3115 Instructions for Form 3115

Instructions for Form 3115

Department of the Treasury
Internal Revenue Service

(Rev. December 2022)

Application for Change in Accounting Method
Section references are to the Internal Revenue Code unless
otherwise noted.
All references to Rev. Proc. 2015-13 are to Rev. Proc.
2015-13, 2015-5 I.R.B. 419 (as clarified and modified by
CAUTION Rev. Proc. 2015-33, 2015-24 I.R.B. 1067, and as
modified by Rev. Proc. 2021-34, 2021-35 I.R.B. 337; Rev. Proc.
2021-26, 2021-22 I.R.B. 116; by Rev. Proc. 2017-59, 2017-48
I.R.B. 543, and section 17.02 of Rev. Proc. 2016-1, 2016-1
I.R.B. 1), or any successor.

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All references to Rev. Proc. 2022-14 and the List of Automatic
Changes are to Rev. Proc. 2022-14, 2022-7 I.R.B. 502 (as
modified by Rev. Proc. 2022-23, 2022-18 I.R.B. 105 and Rev.
Proc. 2023-11, 2023-3 I.R.B. 417) or any successor.
All references to Rev. Proc. 2023-1 are to Rev. Proc. 2023-1,
2023-1 I.R.B. 1, or any successor (updated annually).

Future Developments

For the latest information about developments related to Form
3115 and its instructions, such as legislation enacted after they
were published, go to IRS.gov/Form3115.

What's New
Changes related to the deferral method for advance payments, cost offset methods, and/or the applicable financial
statement income inclusion rule. The instructions for
Schedule B have been updated to include additional information
about accounting method changes relating to the deferral
method for advance payments, cost offset methods, and
methods to conform to the applicable financial statement (AFS)
income inclusion rule under section 451.
Research and experimental expenditures. Effective for
specified research or experimental expenditures paid or incurred
in tax years beginning after 2021, no deduction is allowed for
such expenditures. Instead, you must capitalize and amortize
these amounts over a 5-year period for amounts attributable to
domestic research and over a 15-year period for amounts
attributable to foreign research. See DCN 265 and Rev. Proc.
2023-11, 2023-3 I.R.B. 417.

General Instructions
Purpose of Form

File Form 3115 to request a change in either an overall
accounting method or the accounting treatment of any item.

Method Change Procedures
When filing Form 3115, you must determine if the IRS
has issued any new published guidance which includes
CAUTION revenue procedures, revenue rulings, notices,
regulations, or other relevant guidance in the Internal Revenue
Bulletin (I.R.B ) For the latest information, go to IRS.gov.

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For general application procedures on requesting accounting
method changes, see Rev. Proc. 2015-13. Rev. Proc. 2015-13
provides procedures for both automatic and non-automatic
accounting method changes.
Feb 7, 2023

Automatic change procedures. Unless otherwise provided in
published guidance, you must file under the automatic change
procedures if you are eligible to request consent to make an
accounting method change under the automatic change
procedures for the requested year of change. See the
instructions for Part I Information for Automatic Change Request,
later, and the List of Automatic Changes in Rev. Proc. 2022-14.
No user fee is required for a Form 3115 filed under the
automatic change procedures. An applicant that timely files and
complies with the automatic change procedures is granted
consent to change its accounting method, subject to review by
the IRS National Office and operating division director. If it is
reviewed by the IRS, you will be notified if information in addition
to that requested on Form 3115 is required or if your request is
denied. Ordinarily, you are required to file a separate Form 3115
for each accounting method change. However, in some cases,
you are required or permitted to file a single Form 3115 for
particular concurrent accounting method changes. See section
6.03(1)(b) of Rev. Proc. 2015-13 for more information.
Note. The List of DCNs (Designated automatic accounting
method change numbers) at the end of these instructions is a list
of many accounting method changes and is presented for
informational purposes only and subject to the most recently
issued revenue procedures.
You may qualify for a reduced Form 3115 filing

TIP requirement for certain DCNs. A reduced Form 3115

filing requirement involves completing only certain lines
and schedules of Form 3115. For qualifying changes and filing
requirements, see Rev. Proc. 2022-14. For example, qualified
small taxpayers are eligible for a reduced Form 3115 filing
requirement for DCNs 7, 8, 21, 88, 89, 107, 121, 145, 157,
184-193, 198, 199, 200, 205, 206, 207, and 222.
Non-automatic change procedures. If you do not qualify to
file under the automatic change procedures for the requested
accounting method change for the requested year of change,
you may be able to file under the non-automatic change
procedures. See Non-automatic change-scope and eligiblity
rules , under Part III, later. If the requested change is approved
by the IRS National Office, the filer will receive a letter ruling on
the requested change. File a separate Form 3115 for each
unrelated item or submethod that is being changed. A user fee is
required. See the instructions for Part III for more information.

Who Must File

The filer is the entity or person required to file Form 3115,
whether on its own behalf or on behalf of another entity. An
applicant is an entity, a person, or a separate and distinct trade
or business of an entity or a person (for purposes of Regulations
section 1.446-1(d)), whose accounting method is being
changed.
For a consolidated group of corporations, the common parent
corporation must file Form 3115 for an accounting method
change for itself and for any member of the consolidated group.
For example, the common parent corporation of a consolidated
group is the filer when requesting an accounting method change
for another member of that consolidated group (or a separate
and distinct trade or business of that member), and the other

Cat. No. 63215H

File Form 3115 with the IRS National Office at the address listed
in the Address Chart for Form 3115 below. Alternatively, Form
3115 may be submitted by secure electronic facsimile or
encrypted electronic mail. 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.

member (or trade or business) on whose behalf Form 3115 is
filed is the applicant.
For information on the difference between a filer and an
applicant, see Name(s) and Signature(s), later.
For information on a controlled foreign corporation (CFC) or
10/50 corporation without a U.S. trade or business, see section
6.02(6) of Rev. Proc. 2015-13.

The IRS normally sends an acknowledgment of receipt within
60 days after receiving a Form 3115 filed under the
non-automatic change procedures. If the filer does not receive
an acknowledgment of receipt for a non-automatic change
request within 60 days, the filer can inquire to:

Generally, a filer must file a separate Form 3115 for each
applicant seeking consent to change an accounting method. A
separate Form 3115 and user fee (for non-automatic change
requests) must be submitted for each applicant and each
separate trade or business of an applicant, including a qualified
subchapter S subsidiary (QSub) or a single-member limited
liability company (LLC), requesting an accounting method
change. See section 9.02 of Rev. Proc. 2023-1.

Internal Revenue Service
Control Clerk
CC:IT&A, Room 4512
1111 Constitution Ave. NW
Washington, DC 20224

However, identical accounting method changes for two or
more of the following in any combination may be included in a
single Form 3115.
1. Entities with a common sponsor.
2. Members of a consolidated group;
3. Separate and distinct trades or businesses (for purposes
of Regulations section 1.446-1(d)) of that entity or member(s) of
a consolidated group. Separate and distinct trades or
businesses include QSubs and single-member LLCs;
4. Partnerships that are wholly owned within a consolidated
group; and
5. CFCs and 10/50 corporations that do not engage in a
trade or business within the United States where (i) all controlling
domestic shareholders (as provided in Regulations section
1.964-1(c)(5)) of the CFCs and of the 10/50 corporations, as
applicable, are members of a consolidated group; or (ii) the
taxpayer is the sole controlling domestic shareholder of the
CFCs or of the 10/50 corporations.

In specified circumstances, you are required to send
additional copies of Form 3115 to another IRS
CAUTION address. For example, another copy of Form 3115
would be sent when an applicant is under examination, before
an Appeals office, or before a federal court, or is a certain foreign
corporation or certain foreign partnership. See section 6.03(3) of
Rev. Proc. 2015-13 for more information. Also see the
instructions for Part II, lines 6 and 8, later.

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Address Chart for Form 3115
File Form 3115 at the applicable IRS address listed below.

For information on what is an identical accounting method
change, see section 15.07(4) of Rev. Proc. 2023-1.

When and Where To File
Automatic change requests. Except if instructed differently,
you must file Form 3115 under the automatic change procedures
in duplicate as follows.
• Attach the original Form 3115 to the filer's timely filed
(including extensions) federal income tax return for the year of
change. The original Form 3115 attachment does not need to be
signed.
• File a copy of the signed Form 3115 (duplicate copy) with the
IRS National Office at the address provided in the Address Chart
for Form 3115, later, no earlier than the first day of the year of
change and no later than the date the original is filed with the
federal income tax return for the year of change. This signed
Form 3115 may be a photocopy. For more on the signature
requirement, see Name(s) and Signature(s), later. Alternatively,
the duplicate copy of the signed Form 3115 may be submitted by
fax.
The IRS does not send acknowledgements of receipt for
automatic change requests.

A non-automatic change
request

An automatic change
request (Form 3115 copy)

Delivery by mail

Internal Revenue Service
Attn: CC:PA:LPD:TSS
P.O. Box 7604
Benjamin Franklin Station
Washington, DC 20044

Internal Revenue Service
Ogden, UT 84201
M/S 6111

Delivery by
private delivery
service

Internal Revenue Service
Attn: CC:PA:LPD:TSS
Room 5336
1111 Constitution Ave. NW
Washington, DC 20224

Internal Revenue Service
1973 N. Rulon White Blvd.
Ogden, UT 84201
Attn: M/S 6111

Delivery by
facsimile

877-773-4950 (Secure)

844-249-8134

Delivery by
encrypted
electronic mail

[email protected].
gov

N/A

Late Application

In general, a filer 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 section 6.03(4)(b) of Rev. Proc.
2015-13 and 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. 2023-1.
However, an automatic 6-month extension from the due date
(excluding any extension) of the federal income tax return to file
Form 3115 may be available for automatic change requests. For
details, see section 6.03(4)(a) of Rev. Proc. 2015-13, and
Regulations section 301.9100-2.

For filing procedures relating to automatic change

TIP requests for certain foreign corporations and foreign

partnerships, see section 6.03(1)(a)(ii) and (iii) of Rev.
Proc. 2015-13.

An applicant 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 a non-automatic change request, a
separate user fee for its accounting method change request. For
the schedule of user fees, see section (A)(3)(b), (A)(4), and (A)
(5)(d) in Appendix A of Rev. Proc. 2023-1.

Non-automatic change requests. You must file Form 3115
under the non-automatic change procedures during the tax year
for which the change is requested, unless otherwise provided by
published guidance. See section 6.03(2) of Rev. Proc. 2015-13.
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Useful Items

Non-consolidated corporations, personal service corporations, S corporations, and cooperatives. 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 in the space provided.

Refer to the following items for more information on changing an
accounting method.
Rev. Proc. 2023-1. See Rev. Proc. 2023-1. This revenue
procedure provides specific and additional procedures for
requesting an accounting method change, including the user fee
for non-automatic method of change requests.

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 an accounting method
change. 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
in the space provided.

Rev. Proc. 2015-13. See Rev. Proc. 2015-13. This revenue
procedure provides the automatic and non-automatic method
change procedures to obtain consent of the IRS to change an
accounting method.
Rev. Proc. 2022-14. See Rev. Proc. 2022-14. This revenue
procedure contains a list of accounting method changes that
may be eligible to file under the automatic method change
procedures.

Multiple entities with a common sponsor. Enter the name of
the common sponsor on the first line of Form 3115. Enter on the
fourth line the name of each entity with the common sponsor that
is requesting an accounting method change. In the signature
section, enter the signature of the officer who has personal
knowledge of the facts and authority to bind the common
sponsor and the applicants with that common sponsor in the
matter, and that officer’s name and official title in the space
provided.

Inflation-adjusted amount. Certain automatic accounting
method changes require that the applicant’s average annual
gross receipts for the 3 preceding tax years be at or less than the
“inflation-adjusted amount” (set forth in an annual revenue
procedure) See, for example, DCN 22. For years beginning in
2022, the inflation adjusted amount is $27,000,000. See Rev.
Proc. 2021-45.
Pub. 538, Accounting Periods and Methods. This
publication provides general information on accounting
methods.

Separate and distinct trade or business of an entity. Enter
the name of the entity (or common parent corporation if the entity
is a member of a consolidated group) on the first line of Form
3115. Also enter the name of the separate and distinct trade or
business requesting an accounting method change on the fourth
line. In the signature section, enter the signature of the individual
who has personal knowledge of the facts and authority to bind
the separate and distinct trade or business of the entity in the
matter, and that person's name and official title in the space
provided.

Specific Instructions
Name(s) and Signature(s)

Enter the name of the filer on the first line of page 1 of Form
3115.
In general, the filer of Form 3115 is the applicant. However, in
circumstances where Form 3115 is filed on behalf of the
applicant, 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. Receivers, trustees, or
assignees must sign any Form 3115 they are required to file.

CFC or 10/50 corporation. For a CFC or 10/50 corporation
with a U.S. trade or business, enter the name of the designated
(controlling domestic) shareholder that retains the jointly
executed consent as provided for in Regulations section
1.964-1(c)(3)(ii) (or, if the designated shareholder is a member
of a consolidated group, the common parent corporation) on the
first line of Form 3115. Enter the name of the CFC or 10/50
corporation on the fourth line of Form 3115. In addition, a Form
3115 filed on behalf of the CFC or 10/50 corporation by its
controlling domestic shareholder(s) (or the common parent)
must be signed by an authorized officer of the designated
(controlling domestic) shareholder (or the common parent). 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 Form 3115 is filed for multiple (i) applicants in a
consolidated group of corporations, (ii) applicants with a
common sponsor, (iii) CFCs, (iv) wholly owned partnerships
within a consolidated group, and/or (v) separate and distinct
trades or businesses (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 24a (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 Form 3115, signed under
penalties of perjury using the same language as in the
declaration on page 1 of Form 3115.

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 in the space provided.

Individuals. If Form 3115 is filed for a couple 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, include the signature of
one of the general partners or LLC members who has personal
knowledge of the facts and who is authorized to sign. Enter that
person's name and official title in the space provided. If the
authorized partner is a member of a consolidated group, then an
authorized officer of the common parent corporation with
personal knowledge of the facts must sign.

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 in the space provided.
Preparer (other than filer/applicant). If the individual
preparing Form 3115 is not the filer or applicant, the preparer
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Form 2848

must also sign, and include the firm's name, where applicable.
Generally, for both automatic and non-automatic changes, the
preparer (if not the filer or applicant) must sign the original and
copies of Form 3115. If Form 3115 is e-filed, the preparer need
not sign the original e-filed Form 3115 but must still complete the
preparer information and, if applicable, must sign the duplicate
automatic Form 3115 copy.

Authorization to (1) represent the filer before the IRS, (2) receive
a copy of the requested letter ruling, or (3) perform any other
act(s) must be properly reflected on Form 2848. For further
details for an authorized representative and a power of attorney,
see section 9.03(8) and (9) of Rev. Proc. 2023-1.

Identification Number

A Form 2848 must be attached to Form 3115 in order for the
IRS to discuss a Form 3115 with the filer's representative, even if
the filer's representative prepared and/or signed the Form 3115.

Enter the filer's taxpayer identification number on the first line of
Form 3115 as follows.
• Individuals enter their social security number (SSN). For a
resident or nonresident alien, enter an individual taxpayer
identification number (ITIN). If Form 3115 is for a couple who file
a joint return, enter the identification numbers of both spouses.
• All others enter the employer identification number (EIN).
• If the filer is the common parent corporation of a consolidated
group of corporations or a common sponsor of multiple entities,
enter the EIN of the common parent or common sponsor on the
first line of Form 3115. If a member of a consolidated group other
than, or in addition to, the common parent, or if an entity with a
common parent, or if an entity with a common sponsor is
requesting an accounting method change, enter the EIN of the
applicant on the fourth line.
• If the common sponsor is filing Form 3115 on behalf of
multiple applicants with that common sponsor, or if the common
parent is filing Form 3115 on behalf of multiple applicants in a
consolidated group of corporations, multiple CFCs or 10/50
corporations, or multiple and distinct trades or businesses of a
member (including QSubs or single-member LLCs), attach a
schedule listing each applicant and its identification number (if
applicable).
• If the applicant is a foreign entity that is not otherwise required
to have or obtain an EIN, enter “Not applicable” in the space
provided for the identifying number.

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CAUTION

If the filer intends to have the authorized representative
receive copies of correspondences regarding its Form
3115, it must check the appropriate box on Form 2848.

Fax Number for Option To Receive
Correspondence by Fax or Electronic Facsimile

Check the box to indicate whether the filer wants to receive, or
wants its authorized representative to receive, a copy of
correspondence regarding its Form 3115 (for example,
additional information letters or the letter ruling) by fax or
electronic facsimile. If the filer answered yes, the filer must
attach a statement indicating the applicant’s intention to request
to correspond by fax or electronic facsimile and include the
contact person’s fax number. The listed person(s) must be either
authorized to sign the Form 3115 or an authorized
representative of the filer that is included on Form 2848. For
further details on the fax procedures, see section 9.04(3) of Rev.
Proc. 2023-1.

Option To Receive Correspondence by
Encrypted Email Attachment

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 encrypted email attachment must attach to Form 3115
a statement requesting the service. The request must specify
which email encryption method is to be used and, if the taxpayer
has not already provided the appropriate memorandums of
understanding (MOUs) to use encrypted email attachments,
must include those MOUs. For acceptable email encryption
methods and procedures, see section 9.05(3) of Rev. Proc.
2023-1.

Principal Business Activity Code

If the filer is a business, enter the 6-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.

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.

Type of Accounting Method Change
Requested

Check the appropriate box on Form 3115 to indicate the type of
change being requested.
• Depreciation or amortization. Check this box for a change
in (1) depreciation or amortization (for example, the depreciation
method or recovery period); (2) the treatment of salvage
proceeds or costs of removal; (3) the method of accounting for
dispositions of depreciable property; or (4) the 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), or in the financial
activities of a financial institution (for example, a lending
institution, a regulated investment company, a real estate
investment trust, or a real estate mortgage investment conduit).
• Other. For non-automatic change 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; or change to the

Year of Change

The year of change is the first tax year the applicant uses the
proposed accounting method, even if no affected items are
taken into account for that year. Each applicant (and filer, if also
an applicant) must list its respective year of change.
Example. A calendar year taxpayer that has consistently
capitalized certain building repair costs from 2015 to 2020 files a
Form 3115 to change its method of accounting for building repair
costs to begin deducting these repair costs in 2021. The year of
change is calendar year 2021. Each applicant (and filer, if also
an applicant) must list its respective year of change.

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.

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Table A: Parts To Complete on Form 3115 for Accounting Method Changes
Information to be completed for automatic and non-automatic change requests
Automatic Change

Part I

Part II

X

X

Non-Automatic Change

Part III

X

X

completed contract method for long-term contracts, section
460).

Part IV

X

X

Part I—Information for Automatic
Change Request

For automatic change requests, this informational
requirement is satisfied by properly completing Part I, line 1, of
Form 3115.

Automatic Changes—Scope and Eligibility
Rules

As noted on Form 3115, the filer must provide all information
relevant to the requested accounting method change. All
relevant information includes all information requested on Form
3115, these instructions, and any other relevant information,
even if not specifically identified on Form 3115 or in these
instructions. Table A illustrates, for automatic and non-automatic
changes, the Parts of Form 3115 that must be completed. Table
B illustrates the Schedule(s) to be completed for common
method changes.

Line 1a. Enter the DCN on line 1a. These numbers may be
found in the List of DCNs at the end of the instructions, the List
of Automatic Changes, 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 1a if
specifically permitted in applicable published guidance to file a
single Form 3115 for particular concurrent accounting method
changes. See section 6.03(1)(b) of Rev. Proc. 2015-13. For
example, an applicant requesting both a change to deduct repair
and maintenance costs for tangible property (DCN 184) and a

Table B: Schedules To Complete on Form 3115 for Common Accounting Method Changes
Information to be completed for common method change requests
Common Method
Changes

Schedule A
Part I

Part II

Accrual to Cash

X

X

Cash to Accrual

X

Schedule B

Schedule C
Part I

Part II

Schedule D
Part I

Part II

Schedule E
Part III

X**

Capitalize to Expense
Expense to Capitalize

X*

Depreciation

X

Long-Term Contracts

X

Inventory Valuation
Change

X

X
X

Must fully complete section
Section does not need to be completed.

X*

X
X

LIFO Change—Including
Pooling
Revenue Recognition
Change for Deferral
Method for Advance
Payments, Cost Offset
Methods, and/or
Applicable Financial
Statement Income
Inclusion Rule

X*

To be completed if applicable—See instructions regarding Schedules D and E, later

X** To be completed if applicable—See instructions regarding Schedule B, later.

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X

X*

non-automatic change requests. See Table B for a sample of
common method changes and the Form 3115 Schedule(s) to be
completed for each. Additionally, see published guidance for any
additional required information or statements. For example, an
applicant that wants to use the mark-to-market method of
accounting under section 475(e) or (f) (DCN 64) must, by the
due dates provided in section 5.03 of Rev. Proc. 99-17, file a
statement that satisfies the requirements of section 5.04 of Rev.
Proc. 99-17.

change to capitalize acquisition or production costs (DCN 192)
may file a single Form 3115 for both changes by including both
DCNs 184 and 192 on line 1a of Form 3115.
Line 1b. If the accounting method change is not included in the
List of Automatic Changes or assigned a number in the
published guidance providing the automatic accounting method
change, check the box for “Other” on line 1b and identify the
revenue procedure or other published guidance under which the
automatic accounting method change is being requested.

Part II—Information for All Requests

Line 2. If “Yes,” provide an explanation as to why the
applicant(s) qualifies to file under the automatic change
procedures. If other published guidance provides for an
automatic accounting method change not listed in the List of
Automatic Changes, attach a statement citing the guidance. For
example, for an applicant electing out of certain exemptions from
securities dealer status to the mark-to-market method under
section 475, attach a statement citing Rev. Proc. 97-43. If the
eligibility rules otherwise restrict the applicant from requesting
the change under the automatic change procedures, but such
rules are waived for the requested change, then check “No.”

Line 4. If no, check “No.” If yes, check “Yes” and attach a
statement explaining why the applicant is eligible to change its
accounting method. For example, specific guidance may permit
an applicant to change its method of accounting in its final tax
year. See section 5.03(2) of Rev. Proc. 2015-13 and sections
6.01 (DCN 7) and 6.07 (DCN 107) of Rev. Proc. 2022-14, or any
successor.
Ordinarily, the IRS will not consent to a request for an
accounting method change when an applicant ceases to engage
in the trade or business or terminates its existence. Generally,
an applicant is considered to cease to engage in a trade or
business if the applicant terminates its existence for federal
income tax purposes, ceases operation of the trade or business,
or transfers substantially all the assets of the trade to another
taxpayer. For example, a cessation of a trade or business occurs
when a trade or business is incorporated or the assets of the
trade or business are contributed to a partnership. See sections
3.04, 5.01, and 5.03 of Rev. Proc. 2015-13.

Certain automatic method change requests require
concurrent method changes to be made in order to
CAUTION qualify for the automatic change procedures. For
example, a taxpayer making a change for accrued bonuses
under DCN 133 must make the concurrent UNICAP change if
the taxpayer is subject to section 263A but is not capitalizing the
accrued bonuses under section 263A.

!

Generally, an applicant is only eligible to use the automatic
change procedures of Rev. Proc. 2015-13 if it satisfies the
following requirements (see section 5.01(1) of Rev. Proc.
2015-13).
1. On the date the applicant files a Form 3115, the change is
described in the List of Automatic Changes.
2. On the date the applicant files a Form 3115, the applicant
meets all requirements for the change provided in the applicable
section of the List of Automatic Changes.
3. The requested change is not to the principal method
under Regulations sections 1.381(c)(4)-1(d)(1) or
1.381(c)(5)-1(d)(1).
4. The requested year of change is not the final year of the
trade or business (but see the instructions for line 4).
5. For an overall method of accounting change, the
applicant has not made or requested an overall method change
during any of the 5 tax years ending with the year of change.
6. The applicant has not made or requested a change for
the same item during any of the 5 tax years ending with the year
of change, and
7. In the case of a taxpayer that uses the AFS cost offset
method in Regulations section 1.451-3(c) and/or the advance
payment cost offset method in Regulations section 1.451-8(e)
and wants to make a cost-offset related inventory method
change, as defined in section 5.06 of Rev. Proc. 2015-13, as
modified by section 4.02 of Rev. Proc. 2021-34, 2021-35 I.R.B.
337 (that is described in the List of Automatic Changes) the
taxpayer makes a concurrent change under section 16.10(2)(a)
(iii)(E) and/or section 16.10(2)(a)(iv)(F) or section 16.10(2)(b)(ii)
(E) of Rev. Proc. 2022-14, as applicable.

Line 5. When an acquiring corporation operates the trades or
businesses of the parties as separate and distinct trades or
businesses after the date of distribution or transfer, the acquiring
corporation must use a carryover method. See Regulations
sections 1.381(c)(4)-1(a)(2) and 1.381(c)(5)-1(a)(2). On the
other hand, when the acquiring corporation does not operate the
trades or businesses of the parties as separate and distinct
trades or businesses after the date of distribution or transfer, the
acquiring corporation will generally use the principal method.
The applicant does not need to secure the Commissioner's
consent to use the principal method. See Regulations sections
1.381(c)(4)-1(d)(1) and 1.381(c)(5)-1(d)(1).
Line 6a. Generally, the applicant is under examination with
respect to a federal income tax return as of the date the
applicant (or filer) is contacted in any manner by a representative
of the IRS for the purpose of scheduling or conducting any type
of examination of the return. See section 3.18 of Rev. Proc.
2015-13.
Line 6b. Generally, the applicant's accounting method is an
issue under consideration if the examining agent has given the
applicant (or filer) written notification specifically citing the
treatment of the item as an issue under consideration. If an
examining agent does not propose an adjustment for the item
that is an issue under consideration during the examination, the
item continues to be an issue under consideration after the
examination ends only if the issue is placed in suspense. The
applicant's accounting method is an issue placed in suspense if
the examining agent has given the applicant (or filer) written
notification of the IRS's intent to examine the issue during the
examination of the subsequent tax year(s) to be examined. See
section 3.08 of Rev. Proc. 2015-13. A partnership or an S
corporation has an issue under consideration before
examination if the same item is an issue under consideration in
an examination of a partner’s, member’s, or shareholder's
federal income tax return. For consolidated groups, see section
3.08 of Rev. Proc. 2015-13 for issue under consideration rules.

Note. Some automatic changes in methods of accounting waive
some of the above requirements. These changes may be found
in the List of Automatic Changes or the published guidance
providing the automatic accounting method change.
Line 3. The filer must complete Form 3115, including any
required statements or attachments. See Table A for the Form
3115 Part(s) required to be completed for all automatic and
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!

CAUTION

• 120-day window period. The 120-day window is the
120-day period following the date an examination of the
applicant ends, regardless of whether a subsequent examination
has commenced. An applicant qualifies under the 120-day
window period if Form 3115 is filed in a 120-day window and the
accounting method for the same item the applicant is requesting
to change is not an issue under consideration. See section
8.02(1)(b) of Rev. Proc. 2015-13. If the applicant checks this
box, also include the date the examination ended in the
designated space on line 7b.
• Method not before the director. The present method is not
before the director when it is (A) a change from a clearly
permissible method of accounting or (B) a change from an
impermissible method of accounting and the impermissible
method was adopted subsequent to the tax year(s) under
examination on the date the applicant files Form 3115. Checking
this box satisfies the statement requirement of section 8.02(1)(c)
(ii) of Rev. Proc. 2015-13.
• Change resulting in a negative adjustment. Check this
box if the change results in a negative adjustment. A negative
adjustment occurs where an item (A) results in a negative
section 481(a) adjustment for that item for the year of change,
and (B) would have resulted in a negative section 481(a)
adjustment in each tax year under examination if the change in
accounting method for that item had been made in the tax
year(s) under examination. Checking this box satisfies the
statement requirement in section 8.02(1)(e)(iii) of Rev. Proc.
2015-13.
• CAP. This box applies only to consolidated group members
participating in the compliance assurance process (CAP). In
general, audit protection applies to a new member if the new
member is under audit solely by joining a consolidated group
that participates in the CAP. See section 8.02(1)(d) of Rev. Proc.
2015-13. Checking this box satisfies the statement requirement
of section 8.02(1)(d)(ii) of Rev. Proc. 2015-13. If the applicant
checks this box, include the date the member joined the
consolidated group in the designated space on line 7b.
• Other. The List of Automatic Changes or other guidance
published in the I.R.B. may provide applicants with audit
protection. For example, specific guidance may provide a filer
under exam with audit protection. If this box is checked, attach a
statement citing the guidance providing audit protection.
• Audit protection at end of exam. If the applicant does not
fall into one of the categories listed above for line 7b, this box
should generally be checked. The applicant may receive audit
protection at the end of the examination, provided the examining
agent does not propose an adjustment for the same item and the
accounting method for that same item is not an issue under
consideration. For certain foreign corporations, the applicant
must satisfy additional requirements in order to receive audit
protection at the end of the examination. See section 8.02(1)(f)
of Rev. Proc. 2015-13.

For CFCs and 10/50 corporations, the issue under
consideration rules are different. See section 3.08(4) of
Rev. Proc. 2015-13.

Lines 6c and 6d. If you answered “Yes” to line 6a, include the
name and telephone number of the examining agent, and the tax
year(s) under examination in the designated places on line 6c.
For any present or former consolidated groups, if there is a tax
year under examination, complete the information on line 6c.
Provide a copy of Form 3115 to the examining agent no later
than the date the filer timely files Form 3115. See section 6.03(3)
(a) of Rev. Proc. 2015-13.
Line 7a. In general, audit protection applies when an
application for change in accounting method is granted. See
section 8.01 of Rev. Proc. 2015-13. For exceptions where audit
protection is not provided, see section 8.02 of Rev. Proc.
2015-13. You should answer “Yes” even if you do not receive
audit protection when the change is granted but might receive it
at the end of the exam under section 8.02(1)(f) of Rev. Proc.
2015-13. For example, a change made under DCN 17 for an
applicant that wants to change its treatment of research and
experimental expenditures does not receive audit protection.
See the List of Automatic Changes for additional method
changes not subject to audit protection. If you are making a
change on behalf of one or more applicants that are CFCs or
10/50 corporations and audit protection is unavailable for any
such applicants for one or more years due to the application of
section 8.02(5) of Rev. Proc. 2015-13, you should check “No”
and attach an explanation stating the applicants and the years
for which there is no audit protection under section 8.02(5).
If no audit protection is given for the requested change, check
“No” and attach an explanation. For example, if you are making a
change under DCN 17, your explanation is DCN 17. If you are
making a change under DCN 7, your explanation could be that
none of the items on line 7b apply. If multiple items are being
changed on one Form 3115 and at least one item has audit
protection and another item does not have audit protection,
check both “Yes” and “No.”
Line 7b. Generally, the applicant receives audit protection for
tax years prior to the year of change if they fall into one of the
following categories listed below. If Form 3115 is being filed on
behalf of multiple applicants or if multiple items are being
changed on one Form 3115, check all that apply and attach a
statement identifying which category applies to which applicant
or item. Except for “Not under exam” and “Other,” the following
only apply to applicants under examination.
• Not under exam. Check this box if (A) the applicant is not
under exam, and (B) audit protection applies to the item(s) being
changed.
• 3-month window. The 3-month window is the period
beginning on the 15th day of the 7th month following the close of
the applicant's tax year and ending on the 15th day of the 10th
month following the close of the applicant's tax year. For
52-53-week applicants, the tax year begins on the 1st day of the
calendar month nearest to the 1st day of the 52-53-week tax
year. See Rev. Proc. 2015-33. For applicants with a short tax
year ending before the 15th day of the 10th month after the short
tax year begins, the 3-month window is the period beginning on
the 1st day of the 2nd month preceding the month in which the
short tax year ends and ending on the last day of the short tax
year. An applicant qualifies under the 3-month window period
when (A) it has been under examination for at least 12
consecutive months as of the 1st day of the 3-month window,
and (B) the accounting method for the same item the applicant is
requesting to change is not an issue under consideration. See
section 8.02(1)(a) of Rev. Proc. 2015-13. Checking this box
satisfies the statement requirement of section 8.02(1)(a)(iv) of
Rev. Proc. 2015-13.

For CFCs and 10/50 corporations, the rules for audit
protection are different. See section 8.02 of Rev. Proc.
CAUTION 2015-13 (different rules for the 3-month window,
120-day window, and audit protection at end of exam).

!

Line 8a. If you answered “Yes,” complete lines 8b–d.
Line 8b. To determine if the applicant’s accounting method is
an issue under consideration by Appeals and/or a federal court,
see sections 3.08(2) and 3.08(3) of Rev. Proc. 2015-13.
Line 8c. If you answered “Yes” to line 8a, include the name and
telephone number of the Appeals officer(s) and/or counsel to the
government, as well as the tax year(s) before Appeals and/or
federal court in the designated places.
Line 8d. If you answered “Yes” for line 8a, provide a copy of the
signed Form 3115 to the Appeals officer(s) and/or all counsel to
the government, as applicable, no later than the date the filer
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lines 16a–b is otherwise provided in the applicable Form 3115
Schedules A–E: DCNs 6, 7, 28, 54, 55, 64, 65, 108, 111, 114,
127, 194, and 200 (only for changes listed in sections 6.12(3)(a)
(ix), 6.12(3)(a)(x), and 6.12(3)(b)(viii) in the List of Automatic
Changes; 205 (only for changes listed in sections 6.13(3)(h) and
6.13(3)(j) in the List of Automatic Changes); 206 (only for
changes listed in sections 6.14(3)(a), 6.14(3)(h), and 6.14(3)(j)
in the List of Automatic Changes; 207 (only for changes listed in
sections 6.15(3)(a) and 6.15(3)(d) in the List of Automatic
Changes); 211, 218, 231, 237, 241, 242, 250, 251, 252, 253,
254, 255, and 256. Line 16c does not need to be completed for
applicants filing automatic method changes. For further details
on what is to be included, see Rev. Proc. 2023-1, sections
7.01(9) (statement of supporting authorities), 9.03(1) (facts and
other information), and 9.03(4) (analysis of material facts).
If the automatic DCN is not specifically listed in the paragraph
above, or subsequent guidance released after the issuance of
these instructions, skip lines 16a–c.

timely files Form 3115. See section 6.03(3)(a) of Rev. Proc.
2015-13.
Line 9. If you answered “Yes” to line 6a or 8a, complete line 9.
The information requested on line 9 should be included on a
separate attachment.
Line 10. If you answered “Yes,” attach an explanation. Unless
otherwise provided, the applicant does not receive audit
protection for the requested change if it is an issue under
consideration. See sections 3.08 and 8.02(7) of Rev. Proc.
2015-13.
Lines 11a–c. Unless otherwise provided, an applicant is not
eligible to file under the automatic change procedures if the
applicant made or requested a prior overall method change or a
prior item change (for the same item) within the 5 tax years
ending with the requested year of change. For additional details,
see section 9.03(6)(a) of Rev. Proc. 2023-1 and section 11.02(2)
of Rev. Proc. 2015-13.

Line 17. Insurance companies must also attach a statement
indicating whether the proposed accounting method will be used
for annual statement accounting purposes.

Line 12. For further details, see section 9.03(6)(b) of Rev. Proc.
2022-1.
Line 13. If you answered “Yes,” complete Schedule A of Form
3115. For example, an overall accounting method change
includes a change from an accrual method to the cash receipts
and disbursements method or vice versa. See section 446(c).

Line 18. For details on requesting and scheduling a
conference, see sections 9.04(4) and 10 of Rev. Proc. 2023-1.
Lines 19a and 19b. For certain automatic method changes, the
applicant must demonstrate that it meets the gross receipts test
under section 448(c) to qualify for the change. This gross
receipts test is met if a taxpayer has average annual gross
receipts for the 3 prior tax years at or below the inflation-adjusted
amount. See Useful Items earlier, for guidance on the
inflation-adjusted amounts.
For the calculation of gross receipts for an overall accounting
method change request, whether an applicant qualifies as a
small business taxpayer for purposes of applying sections 263A
and 471, or whether an applicant qualifies as an eligible small
business under section 474(c), see section 448(c) and
Regulations section 1.448-2(c), and, as applicable, Regulations
section 1.263A-1(b)(1)(j) or Regulations section 1.471-1(a)(2).
For the calculation of gross receipts for determining whether
the applicant has an exempt construction contract under
Regulations section 1.460-3(b), for contracts entered into after
December 31, 2017, in tax years ending after December 31,
2017, see section 448(c) and Regulations sections 1.448-2(c)
and 1.460-3(b)(3).

Line 14. Provide the information requested on lines 14a–d if the
applicant answered “No” to question 13 or if the applicant
answered “Yes” to question 13 and is also changing to a special
accounting method for one or more items.
With the information requested on line 14b, the applicant is
also required to provide a statement of whether or not the
applicant has claimed any federal tax credit, grant, or subsidy
relating to the item(s) being changed (for example, the employee
retention credit for a change in method related to payroll taxes).
A special accounting method for an item is an accounting
method (other than the cash method or an accrual method)
expressly permitted by the Code, regulations, or guidance
published in the I.R.B. that deviates from the rules of sections
446, 451, and 461 (and the related regulations) that is applicable
to the applicant's overall accounting method (proposed overall
method if being changed). For example, the installment
accounting method under section 453, the mark-to-market
method under section 475, and the long-term contract method
under section 460 are special methods of accounting. See
section 15.01(2)(d) of Rev. Proc. 2022-14.

Part III—Information for
Non-Automatic Change Request

Lines 15a and 15b. Provide the requested information for each
applicant. For guidance on using different methods of
accounting for each trade or business, see section 446(d).
An applicant may include each member of a consolidated
group, each wholly owned partnership within a consolidated
group, each separate and distinct trade or business of each
member of a consolidated group or other entity (even if the
change is for all of a member's or other entity's trades or
businesses), and each eligible CFC or 10/50 corporation filing a
single Form 3115 requesting the identical accounting method
change. Also see Who Must File, earlier.

Non-automatic change—scope and eligibility rules. An
applicant may not use the non-automatic change procedures if
any of the following eligibility limitations apply at the time Form
3115 is filed with the IRS National Office.
1. The change in accounting method is required to be made
according to a published automatic change procedure, such as
Rev. Proc. 2022-14.
2. The requested year of change is the final year of the trade
or business, unless (a) the change is a result of a transaction to
which section 381(a) applies; or (b) the applicant demonstrates
to the satisfaction of the IRS National Office compelling
circumstances, or that it is in the interest of sound tax
administration for the applicant to change in its final year.

Lines 16a–c. For non-automatic changes, the applicant is
required to provide a full explanation of the legal basis to support
the proposed method, including all authorities supporting the
proposed method, and a discussion of all contrary authorities.
For further details on what is to be included, see Rev. Proc.
2023-1, sections 7.01(9) (statement of supporting authorities),
9.03(1) (facts and other information), 9.03(2) (statement of
contrary authorities), 9.03(4) (analysis of material facts), and
9.03(7) (statement identifying pending legislation).
For the following automatic method changes, the applicant is
only required to complete lines 16a–b, unless the information on

Line 20. If you answered “Yes,” attach an explanation
describing why the applicant is not eligible to file a request under
the automatic change procedures.

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change and next 3 tax years) for a positive section 481(a)
adjustment. However, when an applicant is under examination,
the section 481(a) adjustment period is 2 tax years (year of
change and next tax year) for a positive section 481(a)
adjustment for a requested accounting method change unless
one of the following categories described on line 7b applies:
3-month window, 120-day window period, method not before the
director, or CAP.
For some accounting method changes, there may be special
rules relating to the section 481(a) adjustment period. See, for
example, section 16.10(4)(b)(iv)(D) of Rev. Proc. 2022-14
pertaining to certain section 451 cost offset accounting method
changes resulting from concurrent cost-offset related inventory
method changes.
Also, for certain accounting method changes, the applicant
must make the change on a cut-off basis or modified cut-off
basis. See, for example, Regulations section 1.446-1(e)(2)(ii)(d)
(5)(iii). In those cases, there is no section 481(a) adjustment.
Under a cut-off basis, only the items arising on or after the
beginning of the year of change are accounted for under the new
method of accounting. Any items arising before the year of
change continue to be accounted for under the applicant's
former accounting method.
For a change in accounting method for accruing a foreign
income tax expense, do not compute a section 481(a)
adjustment. Instead, apply the modified cut-off rules in
Regulations section 1.905-1(d)(5). Attach a statement showing,
for each separate statutory or residual grouping, the upward and
downward adjustment (accounted for in the currency in which
the foreign tax liability is denominated) that is required by
Regulations section 1.905-1(d)(5)(ii). Provide a separate upward
and downward adjustment for foreign income taxes for which the
foreign tax credit is disallowed and to which section 275(a)(4)
does not apply. See Regulations section 1.905-1(d)(5) and the
examples in Regulations section 1.905-1(d)(6) for additional
information.
If multiple items are being changed on one Form 3115 and at
least one item is changed on a cut-off basis or modified cut-off
basis and another item is changed with a section 481(a)
adjustment, check both “Yes” and “No” and attach a statement
identifying which item(s) is being made on a cut-off basis or
modified cut-off basis.
An eligible terminated S corporation (as defined in section
481(d)(2)) that is required to change an accounting method as a
result of a revocation of its S corporation election must take into
account the resulting positive or negative section 481(a)
adjustment ratably during the 6-year period beginning with the
year of change. In addition, an eligible terminated S corporation
that is permitted to continue to use the cash method after the
revocation of its S corporation election and that changes to an
overall accrual method for the C corporation’s first tax year after
such revocation may take into account the resulting positive or
negative adjustment required by section 481(a)(2) ratably during
the 6-year period beginning with the year of change. See Rev.
Proc. 2018-44, 2018-37 I.R.B. 426. Section 481(d)(2) defines an
eligible terminated S corporation as any C corporation that (1)
was an S corporation on December 21, 2017; (2) revokes its S
corporation election after December 21, 2017, but before
December 22, 2019; and (3) has the same owners of stock in
identical proportions on December 22, 2017, and the revocation
date.
If the accounting method change is an automatic change in
functional currency under section 985 (see section 29.01 of Rev.
Proc. 2022-14), the adjustments required under Regulations
section 1.985-5 must be made on the last day of the tax year
ending before the year of change. Any gain or loss that must be
recognized under Regulations section 1.985-5 is included in
income or earning and profits on the last day of the tax year

Line 21. Attach true copies of all contracts, agreements, and
other documents directly related to the proposed accounting
method change. See section 9.03(3) of Rev. Proc. 2023-1.
Line 22. Include a statement explaining the reason for the
proposed change. See sections 7.01(1)(d) and 9.03(1) of Rev.
Proc. 2023-1.
Line 23. If you answered “No” to line 23, a common parent
requesting an accounting method change on behalf of a member
of the consolidated group must attach a statement explaining the
accounting method used by each member of the consolidated
group for the particular item that is the subject of the method
change request. See section 6.02(5) of Rev. Proc. 2015-13.
Lines 24a and 24b. For non-automatic change requests, you
must pay a user fee for each applicant. Where the filer is not an
applicant, a fee is not required for the filer. See section 15 and
Appendix A of Rev. Proc. 2023-1 for information regarding user
fees, including reduced user fees and user fees for additional
applicants filing identical changes in methods of accounting.
Pay the user fees through PAY.gov.
Note. Filers filing under the automatic change procedures do
not pay a user fee.
Example 1. Filer is the common parent of a consolidated
group of corporations. Filer files a single Form 3115 on behalf of
itself and two other members of the consolidated group for an
identical accounting method change. There are three applicants
(Filer and the two other members of the consolidated group).
Therefore, for a non-automatic change request, all three
applicants are required to pay a user fee. The filer applicant
must submit the regular user fee under section (A)(3)(b)(i) of
Appendix A of Rev. Proc. 2023-1 (or a reduced fee per section
(A)(4) of Appendix A of Rev. Proc. 2023-1, if applicable), and the
two other applicants qualify for the reduced user fee under
section (A)(5)(b) of Appendix A of Rev. Proc. 2023-1.
Example 2. Filer is the common parent of a consolidated
group of corporations. Filer is filing a single Form 3115 on behalf
of two other members of the consolidated group for an identical
accounting method change. There are two applicants on Form
3115 (the two members of the consolidated group). Filer is not
changing its accounting method and, therefore, does not pay a
fee on account of itself. For a non-automatic change request,
both applicants are required to pay a user fee. One applicant
must submit the regular user fee under section (A)(3)(b)(i) of
Appendix A of Rev. Proc. 2023-1 (or a reduced fee per section
(A)(4) of Appendix A of Rev. Proc. 2023-1, if applicable), and the
other applicant qualifies for the reduced user fee under section
(A)(5)(b) of Appendix A of Rev. Proc. 2023-1. This example
applies similarly to a filer that is the common sponsor of multiple
entities.
Example 3. Filer, a single taxpayer, files Form 3115 on
behalf of its three separate and distinct trades or businesses.
The request is for an identical accounting method change.
Notwithstanding that Filer is a single taxpayer, there are three
applicants on Form 3115. For a non-automatic change request,
all three applicants are required to pay a user fee. One applicant
must submit the regular user fee under section (A)(3)(b)(i) of
Appendix A of Rev. Proc. 2023-1 (or a reduced fee per section
(A)(4) of Appendix A of Rev. Proc. 2023-1, if applicable), and the
other two applicants qualify for the reduced user fee under
section (A)(5)(b) of Appendix A of Rev. Proc. 2023-1.

Part IV—Section 481(a) Adjustment
Line 25. Ordinarily, an adjustment under section 481(a) is
required for accounting method changes. The section 481(a)
adjustment period is generally 1 tax year (year of change) for a
negative section 481(a) adjustment and 4 tax years (year of
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ending before the year of change, and is not subject to section
481. Attach a statement showing the adjustment required under
Regulations section 1.985-5. The statement 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.
Except if instructed differently, you must attach a statement
showing the (net) section 481(a) adjustment for each change in
method for each applicant included on Form 3115. Include a
summary of how the (net) section 481(a) adjustment was
computed and an explanation of the methodology used to
determine it. The summary of computation and explanation must
be sufficient to demonstrate that the (net) section 481(a)
adjustment is computed correctly. If the applicant is a CFC or
10/50 corporation, or a trade or business of a CFC or 10/50
corporation, and its functional currency is not the U.S. dollar,
state the (net) section 481(a) adjustment in that functional
currency. The statement may be combined with the information
requested on the fourth line on page 1 (list the applicants and
their identification numbers) and on line 24 (user fee).

Salary bonuses treated as incurred
under the present method, but not
incurred under the proposed
method . . . . . . . . . . . . . . . .
Beginning inventory as of January. 1,
2022, with capitalized salary bonuses
computed under the present
method . . . . . . . . . . . . . . . .
Beginning inventory as of January. 1,
2022, with capitalized salary bonuses,
computed under the proposed
method . . . . . . . . . . . . . . . .
Decrease in beginning inventory as of
January. 1, 2022 . . . . . . . . . . .
Net section 481(a) adjustment . . . .

$100,000

$92,000
($8,000)
+$32,000

Line 26. In computing the net section 481(a) adjustment, an
applicant must take into account all relevant accounts. For some
changes (for example, a change that affects multiple accounts),
the section 481(a) adjustment is a net section 481(a)
adjustment. See Example 2 above and the example under
Schedule A, Part l, line 2h, later. If there is more than one
method change requested, the section 481(a) adjustment is
generally separately stated for each method change. However,
some changes may require the netting of section 481(a)
adjustments with those for certain other method changes made
during the same year of change. See, for example, certain
changes under section 16.10 of Rev. Proc. 2022-14.
If an election has been made under Regulations section
1.59A-3(c)(6)(i) to waive an allowed deduction for purposes of
determining the section 59A base erosion and anti-abuse tax,
and the method of accounting for the waived deduction is being
changed, the amount of the net section 481(a) adjustment is
determined without regard to the waived deduction. See
Regulations section 1.59A-3(c)(6)(iii)(D). As a result, a waived
deduction has no effect on the calculation of the amount of a
section 481(a) adjustment. For an example illustrating how to
calculate a section 481(a) adjustment with respect to a method
of accounting for which an applicant has waived deductions, see
Regulations 1.59A-3(d)(9) (Example 9).

Section 481(a) adjustments (or components of section
481(a) adjustments) from changes under DCN 248
CAUTION included in the same Form 3115 must be stated in
accordance with section 6.22(8) of Rev. Proc. 2022-14.

!

Example 1. 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 account method to properly capitalize such costs.
The computation of the section 481(a) adjustment with respect
to the accounting method change is demonstrated as follows.
Beginning inventory for year of change under
proposed method . . . . . . . . . . . . . . . . .
Beginning inventory for year of change under present
method . . . . . . . . . . . . . . . . . . . . . . .
Section 481(a) adjustment . . . . . . . . . . . . . .

$40,000

$120,000
$100,000
+$20,000

Example 2. WXY Corporation, a calendar year taxpayer, is a
producer and capitalizes costs that are required to be capitalized
into inventory under section 263A. Each February, WXY
Corporation pays a salary bonus to each employee who remains
in its employment as of January 31 for the employee's services
provided in the prior calendar year. Under its present method,
WXY Corporation treats these salary bonuses as incurred in the
tax year the employee provides the related services. For 2022,
WXY Corporation proposes to change its accounting method to
treat salary bonuses as incurred in the tax year in which all
events have occurred that establish the fact of the liability to pay
the salary bonuses and the amount of the liability can be
determined with reasonable accuracy, pursuant to section
20.01(2) of Rev. Proc. 2022-14. The computation of WXY
Corporation's net section 481(a) adjustment for the change in
accounting method for salary bonuses is demonstrated as
follows.

Line 27. Certain automatic method changes require an
applicant with a section 481(a) adjustment remaining on a prior
change in accounting method to take the remaining portion of
the prior section 481(a) adjustment into account in the year of
change. See, for example, DCNs 234 and 262. If applicable,
enter the amount of the remaining portion of the section 481(a)
adjustment from the prior change.
Line 28. An applicant may elect a 1-year section 481(a)
adjustment period for a positive section 481(a) adjustment that is
less than $50,000. See section 7.03(3)(c) of Rev. Proc. 2015-13.
An applicant may also elect a 1-year section 481(a) adjustment
period for all positive section 481(a) adjustments for the year of
change if an eligible acquisition transaction occurs during the
year of change or in the subsequent tax year on or before the
due date for filing the applicant's federal tax return for the year of
change. For more details about the eligible acquisition
transaction election, see section 7.03(3)(d) of Rev. Proc.
2015-13.
Line 29. If “Yes,” explain the nature and amount of the section
481 adjustment attributable to the intercompany transaction(s).

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Schedule A—Change in Overall
Method of Accounting

Accrued income (line 2a) . . . . . . . . . . . .
Less:
Uncollectible amount

Part I—Change in Overall Method

Accrued expenses (line 2c)

. . . . . . .

75,000

. . . . . . .

5,000

(75,000)

Expenses deducted as recurring item
(line 2g) . . . . . . . . . . . . . . . . . . . . .

(5,000)
(80,000)
+$120,000

Line 3. Check “Yes” if the 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.
Line 5. Check "Yes" if the applicant is requesting a change to
the overall cash method or to a method in which a taxpayer uses
an accrual method for purchases and sales of inventories and
uses the cash method for computing all other items of income
and expense under section 15.17 of Rev. Proc. 2022-14 (DCNs
233 and 259). See section 15.17(5)(a) of Rev. Proc. 2022-14 to
determine whether an applicant qualifies as a small business
taxpayer.

Part II—Change to the Cash Method for
Non-Automatic Change 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. Tax shelters are also 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 the following.
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 that meets the section 448(c) gross receipts test for the
tax year. The gross receipts test is met if a taxpayer has average
annual gross receipts for the 3 prior tax years at or below the
inflation-adjusted amount. See Useful Items, earlier, for
guidance on the inflation-adjusted amount for the applicable tax
year. Also, see section 448(c) and Regulations section
1.448-2(c) to determine if the applicant qualifies for this
exception.

Line 2h. Enter the net amount, which is the net section 481(a)
adjustment, on line 2h. Also, enter the net section 481(a)
adjustment on Part IV, line 26. See the instructions for Part IV,
line 26, earlier.
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, 2021.

50,000

. . . . . . . . . .

Section 481(a) adjustment . . . . . . . . . . . .

Line 2b. 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 in the subsequent year if the
applicant qualifies under Regulations section 1.451-8(c) or (d),
as applicable. If any amounts entered on line 2b are for advance
payments, complete Schedule B.

. . . . . . .

$200,000

. . . .

Total expenses accrued but not paid . . . . .

Note. Do not include amounts that are not attributable to the
accounting method change, 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 of
accounting, do not include any amounts attributable to a special
method of accounting. See DCN 127.

$250,000

(50,000)

Less:

Lines 2a–g. Enter the amounts requested on lines 2a through
2g, even though the calculation of some amounts may not have
been required in determining taxable income due to the
applicant's present accounting method. Applicants with an
applicable financial statement changing to an accrual method
and entering an amount on line 2a should complete Schedule B
if the income is subject to section 451(b).

. . . . . . .

. . . . . . . . . . . . . .

Net income accrued but not received

All applicants filing to change their overall accounting method
must complete Schedule A, Part I, including applicants filing
under DCNs 122, 126, 127, 128, 233, 257, 258, and 259 in the
List of Automatic Changes.

Accrued income . . . . . . . . . . . . . . .
Uncollectible amounts based on
the nonaccrual-experience method . .
Accrued amounts properly deductible
(economic performance has occurred)
Expenses eligible for recurring item
exception . . . . . . . . . . . . . . . . . .

$250,000

ABC Corporation changes to an overall accrual method, a
nonaccrual-experience method, and the recurring item
exception for calendar year 2022. The section 481(a) adjustment
is calculated as of January 1, 2022, as follows.

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 for a taxpayer that is
required to maintain an inventory because the production,
purchase, or sale of merchandise is an income-producing factor.
However, see sections 448(c) and 471(c), and sections 15, 17
(DCNs 233 and 259), and 22.18 of Rev. Proc. 2022-14 (DCN
235) for an exception to this requirement for small business
taxpayers with average annual gross receipts that meet the
gross receipts test.

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Schedule B—Changes Related to the
Deferral Method for Advance
Payments, Cost Offset Methods,
and/or the Applicable Financial
Statement Income Inclusion Rule

determine the AFS income inclusion amount from the sale of
inventory (AFS cost offset method). See Regulations section
1.451-3(c) for the rules relating to the AFS cost offset method.
Applicants using this method for a trade or business that have
advance payments for the sale of inventory must also use the
advance payment cost offset method described in Regulations
section 1.451-8(e). If an applicant chooses to use the AFS cost
offset method and/or the advance payment cost offset method,
as applicable, it must use such method(s) for all items of gross
income in the trade or business that meet the criteria set forth in
Regulations sections 1.451-3(c) and 1.451-8(e), as applicable.
Under the AFS cost offset method and the advance payment
cost offset method, the cost of goods in progress offset must be
determined separately for each item of inventory. Under some
circumstances, an applicant without an AFS may use the
advance payment cost offset method in Regulations section
1.451-8(e). See DCN 253 in section 16.10 of Rev. Proc.
2022-14. Applicants changing to or within a cost offset method
may be required to make concurrent accounting method
changes, including cost-offset related inventory changes, as
defined in section 5.06 of Rev. Proc. 2015-13, as modified by
section 4.02 of Rev. Proc. 2021-34. See DCN 255 in section
16.10 of Rev. Proc. 2022-14.
If the applicant is requesting to change to or within a cost
offset method, attach a detailed description of the present and
proposed methods including the following information.
1. Does the applicant have an AFS as defined in
Regulations section 1.451-3(a)(5)? If so, identify the type of
AFS.
2. Describe any other concurrent proposed cost-offset
related inventory method changes and describe the order in
which the concurrent changes are being implemented. See
section 16.10 of Rev. Proc. 2022-14.
3. Provide a general description of the items of inventory to
which the change applies.
4. Describe how the applicant determines the cost of goods
allocable to each respective item of inventory as required by
Regulations section 1.451-3(c)(3) or Regulations section
1.451-8(e)(4), as applicable.

Line 1. The deferral method for advance payments. In
general, advance payments must be included in gross income in
the tax year of receipt for federal income tax purposes. However,
under Regulations section 1.451-8(c) or (d), an applicant may
defer the inclusion in income of certain advance payments (or a
portion thereof), as defined in Regulations section 1.451-8(a)(1),
to the next tax year. If the applicant is also using the advance
payment cost offset method, the portion of any advance
payment to which the cost offset applies is deferred to the tax
year in which ownership of the good is transferred to the
customer. Under the cost offset method, only the portion of the
payment in excess of costs incurred is recognized by the year
following the year of receipt.
Applicants with or without an applicable financial statement
(AFS), as defined in Regulations section 1.451-3(a)(5), may be
eligible to use a deferral method for advance payments. See
section 451(c), Regulations section 1.451-8, and section 16.10
of Rev. Proc. 2022-14 for more information about the deferral
method for advance payments.
Some applicants requesting to change to the deferral method
must file under the non-automatic change procedures of Rev.
Proc. 2015-13. See section 16.10(3) of Rev. Proc. 2022-14. All
other applicants must generally file under the automatic change
procedures of Rev. Proc. 2015-13.
If the applicant is requesting to change to the deferral method
for advance payments described in Regulations section
1.451-8(c) or (d), attach a detailed description of the present and
proposed methods including the following information.
1. Explain how the payments meet the definition of an
advance payment as defined in Regulations section 1.451-8(a)
(1).
2. Does the applicant have an AFS as defined in
Regulations section 1.451-3(a)(5)? If so, identify the type of
AFS.
3. For applicants with an AFS. Describe the advance
payment allocation method if there is more than one
performance obligation as defined in Regulations section
1.451-3(a)(11).
For applicants without an AFS. If the applicant receives an
advance payment that is attributable to one or more items
described in Regulations section 1.451-8(a)(1)(i)(C), describe
the objective criteria on which the applicant's method is based.
For example, the allocation method may be based on payments
the applicant receives for an item or items it regularly sells or
provides separately.
4. For applicants with an AFS. Under the proposed method,
if the applicant is required to adjust AFS revenue in accordance
with Regulations section 1.451-8(c)(2), describe the specific
adjustments used to arrive at the amount taken into account as
AFS revenue.

Line 3. Methods to conform to the AFS income inclusion
rule. Generally, for an accrual method taxpayer, the all events
test under Regulations section 1.451-1(a) for an item of gross
income, or portion thereof, is met no later than when that item, or
portion thereof, is taken into account as AFS revenue (AFS
income inclusion rule). The AFS income inclusion rule does not
apply to taxpayers that do not have an AFS, as defined in
Regulations section 1.451-3(a)(5), for a tax year. See section
451(b), Regulations section 1.451-3, and DCN 250 in section
16.10 of Rev. Proc. 2022-14 for additional information about
methods to conform to the AFS income inclusion rule.
If the applicant is requesting to change to or within a method
to conform to the AFS income inclusion rule under section
451(b) and Regulations section 1.451-3, attach a detailed
description of the present and proposed methods including the
following information:
1. Identify the type of AFS that is used for purposes of the
AFS income inclusion rule.
2. If the taxpayer is required to allocate transaction price to
multiple items of gross income in accordance with Regulations
section 1.451-3(d), including any item(s) of gross income that is
accounted for under a special method of accounting, describe
the present and proposed allocation method.
3. Under the proposed method, if the applicant is required to
adjust AFS revenue in accordance with Regulations section
1.451-3(b)(2), describe the specific adjustments used to arrive at
the amount taken into account as AFS revenue.

Applicants filing under the non-automatic change procedures
of Rev. Proc. 2015-13 should include all information requested in
the instructions for Schedule B, line 1, and see Rev. Proc.
2015-13 and Non-automatic change scope and eligibility rules
under Part III, earlier, for additional requirements.
Line 2. Cost offset methods. Regulations section 1.451-3(c)
allows taxpayers to use a cost offset accounting method to
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submethod, Schedule D, Part II, is not applicable. Use
Schedule C, Changes Within the LIFO Inventory Method.

4. If under the applicant's proposed method of accounting,
AFS revenue is reduced in accordance with the enforceable
right rules in Regulations section 1.451-3(b)(2)(i)(B), describe
why the applicant does not have an enforceable right to the
reduction amount.

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).

Schedule C—Changes Within the
LIFO Inventory Method

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.”

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
Line 6. Applicants changing to the inventory price index
computation (IPIC) method must use this method for all LIFO
inventories. This requirement includes applicants requesting
DCN 61 or 62 in the List of DCNs, later.

Line 5c. Attach the two statements required by section 23.01(5)
of Rev. Proc. 2022-14.

Schedule D—Change in the
Treatment of Long-Term Contracts
Under Section 460, Inventories, or
Other Section 263A Assets

Line 6 Applicants requesting to make a cost-offset related
inventory method change, as defined in section 5.06 of Rev.
Proc. 2015-13, as modified by section 4.02 of Rev. Proc.
2021-34, may also be required to make concurrent cost offset
changes under Regulations sections 1.451-3 and/or 1.451-8.
See the changes under DCN 255 in section 16.10 of Rev. Proc.
2022-14. Applicants making concurrent cost offset changes
under Regulations sections 1.451-3 and/or 1.451-8 should also
complete Schedule B, line 2. Concurrent changes may need to
be implemented in a particular order, and special eligibility rules
regarding section 481(a) adjustments may apply. See section
16.10 of Rev. Proc. 2022-14 and section 5.01(1)(g) of Rev. Proc.
2015-13, as modified by section 4.01 of Rev. Proc. 2021-34.

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.
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.

Part III—Method of Cost Allocation

Applicants requesting to change their accounting method 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.

Line 2b. To qualify for the exceptions under section 460(e), the
contract must be:
1. A home construction contract as defined in section 460(e)
(5)(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 for the 3-year period preceding the tax
year the contract was entered into do not exceed the
inflation-adjusted amount. See Useful items, earlier.

There are several methods available for allocating and
capitalizing costs under section 263A, and for allocating costs 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.

1. Allocating Direct and Indirect Costs

Line 2d. 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).

• 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.

Part II—Change in Valuing Inventories Including
Cost Allocation Changes

2. Allocating Mixed Service Costs

If the applicant is currently using a LIFO inventory method or
submethod and is changing to another LIFO inventory method or

• Direct reallocation method—Regulations section 1.263A-1(g)
(4)(iii)(A).
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• Step-allocation method—Regulations section 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).

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).

3. Capitalizing Additional Section 263A Costs

• Simplified production method:

List of DCNs

—Without historic absorption ratio election—Regulations
section 1.263A-2(b)(3).
—With historic absorption ratio election—Regulations
section 1.263A-2(b)(4).
• Modified simplified production method:
—Without historic absorption ratio election—Regulations
section 1.263A-2(c)(3).
—With historic absorption ratio election—Regulations
section 1.263A-2(c)(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 above under
Allocating Direct and Indirect Costs).

Summary of Automatic Accounting Method
Changes

This list includes regulatory automatic changes, changes
provided for in Rev. Proc. 2022-14, and automatic changes
provided for in other guidance. These automatic changes may
be modified or supplemented with additional automatic changes
by subsequently published guidance.
This 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 list conflicts with
published guidance, the published guidance applies. Each
automatic method change described in Rev. Proc. 2022-14, as
modified, contains a contact person you may call if you need
additional information concerning the change (not a toll-free
number).

Schedule E—Change in Depreciation
or Amortization

All applicants requesting to change their accounting method for
depreciation or amortization must complete Schedule E of Form
3115. Attach a statement describing the property subject to the
change. Include the property description, type, placed-in-service
year, and use in the applicant's trade or business or
income-producing activity, and include the type and amount of
any tax credit claimed, subsidy, or grant received, along with any
necessary adjustments to basis required under the Code, with
respect to the property. The statement should include a
description of the incentive received with respect to the property
subject to the change, including whether the type of incentive is
a tax credit, subsidy, grant, or other incentive and whether the
incentive is funded by the federal government, a state or local
government, or an agency or instrumentality thereof. Applicants
changing their accounting method for depreciation or
amortization under the automatic change procedures should see
the depreciation changes in the List of DCNs below.

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; and
• 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.
Note. Certain retired or obsolete numbers in the List of DCNs
have not been replaced in order to maintain continuity for the
active DCNs.

Do not file Form 3115:
1. To make an election under section 167, 168, 179, 197, or
former section 1400I;
2. To revoke an election made under one of those sections;

!

CAUTION

-14-

In the event the underlying authority for any of the DCNs
becomes obsolete or is superseded, then a change can
no longer be made under such DCN.

List of DCNs
No.

Change

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 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

2

Advances made by a lawyer on behalf of clients (section 162)—from treating advances of money to or on behalf of their
clients for litigation or other client expenses as deductible expenses to treating those advances as a loan. See section 3.01 of
Rev. Proc. 2022-14.

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 of Rev. Proc. 2022-14.

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 of Rev. Proc.
2022-14.

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 of Rev. Proc. 2022-14.

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. 2022-14. Instead, see Regulations section 1.166-2(d)(3). Note. This change is
implemented on a cut-off basis and generally with audit protection, but with some conditions or limitations.

7

Depreciation or amortization (impermissible to permissible) (sections 56, 167, 168, 197, 280F, or former sections
168, 1400I, 1400L, or 1400N)—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
DCN 10 (sale or lease transactions) must file Form 3115 according to the DCN 10. Additionally, a qualified small taxpayer
qualifies for a reduced Form 3115 filing requirement. See section 6.01 of Rev. Proc. 2022-14.

8

Depreciation (permissible to permissible) (sections 56 and 167)—from a permissible method to another permissible
method listed in section 6.02 of Rev. Proc. 2022-14. Complete Schedule E of Form 3115. Change is implemented on a modified
cut-off basis. An applicant making a change from a permissible to another permissible method of depreciating MACRS property
must file Form 3115 according to DCN 200. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing
requirement. See section 6.02 of Rev. Proc. 2022-14.

10

Sale, lease, or financing transactions (sections 61, 162, 167, 168, and 1012)—from improperly treating property as sold,
leased, or financed to a permissible method as described in section 6.03 of Rev. Proc. 2022-14. See section 6.03 of Rev. Proc.
2022-14. Note. This change is implemented on a cut-off basis.

11

Obsolete. See DCN 7.

12

Obsolete.See DCN 7.

13

Obsolete. See DCN 7.

14

Obsolete.See DCN 7.

15

Obsolete.See DCN 210.

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 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis and is
also generally made with audit protection, but with conditions or limitations.

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,
from the current period of amortization to a different period of amortization under the deferred expense method, or from
treating research and experimental expenditures under any provision of the Internal Revenue Code other than section 174 to
treating such expenditures under section 174. See section 7.01 of Rev. Proc. 2022-14. Note. This change is implemented on a
cut-off basis and does not receive audit protection. Note. This change does not apply to costs of developing computer software
that are paid or incurred in tax years beginning after December 31, 2021. To make a change for such costs, see DCN 265.

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
of Rev. Proc. 2022-14. Note.This change does not apply to costs of developing computer software that are paid or incurred in
tax years beginning after December 31, 2021. To make a change for such costs, see DCN 265.

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No.

Change

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 11.01 of Rev. Proc.
2022-14.

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 must also 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 11.02 of Rev. Proc. 2022-14.

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, or for removal costs in disposal of a depreciable asset, including a partial
disposition, as described under Regulations section 1.263(a)-3(g)(2)(i). Additionally, a qualified small taxpayer qualifies for a
reduced Form 3115 filing requirement. See section 11.03 of Rev. Proc. 2022-14.

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 12.01 of Rev.
Proc. 2022-14.

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 12.02 of Rev.
Proc. 2022-14.

24

Obsolete.See DCN 17.

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 12.03 of Rev. Proc. 2022-14.

26

Related party transactions (section 267)—for losses, expenses, and qualified stated interest incurred in transactions
between related parties, to treating certain deductions attributable to such transactions in accordance with section 267,
including the exception in section 1.267(a)-3(c)(4). See section 13.01 of Rev. Proc. 2022-14.

27

Obsolete.

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 14.01 of Rev. Proc.
2022-14.

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 14.02 of Rev. Proc. 2022-14.

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 15.02 of Rev. Proc. 2022-14.

32

Obsolete.See DCN 233.

33

Obsolete.See DCN 233.

34

First section 448 year (section 448)—for an applicant changing from the cash method for its first section 448 year that
makes the change using the regulation provision in lieu of Rev. Proc. 2015-13. Complete Schedule A, Part I, of Form 3115.
Also, complete Schedule D, Parts II and III, as applicable, of Form 3115. This change does not fall under the procedures of Rev.
Proc. 2015-13. Instead, see Regulations section 1.448-1. (See DCN 123 for taxpayers making the change under Rev. Proc.
2015-13. For applicants subject to section 447, see DCN 258). Note. This change does not apply for any tax year beginning on
or after January 5, 2021. See, however, DCN 257.

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No.

Change

35

Nonaccrual-experience method (section 448)—for an applicant changing: to a safe harbor method provided in Regulations
section 1.448-3(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), or (f)(5) (the alternative nonaccrual-experience method); to
a periodic system; from an NAE method to a specific charge-off method; from a sub-method of its current NAE method
provided in Regulations section 1.448-3 regarding applicable periods to another sub-method regarding applicable periods that
is permitted under Regulations section 1.448-3, other than a change to exclude tax years from an applicable period under
Regulations section 1.448-3(d)(6); from a sub-method of its current NAE method provided in Regulations section 1.448-3
regarding tracing of recoveries to another sub-method regarding tracing of recoveries permitted under Regulations section
1.448-3(f)(2)(iii); or to the NAE book safe harbor method described in section 5.01 of Rev. Proc. 2011-46, 2011-42 I.R.B. 518.
Note. An applicant using the NAE book safe harbor method that wants to make certain changes within the NAE book safe
harbor method (as described in sections 5.02 and 5.03 of Rev. Proc. 2011-46) must attach a statement to its federal income tax
return in lieu of filing a Form 3115. See Rev. Proc. 2011-46; section 15.03 of Rev. Proc. 2022-14; and Rev. Proc. 2006-56,
2006-2 C.B. 1169. Note. Certain changes are made on a cut-off basis.

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 16.01 of Rev. Proc. 2022-14.

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 16.02 of Rev. Proc. 2022-14.

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 16.03 of Rev. Proc. 2022-14.

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 16.04 of Rev. Proc. 2022-14.

41

Obsolete.

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 20.01(1) of Rev. Proc. 2022-14.

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 20.02 of Rev. Proc. 2022-14.

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 20.03 of Rev. Proc. 2022-14.

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. See section 20.04 of Rev. Proc. 2022-14.

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 20.05 of Rev. Proc. 2022-14.

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. This change is
implemented on a cut-off basis and applies only to distributor commissions paid or incurred on or after the beginning of the year
of change. See section 11.04 of Rev. Proc. 2022-14. Complete Schedule E of Form 3115.

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No.

Change

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 22.01 of Rev. Proc. 2022-14.

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, 1998-1 C.B. 857, 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 22.02 of Rev. Proc. 2022-14.

50

Obsolete. See DCN 235.

51

Obsolete. See DCN 235.

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 22.03 of Rev. Proc. 2022-14.

54

Impermissible methods of identification and valuation of inventories (section 471)—for an applicant changing from an
impermissible method of identifying or valuing inventories to a permissible method of identifying or valuing inventories.
Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.04 of Rev. Proc. 2022-14.

55

Core alternative valuation method for remanufactured and rebuilt motor vehicle parts (section 471)—for
remanufactures 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 22.05 of Rev. Proc. 2022-14.

56

Change from LIFO inventory method (section 472)—for an applicant changing from the LIFO inventory method for its entire
LIFO inventory, or for one or more dollar-value pools within its LIFO inventory, to the permitted method as described in section
23.01(1)(b) of Rev. Proc. 2022-14. Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 23.01 of
Rev. Proc. 2022-14.

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, as modified by Rev. Proc. 2008-52, 2008-2 C.B. 587. Complete Schedule C, Part I, of Form 3115.
See section 23.02 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

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,
2008-1 C.B. 664. Complete Schedule C of Form 3115, as applicable. See section 23.03 of Rev. Proc. 2022-14. Note. This
change is implemented on a cut-off basis.

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No.

Change

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, 2008-1 C.B. 664. Complete Schedule C, Part I,
of Form 3115. See section 23.04 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

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 23.05 of Rev.
Proc. 2022-14. Note. This change is implemented on a cut-off basis.

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 23.06 of Rev. Proc. 2022-14. Note. This
change is implemented on a cut-off basis.

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% 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% pooling rules; (d) combine or separate pools as a result of the application of a 5%
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 9 (Producer price indexes and percent changes for commodity
groupings and individual items, not seasonally adjusted) of the monthly PPI Detailed Report, or vice versa; (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
9 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 23.02 of Rev. Proc. 2022-14; 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 23.07 of Rev. Proc. 2022-14. Note. This change is
implemented on a cut-off basis.

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 22.06 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off
basis.

64

Mark-to-market (section 475)—for accounting for securities or commodities by electing 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
24.01 of Rev. Proc. 2022-14. In general, for an electing dealer or trader, the election cannot be revoked within 5 tax years of the
election year under the automatic method change described in section 24.02 of Rev. Proc. 2022-14 (DCN 218). Instead, the
dealer or trader must use the non-automatic change procedures in Rev. Proc. 2015-13 to revoke the election and change to a
realization method.

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 automatic change procedures of Rev. Proc. 2015-13. Instead, see
Rev. Proc. 97-43, 1997-2 C.B. 494. Note. This change is implemented on a cut-off basis.

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 25.01 of Rev. Proc. 2022-14.

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 26.01 of
Rev. Proc. 2022-14.

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 27.01 of Rev. Proc. 2022-14.

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No.

Change

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 Regulations section 1.985-1(b)(1)(iii). See section 29.01 of Rev. Proc. 2022-14.

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 15.04 of Rev. Proc. 2022-14.

72

Original issue discount (sections 1272 and 1273)—to the principal-reduction method for de minimis original issue discount
(OID). See section 30.01 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis and does not receive
audit protection.

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). Note. This change is implemented on a cut-off basis and is also generally made with
audit protection, but with conditions or limitations. See section 31.01 of Rev. Proc. 2022-14.

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 32.01 of Rev. Proc. 2022-14.

75

Stated interest on short-term loans (section 1281)—for a bank using the cash 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 32.02 of Rev. Proc. 2022-14.

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 automatic change procedures of Rev. Proc. 2015-13. 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 12.04 of Rev. Proc. 2022-14.

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
section 11.05 of Rev. Proc. 2022-14.

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 28.01 of Rev. Proc. 2022-14.

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 16.05 of Rev. Proc. 2022-14.

81

Ratable inclusion method for credit card annual fees (section 446)—to the ratable inclusion method for credit card annual
fees. See section 16.05 of Rev. Proc. 2022-14.

82

Obsolete.

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 16.06 of Rev. Proc. 2022-14. Note. This change may not be made for a year of change beginning on or
after January 1, 2021. See, however, DCN 254.

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 16.06 of Rev. Proc. 2022-14. Note. This change
may not be made for a year of change beginning on or after January 1, 2021. See, however, DCN 254.

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 15.05 of Rev. Proc. 2022-14.

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 of Rev. Proc. 2022-14.

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No.

Change

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) (as in effect before January 1,
2012) or to the method of accounting provided in Regulations section 1.168(i)-1(h)(2) to comply with the 2020 change in law to
retroactively provide a 30-year recovery period under the alternative depreciation system in section 168(g) for certain residential
rental property placed in service before 2018 and held by an electing real property trade or business. Complete Schedule E of
Form 3115. Change is implemented on a modified cut-off basis. Additionally, a qualified small taxpayer qualifies for a reduced
Form 3115 filing requirement. See Regulations section 1.168(i)-1(l)(2)(ii) and section 6.04 of Rev. Proc. 2022-14.

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 to 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. Additionally, a
qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See Regulations section 1.168(i)-4(g)(2) and
section 6.05 of Rev. Proc. 2022-14. Note. The applicant is required to calculate a section 481(a) adjustment as of the first day
of the year of change as if the proposed method of accounting had always been used by the taxpayer beginning with the tax
year in which the change in the use of the MACRS property occurred by the applicant.

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. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See Regulations
section 1.280F-6(f)(2)(iv) and section 6.06 of Rev. Proc. 2022-14.

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
15.06 of Rev. Proc. 2022-14.

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 of Rev. Proc. 2022-14.

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 12.05 of Rev. Proc. 2022-14.

94

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 22.07 of Rev. Proc. 2022-14. Note. This change is
implemented on a cut-off basis.

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, 2007-1 C.B. 350. See section
20.06 of Rev. Proc. 2022-14.

107

Impermissible to permissible method of accounting for depreciation or amortization for disposed depreciable or
amortizable property (sections 167, 168, or 197; or former sections 168, 1400I, 1400L(b), 1400L(c), or 1400N(d))—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. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115
filing requirement. See section 6.07 of Rev. Proc. 2022-14.

108

Change by bank for uncollected interest (section 446)—for a bank (as defined in Regulations 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 6 or more years of collection experience to change to the safe harbor method of
accounting for uncollected interest (other than interest described in Regulations section 1.446-2(a)(2)) set forth in section 4 of
Rev. Proc. 2007-33, 2007-1 C.B. 1289. See section 15.07 of Rev. Proc. 2022-14.

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, 2007-2 C.B. 110. Complete Schedule E of Form 3115. See section 11.06 of Rev. Proc.
2022-14.

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, 2007-2 C.B. 110, to treating rotable spare parts as inventoriable
items. See section 22.08 of Rev. Proc. 2022-14.

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Change

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, 2007-2 C.B. 233. See section 22.09 of Rev. Proc. 2022-14.

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, 2008-1 C.B. 664. See section 23.08 of Rev.
Proc. 2022-14. Note. This change is implemented on a cut-off basis.

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, 2008-1 C.B. 686, which provides that, solely for the purposes
of the recurring item exception, an applicant will be treated as satisfying the requirement in Regulations 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 20.04 of Rev. Proc. 2022-14.

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 22.13 of Rev. Proc. 2022-14. Note. This change must be implemented on a cut-off basis unless
the applicant’s books and records contain sufficient information to compute a section 481(a) adjustment, in which case the
applicant may choose to implement the change with a section 481(a) adjustment.

116

Obsolete. See DCN 7.

117

Obsolete. See DCN 205 or 206, as applicable.

119

Obsolete. See DCN 7.

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. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See
section 11.07 of Rev. Proc. 2022-14.

122

Overall accrual method change that is made other than (1) for the applicant’s first section 448 year, (2) mandatory
section 448 year, or (3) because taxpayer is subject to section 447 (section 446)—for a qualifying applicant that makes
a change for a year of change other than in its first section 448 year, mandatory section 448 year, or that is not subject to
section 447, from the overall cash method to an overall accrual method. Complete Schedule A, Part I, of Form 3115. Also
complete Schedule D, Parts II and III, as applicable. See section 15.01 of Rev. Proc. 2022-14. Note. See DCN 123 for a change
in the first section 448 year, DCN 257 for a change made in mandatory section 448 year, or DCN 258 for change made as a
result of applicant being subject to section 447.

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 Regulations sections 1.448-1(g) and (h)(2)
as well as Rev. Proc. 2015-13 for a year of change that is the applicant’s first section 448 year. See Regulations sections
1.448-1(g) and (h)(2), and section 15.01 of Rev. Proc. 2022-14. Note: This change does not apply to tax years beginning on or
after January 5, 2021.

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 15.08 of Rev. Proc. 2022-14.

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 15.09 of Rev. Proc. 2022-14. Note. This
change is implemented on a cut-off basis and also has a reduced Form 3115 filing requirement.

126

Overall cash method for specified transportation industry taxpayers (section 446)—for “specified transportation
industry taxpayers,” as defined in section 15.10(2) of Rev. Proc. 2022-14, with average annual gross receipts of more than $10
million and not in excess of $50 million to the overall cash method. See section 15.10 of Rev. Proc. 2022-14.

127

Change to overall cash/hybrid method for certain banks (section 446)—for an eligible bank, as defined in section
15.11(2)(a) of Rev. Proc. 2022-14, to an overall cash/hybrid method described in section 15.12(2)(b) of Rev. Proc. 2022-14.
See section 15.11 of Rev. Proc. 2022-14.

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 method. See section 15.12 of Rev. Proc. 2022-14. Note. For applicants changing from the crop
method, that portion of the change is implemented using a cut-off basis. For applicants that wish to change to the cash method
for all items of income and expense and an accrual method for purchases and sales of inventories, see DCN 259.

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Change

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 former section 118(c)), by characterizing the payments or the fair market value of property
as nontaxable contributions to capital under section 118(c), 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 former section 118(c) that
changes from including in gross income under section 61 payments or the fair market value of property received that are
contributions in aid of construction under former section 118(c) and Regulations section 1.118-2 and that meet the
requirements of former 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 section 118(a). See section 15.13 of Rev. Proc. 2022-14. Note. The
change described in section 15.13(1)(a)(ii) of Rev. Proc. 2022-14 does not apply to contributions made after December 22,
2017.

130

Retainages not received under long-term contracts (section 451)—for an accrual method applicant’s retainages under
section 451 to a method consistent with the holding in Rev. Rul. 69-314, 1969-1 C.B. 139. 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 16.07 of Rev. Proc. 2022-14.

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 17.01 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

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 18.01 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

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. See section 20.01(2) of Rev. Proc. 2022-14.

134

Timing of incurring liabilities for vacation pay, sick pay, and severance pay (section 461)—to treat vacation pay, sick
pay, and severance pay as incurred in the tax year in which all events have occurred that establish the fact of the liability to pay
vacation pay, sick pay, and severance pay, and the amount of the liability can be determined with reasonable accuracy. The
applicant may make this change if the vacation pay, sick pay, and severance pay vests in that tax year and the vacation pay,
sick pay, and severance pay is received by the employee by the 15th day of the 3rd calendar month after the end of that tax
year. See section 20.01(3) of Rev. Proc. 2022-14.

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 Regulations section 1.461-5. See section 20.07 of Rev. Proc.
2022-14.

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 Regulations section 1.467-1(d)(2)(iii). See section 21.01 of Rev. Proc.
2022-14. Note. This change only receives limited audit protection.

137

Permissible methods of identification and valuation of inventories (section 471)—for an applicant changing from one
permissible method of identifying and valuing inventories to another permissible method of identifying and valuing inventories.
Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.10 of Rev. Proc. 2022-14.

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 22.11 of Rev. Proc. 2022-14.

139

Invoiced 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 Regulations section 1.471-3(b) to deducting the advertising costs under section 162 as the
advertising services are provided to the dealership. See Regulations section 1.461-4(d)(2)(i), and section 22.12 of Rev. Proc.
2022-14.

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Change

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, 2008-1 C.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 23.09 of Rev. Proc. 2022-14. Note. This change is implemented on a
cut-off basis.

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 Regulations section 1.472-8(b)(3)
to using natural business unit (NBU) pools described in Regulations section1.472-8(b)(1), or vice versa; or wants to reassign
items in NBU pools described in Regulations section 1.472-8(b)(1) into the same number or a greater number of NBU pools.
See section 23.10 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

145

Tenant construction 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. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section
6.08 of Rev. Proc. 2022-14.

146

Obsolete. See DCN 205.

147

Obsolete. See DCN 206.

148

Debt issuance costs (section 446)—for an applicant changing its method of accounting to comply with Regulations section
1.446-5, which provides rules for allocating the costs over the term of the debt. See section 15.14 of Rev. Proc. 2022-14.

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 tax
year other than the applicant’s first tax year in which real property taxes are incurred. See section 20.08 of Rev. Proc. 2022-14.
Note. This change has a reduced Form 3115 filing requirement.

150

Retail sales facility safe harbor for a motor vehicle dealership (section 263A)—for a motor vehicle dealership to treat its
sales facility as a retail sales facility as described in section 5.01 of Rev. Proc. 2010-44, 2010-49 I.R.B. 811. See section 12.06
of Rev. Proc. 2022-14.

151

Reseller without production activities safe harbor for a motor vehicle dealership (section 263A)—for a motor vehicle
dealership to be treated as a reseller without production activities as described in section 5.02 of Rev. Proc. 2010-44, 2010-49
I.R.B. 811. See section 12.06 of Rev. Proc. 2022-14.

152

Deduction for energy efficient commercial buildings (section 179D)—for an applicant to change its method of accounting
to deduct under section 179D amounts paid or incurred for the installation of energy efficient commercial building property,
subject to the limits of section 179D(b), in the year the property is placed in service. See Rev. Proc. 2012-39, 2012-2 C.B. 470,
and section 8.01 of Rev. Proc. 2022-14. Note. This change does not receive audit protection.

153

Certain revenue recognition methods of accounting—change in applicable financial statements (AFS) (section 451)
— for an applicant with an AFS (1) using the deferral method for including advance payments in gross income in accordance
with its AFS to change its method to recognize advance payments in gross income consistent with a changed manner for
recognizing advance payments for its AFS; or (2) that includes amounts in income in accordance with Regulations section
1.451-3 that has a change in the manner in which the item, or portion of it, is taken into account as AFS revenue or has a
change in transaction price allocation to performance allocations to use the new AFS method for purposes of Regulations
section 1.451-3(b)(1) or (d), as applicable. The requirement in section 6.03(3)(a) of Rev. Proc. 2015-13 to provide an additional
copy of the application to the examining agent(s), appeals officer(s), and counsel to the government, if applicable, applies to
this application. A statement in lieu of a Form 3115 is authorized for this change. See section 16.08 of Rev. Proc. 2022-14.
Note. This change is implemented on a cut-off basis or with a section 481(a) adjustment depending on the change being made
and does not receive audit protection. This change does not apply to method changes relating to Rev. Proc. 2004-34, section
451(b), Proposed Regulations section 1.451-3, and Proposed Regulations section 1.451-8 for tax years beginning on or after
January 1, 2021.

154

California franchise taxes (Rev. Rul. 2003-90)—for an accrual method applicant changing to recognizing its California
franchise tax liability in the tax year following the tax year in which the tax is incurred under the Cal. Rev. & Tax Code. See
section 20.09 of Rev. Proc. 2022-14.

155

Unearned premiums (section 833)—for a Blue Cross or Blue Shield organization within the meaning of section 833(c)(2) or
an organization described in section 833(c)(3) required to change its method of accounting for unearned premiums because it
fails to meet or meets anew the MLR requirements of section 833(c)(5). See section 26.02 of Rev. Proc. 2022-14.

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Change

156

Gift cards issued as a refund (Rev. Proc. 2011-17)—for an accrual method applicant who issues gift cards as a refund for
returned goods changing to treat the transaction as the payment of a cash refund and sale of a gift card in the amount of the gift
card, as provided in Rev. Proc. 2011-17, 2011-5 I.R.B. 441. See section 20.10 of Rev. Proc. 2022-14.

157

Classification of wireless telecommunications assets used by wireless telecommunications carriers (sections 167
and 168)—for applicants that have a depreciable interest in wireless telecommunications assets (as defined in Rev. Proc.
2011-22, 2011-8 I.R.B. 737) used primarily to provide wireless telecommunications or broadband services by mobile phones
that are changing to the method described in Rev. Proc. 2011-22 to determine the recovery periods for depreciation of certain
tangible assets used by wireless telecommunications carriers. Additionally, a qualified small taxpayer qualifies for a reduced
Form 3115 filing requirement. See Rev. Proc. 2011-22 and section 6.09 of Rev. Proc. 2022-14.

158

Wireline network property (section 263(a))—for certain applicants that have a depreciable interest in wireline network
assets (as described in section 4 of Rev. Proc. 2011-27, 2011-8 I.R.B. 740) used primarily to provide wireline
telecommunications or broadband services that are changing to (a) the wireline network assets maintenance allowance method
described in section 5 of Rev. Proc. 2011-27; or (b) the adoption of all, or some, of the units of property described in section 6 of
Rev. Proc. 2011-27, to determine whether expenditures to maintain, replace, or improve wireline network assets must be
capitalized under section 263(a). See section 3.07 of Rev. Proc. 2022-14.

159

Wireless network property (section 263(a))—for certain applicants that have a depreciable interest in wireless network
assets (as described in section 4 of Rev. Proc. 2011-28, 2011-8 I.R.B. 743) used primarily to provide wireless
telecommunications or broadband services by mobile phones that are changing to (a) the wireless network asset maintenance
allowance method described in section 5 of Rev. Proc. 2011-28, or (b) the adoption of all, or some, of the units of property
described in section 6 of Rev. Proc. 2011-28, to determine whether expenditures to maintain, replace, or improve wireless
network assets must be capitalized under section 263(a). See section 3.08 of Rev. Proc. 2022-14.

160

Electric transmission and distribution property (section 263(a))—for certain applicants that have a depreciable interest in
electric transmission or distribution property (as described in section 4 of Rev. Proc. 2011-43, 2011-37 I.R.B. 326) used
primarily to transport, deliver, or sell electricity that are changing to the method described in Rev. Proc. 2011-43, to determine
whether expenditures incurred to maintain, replace, or improve transmission and distribution property are deductible repairs
under section 162 or capitalizable improvements under section 263(a). See section 3.09 of Rev. Proc. 2022-14.

161

Timing of incurring liabilities under the recurring item exception to the economic performance rules (section 461(h)
(3))—for an applicant changing to a method of accounting to conform to any of the holdings in Rev. Rul. 2012-1, 2012-2 I.R.B.
255, which addresses the “not material” and “better matching” requirements of the recurring item exception and distinguishes
contracts for the provision of services from insurance and warranty contracts. See section 20.11 of Rev. Proc. 2022-14.

175

Obsolete. See DCN 199.

176

Obsolete. See DCN 200.

177

Obsolete. See DCN 205.

178

Obsolete. See DCN 206.

179

Obsolete. See DCN 207.

181

Plants removed from the list of plants that have a preproductive period in excess of 2 years (section 263A)—for an
applicant that is not a corporation, partnership, or tax shelter required to use an accrual method of accounting and either is
changing to not applying section 263A to the production of a plant or plants that have been removed from the list of plants with
a nationwide weighted average preproductive period in excess of 2 years, or is revoking its section 263A(d)(3) election to not
apply section 263A to the production of a plant or plants that have been removed from the list of plants with a nationwide
weighted average preproductive period in excess of 2 years. See Rev. Proc. 2013-20 and section 12.07 of Rev. Proc. 2022-14.

182

Steam or electric power generation property (section 263(a))—for an applicant changing its method of accounting for its
treatment of expenditures on generation property (as defined in section 4.01 of Rev. Proc. 2013-24, 2013-22 I.R.B. 1142) to
use all or some of the unit of property definitions and the corresponding major component definitions described in Appendix A
of Rev. Proc. 2013-24, to determine whether expenditures to maintain, replace, or improve generation property must be
capitalized under section 263(a). See section 3.10 of Rev. Proc. 2022-14.

183

Change to proportional method of accounting for OID on a pool of credit card receivables (section 1272(a)(6))—for
an eligible taxpayer that wants to change to the proportional method of accounting for original issue discount (OID) on a pool of
credit card receivables, as described in Rev. Proc. 2013-26, 2013-22 I.R.B. 1160, as modified by Rev. Proc. 2021-35, 2021-35
I.R.B. 355. See section 30.02 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

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Change

184

Deducting repair and maintenance costs or capitalizing improvement costs (sections 162 and 263(a))—for an
applicant changing to deducting amounts paid or incurred for repair and maintenance costs under section 162 and Regulations
section 1.162-4 or changing to capitalizing amounts paid or incurred for improvements to tangible property and, if depreciable,
to depreciating such property under section 167 or 168. Includes a change by an applicant in the method of identifying units of
property under Regulations section 1.263(a)-3(e) for purposes of determining whether amounts paid or incurred improve a unit
of property under Regulations section 1.263(a)-3. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115
filing requirement. See section 11.08 of Rev. Proc. 2022-14.

185

Change to the regulatory accounting method (section 162)—for a regulated applicant changing its method of accounting
for amounts paid or incurred to repair or maintain tangible property to follow its method of accounting for regulatory accounting
purposes to determine whether an amount paid or incurred improves property under Regulations section 1.263(a)-3, consistent
with Regulations section 1.263(a)-3(m). Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing
requirement. See section 11.08 of Rev. Proc. 2022-14.

186

Deducting non-incidental materials and supplies when used or consumed (section 162)—for an applicant changing its
method of accounting for non-incidental materials and supplies to the method of deducting such amounts in the tax year in
which they are actually used or consumed, consistent with Regulations section 1.162-3. Additionally, a qualified small taxpayer
qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2022-14.

187

Deducting incidental materials and supplies when paid or incurred (section 162)—for an applicant that wants to change
its method of accounting for incidental materials and supplies to the method of deducting such amounts in the tax year in which
they are paid or incurred, consistent with Regulations section 1.162-3. Additionally, a qualified small taxpayer qualifies for a
reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2022-14.

188

Deducting non-incidental rotable and temporary spare parts when disposed (section 162)—for an applicant changing
its method of accounting for costs to acquire or produce non-incidental rotable and temporary spare parts to the method of
deducting such costs in the tax year in which the taxpayer disposes of the parts, consistent with Regulations section 1.162-3.
Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc.
2022-14.

189

Change to the optional method for rotable and temporary spare parts (section 162)—for an applicant changing its
method of accounting for rotable and temporary spare parts to the optional method of accounting for rotable and temporary
spare parts (described in Regulations section 1.162-3(e)), consistent with Regulations section 1.162-3. Additionally, a qualified
small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2022-14.

190

Deducting dealer expenses that facilitate the sale of property (section 162)—for an applicant that is a dealer in property
changing its method of accounting for commissions and other costs paid or incurred to facilitate the sale of tangible property to
the method of treating such costs as ordinary and necessary business expenses, consistent with Regulations section
1.263(a)-1(e)(2). Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 11.08
of Rev. Proc. 2022-14.

191

Non-dealer expense to facilitate the sale of property (section 263(a))—for an applicant that is not a dealer in property
changing its method of accounting for commissions and other costs paid or incurred to facilitate the sale of property to the
method of capitalizing such costs, consistent with Regulations section 1.263(a)-1(e)(1). Additionally, a qualified small taxpayer
qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2022-14.

192

Capitalizing acquisition or production costs (section 263(a))—for an applicant changing its method of accounting to
capitalizing amounts paid or incurred to acquire or produce property under Regulations section 1.263(a)-2 and, if depreciable,
to depreciating such property under section 167 or 168. Additionally, a qualified small taxpayer qualifies for a reduced Form
3115 filing requirement. See section 11.08 of Rev. Proc. 2022-14.

193

Deducting certain costs for investigating or pursuing the acquisition of property (section 162)—for an applicant
changing its method of accounting from capitalizing to deducting amounts paid or incurred in the process of investigating or
otherwise pursuing (a) the acquisition of real property if the amounts meet the requirements of Regulations section 1.263(a)-2(f)
(2)(iii); or (b) the acquisition of real or personal property if the amounts are for employee compensation or overhead costs under
Regulations section 1.263(a)-2(f)(2)(iv), consistent with Regulations section 1.263(a)-2. Additionally, a qualified small taxpayer
qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2022-14.

194

Change to a reasonable allocation method for self-constructed assets (section 263A)—for a producer or a
reseller-producer to a reasonable allocation method under Regulations section 1.263A-1(f)(4) for self-constructed assets or
from not capitalizing a cost subject to section 263A to capitalizing that cost under a reasonable allocation method under
Regulations section 1.263A-1(f)(4) that the producer or reseller-producer is already using for self-constructed assets. See
section 12.08 of Rev. Proc. 2022-14.

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Change

195

Real property acquired through foreclosure (section 263A)—for an applicant that capitalizes costs under section 263A(b)
(2) and Regulations section 1.263A-3(a)(1) to real property acquired through foreclosure, or similar transaction, to an otherwise
permissible method of accounting under which the acquisition and holding costs for real property acquired through foreclosure,
or similar transaction, are not capitalized under section 263A(b)(2) and Regulations section 1.263A-3(a)(1). See section 12.09
of Rev. Proc. 2022-14.

196

Obsolete.

197

Obsolete.

198

Partial dispositions of tangible depreciable asset to which the IRS’s adjustment pertains (section 168)—for MACRS
property for which the applicant is making a partial disposition election under Regulations section 1.168(i)-8(d)(2)(iii) to the
disposition of a portion of the asset to which the IRS’s adjustment pertains (as described in Regulations section 1.168(i)-8(d)(2)
(iii)). Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing
requirement. See section 6.10 of Rev. Proc. 2022-14.

199

Depreciation of leasehold improvements (sections 167, 168, and 197)—for leasehold improvements in which the
applicant has a depreciable interest at the beginning of the year of change, from improperly depreciating or amortizing these
leasehold improvements over the term of the lease (including renewals, if applicable) to properly depreciating or amortizing
these leasehold improvements under section 167(f)(1), 168, or 197, as applicable. Complete Schedule E of Form 3115.
Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 6.11 of Rev. Proc.
2022-14.

200

Depreciation of MACRS property (permissible to permissible) (section 168)—for MACRS property, from a permissible
method to another permissible method listed in section 6.12(3) of Rev. Proc. 2022-14. Certain changes are made on a modified
cut-off basis or a cut-off basis. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a
reduced Form 3115 filing requirement. See section 6.12 of Rev. Proc. 2022-14.

201

Sales-based royalties (section 263A)—for sales-based royalties (as described in Regulations section 1.263A-1(e)(3)(ii)(U)
(2)) properly allocable to inventory property for which the applicant is making a change listed in section 12.10(1) of Rev. Proc.
2022-14. See Rev. Proc. 2014-33 and section 12.10 of Rev. Proc. 2022-14.

202

Sales-based vendor chargebacks under a simplified method (section 263A)—for an applicant changing its method of
accounting to no longer include cost adjustments for sales-based vendor chargebacks (as described in Regulations section
1.471-3(e)(1)) in the formulas used to allocate additional section 263A costs to ending inventory under a simplified method. See
Rev. Proc. 2014-33 and section 12.11 of Rev. Proc. 2022-14.

203

Sales-based vendor chargebacks (section 471)—for an applicant changing its method of accounting to treat sales-based
vendor chargebacks as a reduction in cost of goods sold in accordance with Regulations section 1.471-3(e)(1). See Rev. Proc.
2014-33 and section 22.14 of Rev. Proc. 2022-14.

204

Retail inventory method (section 471)—for an applicant using the retail inventory method, a change to (a) not adjusting the
numerator of the cost complement for an allowance, discount, or price rebate required by Regulations section 1.471-3(e) to
reduce only cost of goods sold; (b) not adjusting the denominator of the cost complement for temporary markups and
markdowns; (c) computing the cost complement using a method described in Regulations section 1.471-8(b)(3) (including
changes from a method described in section 1.471-8(b)(3) to another method described in that section) for a retail LCM
applicant; or (d) adjusting the denominator of the cost complement for permanent markups and markdowns for a retail cost
applicant. See section 22.15 of Rev. Proc. 2022-14. Note. A taxpayer making any of these changes for its first or second tax
year after December 31, 2014, may use either a section 481(a) adjustment or a cut-off basis to implement the change.

205

Dispositions of a building or structural component (section 168)—for MACRS property for which the applicant is making
a change listed in section 6.13(3) of Rev. Proc. 2022-14 for disposing of a building or a structural component or disposing of a
portion of a building (including its structural components) to which the partial disposition rule in Regulations section 1.168(i)-8(d)
(1) applies. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing
requirement. See section 6.13 of Rev. Proc. 2022-14.

206

Dispositions of tangible depreciable assets (other than a building or its structural components) (section 168)—for
MACRS property for which the applicant is making a change listed in section 6.14(3) of Rev. Proc. 2022-14 for disposing of
section 1245 property or a depreciable land improvement or disposing of a portion of section 1245 property or a depreciable
land improvement to which the partial disposition rule in Regulations section 1.168(i)-8(d)(1) applies. Complete Schedule E of
Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 6.14 of
Rev. Proc. 2022-14.

207

Dispositions of tangible depreciable assets in a general asset account (section 168)—for MACRS property for which
the applicant is making a change listed in section 6.15(3) of Rev. Proc. 2022-14 for disposing of an asset subject to a general
asset account election. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced
Form 3115 filing requirement. See section 6.15 of Rev. Proc. 2022-14.

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Change

208

Cable network asset maintenance allowance or unit of property method of accounting (section 263(a))—for certain
applicants that operate and have a depreciable interest in cable network assets used in a cable system that provides video,
high speed internet, and VOIP phone services that are changing to (a) the network maintenance allowance method for cable
network assets described in section 5 of Rev. Proc. 2015-12, 2015-2 I.R.B. 265; or (b) the adoption of all, or some, of the units
of property described in section 6 of Rev. Proc. 2015-12, to determine whether expenditures to maintain, replace, or improve
cable network assets must be capitalized under section 263(a). See section 3.11 of Rev. Proc. 2022-14.

209

Cable network customer drops and labor costs associated with installing customer premise equipment (section
263(a))—for certain applicants that operate cable systems and (a) are changing to the specific identification method described
in section 7.01(1) of Rev. Proc. 2015-12, or the safe harbor allocation method described in section 7.01(2) of Rev. Proc.
2015-12 for determining whether customer drop costs (including installations) may be deducted under section 162 or must be
capitalized under section 263(a), or (b) are changing to deducting labor costs associated with installing customer premise
equipment under section 7.02 of Rev. Proc. 2015-12. See section 3.11 of Rev. Proc. 2022-14.

210

Depreciation of fiber optic transfer node and fiber optic cable used by a cable system operator (section 168)—for a
cable system operator within the scope of Rev. Proc. 2015-12 that is changing to the safe harbor method of accounting in
section 8.03 of Rev. Proc. 2015-12 for determining depreciation of a fiber optic transfer node and trunk line consisting of fiber
optic cable used in a cable distribution network providing one-way and two-way communication services. See Rev. Proc.
2015-12 and section 6.17 of Rev. Proc. 2022-14.

211

Bad debt conformity election by bank after previous election automatically revoked (section 166)—for an eligible bank
changing its method of accounting for bad debts by making the conformity election under Regulations section 1.166-2(d)(3)(iii)
(C)(3). See section 4.02 of Rev. Proc. 2022-14.

212

Change to comply with section 163(e)(3)—for a taxpayer changing its method or methods of accounting to comply with the
requirements of section 163(e)(3), which defers certain deductions attributable to OID debt instruments held by related foreign
persons. Any portion of the OID will not be allowable as a deduction to the U.S. person issuer until paid. See section 5.02 of
Rev. Proc. 2022-14.

213

Railroad track structure expenditures (section 263(a))—for a taxpayer changing its method of accounting for track
structures to (a) the safe harbor method provided in Rev. Proc. 2002-65, 2002-2 C.B. 700; or (b) the safe harbor method
provided in Rev. Proc. 2001-46, 2001-2 C.B. 263. See section 11.09 of Rev. Proc. 2022-14.

214

U.S. ratio method (section 263A)—for a foreign person (as defined in Notice 88-104, as modified by Notice 89-67) required
to capitalize costs under section 263A that is changing its method of accounting to the U.S. ratio method (as described in
Notice 88-104) or that currently uses the U.S. ratio method and is changing to the U.S. ratio method of a different applicable
U.S. trade or business for applying the U.S. ratio method. See section 12.12 of Rev. Proc. 2022-14.

215

Depletion (section 263A)—for an applicant changing its method of accounting for depletion to treat these amounts as an
indirect cost that is only properly allocable to property that has been sold under Regulations section 1.263A-1(e)(3)(ii)(J). See
section 12.13 of Rev. Proc. 2022-14.

216

Obsolete.

217

Retainages received under long-term contracts (section 451)—for an accrual method applicant’s retainages under section
451 to a method consistent with the holding in Rev. Rul. 69-314, 1969-1 C.B. 139. This change only applies to retainages under
long-term contracts as defined in section 460(f) that are exempt construction contracts (as defined in Regulations section
1.460-3(b)(1)). An applicant changing its method of accounting under this section must treat all retainages (receivables and
payables) in the same manner. See section 16.07 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

218

Change from the mark-to-market method of accounting to a realization method (section 475)—for a taxpayer changing
its method of accounting for securities or commodities from the mark-to-market method described in section 475 to a
realization method of accounting (for example, by revoking an election under section 475(e), section 475(f)(1), or section 475(f)
(2)). A notification statement must be filed earlier than the due date of the Form 3115. See section 24.02 of Rev. Proc. 2022-14.
Note. This change is generally made with audit protection, but has conditions or limitations. This change is also implemented
on a cut-off basis.

219

Change in qualification as life/non-life insurance company (section 816)—for a taxpayer changing its qualification under
section 816(a) to move from a life insurance company taxable under Part I of subchapter L to a non-life insurance company
taxable under Part II of subchapter L, or vice versa. See section 26.03 of Rev. Proc. 2022-14. Note. This change does not
receive audit protection.

220

Economic performance safe harbor for Ratable Service Contracts (section 461)—for an accrual method taxpayer that
wants to change its treatment of Ratable Service Contracts to conform to the safe harbor method provided by Rev. Proc.
2015-39, 2015-33 I.R.B. 197. See section 20.12 of Rev. Proc. 2022-14.

221

Obsolete.

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Change

222

Remodel-refresh safe harbor method (section 263)—for a qualified taxpayer changing to the remodel-refresh safe harbor
method of accounting provided in section 5.02 of Rev. Proc. 2015-56 for its qualified costs, including the making of a late
general asset account election as provided under section 5.02(6)(d) of Rev. Proc. 2015-56. Additionally, a qualified small
taxpayer qualifies for a reduced Form 3115 filing requirement. See section 11.10 of Rev. Proc. 2022-14. Note. This change is
generally made with audit protection, but has conditions or limitations. Certain changes are also implemented on a cut-off basis.

223

Start-up expenditures (section 195)— for an applicant changing its method of accounting under section 195 to change the
characterization of an item as a start-up expenditure, the determination of the tax year in which the taxpayer begins the active
trade or business to which the start-up expenditures relate, or the amortization period of a start-up expenditure to 180 months.
See section 10.01 of Rev. Proc. 2022-14.

224

Interest capitalization (section 263A)—for an applicant changing its method of accounting for interest from not capitalizing
any interest, capitalizing interest in accordance with its method of accounting for financial reporting purposes, or applying an
improper method of capitalizing interest under Regulations sections 1.263A-8 through -14, with respect to the production of
designated property, to capitalizing interest with respect to the production of designated property in accordance with
Regulations sections 1.263A-8 through -14. See section 12.14 of Rev. Proc. 2022-14.

225

Certain changes within the retail inventory method (section 471)—for an applicant using the retail inventory method that
wants to change from including to not including temporary markups and markdowns in determining the retail selling prices of
goods on hand at the end of the tax year. See section 22.16 of Rev. Proc. 2022-14.

226

Transfer of interties under the safe harbor described in Notice 2016-36 (section 118)—for a utility changing to the safe
harbor method of accounting provided in section III.C of Notice 2016-36 for the treatment under section 118 of a transfer of an
intertie, including a dual-use intertie, by a generator to a utility, or for a utility using the safe harbor method of accounting
provided in section III.C of Notice 2016-36 and is required to terminate that safe harbor method of accounting. See section
15.15 of Rev. Proc. 2022-14. Note. The change from using the safe harbor method of accounting provided in section III.C of
Notice 2016-36 to terminating that safe harbor method of accounting is implemented on a cut-off basis.

227

Change to or from the net asset value (NAV) method (section 446)—for an applicant that holds shares in a money market
fund (MMF) and that wants to change its method of accounting for gain or loss on the shares from a realization method to the
NAV method described in Regulations section 1.446-7 or from the NAV method to a realization method. See section 15.16 of
Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis and also has a reduced Form 3115 filing requirement.

228

Organizational expenditures under section 248 (section 248)—for a corporation changing its method of accounting under
section 248 to change the characterization of an item as an organizational expenditure, the determination of the tax year in
which the corporation begins business to which the organizational expenditures relate, or the amortization period of an
organizational expenditure to 180 months. See section 10.02 of Rev. Proc. 2022-14.

229

Organization fees under section 709 (section 709)—for a partnership changing its method of accounting under section 709
to change the characterization of an item as an organizational expense, the determination of the tax year in which the
partnership begins business to which the organizational expenses relate, or the amortization period of an organizational
expense to 180 months. See section 10.03 of Rev. Proc. 2022-14.

230

Change from currently deducting inventories to permissible methods of identification and valuation of inventories
(section 471)—for an applicant changing from currently deducting inventories to a permissible method of identifying and
valuing inventories. See section 22.17 of Rev. Proc. 2022-14.

231

Changes in the timing of recognition of income due to the New Standards (section 451)—for an applicant that wants to
change its method of accounting for the recognition of income to a method under the new financial accounting standards jointly
announced by the Financial Accounting Standards Board and the International Accounting Standards Board for (i) identifying
performance obligations, (ii) allocating transaction price to performance obligations, and/or (iii) considering performance
obligations satisfied. See section 16.09 of Rev. Proc. 2022-14. Note. A taxpayer making this change may implement the
change with either a section 481(a) adjustment or on a cut-off basis. This change applies to a tax year beginning on or before
May 10, 2022. An applicant that makes a New Standards change that also wants to comply with section 451(b) and Regulations
section 1.451-3, and/or section 451(c) and Regulations section 1.451-8(a) or (c) must use section 16.06, 16.08, or 16.10 of
Rev. Proc. 2022-14, as applicable.

232

Change to not apply section 263A to replanting costs for lost or damaged citrus plants pursuant to section 263A(d)
(2)(C)—for certain applicants that currently capitalize costs of replanting citrus plants under section 263A(d)(2), to not applying
section 263A to those costs under section 263A(d)(2)(C). Costs must be paid or incurred after December 22, 2017, and on or
before December 22, 2027. See Rev. Proc. 2018-35, 2018-28 I.R.B. 204, and section 12.15 of Rev. Proc. 2022-14. Note. The
section 481(a) adjustment is calculated by taking into account only amounts paid or incurred after December 22, 2017, and on
or before December 22, 2027.

233

Overall cash method for a small business taxpayer (section 446)—for a qualifying applicant with average annual gross
receipts of $25 million or less (adjusted for inflation) changing to the overall cash method. Complete certain lines of Schedule A,
Part I, of Form 3115. See section 15.17 of Rev. Proc. 2022-14.

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Change

234

Uniform capitalization exception for a small business taxpayer (section 263A)—for a qualifying applicant with average
annual gross receipts of $25 million or less (adjusted for inflation) changing from capitalizing costs under section 263A to no
longer capitalizing costs under section 263A, including for self-constructed assets. See Rev. Proc. 2018-40 and section 12.16
of Rev. Proc. 2022-14.

235

Inventory exception for a small business taxpayer (section 471)—for a qualifying applicant with average annual gross
receipts of $25 million or less (adjusted for inflation) changing its accounting method for inventory items under section 471 to
one of the following methods: (a) treating inventory as non-incidental materials and supplies (NIMS) under section 471(c)(1)(B)
(i); (b) treating inventory as NIMS under Proposed Regulations section 1.471-1(b)(4); (c) a method that conforms to section
471(c)(1)(B)(ii) by using the taxpayer’s method of accounting reflected in its AFS, as defined in section 451(b)(3), with respect
to the tax year, or if the taxpayer does not have an AFS for the tax year, the books and records of the taxpayer prepared in
accordance with the taxpayer’s accounting procedures; or (d) the AFS section 471(c) method in Proposed Regulations section
1.471-1(b)(5), or if the taxpayer does not have an AFS for the tax year, the non-AFS section 471(c) method described in
Proposed Regulations section 1.471-1(b)(6). See section 22.18 of Rev. Proc. 2022-14. Note. This change does not apply to tax
years beginning on or after January 5, 2021. See, however, DCN 260 or 261 for tax years beginning on or after January 5, 2021.

236

Long-term contract exception for small business taxpayer (section 460)—for a qualifying applicant with average annual
gross receipts of $25 million or less (adjusted for inflation) (a) changing from the percentage-of-completion accounting method
described in Regulations section 1.460-4(b) for exempt long-term construction contracts described in section 460(e)(1)(B) to
an exempt contract accounting method described in section 1.460-4(c), or (b) with long-term home construction contracts
defined in section 460(e)(1)(A) changing its accounting method to stop capitalizing costs under 263A. Complete Schedule D,
Part I, of Form 3115. See section 19.01 of Rev. Proc. 2022-14. Note. A change to account for exempt long-term contracts
under this change is made on a cut-off basis.

237

Recharacterizing costs under the simplified resale method, the simplified production method, or the modified
simplified production method—for an applicant that uses or is changing to the simplified resale method, the simplified
production method, or the modified simplified production method and wants to recharacterize a section 471 cost, as defined in
section 1.263A-1(d)(2), as an additional section 263A cost, as defined in section 1.263A-1(d)(3), or vice versa. See section
12.17 of Rev. Proc. 2022-14.

238

Revocation of a historic absorption ratio election—for an applicant that either (a) uses the simplified resale method with
historic absorption ratio election that wants to revoke its historic absorption ratio election and change to the simplified resale
method without historic absorption ratio election, or (b) uses the simplified production method with historic absorption ratio
election that wants to revoke its historic absorption ratio election and change to the simplified production method without
historic absorption ratio election. This change applies to a taxpayer’s first, second, or third tax year ending on or after November
20, 2018. See section 12.18 of Rev. Proc. 2022-14.

239

Obsolete.

240

Change in basis of computing reserves (section 807)—for a life insurance company changing the basis of computing any
item referred to in section 807(c), as described in section 807(f), or a non-life insurance company changing the basis of
computing life insurance reserves. See section 26.04 of Rev. Proc. 2022-14.

241

Late elections or revocation of elections under sections 168(k)(5), (k)(7), and (k)(10)—for an applicant within the scope
of Rev. Proc. 2019-33, 2019-34 I.R.B. 662, that wants to make a late election, or to revoke an election, provided in sections 4,
5, and 6 of Rev. Proc. 2019-33 under section 168(k)(5), (k)(7), or (k)(10). See section 6.18 of Rev. Proc. 2022-14.

242

Changes in timing of income recognition under Proposed Regulations sections 1.451-3 and 1.451-8 (section 451)—
for an accrual method applicant with an applicable financial statement (AFS) that is changing to (a) a method of accounting
under Proposed Regulations section 1.451-3, or (b) a method of accounting for advance payments under Proposed
Regulations section 1.451-8(a) or (c). This change is also for an applicant without an AFS that is changing to a method of
accounting for advance payments under Proposed Regulations section 1.451-8(a) or (d). Note. This change does not apply to
tax years beginning after December 31, 2020. Some changes may be made on a cut-off basis. See section 16.10 of Rev. Proc.
2022-14.

243

Late revocation of elections under section 263A(d)(3)—for an eligible small business taxpayer that wants to make a late
revocation election under section 263A(d)(3) as provided in section 5.02(2)(b) of Rev. Proc. 2020-13. See section 12.19 of Rev.
Proc. 2022-14. Note. The change under section 12.19 of Rev. Proc. 2022-14 must be made for the taxpayer's first, second, or
third tax year beginning after the taxpayer's first tax year beginning in 2018.

244

Qualified improvement property placed in service after December 31, 2017 (section 168)—for an applicant that wants to
change from an impermissible to a permissible method of accounting for depreciation of any item of qualified improvement
property, as defined in section 168(e)(6), that is placed in service by the taxpayer after December 31, 2017, and that is owned
by the taxpayer at the beginning of the year of change. An applicant qualifies for a reduced filing requirement. See section 6.19
of Rev. Proc. 2022-14.

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Change

245

Certain late elections under sections 168 and 1502 or revocation of certain elections under section 168 (sections
168(g)(7), (k)(5), (k)(7), and (k)(10); and Regulations sections 1.168(k)-2 and 1.1502-68)—for an applicant within the
scope of section 4 of Rev. Proc. 2020-25, 2020-19 I.R.B. 785, as modified by section 8 of Rev. Proc. 2020-50, 2020-48 I.R.B.
1122, that wants to make a late election provided in section 4.02(2) of Rev. Proc. 2020-25 under section 168(g)(7), (k)(5), (k)
(7), or (k)(10). This change also applies to an applicant within the scope of section 5 of Rev. Proc. 2020-25 that wants to revoke
an election provided in section 5.02(2)(b) of Rev. Proc. 2020-25 under section 168(k)(5), (k)(7), or (k)(10). This change also
applies to an applicant within the scope of section 5 of Rev. Proc. 2020-50 that wants to make a late election under section
168(k)(5), (k)(7), or (k)(10); Regulations section 1.168(k)-2(c) (component election); Regulations section 1.1502-68(c)(4)
(designated transaction election); or Proposed Regulations section 1.168(k)-2(c) (proposed component election) as provided in
section 5.02(2) of Rev. Proc. 2020-50. Finally, this change also applies to a taxpayer within the scope of section 6 of Rev. Proc.
2020-50 that wants to revoke an election under section 168(k)(5), (k)(7), or (k)(10); or a proposed component election as
provided in section 6.02(2)(b) of Rev. Proc. 2020-50. An applicant qualifies for a reduced filing requirement. See section 6.20 of
Rev. Proc. 2022-14.

246

Change in depreciation as a result of applying the additional first year depreciation regulations (section 168(k) and
Regulations sections 1.168(k)-2 and 1.1502-68)—This change applies to an applicant within the scope of section 4 of Rev.
Proc. 2020-50, 2020-48 I.R.B. 1122, that wants to change its method of accounting for depreciation under section 168 from an
impermissible method to a permissible method to comply with Regulations section 1.168(k)-2 or 1.1502-68, as applicable, for
depreciable property and specified plants within the scope of section 4 of Rev. Proc. 2020-50. An applicant qualifies for a
reduced filing requirement. See section 4.03 of Rev. Proc. 2020-50 and section 6.21(3) of Rev. Proc. 2022-14.

247

Change in depreciation as a result of applying the additional first year depreciation regulations (section 168(k) and
Regulations sections 1.168(k)-2 and 1.1502-68)—This change applies to an applicant within the scope of section 4 of Rev.
Proc. 2020-50, 2020-48 I.R.B. 1122, that wants to change its method of accounting for depreciation under section 168 from a
permissible method to another permissible method to comply with Regulations 1.168(k)-2 or 1.1502-68, as applicable, for
depreciable property and specified plants within the scope of section 4 of Rev. Proc. 2020-50. An applicant qualifies for a
reduced filing requirement. See section 4.04 of Rev. Proc. 2020-50 and section 6.21(4) of Rev. Proc. 2022-14. Note.This
change is implemented on a cut-off basis.

248

Depreciation of tangible property under section 168(g) by CFCs—for a CFC (as defined in section 957(a)) that seeks to
change its method of accounting for depreciation of an item of property that is described in section 168(g)(1)(A) (except for
property excluded from the application of section 168 as a result of section 168(f)) and owned by the CFC at the beginning of
the year of change to the permissible depreciation method, convention, and recovery period prescribed under the alternative
depreciation system in section 168(g) for such property in determining the CFC’s gross and taxable income under section
1.952-2 as well as its earnings and profits under sections 964 and 986(b) and the regulations thereunder. This change is
effective for a Form 3115 filed on or after May 11, 2021, for a tax year of a CFC ending before January 1, 2024. See section
6.22 of Rev. Proc. 2022-14.

249

Timing of incurring liabilities for commissions (section 461)—for an accrual method applicant to treat commissions as
incurred in the tax year in which all events have occurred that establish the fact of the liability to pay a commission and the
amount of the liability can be determined with reasonable accuracy. Note. This change does not apply to an applicant that is
required under section 263A to capitalize the costs with respect to which the applicant wants to change its method of
accounting if the applicant is not capitalizing these costs, unless the applicant concurrently changes its method to capitalize
these costs. See section 20.01(4) of Rev. Proc. 2022-14.

250

Changes in timing of income recognition related to Regulations section 1.451-3, other than cost offset (section 451)
—for an accrual method applicant with an applicable financial statement (AFS) to (a) change to comply with Regulations
section 1.451-3(b) to determine the amount of gross income that is taken into account as AFS revenue by making the AFS
revenue adjustments provided in Regulations sections 1.451-3(b)(2)(i) or (ii) (including a change for specified credit card fees
under Regulations sections 1.451-3(j)(2) and 1.1275-2(l)), (b) change to comply with the transaction price allocation rules in
Regulations section 1.451-3(d), or (c) change to a method described in Regulations section 1.451-3(h)(4) when an applicant’s
AFS covers mismatched reportable periods. Note. Some changes related to inventory sales may require netting of section
481(a) adjustments. A change to make the AFS revenue adjustments provided in Regulations sections 1.451-3(b)(2)(i) or (ii)
applies only to tax years beginning before January 1, 2021, and to the applicant’s first, second, or third tax year beginning after
December 31, 2020. See section 16.10 of Rev. Proc. 2022-14.

251

Changes in timing of income recognition related to cost offset, except concurrent cost-offset related inventory
method changes (section 451)—for an accrual method applicant with an AFS to (a) apply or (b) not apply a cost offset
method to determine the amount of an item of gross income from the sale of inventory that is required to be included in gross
income under the AFS income inclusion rule in Regulations section 1.451-3(b). Note. An applicant that also needs to comply
with Regulations section 1.451-3(c)(5)(ii) as a result of a concurrent cost-offset related inventory method may also need to
make a change under DCN 255 for the same year of change. Some changes related to inventory sales may require netting of
section 481(a) adjustments. See section 16.10 of Rev. Proc. 2022-14.

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List of DCNs
No.

Change

252

Changes in timing of income recognition related to the deferral method for advance payments (section 451)—for an
applicant with an AFS to change to (a) the deferral method provided in Regulations section 1.451-8(c), (b) the specified goods
method described in Regulations section 1.451-8(f) when accounting for advance payments using the deferral method, (c) a
method described in Regulations section 1.451-8(c)(7) when an applicant’s AFS covers mismatched reporting periods, or (d)
comply with the payment allocation rules in Regulations section 1.451-8(c)(8). This change is also for applicants without an AFS
to change to (a) the deferral method provided in Regulations section 1.451-8(d)(3), or (b) a payment allocation method
described in Regulations section 1.451-8(d)(4)(ii). Note. Some changes related to inventory sales may require netting of
section 481(a) adjustments. See section 16.10 of Rev. Proc. 2022-14.

253

Changes in timing of income recognition related to advance payment cost offset, except concurrent cost-offset
related inventory method changes (section 451)—for an applicant with or without an AFS to change to (a) apply or (b) not
apply an advance payment cost offset method to determine the amount of an advance payment from the sale of inventory that
is required to be included in gross income under either the full inclusion method in Regulations section 1.451-8(b) or the
deferral method in Regulations section 1.451-8(c), as applicable. Note. An applicant that also needs to comply with
Regulations section 1.451-8(e)(8)(ii) as a result of a concurrent cost-offset related inventory method change may also need to
make a change under DCN 255 for the same year of change. Some changes related to inventory sales may require netting of
section 481(a) adjustments. See section 16.10 of Rev. Proc. 2022-14.

254

Changes in timing of income recognition related to the full inclusion method (section 451)—for an applicant to change
to the full inclusion method provided in Regulations section 1.451-8(b) or, in the case of an applicant with an AFS, to change to
the specified goods method described in Regulations section 1.451-8(f) when accounting for advance payments using the full
inclusion method. Note. Some changes related to inventory sales may require netting of section 481(a) adjustments. See
section 16.10 of Rev. Proc. 2022-14.

255

Changes in timing of income recognition related to cost offsets resulting from concurrent cost-offset related
inventory method changes (section 451)—for an applicant with an AFS to change to comply with Regulations section
1.451-3(c)(5)(ii) or Regulations section 1.451-8(e)(8)(ii) as a result of a concurrent cost-offset related inventory method change
or because the applicant determines its cost of goods in progress offset by reference to costs that the applicant has
impermissibly capitalized and/or allocated under its present method of accounting. This change also applies to an applicant
without an AFS to change to comply with Regulations section 1.451-8(e)(8)(ii) as a result of a concurrent cost-offset related
inventory method change or because the applicant determines its cost of goods in progress offset by reference to costs that the
applicant has impermissibly capitalized and/or allocated under its present method of accounting. Note. An applicant that makes
more than one change under DCN 255 for the same year of change may be required to net the section 481(a) adjustments in
certain circumstances. This change requires a section 481(a) adjustment spread period that mirrors a corresponding cost-offset
related inventory method change. In very limited situations, this change may be made on an amended return. See section 16.10
of Rev. Proc. 2022-14.

256

Timing of incurring inventory costs (section 461)—for an accrual method applicant to change its method for one or more
inventory costs to treat such costs as incurred in accordance with Regulations sections 1.461-1(a)(2) and 1.461-4(d)(4) if
certain conditions are met. This change must be made for an applicant’s early application year, or, if the applicant does not
apply Regulations section 1.451-3 and/or 1.451-8 for a tax year prior to January 1, 2021, for the applicant’s first tax year
beginning on or after January 1, 2021. See section 20.13 of Rev. Proc. 2022-14.

257

Change in overall method from the cash method to an accrual method for the mandatory 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 in
the applicant’s mandatory section 448 year. See section 15.01 of Rev. Proc. 2022-14.

258

Change in overall method from the cash method to an accrual method for a taxpayer subject to section 447 (section
446)—for an applicant subject to section 447 that is required by section 447 to change from the overall cash method to an
overall accrual method. See section 15.01 of Rev. Proc. 2022-14.

259

Accrual method for inventories, and the cash method for computing all other items of income and expense (section
446)— for a qualifying applicant with average annual gross receipts of $25 million or less (adjusted for inflation) changing to an
accounting method in which a small business taxpayer uses an accrual method for purchases and sales of inventories and uses
the cash method for computing all other items of income and expense. Complete certain lines of Schedule A, Part I, of Form
3115. See section 15.17 of Rev. Proc. 2022-14

260

Inventory exception for a small business taxpayer (section 471)—for a qualifying applicant with average annual gross
receipts of $25 million or less (adjusted for inflation) changing its section 471 inventory method to the section 471(c) NIMS
inventory method provided in Regulations section 1.471-1(b)(4). See section 22.18 of Rev. Proc. 2022-14.

261

Inventory exception for a small business taxpayer (section 471)—for a qualifying applicant with average annual gross
receipts of $25 million or less (adjusted for inflation) changing its accounting method for inventory items under section 471 to
one of the following methods: (a) the AFS section 471(c) inventory method provided in Regulations section 1.471-1(b)(5), for
taxpayers with an AFS, as defined in Regulations section 1.471(b)(5)(ii); or (b) the non-AFS section 471(c) inventory method
provided in Regulations section 1.471-1(b)(6), for taxpayers that do not have an AFS. See section 22.18 of Rev. Proc. 2022-14.

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List of DCNs
No.

Change

262

Changes within a section 471(c) inventory method—for a qualifying applicant with average annual gross receipts of $25
million or less (adjusted for inflation) making changes within a section 471(c) inventory method. See section 22.19 of Rev.
Proc. 2022-14. Note. This change does not receive audit protection. Additionally, reduced Form 3115 filing requirements apply
to this change.

263

Change from a small business taxpayer section 471(c) inventory method to an inventory method under section
471(a)—for a qualifying applicant with average annual gross receipts of $25 million or less (adjusted for inflation) changing
from using a small business taxpayer inventory method under section 471(c) inventory method to an inventory method under
section 471(a). See section 22.20 of Rev. Proc. 2022-14.

264

Certain late elections under sections 168(j)(3), 168(l)(3)(D), and 181(a)(1)—for an applicant making a late election (1) not
to apply section 168(j) for qualified Indian reservation property placed in service after December 31, 2017, for its 2018 or 2019
tax year; (2) not to apply section 168(l) for qualified second generation biofuel plant property placed in service after December
31, 2017, for its 2018 or 2019 tax year; or (3) to apply section 181 to the production costs for its 2018 or 2019 tax year of any
qualified film, television, or live theatrical production, commenced by the taxpayer after December 31, 2017. See section 6.23 of
Rev. Proc. 2022-14.

265

Research and experimental expenditures (section 174)—to charging specified research or experimental expenditures to
capital account and amortizing such expenditures over a 5- or 15-year period, as applicable. See section 7.02 of Rev. Proc.
2022-14. Note. For specified research or experimental expenditures paid or incurred in the first tax year beginning after
December 31, 2021, this change is implemented on a cut-off basis. For specified research or experimental expenditures paid or
incurred in any year of change later than the first tax year beginning after December 31, 2021, this change is implemented with
a modified section 481(a) adjustment. This change applies to amounts paid or incurred in tax years beginning after December
31, 2021. For amounts paid or incurred in tax years beginning before January 1, 2022, see DCN 17.

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Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
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 business
taxpayers filing this form is approved under OMB control number 1545-0123 and is included in the estimates shown in the instructions
for their business income tax return. 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.
Time Per Response
Recordkeeping
Learning . . . .
Preparing . . .
Sending . . . .

. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .

60 hours, 58 minutes
17 hours, 25 minutes
21 hours, 3 minutes
32 minutes

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 send us comments from IRS.gov/FormComments. Or you can send your comments to: Internal
Revenue Service, Tax Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send
Form 3115 to this address. Instead, see When and Where To File, earlier.

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