Form 3115 Application for Change in Accounting Method

Form

3115

Application for Change in Accounting Method

(Rev. December 2009)
Department of the Treasury
Internal Revenue Service

Name of filer (name of parent corporation if a consolidated group) (see instructions)

OMB No. 1545-0152

Identification number (see instructions)
Principal business activity code number (see instructions)

Number, street, and room or suite no. If a P.O. box, see the instructions.

Tax year of change begins (MM/DD/YYYY)
Tax year of change ends (MM/DD/YYYY)

City or town, state, and ZIP code

Name of contact person (see instructions)

Name of applicant(s) (if different than filer) and identification number(s) (see instructions)

Contact person’s telephone number

If the applicant is a member of a consolidated group, check this box
. . . . . . . . . . . . . . . . .©
If Form 2848, Power of Attorney and Declaration of Representative, is attached (see instructions for when Form 2848 is
required), check this box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ©
Check the box to indicate the type of applicant.
Check the appropriate box to indicate the type
of accounting method change being requested.
Individual
Cooperative (Sec. 1381)
(see instructions)
Corporation
Partnership
S corporation
Depreciation or Amortization
Controlled foreign corporation
(Sec. 957)
Insurance co. (Sec. 816(a))
Financial Products and/or Financial Activities of
Financial Institutions
10/50 corporation (Sec. 904(d)(2)(E))
Insurance co. (Sec. 831)
©
Other (specify)
Other (specify) ©
Qualified personal service
corporation (Sec. 448(d)(2))
Exempt organization. Enter Code section ©
Caution. To be eligible for approval of the requested change in method of accounting, the taxpayer must provide all information that is relevant to the taxpayer
or to the taxpayer's requested change in method of accounting. This includes all information requested on this Form 3115 (including its instructions), as
well as any other information that is not specifically requested.
The taxpayer must attach all applicable supplemental statements requested throughout this form.

Part I

Information For Automatic Change Request

Enter the applicable designated automatic accounting method change number for the requested automatic change. Enter
only one designated automatic accounting method change number, except as provided for in guidance published by the
IRS. If the requested change has no designated automatic accounting method change number, check "Other," and provide
both a description of the change and citation of the IRS guidance providing the automatic change. See instructions.

1

Yes No

(b) Other
(a) Change No.
Description ©
Do any of the scope limitations described in section 4.02 of Rev. Proc. 2008-52 cause automatic consent to be
unavailable for the applicant's requested change? If "Yes," attach an explanation. . . . . . . . . . . .
Note. Complete Part II below and then Part IV, and also Schedules A through E of this form (if applicable).
©

2

Part II

Information For All Requests

Yes No

3

Did or will the applicant cease to engage in the trade or business to which the requested change relates, or
terminate its existence, in the tax year of change (see instructions)? . . . . . . . . . . . . . . . . . . .
If “Yes,” the applicant is not eligible to make the change under automatic change request procedures.

4a

Does the applicant (or any present or former consolidated group in which the applicant was a member during the
applicable tax year(s)) have any Federal income tax return(s) under examination (see instructions)? . . . . .
If “No,” go to line 5.

b Is the method of accounting the applicant is requesting to change an issue (with respect to either the applicant or
any present or former consolidated group in which the applicant was a member during the applicable tax year(s))
either (i) under consideration or (ii) placed in suspense (see instructions)? . . . . . . . . . . . . . .
Signature (see instructions)
Under penalties of perjury, I declare that I have examined this application, including accompanying schedules and statements, and to the best of my knowledge and belief,
the application contains all the relevant facts relating to the application, and it is true, correct, and complete. Declaration of preparer (other than applicant) is based on all
information of which preparer has any knowledge.

Filer

Preparer (other than filer/applicant)

Signature and date

Signature of individual preparing the application and date

Name and title (print or type)

Name of individual preparing the application (print or type)
Name of firm preparing the application

For Privacy Act and Paperwork Reduction Act Notice, see the instructions.

Cat. No. 19280E

Form

3115

(Rev. 12-2009)

Form 3115 (Rev. 12-2009)

Part II

Page

Information For All Requests (continued)

2

Yes No

4c

Is the method of accounting the applicant is requesting to change an issue pending (with respect to either the
applicant or any present or former consolidated group in which the applicant was a member during the applicable
tax year(s)) for any tax year under examination (see instructions)? . . . . . . . . . . . . . . . .
d Is the request to change the method of accounting being filed under the procedures requiring that the operating
division director consent to the filing of the request (see instructions)? . . . . . . . . . . . . . . .
If “Yes,” attach the consent statement from the director.
e Is the request to change the method of accounting being filed under the 90-day or 120-day window period? . .
If “Yes,” check the box for the applicable window period and attach the required statement (see instructions).
90 day
120 day: Date examination ended ©
f If you answered “Yes” to line 4a, enter the name and telephone number of the examining agent and the tax
year(s) under examination.
Name ©
Tax year(s) ©
Telephone number ©
g Has a copy of this Form 3115 been provided to the examining agent identified on line 4f? . . . . . . . .
5a Does the applicant (or any present or former consolidated group in which the applicant was a member during the
applicable tax year(s)) have any Federal income tax return(s) before Appeals and/or a Federal court?
. . . .
Appeals officer and/or
counsel for the government,
If “Yes,” enter the name of the (check the box)
telephone number, and the tax year(s) before Appeals and/or a Federal court.
Name ©
Tax year(s) ©
Telephone number ©
b Has a copy of this Form 3115 been provided to the Appeals officer and/or counsel for the government identified
on line 5a? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c Is the method of accounting the applicant is requesting to change an issue under consideration by Appeals and/or
a Federal court (for either the applicant or any present or former consolidated group in which the applicant was a
member for the tax year(s) the applicant was a member) (see instructions)? . . . . . . . . . . . . .
If “Yes,” attach an explanation.
If the applicant answered “Yes” to line 4a and/or 5a with respect to any present or former consolidated group,
6
attach a statement that provides each parent corporation’s (a) name, (b) identification number, (c) address,
and (d) tax year(s) during which the applicant was a member that is under examination, before an Appeals office,
and/or before a Federal court.
7

If, for federal income tax purposes, the applicant is either an entity (including a limited liability company) treated as
a partnership or an S corporation, is it requesting a change from a method of accounting that is an issue under
consideration in an examination, before Appeals, or before a Federal court, with respect to a Federal income tax
return of a partner, member, or shareholder of that entity? . . . . . . . . . . . . . . . . . . .

If “Yes,” the applicant is not eligible to make the change.
Does the applicable revenue procedure (advance consent or automatic consent) state that the applicant does not
receive audit protection for the requested change (see instructions)? . . . . . . . . . . . . . . .
b If “Yes,” attach an explanation.
9a Has the applicant, its predecessor, or a related party requested or made (under either an automatic change
procedure or a procedure requiring advance consent) a change in method of accounting within the past 5 years
(including the year of the requested change)? . . . . . . . . . . . . . . . . . . . . . . .
8a

b If "Yes," for each trade or business, attach a description of each requested change in method of accounting
(including the tax year of change) and state whether the applicant received consent.
c If any application was withdrawn, not perfected, or denied, or if a Consent Agreement granting a change was not
signed and returned to the IRS, or the change was not made or not made in the requested year of change, attach
an explanation.
10a Does the applicant, its predecessor, or a related party currently have pending any request (including any
concurrently filed request) for a private letter ruling, change in method of accounting, or technical advice? . . .
b If “Yes,” for each request attach a statement providing the name(s) of the taxpayer, identification number(s), the
type of request (private letter ruling, change in method of accounting, or technical advice), and the specific issue(s)
in the request(s).
11
Is the applicant requesting to change its overall method of accounting?
. . . . . . . . . . . . .
If “Yes,” check the appropriate boxes below to indicate the applicant’s present and proposed methods of
accounting. Also, complete Schedule A on page 4 of this form.
Present method:

Cash

Accrual

Hybrid (attach description)

Proposed method:

Cash

Accrual

Hybrid (attach description)
Form

3115

(Rev. 12-2009)

Form 3115 (Rev. 12-2009)

Part II

Page

Information For All Requests (continued)

3

Yes No

12

If the applicant is either (i) not changing its overall method of accounting, or (ii) is changing its overall method of
accounting and also changing to a special method of accounting for one or more items, attach a detailed and
complete description for each of the following:
a The item(s) being changed.
b The applicant’s present method for the item(s) being changed.
c The applicant’s proposed method for the item(s) being changed.
d The applicant’s present overall method of accounting (cash, accrual, or hybrid).

13

14

15a

Attach a detailed and complete description of the applicant’s trade(s) or business(es), and the principal business
activity code for each. If the applicant has more than one trade or business as defined in Regulations section
1.446-1(d), describe: whether each trade or business is accounted for separately; the goods and services
provided by each trade or business and any other types of activities engaged in that generate gross income; the
overall method of accounting for each trade or business; and which trade or business is requesting to change its
accounting method as part of this application or a separate application.
Will the proposed method of accounting be used for the applicant’s books and records and financial statements?
For insurance companies, see the instructions
. . . . . . . . . . . . . . . . . . . . . .
If “No,” attach an explanation.
Has the applicant engaged, or will it engage, in a transaction to which section 381(a) applies (e.g., a
reorganization, merger, or liquidation) during the proposed tax year of change determined without regard to any
potential closing of the year under section 381(b)(1)? . . . . . . . . . . . . . . . . . . . .

b If “Yes,” for the items of income and expense that are the subject of this application, attach a statement identifying
the methods of accounting used by the parties to the section 381(a) transaction immediately before the date of
distribution or transfer and the method(s) that would be required by section 381(c)(4) or (c)(5) absent consent to
the change(s) requested in this application.
Does the applicant request a conference with the IRS National Office if the IRS proposes an adverse response?
16
17

If the applicant is changing to either the overall cash method, an overall accrual method, or is changing its method
of accounting for any property subject to section 263A, any long-term contract subject to section 460, or
inventories subject to section 474, enter the applicant's gross receipts for the 3 tax years preceding the tax year of
change.
1st preceding
year ended: mo.

yr.

$

Part III
18

2nd preceding
year ended: mo.

$

yr.

3rd preceding
year ended: mo.

yr.

$

Information For Advance Consent Request

Yes No

Is the applicant’s requested change described in any revenue procedure, revenue ruling, notice, regulation, or
other published guidance as an automatic change request? . . . . . . . . . . . . . . . . . .
If “Yes,” attach an explanation describing why the applicant is submitting its request under advance consent
request procedures.

Attach a full explanation of the legal basis supporting the proposed method for the item being changed. Include a
detailed and complete description of the facts that explains how the law specifically applies to the applicant’s
situation and that demonstrates that the applicant is authorized to use the proposed method. Include all authority
(statutes, regulations, published rulings, court cases, etc.) supporting the proposed method. Also, include either a
discussion of the contrary authorities or a statement that no contrary authority exists.
20
Attach a copy of all documents related to the proposed change (see instructions).
21
Attach a statement of the applicant’s reasons for the proposed change.
22
If the applicant is a member of a consolidated group for the year of change, do all other members of the
consolidated group use the proposed method of accounting for the item being changed? . . . . . . . .
If “No,” attach an explanation.
23a Enter the amount of user fee attached to this application (see instructions). © $
b If the applicant qualifies for a reduced user fee, attach the required information or certification (see instructions).
19

Part IV

Section 481(a) Adjustment

Yes No

24

Does the applicable revenue procedure, revenue ruling, notice, regulation, or other published guidance require the applicant to
implement the requested change in method of accounting on a cut-off basis rather than a section 481(a) adjustment? . . .
If “Yes,” do not complete lines 25, 26, and 27 below.

25

Enter the section 481(a) adjustment. Indicate whether the adjustment is an increase (+) or a decrease (-) in
income. © $
Attach a summary of the computation and an explanation of the methodology
used to determine the section 481(a) adjustment. If it is based on more than one component, show the
computation for each component. If more than one applicant is applying for the method change on the same
application, attach a list of the name, identification number, principal business activity code (see instructions), and
the amount of the section 481(a) adjustment attributable to each applicant.
Form

3115

(Rev. 12-2009)

Form 3115 (Rev. 12-2009)

Part IV
26

Page

Section 481(a) Adjustment (continued)

4

Yes No

If the section 481(a) adjustment is an increase to income of less than $25,000, does the applicant elect to take the
entire amount of the adjustment into account in the year of change? . . . . . . . . . . . . . . .
Is any part of the section 481(a) adjustment attributable to transactions between members of an affiliated group, a
consolidated group, a controlled group, or other related parties? . . . . . . . . . . . . . . . .
If “Yes,” attach an explanation.

27

Schedule A—Change in Overall Method of Accounting (If Schedule A applies, Part I below must be completed.)
Part I
1

Change in Overall Method (see instructions)

Enter the following amounts as of the close of the tax year preceding the year of change. If none, state “None.” Also, attach a
statement providing a breakdown of the amounts entered on lines 1a through 1g.
Amount

$
a Income accrued but not received (such as accounts receivable) . . . . . . . . . . . . . .
b Income received or reported before it was earned (such as advanced payments). Attach a description of
the income and the legal basis for the proposed method . . . . . . . . . . . . . . . .
c Expenses accrued but not paid (such as accounts payable) . . . . . . . . . . . . . . .
d Prepaid expenses previously deducted . . . . . . . . . . . . . . . . . . . . . .
e Supplies on hand previously deducted and/or not previously reported . . . . . . . . . . . .
f Inventory on hand previously deducted and/or not previously reported. Complete Schedule D, Part II .
g Other amounts (specify). Attach a description of the item and the legal basis for its inclusion in the
calculation of the section 481(a) adjustment. ©
h Net section 481(a) adjustment (Combine lines 1a–1g.) Indicate whether the adjustment is an increase (+)
or decrease (-) in income. Also enter the net amount of this section 481(a) adjustment amount on Part IV,
$
line 25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
3

Yes
No
Is the applicant also requesting the recurring item exception under section 461(h)(3)? . . . . . . .
Attach copies of the profit and loss statement (Schedule F (Form 1040) for farmers) and the balance sheet, if applicable, as of
the close of the tax year preceding the year of change. Also attach a statement specifying the accounting method used when
preparing the balance sheet. If books of account are not kept, attach a copy of the business schedules submitted with the
Federal income tax return or other return (e.g., tax-exempt organization returns) for that period. If the amounts in Part I, lines
1a through 1g, do not agree with those shown on both the profit and loss statement and the balance sheet, attach a statement
explaining the differences.

Part II

Change to the Cash Method For Advance Consent Request (see instructions)

Applicants requesting a change to the cash method must attach the following information:
1

A description of inventory items (items whose production, purchase, or sale is an income-producing factor) and materials and
supplies used in carrying out the business.
An explanation as to whether the applicant is required to use the accrual method under any section of the Code or regulations.

2

Schedule B—Change to the Deferral Method for Advance Payments (see instructions)
1

If the applicant is requesting to change to the Deferral Method for advance payments described in section 5.02 of Rev. Proc.
2004-34, 2004-1 C.B. 991, attach the following information:
a A statement explaining how the advance payments meet the definition in section 4.01 of Rev. Proc. 2004-34.
b If the applicant is filing under the automatic change procedures of Rev. Proc. 2008-52, the information required by section
8.02(3)(a)-(c) of Rev. Proc. 2004-34.
c If the applicant is filing under the advance consent provisions of Rev. Proc. 97-27, the information required by section
8.03(2)(a)-(f) of Rev. Proc. 2004-34.

2

If the applicant is requesting to change to the deferral method for advance payments described in Regulations section
1.451-5(b)(1)(ii), attach the following.
A statement explaining how the advance payments meet the definition in Regulations section 1.451-5(a)(1).

a
b A statement explaining what portions of the advance payments, if any, are attributable to services, whether such services are
integral to the provisions of goods or items, and whether any portions of the advance payments that are attributable to
non-integral services are less than five percent of the total contract prices. See Regulations sections 1.451-5(a)(2)(i) and (3).
c A statement explaining that the advance payments will be included in income no later than when included in gross receipts for
purposes of the applicant's financial reports. See Regulations section 1.451-5(b)(1)(ii).
d A statement explaining whether the inventoriable goods exception of Regulations section 1.451-5(c) applies and if so, when
substantial advance payments will be received under the contracts, and how the exception will limit the deferral of income.
Form

3115

(Rev. 12-2009)

Form 3115 (Rev. 12-2009)

Page

5

Schedule C—Changes Within the LIFO Inventory Method (see instructions)
Part I

General LIFO Information

Complete this section if the requested change involves changes within the LIFO inventory method. Also, attach a copy of all
Forms 970, Application To Use LIFO Inventory Method, filed to adopt or expand the use of the LIFO method.
1

Attach a description of the applicant’s present and proposed LIFO methods and submethods for each of the following
items:
a Valuing inventory (e.g., unit method or dollar-value method).
b Pooling (e.g., by line or type or class of goods, natural business unit, multiple pools, raw material content, simplified dollarvalue method, inventory price index computation (IPIC) pools, vehicle-pool method, etc.).
c Pricing dollar-value pools (e.g., double-extension, index, link-chain, link-chain index, IPIC method, etc.).
d Determining the current-year cost of goods in the ending inventory (i.e., most recent acquisitions, earliest acquisitions during
the current year, average cost of current-year acquisitions, or other permitted method).

2
3
4
5

6

If any present method or submethod used by the applicant is not the same as indicated on Form(s) 970 filed to adopt or
expand the use of the method, attach an explanation.
If the proposed change is not requested for all the LIFO inventory, attach a statement specifying the inventory to which the
change is and is not applicable.
If the proposed change is not requested for all of the LIFO pools, attach a statement specifying the LIFO pool(s) to which the
change is applicable.
Attach a statement addressing whether the applicant values any of its LIFO inventory on a method other than cost. For
example, if the applicant values some of its LIFO inventory at retail and the remainder at cost, identify which inventory items
are valued under each method.
If changing to the IPIC method, attach a completed Form 970.

Part II

Change in Pooling Inventories

1

If the applicant is proposing to change its pooling method or the number of pools, attach a description of the contents of, and
state the base year for, each dollar-value pool the applicant presently uses and proposes to use.
If the applicant is proposing to use natural business unit (NBU) pools or requesting to change the number of NBU pools,
2
attach the following information (to the extent not already provided) in sufficient detail to show that each proposed NBU was
determined under Regulations section 1.472-8(b)(1) and (2):
a A description of the types of products produced by the applicant. If possible, attach a brochure.
b A description of the types of processes and raw materials used to produce the products in each proposed pool.
c If all of the products to be included in the proposed NBU pool(s) are not produced at one facility, state the reasons for the
separate facilities, the location of each facility, and a description of the products each facility produces.
d A description of the natural business divisions adopted by the taxpayer. State whether separate cost centers are maintained
and if separate profit and loss statements are prepared.
e A statement addressing whether the applicant has inventories of items purchased and held for resale that are not further
processed by the applicant, including whether such items, if any, will be included in any proposed NBU pool.
f A statement addressing whether all items including raw materials, goods-in-process, and finished goods entering into the
entire inventory investment for each proposed NBU pool are presently valued under the LIFO method. Describe any items that
are not presently valued under the LIFO method that are to be included in each proposed pool.
g A statement addressing whether, within the proposed NBU pool(s), there are items both sold to unrelated parties and
transferred to a different unit of the applicant to be used as a component part of another product prior to final processing.
3
If the applicant is engaged in manufacturing and is proposing to use the multiple pooling method or raw material content
pools, attach information to show that each proposed pool will consist of a group of items that are substantially similar. See
Regulations section 1.472-8(b)(3).
4
If the applicant is engaged in the wholesaling or retailing of goods and is requesting to change the number of pools used,
attach information to show that each of the proposed pools is based on customary business classifications of the applicant’s
trade or business. See Regulations section 1.472-8(c).
Form

3115

(Rev. 12-2009)

Form 3115 (Rev. 12-2009)

Page

6

Schedule D—Change in the Treatment of Long-Term Contracts Under Section 460, Inventories, or Other
Section 263A Assets (see instructions)
Part I
Change in Reporting Income From Long-Term Contracts (Also complete Part III on pages 7 and 8.)
1

To the extent not already provided, attach a description of the applicant’s present and proposed methods for reporting income
and expenses from long-term contracts. Also, attach a representative actual contract (without any deletion) for the requested
change. If the applicant is a construction contractor, attach a detailed description of its construction activities.
2a Are the applicant’s contracts long-term contracts as defined in section 460(f)(1) (see instructions)? . .
Yes
No
b If “Yes,” do all the contracts qualify for the exception under section 460(e) (see instructions)? . . . .
Yes
No
If line 2b is “No,” attach an explanation.
c If line 2b is “Yes,” is the applicant requesting to use the percentage-of-completion method using cost-tocost under Regulations section 1.460-4(b)? . . . . . . . . . . . . . . . . . . . .
Yes
No
d If line 2c is “No,” is the applicant requesting to use the exempt-contract percentage-of-completion
method under Regulations section 1.460-4(c)(2)? . . . . . . . . . . . . . . . . . . .
Yes
No
If line 2d is “Yes,” attach an explanation of what cost comparison the applicant will use to determine a
contract’s completion factor.
If line 2d is “No,” attach an explanation of what method the applicant is using and the authority for its use.
3a Does the applicant have long-term manufacturing contracts as defined in section 460(f)(2)? . . . . .
Yes
No
b If “Yes,” attach an explanation of the applicant’s present and proposed method(s) of accounting for longterm manufacturing contracts.
c Attach a description of the applicant’s manufacturing activities, including any required installation of manufactured goods.
4
To determine a contract’s completion factor using the percentage-of-completion method:
a Will the applicant use the cost-to-cost method in Regulations section 1.460-4(b)? . . . . . . . .
Yes
No
b If line 4a is “No,” is the applicant electing the simplified cost-to-cost method (see section 460(b)(3) and
Regulations section 1.460-5(c))? . . . . . . . . . . . . . . . . . . . . . . . .
Yes
No
5
Attach a statement indicating whether any of the applicant’s contracts are either cost-plus long-term
contracts or Federal long-term contracts.
Change in Valuing Inventories Including Cost Allocation Changes (Also complete Part III on pages 7 and 8.)
Part II
1
Attach a description of the inventory goods being changed.
2
Attach a description of the inventory goods (if any) NOT being changed.
Yes
No
3a Is the applicant subject to section 263A? If "No," go to line 4a . . . . . . . . . . . . . .
b Is the applicant's present inventory valuation method in compliance with section 263A (see instructions)?
If "No," attach a detailed explanation . . . . . . . . . . . . . . . . . . . . . . .
Yes
No
Inventory Not

Inventory Being Changed

Being Changed
Check the appropriate boxes below.
Present
method
Proposed
method
Present
method
Identification methods:
Specific identification . . . . . . . . . . . . . . . .
FIFO . . . . . . . . . . . . . . . . . . . . .
LIFO . . . . . . . . . . . . . . . . . . . . .
Other (attach explanation) . . . . . . . . . . . . . .
Valuation methods:
Cost . . . . . . . . . . . . . . . . . . . . .
Cost or market, whichever is lower . . . . . . . . . . .
Retail cost . . . . . . . . . . . . . . . . . . .
Retail, lower of cost or market . . . . . . . . . . . . .
Other (attach explanation) . . . . . . . . . . . . . .
b Enter the value at the end of the tax year preceding the year of change
5
If the applicant is changing from the LIFO inventory method to a non-LIFO method, attach the following information (see
instructions).
a Copies of Form(s) 970 filed to adopt or expand the use of the method.
b Only for applicants requesting advance consent. A statement describing whether the applicant is changing to the method
required by Regulations section 1.472-6(a) or (b), or whether the applicant is proposing a different method.
c Only for applicants requesting an automatic change. The statement required by section 22.01(5) of the Appendix of Rev.
Proc. 2008-52 (or its successor).

4a

Form

3115

(Rev. 12-2009)

Form 3115 (Rev. 12-2009)

Part III

Page

Method of Cost Allocation (Complete this part if the requested change involves either property subject
to section 263A or long-term contracts as described in section 460 (see instructions)).

7

Section A—Allocation and Capitalization Methods
Attach a description (including sample computations) of the present and proposed method(s) the applicant uses to capitalize direct
and indirect costs properly allocable to real or tangible personal property produced and property acquired for resale, or to allocate
and, where appropriate, capitalize direct and indirect costs properly allocable to long-term contracts. Include a description of the
method(s) used for allocating indirect costs to intermediate cost objectives such as departments or activities prior to the allocation of
such costs to long-term contracts, real or tangible personal property produced, and property acquired for resale. The description
must include the following:
1

The method of allocating direct and indirect costs (i.e., specific identification, burden rate, standard cost, or other reasonable
allocation method).

2

The method of allocating mixed service costs (i.e., direct reallocation, step-allocation, simplified service cost using the laborbased allocation ratio, simplified service cost using the production cost allocation ratio, or other reasonable allocation
method).

3

The method of capitalizing additional section 263A costs (i.e., simplified production with or without the historic absorption
ratio election, simplified resale with or without the historic absorption ratio election including permissible variations, the U.S.
ratio, or other reasonable allocation method).

Section B—Direct and Indirect Costs Required To Be Allocated
Check the appropriate boxes showing the costs that are or will be fully included, to the extent required, in the cost of real or tangible
personal property produced or property acquired for resale under section 263A or allocated to long-term contracts under section
460. Mark “N/A” in a box if those costs are not incurred by the applicant. If a box is not checked, it is assumed that those costs are
not fully included to the extent required. Attach an explanation for boxes that are not checked.
Present method

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Proposed method

Direct material . . . . . . . . . . . . . . . . . . . . . . . . .
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . .
Indirect labor
. . . . . . . . . . . . . . . . . . . . . . . . .
Officers’ compensation (not including selling activities) . . . . . . . . . . . .
Pension and other related costs . . . . . . . . . . . . . . . . . . .
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . .
Indirect materials and supplies . . . . . . . . . . . . . . . . . . . .
Purchasing costs . . . . . . . . . . . . . . . . . . . . . . . .
Handling, processing, assembly, and repackaging costs . . . . . . . . . . .
Offsite storage and warehousing costs . . . . . . . . . . . . . . . . .
Depreciation, amortization, and cost recovery allowance for equipment and facilities
placed in service and not temporarily idle . . . . . . . . . . . . . . . .
Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes other than state, local, and foreign income taxes . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance and repairs that relate to a production, resale, or long-term contract activity
Engineering and design costs (not including section 174 research and experimental
expenses)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Rework labor, scrap, and spoilage
. . . . . . . . . . . . . . . . . .
Tools and equipment . . . . . . . . . . . . . . . . . . . . . . .
Quality control and inspection . . . . . . . . . . . . . . . . . . . .
Bidding expenses incurred in the solicitation of contracts awarded to the applicant . .
Licensing and franchise costs . . . . . . . . . . . . . . . . . . . .
Capitalizable service costs (including mixed service costs)
. . . . . . . . . .
Administrative costs (not including any costs of selling or any return on capital) . . . .
Research and experimental expenses attributable to long-term contracts . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other costs (Attach a list of these costs.) . . . . . . . . . . . . . . . .
Form

3115

(Rev. 12-2009)

Form 3115 (Rev. 12-2009)

Part III

Page

8

Method of Cost Allocation (see instructions) (continued)

Section C—Other Costs Not Required To Be Allocated (Complete Section C only if the applicant is requesting to change its
method for these costs.)
Present method

1
2
3
4
5
6
7
8
9
10
11

Marketing, selling, advertising, and distribution expenses . . . . . . . . .
Research and experimental expenses not included in Section B, line 26 . . . .
Bidding expenses not included in Section B, line 22
. . . . . . . . . .
General and administrative costs not included in Section B . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . .
Cost of strikes . . . . . . . . . . . . . . . . . . . . . . .
Warranty and product liability costs . . . . . . . . . . . . . . . .
Section 179 costs . . . . . . . . . . . . . . . . . . . . . .
On-site storage . . . . . . . . . . . . . . . . . . . . . . .
Depreciation, amortization, and cost recovery allowance not included in Section B,
line 11
. . . . . . . . . . . . . . . . . . . . . . . . .
Other costs (Attach a list of these costs.) . . . . . . . . . . . . . .

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Proposed method

Schedule E—Change in Depreciation or Amortization (see instructions)
Applicants requesting approval to change their method of accounting for depreciation or amortization complete this section.
Applicants must provide this information for each item or class of property for which a change is requested.
Note. See the List of Automatic Accounting Method Changes in the instructions for information regarding automatic changes
under sections 56, 167, 168, 197, 1400I, 1400L, or former section 168. Do not file Form 3115 with respect to certain late elections
and election revocations (see instructions).
1
2

3

Is depreciation for the property determined under Regulations section 1.167(a)-11 (CLADR)? . . . .
If “Yes,” the only changes permitted are under Regulations section 1.167(a)-11(c)(1)(iii).
Is any of the depreciation or amortization required to be capitalized under any Code section (e.g., section
263A)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If “Yes,” enter the applicable section ©
Has a depreciation, amortization, or expense election been made for the property (e.g., the election under
sections 168(f)(1), 179, or 179C)? . . . . . . . . . . . . . . . . . . . . . . . .
If “Yes,” state the election made ©

Yes

No

Yes

No

Yes

No

4a

To the extent not already provided, attach a statement describing the property being changed. Include in the description the
type of property, the year the property was placed in service, and the property’s use in the applicant’s trade or business or
income-producing activity.
b If the property is residential rental property, did the applicant live in the property before renting it? . .
Yes
No
c Is the property public utility property? . . . . . . . . . . . . . . . . . . . . . .
Yes
No
5
To the extent not already provided in the applicant’s description of its present method, attach a statement explaining how the
property is treated under the applicant’s present method (e.g., depreciable property, inventory property, supplies under
Regulations section 1.162-3, nondepreciable section 263(a) property, property deductible as a current expense, etc.).
If the property is not currently treated as depreciable or amortizable property, attach a statement of the facts supporting the
6
proposed change to depreciate or amortize the property.
If the property is currently treated and/or will be treated as depreciable or amortizable property, provide the following
7
information for both the present (if applicable) and proposed methods:
a

The Code section under which the property is or will be depreciated or amortized (e.g., section 168(g)).

b The applicable asset class from Rev. Proc. 87-56, 1987-2 C.B. 674, for each asset depreciated under section 168 (MACRS) or
under section 1400L; the applicable asset class from Rev. Proc. 83-35, 1983-1 C.B. 745, for each asset depreciated under
former section 168 (ACRS); an explanation why no asset class is identified for each asset for which an asset class has not
been identified by the applicant.
c The facts to support the asset class for the proposed method.
d The depreciation or amortization method of the property, including the applicable Code section (e.g., 200% declining balance
method under section 168(b)(1)).
e The useful life, recovery period, or amortization period of the property.
f The applicable convention of the property.
g A statement of whether or not the additional first-year special depreciation allowance (for example, as provided by section
168(k), 168(l), 168(m), 168(n), 1400L(b), or 1400N(d)) was or will be claimed for the property. If not, also provide an explanation
as to why no special depreciation allowance was or will be claimed.
Form

3115

(Rev. 12-2009)