insurance (section 461) — for an applicant that is currently
treating the mere execution of a contract for services or
insurance as establishing the fact of the liability under section
461 and wants to change from that method for liabilities for
services or insurance to comply with Rev. Rul. 2007-3, 2007-4
I.R.B. 350. See section 19.06 in the Appendix of Rev. Proc.
2008-52.
107. Impermissible to permissible method of accounting
for depreciation or amortization for disposed depreciable
or amortizable property (sections 167, 168, 197, 1400I,
1400L(b), 1400L(c), or 1400N(d) or former 168) — for an item
of certain depreciable or amortizable property that has been
disposed of by the applicant and for which the applicant did not
take into account any depreciation allowance or did take into
account some depreciation but less than the depreciation
allowable, from using an impermissible method of accounting
for depreciation to using a permissible method of accounting for
depreciation. Complete Schedule E of Form 3115. See section
6.17 in the Appendix of Rev. Proc. 2008-52.
108. Change by bank for uncollected interest (section
446) — for a bank (as defined in Regulation section
1.166-2(d)(4)(i)) that uses an accrual method of accounting; is
subject to supervision by Federal authorities, or by state
authorities maintaining substantially equivalent standards; and
has six or more years of collection experience to change to the
safe harbor method of accounting for uncollected interest (other
than interest described in Regulation section 1.446 – 2(a)(2)) set
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forth in section 4 of Rev. Proc. 2007-33, 2007-1 C.B. 1289. See
section 14.08 in the Appendix of Rev. Proc. 2008-52.
109. Rotable spare parts (section 263(a)) — for an applicant
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 to the
safe harbor method provided in Rev. Proc. 2007-48, 2007-1
C.B. 110. Complete Schedule E of Form 3115. See section
10.06 in the Appendix of Rev. Proc. 2008-52.
110. Rotable spare parts (section 471) — from the safe
harbor method (or a similar method) of treating rotable spare
parts as depreciable assets, in accordance with Rev. Proc.
2007-48, 2007-1 C.B. 110, to treating rotable spare parts as
inventoriable items . See section 21.09 in the Appendix to Rev.
Proc. 2008-52.
111. Advance trade discount method (section 471) — for
an accrual method applicant required to use an inventory
method of accounting and maintaining inventories, as provided
in section 471, that receives advance trade discounts to the
Advance Trade Discount Method described in Rev. Proc.
2007-53, 2007-30 I.R.B. 233. See section 21.10 in the
Appendix to Rev. Proc. 2008-52.
112. Changes to the Vehicle-Pool Method (section 472) —
for a retail dealer or wholesaler distributor (reseller) of cars and
light-duty trucks to the Vehicle-Pool Method as described in
Rev. Proc. 2008-23, 2008-12 I.R.B. 664. See section 22.08 in
the Appendix to Rev. Proc. 2008-52.
113. Payroll tax liabilities (section 461) — for an accrual
method applicant that wants to change its method for FICA and
FUTA taxes to the safe harbor method provided in Rev. Proc.
2008-25, 2008-13 I.R.B. 686, which provides that, solely for the
purposes of the recurring item exception, an applicant will be
treated as satisfying the requirement in Regulation section
1.461-5(b)(1)(i) for its payroll tax liability in the same tax year in
which all events have occurred that establish the fact of the
related compensation liability and the amount of the related
compensation liability can be determined with reasonable
accuracy. See section 19.04 in the Appendix to Rev. Proc.
2008-52.
114. Rolling-average method of accounting for inventories
(sections 471 and 472) — for an applicant required to account
for inventories under section 471 and that uses a
rolling-average method to value inventories for financial
accounting purposes to the same rolling-average method to
value inventories for federal income tax purposes, in
accordance with Rev. Proc. 2008-43, 2008-30 I.R.B. 186. See
section 21.14 in the Appendix to Rev. Proc. 2008-52.
115. Kansas additional first year depreciation — for
qualified Recovery Assistance property placed in service by the
applicant on or after May 5, 2007, during the tax year that
includes May 5, 2007, to claim the Kansas additional first year
depreciation deduction for a class of property for which the
taxpayer did not claim the Kansas additional first year
depreciation deduction on the taxpayer’s timely filed federal tax
return for the tax year that includes May 5, 2007, provided the
taxpayer did not make an election not to deduct the Kansas
additional first year depreciation for the class of property.
Complete Schedule E of Form 3115. See section 6.22 in the
Appendix to Rev. Proc. 2008-52.
116. Depreciation of MACRS property acquired in a
like-kind exchange or as a result of an involuntary
conversion (section 168) — to apply the provisions of
Regulations section 1.168(i)-6 or rely on prior guidance by the
Service for determining the depreciation deductions of
replacement MACRS property and relinquished MACRS
property, for a like-kind exchange or an involuntary conversion
of MACRS property for which the time of disposition, the time of
replacement, or both occur on or before February 27, 2004 or,
to apply Regulations section 1.168(i)-6(i)(2) to the relinquished
property and the replacement property for which the time of
disposition, the time of replacement, or both occur on or before
February 26, 2007, if the replacement property replaces
relinquished property for which the taxpayer made a valid
election under section 168(f)(1) to exclude it from the
application of section 168. Complete Schedule E of Form 3115.
See Regulations sections 1.168(i)-6 and 1.168(i)-6(i)(2), and
section 6.18 in the Appendix of Rev. Proc. 2008-52.
117. Lessor improvements abandoned at termination of
lease (section 168) — for an applicant that is a lessor, from
depreciating under section 168 an improvement described in
section 168(i)(8)(B)(i) and (ii) after the improvement was
irrevocably disposed of or abandoned by the lessor at the
termination of the applicable lease by the lessee to complying
with section 168(i)(8)(B) by recognizing gain or loss upon
disposition or abandonment of the improvement. See section
168(i)(8)(B), and section 6.19 in the Appendix of Rev. Proc.
2008-52.
118. Repairable and reusable spare parts (section 168) —
for repairable and reusable spare parts, from item accounting
to multiple asset accounting (pooling) in accordance with
section 6.20(2) in the Appendix of Rev. Proc. 2008-52, or to
using a permissible method of identifying disposed repairable
and reusable spare parts, as described in section 6.20(3) in the
Appendix of Rev. Proc. 2008-52. Complete Schedule E of Form
3115. See section 6.20 in the Appendix of Rev. Proc. 2008-52.
119. Land (sections 167 and 168) — from depreciating land
to not depreciating land, or from depreciating a nondepreciable
land improvement to not depreciating a nondepreciable land
improvement. See section 6.21 in the Appendix of Rev. Proc.
2008-52.
120. Year 2000 Costs (sections 162 and 167) — for Year
2000 costs to conform to the method described in section 3 of
Rev. Proc. 97-50, 1997-2 C.B. 525. Complete Schedule E of
Form 3115. See section 9.02 in the Appendix of Rev. Proc.
2008-52.
121. Repairable and reusable spare parts (section
263(a)) — to treat certain repairable and reusable spare parts
as depreciable property in accordance with the holding in Rev.
Rul. 69-200, 1969-1 C.B. 60, or Rev. Rul. 69-201, 1969-1 C.B.
60. Complete Schedule E of Form 3115. See section 10.07 in
the Appendix of Rev. Proc. 2008-52.
122. Overall accrual method other than for the first
section 448 year (section 446) — for a qualifying applicant for
other than its first section 448 year, from the overall cash
receipts and disbursements method to an overall accrual
method, or to an overall accrual method in conjunction with the
recurring item exception under 461(h)(3). Complete Schedule
A, Part I, of Form 3115. Also complete Schedule D, Parts II and
III, as applicable. See section 14.01 in the Appendix of Rev.
Proc. 2008-52, as clarified by Rev. Proc. 2009-39.
123. Change in overall method from the cash method to
an accrual method for the first section 448 year (section
446) — for an applicant that is required by section 448 to
change from the overall cash method to an overall accrual
method and the applicant qualifies to make the change under
the automatic consent procedures of Regulation sections
1.448-1(g) and (h)(2) as well as Rev. Proc. 2008-52 for a year
of change that is the applicant’s first section 448 year. See
Regulation sections 1.448-1(g) and (h)(2), and section 14.01 in
the Appendix to Rev. Proc. 2008-52, as clarified and modified
by Rev. Proc. 2009-39.
124. Change from the cash method to an accrual method
for specific items (section 446) — for a qualifying applicant
using an overall accrual method and accounting for one or more
identified specific items of income and expense on the cash
method to an accrual method of accounting for the identified
specific item or items. See section 14.09 in the Appendix to
Rev. Proc. 2008-52.
125. Multi-year service warranty contracts (section 446) —
for an eligible accrual method manufacturer, wholesaler, or
retailer of motor vehicles or other durable consumer goods that
wants to change to the service warranty income method
described in section 5 of Rev. Proc. 97-38, 1997-2 C.B. 479.
See Rev. Proc. 97-38 and section 14.10 in the Appendix to
Rev. Proc. 2008-52.
126. Overall cash method for specified transportation
industry taxpayers (section 446) — for “specified
transportation industry taxpayers,” as defined in section
14.11(2) of Rev. Proc. 2008-52, with average annual gross
receipts of more than $10,000,000 and not in excess of
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$50,000,000 to the overall cash receipts and disbursements
method. See section 14.11 in the Appendix to Rev. Proc.
2008-52.
127. Change to overall cash/hybrid method for certain
banks (section 446) — for an eligible bank, as defined in
section 14.12(2)(a) in the Appendix to Rev. Proc. 2008-52, to
an overall cash/hybrid method described in section 14.12(2)(b)
in the Appendix to Rev. Proc. 2008-52. See section 14.12 in the
Appendix to Rev. Proc. 2008-52.
128. Change to overall cash method for farmers (section
446) — for a qualifying applicant engaged in the trade or
business of farming to the overall cash receipts and
disbursements method. See section 14.13 in the Appendix to
Rev. Proc. 2008-52.
129. Nonshareholder contributions to capital under
section 118 (section 446) — from excluding from gross
income under section 61 certain payments or the fair market
value of property received (including customer connection fees
received by a regulated public utility described in section
118(c)), by characterizing the payments or the fair market value
of property as nontaxable contributions to capital under section
118(a), to including the payments or the fair market value of
property in gross income under section 61. This change also
applies to a regulated public utility described in section 118(c)
that changes from including in gross income under section 61
payments or fair market value of property received that are
contributions in aid of construction under section 118(c) and
Regulation section 1.118-2 and that meet the requirements of
sections 118(c)(1)(B) and 118(c)(1)(C) to excluding from
income the payments or the fair market value of the property as
nontaxable contributions to capital under sections 118(a). See
section 14.14 in the Appendix to Rev. Proc. 2008-52, as
modified by Rev. Proc. 2009-39.
130. Retainages (section 451) — for an accrual method
applicant’s retainages under section 451 to a method with the
holding in Rev. Rul. 69-314, 1969-1 C.B. 319. This change
does not apply to retainages under long-term contracts as
defined in section 460(f). An applicant changing its method of
accounting under this section must treat all retainages
(receivables and payables) in the same manner. See section
15.10 in the Appendix to Rev. Proc. 2008-52, as modified by
Rev. Proc. 2009-39.
131. Series E, EE, or I U.S. savings bonds (section 454) —
for a cash method taxpayer changing the taxpayer’s method of
accounting for interest income on Series E, EE, or I U.S.
savings bonds from reporting as interest income the increase in
redemption price on a bond occurring in a tax year to reporting
this income in the tax year in which the bond is redeemed,
disposed of, or finally matures, whichever is earliest. A
statement in lieu of a Form 3115 is authorized for this change.
See section 16.01 in the Appendix to Rev. Proc. 2008-52.
132. Prepaid subscription income (section 455) — for an
accrual method applicant changing its method of accounting for
prepaid subscription income to the method described in section
455 and the related regulations, including an eligible applicant
that wants to make the “within 12 months” election under
Regulations section 1.455-2. A statement in lieu of a Form 3115
is authorized for this change. See section 17.01 in the Appendix
to Rev. Proc. 2008-52.
133. Timing of incurring liabilities for bonuses (section
461) — to treat bonuses as incurred in the tax year in which all
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. The applicant may make this change
if the bonus is received by the employee by the 15th day of the
3rd calendar month after the end of that tax year. See section
19.01(2) in the Appendix to Rev. Proc. 2008-52, as amplified
and clarified by Rev. Proc. 2009-39.
134. Timing of incurring liabilities for vacation pay
(section 461) — to treat vacation pay as incurred in the tax
year in which all events have occurred that establish the fact of
the liability to pay vacation pay, and the amount of the liability
can be determined with reasonable accuracy. The applicant
may make this change if the vacation pay vests in that tax year
and the vacation pay is received by the employee by the 15th
day of the 3rd calendar month after the end of that tax year.
See section 19.01(3) in the Appendix to Rev. Proc. 2008-52, as
amplified and clarified by Rev. Proc. 2009-39.
135. Rebates and allowances (section 461) — for an accrual
method applicant’s liability for rebates and allowances to the
recurring item exception method under section 461(h)(3) and
Regulation section 1.461-5. See section 19.07 in the Appendix
to Rev. Proc. 2008-52.
136. Change from an improper method of inclusion of
rental income or expense to inclusion in accordance with
the rent allocation (section 467) — for an applicant that is a
party to a section 467 rental agreement; and is changing its
method for its fixed rent to the rent allocation method provided
in Regulation section 1.467-1(d)(2)(iii). See section 20.01 in the
Appendix to Rev. Proc. 2008-52, as modified and clarified by
Rev. Proc. 2009-39.
137. Permissible methods of inventory identification and
valuation (section 471) — for an applicant changing from one
permissible method of identifying and valuing inventories to
another permissible method of identifying and valuing
inventories that is not a change described in another section in
the Appendix to Rev. Proc. 2008-52 or in other guidance
published in the IRB. See section 21.11 in the Appendix to Rev.
Proc. 2008-52, as clarified by Rev. Proc. 2009-39.
138. Change in the official used vehicle guide utilized in
valuing used vehicles (section 471) — for a used vehicle
dealer from not using an official used vehicle guide for valuing
used vehicles to using an official used vehicle guide for valuing
used vehicles; or from using an official used vehicle guide for
valuing used vehicles to using a different official used vehicle
guide for valuing used vehicles. See section 21.12 in the
Appendix to Rev. Proc. 2008-52.
139. Invoice advertising association costs for new vehicle
retail dealerships (section 471) — for an applicant engaged in
the trade or business of retail sales of new automobiles or new
light-duty trucks (dealership) from capitalizing certain
advertising costs as acquisition costs under Regulation section
1.471-3(b) to deducting the advertising costs under section 162
as the advertising services are provided to the dealership. See
Regulation section 1.461-4(d)(2)(i), and section 21.13 in the
Appendix to Rev. Proc. 2008-52.
140. Changes within the Used Vehicle Alternative LIFO
Method (section 472) — for a taxpayer using the Used Vehicle
Alternative LIFO Method, as described 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, 2008-12 I.R.B. 664,
to use a different “official used vehicle guide” in conjunction
with the Used Vehicle Alternative LIFO Method, or to a different
precise manner of using an official used vehicle guide (for
example, a change in the specific guide category that an
applicant uses to represent vehicles of average condition for
purposes of section 4.02(5)(a) of Rev. Proc. 2001-23). See
section 22.09 in the Appendix to Rev. Proc. 2008-52.
141. Changes to dollar-value pools of manufacturers
(section 472) — for a manufacturer that 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 resale pools, and the manufacturer wants to change from
using multiple pools described in Regulation section
1.472-8(b)(3) to using natural business unit (NBU) pools
described in Regulation section1.472-8(b)(1), or vice versa; or
wants to reassign items in NBU pools described in Regulation
section 1.472-8(b)(1) into the same number or a greater
number of NBU pools. See section 22.10 in the Appendix to
Rev. Proc. 2008-52, as clarified by Rev. Proc. 2009-39.
142. Basis of certain securities sold or transferred
(section 1012) — for an applicant that sells or transfers shares
of stock in a corporation, bonds, or book-entry securities (as
defined in Regulation section 1.1012-1(c)(7)(iii)), to the method
provided in Regulation section 1.1012-1(c)(1) for determining
basis in the securities sold or transferred. See section 30.01 in
the Appendix to Rev. Proc. 2008-52.
143. Materials and supplies (section 162) — for an applicant
changing to the method of accounting described in Regulations
section 1.162-3 to treat materials and supplies as a deferred
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Instructions for Form 3115
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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
expense to be taken into account in the taxable year in which
they are actually consumed and used in operation. See section
3.05 in the Appendix to Rev. Proc. 2008-52, as modified by
section 2.07 of Rev. Proc. 2009-39 (creating new section 3.05).
144. Repair and maintenance costs (section 162) — for an
applicant changing from capitalizing under section 263(a) costs
paid or incurred to repair and maintain tangible property
(including network assets) to treating the repair and
maintenance costs as ordinary and necessary business
expenses under section 162 and Regulations section 1.162-4.
See section 3.06 in the Appendix to Rev. Proc. 2008-52, as
modified by section 2.08 of Rev. Proc. 2009-39 (creating new
section 3.06).
145. Tenant constructions allowances (section 168) — for
an applicant changing from improperly treating the applicant as
having a depreciable interest in the property subject to the
tenant construction allowances for federal income tax purposes
to properly treating the applicant as not having a depreciable
interest in such property for federal income tax purposes; or
from improperly treating the applicant as not having a
depreciable interest in the property subject to the tenant
construction allowances for federal income tax purposes to
properly treating the applicant as having a depreciable interest
in such property for federal income tax purposes. See section
6.09 in the Appendix to Rev. Proc. 2008-52, as modified by
section 2.09 of Rev. Proc. 2009-39 (creating new section 6.09).
146. Dispositions of structural components of a building
(section 168) — for an applicant changing to a unit of property
that is permissible under applicable legal authority for
determining when the applicant has disposed of a building and
its structural components for depreciation purposes. This
change will also affect the determination of gain or loss from the
disposition of the building (including its structural components).
See section 6.24 in the Appendix to Rev. Proc. 2008-52, as
modified by section 2.10 of Rev. Proc. 2009-39 (creating new
section 6.24).
147. Dispositions of tangible depreciable assets (other
than a building or its structural components) (section
168) — for an applicant changing to a unit of property that is
permissible under applicable legal authority for determining
when the applicant has disposed of a section 1245 property a
depreciable land improvement for depreciation purposes. This
change will also affect the determination of gain or loss from the
disposition of the section 1245 property or the depreciable land
improvement. See section 6.25 in the Appendix to Rev. Proc.
2008-52, as modified by section 2.11 of Rev. Proc. 2009-39
(creating new section 6.25).
148. Debt issuance costs (section 446) — for an applicant
changing its method of accounting to comply with 1.446-5,
which provides rules for allocating the costs over the term of the
debt. See section 14.15 in the Appendix to Rev. Proc. 2008-52,
as modified by section 2.16 of Rev. Proc. 2009-39 (creating
new section 14.15).
149. Ratable accrual of real property taxes (section 461) —
for an accrual method applicant for real property taxes that
relate to a definite period of time to the method described in
section 461(c) and section 1.461-1(c)(1) (ratable accrual
election) for a taxable year other than the applicant’s first
taxable year in which real property taxes are incurred. See
section 19.08 in the Appendix to Rev. Proc. 2008-52, as
modified by section 2.23 of Rev. Proc. 2009-39 (creating new
section 19.08).
Privacy Act and Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws
of the United States. Section 446(e) says that you must obtain IRS approval before you change your method of accounting, except
where otherwise provided. To obtain this approval, you are required to provide the information requested on this form. This
information will be used to ensure that you are complying with the applicable laws, and to figure and collect the right amount of tax.
Failure to provide all of the information requested may prevent processing of this form. Providing false information may subject you
to penalties. Routine uses of this information include giving it to the Department of Justice for civil and criminal litigation, and to
cities, states, and the District of Columbia for use in the administration of their tax laws. We may also disclose this information
including giving it to Federal and state agencies to enforce Federal non-tax criminal laws and to combat terrorism.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the
form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their
contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are
confidential, as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for
individual taxpayers filing this form is approved under OMB control number 1545-0074 and is included in the estimates shown in the
instructions for their individual income tax return. The estimated burden for all other taxpayers who file this form is shown below.
Form
3115
Sch. A
Sch. B
Sch. C
Sch. D
Sch. E
Recordkeeping
38 hr., 29 min.
3 hr., 21 min.
1 hr., 25 min.
5 hr., 1 min.
27 hr., 30 min.
3 hr., 49 min.
Learning about the law
or the form
19 hr., 54 min.
1 hr., 51 min.
30 min.
45 min.
1 hr., 59 min.
1 hr., 59 min.
Preparing and sending
the form to the IRS
23 hr., 48 min.
3 hr., 11 min.
33 min.
2 hr., 4 min.
2 hr., 31 min.
2 hr., 8 min.
If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be
happy to hear from you. You can write to the Internal Revenue Service, Tax Products Coordinating Committee,
SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave. NW, IR-6406, Washington, DC 20224. Do not send the tax form to this office.
Instead, see When and Where To File on page 2.
-17-
| File Type | application/pdf |
| File Title | Instruction 3115 (Rev. December 2009) |
| Subject | Instructions for Form 3115, Application for Change in Accounting Method |
| Author | W:CAR:MP:FP |
| File Modified | 2010-03-18 |
| File Created | 2010-03-18 |