Rp 2024-23

26 CFR 601.204: Changes in accounting periods and in methods of accounting.
(Also Part I, §§ 56, 61, 77, 118, 162, 163, 166, 167, 168, 171, 174, 179D, 181, 194, 195, 197, 248, 263, 263A, 267, 280F, 404, 446, 447, 448, 451, 454, 455, 460,
461, 467, 471, 472, 475, 481, 585, 709, 807, 816, 832, 833, 846, 860A-860G, 861, 904, 953, 985, 1272, 1273, 1278, 1281, 1363, 1400I, 1400L, 1400N; 1.61-1,
1.61-4, 1.61-8, 1.77-1, 1.77-2, 1.118-2, 1.162-1, 1.162-3, 1.162-4, 1.162-11, 1.162-12, 1.166-1, 1.166-2, 1.166-4, 1.167(a)-2, 1.167(a)-3(b), 1.167(a)-4, 1.167(a)-7,
1.167(a)-8, 1.167(a)-11, 1.167(a)-14, 1.167(e)-1, 1.168(d)-1, 1.168(i)-1, 1.168(i)-4, 1.168(i)-6, 1.168(i)-7, 1.168(i)-8, 1.168(k)-1, 1.168(k)-2, 1.171-4, 1.174-1, 1.1743, 1.174-4, 1.179-5, 1.181-2, 1.194-1, 1.195-1, 1.197-2, 1.248-1, 1.263(a)-1, 1.263(a)-2, 1.263(a)-3, 1.263(a)-4, 1.263(a)-5, 1.263A-1, 1.263A-2, 1.263A-3, 1.263A-4,
1.263A-7, 1.267(a)-1, 1.280F-6, 1.404(b)-1T, 1.446-1, 1.446-1T, 1.446-2, 1.446-5, 1.446-6, 1.446-7, 1.448-1, 1.448-2, 1.451-1, 1.451-3, 1.451-8, 1.454-1, 1.455-6,
1.460-1, 1.460-3, 1.460-4, 1.461-1, 1.461-4, 1.461-5, 1.467-1, 1.471-1, 1.471-2, 1.471-3, 1.471-4, 1.471-5, 1.471-8, 1.472-1, 1.472-2, 1.472-6, 1.472-8, 1.481-1,
1.481-4, 1.709-1, 1.709-2, 1.832-4, 1.832-5, 1.860A-6, 1.861-18, 1.985-5, 1.985-8, 1.1016-3, 1.1245-3, 1.1272-1, 1.1273-1, 1.1273-2, 1.1275-2, 1.1363-2, 1.1374-4,
1.1400L(b)-1, 1.1502-68.)

LIST OF AUTOMATIC CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1339
SECTION 1. GROSS INCOME (§ 61) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1339
.01 Up-front Payments for Network Upgrades received by Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1339
SECTION 2. COMMODITY CREDIT LOANS (§ 77) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1339
.01 Treating amounts received as loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1339
SECTION 3. TRADE OR BUSINESS EXPENSES (§ 162) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1339
.01 Advances made by a lawyer on behalf of clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1339
.02 ISO 9000 Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1339
.03 Restaurant or tavern smallwares packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1339
.04 Timber grower fertilization costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1339
.05 Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1340
.06 Repair and maintenance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1340
.07 Wireline network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011-27 . .1340
.08 Wireless network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011-28 . .1340
.09 Method of accounting under Rev. Proc. 2011-43 for taxpayers in the business of transporting, delivering, or
selling electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1340
.10 Method of accounting under Rev. Proc. 2013-24 for taxpayers in the business of generating steam or electric power. . . . .1340
.11 Cable network asset capitalization methods of accounting under Rev. Proc. 2015-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1340
.12 Natural gas transmission and distribution property method of accounting under Rev. Proc. 2023-15 . . . . . . . . . . . . . . . . . .1341
SECTION 4. BAD DEBTS (§ 166) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1345
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1345
.02 Conformity election by bank after previous election automatically revoked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1345
SECTION 5. INTEREST EXPENSE (§ 163) AND AMORTIZABLE BOND PREMIUM (§ 171) . . . . . . . . . . . . . . . . . . . . . . . .1345
.01 Revocation of § 171(c) election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1345
.02 Change to comply with § 163(e)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1346
SECTION 6. DEPRECIATION OR AMORTIZATION (§ 56(a)(1), 167, 168, 197, 280F(a), or 1502, OR FORMER
§ 56(g)(4)(A), 168, 1400I, 1400L, or 1400N(d)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1346
.01 Impermissible to permissible method of accounting for depreciation or amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1346
.02 Permissible to permissible method of accounting for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1351
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1353
.04 Change in general asset account treatment due to a change in the use of MACRS property . . . . . . . . . . . . . . . . . . . . . . . . .1353
.05 Change in method of accounting for depreciation due to a change in the use of MACRS property . . . . . . . . . . . . . . . . . . .1354
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1355
.07 Impermissible to permissible method of accounting for depreciation or amortization for disposed depreciable or
amortizable property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1355
.08 Tenant construction allowances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1357

.09
.10
.11
.12
.13
.14
.15
.16

.19

.21
.22

Safe harbor method of accounting for determining the depreciation of certain tangible assets used by wireless
telecommunications carriers under Rev. Proc. 2011-22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1357
Partial dispositions of tangible depreciable assets to which the IRS’s adjustment pertains (§ 168; § 1.168(i)-8) . . . . . . . . .1358
Depreciation of leasehold improvements (§§ 167, 168, and 197; § 1.167(a)-4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1358
Permissible to permissible method of accounting for depreciation of MACRS property (§ 168; §§ 1.168(i)-1,
1.168(i)-7, and 1.168(i)-8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1359
Disposition of a building or structural component (§ 168; § 1.168(i)-8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1362
Dispositions of tangible depreciable assets (other than a building or its structural components) (§ 168; § 1.168(i)-8). . . . .1365
Dispositions of tangible depreciable assets in a general asset account (§ 168(i)(4); § 1.168(i)-1) . . . . . . . . . . . . . . . . . . . . .1367
Summary of certain changes in methods of accounting related to dispositions of MACRS property . . . . . . . . . . . . . . . . . .1369
. . . . . . . .1371
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1372
Certain late elections under §§ 168 and 1502 or revocation of certain elections under § 168 (§ 168(g)(7), (k)(5), (k)
(7), and (k)(10); §§ 1.168(k)-2 and 1.1502-68). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1373
§§ 1.168(k)-2 and 1.1502-68) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1373
Depreciation of tangible property under § 168(g) by controlled foreign corporations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1375
Late elections under § 168(j)(8), § 168(l)(3)(D), and § 181(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1376

SECTION 7. RESEARCH AND EXPERIMENTAL EXPENDITURES (§ 174) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1377
.01 Change in Method of Accounting for SRE Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1377
SECTION 8. ELECTIVE EXPENSING PROVISIONS (§ 179D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1378
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1378

SECTION 9. COMPUTER SOFTWARE EXPENDITURES (§§ 162, 167, and 197) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1379
.01

Computer software expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1379

SECTION 10. START-UP EXPENDITURES AND ORGANIZATIONAL FEES (§§ 195, 248 AND 709) . . . . . . . . . . . . . . . . . .1379
.01
.02
.03

Start-up expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1379
Organizational expenditures under § 248 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1380
Organization fees under § 709. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1380

SECTION 11. CAPITAL EXPENDITURES (§ 263) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1380
.01
.02
.03
.04
.05
.06
.07
.08
.09
.10

Package design costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1380
Line pack gas or cushion gas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1381
Removal costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1381
Distributor commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1381
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1381
Rotable spare parts safe harbor method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1382
Repairable and reusable spare parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1382
Tangible property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1383
Railroad track structure expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1386
Remodel-refresh safe harbor method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1386

SECTION 12. UNIFORM CAPITALIZATION (UNICAP) METHODS (§ 263A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1387
.01
.02
.03
.04
.05
.06
.07
.08
.09

Certain uniform capitalization (UNICAP) methods used by resellers and reseller-producers . . . . . . . . . . . . . . . . . . . . . . . .1387
Certain uniform capitalization (UNICAP) methods used by producers and reseller-producers . . . . . . . . . . . . . . . . . . . . . . .1391
Impact fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1392
Change to capitalizing environmental remediation costs under § 263A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1392
Change in allocating environmental remediation costs under § 263A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1392
Safe harbor methods under § 263A for certain dealerships of motor vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1393
Change to not apply § 263A to one or more plants removed from the list of plants that have a preproductive period
in excess of 2 years.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1393
Change to a reasonable allocation method described in § 1.263A-1(f)(4) for self-constructed assets . . . . . . . . . . . . . . . . . .1393
Real property acquired through foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1394

.10
.12
.13
.14
.15
.16

Sales-Based Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1394
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1394
U.S. ratio method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1395
Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1396
Interest capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1397
Change to not apply § 263A to replanting costs for lost or damaged citrus plants pursuant to § 263A(d)(2)(C). . . . . . . . . .1397
Small business taxpayer exception from requirement to capitalize costs under § 263A . . . . . . . . . . . . . . . . . . . . . . . . . . . .1397
production method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1398

SECTION 13. LOSSES, EXPENSES AND INTEREST WITH RESPECT TO TRANSACTIONS BETWEEN RELATED
.01

TAXPAYERS (§ 267) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1399
Change to comply with § 267 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1399

SECTION 14. DEFERRED COMPENSATION (§ 404) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1399
.01
.02

Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1399
Grace period contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1399

SECTION 15. METHODS OF ACCOUNTING (§ 446) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1400
.01
.02
.03
.04
.05
.06
.07
.09
.11
.12
.13
.14
.15
.16
.17

Change in overall method from the cash method, or from an accrual method with regard to purchases and sales of
inventories and the cash method for all other items, to an accrual method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1400
Multi-year insurance policies for multi-year service warranty contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1402
Nonaccrual-experience method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1402
Interest accruals on short-term consumer loans—Rule of 78’s method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1403
Film producer’s treatment of certain creative property costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1403
Deduction of incentive payments to health care providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1403
Change by bank for uncollected interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1404
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1404
Multi-year service warranty contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1405
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1405
Change to overall cash/hybrid method for certain banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1406
Change to overall cash method for farmers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1407
Nonshareholder contributions to capital under § 118 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1408
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1408
Transfers of interties under the safe harbor described in Notice 2016-36 (§ 118). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1408
Change to or from the net asset value (NAV) method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1409
Small business taxpayer changing the overall method of accounting to the cash method, or to a method of
accounting 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1410

SECTION 16. TAXABLE YEAR OF INCLUSION (§ 451) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1411
.01
.02
.03
.04
.05
.06

Accrual of interest on nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1411
Advance rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1411
State or local income or franchise tax refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1411
Capital Cost Reduction Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1411
Credit card annual fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1411
Retainages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1412

.08

accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1412
Changes in the timing of income recognition under § 451(b) and (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1413

SECTION 17. OBLIGATIONS ISSUED AT DISCOUNT (§ 454) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1419
.01

Series E, EE or I U.S. savings bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1419

SECTION 18. PREPAID SUBSCRIPTION INCOME (§ 455) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1420
.01

Prepaid subscription income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1420

SECTION 19. SPECIAL RULES FOR LONG-TERM CONTRACTS (§ 460) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1420
.01
.02

Small business taxpayer exceptions from requirement to account for certain long-term contracts under
§ 460 or to capitalize costs under § 263A for certain home construction contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1420
Change to rely on the interim guidance provided in section 8 of Notice 2023-63, 2023-39 I.R.B. 919. . . . . . . . . . . . . . . . .1421

SECTION 20. TAXABLE YEAR INCURRED (§ 461) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1422
.01

.02
.03
.04
.05
.06
.07
.08
.09
.10
.11
.12
.13

Timing of incurring liabilities for employee compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1422
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1422
(2) Bonuses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1422
(3) Vacation pay, sick pay, and severance pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1422
(4) Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1423
Timing of incurring liabilities for real property taxes, personal property taxes, state income taxes, and state franchise
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1423
Timing of incurring liabilities under a workers’ compensation act, tort, breach of contract, or violation of law. . . . . . . . . .1424
Timing of incurring certain liabilities for payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1424
Cooperative advertising. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1425
Timing of incurring certain liabilities for services or insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1425
Rebates and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1425
Ratable accrual of real property taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1425
California Franchise Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1426
Gift cards issued as a refund for returned goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1426
Timing of incurring liabilities under the recurring item exception to the economic performance rules. . . . . . . . . . . . . . . . .1426
Economic performance safe harbor for ratable service contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1426
Alternative Cost Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1426

SECTION 21. RENT (§ 467) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1428
.01

Change from an improper method of inclusion of rental income or expense to inclusion in accordance with
the rent allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1428

SECTION 22. INVENTORIES (§ 471) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1428
.01
.02
.03
.05
.06
.07
.08
.09

.12
.13
.14
.15
.16
.18
.19
.20

Cash discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1428
Estimating inventory “shrinkage.” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1429
Qualifying volume-related trade discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1429
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1429
Core Alternative Valuation Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1430
Replacement cost for automobile dealers’ parts inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1430
Replacement cost for heavy equipment dealers’ parts inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1430
Rotable spare parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1431
Advance Trade Discount Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1431
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1431
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1432
Invoiced advertising association costs for new vehicle retail dealerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1432
Rolling-average method of accounting for inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1432
Sales-Based Vendor Chargebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1432
Certain changes to the cost complement of the retail inventory method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1433
Certain changes within the retail inventory method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1433
. . . . .1433
Small business taxpayer § 471(c) inventory methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1434
Changes within a § 471(c) inventory method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1434
Change from a small business taxpayer § 471(c) inventory method to an inventory method under § 471(a). . . . . . . . . . . . .1435

SECTION 23. LAST-IN, FIRST-OUT (LIFO) INVENTORIES (§ 472). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1435
.01
.02
.03
.04
.05

Change from the LIFO inventory method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1435
Determining current-year cost under the LIFO inventory method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1436
Alternative LIFO inventory method for retail automobile dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1437
Used vehicle alternative LIFO method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1437
Determining the cost of used vehicles purchased or taken as a trade-in . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1438

.06
.07
.08
.09
.10

Change to the inventory price index computation (IPIC) method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1438
Changes within the inventory price index computation (IPIC) method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1439
Changes to the Vehicle-Pool Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1439
Changes within the used vehicle alternative LIFO method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1440
Changes to dollar-value pools of manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1440

SECTION 24. MARK-TO-MARKET ACCOUNTING METHOD (Including § 475) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1440
.01
.02

Commodities dealers, securities traders, and commodities traders electing to use the mark-to-market method of
accounting under § 475(e) or (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1440
Taxpayers requesting to change their method of accounting from the mark-to-market method of accounting
described in § 475 to a realization method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1441

SECTION 25. BANK RESERVES FOR BAD DEBTS (§ 585) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1443
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1443

SECTION 26. INSURANCE COMPANIES (§§ 807, 816, 832, 833) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1444
.01
.02
.04

Safe harbor method of accounting for premium acquisition expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1444
Certain changes in method of accounting for organizations to which § 833 applies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1444
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1445
Changes in basis of computing reserves under § 807(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1445

SECTION 27. DISCOUNTED UNPAID LOSSES (§ 846) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1447
.01

Composite method for discounting unpaid losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1447

SECTION 28. REAL ESTATE MORTGAGE INVESTMENT CONDUIT (REMIC) (§§ 860A-860G) . . . . . . . . . . . . . . . . . . . .1447
.01

REMIC Inducement Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1447

SECTION 29. FUNCTIONAL CURRENCY (§ 985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1447
.01

Change in functional currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1447

SECTION 30. ORIGINAL ISSUE DISCOUNT (§§ 1272, 1273) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1448
.01
.02

De minimis original issue discount (OID) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1448
Proportional method of accounting for OID on a pool of credit card receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1448

SECTION 31. MARKET DISCOUNT BONDS (§ 1278) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1448
.01

Revocation of § 1278(b) election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1448

SECTION 32. SHORT-TERM OBLIGATIONS (§ 1281) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1449
.01
.02

Interest income on short-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1449
Stated interest on short-term loans of cash method banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1449

EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1449
EFFECT ON OTHER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1451
PAPERWORK REDUCTION ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1452
SIGNIFICANT CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1452
DRAFTING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1454
LIST OF AUTOMATIC CHANGES CONTACT LIST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1455

This revenue procedure provides the
List of Automatic Changes to which the
automatic change procedures in Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, as clar-

section, contact William E. Blanchard at
(202) 317-3900 (not a toll-free number).

Rev. Proc. 2021-34, 2021-35 I.R.B. 337,
by Rev. Proc. 2021-26, 2021-22 I.R.B.
1163, by Rev. Proc. 2017-59, 2017-48
I.R.B. 543, and by section 17.02(b) and
(c) of Rev. Proc. 2016-1, 2016-1 I.R.B. 1,

.01 Treating amounts received as loans.
(1) Description of change. This
change applies to a taxpayer that wants to
change its method of accounting for loans
received from the Commodity Credit Corporation from including the loan amount
in gross income for the taxable year in
which each loan is received to treating
each loan amount as a loan.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to this change.
(3) Manner of making change. This
change is made on a cut-off basis and
applies only to loans received from the
Commodity Credit Corporation on or
after the beginning of the year of change.
Accordingly, a § 481(a) adjustment is neither permitted nor required.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
2.01 is “1.”
(5) Contact information. For further
information regarding a change under this
section, contact Michael Finn at (202)
317-4718 (not a toll-free number).

Proc. 2015-13 apply to this revenue procedure.
LIST OF AUTOMATIC CHANGES
SECTION 1. GROSS INCOME (§ 61)
.01 Up-front Payments for Network
Upgrades received by Utilities.
(1) Description of change. This change
applies to a Utility that wants to change its
method of accounting for Up-front Payments to the safe harbor method described
in Rev. Proc. 2005-35, 2005-2 C.B. 76. In
general, this change applies to a Utility
that receives an Up-front Payment from
to the Utility’s Transmission System.
For federal income tax purposes, if an
Up-front Payment is made pursuant to
an Interconnection Agreement that satisof Rev. Proc. 2005-35, a Utility may treat
that Up-front Payment as not being taxable income under § 61 when received
(the safe harbor method). In addition, a
Utility that uses the safe harbor method is
not entitled to any deduction for its reimbursements of the Up-front Payment. To
the extent that Federal Energy Regulatory
Commission (FERC) interest is deductible, it must be properly allocated to the
periods in which it accrues. A Utility using
the safe harbor method must comply with
all other applicable provisions of Rev.
Proc. 2005-35. See Rev. Proc. 2005-35
poses of this change.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
1.01 is “91.”
(3) Contact information. For further
information regarding a change under this

SECTION 2. COMMODITY CREDIT
LOANS (§ 77)

SECTION 3. TRADE OR BUSINESS
EXPENSES (§ 162)
.01 Advances made by a lawyer on
behalf of clients.
(1) Description of change. This
change applies to a lawyer who
advances money to pay for costs of litigation or for other expenses on behalf
of clients, and who wants to change the
method of accounting for such advances
from treating them as deductible business expenses to treating them as loans
to clients. This change applies to cases
handled either on a non-contingent or a
contingent fee basis. See Pelton & Gunther, P.C. v. Commissioner, T.C. Memo.
1999-339 (non-contingent fee); Canelo
v. Commissioner, 53 T.C. 217 (1969),
aff ’d per curiam, 447 F.2d 484 (9th Cir.
1971) (contingent fee).

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.01 is “2.”
(3) Contact information. For further
information regarding a change under this
section, contact Alicia Lee-Won at (202)
317-7003 (not a toll-free number).
.02 ISO 9000 costs.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for costs incurred
to obtain, maintain, and renew ISO 9000

this revenue procedure.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.02 is “3.”
(3) Contact information. For further
information regarding a change under this
section, contact Alicia Lee-Won at (202)
317-7003 (not a toll-free number).
.03 Restaurant or tavern smallwares
packages.
(1) Description of change. This change
applies to a taxpayer engaged in the trade
or business of operating a restaurant or
tavern (within the meaning of section
4.01 of Rev. Proc. 2002-12, 2002-1 C.B.
374) that wants to change its method of
accounting for the costs of smallwares to
the smallwares method described in Rev.
nue procedure.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.03 is “4.”
(3) Contact information. For further
information regarding a change under this
section, contact Renay France at (202)
317-7003 (not a toll-free number).
.04 Timber grower fertilization costs.
(1) Description of change. This change
applies to a timber grower that wants to
change its method of accounting to treat
post-establishment fertilization costs of
an established timber stand as ordinary
and necessary business expenses deductible under § 162. See Rev. Rul. 2004-62,
enue procedure.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.04 is “86.”
(3) Contact information. For further
information regarding a change under this
section, contact Maria Castillo Valle at
(202) 317-7003 (not a toll-free number).
.05 Materials and supplies. See section
11.08 of this revenue procedure.
.06 Repair and maintenance costs. See
section 11.08 of this revenue procedure.
.07 Wireline network asset maintenance allowance and units of property
methods of accounting under Rev. Proc.
2011-27.
(1) Description of change. This change
applies to a wireline telecommunications
carrier that is within the scope of Rev.
Proc. 2011-27, 2011-18 I.R.B. 740, and
wants to change its treatment of wireline
network asset expenditures to use either
(a) the wireline network asset maintenance allowance method of accounting,
or (b) all or some of the units of property
described in Rev. Proc. 2011-27.
(2) Section 481(a) adjustment. In general, a change to the wireline network
asset maintenance allowance method of
accounting or to use all or some of the units
27 requires an adjustment under § 481(a).
The § 481(a) adjustment shall not include
any amount attributable to property for
which the taxpayer elected to apply the
repair allowance under § 1.167(a)-11(d)
(2).
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.07 is “158.”
(4) Contact information. For further
information regarding a change under this
section, contact Ian Heminsley at (202)
317-5100 (not a toll-free number).
.08 Wireless network asset maintenance allowance and units of property
methods of accounting under Rev. Proc.
2011-28.
(1) Description of change. This change
applies to a wireless telecommunications
carrier that is within the scope of Rev.
Proc. 2011-28, 2011-18 I.R.B. 743, and
wants to change its treatment of wireless
network asset expenditures to use either

(a) the wireless network asset maintenance allowance method of accounting,
or (b) all or some of the units of property
described in Rev. Proc. 2011-28.
(2) Section 481(a) adjustment. In general, a change to the wireless network
asset maintenance allowance method of
accounting or to use all or some of the units
28 requires an adjustment under § 481(a).
The § 481(a) adjustment does not include
any amount attributable to property for
which the taxpayer elected to apply the
repair allowance under § 1.167(a)-11(d)
(2).
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.08 is “159.”
(4) Contact information. For further
information regarding a change under this
section, contact Samuel Terhaar at (202)
317-5100 (not a toll-free number).
.09 Method of accounting under Rev.
Proc. 2011-43 for taxpayers in the business of transporting, delivering, or selling
electricity.
(1) Description of change. This change
applies to a taxpayer that is within the
scope of Rev. Proc. 2011-43, 2011-37
I.R.B. 326, and wants to change its treatment of transmission and distribution
property expenditures to use the method
of accounting described in Rev. Proc.
2011-43.
(2) Section 481(a) adjustment. A taxpayer must take the entire net § 481(a)
adjustment into account (whether positive
or negative) in computing taxable income
for the year of change. The § 481(a)
adjustment does not include any amount
attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)-11(d)(2) for any
taxable year in which the election was
made. For guidance regarding permissible
§ 481(a) calculation methodologies, see
section 7.02 and Appendix A of Rev. Proc.
2011-43.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.09 is “160.”
(4) Contact information. For further
information regarding a change under this

section, contact Nathaniel Kupferman at
(202) 317-5100 (not a toll-free number).
.10 Method of accounting under Rev.
Proc. 2013-24 for taxpayers in the business
of generating steam or electric power.
(1) Description of change. This change
applies to a taxpayer that is within the
scope of Rev. Proc. 2013-24, 2013-22
I.R.B. 1142, and wants to change its treatment of generation property expenditures
to use all or some of the unit of property

Proc. 2013-24.
(2) Section 481(a) adjustment.
(a) A taxpayer must take the entire net
§ 481(a) adjustment into account (whether
positive or negative) in computing taxable
income for the year of change. For guidance regarding the use of extrapolation in
computing a § 481(a) adjustment, see sections 6.02 and Appendix B of Rev. Proc.
2013-24.
(b) A taxpayer changing to this method
of accounting must not include in the
§ 481(a) adjustment any amount attributable to property for which the taxpayer
elected to apply the repair allowance
under § 1.167(a)–11(d)(2) for any taxable
year in which the repair allowance election was made.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.10 is “182.”
(4) Contact information. For further
information regarding a change under
this section, contact Morgan Lawrence at
(202) 317-7011 (not a toll-free number).
.11 Cable network asset capitalization
methods of accounting under Rev. Proc.
2015-12.
(1) Description of change. This change
applies to a cable system operator that is
within the scope of Rev. Proc. 2015-12,
2015-2 I.R.B. 266, and wants to make
one or more of the following changes in
method of accounting:
(a) Change its treatment of cable network asset expenditures to the cable
network asset maintenance allowance
method of accounting provided in section
5 of Rev. Proc. 2015-12;
(b) Change to use any of the unit of
of Rev. Proc. 2015-12;

customer drop costs described in section
7.01(1) of Rev. Proc. 2015-12;
(d) Change to use the safe harbor
allocation method for installations and
customer drop costs described in section
7.01(2) of Rev. Proc. 2015-12; or
(e) Change to deduct the labor costs
associated with installing customer premises equipment under section 7.02 of Rev.
Proc. 2015-12.
(2) Concurrent automatic change. A
taxpayer that wants to make one or more
changes in method of accounting pursuant
to this section 3.11 and a change to a UNICAP method under section 12 of this revenue procedure for the same year of change
all of these changes and must enter the
designated automatic accounting method
change numbers for all of these changes on
the appropriate line on the Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13 for
information on making concurrent changes.
(3) Section 481(a) adjustment.
(a) In general, a change to one or more
of the changes in method of accounting
described in section 3.11(1) of this revenue procedure requires an adjustment
under § 481(a). The § 481(a) adjustment
shall not include any amount attributable
to property for which the taxpayer elected
to apply the repair allowance under
§ 1.167(a)-11(d)(2).
(b) Itemized listing on Form 3115. The
taxpayer must include on Form 3115 (Rev.
December 2022), Part IV, line 26, the total
§ 481(a) adjustment for all changes in
methods of accounting being made. If the
taxpayer is making more than one change
in method of accounting under Rev. Proc.
2015-12, the taxpayer must include on an
attachment to Form 3115:
(i) the information required by Part
IV, line 26 for each change in method of
accounting (including the amount of the
§ 481(a) adjustment for each change in
method of accounting, which includes the
portion of the § 481(a) adjustment attributable to UNICAP);
(ii) the information required by Part
II, line 14 of Form 3115 that is associated
with each change; and
(iii) the citation to the paragraph of
Rev. Proc. 2015-12 that provides for each
proposed method of accounting.

(4) Designated automatic accounting method change number. The designated automatic accounting method
change number for a change to a method
of accounting provided in section 5 or 6
of Rev. Proc. 2015-12 is “208.” The designated automatic accounting method
change number for a change to a method
of accounting provided in section 7 of
Rev. Proc. 2015-12 is “209.”
(5) Contact information. For further
information regarding a change under this
section, contact Elizabeth Boone at (202)
317-5100 (not a toll-free number).
.12 Natural gas transmission and distribution property method of accounting
under Rev. Proc. 2023-15.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that is within the scope of
Rev. Proc. 2023-15 and wants to change
its treatment of natural gas transmission
and distribution property costs to use the
natural gas transmission and distribution
property safe harbor method of accounting (NGSH Method) described in Rev.
applies to a taxpayer that wants to change
to “the safe harbor method for linear
property” or “the safe harbor method for
non-linear property” and other applicable rules in accordance with Rev. Proc.
2023-15, including the making of a late
general asset account election as required
under section 5.08(2) of Rev. Proc. 202315. This change also applies to a taxpayer
that previously changed to the safe harbor method for linear property and wants
to change to the safe harbor method for
non-linear property for a subsequent taxable year.
(b) Inapplicability. This change does
not apply to the making of a late general
asset account election other than in accordance with section 5.08(2) of Rev. Proc.
2023-15.
(2) Certain eligibility rules temporarily
inapplicable.
(a) In general. The eligibility rules in
section 5.01(1)(d) and (f) of Rev. Proc.
2015-13 do not apply to a taxpayer that
changes to the NGSH Method provided in
third taxable year ending after May 1, 2023.
(b) Concurrent automatic change.
(i) If a taxpayer makes both a change
under this section 3.12 and a change under

section 6.12(3)(b) and/or section 6.15 of
this revenue procedure for linear property
second, or third taxable year ending after
May 1, 2023, on a single Form 3115 for
the same asset for the same year of change
in accordance with section 3.12(6)(b)
of this revenue procedure, the eligibility
rules in section 5.01(1)(d) and (f) of Rev.
Proc. 2015-13 do not apply to the taxpayer
for these changes.
(ii) If a taxpayer makes both a change
under this section 3.12 and a change under
section 11.08, 12.01, 12.02, 12.08, and/or
12.12 of this revenue procedure, as applicable, for its linear property or non-linear
taxable year ending after May 1, 2023, on
a single Form 3115 for the same year of
change in accordance with section 3.12(6)
(c) of this revenue procedure, the eligibility rules in section 5.01(1)(d) and (f)
of Rev. Proc. 2015-13 do not apply to the
taxpayer for these changes.
(3) Manner of making change.
(a) Late general asset account election.
(i) The late general asset account election change described in section 5.08(2) of
Rev. Proc. 2023-15 is made using a modijusted depreciable basis and the depreciation
reserve of the asset as of the beginning of
the year of change are accounted for using
the proposed method of accounting. The
late general asset account election change
requires each general asset account to
include a beginning balance for both the
unadjusted depreciable basis and the depreciation reserve. The beginning balance for
the unadjusted depreciable basis of each
general asset account is equal to the sum
of the unadjusted depreciable bases as of
the beginning of the year of change for all
assets included in that general asset account.
The beginning balance of the depreciation
reserve of each general asset account is equal
to the sum of the greater of the depreciation
allowed or allowable as of the beginning of
the year of change for all assets included in
that general asset account.
(ii) For the late general asset account
election change described in section
5.08(2) of Rev. Proc. 2023-15, the taxpayer must attach to its Form 3115 a statement providing that the taxpayer agrees to
the following additional terms and conditions:

(A) The taxpayer consents to, and
agrees to apply, all the provisions of
§ 1.168(i)-1 to the assets that are subject
of Rev. Proc. 2023-15; and
(B)
Except
as
provided
in
§ 1.168(i)-1(c)(1)(ii)(A), (e)(3), (g), or (h),
the election made by the taxpayer under
section 5.08(2) of Rev. Proc. 2023-15 is
irrevocable and will be binding on the taxpayer for computing taxable income for
the year of change and for all subsequent
taxable years with respect to the assets
that are subject to this election.
(b) Cut-off basis for certain changes.
Except for changes to make a late general
asset account election described in section
3.12(3)(a) of this revenue procedure, a
change to the NGSH Method described in
Rev. Proc. 2023-15 is made on a cut-off
basis and applies only to natural gas transmission and distribution property costs
paid or incurred beginning in or after the
year of change if(i) Sections 5.08(2)(a)(ii) and 6.04 of
Rev. Proc. 2023-15 apply (the taxpayer
changes to the NGSH Method described
or third taxable year ending after May 1,
2023, on a cut-off basis); or
(ii) Section 5.08(2)(a)(iii) of Rev. Proc.
2023-15 applies (the taxpayer changes to
the NGSH Method described in Rev. Proc.
2023-15 for the fourth taxable year ending
after May 1, 2023, or for any subsequent
taxable year).
(c) Public Utility Property. If the taxpayer’s change to the NGSH Method
described in Rev. Proc. 2023-15 applies
to any asset that is public utility property
within the meaning of § 168(i)(10), the
taxpayer must attach a statement to its
Form 3115 agreeing to the following additional terms and conditions:
(i) A normalization method of accounting (within the meaning of § 168(i)(9))
will be used for the public utility property
subject to the Form 3115;
(ii) As of the beginning of the year
of change, the taxpayer will adjust its
deferred tax reserve account or similar
account in the taxpayer’s regulatory books
of account by the amount of the deferral
of federal income tax liability associated
with the § 481(a) adjustment applicable
to the public utility property subject to the
Form 3115 if such amount is no longer

being normalized for regulatory purposes
by the taxpayer; and
the federal income tax return for the year
of change, the taxpayer will provide a
copy of the completed Form 3115 to any
regulatory body having jurisdiction over
the public utility property subject to the
Form 3115.
(4) Section 481(a) adjustment.
(a) In general. Except as provided in
section 3.12(3)(b) of this revenue procedure, a taxpayer changing its methods of
accounting under this section 3.12 must
take the entire net § 481(a) adjustment
into account, whether positive or negative, in computing taxable income for the
year of change in the manner provided in
section 7.03 of Rev. Proc. 2015-13. The
entire net § 481(a) adjustment includes all
aspects of the NGSH Method described in
Rev. Proc. 2023-15, including a change
to the methods of accounting permitted
under § 1.168(i)-1 pursuant to section
5.08(2) of Rev. Proc. 2023-15. However,
a § 481(a) adjustment is neither required
nor permitted for the late general asset
account election described in section
5.08(2) of Rev. Proc. 2023-15. Further,
a § 481(a) adjustment is neither required
nor permitted if the taxpayer chooses to
change to the NGSH Method on a cutoff basis under section 6.04 of Rev. Proc.
2023-15 or if the taxpayer changes to this
method during the time described in section 5.08(2)(a)(iii) of Rev. Proc. 2023-15.
(b) Repair allowance property. A taxpayer changing its method of accounting
under this section 3.12 must not include
in the § 481(a) adjustment any amount
attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)-11(d)(2) for any
taxable year in which the repair allowance
election was made.
(c) Property subject to the election
to capitalize repair and maintenance
costs. A taxpayer changing its method of
accounting under this section 3.12 must
not include in the § 481(a) adjustment
any amount attributable to property for
which the taxpayer elected to capitalize repair and maintenance costs under
§ 1.263(a)-3(n) for any taxable year in
which this election was made.
(d) Statistical sampling. A taxpayer
changing to the NGSH Method under this

section 3.12 may use statistical sampling
in determining the § 481(a) adjustment
amount attributable to any single taxable
year by following the guidance provided
in Rev. Proc. 2011-42, 2011-37 I.R.B. 318.
(e) Extrapolation. A taxpayer changing
to the NGSH Method under this section
3.12 may use the extrapolation methodology provided in Appendix B to Rev. Proc.
2023-15 (Appendix B) in determining the
§ 481(a) adjustment amount if the taxpayer is within the scope of section 1.02
of Appendix B. Extrapolation methodologies not permitted in Appendix B are not
permitted under the NGSH Method.
(5) No audit protection for certain taxpayers. If a taxpayer chooses to change
to the NGSH Method described in Rev.
Proc. 2023-15 on a cut-off basis as permitted under section 6.04 of Rev. Proc.
2023-15 or is required to change on a cutoff basis under section 5.08(3)(b)(i) of
Rev. Proc. 2023-15, the taxpayer does not
receive audit protection under section 8.01
of Rev. Proc. 2015-13 in connection with
this change.
(6) Concurrent automatic changes.
(a) A taxpayer making changes under
this section 3.12 for more than one asset
gle Form 3115 for all such assets. The single Form 3115 must provide a single net
§ 481(a) adjustment for all such changes.
(b) A taxpayer making changes under
this section 3.12 and changes under section 6.12(3)(b) and/or section 6.15 of this
revenue procedure for linear property or
non-linear property costs for the same
3115 for all changes and must enter the
designated automatic accounting method
change numbers for all changes on the
appropriate line on the Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.
(c) A taxpayer making changes under
this section 3.12 and also making a coordinating change to its linear property or
non-linear property costs under section
11.08, 12.01, 12.02, 12.08, and/or 12.12
of this revenue procedure, as applicable,
year of change for all these changes, provided that the taxpayer is not prohibited
the eligibility rules under section 5 of

Rev. Proc. 2015-13. For changes required
this section, the taxpayer must enter the
designated automatic accounting method
change numbers for all changes on the
appropriate line on the Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.
(d) A taxpayer that changes to a method
of accounting under this section 3.12 for
taxable years ending after the third taxable year ending after May 1, 2023 and
is also required to change its method of
accounting to properly capitalize its linear property or non-linear property costs
under § 263(a) and/or § 263A under section 5.08(3)(b)(ii) of Rev. Proc. 2023-15,
year of change for all these changes, provided that the taxpayer is not prohibited
eligibility rules set out in section 5 of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419. For
Form 3115 under this paragraph, the taxpayer must enter the designated automatic
accounting method change numbers for
all changes on the appropriate line on the
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes.
(7) Examples. The following examples illustrate this section 3.12. In each
example, it is assumed that the taxpayer
(a) is a C corporation, on an accrual
method of accounting and using a calendar taxable year, (b) is within the scope
of Rev. Proc. 2023-15, (c) placed in service natural gas transmission property
or distribution property that is described
in section 4 of Rev. Proc. 2023-15 and
is MACRS property, (d) did not make
a general asset account election for any
natural gas transmission property or distribution property placed in service by
the taxpayer in any taxable year before
uses the NGSH Method, (e) is changing
its methods of accounting for both linear
property and non-linear property under
the NGSH Method for the same taxable
year, and (f) is not changing to the NGSH
Method on a cut-off basis under section
6.04 of Rev. Proc. 2023-15. Unless otherwise stated, it also is assumed that (a)
the cost of the replacements before Year

1 were not capitalized under § 263(a),
(b) the cost of the replacements before
Year 1 would not have been capitalized
if the taxpayer used the NGSH Method
provided under sections 5.02, 5.03, 5.04,
5.06, and 5.07 of Rev. Proc. 2023-15
for such prior taxable years, and (c) the
taxpayer’s natural gas transmission and
distribution property expenditures are
not per se capital expenditures under
section 5.05(1)(a)-(f), (i), or (j) of Rev.
Proc. 2023-15. Further, it is assumed
that § 1.168(i)-1(e)(3) (special rules for
certain dispositions of assets in general
asset accounts) does not apply for the
the NGSH Method. Moreover, for purposes of these examples, “Year 1” refers
after May 1, 2023, “Year 2” refers to the
taxpayer’s second taxable year ending
after May 1, 2023, and “Year 4” refers to
the taxpayer’s fourth taxable year ending
after May 1, 2023.
(a) Example 1. (i) X is a local natural gas distribution company. Before Year 1, X owned and placed
in service natural gas distribution property at a cost
of $120 million before any dispositions or additions.
Before Year 1, X replaced parts of such property that
had an original cost of $10 million and incurred $12
million for the cost of such replacements. On its Federal income tax returns before Year 1, X recognized
losses upon the dispositions of that $10 million of
property, capitalized $12 million for the cost of the
replacements of that property under § 263(a), and
deducted depreciation of $800,000 on such $12 million. X
return for Year 1 to change its methods of accounting to use the NGSH Method described in Rev. Proc.
2023-15.
(ii) Because Year 1 is X
ing after May 1, 2023, section 5.08(2)(a)(i) and (3)
(a) of Rev. Proc. 2023-15 apply. Pursuant to section
5.08(3)(a) of Rev. Proc. 2023-15, the per se capital
expenditure rules in section 5.05(1)(g) and (h) of
Rev. Proc. 2023-15 do not apply to the replacement
cost of $12 million that X capitalized under § 263(a)
on its Federal income tax returns before Year 1.
Accordingly, this $12 million cost of the replacements is not treated as a per se capital expenditure
under the NGSH Method. Therefore, at the beginning of Year 1, X is treated under Rev. Proc. 202315 as owning natural gas distribution property at a
cost of $110 million ($120 million - $10 million).
Under section 5.08(2)(a)(i) of Rev. Proc. 2023-15, X
must make a late general asset account election on its
Form 3115 to include in general asset accounts all of
the $110 million of natural gas distribution property
that X owns at the beginning of Year 1. These general
asset accounts also must include the total depreciation allowed or allowable before the beginning of
Year 1 for such property as the beginning balances
of the depreciation reserves. The late general asset

off method and, therefore, a § 481(a) adjustment is
neither required nor permitted for the late general
asset account election change.
(iii) On its Form 3115 to change to the NGSH
Method provided under Rev. Proc. 2023-15, the
net negative § 481(a) adjustment for this change is
$11,200,000 (deduction of $12 million for the cost
of the replacements before Year 1 less depreciation
of $800,000 for such replacement assets before Year
1) and is deducted in computing X’s taxable income
for Year 1.
(b) Example 2. (i) The facts are the same as in
Example 1, except that X
its Federal income tax return for Year 2 to change
its method of accounting to use the NGSH Method
described in Rev. Proc. 2023-15, and, before Year
2, X deducted depreciation of $1,000,000 on the
replacement cost of $12 million.
(ii) Because X
the special rule under section 5.08(3)(a) of Rev. Proc.
2023-15 does not apply to the replacement cost of
$12 million that X capitalized under § 263(a) on its
Federal income tax returns before Year 1. Accordingly, section 5.05(1)(g) and (h) of Rev. Proc. 202315 apply to the replacement cost of $12 million that
X capitalized on its Federal income tax returns before
Year 2. The total cost of $12 million for this replacement is a per se capital expenditure, and must be capitalized, under the NGSH Method.
(iii) At the beginning of Year 2, X is treated under
the NGSH Method as owning natural gas distribution property at a cost of $122 million ($120 million $10 million + $12 million). Under section 5.08(2)(a)
(i) of Rev. Proc. 2023-15, X must make a late general
asset account election on its Form 3115 to include
in general asset accounts all of the $122 million of
natural gas distribution property that X owns at the
beginning of Year 2. These general asset accounts
also must include the total depreciation allowed or
allowable before the beginning of Year 2 for such
property as the beginning balances of the depreciation reserves. The late general asset account election
therefore, a § 481(a) adjustment is neither required
nor permitted for the late general asset account election.
(iv) On its Form 3115 to change to the NGSH
Method under Rev. Proc. 2023-15, the net § 481(a)
adjustment for this change is zero. Under its present
method of accounting and under the NGSH Method
(proposed method of accounting), X properly capitalized the $12 million for the cost of the replacements
before Year 1 and claimed depreciation for such
replacement assets before Year 2.
(c) Example 3. (i) Y is a local natural gas distribution company. Before Year 1, Y owned and placed
in service natural gas distribution property at a cost
of $120 million before any dispositions or additions.
Before Year 1, Y replaced parts of such property that
had an original cost of $10 million and incurred $12
million for the cost of such replacements. On its Federal income tax returns before Year 1, Y recognized
losses upon the dispositions of that $10 million of
property and deducted $12 million for the cost of the
replacements of such property under § 162(a). During
Year 1, Y replaced a part of the natural gas distribution property that had an original cost of $2 million
and incurred $3 million for the cost of such replace-

ments. If Y had capitalized the $15 million for the cost
of the replacements, the total depreciation allowed or
allowable for these assets would have been $1 million
before Year 2. On its Federal income tax return for
Year 1, Y recognized a loss upon the disposition of
that $2 million of property and deducted $3 million for
the cost of the replacements under § 162(a). Y
Form 3115 with its Federal income tax return for Year
2 to change its method of accounting to use the NGSH
Method described in Rev. Proc. 2013-15.
(ii) Because Y
section 5.08(2)(a)(i) of Rev. Proc. 2023-15 applies to
this change. However, the special rule under section
5.08(3)(a) of Rev. Proc. 2023-15 would apply only
if Y
ingly, section 5.05(1)(g) and (h) of Rev. Proc. 202315 apply to the replacement cost of $12 million that
Y deducted under § 162(a) on its Federal income tax
returns before Year 1, and to the replacement cost
of $3 million that Y deducted under § 162(a) on its
Federal income tax return for Year 1. Therefore, the
total cost of $15 million for these replacements is a
per se capital expenditure, and must be capitalized,
under the NGSH Method.
(iii) At the beginning of Year 2, Y is treated under
Rev. Proc. 2023-15 as owning natural gas distribution property at a cost of $123 million ($120 million $10 million + $12 million - $2 million + $3 million).
Under section 5.08(2)(a)(i) of Rev. Proc. 2023-15, Y
must make a late general asset account election on its
Form 3115 to include in general asset accounts all of
the $123 million of natural gas distribution property
that Y owns at the beginning of Year 2. These general
asset accounts also must include the total depreciation allowed or allowable before the beginning of
Year 2 for such property as the beginning balances
of the depreciation reserves. The late general asset
off method and, therefore, a § 481(a) adjustment is
neither required nor permitted for the late general
asset account election.
(iv) On its Form 3115 to change to the NGSH
Method of Rev. Proc. 2023-15, the net positive
§ 481(a) adjustment for this change is $14 million
($15 million for the cost of the replacements before
Year 2 less depreciation allowed or allowable of $1
million for such replacement assets before Year 2)
and is taken into account in computing Y’s income
in the manner provided in section 3.12(4)(a) of this
revenue procedure.
(d) Example 4. (i) Z is a local natural gas distribution company. Before Year 4, Z owned and placed
in service natural gas distribution property at a cost
of $150 million before any dispositions or additions.
Before Year 4, Z replaced parts of such property that
had an original cost of $30 million and incurred $45
million for the cost of such replacements. On its Federal income tax returns before Year 4, Z recognized
losses upon the dispositions of that $30 million of
property, capitalized $45 million for the cost of the
replacements under § 263(a), and deducted depreciation of $15 million on such $45 million. Z
a Form 3115 with its Federal income tax return for
Year 4 to change its method of accounting to use the
NGSH Method described in Rev. Proc. 2013-15.
Assume Z
under the automatic change procedures in Rev. Proc.
2015-13.

(ii) At the beginning of Year 4, Z owns natural
gas distribution property at a cost of $165 million
($150 million - $30 million + $45 million). Because
Year 4 is Z’s fourth taxable year ending after May 1,
2023, sections 5.08(2)(a)(iii) and 5.08(3)(b) of Rev.
Proc. 2023-15 apply. Accordingly, under section
5.08(2)(a)(iii) of Rev. Proc. 2023-15, Z must make a
late general asset account election on its Form 3115
to include in general asset accounts all of the $165
million of natural gas distribution property that Z
owns at the beginning of Year 4. These general asset
accounts also must include the total depreciation
allowed or allowable before the beginning of Year
4 for such property as the beginning balances of the
depreciation reserves. The late general asset account
method and, therefore, a § 481(a) adjustment is neither permitted nor required for the late general asset
account election.
(iii) Because sections 5.08(2)(a)(iii) and 5.08(3)
(b) of Rev. Proc. 2023-15 apply, Z’s change to the
NGSH Method described in Rev. Proc. 2023-15,
applies only to natural gas transmission and distribution property expenditures paid or incurred by Z
beginning in Year 4 and is made on a cut-off basis.
Therefore, a § 481(a) adjustment is neither required
nor permitted for the change to the NGSH Method
described in Rev. Proc. 2023-15.
(e) Example 5. (i) The facts are the same as
in Example 4, except that, on its Federal income
tax returns before Year 4, Z improperly deducted
$45 million for the cost of the replacements under
§ 162(a). Such $45 million of replacement costs
should have been capitalized under § 263(a). If Z
had capitalized the $45 million for the cost of the
replacements, the total depreciation allowed or
allowable for such assets would have been $15 million before Year 4.
(ii) Because Year 4 is Z’s fourth taxable year ending after May 1, 2023, sections 5.08(2)(a)(iii) and
5.08(3)(b) of Rev. Proc. 2023-15 apply. Pursuant to
section 5.08(3)(b) of Rev. Proc. 2023-15, Z must also
change its method of accounting to capitalize under
§ 263(a) the $45 million for the cost of the replacements incurred before Year 4. The net positive
§ 481(a) adjustment for this coordinating change is
$30 million ($45 million for the cost of the replacements before Year 4 less depreciation allowed or
allowable of $15 million for such replacement assets
before Year 4). Z takes this net positive § 481(a)
adjustment of $30 million into account in computing
Z’s taxable income in the manner provided in section
3.12(4)(a) of this revenue procedure.
(iii) Z owns natural gas distribution property at
a cost of $165 million ($150 million - $30 million +
$45 million) at the beginning of Year 4. Accordingly,
Z must make a late general asset account election on
its Form 3115 to include in general asset accounts
all of the $165 million of natural gas distribution
property that Z owns at the beginning of Year 4.
These general asset accounts also must include the
total depreciation allowed or allowable before the
beginning of Year 4 for such property as the beginning balances of the depreciation reserves. The late
general asset account election change is made using
adjustment is neither permitted nor required for the
late general asset account election.

(iv) Because sections 5.08(2)(a)(iii) and 5.08(3)
(b) of Rev. Proc. 2023-15 apply, Z’s change to
the NGSH Method provided under sections 5.02,
5.03, 5.04, 5.06, and 5.07 of Rev. Proc. 2023-15,
applies only to natural gas transmission and distribution property expenditures paid or incurred by Z
beginning in Year 4 and is made on a cut-off basis.
Therefore, a § 481(a) adjustment is neither required
nor permitted for the change to the NGSH Method
described in Rev. Proc. 2023-15.
(v) Pursuant to section 3.12(6)(c) and section
5.08(3)(b) of Rev. Proc. 2023-15 the change to
capitalize the replacement costs of $45 million, the
late general asset account election change, and the
change to use the NGSH Method provided under
Rev. Proc. 2023-15 must be included on the same
Z for Year 4.

(8) Option to treat method changes
poses of section 5.08(3)(a) of Rev. Proc.
2023-15.
(a) In general. A taxpayer may choose
payer’s second taxable year ending after

May 1, 2023 (Year 1), solely for purposes
of applying the special rule under section
cally, a taxpayer changing to the safe harbor method for linear property or for both
linear property and non-linear property,
as applicable, for the taxpayer’s second
taxable year ending after May 1, 2023,
with a § 481(a) adjustment may choose
not to apply the per se capital expenditure rules under section 5.05(1)(g) and
(h) of Rev. Proc. 2023-15 to amounts
paid or incurred to replace or repair linear property or both linear property and
non-linear property, as applicable, in
taxable years ending on or before May
1, 2023. A taxpayer choosing to treat a
for Year 1 under this section 3.12(8) must
otherwise comply with all the provisions
of Rev. Proc. 2023-15.
(b) Application. A taxpayer that
changed to the safe harbor method for
linear property or both linear property
and non-linear property, as applicable, for
Year 1, may not choose to treat a method
1 under paragraph 3.12(8) of this revenue
procedure. Further, if a taxpayer chooses

this revenue procedure, the taxpayer must
do so for all members of a consolidated
group changing to the NGSH Method.

(c) Example. The examples in section
3.12(7)(a) through (e) of this revenue
procedure address taxpayers that do not

3.12(8). The following example illustrates
this section 3.12(8). The assumptions set
out in 3.12(7) of this revenue procedure
apply to this example.
(i) A is a local natural gas distribution company.
Before Year 1, A owned and placed in service natural
gas distribution property at a cost of $120 million
before any dispositions or additions. Before Year
1, A replaced parts of such property that had an
aggregate original cost of $10 million and incurred
$12 million for the cost of the replacements. On its
Federal income tax returns for taxable years before
Year 1, A recognized losses upon the disposition of
that $10 million of property, capitalized $12 million of the replacement costs of such property under
§ 263(a), and deducted depreciation of $800,000 on
the $12 million of replacement costs. During Year
1, A replaced a part of the natural gas distribution
property that had an original cost of $2 million and
incurred $3 million for the cost of such replacements.
On its Federal income tax return for Year 1, A recognized a loss upon the disposition of that $2 million of
property, capitalized $3 million for the cost of such
replacements under § 263(a), and deducted depreciation of $200,000 on the $3 million of replacement
costs. A
return for Year 2 to change its method of accounting
to use the NGSH Method described in Rev. Proc.

of this revenue procedure. Accordingly, A does
not apply the per se capitalization rules of section
5.05(1)(g) and (h) of Rev. Proc. 2023-15 to amounts
paid or incurred to replace or repair linear property
or both linear property and non-linear property, as
applicable, in taxable years ending on or before May
1, 2023.
(ii) Because A chooses to treat its method change
3.12(8)(a) of this revenue procedure, the special
transition rule under section 5.08(3)(a) applies to
amounts paid or incurred by A to replace or repair
linear natural gas distribution or both linear property and non-linear property distribution property, as
applicable, in taxable years ending on or before May
1, 2023. Accordingly, the per se capital expenditure
rules under section 5.05(1)(g) and (h) of Rev. Proc.
2023-15 do not apply to the replacement cost of $12
million that A capitalized under § 263(a) on its Federal income tax returns for taxable years ending on or
before May 1, 2023. As a result, the replacement cost
of $12 million is not required to be capitalized under
the NGSH Method. However, the per se capital
expenditure rules under section 5.05(1)(g) and (h) of
Rev. Proc. 2023-15 do apply to the replacement cost
of $3 million that A capitalized on its Federal income
tax return for Year 1. The total cost of $3 million for
this replacement is a per se capital expenditure and
must be capitalized under the NGSH Method.
(iii) Therefore, at the beginning of Year 2, A is
treated under Rev. Proc. 2023-15 as owning natural
gas distribution property with an original cost of $111

million ($120 million - $10 million - $2 million + $3
million). Under section 5.08(2)(a)(i) of Rev. Proc.
2023-15, A must make a late general asset account
election on its Form 3115 to include in general asset
accounts all of the $111 million of natural gas distribution property that A owns at the beginning of Year
2. These general asset accounts also must include the
total depreciation allowed or allowable before the
beginning of Year 2 for such property as the beginning balances of the depreciation reserves. The late
general asset account election change is made on a
adjustment is neither required nor permitted for the
late general asset account election change.
(iv) On its Form 3115 to change to the NGSH
Method provided under Rev. Proc. 2023-15 for
Year 2, the net negative § 481(a) adjustment for this
change is $11,200,000 (deduction of $12 million
for the cost of the replacements before Year 1 less
depreciation of $800,000 for such replacement assets
before Year 1). Because A property capitalized the $3
million for the cost of the replacements in Year 1 as
per se capital expenditures under section 5.05(1)(g)
and (h) of Rev. Proc. 2023-15 and properly claimed
depreciation in Year 1 for such replacement assets,
A does not include in its § 481(a) adjustment any
amounts related to the cost of replacements in Year
1. Accordingly, A deducts $11,200,000 in computing
A’s taxable income for Year 2.

(9) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the methods of
accounting under this section 3.12 is
“269.”
(10) Contact information. For further
information regarding a change under this
section, contact Kasey A. Place or Merrill
Feldstein at (202) 317-5100 (not a tollfree number).
SECTION 4. BAD DEBTS (§ 166)
.01 Change from reserve method to
.
(1) Description of change. This change
applies to a taxpayer (other than a bank
change its method of accounting for bad
debts from a reserve method (or other
method that complies with § 166. For procedures applicable to banks, see § 585(c)
and the regulations thereunder and section
25 of this revenue procedure.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
4.01 is “5.”
(3) Contact information. For further
information regarding a change under this

section, contact Renay France at (202)
317-7003 (not a toll-free number).
.02 Conformity election by bank after
previous election automatically revoked.
(1) Description of change. This change
applies to a bank that wants to change
its method of accounting for bad debts
by making the conformity election under
§ 1.166-2(d)(3)(iii)(C)(3).
(2) Applicability. This change
§ 1.166-2(d)(4)(i)) that:
(a) is subject to supervision by Federal
authorities, or by state authorities maintaining substantially equivalent standards;
(b) has previously adopted or elected
to change to the method of accounting for
bad debts described in § 1.166-2(d)(3);
(c) has had that previous election automatically revoked under § 1.166-2(d)(3)
(iv)(C);
(d) meets the express determination
requirement of § 1.166-2(d)(3)(iii)(D) for
the year of change; and
(e) now seeks the consent of the Commissioner to make an election under
§ 1.166-2(d)(3)(iii)(C)(3).
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to this change.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
4.02 is “211.”
(5) Contact information. For further
information regarding a change under this
section, contact K. Scott Brown at (202)
317-4423 (not a toll-free number).
SECTION 5. INTEREST EXPENSE
(§163) AND AMORTIZABLE BOND
PREMIUM (§ 171)
.01 Revocation of § 171(c) election.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for amortizable
bond premium by revoking its § 171(c)
election. Under § 171(c), a taxpayer that
holds certain taxable bonds may elect to
amortize any bond premium on the bonds
in accordance with regulations prescribed
by the Secretary. Sections 1.171-1 through
1.171-5 provide rules relating to the amortization of bond premium by a taxpayer.

Section 1.171-4 provides the procedures
to make a § 171(c) election to amortize
bond premium.
(2) Revocation of election. The revocation of a § 171(c) election applies to all
taxable bonds that are held by the taxpayer
which the revocation is effective (year of
change), and to all taxable bonds that are
subsequently acquired by the taxpayer.
(3) Manner of making change. This
change is made using a cut-off basis and
applies only to taxable bonds held on or
after the beginning of the year of change.
Accordingly, a § 481(a) adjustment is neither permitted nor required.
Under the cut-off basis, for taxable
bonds held at the beginning of the year
of change, the taxpayer may not amortize any remaining bond premium on the
bonds. Because the cut-off basis is prescribed for this change, the basis of any
bond, adjusted for amounts previously
amortized during the period of the election, is not affected by the revocation.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
5.01 is “16.”
(5) Additional requirements. On a
statement attached to the Form 3115, the
taxpayer must provide:
(a) the reason(s) for revoking the election; and
(b) a description of the method by
which, and the date on which, the taxpayer made the § 171(c) election that is
proposed to be revoked.
(6) Audit protection. Any audit protection applicable to this change under
section 8 of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not preclude the Commissioner from examining the method
used by the taxpayer to determine the
amount of amortizable bond premium
under § 171(b) for a taxable year prior to
the year of change.
(7) Contact information. For further
information regarding a change under this
section, contact Steven Harrison at (202)
317-6842 (not a toll-free number).
.02 Change to comply with § 163(e)(3).
(1) Description of change. This change
applies to a taxpayer that wants to change
its method or methods of accounting to
comply with the requirements of § 163(e)

(3), which defers certain deductions
attributable to original issue discount debt
instruments held by related foreign persons. Any portion of the original issue discount will not be allowable as a deduction
to the U.S. person issuer until paid.
(2) Accelerated § 481(a) adjustment
period in certain situations. In addition
to the circumstances set forth in section
7.03(4) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, the § 481 adjustment period
provided in section 7.03 of Rev. Proc.
2015-13 will be accelerated for a U.S. person with a remaining balance of a § 481(a)
adjustment that arose by reason of a
change in method of accounting described
in this section 5.02 if a debt instrument
subject to the change is paid off, retired,
ing of § 1.1001-3 prior to the end of the
§ 481(a) adjustment period. The portion
of the remaining § 481(a) adjustment
attributable to the debt instrument must
be taken into account in the taxable year
the debt instrument is paid off, retired, or
of § 1.1001-3.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
5.02 is “212.”
(4) Contact information. For further
information regarding a change under
this section, contact Anisa Afshar at (202)
317-6934 (not a toll-free number).
SECTION 6. DEPRECIATION OR
AMORTIZATION (§ 56(a)(1), 167, 168,
197, 280F(a), or 1502, OR FORMER
§ 56(g)(4)(A), 168, 1400I, 1400L, or
1400N(d))
.01 Impermissible to permissible
method of accounting for depreciation or
amortization.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to change from an
impermissible to a permissible method of
accounting for depreciation or amortization (depreciation) for any item of depreciable or amortizable property under the
taxpayer’s present or proposed method of
accounting:
(i) for which the taxpayer used the
impermissible method of accounting in at

least two taxable years immediately preceding the year of change (but see section
6.01(1)(b) of this revenue procedure for
property placed in service in the taxable
year immediately preceding the year of
change);
(ii) for which the taxpayer is making
a change in method of accounting under
§ 1.446-1(e)(2)(ii)(d);
(iii) for which depreciation is determined under § 56(a)(1), § 56(g)(4)(A)
(as in effect on the day before the date
of enactment of Public Law 115-97, 131
Stat. 2054 (Dec. 22, 2017), commonly
referred to as the Tax Cuts and Jobs Act
(TCJA)), § 167, § 168, § 197, § 1400I,
or § 1400L(c), under § 168 prior to its
amendment in 1986 (former § 168), or
tion deduction provision of the Code (for
example, § 168(k), § 168(l), § 1400L(b),
or § 1400N(d)); and
(iv) that is owned by the taxpayer at
the beginning of the year of change (but
see section 6.07 of this revenue procedure
for property disposed of before the year of
change).
(b) Taxpayer has not adopted a method
of accounting for the item of property.
If a taxpayer does not satisfy section
6.01(1)(a)(i) of this revenue procedure
for an item of depreciable or amortizable
property because this item of property
is placed in service by the taxpayer in
the taxable year immediately preceding
the year of change (“1-year depreciable
property”), the taxpayer may change
from the impermissible method of determining depreciation to the permissible
method of determining depreciation for
ing a Form 3115 for this change, provided the § 481(a) adjustment reported
on the Form 3115 includes the amount of
any adjustment that is attributable to all
property (including the 1-year depreciable property) subject to the Form 3115.
Alternatively, the taxpayer may change
from the impermissible method of determining depreciation to the permissible
method of determining depreciation for a
amended federal income tax return, or an
administrative adjustment request under
§ 6227 (AAR), as applicable, for the
property’s placed-in-service year prior

income tax return for the taxable year
succeeding the placed-in-service year.
(c) Inapplicability. This change does
not apply to:
(i) any property to which § 1016(a)(3)
(regarding property held by a tax-exempt
organization) applies;
(ii) a taxpayer that is required under
§ 263A and the regulations thereunder to
capitalize the costs with respect to which
the taxpayer wants to change its method
of accounting under this section 6.01 if
the taxpayer is not capitalizing these costs,
unless the taxpayer concurrently changes
its method to capitalize these costs in
conjunction with a change to a UNICAP
method under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable);
(iii) any property for which a taxpayer
is making a change in depreciation under
§ 1.446-1(e)(2)(ii)(d)(2)(vi) or (vii);
(iv) any property subject to § 167(g)
regarding property depreciated under the
income forecast method;
(v) any § 1250 property that a taxpayer
is reclassifying to an asset class of Rev.

C.B. 785), or Rev. Proc. 83-35, 1983-1
C.B. 745, as appropriate, that does not
explicitly include § 1250 property (for
example, asset class 57.0, Distributive
Trades and Services);
(vi) any property for which a taxpayer
is revoking a timely valid election, or
making a late election, under § 167, § 168,
§ 179, § 1400I, § 1400L(c), former § 168,
§ 13261(g)(2) or (3) of the Revenue Reconciliation Act of 1993 (1993 Act), 1993-3
C.B. 1, 128 (relating to amortizable § 197
depreciation deduction provision of the
Code (for example, § 168(k), § 168(l),
§ 1400L(b), or § 1400N(d)). A taxpayer
may request consent to revoke or make the
election by submitting a request for a letter ruling under Rev. Proc. 2024-1, 2024-1
I.R.B. 1 (or successor). However, if a taxpayer is revoking or making an election
under § 179, see § 179(c) and § 1.179-5.
See § 1.446-1(e)(2)(ii)(d)(3)(iii);
(vii) any property for which depreciation is determined under § 56(g)(4)(A)
(as in effect on the day before the date of
enactment of the TCJA) or § 167 (other
than under § 168, § 1400I, § 1400L(c),

depreciation deduction provision of the
Code (for example, § 168(k), § 168(l),
§ 1400L(b), or § 1400N(d)) and a taxpayer
is changing the useful life of the property.
A change in the useful life of property is
corrected by adjustments in the applicable
taxable year provided under § 1.446-1(e)
(2)(ii)(d)(5)(iv). However, this section
6.01(1)(c)(vii) does not apply if the taxpayer is changing to or from a useful life,
recovery period, or amortization period
(for example, § 167(f)(1), § 168(c)), the
regulations thereunder, or other guidance
published in the Internal Revenue Bulletin and, therefore, this change is a change
in method of accounting (unless section
6.01(1)(c)(xv) of this revenue procedure
applies). See § 1.446-1(e)(2)(ii)(d)(3)(i);
(viii) any depreciable property for
which the use changes in the hands of the
same taxpayer. See § 1.446-1(e)(2)(ii)(d)
(3)(ii). But see sections 6.04 and 6.05 of
this revenue procedure for changing to
the methods of accounting provided in
§ 1.168(i)-1(c)(2)(ii)(I) or § 1.168(i)-1(h)
(2), and § 1.168(i)-4, respectively;
(ix) any property for which depreciation is determined in accordance
with § 1.167(a)-11 (regarding the Class
Life Asset Depreciation Range System
(ADR));
(x) any change in method of accounting involving a change from deducting the
cost or other basis of any property as an
expense to capitalizing and depreciating
the cost or other basis, or vice versa (but
see section 11.08 of this revenue procedure for making such a change in method
property regulations);
(xi) any change in method of accounting involving a change from one permissible method of accounting for the property
to another permissible method of accounting for the property. For example:
(A) a change from the straight-line
method of depreciation to the income
forecast method of depreciating for videocassettes. See Rev. Rul. 89-62, 1989-1
C.B. 78; or
(B) a change from charging the depreciation reserve with costs of removal and
crediting the depreciation reserve with
salvage proceeds to deducting costs of
removal as an expense (provided the costs

of removal are not required to be capitalized under any provision of the Code,
such as § 263(a)) and including salvage
proceeds in taxable income (see section
6.02 of this revenue procedure for making
this change for property for which depreciation is determined under § 167);
(xii) any change in method of accounting involving both a change from treating
the cost or other basis of the property as
nondepreciable or nonamortizable property to treating the cost or other basis of
the property as depreciable or amortizable
property and the adoption of a method
of accounting for depreciation requiring
an election under § 167, § 168, § 1400I,
§ 1400L(c), former § 168, § 13261(g)(2)
or (3) of the 1993 Act, or any additional
sion of the Code (for example, § 168(k),
§ 168(l), § 1400L(b), or § 1400N(d)) (for
example, a change in the treatment of
service in 2006 from nondepreciable to
depreciable property (assuming section
6.01(1)(c)(xiii) of this revenue procedure
does not apply) and the making of an
election under § 168(f)(1) to depreciate
this property under the unit-of-production
method of depreciation under § 167);
(xiii) any change in method of accounting for any item of income or deduction
other than depreciation, even if the change
results in a change in computing depreciation under § 1.446-1(e)(2)(ii)(d)(2)(i),
(ii), (iii), (iv), (v), (vi), (vii), or (viii). For
example, a change in method of accounting involving:
(A) a change in inventory costs (for
from inventory property to depreciable
property, or vice versa) (but see section
11.02 of this revenue procedure for making a change in method of accounting
from inventory property to depreciable
property for unrecoverable line pack gas
or unrecoverable cushion gas, and section 11.06 of this revenue procedure for
making a change in method of accounting
from inventory property to depreciable
property for rotable spare parts); or
(B) a change in the character of a transaction from sale to lease, or vice versa (but
see section 6.03 of this revenue procedure
for making this change);
(xiv) a change from determining
depreciation under § 168 to determining

depreciation under former § 168 for any
property subject to the transition rules in
§ 203(b) or § 204(a) of the Tax Reform
Act of 1986, 1986-3 (Vol. 1) C.B. 1, 60-80;
(xv) any change in the placed-in-service date of a depreciable or amortizable
property. This change is corrected by
adjustments in the applicable taxable year
provided under § 1.446-1(e)(2)(ii)(d)(5)
(v);
(xvi) any property for which the taxpayer has claimed a federal income tax
credit (e.g., the rehabilitation credit under
§ 47), unless the change does not alter the
amount of the federal income tax credit;
service by the taxpayer after December
31, 2017, to which section 6.18 of this
revenue procedure applies;
(xviii) any property to which section 4
or 5 of Rev. Proc. 2020-22, 2020-18 I.R.B.
745, applies. (See sections 4.02 and 4.03,
or 5.02 of Rev. Proc. 2020-22, as applicable, for making any changes to depreciation for such property.);
(xix) any change in method of accounting to which section 6.20 of this revenue
procedure applies; or
(xx) the change in method of accountnue procedure.
(2) Certain eligibility rules inapplicable. The eligibility rule in section 5.01(1)
(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to this change. If
ing with the year of change, a taxpayer
requested or made a change in method of
accounting from expensing to capitalizing, or vice versa, the cost or other basis
of an asset, the eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13 is not
applicable to a change under this section
6.01 for that same asset.
(3) Additional requirements. A taxpayer also must comply with the following:
(a) Permissible method of accounting
for depreciation. A taxpayer must change
to a permissible method of accounting for
depreciation for the item of depreciable
or amortizable property. The permissible
method of accounting is the same method
that determines the depreciation allowable
for the item of property (as provided in
section 6.01(7) of this revenue procedure).

(b) Statements required. A taxpayer
enue procedure) must provide the following statements, if applicable, and attach
them to the completed Form 3115:
(i) a detailed description of the present
and proposed methods of accounting. A
general description of these methods of
accounting is unacceptable (for example,
MACRS to MACRS, erroneous method
to proper method, claiming less than the
depreciation allowable to claiming the
depreciation allowable);
(ii) to the extent not provided elsewhere
on the Form 3115, a statement describing
the taxpayer’s business or income-producing activities. Also, if the taxpayer has
more than one business or income-producing activity, a statement describing the
taxpayer’s business or income-producing
activity in which the item of property at
issue is primarily used by the taxpayer;
(iii) to the extent not provided elsewhere on the Form 3115, a statement of
the facts and law supporting the proposed
of the item of property, and new asset
class in, as appropriate, Rev. Proc. 87-56
or Rev. Proc. 83-35. If the taxpayer is the
owner and lessor of the item of property
at issue, the statement of the facts and law
supporting the new asset class also must
describe the business or income-producing activity in which that item of property
is primarily used by the lessee;
(iv) to the extent not provided elsewhere on the Form 3115, a statement identifying the year in which the item of property was placed in service by the taxpayer;
(v) if any item of property is public
utility property within the meaning of
§ 168(i)(10) or former § 167(l)(3)(A),
as applicable, a statement providing that
the taxpayer agrees to the following additional terms and conditions:
(A) a normalization method of accounting (within the meaning of former § 167(l)
(3)(G), former § 168(e)(3)(B), or § 168(i)
(9), as applicable) will be used for the
public utility property subject to the Form
3115;
(B) as of the beginning of the year
of change, the taxpayer will adjust its
deferred tax reserve account or similar
reserve account in the taxpayer’s regulatory books of account by the amount of

the deferral of federal income tax liability
associated with the § 481(a) adjustment
applicable to the public utility property
subject to the Form 3115; and
the federal income tax return for the year
of change, the taxpayer will provide a
copy of the completed Form 3115 to any
regulatory body having jurisdiction over
the public utility property subject to the
Form 3115;
(vi) if the taxpayer is changing the clasplaced in service after August 19, 1996, to
a retail motor fuels outlet under § 168(e)
(3)(E)(iii), a statement containing the following representation: “For purposes of
§ 168(e)(3)(E)(iii) of the Internal Revenue
Code, the taxpayer represents that (A) 50
percent or more of the gross revenue generated from the item of § 1250 property is
from the sale of petroleum products (not
including gross revenue from related services, such as the labor cost of oil changes
and gross revenue from the sale of nonpetroleum products such as tires and oil
space in the item of property is devoted
to the sale of petroleum products (not

space devoted to nonpetroleum products
of § 1250 property is 1,400 square feet or
less.”; and
(vii) if the taxpayer is changing the
§ 1250 property to § 1245 property under
§ 168 or former § 168, a statement of the
facts and law supporting the new § 1245
containing the following representation:
“Each item of depreciable property that is
section 6.01 of Rev. Proc. 2024-23 for
the year of change beginning [Insert the
date],
Insert,
as appropriate: nonresidential real propleasehold improvement property, quali(as amended by § 13204 of the TCJA),
19-year real property, 18-year real property, or 15-year real property] to an asset
class of [Insert, as appropriate, either:

Rev. Proc. 87-56, 1987-2 C.B. 674, or
Rev. Proc. 83-35, 1983-1 C.B. 745] that
does not explicitly include § 1250 property, is § 1245 property for depreciation
purposes.”
(4)
.
(a) In general
of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2022) to
make this change:
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
15b, 16c, 17, and 19;
(v) Part IV, all lines except line 25; and
(vi) Schedule E.
(b)
payer
is a taxpayer whose average annual
gross receipts, as determined under
§ 1.263(a)-3(h)(3), for the three preceding taxable years is less than or equal to
$10,000,000.
(5) Section 481(a) adjustment. Because
the adjusted basis of the property is
changed as a result of a method change
made under this section 6.01 (see section 6.01(6) of this revenue procedure),
items are duplicated or omitted. Accordingly, this change is made with a § 481(a)
adjustment. This adjustment may result in
either a negative § 481(a) adjustment (a
decrease in taxable income) or a positive
§ 481(a) adjustment (an increase in taxable
income) and may be a different amount
for regular tax, alternative minimum tax,
and adjusted current earnings purposes.
This § 481(a) adjustment equals the difference between the total amount of depreciation taken into account in computing
taxable income for the property under the
taxpayer’s present method of accounting
(including the amount attributable to any
property described in section 6.01(1)(b) of
this revenue procedure that is included in
the taxpayer’s Form 3115), and the total
amount of depreciation allowable for the
property under the taxpayer’s proposed
method of accounting (as determined
under section 6.01(7) of this revenue procedure, and including the amount attribut-

able to any property described in section
6.01(1)(b) of this revenue procedure that
is included in the taxpayer’s Form 3115),
for open and closed years prior to the
year of change. However, the amount of
the § 481(a) adjustment must be adjusted
to account for the proper amount of the
depreciation allowable that is required to
be capitalized under any provision of the
Code (for example, § 263A) at the beginning of the year of change.
(6) Basis adjustment. As of the beginning of the year of change, the basis of
depreciable property to which this section
required by § 1016(a)(2) for the depreciation allowable for the property (as determined under section 6.01(7) of this revenue procedure).
(7) Meaning of depreciation allowable.
(a) In general. Section 6.01(7) of this
revenue procedure provides the amount
of the depreciation allowable determined
under § 56(a)(1), § 56(g)(4)(A) (as in
effect on the day before the date of enactment of the TCJA), § 167, § 168, or § 197,
or former § 168, § 1400I, or § 1400L(c).
This amount, however, may be limited by
other provisions of the Code (for example,
§ 280F).
(b) Section 56(a)(1) property. The
depreciation allowable for any taxable
year for property for which depreciation is
determined under § 56(a)(1) is determined
by using the depreciation method, recovery period, and convention provided for
under § 56(a)(1) that applies for the property’s placed-in-service date.
(c) Section 56(g)(4)(A) property. The
depreciation allowable for any taxable
year for property for which depreciation
is determined under § 56(g)(4)(A) (as in
effect on the day before the date of enactment of the TCJA) is determined by using
the depreciation method, recovery period
or useful life, as applicable, and convention provided for under § 56(g)(4)(A)
(as in effect on the day before the date of
enactment of the TCJA) that applies for
the property’s placed-in-service date.
(d) Section 167 property. Generally, for
any taxable year, the depreciation allowable
for property for which depreciation is determined under § 167, is determined either:
(i) under the depreciation method
adopted by the taxpayer for the property;
or

(ii) if that depreciation method does not
result in a reasonable allowance for depreciation or the taxpayer has not adopted
a depreciation method for the property, under the straight-line depreciation
method.
For determining the estimated useful
life and salvage value of the property, see
§ 1.167(a)-1(b) and (c), respectively.
The depreciation allowable for any taxable year for property subject to § 167(f)
(regarding certain property excluded from
§ 197) is determined by using the depreciation method and useful life prescribed
in § 167(f). If computer software is depre-

amended by the TCJA and § 1.168(k)-2),
(2) as in effect on the day before the date
of enactment of the TCJA and § 1.168(k)1), 50-percent bonus depreciation propon the day before the date of enactment of
the Economic Stimulus Act of 2008, Pub.
L. No. 110-185, 122 Stat. 613 (February

§ 168(n)(2) (as in effect on the day before
the date of enactment of the Tax Technical
Corrections Act of 2018, Pub. L. No. 115141, Division U, 132 Stat. 1211 (March

in § 1400L(b)(2) (as in effect on the day
before the date of enactment of the Tax
Technical Corrections Act of 2018) and
in § 1400N(d)(2) (as in effect on the day
before the date of enactment of the Tax
Technical Corrections Act of 2018) and
sections 2.02 and 2.03 of Notice 2006-77,

Zone extension property (GO Zone exten(6) (as in effect on the day before the date
of enactment of the Tax Technical Corrections Act of 2018) and section 4 of

sections 2.02 and 2.03 of Notice 200867, 2008-32 I.R.B. 307), the depreciation allowable for that computer software
under § 167(f)(1) is also determined by

year depreciation deduction provided by
§ 168(k), § 168(n) (as in effect on the
day before the date of enactment of the
Tax Technical Corrections Act of 2018),
§ 1400L(b) (as in effect on the day before
the date of enactment of the Tax Technical
Corrections Act of 2018), or § 1400N(d)
(as in effect on the day before the date of
enactment of the Tax Technical Corrections Act of 2018), or by § 15345(a)(1)
and (d)(1) of the Food, Conservation, and
Energy Act of 2008, Pub. L. No. 110-246,
122 Stat. 1651 (June 18, 2008), as applicable, unless the taxpayer made a timely
valid election not to deduct any additional
software.
(e) Section 168 property. The depreciation allowable for any taxable year for
property for which depreciation is determined under § 168, is determined as follows:
(i) by using either:
(A) the general depreciation system in
§ 168(a); or
(B) the alternative depreciation system in § 168(g) if the property is required
to be depreciated under the alternative
depreciation system pursuant to § 168(g)
(1) or other provisions of the Code (for
example, property described in § 263A(e)
(2)(A) or § 280F(b)(1)). Property required
to be depreciated under the alternative
depreciation system pursuant to § 168(g)
(1) includes property in a class (as set out
in § 168(e)) for which the taxpayer made
a timely valid election under § 168(g)(7);
50-percent bonus depreciation property,
erty Zone property, GO Zone property, GO
Zone extension property, or RA property,
by also taking into account the additional
by § 168(k), § 168(n) (as in effect on the
day before the date of enactment of the
Tax Technical Corrections Act of 2018),
§ 1400L(b) (as in effect on the day before
the date of enactment of the Tax Technical
Corrections Act of 2018), or § 1400N(d)
(as in effect on the day before the date
of enactment of the Tax Technical Corrections Act of 2018), or by § 15345(a)
(1) and (d)(1) of the Food, Conservation,
and Energy Act of 2008, as applicable,
unless the taxpayer made a timely valid

year depreciation (or made a deemed elecdepreciation; for further guidance, see, for
example, Rev. Proc. 2002-33, 2002-1 C.B.
963, Rev. Proc. 2003-50, 2003-2 C.B. 119,
Notice 2006-77, Notice 2008-67, section
5 of Rev. Proc. 2011-26, 2011-16 I.R.B.
664, Rev. Proc. 2015-48, 2015-40 I.R.B.
469, or Rev. Proc. 2019-33, 2019-34 I.R.B.
in § 1.168(k)-2(f)(1)(ii), § 1.168(k)-1(e)
(2), § 1.1400L(b)-1(e)(2), or section 4.02
of Notice 2006-77, as applicable) in which
that property is included;
ond generation biofuel plant property (as
-

by also taking into account the additional
by § 168(l)(1), unless the taxpayer made
a timely valid election not to deduct the

example, the straight-line method in former § 168(b)(3)).
(h)
.
The depreciation allowable for any tax-

effect on the day before the date of enactment of the Tax Technical Corrections Act
of 2018)) for which the taxpayer has made
a timely valid election under § 1400I(a) is
determined as follows:
(i) if the taxpayer elected to deduct

and as limited by § 1400I(c) (as in effect
on the day before the date of enactment
of the Tax Technical Corrections Act of
2018)) chargeable to a capital account
building for the taxable year in which the
building is placed in service by the taxpayer, the depreciation allowable for the
in-service year is equal to one-half of the

property; and

the building and the depreciation allowable for the remaining depreciable basis

(2)), by also taking into account the addi-

its placed-in-service year and subsequent
taxable years is determined using the
general depreciation system of § 168(a)
or the alternative depreciation system of
§ 168(g), as applicable; or
(ii) if the taxpayer elected to amortize
ditures chargeable to a capital account
tion building ratably over the 120-month
period beginning with the month in which
the building is placed in service, the

provided by § 168(m)(1), unless the taxpayer made a timely valid election not to
tion for the property.
(f) Section 197 property. The amortization allowable for any taxable year for
an amortizable § 197 intangible (including
any property for which a timely election
under § 13261(g)(2) of the 1993 Act was
made) is determined in accordance with
§ 1.197-2(f).
(g) Former § 168 property. The depreciation allowable for any taxable year for
property subject to former § 168 is determined by using either:
(i) the accelerated method of cost
recovery applicable to the property (for
example, for 5-year property, the recovery
method under former § 168(b)(1)); or
(ii) the straight-line method applicable
to the property if the property is required
to be depreciated under the straight-line
method (for example, property described
in former § 168(f)(2) or former § 280F(b)
(2)) or if the taxpayer elected to determine the depreciation allowance under
the optional straight-line percentage (for

revitalization expenditures is determined
in accordance with this election and the
depreciation allowable for the remaining
ization building is determined using the
general depreciation system of § 168(a)
or the alternative depreciation system of
§ 168(g), as applicable.
(i)
leasehold improvement property. The
depreciation allowable for any taxable
Zone leasehold improvement property (as
the day before the date of enactment of the
Tax Technical Corrections Act of 2018))

is determined by using the depreciation
method and recovery period prescribed in
§ 1400L(c) (as in effect on the day before
the date of enactment of the Tax Technical
Corrections Act of 2018) unless the taxpayer made a timely valid election under
§ 1400L(c)(5) (as in effect on the day
before the date of enactment of the Tax
Technical Corrections Act of 2018) not to
use that recovery period.
(8) Concurrent automatic change.
(a) A taxpayer making this change for
more than one asset for the same year of

which case the taxpayer must enter the
designated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent

property to 7-year property.
(b) A taxpayer making both this change
and a change to a UNICAP method under
section 12.01, 12.02, 12.08, or 12.12 of
this revenue procedure (as applicable)

taxpayer must include on the single Form
3115 the information required by section
6.01(4)(a) of this revenue procedure for
this change and the information required
by the lines on Form 3115 applicable to
the UNICAP method change, including Part II lines 14 and 15, Part IV, and
Schedule D, and must include a separate
response to each line on Form 3115 that is
applicable to both changes (such as Part II
lines 6b, 7, 8b, 14, and, as applicable for
this change, Part IV) for which the taxpayer’s response is different for this change
and the change to a UNICAP method.
(9) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.01 is “7.”
(10) Contact information. For further
information regarding a change under this
section, contact James Liechty at (202)
317-7005 (not a toll-free number).
.02 Permissible to permissible method
of accounting for depreciation.
(1) Description of change. This change
applies to a taxpayer that wants to change
from a permissible method of accounting
for depreciation under § 56(g)(4)(A)(iv)
(as in effect on the day before the date of
enactment of Public Law 115-97, 131 Stat.
2054 (Dec. 22, 2017), commonly referred
to as the Tax Cuts and Jobs Act (TCJA))
or § 167 to another permissible method of
accounting for depreciation under § 56(g)
(4)(A)(iv) (as in effect on the day before
the date of enactment of the TCJA) or
§ 167. Pursuant to § 1.167(a)-7(a) and (c),
a taxpayer may account for depreciable
property either by treating each individual
asset as an account or by combining two
or more assets in a single account and, for
each account, depreciation allowances are
computed separately.
(2) Applicability.
(a) In general. This change applies to
any taxpayer wanting to make a change
in method of accounting for depreciation

a single Form 3115 for both changes, in

procedure for the property in an account:

all such assets and provide a single net
§ 481(a) adjustment for all the changes
included in that Form 3115. If one or more
of the changes in that single Form 3115
generate a negative § 481(a) adjustment
and other changes in that same Form 3115
generate a positive § 481(a) adjustment,
the taxpayer may provide a single negative
§ 481(a) adjustment for all the changes
that are included in that Form 3115 generating such adjustment and a single positive
§ 481(a) adjustment for all the changes
that are included in that Form 3115 generating such adjustment. For example,
change the depreciation methods, recovery periods, and/or conventions under
tion of two computers from nonresidential
desk from nonresidential real property to
5-year property to 7-year property. On
that Form 3115, the taxpayer must provide either (i) a single net § 481(a) adjustment that covers all the changes resulting
a single negative § 481(a) adjustment
that covers the changes resulting from the

property to 5-year property and 7-year
property, respectively, and a single positive § 481(a) adjustment that covers the
-

(i) for which the present and proposed
methods of accounting for depreciation
procedure are permissible methods for the
property under § 56(g)(4)(A)(iv) (as in
effect on the day before the date of enactment of the TCJA) or § 167; and
(ii) that is owned by the taxpayer at the
beginning of the year of change.
(b) Inapplicability. This change does
not apply to:
(i) a taxpayer that is required under
§ 263A and the regulations thereunder to
capitalize the costs with respect to which
the taxpayer wants to change its method
of accounting under this section 6.02 if
the taxpayer is not capitalizing these costs,
unless the taxpayer concurrently changes
its method to capitalize these costs in
conjunction with a change to a UNICAP
method under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable);
(ii) any property to which § 1016(a)(3)
(regarding property held by a tax-exempt
organization) applies;
(iii) any property described in § 167(f)
(regarding certain property excluded from
§ 197);
(iv) any property subject to § 167(g)
(regarding property depreciated under the
income forecast method);
(v) any property for which depreciation
is determined under § 56(a)(1), § 56(g)(4)
(A)(i), (ii), (iii), or (v) (as in effect on the day
before the date of enactment of the TCJA),
§ 168, § 1400I (as in effect on the day before
the date of enactment of the Tax Technical
Corrections Act of 2018, Pub. L. No. 115141, Division U, 132 Stat. 1211 (March
23, 2018)), § 1400L(c) (as in effect on the
day before the date of enactment of the Tax
Technical Corrections Act of 2018), § 168
prior to its amendment in 1986 (former
ation deduction provision of the Code (for
example, § 168(k), § 168(l), § 1400L(b) (as
in effect on the day before the date of enactment of the Tax Technical Corrections Act
of 2018), or § 1400N(d) (as in effect on the
day before the date of enactment of the Tax
Technical Corrections Act of 2018));
(vi) any property that the taxpayer
elected under § 168(f)(1) or former
§ 168(e)(2) to exclude from the application of, respectively, § 168 or former
§ 168;

(vii) any property for which depreciation is determined in accordance with
§ 1.167(a)-11 (ADR);
(viii) any depreciable property for
which the taxpayer is changing the depreciation method pursuant to § 1.167(e)-1(b)
(change from declining-balance method
to straight-line method), § 1.167(e)-1(c)
(certain changes for § 1245 property),
or § 1.167(e)-1(d) (certain changes for
§ 1250 property). These changes must be
made prospectively and are not permitted
under the cited regulations for property
for which the depreciation is determined
under § 168, § 1400I (as in effect on the
day before the date of enactment of the
Tax Technical Corrections Act of 2018),
§ 1400L(c) (as in effect on the day before
the date of enactment of the Tax Technical
Corrections Act of 2018), former § 168,
deduction provision of the Code (for
example, § 168(k), § 168(l), § 1400L(b)
(as in effect on the day before the date of
enactment of the Tax Technical Corrections Act of 2018), or § 1400N(d) (as in
effect on the day before the date of enactment of the Tax Technical Corrections Act
of 2018)); or
(ix) any distributor commissions (as

Proc. 2007-16, 2007-1 C.B. 358) for which
the taxpayer is changing the useful life
under the distribution fee period method
or the useful life method (both described
in Rev. Proc. 2000-38). A change in this
useful life is corrected by adjustments in
the applicable taxable year provided under
§ 1.446-1(e)(2)(ii)(d)(5)(iv).
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to this change.
(4) Changes covered. This section 6.02
only applies to the following changes in
methods of accounting for depreciation:
(a) a change from the straight-line
method to the sum-of-the-years-digits
method, the sinking fund method, the
unit-of-production method, or the declining-balance method using any proper percentage of the straight-line rate;
(b) a change from the declining-balance method using any percentage of the
straight-line rate to the sum-of-the-yearsdigits method, the sinking fund method,

or the declining-balance method using a
different proper percentage of the straightline rate;
(c) a change from the sum-of-the-yearsdigits method to the sinking fund method,
the declining-balance method using any
proper percentage of the straight-line rate,
or the straight-line method;
(d) a change from the unit-of-production method to the straight-line method;
(e) a change from the sinking fund
method to the straight-line method, the
unit-of-production method, the sum-ofthe-years-digits method, or the declining-balance method using any proper percentage of the straight-line rate;
(f) a change in the interest factor used
in connection with a compound interest
method or sinking fund method;
(g) a change in averaging convention as
set forth in § 1.167(a)-10(b). However, as
in any taxable year in which an averaging convention substantially distorts the
depreciation allowance for the taxable
year, it may not be used (see Rev. Rul.
73-202, 1973-1 C.B. 81);
(h) a change from charging the depreciation reserve with costs of removal and
crediting the depreciation reserve with
salvage proceeds to deducting costs of
removal as an expense and including salvage proceeds in taxable income as set
forth in § 1.167(a)-8(e)(2). See Rev. Rul.
74-455, 1974-2 C.B. 63. This section 6.02
applies to this change, however, only if:
(i) the change is applied to all items in
the account for which the change is being
made; and
(ii) the removal costs are not required
to be capitalized under any provision of
the Code (for example, § 263(a), § 263A,
or § 280B);
(i) a change from crediting the depreciation reserve with the salvage proceeds
realized on normal retirement sales to
computing and recognizing gains and
losses on the sales (see Rev. Rul. 70-165,
1970-1 C.B. 43);
(j) a change from crediting ordinary income (including the combination
method of crediting the lesser of estimated
salvage value or actual salvage proceeds
to the depreciation reserve, with any
excess of salvage proceeds over estimated
salvage value credited to ordinary income)
with the salvage proceeds realized on nor-

mal retirement sales, to computing and
recognizing gains and losses on the sales
(see Rev. Rul. 70-166, 1970-1 C.B. 44);
(k) a change from item accounting for
ing (pooling) for the same assets, or vice
versa;
(l) a change from one type of multiple
assets to a different type of multiple asset
accounting (pooling) for the same assets;
(m) a change from one method
described in Rev. Proc. 2000-38 for amorby section 2 of Rev. Proc. 2000-38) to
another method described in Rev. Proc.
2000-38 for amortizing distributor commissions; or
(n) a change from pooling to a single
asset, or vice versa, for distributor comProc. 2000-38) for which the taxpayer is
using the distribution fee period method
or the useful life method (both described
in Rev. Proc. 2000-38).
(5) Additional requirements. A taxpayer also must comply with the following:
(a) Basis for depreciation. At the
beginning of the year of change, the basis
for depreciation of property to which this
change applies is the adjusted basis of the
property as provided in § 1011 at the end
of the taxable year immediately preceding the year of change (determined under
taxpayer’s present method of accounting
for depreciation). If applicable under the
taxpayer’s proposed method of accounting for depreciation, this adjusted basis is
reduced by the estimated salvage value of
the property (for example, a change to the
straight-line method).
(b) Rate of depreciation. The rate of
depreciation for property changed to:
(i) the straight-line or the sum-of-theyears-digits method of depreciation must
be based on the remaining useful life of
the property as of the beginning of the
year of change; or
(ii) the declining-balance method of
depreciation must be based on the useful life of the property measured from
the placed-in-service date, and not the
expected remaining life from the date the
change becomes effective.
(c) Regulatory requirements. For
changes in method of depreciation to

the sum-of-the-years-digits or declining-balance method, the property must
meet the requirements of § 1.167(b)-0 or
§ 1.167(c)-1, as appropriate.
(d) Public utility property. If any item
of property is public utility property within
the meaning of former § 167(l)(3)(A), the
this revenue procedure) must attach to
the Form 3115 a statement providing that
the taxpayer agrees to the following additional terms and conditions:
(i) a normalization method of accounting within the meaning of former § 167(l)
(3)(G) will be used for the public utility
property subject to the Form 3115; and
federal income tax return for the year of
change, the taxpayer will provide a copy
of the completed Form 3115 to any regulatory body having jurisdiction over the
public utility property subject to the Form
3115.
(6)
-

of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2022) to
make this change:
(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;
(d) Part II, all lines except lines 13,
15b, 16, 17, and 19;
(e) Part IV, line 25; and
(f) Schedule E.
(7) Section 481(a) adjustment. Because
the adjusted basis of the property is not
changed as a result of a method change
made under this section 6.02, no items are
being duplicated or omitted. Accordingly,
a § 481(a) adjustment is neither required
nor permitted.
(8) Concurrent automatic change.
(a) A taxpayer making this change for
more than one asset for the same year of
all such assets.
(b) A taxpayer making both this change
and a change to a UNICAP method under
section 12.01, 12.02, 12.08, or 12.12 of
this revenue procedure (as applicable)

a single Form 3115 for both changes, in
which case the taxpayer must enter the
designated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
taxpayer must include on the single Form
3115 the information required by section
6.02(6) of this revenue procedure for this
change and the information required by
the lines on Form 3115 applicable to the
UNICAP method change, including Part
II lines 14 and 15, Part IV, and Schedule
D, and must include a separate response to
each line on Form 3115 that is applicable
to both changes (such as Part II lines 6b, 7,
8b, 14, and, as applicable for this change,
Part IV) for which the taxpayer’s response
is different for this change and the change
to a UNICAP method.
(9) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.02 is “8.”
(10) Contact information. For further
information regarding a change under
this section, contact Bruce Chang at (202)
317-7005 (not a toll-free number).
.03
tions.
(1) Description of change and scope.
(a) Applicability. This change applies
to a taxpayer that wants to change its
method of accounting from:
(i) improperly treating property as sold
by the taxpayer to properly treating prop(ii) improperly treating property as
leased by the taxpayer to properly treating
payer;
(iii) improperly treating property as
ing property as sold or leased by the taxpayer;
(iv) improperly treating property as
purchased by the taxpayer to properly
treating property as leased by the taxpayer; and
(v) improperly treating property as
leased by the taxpayer to properly treating
property as purchased by the taxpayer.
(b) Inapplicability. This change does
not apply to:

(i) a rent-to-own dealer that wants to
change its method of accounting for rentto-own contracts described in section 3 of
Rev. Proc. 95-38, 1995-2 C.B. 397; or
(ii) a taxpayer that holds assets for sale
or lease, if any asset so held is not the subject of a sale or lease transaction as of the
beginning of the year of change.
(2) Manner of making the change.
(a) Required statement. A taxpayer
changing its method of accounting under
this section 6.03 must submit a statement
with the Form 3115 that provides the
name of the counterparty to the sale, lease,
ning of the year of change.
(b) Section 481(a) adjustment. A
change under this section 6.03 is made
with a § 481(a) adjustment.
(3) No ruling on the characterization of
ing transaction. The consent granted under
section 9 of Rev. Proc. 2015-13 for a change
mination by the Commissioner that the
taxpayer has properly characterized any
transaction and does not create any presumption that the proposed characterization
ing transaction is permissible. The director
will ascertain whether the taxpayer’s characterization of any transaction as a sale, lease,
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.03 is “10.”
(5) Contact information. For further
information regarding a change under this
section, contact Edward Schwartz at (202)
317-7006 (not a toll-free number).
.04 Change in general asset account
treatment due to a change in the use of
MACRS property.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to change the
method of accounting for general asset
account treatment of MACRS propto the method of accounting provided in
§ 1.168(i)-1(c)(2)(ii)(I) or § 1.168(i)-1(h)
(2), which applies when there is a change
in the use of MACRS property pursuant to
§ 1.168(i)-4(d).

(b) Taxpayer has not adopted a method
of accounting for the item of property. If a
taxpayer does not satisfy section 6.04(1)
(a) of this revenue procedure for an item
of MACRS property because a change in
the use of this item of MACRS property
occurred in the taxable year immediately
preceding the year of change (1-year
change in use property), the taxpayer may
change from the impermissible method
for general asset account treatment to
the permissible method provided in
§ 1.168(i)-1(c)(2)(ii)(I) or § 1.168(i)-1(h)
(2) for the 1-year change in use property
taxpayer may change from the impermissible method for general asset account
treatment to the permissible method
provided in § 1.168(i)-1(c)(2)(ii)(I) or
§ 1.168(i)-1(h)(2) for a 1-year change in
income tax return, or an administrative
adjustment request under § 6227 (AAR),
as applicable, for the year of change in the

its federal income tax return for the taxable year succeeding the year of change in
the use of such property.
(c) Inapplicability.
(i) The change described in section
6.04(1)(a) of this revenue procedure does
not apply to any property to which section 4.05 of Rev. Proc. 2020-22, 2020-18
I.R.B. 745, applies unless the taxpayer
and property are within the scope of Rev.
Proc. 2021-28, 2021-27 I.R.B. 5. (See sections 4.02 and 4.03 of Rev. Proc. 2020-22,
as applicable, for making such changes for
such property.); and
(ii) The change described in section
6.04(1)(a) of this revenue procedure does
not apply to any property to which section 5.04 of Rev. Proc. 2020-22, 202018 I.R.B. 745, applies. (See section 5.02
of Rev. Proc. 2020-22 for making such
change for such property.).
(2) Certain eligibility rules inapplicable.
(a) In general. The eligibility rule in
section 5.01(1)(d) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a taxpayer making this change.
(b) Special rule. The eligibility rule in
section 5.01(1)(f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a taxpayer within the scope of section 3 of Rev.

Proc. 2021-28, 2021-27 I.R.B. 5, making
this change for any residential rental property within the scope of section 3 of Rev.
Proc. 2021-28 for a taxable year beginning in 2019, 2020, 2021, or 2022.
(3) Manner of making change.

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

of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2022) to
make this change:
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19;
(v) Part IV, line 25; and
(vi) Schedule E, all lines except lines 1,
4c, 5, 6, 7b, and 7c.
(4) Concurrent automatic change.
(a) A taxpayer making this change for
more than one asset for the same year of
all such assets.
(b) A taxpayer making this change
and a change under section 6.05, section
6.12(3)(b), and/or section 6.15 of this
revenue procedure for the same year of
for all such changes and must enter the
designated automatic accounting method
change numbers for the changes on the
appropriate line on the Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.
(5) Designated automatic accounting
method change number. The designated
automatic accounting method change

number for a change under this section
6.04 is “87.”
(6) Contact information. For further
information regarding a change under this
section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).
.05 Change in method of accounting
for depreciation due to a change in the use
of MACRS property.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to (i) change
the method of accounting for depreciin § 1.168(b)-1(a)(2)) to the method of
accounting for depreciation provided in
§ 1.168(i)-4, which applies when there
is a change in the use of MACRS property, or (ii) revoke the election provided
in § 1.168(i)-4(d)(3)(ii) to disregard a
change in the use of MACRS property.
See § 1.168(i)-4(g)(2).
(b) Taxpayer has not adopted a method
of accounting for the item of property. If a
taxpayer does not satisfy section 6.05(1)
(a)(i) of this revenue procedure for an item
of MACRS property because a change in
the use of this item of MACRS property
occurred in the taxable year immediately
preceding the year of change (1-year
change in use property), the taxpayer may
change from the impermissible method
of determining depreciation to the permissible method of determining depreciation provided in § 1.168(i)-4 for the
Form 3115 for this change, provided the
§ 481(a) adjustment reported on the Form
3115 includes the amount of any adjustment that is attributable to all property
(including the 1-year change in use property) subject to the Form 3115. Alternatively, the taxpayer may change from the
impermissible method of determining
depreciation to the permissible method
of determining depreciation provided in
§ 1.168(i)-4 for a 1-year change in use
income tax return, or an administrative
adjustment request under § 6227 (AAR),
as applicable, for the year of change in the

its federal income tax return for the taxable year succeeding the year of change in
the use of such property.
(c) Inapplicability.

(i) The change described in section
6.05(1)(a)(i) of this revenue procedure
does not apply to any property to which
section 4.05 of Rev. Proc. 2020-22, 202018 I.R.B. 745, applies unless the taxpayer
and property are within the scope of Rev.
Proc. 2021-28, 2021-27 I.R.B. 5. (See sections 4.02 and 4.03, or 5.02 of Rev. Proc.
2020-22, as applicable, for making such
change for such property.);
(ii) The change described in section
6.05(1)(a)(i) of this revenue procedure
does not apply to any property to which
section 5.04 of Rev. Proc. 2020-22, 202018 I.R.B. 745, applies. (See section 5.02
of Rev. Proc. 2020-22 for making such
change for such property.); and
(iii) The change described in this section 6.05 does not apply to any property
that is not owned by the taxpayer at the
beginning of the year of change.
(2) Certain eligibility rules inapplicable.
(a) In general. The eligibility rule in
section 5.01(1)(d) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a taxpayer making this change.
(b) Special rule. The eligibility rule in
section 5.01(1)(f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a taxpayer within the scope of section 3 of Rev.
Proc. 2021-28, 2021-27 I.R.B. 5, making
this change for any residential rental property within the scope of section 3 of Rev.
Proc. 2021-28 for a taxable year beginning in 2019, 2020, 2021, or 2022.
(3)
-

of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2022) to
make this change:
(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;
(d) Part II, all lines except lines 13,
15b, 16, 17, and 19;
(e) Part IV, all lines except line 25; and
(f) Schedule E, all lines except lines 1,
4c, 5, 6, 7b, and 7c.
(4) Section 481(a) adjustment. A taxpayer changing its method of accounting
under this section 6.05 is required to cal-

day of the year of change as if the proposed method of accounting had always
been used by the taxpayer beginning with
the taxable year in which the change in the
use of the MACRS property occurred by
the taxpayer.
(5) Concurrent automatic change.
(a) A taxpayer making this change for
more than one asset for the same year of

passenger automobile under § 1.280F-6T
as in effect prior to July 7, 2003. If the tax-

all such assets and provide a single net
§ 481(a) adjustment for all the changes
included in that Form 3115. If one or
more of the changes in that single Form
3115 generate a negative § 481(a) adjustment and other changes in that same Form
3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single
negative § 481(a) adjustment for all the
changes that are included in that Form
3115 generating such adjustment and a
single positive § 481(a) adjustment for all
the changes that are included in that Form
3115 generating such adjustment.
(b) A taxpayer making this change
and a change under section 6.04, section
6.12(3)(b), and/or section 6.15 of this
revenue procedure for the same year of

of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2022) to
make this change:

for all such changes and must enter the
designated automatic accounting method
change numbers for the changes on the
appropriate line on the Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.05 is “88.”
(7) Contact information. For further
information regarding a change under this
section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).
.06
sonal use vans and light trucks.
(1) Description of change. This change
applies to a taxpayer that wants to change
the method of accounting for depreciation
for certain vehicles in accordance with
§ 1.280F-6(f)(2)(iv). Section 1.280F6(f)(2)(iv) applies to a truck or van that

in service by the taxpayer before July 7,
2003, and was treated by the taxpayer as a

§ 1.280F-6(f)(2)(iv), the treatment of the
truck or van will be changed from property to which § 280F(a) applies to property to which § 280F(a) does not apply.
(2)
-

(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;
(d) Part II, all lines except lines 13,
15b, 16, 17, and 19;
(e) Part IV, all lines except line 25; and
(f) Schedule E.
(3) Concurrent automatic change. A
taxpayer making this change for more
than one asset for the same year of change
assets and provide a single net § 481(a)
adjustment for all the changes included
in that Form 3115. If one or more of the
changes in that single Form 3115 generate
a negative § 481(a) adjustment and other
changes in that same Form 3115 generate a positive § 481(a) adjustment, the
taxpayer may provide a single negative
§ 481(a) adjustment for all the changes
that are included in that Form 3115 generating such adjustment and a single positive
§ 481(a) adjustment for all the changes
that are included in that Form 3115 generating such adjustment.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.06 is “89.”
(5) Contact information. For further
information regarding a change under this
section, contact C. Dylan Durham at (202)
317-7005 (not a toll-free number).
.07 Impermissible to permissible
method of accounting for depreciation or
amortization for disposed depreciable or
amortizable property.
(1) Description of change. This change
applies to a taxpayer that wants to make
the change in method of accounting for

depreciation or amortization (depreciation) provided under section 3 of Rev.
Proc. 2007-16, 2007-1 C.B. 358, for an
item of depreciable or amortizable property that has been disposed of by the taxpayer. Section 3 of Rev. Proc. 2007-16
allows a taxpayer to make a change in
method of accounting for depreciation for
the disposed property if the taxpayer used
an impermissible method of accounting
for depreciation for the property under
which the taxpayer did not take into
account any depreciation allowance, or
did take into account some depreciation
but less than the depreciation allowable,
6.07(4) of this revenue procedure) or any
prior taxable year.
(2) Applicability.
(a) In general. Except as provided in
section 6.07(2)(b) of this revenue procedure, this section 6.07 applies to a taxpayer
that is changing from an impermissible
method of accounting for depreciation
to a permissible method of accounting
for depreciation for any item of depreciable or amortizable property subject to
§§ 167, 168, 197, 1400I, or 1400L(c), to
year depreciation deduction provision of
the Code (for example, § 168(k), § 168(l),
§ 1400L(b), or § 1400N(d)):
(i) that has been disposed of by the
taxpayer during the year of change (as
procedure); and
(ii) for which the taxpayer did not take
into account any depreciation allowance,
or did take into account some depreciation but less than the depreciation allowable (hereinafter, both are referred to as
“claimed less than the depreciation allowsection 6.07(4) of this revenue procedure)
or any prior taxable year.
(b) Inapplicability. This section 6.07
does not apply to:
(i) any property to which § 1016(a)(3)
(regarding property held by a tax-exempt
organization) applies;
(ii) any property for which a taxpayer
is revoking a timely valid depreciation
election, or making a late depreciation
election, under the Code or regulations
thereunder, or under other guidance published in the Internal Revenue Bulletin
(including under § 13261(g)(2) or (3) of

the Revenue Reconciliation Act of 1993
(1993 Act), 1993-3 C.B. 1, 128 (relating
to amortizable § 197 intangibles));
(iii) any property for which the taxpayer deducted the cost or other basis of
the property as an expense; or
(iv) any property disposed of by the
taxpayer in a transaction to which a nonrecognition section of the Code applies
(for example, § 1031, transactions subject to § 168(i)(7)(B)). However, this
section 6.07(2)(b)(iv) does not apply to
property disposed of by the taxpayer in a
§ 1031 or § 1033 transaction if the taxpayer elects under § 1.168(i)-6(i) and (j)
to treat the entire basis (that is, both the
§ 1.168(i)-6(b)(7) and (8), respectively)
of the replacement MACRS property (as
erty placed in service by the taxpayer
at the time of replacement and treat the
adjusted depreciable basis of the relin§ 1.168(i)-6(b)(2)) as being disposed of by
the taxpayer at the time of disposition.
(3) Manner of making the change.
(a) Change made on an original return
for the year of change. This change may
(including any extension) original federal tax return for the year of change (as

original Form 3115 in accordance with
section 6.03(1)(a) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419.
(b) Change made on an amended
return or an AAR for the year of change.
This change may also be made on an
amended federal income tax return, or
administrative adjustment request under
§ 6227 (AAR), as applicable, for the year
this revenue procedure), provided:
Form 3115 with the taxpayer’s amended
federal income tax return for the year
of this revenue procedure) prior to the
expiration of the period of limitation for
assessment under § 6501(a) for the taxable year in which the item of depreciable
or amortizable property was disposed of
by the taxpayer, or if applicable (B) the
partnership subject to the centralized partnership audit regime enacted as part of

the Bipartisan Budget Act of 2015 (BBA
with its AAR for the year of change (as
nue procedure) prior to the expiration of
the applicable period of limitations for
making adjustments under § 6235 for the
1(a)(8) of the Procedure and Administration Regulations; and
(ii) the taxpayer’s amended federal
income tax return, or AAR, as applicain section 6.07(4) of this revenue procedure) includes the adjustments to taxable
income and any collateral adjustments to
taxable income or tax liability (for example, adjustments to the amount or character of the gain or loss of the disposed
depreciable or amortizable property)
resulting from the change in method of
accounting for depreciation made by the
taxpayer under this section 6.07.
(4) Year of change. The year of change
for this change is the taxable year in which
the item of depreciable or amortizable
property was disposed of by the taxpayer.
(5) Certain eligibility rules inapplicable. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13
do not apply to this change.
(6) Filing requirements.
(a) Notwithstanding section 6.03(1)(a)
of Rev. Proc. 2015-13, a taxpayer making this change in accordance with section 6.07(3)(b) of this revenue procedure
must attach the original Form 3115 to the
income tax return, or AAR, as applicable,
required duplicate copy (with signature)
of the Form 3115 with the IRS in Ogden,
UT, no later than when the original Form
income tax return, or AAR, as applicable, for the year of change. If a taxpayer
is making this change in accordance with
section 6.07(3)(a) of this revenue proce6.03(1)(a) of Rev. Proc. 2015-13 apply.
(b)
-

of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2022) to
make this change:

(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19;
(v) Part IV, all lines except line 25; and
(vi) Schedule E.
(7) Section 481(a) adjustment period.
A taxpayer must take the entire § 481(a)
adjustment into account in computing taxable income for the year of change.
(8) Concurrent automatic change. A
taxpayer making this change for more
than one asset for the same year of change
assets.
(9) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.07 is “107.”
(10) Contact information. For further
information regarding a change under this
section, contact James Liechty at (202)
317-7005 (not a toll-free number).
.08 Tenant construction allowances.
(1) Description of change and scope.
(a) Applicability. This change applies
to a taxpayer that wants to change its
method of accounting for tenant construction allowances:
(i) from improperly treating the taxpayer as having a depreciable interest in the
property subject to the tenant construction
allowances for federal income tax purposes
to properly treating the taxpayer as not having a depreciable interest in such property
for federal income tax purposes; or
(ii) from improperly treating the taxpayer as not having a depreciable interest
in the property subject to the tenant construction allowances for federal income tax
purposes to properly treating the taxpayer
as having a depreciable interest in such
property for federal income tax purposes.
(b) Inapplicability. This change does
not apply to:
(i) any tenant construction allowance
(ii) any portion of a tenant construction
allowance that is not expended on depreciable property; or
(iii) any amount expended for depreciable property in excess of the tenant
construction allowance.

(2)
. For purposes of this section 6.08, the term “tenant construction
allowance(s)” means any amount received
by a lessee from a lessor to construct,
acquire, or improve property for use by
the lessee pursuant to a lease.
(3) Manner of making the change. A
taxpayer changing its method of accounting under this section 6.08 must submit
the following information:
the lessee must submit a statement with
the Form 3115 that provides the amount
of the tenant construction allowance
received by the lessee, the amount of such
tenant construction allowance expended
by the lessee on property, and the name
of the lessor that provided the tenant construction allowance.
the lessor must submit a statement with
the Form 3115 that provides the amount
of the tenant construction allowance provided to the lessee and the name of the lessee that received such tenant construction
allowance.
(4)
-

of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2022) to
make this change in accordance with section 6.08(3)(a) of this revenue procedure:
(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;
(d) Part II, all lines except lines 13,
15b, 16, 17, and 19;
(e) Part IV, line 25; and
(f) Schedule E.
(5) No ruling on which party has the
depreciable interest in the property subject to tenant construction allowances.
The consent granted under section 9 of
in this section 6.08 is not a determination
by the Commissioner that the taxpayer has
properly determined that the taxpayer has,
or does not have, a depreciable interest
in the property subject to the tenant construction allowances for federal income
tax purposes and does not create any presumption that the proposed determination
of which party has the depreciable inter-

est in such property is permissible. The
director will ascertain whether the taxpayer’s determination of which party has the
depreciable interest in the property subject
to the tenant construction allowances is
permissible.
(6) Concurrent automatic change. A
taxpayer making this change for more
than one asset for the same year of change
assets.
(7) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.08 is “145.”
(8) Contact information. For further
information regarding a change under this
section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).
.09 Safe harbor method of accounting
for determining the depreciation of certain tangible assets used by wireless telecommunications carriers under Rev. Proc.
2011-22.
(1) Description of change. This change
applies to a taxpayer that is within the
scope of Rev. Proc. 2011-22, 2011-18
I.R.B. 737, and wants to change to the
recovery periods described in section 5
of Rev. Proc. 2011-22 and any collateral
change to the depreciation methods for all,
or some of, the assets listed in that section.
(2)
-

of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2022) to
make this change:
(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;
(d) Part II, all lines except lines 13,
15b, 16, 17, and 19;
(e) Part IV, all lines except line 25; and
(f) Schedule E.
(3) Concurrent automatic change. A
taxpayer making this change for more
than one asset for the same year of change
assets and provide a single net § 481(a)
adjustment for all the changes included
in that Form 3115. If one or more of the
changes in that single Form 3115 generate

a negative § 481(a) adjustment and other
changes in that same Form 3115 generate a positive § 481(a) adjustment, the
taxpayer may provide a single negative
§ 481(a) adjustment for all the changes
that are included in that Form 3115 generating such adjustment and a single positive
§ 481(a) adjustment for all the changes
that are included in that Form 3115 generating such adjustment.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.09 is “157.”
(5) Contact information. For further
information regarding a change under this
section, contact Charles Magee at (202)
317-7005 (not a toll-free number).
.10 Partial dispositions of tangible
depreciable assets to which the IRS’s
adjustment pertains (§ 168; § 1.168(i)-8).
(1) Description of change.
(a) Applicability. This change applies to a
taxpayer that is described in § 1.168(i)-8(d)
(2)(iii) and, pursuant to § 1.168(i)-8(d)(2)
(iii), that wants to make the partial disposi-

enue procedure, is required to complete
only the following information on Form
3115 (Rev. December 2022) to make this
change:
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19;
(v) Part IV, all lines except line 25; and
(vi) Schedule E.

revenue procedure as a change in method
of accounting.
(3) Certain eligibility rules inapplicable. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, do not apply to this
change.
(4) Manner of making change.

small taxpayer) making this change must:
(i) Apply § 1.168(i)-8(h)(1) and (3)
(accounting for asset disposed of);
(ii) If the asset (as determined under
§ 1.168(i)-8(c)(4)) of which the disposed
portion is a part is properly included in
one of the asset classes 00.11 through 00.4
of Rev. Proc. 87-56, 1987-2 C.B. 674,
classify the replacement portion of such
asset under the same asset class as the disposed portion of the asset in the taxable
year in which the replacement portion is
placed in service by the taxpayer;
(iii) If the taxpayer’s present method
of accounting is not in accord with
§ 1.168(i)-8(c)(4) (determination of asset
disposed of), change to the appropriate
asset as determined under § 1.168(i)-8(c)
(4);
(iv) If the taxpayer continues to deduct
depreciation for the disposed portion of the
asset (as determined under § 1.168(i)-8(c)
(4)) under the taxpayer’s present method
of accounting, change from depreciating such disposed portion to recognizing
gain or loss for the disposed portion or, if
§ 280B and § 1.280B-1 apply to the disposition, change from depreciating such
disposed portion to capitalizing the loss
sustained on account of the demolition to
the land on which the demolished structure was located; and
(v) If any asset is public utility property
within the meaning of § 168(i)(10), attach
a statement to its Form 3115 providing
that the taxpayer agrees to the following
additional terms and conditions:
(A) A normalization method of accounting (within the meaning of § 168(i)(9))
will be used for the public utility property
subject to the Form 3115;

-

the federal income tax return for the year

(i) to the disposition of a portion of an asset
to which the IRS’s adjustment (as described
in § 1.168(i)-8(d)(2)(iii)) pertains.
(b) Inapplicability. This change does
not apply to:
(i) Any asset of which the disposed
portion was a part that is not owned by
the taxpayer at the beginning of the year
of change; or
(ii) Any partial disposition election
made pursuant to § 1.168(i)-8(d)(2)(iii)
(for example, this change does not apply
in § 1.168(i)-8(d)(2)(i) that is made pursuant to § 1.168(i)-8(d)(2)(iv)).
(2) Change in method of accounting.
The IRS will treat the making of the late

of change, the taxpayer will provide a
copy of the completed Form 3115 to any
regulatory body having jurisdiction over
the public utility property subject to the
Form 3115; and
(C) As of the beginning of the year
of change, the taxpayer will adjust its
deferred tax reserve account or similar
account in the taxpayer’s regulatory books
of account by the amount of the deferral
of federal income tax liability associated
with the § 481(a) adjustment applicable
to the public utility property subject to the
Form 3115.
(5) Concurrent automatic change. A
taxpayer making this change for more
than one asset for the same year of change
assets. If the change for more than one
asset included in that Form 3115 is specprocedure, the single Form 3115 should
provide a single net § 481(a) adjustment
for all such changes. If one or more of the
this revenue procedure in that single Form
3115 generate a negative § 481(a) adjusttion 6.10(1) of this revenue procedure in
that same Form 3115 generate a positive
§ 481(a) adjustment, the taxpayer may
provide a single negative § 481(a) adjustment for all such changes that are included
in that Form 3115 generating such negative adjustment and a single positive
§ 481(a) adjustment for all such changes
that are included in that Form 3115 generating such positive adjustment.
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 6.10 is
“198.”
(7) Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).
.11 Depreciation of leasehold improvements (§§ 167, 168, and 197; § 1.167(a)4).
(1) Description of change. This change,
as described in Rev. Proc. 2014-17, 201412 I.R.B. 661, applies to a taxpayer that
wants to change its method of accounting
to comply with § 1.167(a)-4 for leasehold
improvements in which the taxpayer has a

depreciable interest at the beginning of the
year of change:
(a) From improperly depreciating the
leasehold improvements to which § 168
applies over the term of the lease (including renewals, if applicable) to properly
depreciating these improvements under
§ 168;
(b) From improperly amortizing leasehold improvements to which § 197 applies
over the term of the lease (including
renewals, if applicable) to properly amortizing these improvements under § 197; or
(c) From improperly amortizing leasehold improvements to which § 167(f)(1)
applies over the term of the lease (including renewals, if applicable) to properly
amortizing these improvements under
§ 167(f)(1).
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a taxpayer making
this change.
(3) Manner of making change.
enue procedure, is required to complete
only the following information on Form
3115 (Rev. December 2022) to make this
change:
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19;
(v) Part IV, all lines except line 25; and
(vi) Schedule E.
(b) If any leasehold improvement is
public utility property within the meaning
of § 168(i)(10) or former § 167(l)(3)(A), a
payer) making this change must attach to
its Form 3115 a statement providing that
the taxpayer agrees to the following additional terms and conditions:
(i) A normalization method of accounting (within the meaning of § 168(i)(9) or
former § 167(l)(3)(G)) will be used for
the public utility property subject to the
change;
(ii) As of the beginning of the year
of change, the taxpayer will adjust its
deferred tax reserve account or similar
account in the taxpayer’s regulatory books

of account by the amount of the deferral
of federal income tax liability associated
with the § 481(a) adjustment applicable
to the public utility property subject to the
change; and
the federal income tax return for the year
of change, the taxpayer will provide a
copy of the completed Form 3115 to any
regulatory body having jurisdiction over
the public utility property subject to the
change.
(4) Concurrent automatic change.
(a) A taxpayer making this change for
more than one asset for the same year of
all such assets and provide a single net
§ 481(a) adjustment for all the changes
included in that Form 3115. If one or
more of the changes in that single Form
3115 generate a negative § 481(a) adjustment and other changes in that same Form
3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single
negative § 481(a) adjustment for all the
changes that are included in that Form
3115 generating such adjustment and a
single positive § 481(a) adjustment for all
the changes that are included in that Form
3115 generating such adjustment.
(b) A taxpayer making both this change
and a change to a UNICAP method under
section 12.01, 12.02, 12.08, or 12.12 of
this revenue procedure (as applicable)
a single Form 3115 for all such changes
and must enter the designated automatic
accounting method change numbers for
the changes on the appropriate line on the
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes. For example, a qualsingle Form 3115 the information required
by section 6.11(3)(a) of this revenue procedure for this change and the information
required by the lines on Form 3115 applicable to the UNICAP method change,
including Part II lines 14 and 15, Part IV,
and Schedule D, and must include a separate response to each line on Form 3115
that is applicable to both changes (such as
Part II lines 6b, 7, 8b, 14, and, as applicable for this change, Part IV) for which
the taxpayer’s response is different for
this change and the change to a UNICAP
method.

(5) Designated automatic accounting method change number. The designated automatic accounting method
change number for a change to a method
of accounting under this section 6.11 is
“199.”
(6) Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).
.12 Permissible to permissible method
of accounting for depreciation of MACRS
property (§ 168; §§ 1.168(i)-1, 1.168(i)-7,
and 1.168(i)-8).
(1) Description of change.
(a) Applicability. This change, as
described in Rev. Proc. 2014-54, 2014-41
I.R.B. 675, applies to a taxpayer that wants
to make a change in method of accounting
6.12(3) of this revenue procedure for an
asset:
(i) to which § 168 applies (MACRS
property);
(ii) for which the present and proposed
methods of accounting are permissible
methods of accounting under § 1.168(i)-1,
§ 1.168(i)-7, or § 1.168(i)-8, as applicable; and
(iii) that is owned by the taxpayer at the
beginning of the year of change.
(b) Inapplicability. This change does
not apply to any property that is not depreciated under § 168 under the taxpayer’s
present and proposed methods of accounting.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a taxpayer making
this change.
(3) Changes covered. This section 6.12
only applies to the following changes in
methods of accounting for depreciation of
MACRS property:
(a) For the items of MACRS property
not subject to a general asset account election under § 168(i)(4) and the regulations
thereunder—
(i) a change from single asset accounts
of MACRS property to multiple asset
accounts (or pools) for the same assets, or
vice versa, in accordance with § 1.168(i)-7;
items of MACRS property in multiple
asset accounts to a different grouping of

the same assets in multiple asset accounts
in accordance with § 1.168(i)-7(c);
(iii) a change in the method of identifying which assets in multiple asset
accounts or which portions of assets
have been disposed of by the taxpayer

under § 1.168(i)-8(g)(2)(i) or the mod§ 1.168(i)-8(g)(2)(ii);
(iv) a change in the method of identifying which assets in multiple asset
accounts or which portions of assets
have been disposed of by the taxpayer
from the FIFO method of accounting
under § 1.168(i)-8(g)(2)(i) or the mod(v) a change in the method of identifying which assets in multiple asset
accounts or which portions of assets
have been disposed of by the taxpayer
from the FIFO method of accounting
under § 1.168(i)-8(g)(2)(i) to the mod§ 1.168(i)-8(g)(2)(ii), or vice versa;
(vi) a change in the method of idenin § 1.168(i)-8(b)(3)) in multiple asset
accounts or which portions of mass assets
have been disposed of by the taxpayer
under § 1.168(i)-8(g)(1) to a mortality dispersion table in accordance with
§ 1.168(i)-8(g)(2)(iii);
(vii) a change in the method of idenin § 1.168(i)-8(b)(3)) in multiple asset
accounts or which portions of mass
assets have been disposed of by the taxpayer from the FIFO method of accounting under § 1.168(i)-8(g)(2)(i) or the
under § 1.168(i)-8(g)(2)(ii) to a mortality dispersion table in accordance with
§ 1.168(i)-8(g)(2)(iii);
(viii) a change in the method of idenin § 1.168(i)-8(b)(3)) in multiple asset
accounts or which portions of mass
assets have been disposed of by the taxpayer from a mortality dispersion table in
accordance with § 1.168(i)-8(g)(2)(iii) to

§ 1.168(i)-8(g)(1), the FIFO method of
accounting under § 1.168(i)-8(g)(2)(i), or
under § 1.168(i)-8(g)(2)(ii);
(ix) if § 1.168(i)-8(f)(2) applies (disposition of an asset in a multiple asset
account) and it is impracticable from the
taxpayer’s records to determine the unadjusted depreciable basis of the asset disposed of, a change in the method of determining the unadjusted depreciable basis
of all assets in the same multiple asset
account from one reasonable method to
another reasonable method; or
(x) if § 1.168(i)-8(f)(3) applies (disposition of a portion of an asset) and it is
impracticable from the taxpayer’s records
to determine the unadjusted depreciable
basis of the disposed portion of the asset,
a change in the method of determining
the unadjusted depreciable basis of all
disposed portions of the asset from one
reasonable method to another reasonable
method; and
(b) For the items of MACRS property
subject to a general asset account election under § 168(i)(4) and the regulations
thereunder—
items of MACRS property in general
asset accounts to a different grouping of
the same assets in general asset accounts
in accordance with § 1.168(i)-1(c);
(ii) a change in the method of identifying which assets or which portions
of assets have been disposed of by the
tion method under § 1.168(i)-1(j)(2)(i)
(A) to the FIFO method of accounting
under § 1.168(i)-1(j)(2)(i)(B) or the mod§ 1.168(i)-1(j)(2)(i)(C);
(iii) a change in the method of identifying which assets or which portions of
assets have been disposed of by the taxpayer from the FIFO method of accounting under § 1.168(i)-1(j)(2)(i)(B) or
ing under § 1.168(i)-1(j)(2)(i)(C) to the
§ 1.168(i)-1(j)(2)(i)(A);
(iv) a change in the method of identifying which assets or which portions of
assets have been disposed of by the taxpayer from the FIFO method of accounting under § 1.168(i)-1(j)(2)(i)(B) to the

under § 1.168(i)-1(j)(2)(i)(C), or vice
versa;
(v) a change in the method of identi§ 1.168(i)-1(b)(6)) or which portions of
mass assets that are in a separate general
asset account in accordance with § 1.1681(c)(2)(ii)(H), have been disposed of by
tion method under § 1.168(i)-1(j)(2)(i)(A)
to a mortality dispersion table in accordance with § 1.168(i)-1(j)(2)(i)(D);
(vi) a change in the method of iden§ 1.168(i)-1(b)(6)) or which portions of
mass assets that are in a separate general
asset account in accordance with § 1.1681(c)(2)(ii)(H), have been disposed of by
the taxpayer from the FIFO method of
accounting under § 1.168(i)-1(j)(2)(i)(B)
ing under § 1.168(i)-1(j)(2)(i)(C) to a
mortality dispersion table in accordance
with § 1.168(i)-1(j)(2)(i)(D);
(vii) a change in the method of iden§ 1.168(i)-1(b)(6)), or which portions of
mass assets that are in a separate general
asset account in accordance with § 1.1681(c)(2)(ii)(H), have been disposed of by
the taxpayer from a mortality dispersion
table in accordance with § 1.168(i)-1(j)
method under § 1.168(i)-1(j)(2)(i)(A),
the FIFO method of accounting under
§ 1.168(i)-1(j)(2)(i)(B), or the modi§ 1.168(i)-1(j)(2)(i)(C); or
(viii) if § 1.168(i)-1(j)(3) applies (basis
of a disposed asset or a disposed portion
of an asset in a general asset account)
and it is impracticable from the taxpayer’s records to determine the unadjusted
depreciable basis of the disposed asset or
the disposed portion of the asset, a change
in the method of determining the unadjusted depreciable basis of all assets in
the same general asset account from one
reasonable method to another reasonable
method.
(4) Manner of making change.
(a) The changes in methods of account(ii) and section 6.12(3)(b)(i) of this revecut-off method under which the unadjusted
depreciable basis and the depreciation

reserve of the asset as of the beginning of
the year of change are accounted for using
the proposed method of accounting.
6.12(3)(a)(i) of this revenue procedure
is a change to a single asset account, the
new single asset account must include a
beginning balance for both the unadjusted
depreciable basis and the depreciation
reserve of the asset included in that single
asset account.
tion 6.12(3)(a)(i) or (ii) of this revenue procedure is a change to a multiple asset account (either a new one or
a different grouping), the multiple asset
account must include a beginning balance for both the unadjusted depreciable basis and the depreciation reserve.
The beginning balance for the unadjusted depreciable basis of each multiple asset account is equal to the sum
of the unadjusted depreciable bases as
of the beginning of the year of change
for all assets included in that multiple
asset account. The beginning balance of
the depreciation reserve of each multiple asset account is equal to the sum of
the greater of the depreciation allowed
or allowable as of the beginning of the
year of change for all assets included in
that multiple asset account.
tion 6.12(3)(b)(i) of this revenue procedure requires the general asset account
to include a beginning balance for both
the unadjusted depreciable basis and the
depreciation reserve. The beginning balance for the unadjusted depreciable basis
of each general asset account is equal to
the sum of the unadjusted depreciable
bases as of the beginning of the year of
change for all assets included in that general asset account. The beginning balance
of the depreciation reserve of each general asset account is equal to the sum of
the greater of the depreciation allowed or
allowable as of the beginning of the year
of change for all assets included in that
general asset account.
(b) The changes in methods of account(vi), (ix), and (x) and section 6.12(3)(b)
(ii), (v), and (viii) of this revenue procedure are made using a cut-off method and
apply to dispositions occurring on or after
the beginning of the year of change.

(c) Even though the changes in meth6.12(3)(a)(iv), (v), (vii), and (viii) and
section 6.12(3)(b)(iii), (iv), (vi), and (vii)
of this revenue procedure are changes
from one permissible method of accounting to another permissible method of
accounting, these changes are made with a
§ 481(a) adjustment. However, see section
6.12(4)(f) of this revenue procedure for
an exception. For the changes in methods
(b)(iii), (iv), (vi), and (vii) of this revenue
procedure, the § 481(a) adjustment should
be zero unless § 1.168(i)-1(e)(3) applies to
the asset subject to the change.
enue procedure, is required to complete
only the following information on Form
3115 (Rev. December 2022) to make this
change:
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
taxpayer is not making a change in method
(a)(ix) and (x) and section 6.12(3)(b)(viii)
of this revenue procedure;
(v) Part II, all lines except lines 13,
taxpayer is making a change in method
(a)(ix) or (x) or section 6.12(3)(b)(viii) of
this revenue procedure;
(vi) Part IV; and
(vii) Schedule E.
(e) If any asset subject to this change
is public utility property within the meaning of § 168(i)(10), a taxpayer (includthis change must attach to its Form 3115
a statement providing that the taxpayer
agrees to the following additional terms
and conditions:
(i) A normalization method of accounting (within the meaning of § 168(i)(9))
will be used for the public utility property
subject to the change;
(ii) As of the beginning of the year
of change, the taxpayer will adjust its
deferred tax reserve account or similar
account in the taxpayer’s regulatory books

of account by the amount of the deferral
of federal income tax liability associated
with the § 481(a) adjustment applicable to
a change in method of accounting speci(viii) or section 6.12(3)(b)(iii), (iv), (vi),
or (vii) of this revenue procedure made
for the public utility property subject to
the change; and
the federal income tax return for the year
of change, the taxpayer will provide a
copy of the completed Form 3115 to any
regulatory body having jurisdiction over
the public utility property subject to the
change.
(f) A taxpayer that met the scope
requirements of section 4 of Rev. Proc.
2015-20, 2015-9 I.R.B. 694, and that
changed its method of accounting under
section 6.37(3)(a)(iv), (a)(v), (a)(vii), or
(a)(viii) of Rev. Proc. 2015-14 (which
is now section 6.12(3)(a)(iv), (a)(v), (a)
(vii), or (a)(viii) of this revenue procedure) by following section 5 of Rev. Proc.
2015-20 is required to calculate a § 481(a)
of change that takes into account only dispositions in taxable years beginning on or
after January 1, 2014.
(5) No audit protection. A taxpayer
calculating a § 481(a) adjustment under
section 6.12(4)(f) of this revenue procedure that takes into account only dispositions in taxable years beginning on or
after January 1, 2014, does not receive
audit protection under section 8.01 of
Rev. Proc. 2015-13 for dispositions subject to a change under section 6.12(3)(a)
(iv), (a)(v), (a)(vii), or (a)(viii) of this revenue procedure in taxable years beginning
before January 1, 2014. See section 5.03
of Rev. Proc. 2015-20.
(6) Concurrent change.
(a) A taxpayer making this change for
more than one asset for the same year of
for all such assets. If the change for more
than one asset included in that Form 3115
(vii), or (viii) or section 6.12(3)(b)(iii), (iv),
(vi), or (vii) of this revenue procedure, the
single Form 3115 also should provide a
single net § 481(a) adjustment for all such
in section 6.12(3)(a)(iv), (v), (vii), or (viii)
or section 6.12(3)(b)(iii), (iv), (vi), or (vii)

of this revenue procedure in that single
Form 3115 generate a negative § 481(a)

I.R.B. 675, applies to a taxpayer that wants
to make a change in method of account-

section 6.12(3)(a)(iv), (v), (vii), or (viii) or
section 6.12(3)(b)(iii), (iv), (vi), or (vii) of
this revenue procedure in that same Form
3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single
negative § 481(a) adjustment for all such
changes that are included in that Form 3115
generating such negative adjustment and a
single positive § 481(a) adjustment for all
such changes that are included in that Form
3115 generating such positive adjustment.
(b) A taxpayer making this change and
any change listed in section 6.12(6)(b)
(i)-(iv) of this revenue procedure for the

this revenue procedure 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 § 1.168(i)-8(d)

Form 3115 for all such changes and must
enter the designated automatic accounting
method change numbers for the changes
on the appropriate line on the Form 3115.
See section 6.03(1)(b) of Rev. Proc. 201513 for information on making concurrent
taxpayer must include on the single Form
3115 the information required to be comtaxpayer under this revenue procedure
for each change in method of accounting
included on that Form 3115. The listed
changes are:
(i) A change under section 6.01 of this
revenue procedure;
(ii) A change under section 6.13 of this
revenue procedure;
(iii) A change under section 6.14 of this
revenue procedure;
(iv) A change under section 6.15 of this
revenue procedure; and
(v) A change under section 11.07(3)(c)
of this revenue procedure.
(7) Designated automatic accounting method change number. The designated automatic accounting method
change number for a change to a method
of accounting under this section 6.12 is
“200.”
(8) Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).
.13 Disposition of a building or structural component (§ 168; § 1.168(i)-8).
(1) Description of change.
(a) Applicability. This change, as
described in Rev. Proc. 2014-54, 2014-41

are consistent with §§ 1.168(i)-8(b)(2),
1.168(i)-8(c)(4)(ii)(A), (B), and (D),
1.168(i)-8(f), and 1.168(i)-8(g), as applicable. This change also affects the determination of gain or loss from disposing
of the building, the structural component,
or the portion of the building (including
its structural components) and may affect
whether the taxpayer must capitalize
amounts paid to restore a unit of property
(as determined under § 1.263(a)-3(e) or
(f)) under § 1.263(a)-3(k).
(b) Inapplicability. This change does
not apply to the following:
(i) Any asset (as determined under
§ 1.168(i)-8(c)(4)) that is not depreciated
under § 168 under the taxpayer’s present
method of accounting and, if applicable,
under the taxpayer’s proposed method of
accounting;
(ii) Any asset subject to a general asset
account election under § 168(i)(4) and the
regulations thereunder (but see section
6.15 of this revenue procedure for making a change in method of accounting for
dispositions of tangible depreciable assets
subject to a general asset account election);
(iii) Any multiple buildings, condominium units, or cooperative units that
are treated as a single building under the
taxpayer’s present method of accounting, or will be treated as a single building
under the taxpayer’s proposed method of
accounting, pursuant to § 1.1250-1(a)(2)
(ii);
(iv) Any disposition of a portion of
an asset in a transaction described in the
last sentence in § 1.168(i)-8(d)(1) for
which the taxpayer did not make a partial disposition election in accordance
with § 1.168(i)-8(d)(2)(ii), (iii), or (iv), as
applicable (but see section 6.10 of this revenue procedure for making a partial disposition election pursuant to § 1.168(i)-8(d)
(2)(iii)); or
(v) Any demolition of a structure to
which § 280B and § 1.280B-1 apply.

(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a taxpayer making
this change.
(3) Covered changes. This section 6.13
only applies to the following changes in
methods of accounting for a building
(including its structural components),
condominium unit (including its structural
components), cooperative unit (including
its structural components), or an improvement or addition (including its structural
components) thereto:
(a) For purposes of applying
§ 1.168(i)-8(c)(4) (determination of asset
disposed of), a change to the appropriate
asset as determined under § 1.168(i)-8(c)
(4)(ii)(A), (B), or (D), as applicable;
(b) If the taxpayer makes the change
enue procedure, and if the taxpayer disposed of the asset as determined under
section 6.13(3)(a) of this revenue procedure in a taxable year prior to the year
of change but under its present method
of accounting continues to deduct depreciation for such disposed asset, a change
from depreciating the disposed asset to
recognizing gain or loss upon disposition
or, if § 280B and § 1.280B-1 apply to the
disposition, change from depreciating
such disposed asset to capitalizing the loss
sustained on account of the demolition to
the land on which the demolished structure was located;
(c) If the taxpayer makes the change
nue procedure, and if the taxpayer disposed
of a portion of the asset as determined
under section 6.13(3)(a) of this revenue
procedure in a transaction described in
a taxable year prior to the year of change
but under its present method of accounting
continues to deduct depreciation for such
disposed portion, a change from depreciating the disposed portion to recognizing
gain or loss upon disposition or, if § 280B
and § 1.280B-1 apply to the disposition,
change from depreciating such disposed
portion to capitalizing the loss sustained
on account of the demolition to the land
on which the demolished structure was
located;
(d) If the taxpayer’s present method
of accounting for its buildings (includ-

ing their structural components), condominium units (including their structural
components), cooperative units (including their structural components), and
improvements or additions (including its
structural components) thereto that are
depreciated under § 168 is in accord with
§ 1.168(i)-8(c)(4)(ii)(A), (B), and (D),
and if the taxpayer disposed of an asset as
determined under § 1.168(i)-8(c)(4)(ii)
(A), (B), or (D), as applicable, in a taxable year prior to the year of change but
under its present method of accounting
continues to deduct depreciation for such
disposed asset, a change from depreciating the disposed asset to recognizing gain
or loss upon disposition or, if § 280B
and § 1.280B-1 apply to the disposition,
change from depreciating such disposed
asset to capitalizing the loss sustained
on account of the demolition to the land
on which the demolished structure was
located;
(e) If the taxpayer’s present method
of accounting for its buildings (including their structural components), condominium units (including their structural
components), cooperative units (including their structural components), and
improvements or additions (including its
structural components) thereto that are
depreciated under § 168 is in accord with
§ 1.168(i)-8(c)(4)(ii)(A), (B), and (D), and
if the taxpayer disposed of a portion of an
asset as determined under § 1.168(i)-8(c)
(4)(ii)(A), (B), or (D), as applicable, in a
in § 1.168(i)-8(d)(1) in a taxable year prior
to the year of change but under its present
method of accounting continues to deduct
depreciation for such disposed portion,
a change from depreciating the disposed
portion to recognizing gain or loss upon
disposition or, if § 280B and § 1.280B-1
apply to the disposition, change from
depreciating such disposed portion to capitalizing the loss sustained on account of
the demolition to the land on which the
demolished structure was located;
(f) A change in the method of identifying which assets in multiple asset accounts
or which portions of assets have been disposed of from a method of accounting
(i), (ii), or (iii) (for example, the last-in,

§ 1.168(i)-8(g)(1) or (2)(i), (ii), or (iii), as
applicable;
(g) If § 1.168(i)-8(f)(2) applies (disposition of an asset in a multiple asset
account) and it is practicable from the
taxpayer’s records to determine the unadjusted depreciable basis of the disposed
asset, a change in the method of determining the unadjusted depreciable basis of
the disposed asset from a method of not
using the taxpayer’s records to a method
of using the taxpayer’s records;
(h) If § 1.168(i)-8(f)(2) applies (disposition of an asset in a multiple asset
account) and it is impracticable from the
taxpayer’s records to determine the unadjusted depreciable basis of the disposed
asset, a change in the method of determining the unadjusted depreciable basis of all
assets in the same multiple asset account
from an unreasonable method (for example, discounting the cost of the replacement asset to its placed-in-service year
cost using the Consumer Price Index) to a
reasonable method;
(i) If § 1.168(i)-8(f)(3) applies (disposition of a portion of an asset) and it is
practicable from the taxpayer’s records
to determine the unadjusted depreciable
basis of the disposed portion of the asset,
a change in the method of determining the
unadjusted depreciable basis of the disposed portion of the asset from a method
of not using the taxpayer’s records to a
method of using the taxpayer’s records;
(j) If § 1.168(i)-8(f)(3) applies (disposition of a portion of an asset) and it is
impracticable from the taxpayer’s records
to determine the unadjusted depreciable
basis of the disposed portion of the asset,
a change in the method of determining the
unadjusted depreciable basis of the disposed portion of the asset from an unreasonable method (for example, discounting
the cost of the replacement portion of the
asset to its placed-in-service year cost
using the Consumer Price Index) to a reasonable method; or
(k) A change from recognizing gain
or loss under § 1.168(i)-8T upon the disposition of an asset (as determined under
§ 1.168(i)-8(c)(4)(ii)(A), (B), or (D), as
applicable) included in a general asset
account to recognizing gain or loss upon
the disposition of the same asset under
§ 1.168(i)-8 if: (A) the taxpayer made the

Proc. 2016-29, 2016-21 I.R.B. 880, section
6.34 of Rev. Proc. 2015-14, 2015-5 I.R.B.
450, or section 6.34 of the APPENDIX to
Rev. Proc. 2011-14, 2011-4 I.R.B. 330, as
39, 2012-41 I.R.B. 470, Rev. Proc. 201417, 2014-12 I.R.B. 661, and Rev. Proc.
2014-54, 2014-41 I.R.B. 675 (revocation
of a general asset account election); (B)
the taxpayer made a qualifying disposition
election under § 1.168(i)-1T(e)(3)(iii) in a
taxable year prior to the year of change for
the disposition of such asset; (C) the taxpayer’s present method of accounting for
such asset is in accord with § 1.168(i)-8(c)
(4)(ii)(A), (B), or (D), as applicable; and
(D) the taxpayer recognized a gain or loss
under § 1.168(i)-8T upon the disposition
of such asset in a taxable year prior to the
year of change.
(4) Examples. The following examples
section 6.13(3) of this revenue procedure.
(a) Example 1. X, a calendar-year taxpayer,
acquired and placed in service a building and its
structural components in 2000. In 2005, X constructed and placed in service an addition to this
building. X depreciates the building, the addition,
and their structural components under § 168. A
change by X to treat the original building (including its structural components) as an asset and the
addition to the building (including the structural
components of such addition) as a separate asset for
disposition purposes is a change described in section
6.13(3)(a) of this revenue procedure solely for purposes of § 1.168(i)-8(c)(4).
(b) Example 2. Y, a calendar year taxpayer,
acquired and placed in service a building and its
structural components in 1990. Y depreciates this
building and its structural components under § 168.
In 2000, a tornado damaged the roof and, as a result,
Y replaced the entire roof of the building. Y did not
recognize a loss on the retirement of the original roof
and continues to depreciate the original roof. Y also
capitalized the cost of the replacement roof and has
been depreciating this roof under § 168 since 2000.
Because the original roof was disposed of as a result
of a casualty event described in § 165, a change by
Y from depreciating the original roof to recognizing a loss upon its retirement is a covered change
described in section 6.13(3)(e) of this revenue procedure solely for purposes of § 1.168(i)-8.
(c) Example 3. The facts are the same as in
Example 2, except a tornado did not occur, but Y
still replaced the entire roof of the building in 2000.
Because the original roof was not disposed of as
sentence in § 1.168(i)-8(d)(1) that require a partial
disposition, a partial disposition election must be
made to change from depreciating the original roof
to recognizing a loss upon its retirement. Pursuant
to section 6.13(1)(b)(iv) of this revenue procedure,
section 6.13 does not apply to the disposition of the
original roof in 2000.

(5) Manner of making change.
(a) A taxpayer (including a quali6.01(4)(b) of this revenue procedure)
making this change must attach to its
Form 3115 a statement with the following:
(i) A description of the assets to which
this change applies;
(ii) If the taxpayer is making a change
enue procedure, a description of the assets
for disposition purposes under the taxpayer’s present and proposed methods of
accounting;
(iii) If the taxpayer is making the

only the following information on Form
3115 (Rev. December 2022) to make this
change:
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
taxpayer is not making a change in method
(h) and (j) of this revenue procedure;
(v) Part II, all lines except lines 13,

(i) If the taxpayer is making the change
enue procedure and if the taxpayer recognized a gain or loss under § 1.168(i)-8T
on the disposition of the asset (or if applicable, a portion thereof) in a taxable year
prior to the year of change;
(ii) If the taxpayer is making the change
nue procedure; or
Proc. 2015-56, 2015-49 I.R.B. 827, and
that is within the scope of section 3 of Rev.
Proc. 2015-56, and is making the change

taxpayer is making a change in method of
this revenue procedure, a description of
the methods of identifying which assets
have been disposed of under the taxpayer’s present and proposed methods of
accounting;
(iv) If the taxpayer is making the
(j) of this revenue procedure, a description
of the methods of determining the unadjusted depreciable basis of the disposed
asset or disposed portion of the asset, as
applicable, under the taxpayer’s present
and proposed methods of accounting; and
(v) If any asset is public utility property within the meaning of § 168(i)(10),
a statement providing that the taxpayer
agrees to the following additional terms
and conditions:
(A) A normalization method of accounting (within the meaning of § 168(i)(9))
will be used for the public utility property
subject to the application;
(B) As of the beginning of the year
of change, the taxpayer will adjust its
deferred tax reserve account or similar
account in the taxpayer’s regulatory books
of account by the amount of the deferral
of federal income tax liability associated
with the § 481(a) adjustment applicable
to the public utility property subject to the
application; and
the federal income tax return for the year
of change, the taxpayer will provide a
copy of the completed application to any
regulatory body having jurisdiction over
the public utility property subject to the
application.
enue procedure, is required to complete

or (j) of this revenue procedure;
(vi) Part IV, all lines except line 25; and
(vii) Schedule E.
(6) No ruling on asset. The consent
granted under section 9 of Rev. Proc. 2015(a) of this revenue procedure is not a determination by the Commissioner that the taxpayer is using the appropriate asset under
§ 1.168(i)-8(c)(4) for determining what asset
is disposed of by the taxpayer and does not
create any presumption that the proposed
asset is permissible under § 1.168(i)-8(c)
(4). The director will ascertain whether the
taxpayer’s determination of its asset under
§ 1.168(i)-8(c)(4) is permissible.
(7) Section 481(a) adjustment.
(a) A taxpayer changing its method of
accounting under this section 6.13 may
use statistical sampling in determining
the § 481(a) adjustment by following the
guidance provided in Rev. Proc. 2011-42,
2011-37 I.R.B. 318.
(b) A taxpayer that met the scope
requirements of section 4 of Rev. Proc.
2015-20, 2015-9 I.R.B. 694, and that
changed its method of accounting under
section 6.38 of Rev. Proc. 2015-14 (which
is now this section 6.13) by following section 5 of Rev. Proc. 2015-20 is required
to calculate a section § 481(a) adjustment
that takes into account only dispositions in
taxable years beginning on or after January 1, 2014.
(8) Section 481(a) adjustment period.
(a) A taxpayer must take the entire
amount of the § 481(a) adjustment into
account in computing taxable income for
the year of change:

the remodel-refresh safe harbor provided
in section 5.02 of Rev. Proc. 2015-56.
(b) If section 6.13(8)(a) of this revenue
procedure does not apply, see section 7.03
of Rev. Proc. 2015-13 for the § 481(a)
adjustment period.
(c) Example
a taxable year beginning December 1 and ending
November 30, acquired and placed in service a
building and its structural components in 2000. Y
depreciates this building and its structural components under § 168. The roof is a structural component of the building. Y replaced the entire roof in
June 2010. On its federal tax return for the taxable
year ended November 30, 2010, Y did not recognize
a loss on the retirement of the original roof and continues to depreciate the original roof. Y also capitalized the cost of the replacement roof and has been
depreciating this roof under § 168 since June 2010.
The adjusted depreciable basis of the original roof at
the time of its retirement in 2010 (taking into account
the applicable convention) is $11,000, and Y claimed
depreciation of $1,000 for such roof after its retirement (taking into account the applicable convention)
and before the taxable year ended November 30,
2013 (2012 taxable year). Also the 12-month allowable depreciation deduction for the original roof is
$500 for the 2012 taxable year, $500 for the taxable
year ended November 30, 2014 (2013 taxable year),
and $500 for the taxable year ended November 30,
2015 (2014 taxable year).
(ii) In accordance with § 1.168(i)-8T(c)(4)(ii)
(A) and (B) and section 6.29(3)(a) and (b) of the

its federal income tax return for the taxable year
ended November 30, 2013, a Form 3115 to treat the
building as an asset and each structural component
of the building as a separate asset for disposition purposes and also to change from depreciating the original roof to recognizing a loss upon its retirement.
The amount of the net negative § 481(a) adjustment
on this Form 3115 is $10,000 (adjusted depreciable
basis of $11,000 for the original roof at the time of
its retirement (taking into account the applicable
convention) less depreciation of $1,000 claimed for

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

(9) No audit protection. A taxpayer
calculating a § 481(a) adjustment under
section 6.13(7)(b) of this revenue procedure that takes into account only dispositions in taxable years beginning on or
after January 1, 2014, does not receive
audit protection under section 8.01 of Rev.
Proc. 2015-13 for dispositions subject to a
change under this section 6.13 in taxable
years beginning before January 1, 2014.
See section 5.04 of Rev. Proc. 2015-20.
(10) Concurrent automatic change.
(a) A taxpayer making this change for
more than one asset for the same year of
all such assets and provide a single net
§ 481(a) adjustment for all the changes
included in that Form 3115. If one or
more of the changes in that single Form
3115 generate a negative § 481(a) adjustment and other changes in that same Form
3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single
negative § 481(a) adjustment for all the
changes that are included in that Form
3115 generating such negative adjustment
and a single positive § 481(a) adjustment
for all the changes that are included in
that Form 3115 generating such positive
adjustment.

(b) A taxpayer making this change and
any change listed in section 6.13(10)(b)
(i)-(iv) of this revenue procedure for the
gle Form 3115 for all of such changes
and must enter the designated automatic
accounting method change numbers for
the changes on the appropriate line on the
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes. For example, a qualsingle Form 3115 the information required
to be completed on Form 3115 by a qualprocedure for each change in method of
accounting included on that Form 3115.
The listed changes are:
(i) A change under section 6.01 of this
revenue procedure;
(ii) A change under section 6.12 of this
revenue procedure;
(iii) A change under section 6.14 of this
revenue procedure; and
(iv) A change under section 6.15 of this
revenue procedure.
(11) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 6.13 is
“205.”
(12) Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).
.14 Dispositions of tangible depreciable
assets (other than a building or its structural components) (§ 168; § 1.168(i)-8).
(1) Description of change.
(a) Applicability. This change, as
described in Rev. Proc. 2014-54, 201441 I.R.B. 675, applies to a taxpayer that
wants to make a change in method of
6.14(3) of this revenue procedure for disposing of § 1245 property or a depreciable
land improvement or disposing of a portion of § 1245 property or a depreciable
land improvement to which the partial disposition rule in § 1.168(i)-8(d)(1) applies.
with §§ 1.168(i)-8(c)(4)(i), 1.168(i)-8(c)
(4)(ii)(C) and (D), 1.168(i)-8(f), and
1.168(i)-8(g), as applicable. This change
also affects the determination of gain or
loss from disposing of the § 1245 prop-

erty, the depreciable land improvement, or
a portion of the § 1245 property or depreciable land improvement, and may affect
whether the taxpayer must capitalize
amounts paid to restore a unit of property
(as determined under § 1.263(a)-3(e) or
(f)) under § 1.263(a)-3(k).
(b) Inapplicability. This change does
not apply to the following:
(i) Any asset (as determined under
§ 1.168(i)-8(c)(4)) that is not depreciated
under § 168 under the taxpayer’s present
method of accounting and, if applicable,
under the taxpayer’s proposed method of
accounting;
(ii) Any building (including its structural components), condominium unit
(including its structural components),
cooperative unit (including its structural
components), or an improvement or addition (including its structural components)
thereto (but see section 6.13 of this revenue procedure for making this change);
(iii) Any asset subject to a general asset
account election under § 168(i)(4) and the
regulations thereunder (but see section
6.15 of this revenue procedure for making a change for dispositions of tangible
depreciable assets subject to a general
asset account election); or
(iv) Any disposition of a portion of
an asset in a transaction described in the
last sentence in § 1.168(i)-8(d)(1) for
which the taxpayer did not make a partial disposition election in accordance
with § 1.168(i)-8(d)(2)(ii), (iii), or (iv), as
applicable (but see section 6.10 of this revenue procedure for making a partial disposition election pursuant to § 1.168(i)-8(d)
(2)(iii)).
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a taxpayer making
this change.
(3) Covered changes. This section 6.14
only applies to the following changes in
methods of accounting for a § 1245 property, a depreciable land improvement, or
an improvement or addition thereto:
(a) For purposes of applying
§ 1.168(i)-8(c)(4) (determination of asset
disposed of), a change to the appropriate
asset as determined under § 1.168(i)-8(c)
(4)(i), (ii)(C), or (ii)(D), as applicable;
(b) If the taxpayer makes the change
-

enue procedure, and if the taxpayer disposed of the asset as determined under
section 6.14(3)(a) of this revenue procedure in a taxable year prior to the year
of change but continues to deduct depreciation for such disposed asset under the
taxpayer’s present method of accounting,
a change from depreciating the disposed
asset to recognizing gain or loss upon disposition;
(c) If the taxpayer makes the change
nue procedure, and if the taxpayer disposed
of a portion of the asset as determined
under section 6.14(3)(a) of this revenue
procedure in a transaction described in
a taxable year prior to the year of change
but under its present method of accounting
continues to deduct depreciation for such
disposed portion, a change from depreciating the disposed portion to recognizing
gain or loss upon disposition;
(d) If the taxpayer’s present method of
accounting for its § 1245 property, depreciable land improvements, or improvements or additions thereto is in accord
with § 1.168(i)-8(c)(4)(i) or (ii), as applicable, and if the taxpayer disposed of an
asset as determined under § 1.168(i)-8(c)
(4)(i) or (ii), as applicable, in a taxable
year prior to the year of change but under
its present method of accounting continues to deduct depreciation for this disposed asset, a change from depreciating
the disposed asset to recognizing gain or
loss upon disposition;
(e) If the taxpayer’s present method of
accounting for its § 1245 property, depreciable land improvements, or improvements or additions thereto is in accord
with § 1.168(i)-8(c)(4)(i) or (ii), as applicable, and if the taxpayer disposed of a
portion of an asset as determined under
§ 1.168(i)-8(c)(4)(i) or (ii), as applicasentence in § 1.168(i)-8(d)(1) in a taxable
year prior to the year of change but under
its present method of accounting continues to deduct depreciation for such disposed portion, a change from depreciating
the disposed portion to recognizing gain
or loss upon disposition;
(f) A change in the method of identifying which assets in multiple asset accounts
or which portions of assets have been disposed of from a method of accounting

(i), (ii), or (iii) (for example, the last-in,

§ 1.168(i)-8(g)(1) or (2)(i), (ii), or (iii), as
applicable;
(g) If § 1.168(i)-8(f)(2) applies (disposition of an asset in a multiple asset
account) and it is practicable from the
taxpayer’s records to determine the unadjusted depreciable basis of the disposed
asset, a change in the method of determining the unadjusted depreciable basis of
the disposed asset from a method of not
using the taxpayer’s records to a method
of using the taxpayer’s records;
(h) If § 1.168(i)-8(f)(2) applies (disposition of an asset in a multiple asset
account) and it is impracticable from the
taxpayer’s records to determine the unadjusted depreciable basis of the disposed
asset, a change in the method of determining the unadjusted depreciable basis of all
assets in the same multiple asset account
from an unreasonable method (for example, discounting the cost of the replacement asset to its placed-in-service year
cost using the Consumer Price Index) to a
reasonable method;
(i) If § 1.168(i)-8(f)(3) applies (disposition of a portion of an asset) and it is
practicable from the taxpayer’s records
to determine the unadjusted depreciable
basis of the disposed portion of the asset,
a change in the method of determining the
unadjusted depreciable basis of the disposed portion of the asset from a method
of not using the taxpayer’s records to a
method of using the taxpayer’s records;
(j) If § 1.168(i)-8(f)(3) applies (disposition of a portion of an asset) and it is
impracticable from the taxpayer’s records
to determine the unadjusted depreciable
basis of the disposed portion of the asset,
a change in the method of determining the
unadjusted depreciable basis of the disposed portion of the asset from an unreasonable method (for example, discounting
the cost of the replacement portion of the
asset to its placed-in-service year cost
using the Consumer Price Index) to a reasonable method; or
(k) A change from recognizing gain or
loss under § 1.168(i)-8T upon the disposition of a section 1245 property, depreciable land improvement, or improvement
or addition thereto included in a general

asset account to recognizing gain or loss
upon the disposition of the same asset
under § 1.168(i)-8 if: (A) the taxpayer
of Rev. Proc. 2016-29, section 6.34 of
Rev. Proc. 2015-14, or section 6.34 of the
APPENDIX to Rev. Proc. 2011-14 (revocation of a general asset account election);
(B) the taxpayer made a qualifying disposition election under § 1.168(i)-1T(e)(3)
(iii) in a taxable year prior to the year of
change for the disposition of such asset;
(C) the taxpayer’s present method of
accounting for such asset is in accord with
§ 1.168(i)-8(c)(4)(i) or (ii), as applicable;
and (D) the taxpayer recognized a gain or
loss under § 1.168(i)-8T on the disposition
of such asset in a taxable year prior to the
year of change.
(4) Manner of making change.
(a) A taxpayer (including a quali6.01(4)(b) of this revenue procedure)
making this change must attach to its
Form 3115 a statement with the following:
(i) A description of the assets to which
this change applies;
(ii) If the taxpayer is making a change
enue procedure, a description of the assets
for disposition purposes under the taxpayer’s present and proposed methods of
accounting;
(iii) If the taxpayer is making the
this revenue procedure, a description of
the methods of identifying which assets
have been disposed of under the taxpayer’s present and proposed methods of
accounting;
(iv) If the taxpayer is making the
(j) of this revenue procedure, a description
of the methods of determining the unadjusted depreciable basis of the disposed
asset or disposed portion of the asset, as
applicable, under the taxpayer’s present
and proposed methods of accounting; and
(v) If any asset is public utility property within the meaning of § 168(i)(10),
a statement providing that the taxpayer
agrees to the following additional terms
and conditions:
(A) A normalization method of accounting (within the meaning of § 168(i)(9))
will be used for the public utility property
subject to the application;

(B) As of the beginning of the year
of change, the taxpayer will adjust its
deferred tax reserve account or similar
account in the taxpayer’s regulatory books
of account by the amount of the deferral
of federal income tax liability associated
with the § 481(a) adjustment applicable
to the public utility property subject to the
application; and
the federal income tax return for the year
of change, the taxpayer will provide a
copy of the completed application to any
regulatory body having jurisdiction over
the public utility property subject to the
application.
enue procedure, is required to complete
only the following information on Form
3115 (Rev. December 2022) to make this
change:
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
taxpayer is not making a change in method
(h) and (j) of this revenue procedure;
(v) Part II, all lines except lines 13,
taxpayer is making a change in method of
or (j) of this revenue procedure;
(vi) Part IV, all lines except line 25; and
(vii) Schedule E.
(5) No ruling on asset. The consent
granted under section 9 of Rev. Proc.
6.14(3)(a) of this revenue procedure is not
a determination by the Commissioner that
the taxpayer is using the appropriate asset
under § 1.168(i)-8(c)(4) for determining
what asset is disposed of by the taxpayer
and does not create any presumption that
the proposed asset is permissible under
§ 1.168(i)-8(c)(4). The director will ascertain whether the taxpayer’s determination
of its asset under § 1.168(i)-8(c)(4) is permissible.
(6) Section 481(a) adjustment.
(a) A taxpayer changing its method of
accounting under section 6.14 of the revenue procedure may use statistical sampling

in determining the § 481(a) adjustment by
following the guidance provided in Rev.
Proc. 2011-42, 2011-37 I.R.B. 318.
(b) A taxpayer that met the scope
requirements of section 4 of Rev. Proc.
2015-20, 2015-9 I.R.B. 694, and that
changed its method of accounting under
section 6.39 of Rev. Proc. 2015-14 (which
is now this section 6.14) by following section 5 of Rev. Proc. 2015-20 is required
to calculate a section § 481(a) adjustment
that takes into account only dispositions in
taxable years beginning on or after January 1, 2014.
(7) Section 481(a) adjustment period.
(a) A taxpayer must take the entire
amount of the § 481(a) adjustment into
account in computing taxable income for
the year of change:
(i) If the taxpayer is making the change
enue procedure and if the taxpayer recognized a gain or loss under § 1.168(i)-8T
on the disposition of the § 1245 property, depreciable land improvement, or
improvement or addition thereto (or if
applicable, a portion of such asset) in a
taxable year prior to the year of change; or
(ii) If the taxpayer is making the change
nue procedure.
(b) If section 6.14(7)(a) of this revenue
procedure does not apply, see section 7.03
of Rev. Proc. 2015-13 for the § 481(a)
adjustment period.
(8) No audit protection. A taxpayer
calculating a § 481(a) adjustment under
section 6.14(6)(b) of this revenue procedure that takes into account only dispositions in taxable years beginning on or
after January 1, 2014, does not receive
audit protection under section 8.01 of Rev.
Proc. 2015-13 for dispositions subject to a
change under this section 6.14 in taxable
years beginning before January 1, 2014.
See section 5.05 of Rev. Proc. 2015-20.
(9) Concurrent automatic change.
(a) A taxpayer making this change for
more than one asset for the same year of
all such assets and provide a single net
§ 481(a) adjustment for all the changes
included in that Form 3115. If one or
more of the changes in that single Form
3115 generate a negative § 481(a) adjustment and other changes in that same Form

3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single
negative § 481(a) adjustment for all the
changes that are included in that Form
3115 generating such negative adjustment
and a single positive § 481(a) adjustment
for all the changes that are included in
that Form 3115 generating such positive
adjustment.
(b) A taxpayer making this change
and any change listed in section 6.14(9)
(b)(i)-(iv) of this revenue procedure for
single Form 3115 for all of such changes
and must enter the designated automatic
accounting method change numbers for
the changes on the appropriate line on the
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes. For example, a qualsingle Form 3115 the information required
to be completed on Form 3115 by a qualprocedure for each change in method of
accounting included on that Form 3115.
The listed changes are:
(i) A change under section 6.01 of this
revenue procedure;
(ii) A change under section 6.12 of this
revenue procedure;
(iii) A change under section 6.13 of this
revenue procedure; and
(iv) A change under section 6.15 of this
revenue procedure.
(10) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 6.14 is
“206.”
(11) Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).
.15 Dispositions of tangible depreciable assets in a general asset account
(§ 168(i)(4); § 1.168(i)-1).
(1) Description of change.
(a) Applicability. This change, as
described in Rev. Proc. 2014-54, 2014-41
I.R.B. 675, applies to a taxpayer that wants
to make a change in method of accountthis revenue procedure for disposing of
an asset subject to a general asset account
election under § 168(i)(4) and the regula-

are consistent with §§ 1.168(i)-1(e)(1),
1.168(i)-1(e)(2)(viii), and 1.168(i)-1(j),
as applicable. This change also may affect
the determination of gain or loss from disposing of the asset and may affect whether
the taxpayer must capitalize amounts paid
to restore a unit of property (as determined under § 1.263(a)-3(e) or (f)) under
§ 1.263(a)-3(k).
(b) Inapplicability. This change does
not apply to the following:
(i) Any asset (as determined under
§ 1.168(i)-1(e)(2)(viii)) that is not depreciated under § 168 under the taxpayer’s
present method of accounting and, if
applicable, proposed method of accounting; or
(ii) Any asset not subject to a general
asset account election under § 168(i)(4)
and the regulations thereunder (but see
sections 6.13 and 6.14 of this revenue
procedure for making a change for dispositions of tangible depreciable assets not
subject to a general asset account election).
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a taxpayer making
this change.
(3) Covered changes. This section 6.15
only applies to the following changes in
methods of accounting for an asset subject
to a general asset account election under
§ 168(i)(4) and the regulations thereunder:
(a) For purposes of applying
§ 1.168(i)-1(e)(2)(viii) (determination
of asset disposed of), a change to the
appropriate asset as determined under
§ 1.168(i)-1(e)(2)(viii)(A) or (B), as applicable;
(b) A change in the method of identifying which assets or which portions
of assets have been disposed of from a
§ 1.168(i)-1(j)(2)(i)(A), (B), (C), or (D)
method of accounting) to a method of
(i)(A), (B), (C), or (D), as applicable;
(c) If § 1.168(i)-1(j)(3) applies (basis
of disposed asset or disposed portion of
an asset) and it is practicable from the
taxpayer’s records to determine the unadjusted depreciable basis of the disposed
asset or the disposed portion of an asset,

as applicable, a change in the method of
determining the unadjusted depreciable
basis of the disposed asset or the disposed portion of an asset, as applicable,
from a method of not using the taxpayer’s
records to a method of using the taxpayer’s records; or
(d) If § 1.168(i)-1(j)(3) applies (basis
of disposed asset or disposed portion of
an asset) and it is impracticable from the
taxpayer’s records to determine the unadjusted depreciable basis of the disposed
asset or the disposed portion of an asset,
as applicable, a change in the method of
determining the unadjusted depreciable
basis of all assets in the same general asset
account from an unreasonable method
(for example, discounting the cost of the
replacement asset to its placed-in-service
year cost using the Consumer Price Index)
to a reasonable method.
(4) Manner of making change.
(a) A taxpayer (including a quali6.01(4)(b) of this revenue procedure)
making this change must attach to its
Form 3115 a statement with the following:
(i) A description of the assets to which
this change applies;
(ii) If the taxpayer is making the
this revenue procedure, a description of
the assets for disposition purposes under
the taxpayer’s present and proposed methods of accounting;
(iii) If the taxpayer is making the

will be used for the public utility property
subject to the application;
(B) As of the beginning of the year
of change, the taxpayer will adjust its
deferred tax reserve account or similar
account in the taxpayer’s regulatory books
of account by the amount of the deferral
of federal income tax liability associated
with the § 481(a) adjustment applicable
to the public utility property subject to the
application; and
the federal income tax return for the year
of change, the taxpayer will provide a
copy of the completed application to any
regulatory body having jurisdiction over
the public utility property subject to the
application.
enue procedure, is required to complete
only the following information on Form
3115 (Rev. December 2022) to make this
change:
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
taxpayer is not making a change in method
(a) and (d) of this revenue procedure;
(v) Part II, all lines except lines 13,
taxpayer is making a change in method of

this revenue procedure, a description of
the methods of identifying which assets
have been disposed of under the taxpayer’s present and proposed methods of
accounting;
(iv) If the taxpayer is making the

or (d) of this revenue procedure;
(vi) Part IV, all lines except line 25; and
(vii) Schedule E.
(5) No ruling on asset. The consent
granted under section 9 of Rev. Proc.

of this revenue procedure, a description
of the methods of determining the unadjusted depreciable basis of the disposed
asset or disposed portion of the asset, as
applicable, under the taxpayer’s present
and proposed methods of accounting; and
(v) If any asset is public utility property within the meaning of § 168(i)(10),
a statement providing that the taxpayer
agrees to the following additional terms
and conditions:
(A) A normalization method of accounting (within the meaning of § 168(i)(9))

6.15(3)(a) of this revenue procedure is
not a determination by the Commissioner
that the taxpayer is using the appropriate asset under § 1.168(i)-1(e)(2)(viii)
for determining what asset is disposed
of by the taxpayer and does not create
any presumption that the proposed asset
is permissible under § 1.168(i)-1(e)(2)
(viii). The director will ascertain whether
the taxpayer’s determination of its asset
under § 1.168(i)-1(e)(2)(viii) is permissible.
(6) Section 481(a) adjustment period.

(a) A taxpayer must take the entire
amount of the § 481(a) adjustment into
account in computing taxable income for
the year of change:
(i) If the taxpayer makes the change
enue procedure and if the taxpayer recognized a gain or loss under § 1.168(i)-1T or
§ 1.168(i)-8T, as applicable, on the disposition of a portion of the asset in a taxable
year prior to the year of change; or
Proc. 2015-56, 2015-49 I.R.B. 827, and
that is within the scope of section 3 of Rev.
Proc. 2015-56, and is making the change
the remodel-refresh safe harbor provided
in section 5.02 of Rev. Proc. 2015-56.
(b) If section 6.15(6)(a) of this revenue
procedure does not apply, see section 7.03
of Rev. Proc. 2015-13 for the § 481(a)
adjustment period.
(c) Example
a taxable year beginning December 1 and ending
November 30, acquired and placed in service a
building and its structural components in 2000. X
depreciates this building and its structural components under § 168. The roof is a structural component of the building. X replaced the entire roof in
June 2010. On its federal tax return for the taxable
year ended November 30, 2010, X did not recognize
a loss on the retirement of the original roof and continues to depreciate the original roof. X also capitalized the cost of the replacement roof and has been
depreciating this roof under § 168 since June 2010.
The adjusted depreciable basis of the original roof at
the time of its retirement in 2010 (taking into account
the applicable convention) is $11,000, and X claimed
depreciation of $1,000 for such roof after its retirement (taking into account the applicable convention)
and before the taxable year ended November 30,
2013 (2012 taxable year). Also the 12-month allowable depreciation deduction for the original roof is
$500 for the 2012 taxable year, $500 for the taxable
year ended November 30, 2014 (2013 taxable year),
and $500 for the taxable year ended November 30,
2015 (2014 taxable year).
(ii) In accordance with § 1.168(i)-1T and section
6.32(1)(a) of the APPENDIX to Rev. Proc. 2011-14,

able year ended November 30, 2013, a Form 3115
to: (1) make a late general asset account election to
include the building (including its structural components) placed in service in 2000 in one general
asset account and the replacement roof in a separate
general asset account; and (2) make a late qualifying
disposition election for the retirement of the original roof in 2010. As a result, X removed the original
roof from the general asset account and reported a
net negative § 481(a) adjustment on this Form 3115
of $10,000 (adjusted depreciable basis of $11,000 for
the original roof at the time of its retirement (taking
into account the applicable convention) less depreciation of $1,000 claimed for such roof after its retirement (taking into account the applicable convention)
and before the 2012 taxable year).
(iii) X complies with § 1.168(i)-1 beginning
with its taxable year ended November 30, 2016
(2015 taxable year). In accordance with section
3115 with its federal income tax return for the
2015 taxable year to change to treating the building (including its original roof and other original
structural components) placed in service in 2000
as an asset and the replacement roof as a separate
asset for disposition purposes. As a result, X must
include the original roof that X retired in 2010 in
the general asset account. Thus, the net positive
§ 481(a) adjustment for this change is $8,500 (net
loss of $10,000 claimed on the 2012 return for the
retirement of the original roof less depreciation of
$1,500 for the original roof for the 2012, 2013, and
2014 taxable years) and is included in X’s taxable
income for the 2015 taxable year.

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

that Form 3115 generating such positive
adjustment.
(b) A taxpayer making this change
and any change listed in section 6.15(7)
(b)(i)-(iv) of this revenue procedure for
single Form 3115 for all of such changes
and must enter the designated automatic
accounting method change numbers for
the changes on the appropriate line on the
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes. For example, a qualsingle Form 3115 the information required
to be completed on Form 3115 by a qualprocedure for each change in method of
accounting included on that Form 3115.
The listed changes are:
(i) A change under section 6.01 of this
revenue procedure;
(ii) A change under section 6.12 of this
revenue procedure;
(iii) A change under section 6.13 of this
revenue procedure; and
(iv) A change under section 6.14 of this
revenue procedure.
(8) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 6.15 is
“207.”
(9) Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).
.16 Summary of certain changes in
methods of accounting related to dispositions of MACRS property.
(1) Final regulations. The following
chart summarizes the changes in methods of accounting under § 1.167(a)-4,
§ 1.168(i)-1, § 1.168(i)-7, and § 1.168(i)-8
that a taxpayer may make under this revenue procedure.

Depreciation of leasehold improvements:

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

DESIGNATED
SECTION # in
CHANGE NUMBER
REV. PROC. 2024-23
(DCN)
6.11
199

General Asset Accounts:

FINAL REGULATION SECTION

DESIGNATED
SECTION # in
CHANGE NUMBER
REV. PROC. 2024-23
(DCN)

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

6.12

200

b. § 1.168(i)-1(e)(2)(viii), Change in determining asset disposed of
c. § 1.168(i)-1(j)(2), Change in method of identifying which assets or portions

6.15

207

6.12

200

6.15

207

6.12

200

6.15

207

6.15

207

in § 1.168(i)-1(j)(2)
d. § 1.168(i)-1(j)(2), Change in method of identifying which assets or portions

e. § 1.168(i)-1(j)(3), Change in determining unadjusted depreciable basis of
disposed asset or disposed portion of an asset from one reasonable method to
another reasonable method when it is impracticable from the taxpayer’s records
to determine the unadjusted depreciable basis of disposed asset or disposed
portion of asset
f. § 1.168(i)-1(j)(3), Change in determining unadjusted depreciable basis of disposed asset or disposed portion of an asset from not using to using the taxpayer’s records when it is practicable from the taxpayer’s records to determine the
unadjusted depreciable basis of disposed asset or disposed portion of asset
g. § 1.168(i)-1(j)(3), Change in determining unadjusted depreciable basis of
disposed asset or disposed portion of an asset from an unreasonable method
to a reasonable method when it is impracticable from the taxpayer’s records
to determine the unadjusted depreciable basis of disposed asset or disposed
portion of asset

Single Asset Accounts or Multiple Asset Accounts for MACRS Property:

FINAL REGULATION SECTION
a. § 1.168(i)-7, Change from single asset accounts to multiple asset accounts, or
vice versa
b. § 1.168(i)-7(c), Change in grouping assets in multiple asset accounts

DESIGNATED
SECTION # in
CHANGE NUMBER
REV. PROC. 2024-23
(DCN)
6.12

200

6.12

200

Dispositions of MACRS Property (not in a general asset account):
SECTION # in
REV. PROC. 2024-23

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

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

DESIGNATED
CHANGE NUMBER
(DCN)
205

206

b. § 1.168(i)-8(f)(2) or (3), Change in determining unadjusted depreciable
6.12
basis of disposed asset in a multiple asset account or disposed portion of
an asset from one reasonable method to another reasonable method when
it is impracticable from the taxpayer’s records to determine the unadjusted
depreciable basis of disposed asset or disposed portion of asset
c. § 1.168(i)-8(f)(2) or (3), Change in determining unadjusted depreciable
6.13 (Building or structural
basis of disposed asset in a multiple asset account or disposed portion of an
component)
asset from not using to using the taxpayer’s records when it is practicable
from the taxpayer’s records to determine the unadjusted depreciable basis
6.14 (Property other than
of disposed asset or disposed portion of asset
a building or structural
component)

200

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

6.13 (Building or structural
component)

205

6.14 (Property other than
a building or structural
component)
6.12

206

e. § 1.168(i)-8(g), Change in method of identifying which assets in a
multiple asset account or portions of assets have been disposed of from one
f. § 1.168(i)-8(g), Change in method of identifying which assets in a
multiple asset account or portions of assets have been disposed of from a

205

206

200

6.13 (Building or structural
component)

205

6.14 (Property other than
a building or structural
component)
g. § 1.168(i)-8(h)(1), Change from depreciating a disposed asset or dis6.13 (Building or structural
posed portion of an asset to recognizing gain or loss upon disposition when
component)
a taxpayer continues to depreciate the asset or portion that the taxpayer
disposed of prior to the year of change
6.14 (Property other than
a building or structural
component)

206

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

198

§ 1.168(i)-8(g)(1) or (2)

.17
system operator (§§ 167 and 168).
(1) Description of change.
(a) Applicability. This change applies to
a cable system operator that is within the

scope of Rev. Proc. 2015-12, 2015-2 I.R.B.
266, and wants to change to the safe harbor
method of accounting provided in section
8.03 of Rev. Proc. 2015-12 for determining depreciation under §§ 167 and 168 of a
-

6.10

205

206

distribution network providing one-way
and two-way communication services. The
safe harbor method provided by section
8.03 of Rev. Proc. 2015-12 determines the
asset for purposes of §§ 167 and 168.

(b) Inapplicability. This change does
not apply to the following:
(i) any property that is not depreciated
under § 168 under the taxpayer’s present
and proposed methods of accounting; or
(ii) any property that is not owned by
the taxpayer at the beginning of the year
of change.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(d) of Rev. Proc. 2015-13 does not apply
to a taxpayer that makes this change.
(3) Concurrent automatic change.
(a) A taxpayer that wants to make this
change for more than one asset for the
Form 3115 for all such assets and provide
a single net § 481(a) adjustment for all the
changes included in that Form 3115. If
one or more of the changes in that single
Form 3115 generate a negative § 481(a)
adjustment and other changes in that same
Form 3115 generate a positive § 481(a)
adjustment, the taxpayer may provide a
single negative § 481(a) adjustment for all
the changes that are included in that Form
3115 generating such adjustment and a
single positive § 481(a) adjustment for all
the changes that are included in that Form
3115 generating such adjustment.
(b) A taxpayer that wants to make
both this change and a change to a UNICAP method under section 12.01, 12.02,
12.08, or 12.12 of this revenue procedure,
as applicable, for the same year of change
changes and must enter the designated
automatic accounting method change
numbers for the changes on the appropriate line on the Form 3115. See section
6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change number for a change to the method of accounting under this section 6.17 is “210.”
(5) Contact information. For further
information regarding a change under this
section, contact Charles Magee at (202)
317-7005 (not a toll-free number).
.18
placed in service after December 31, 2017
(§ 168).
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to change from

an impermissible to a permissible method
of accounting for depreciation of any item

(i) that is placed in service by the taxpayer after December 31, 2017;
(ii) for which the taxpayer used the
impermissible method of accounting in at
least two taxable years immediately preceding the year of change (but see section
6.18(1)(b) of this revenue procedure for
in service in the taxable year immediately
preceding the year of change); and
(iii) that is owned by the taxpayer at
the beginning of the year of change (but
see section 6.07 of this revenue procedure
for property disposed of before the year of
change).
(b) Taxpayer has not adopted a method
ment property. If a taxpayer does not
satisfy section 6.18(1)(a)(ii) of this revimprovement property because the item of
in service by the taxpayer in the taxable
year immediately preceding the year of
change (1-year QIP), the taxpayer may
change from the impermissible method of
determining depreciation to the permissible method of determining depreciation
for this change, provided the § 481(a)
adjustment reported on the Form 3115
includes the amount that is attributable
to all property (including the 1-year QIP)
subject to the Form 3115. Alternatively,
the taxpayer may change from the impermissible method of determining depreciation to the permissible method of determining depreciation for the 1-year QIP
return, or an administrative adjustment
request under § 6227 (AAR), as applicable, for the property’s placed-in-service
its federal income tax return for the taxable year succeeding the placed-in-service year. In addition, if the 1-year QIP
is within the scope of section 3 of Rev.
Proc. 2020-25, 2020-19 I.R.B. 785, the
taxpayer may change from the impermissible method of determining depreciation
to the permissible method of determining
an amended federal income tax return, or

AAR, as applicable, in accordance with
section 3.02(3)(a) of Rev. Proc. 2020-25.
(c) Inapplicability. This change does
not apply to:
erty placed in service by a taxpayer that
made a late election, or withdrew an election, under § 163(j)(7)(B) (electing real
property trade or business) or § 163(j)
(7)(C) (electing farming business) for
improvement property is placed in service
by the taxpayer, in accordance with Rev.
Proc. 2020-22, 2020-18 I.R.B. 745. Any
improvement property, or other depreciable property, affected by the late election
or withdrawn election under § 163(j)(7)
(B) or (C) are made in accordance with
sections 4.02 and 4.03, or 5.02 of Rev.
Proc. 2020-22, as applicable;
erty for which the taxpayer is changing
from deducting the cost or other basis as
an expense to capitalizing and depreciating the cost or other basis, or vice versa;
erty for which the taxpayer is changing
its method of accounting for depreciation
to the method of accounting for depreciation provided in § 1.168(i)-4, which
applies when there is a change in use of
the property (but see section 6.04 or 6.05
of this revenue procedure for making this
change); or
(iv) any change in method of accounting to which section 6.20 of this revenue
procedure applies.
(2)
. A taxpayer making a change under this section
6.18 is required to complete only the following information on Form 3115 (Rev.
December 2022):
(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;
(d) Part II, all lines except lines 11, 12,
13, 15, 16, 17, and 19;
(e) Part IV, all lines; and
(f) Schedule E, all lines except lines 1,
4b, 5, and 6.
(3) Concurrent automatic change.
(a) A taxpayer making this change for
more than one asset for the same year of

all such assets and provide a single net
§ 481(a) adjustment for all the changes
included in that Form 3115.
(b) A taxpayer making this change and
the change in section 6.01 or 6.19 of this
revenue procedure for the same year of
for all such changes and must enter the
designated automatic accounting method
change numbers on the appropriate line
of the Form 3115. See section 6.03(1)(b)
of Rev. Proc. 2015-13 for information on
making concurrent changes.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 6.18 is
“244.”
(5) Contact information. For further
information regarding a change under this
section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).
.19 Certain late elections under §§ 168
and 1502 or revocation of certain elections under § 168 (§ 168(g)(7), (k)(5),
(k)(7), and (k)(10); §§ 1.168(k)-2 and
1.1502-68).
(1) Description of change.
(a) Applicability. This change applies to
a taxpayer within the scope of section 5 of
Rev. Proc. 2020-50, 2020-48 I.R.B. 1122,
that wants to make a late election under
§ 168(k)(5), (7), or (10), § 1.168(k)-2(c)
(component election), § 1.1502-68(c)
(4) (designated transaction election),
or proposed § 1.168(k)-2(c) (proposed
component election) as provided in section 5.02(2) of Rev. Proc. 2020-50. This
change also applies to a taxpayer within
the scope of section 6 of Rev. Proc. 202050 that wants to revoke an election under
§ 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.
(b) Inapplicability. The IRS will
treat the making of a late election under
§ 168(k)(5), (7), or (10), a late component election, a late designated transaction
election, or a late proposed component
election as provided in section 5 of Rev.
Proc. 2020-50, or the revocation of an
election under § 168(k)(5), (k)(7), or (k)
(10), or a proposed component election as
provided in section 6 of Rev. Proc. 202050, as a change in method of accounting
with a § 481(a) adjustment only for the

of this revenue procedure. This treatment
does not apply to a taxpayer that makes
these late elections or revocations before
6.19(2) of this revenue procedure, and any
such late election or revocation is not a
change in method of accounting pursuant
to § 1.446-1(e)(2)(ii)(d)(3)(iii).
(2) Time for making the change. The
change under section 6.19(1)(a) and (b) of
this revenue procedure must be made for
succeeding the taxable year in which the
taxpayer (A) placed in service the property affected by the late election under
§ 168(k)(7) or (10), the late component
election, the late designated transaction
election, or the late proposed component
election, as applicable, or by the revocation of the election under § 168(k)(7)
or (k)(10), or the proposed component
election, as applicable, or (B) planted or
late § 168(k)(5) election applies or to
which the revocation of the election under
§ 168(k)(5) applies.
(3) Certain eligibility rules inapplicable. The eligibility rules in section 5.01(1)
(d) and (f) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, do not apply to the change
under section 6.19(1)(a) and (b) of this
or second taxable year succeeding the taxable year in which the taxpayer (A) placed
in service the property affected by the late
election under § 168(k)(7) or (10), the late
component election, the late designated
transaction election, or the late proposed
component election, as applicable, or
by the revocation of the election under
§ 168(k)(7) or (k)(10), or the proposed
component election, as applicable, or (B)
which the late § 168(k)(5) election applies
or to which the revocation of the election
under § 168(k)(5) applies.
(4)
. A taxpayer making a change under this section
6.19 is required to complete only the following information on Form 3115 (Rev.
December 2022):
(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;

(d) Part II, all lines except lines 11, 12,
13, 15, 16, 17, and 19;
(e) Part IV, all lines; and
(f) Schedule E, all lines except lines 1,
4b, 5, and 6.
(5) Concurrent automatic change.
(a) A taxpayer making one or more late
elections and/or revoking one or more
elections under sections 5 and 6 of Rev.
Proc. 2020-50 for the same year of change
changes. The single Form 3115 must provide a single net § 481(a) adjustment for
all such changes for all assets placed in
grafted, by the taxpayer during the same
taxable year. See section 6.03(1)(b) of
Rev. Proc. 2015-13 for information on
making concurrent changes.
(b) A taxpayer making one or more
changes under this section 6.19 and the
change in section 6.01, 6.18, or 6.20 of
this revenue procedure for the same year
for all such changes and must enter the
designated automatic accounting method
change numbers on the appropriate line
on the Form 3115. The single Form 3115
must provide a single net § 481(a) adjustment for all such changes for all assets
planted or grafted, by the taxpayer during
the same taxable year. See section 6.03(1)
(b) of Rev. Proc. 2015-13 for information
on making concurrent changes.
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 6.19 is
“245.”
(7) Contact information. For further
information regarding a change under this
section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).
.20 Change in depreciation as a
year depreciation regulations (§ 168(k);
§§ 1.168(k)-2 and 1.1502-68).
(1) Description of Change.
(a) Applicability. This change applies to
a taxpayer 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 § 168 to comin section 2.02(6) of Rev. Proc. 2020-50),

payer making this change for the property

scope of section 4.03 of Rev. Proc. 2020-

section 4 of Rev. Proc. 2020-50, as modi-

this revenue procedure, and is planted or
grafted by the taxpayer in the taxable year
immediately preceding the year of change
(1-year Plant), the taxpayer may change
from the impermissible method of determining depreciation to the permissible
method of determining depreciation under
this section 6.20(3) for the 1-year Plant

section 2.02(2) of Rev. Proc. 2020-50),

section 1 of Rev. Proc. 2020-50), as applicable, for depreciable property and speciRev. Proc. 2020-50. A change under this
section 6.20 applies to (i) a taxpayer that is
changing from an impermissible method
of accounting to a permissible method of
accounting under section 4.03(4)(b) of
Rev. Proc. 2020-50 and section 6.20(3) of
this revenue procedure, and (ii) a taxpayer
that is changing from one permissible
method of accounting to another permissible method of accounting under section
4.04 of Rev. Proc. 2020-50 and section
6.20(4) of this revenue procedure. For
purposes of this section 6.20, a taxpayer
is deemed to change from an impermissible method of accounting to a permissible
time, the taxpayer changes its method of
accounting for depreciation under this
section 6.20 for depreciable property
4.02(1) of Rev. Proc. 2020-50 to comply
tions and the 2019 proposed regulations.
Further, any subsequent time the taxpayer changes its method of accounting
for depreciation for depreciable property
4.02(1) of Rev. Proc. 2020-50 to comply
tions and the 2019 proposed regulations,
is a change from a permissible method of
accounting to another permissible method
of accounting under this section 6.20. See
section 4.02(2) of Rev. Proc. 2020-50.
(b) Inapplicability. This change does
not apply to any property for which
the taxpayer is changing its method of
accounting for depreciation to the method
of accounting for depreciation provided in
§ 1.168(i)-4, which applies when there is a
change in use of the property (but see section 6.04 or 6.05 of this revenue procedure
for making this change).
(2) Certain eligibility rules inapplicable.
(a) In general. The eligibility rule in
section 5.01(1)(d) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a tax-

procedure.
(b) Special rule. The eligibility rule in
section 5.01(1)(f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a taxpayer making this change for the property
section 4 of Rev. Proc. 2020-50, as modiond taxable year succeeding the taxable
year in which the taxpayer placed in service such property, or planted or grafted
(3) Impermissible to permissible
method of determining the depreciation
deduction allowable.
(a) A taxpayer may change from an
impermissible method of accounting to a
permissible method of accounting under
section 4.03 of Rev. Proc. 2020-50 for the
scope of section 4.03 of Rev. Proc. 2020this revenue procedure, for which the taxpayer used the impermissible method of
accounting in at least two taxable years
immediately preceding the year of change
(but see section 6.20(3)(b) of this revenue
procedure for property placed in service
the taxable year immediately preceding
the year of change).
(b) If a taxpayer does not satisfy section 6.20(3)(a) of this revenue procedure
for depreciable property that is within the
scope of section 4.03 of Rev. Proc. 2020this revenue procedure, because the depreciable property is placed in service by the
taxpayer in the taxable year immediately
preceding the year of change (1-year
Property), the taxpayer may change from
the impermissible method of determining
depreciation to the permissible method of
determining depreciation for the 1-year
change in accordance with this section
6.20(3), provided the § 481(a) adjustment
reported on the Form 3115 includes the
amount of any adjustment attributable to
all property, including the 1-year Property, subject to the Form 3115. Similarly,

accordance with this section 6.20(3), provided the § 481(a) adjustment reported
on the Form 3115 includes the amount of
any adjustment attributable to all property, including the 1-year Plant, subject
to the Form 3115. Alternatively, the taxpayer may change from the impermissible
method of determining depreciation to the
permissible method of determining depreciation for the 1-year Property or 1-year
tax return, or an administrative adjustment
request under § 6227 (AAR), as applicable, for the 1-year Property’s placed-inservice year or 1-year Plant’s planting or
grafting year, as applicable, prior to the
tax return for the taxable year succeeding
the placed-in-service year or planting or
grafting year, as applicable. In addition,
if the 1-year Property or 1-year Plant is
within the scope of section 4.03 of Rev.
6.20(1)(b) of this revenue procedure, the
taxpayer may change from the impermissible method of determining depreciation
to the permissible method of determining
depreciation for the 1-year Property or
income tax return, or AAR, as applicable,
in accordance with section 4.03(4)(a) of
Rev. Proc. 2020-50.
(c) A change under section 4.03(4)(b)
of Rev. Proc. 2020-50 and this section
6.20(3) is made with a § 481(a) adjustment. However, consent to make a change
in method of accounting under this section
6.20 will be granted by the Commissioner
of Rev. Proc. 2020-50, to the extent relevant. Further, if a taxpayer that has a
indebtedness is applying § 1.168(k)-2(b)
(2)(ii)(G) of the Final Regulations,
regulations, or both § 1.168(k)-2(b)(2)

§ 1.168(k)-2(b)(2)(ii)(G) of the 2019 proposed regulations for depreciable property
placed in service by the taxpayer in its
2018, 2019, or 2020 taxable year, consent
to make a change in method of accounting under this section 6.20 will be granted
by the Commissioner only if the amount
of the § 481(a) adjustment is adjusted to
account for the proper amount of interest
expense, taking into account the business
interest limitation under § 163(j) and the
regulations thereunder, as of the beginning of the year of change.
(4) Permissible to another permissible
method of determining the depreciation
deduction allowable.
(a) A taxpayer may change from one
permissible method of accounting to
another permissible method of accounting
under section 4.04 of Rev. Proc. 2020-50
the scope of section 4.04 of Rev. Proc.
(b) of this revenue procedure.
(b) A change under section 4.04 of Rev.
Proc. 2020-50 and this section 6.20(4)
is made on a cut-off basis. Accordingly,
described in § 1.446-1(e)(2)(ii)(d)(5)(iii),
nor a § 481(a) adjustment is permitted or
required.
(5) Additional requirement. A taxpayer
making a change under this section 6.20
also must comply with section 4.02 of
Rev. Proc. 2020-50, to the extent relevant.
Once a taxpayer applies § 1.168(k)-2 and,
to the extent relevant, § 1.1502-68, of the
Final Regulations, in their entirety, for a
taxable year, the taxpayer must continue
to apply § 1.168(k)-2 and, to the extent
relevant, § 1.1502-68, of the Final Regulations, in their entirety, for the taxpayer’s subsequent taxable years. See
§§ 1.168(k)-2(h)(3)(iii) and 1.1502-68(e)
(2)(iii) of the Final Regulations and section 4.02(1) of Rev. Proc. 2020-50.
(6)
. A taxpayer making a change under this section
6.20 is required to complete only the following information on Form 3115 (Rev.
December 2022):
(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;

(d) Part II, all lines except lines 11, 12,
13, 15, 16, 17, and 19;
(e) Part IV, all lines; and
(f) Schedule E, all lines except lines 1,
4b, 5, and 6.
(7) Concurrent automatic change.
(a) A taxpayer making this change

planted or grafted, by the taxpayer during
the same taxable year and must provide a
single net § 481(a) adjustment for all the
changes included in that Form 3115.
(b) A taxpayer making one or more
changes under section 6.20(3) of this revenue procedure and the change in section
6.01, 6.18, or 6.19 of this revenue procea single Form 3115 for all such changes
and must enter the designated automatic
accounting method change numbers on
the appropriate line on the Form 3115.
The single Form 3115 must provide a single net § 481(a) adjustment for all such
changes for all assets placed in service,
by the taxpayer during the same taxable
year. See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making concurrent changes.
(8) Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for (a) a change under section
6.20(3) of this revenue procedure is “246”,
and (b) a change under section 6.20(4) of
this revenue procedure is “247.”
(9) Contact information. For further
information regarding a change under this
section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).
.21 Depreciation of tangible property
under § 168(g) by controlled foreign corporations.
(1) Description of change. This change
is applicable to a controlled foreign corposeeks to change its method of accounting
for depreciation for an item of property
that is described in § 168(g)(1)(A) (except
for property excluded from the application
of § 168 as a result of § 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 (ADS) in § 168(g) for such

property in determining the CFC’s gross
and taxable income under § 1.952-2 as
under §§ 964 and 986(b) and the regulations thereunder. This change applies
regardless of whether the method of
accounting for depreciation that the CFC
wants to change pursuant to this section
6.21 is impermissible or permissible
under the Internal Revenue Code and the
regulations thereunder.
(2) CFC has not adopted a method of
accounting for the item of property. If a
CFC placed in service an item of property
described in section 6.21(1) of this revenue procedure in the taxable year immediately preceding the year of change (1-year
property), the CFC may change its method
of determining depreciation for the 1-year
property to ADS if the designated shareprovided the § 481(a) adjustment attributable to the 1-year property is included
on the Form 3115. Alternatively, the CFC
may change its impermissible method of
determining depreciation for the 1-year
property to ADS if each U.S. shareholder
of the CFC (or the agent described in
amended federal income tax return for
the taxable year in which or with which
the property’s placed-in-service year ends
federal income tax return for the taxable
year in which or with which the CFC’s
taxable year succeeding the placed-in-service year ends.
(3) Section 481(a) adjustment. A
§ 481(a) adjustment is required with
respect to a change made under this section 6.21 for any CFC.
(4) Certain eligibility rules inapplicable. The eligibility rules in section 5.01(1)
(c), (d), (e), and (f) of Rev. Proc. 201513, 2015-5 I.R.B. 419, do not apply to this
change.
(5) Short Form 3115 in lieu of a standard Form 3115. In accordance with
§ 1.446-1(e)(3)(ii), the requirement in
3115 is waived and, pursuant to section
6.02(2) of Rev. Proc. 2015-13, a short
Form 3115 is authorized with respect
to any CFC making a change under this
section 6.21. The short Form 3115 (Rev.
December 2022) must include the following information:

(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;
(d) Part II, all lines except lines 10, 13,
16, and 19;
(e) Part IV; and
(f) Schedule E.
(6) Concurrent automatic changes.
A designated shareholder making an
accounting method change on behalf of a
CFC under this section 6.21 with respect
to more than one asset for the same year
3115 for all such changes. If any § 481(a)
adjustment (or any component of a
§ 481(a) adjustment) from a change that
is included in that Form 3115 shares all
of the same characteristics as any other
§ 481(a) adjustment (or component) from
a change that is included in that Form
3115, those § 481(a) adjustments (or components) must be provided as a single
§ 481(a) adjustment, with the character§ 481(a) adjustment (or component of a
§ 481(a) adjustment) from a change that
is included in that Form 3115 that does
not share all of the same characteristics
as any other § 481(a) adjustment (or component) from a change that is included in
that Form 3115 must be provided as a separate § 481(a) adjustment, with the char§ 481(a) adjustment (or any component
of a § 481(a) adjustment) shares all of the
same characteristics as another § 481(a)
adjustment (or component) if:
(i) The § 481(a) adjustments (or comand § 1.989(a)-1(b);
(ii) If applicable, the § 481(a) adjustments (or components) relate to the same
(iv);
(iii) The § 481(a) adjustments (or
components) are either all positive or all
negative, as applicable (for this purpose a
negative component of an overall positive
adjustment will be treated as positive and
a positive component of an overall negative adjustment will be treated as negative); and
(iv) The § 481(a) adjustments (or components) have the same source, separate

treatment under section 7.07(2) of Rev.
Rev. Proc. 2021-26, 2021-22 I.R.B. 1163,
1167-68.
(7) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
6.21 is “248.”
(8) Contact information. For further
information regarding a change under this
section, contact Melinda Harvey at (202)
317-6934 (not a toll-free number).
.22 Late elections under § 168(j)(8),
§ 168(l)(3)(D), and § 181(a)(1).
(1) Description of Change.
(a) Applicability. This change applies
to:
(i) A taxpayer within the scope of section 3.01 of Rev. Proc. 2022-23, 2022-18
I.R.B. 1052, that wants to make the late
election provided in section 4.01(2) of
Rev. Proc. 2022-23 under § 168(j)(8) or
§ 168(l)(3)(D); or
(ii) A taxpayer within the scope of section 3.02 of Rev. Proc. 2022-23 that wants
to make the late election provided in section 4.02(2) of Rev. Proc. 2022-23 under
§ 181(a)(1).
(b) Inapplicability. The IRS will treat
the making of a late election provided in
section 4 of Rev. Proc. 2022-23 under
§§ 168(j)(8), 168(l)(3)(D), and 181(a)
(1) as a change in method of accounting with a § 481(a) adjustment only for
6.22(2) of this revenue procedure. This
treatment does not apply to a taxpayer
that makes these late elections before
6.22(2) of this revenue procedure, and
any such late election is not a change in
method of accounting.
(2) Time for making the change. The
change under section 6.22(1)(a)(i) or (ii)
of this revenue procedure must be made

April 19, 2022.
(3) Certain eligibility rules inapplicable. The eligibility rules in section 5.01(1)
(d) and (f) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, do not apply to a change under
section 6.22(1)(a)(i) or (ii) of this revenue
procedure.

(4) Certain audit protection exception
temporarily inapplicable. Sections 8.02(1)
and (7) of Rev. Proc. 2015-13 do not apply
to a change in method of accounting made
under section 6.22(1)(a)(i) or (ii) of this
revenue procedure. However, sections
8.02(1) and (7) of Rev. Proc. 2015-13 continue to apply for purposes of determining
the § 481(a) adjustment period provided in
section 7.03(3)(b) of Rev. Proc. 2015-13.
(5) Short Form 3115.
(a) A taxpayer making a change under
section 6.22(1)(a)(i) of this revenue procedure is required to complete only the following information on Form 3115 (Rev.
December 2022):
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, lines 6, 7, 8, 9, 14, and 18;
(v) Part IV, all lines except line 25; and
(vi) Schedule E, all lines except lines 1,
4b, 5, and 6.
(b) A taxpayer making the change
under section 6.22(1)(a)(ii) of this revenue
procedure is required to attach to the taxpayer’s Form 3115 the statement required
under § 1.181-2(c)(2)(i) and, if applicable,
the statement required under § 1.181-2(c)
(2)(ii), and to complete only the following
information on Form 3115 (Rev. December 2022):
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, lines 6, 7, 8, 9, 14, and 18;
and
(v) Part IV, all lines except line 25.
(6) Concurrent automatic change. A
taxpayer making one or more late elections under section 4.01(2) or 4.02(2) of
Rev. Proc. 2022-23 for the same year of
all such changes. The single Form 3115
must provide a single net § 481(a) adjustment for all such changes. See section
6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(7) Designated automatic accounting
method change number. The designated
automatic accounting method change number for a change to the method of accounting under this section 6.22 is “264.”

(8) Contact information. For further
information regarding a change under this
section 6.22, contact James Liechty at
(202) 317-7005 (not a toll-free number).
SECTION 7. RESEARCH AND
EXPERIMENTAL EXPENDITURES
(§ 174)
.01 Change in Method of Accounting
for SRE Expenditures.
(1) Description of change.
(a) In general. This change applies to a
taxpayer that wants to change its method
of accounting for expenditures paid or
incurred in taxable years beginning after
December 31, 2021, to:
(i) comply with § 174, as amended by
§ 13206(a) of Public Law 115-97, 131
Stat. 2054 (Dec. 22, 2017), commonly
referred to as the Tax Cuts and Jobs Act
(TCJA); or
(ii) rely on interim guidance provided
in sections 3, 4, 5, 6, or 7 of Notice 2023Notice 2024-12, 2024-5 I.R.B. 616.
(b) References to § 174. Unless otherwise stated, references to “§ 174” in this
section 7.01 refer to § 174 as amended by
§ 13206(a) of the TCJA. Section 13206(e)
of the TCJA provides that the amendments
made by § 13206 of the TCJA apply to
amounts paid or incurred in taxable years
beginning after December 31, 2021.
(c) Changes included in section 7.01(1)
(a) of this revenue procedure. The changes
described in section 7.01(1)(a) of this
revenue procedure include, among other
changes, a change:

(2) Inapplicability. This change
described in section 7.01(1)(a) of this revenue procedure does not apply to:
(a) a change in the treatment of
acquired, leased, or licensed computer
software under Rev. Proc. 2000-50,
Proc. 2007-16, 2007-1 C.B. 358 (see section 9.01 of this revenue procedure);
(b) a change in the treatment of research
or experimental expenditures under former
§ 174 (that is, § 174 as in effect prior to
the amendments made by § 13206(a) of the
TCJA), or software development expenditures, paid or incurred in taxable years
beginning before January 1, 2022 (see section 9.01 of this revenue procedure).
(c) change to rely on interim guidance
provided in sections 8 and 9 of Notice
(d) a change from treating SRE expenditures paid or incurred by a taxpayer that
transfers related property (that is, property
with respect to which such SRE expenditures were paid or incurred) in a § 351
exchange as amortizable by the transferee
corporation following such exchange to
treating such SRE expenditures as amortizable by the transferor following such
exchange (as such a change is not a change
in method of accounting).
(3) Manner of making change.
(a)
year beginning after December 31, 2021.
(i) Cut-off basis. The change under section 7.01(1)(a) of this revenue procedure
ning after December 31, 2021, is implemented on a cut-off basis.
(ii) Statement in lieu of a Form 3115

or experimental (SRE) expenditures, as
December 31, 2021. The requirement of
Notice 2023-63, as applicable, to inventoriable property or depreciable property
and recovering such expenditures through
cost of goods sold or depreciation, respectively, to capitalizing and amortizing such
expenditures under § 174(a) or section
3.02 of Notice 2023-63, as applicable; and
(ii) from treating an expenditure that
expenditure as an SRE expenditure subject to capitalization and amortization
under § 174(a) or section 3.02 of Notice
2023-63, as applicable, to treating that
expenditure under the appropriate provision of the Code.

Application for Change in Accounting
Method, is waived, and a statement in
lieu of a Form 3115 is authorized for the
change in method of accounting under
section 7.01(1)(a) of this revenue procedure for which the year of change is
ning after December 31, 2021. Notwithin section 3.07 of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, the statement in lieu
of a Form 3115 that is permitted under
this section 7.01(3)(a)(ii) is considered a
Form 3115 for purposes of the automatic

change procedures of Rev. Proc. 2015copy, under section 6.03(1)(a) of Rev.
Proc. 2015-13, is waived. The statement
must include the following information
for each applicant:
tion number or social security number, as
applicable, of the applicant that has paid
or incurred expenditures after December
31, 2021;
(B) the beginning and ending dates of
described in section 7.01(1)(a) takes effect
for the applicant (year of change);
(C) a general description of the type of
expenditures included as SRE expenditures;
(D) the amount of SRE expenditures
paid or incurred by the applicant during
the year of change; and
(E) a declaration that the applicant is
changing its method of accounting to capitalize SRE expenditures to a SRE capital account, and amortize the capitalized
amount over either a 5-year period for
domestic research or a 15-year period for
foreign research (as applicable), beginning with the mid-point of the taxable
year in which such expenditures are paid
or incurred in accordance with § 174 or
sections 3 through 7 of Notice 2023-63,
as applicable. Also, the declaration must
state that the applicant is making the
change on a cut-off basis.
(b)
taxable year beginning after December
31, 2021.
(i)
cut-off.
(A) In general. Except as provided
in section 7.01(3)(b)(i)(B) of this revenue procedure, the change under section
7.01(1)(a) of this revenue procedure for a
year beginning after December 31, 2021,
ment that takes into account only expenditures paid or incurred in taxable years
beginning after December 31, 2021.
(B)
§ 481(a) adjustment. If a change described
in section 7.01(3)(b)(i)(A) of this revenue
adjustment that is negative, the taxpayer
may instead choose to implement the
change on a cut-off basis.

(ii) Form 3115 and required statement.
In completing a Form 3115, Application
for Change in Accounting Method, to
make the change in method of accounting under section 7.01(1)(a) of this revenue procedure for a year of change later
December 31, 2021, a taxpayer must
include on an attachment to Form 3115:
(A) a general description of the type
of expenditures included as SRE expenditures;
(B) the taxable year(s) in which the
expenditures subject to the change were
paid or incurred by the applicant; and
(C) a declaration that provides the reason for which the applicant is changing
its method of accounting under section
7.01(1)(a) of this revenue procedure.
The declaration must also state whether
the applicant is making the change on a
cut-off basis under section 7.01(3)(b)(i)
(B) of this revenue procedure or with a

(b) Changes made in successive taxable years. A taxpayer may make a change
described in section 7.01(1)(a) of this
revenue procedure for its second taxable
year beginning after December 31, 2021,
regardless of whether the taxpayer made a
able year beginning after December 31,
2021.
(6) Limited audit protection. A taxpayer does not receive audit protection
under section 8.01 of Rev. Proc. 2015-13
for the change under section 7.01(1)(a)
of this revenue procedure with respect to
expenditures paid or incurred in taxable
years beginning on or before December
31, 2021. Additionally, a taxpayer does
not receive audit protection under section
8.01 of Rev. Proc. 2015-13 for a change
under section 7.01(1)(a) of this revenue
procedure in the second taxable year
beginning after December 31, 2021, with
respect to expenditures paid or incurred

into account only expenditures paid
or incurred in taxable years beginning
after December 31, 2021, under section
7.01(3)(b)(i)(A) of this revenue procedure.
(4) Transition rule. A taxpayer who
uary 17, 2023, for a taxable year beginning after December 31, 2021, is deemed
to have complied with the § 446 method
change procedures and section 7.01 of this
revenue procedure to change its method
of accounting for expenditures paid or

December 31, 2021, if the taxpayer did
not change its method of accounting under
section 7.01(1)(a) in an effort to comply
ning after December 31, 2021. See section
8.02(2) of Rev. Proc. 2015-13.
(7) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
7.01 is “265.”
(8) No inference relating to expenditures paid or incurred in taxable years

after December 31, 2021, to comply with
§ 174 if the taxpayer:
(a) reported the amount of SRE expenditures paid or incurred for such taxable
year on Part VI of Form 4562, Depreciation and Amortization
eral tax return, and
(b) properly capitalized and amortized
such SRE expenditures in accordance
with § 174 for such taxable year.
(5) Certain eligibility rules inapplicable.
(a) In general. The eligibility rules in
section 5.01(1)(d) and (f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, do not apply
to a change described in section 7.01(1)(a)
of this revenue procedure for the taxpay-

§ 174 becomes effective. No inference
may be drawn from section 7.01 of this
revenue procedure regarding the treatment of expenditures paid or incurred in,
and changes in methods of accounting for,
taxable years in which former § 174 was
in effect, including issues relating to the
application of §§ 1.174-1, 1.174-2, 1.1743, and 1.174-4 for taxable years in which
former § 174 was in effect.
(9) No ruling on method used. The consent granted under section 9 of Rev. Proc.
2015-13 for a change made under section
7.01(1)(a)(i) of this revenue procedure is
not a determination by the Commissioner
that the new method of accounting is a
permissible method of accounting, nor
does it create any presumption that the
new method of accounting is a permis-

after December 31, 2021.

sible method of accounting. The director
will ascertain whether the new method
of accounting is a permissible method of
accounting.
(10) Contact information. For further
information regarding a change under
this section, contact Bruce Chang at (202)
317-7005 (not a toll-free number).
SECTION 8. ELECTIVE EXPENSING
PROVISIONS (§ 179D)
.01
Commercial Buildings (§ 179D).
(1) Description of change. This change,
as described in Rev. Proc. 2012-39, 201241 I.R.B. 470, applies to a taxpayer that
wants to change its method of accounting to deduct under § 179D amounts paid
or incurred for the installation of energy
building property is subject to the limits of § 179D(b) and must be claimed in
the taxable year in which the property is
placed in service. The basis of the energy
is reduced by the amount of the § 179D
deduction taken and the remaining basis
ing property is depreciated over its recovery period.
(2) Applicability. This change applies
to a taxpayer that places in service property for which a deduction is allowed
under § 179D(a).
(3) Inapplicability. This change does
not apply to a designer to whom the owner
of a government building allocates the
§ 179D deduction.
(4) Manner of making change. A taxpayer making this change must attach to
its Form 3115 (the original, the duplicate
any additional copies) a statement with a
detailed description of the tax treatment of
the property under the taxpayer’s present
and proposed methods of accounting.
(5)
. In addition
to the statement required by section 8.01(4)
of this revenue procedure, a taxpayer making this change must attach to its Form
4 of Notice 2006-52, 2006-1 C.B. 1175, or
section 5 of Notice 2008-40, 2008-1 C.B.

commercial building property has achieved
the reduction in energy and power costs or
in lighting power density necessary to qualify for the § 179D deduction.
(6)
. The consent granted under section 9 of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, for a change
provided in this section 8.01 is not a determination by the Commissioner that the

of Rev. Proc. 2000-50 is obsolete for costs
of developing software paid or incurred
in taxable years beginning after December 31, 2021. Accordingly, section 5 of
Rev. Proc. 2000-50 (costs of developing
computer software) applies only to costs
of developing computer software paid or
incurred in any taxable year beginning on
or before December 31, 2021.
(2) Scope. This change applies to all

section 179D. The director will ascerdeduction under section 179D (including
See section 12 of Rev. Proc. 2015-13.
(7) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
8.01 is “152.”
(8) Contact information. For further
information regarding a change under this
section, contact Charles Hyde at (202)
317-5214 (not a toll-free number).
SECTION 9. COMPUTER SOFTWARE
EXPENDITURES (§§ 162, 167, and 197)
.01 Computer software expenditures.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for the costs of
computer software to a method described
in Rev. Proc. 2000-50, 2000-2 C.B. 601,
C.B. 358. Section 5 of Rev. Proc. 2000-50
describes the methods applicable to the
costs of developing computer software.
Section 6 of Rev. Proc. 2000-50 describes
the method applicable to the costs of
acquired computer software. Section 7 of
Rev. Proc. 2000-50 describes the method
applicable to leased or licensed computer
software. Section 13206 of Public Law
115-97, 131 Stat. 2054 (Dec. 22, 2017),
commonly referred to as the Tax Cuts
and Jobs Act (TCJA), amended § 174 to
treat the costs of software development
as research or experimental expenditures,
effective for amounts paid or incurred in
taxable years beginning after December
31, 2021. Section 12 of Notice 2023Notice 2024-12, 2024-5 I.R.B. 616, provides that, as a result of the TCJA amendments to § 174 and the rules in sections
3 through 5 of Notice 2023-63, section 5

section 2 of Rev. Proc. 2000-50. However,
this change does not apply to any computer
software that is subject to amortization as
an “amortizable section 197 intangible”
thereunder, or to costs that a taxpayer has
treated as research and experimentation
expenditures under § 174.
(3) Inapplicability. This change does
not apply to costs of developing computer
software that are paid or incurred in taxable years beginning after December 31,
2021.
(4) Statement required. If a taxpayer
is changing to the method described in
section 5.01(2) of Rev. Proc. 2000-50,
the taxpayer must attach to its Form 3115
a statement providing the information
required in section 8.02(2) of Rev. Proc.
2000-50.
(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
9.01 is “18.”
(6) Contact information. For further
information regarding a change under
this section, contact Bruce Chang at (202)
317-7005 (not a toll-free number).
SECTION 10. STARTUP EXPENDITURES AND
ORGANIZATIONAL FEES (§§ 195,
248, AND 709)
.01 Start-up expenditures.
(1) Description of change and scope.
(a) Applicability. This change applies to
a taxpayer that wants to change its method
of accounting under § 195 to change:
(i) the characterization of an item as a
start-up expenditure;
(ii) the determination of the taxable
year in which the taxpayer begins the
active trade or business to which the
start-up expenditures relate; or

(iii) the amortization period of a
start-up expenditure to 180 months.
(b) Inapplicability. This change does
not apply to:
(i) start-up expenditures paid or
incurred before October 23, 2004; or
(ii) start-up expenditures paid or
incurred after October 22, 2004, and
before August 17, 2011, if the period of
limitations on assessment of tax for the
taxable year the election under § 1.1951(b) is deemed made has expired.
(2) No rulings.
(a) Characterization of item. The consent granted under section 9 of Rev. Proc.
10.01(1)(a)(i) of this revenue procedure is
not a determination by the Commissioner
that the taxpayer has properly characterized an item as a start-up expenditure and
does not create any presumption that the
proposed characterization of an item as a
start-up expenditure is permissible under
§ 195(c)(1). The director will ascertain
whether the taxpayer’s characterization of
an item as a start-up expenditure is permissible.
(b) When active trade or business
begins. The consent granted under section 9 of Rev. Proc. 2015-13 for a change
revenue procedure is not a determination
by the Commissioner that the taxpayer
has properly determined the taxable year
in which the taxpayer begins the active
trade or business to which the start-up
expenditures relate and does not create
any presumption that the proposed taxable year in which the taxpayer begins
the active trade or business to which the
start-up expenditures relate is permissible under § 195(c)(2). The director will
ascertain whether the taxpayer’s determination of the taxable year in which the
taxpayer begins the active trade or business to which the start-up expenditures
relate is permissible.
(3) Designated automatic accounting method change number. The designated automatic accounting method
change number for a change to a method
of accounting under this section 10.01 is
“223.”
(4) Contact information. For further
information regarding a change under this
section, contact Elizabeth Binder at (202)
317-7005 (not a toll-free number).

.02 Organizational expenditures under
§ 248.
(1) Description of change and scope.
(a) Applicability. This change applies
to a corporation that wants to change
its method of accounting under § 248 to
change:
(i) the characterization of an item as an
organizational expenditure;
(ii) the determination of the taxable
year in which the corporation begins business to which the organizational expenditures relate; or
(iii) the amortization period of an organizational expenditure to 180 months.
(b) Inapplicability. This change does
not apply to:
(i) organizational expenditures paid or
incurred before October 23, 2004; or
(ii) organizational expenditures paid
or incurred after October 22, 2004, and
before August 17, 2011, if the period of
limitations on assessment of tax for the
taxable year the election under § 1.2481(c) is deemed made has expired.
(2) No rulings.
(a) Characterization of items. The consent granted under section 9 of Rev. Proc.
10.02(1)(a)(i) of this revenue procedure
is not a determination by the Commissioner that the corporation has properly
characterized an item as an organizational
expenditure and does not create any presumption that the proposed characterization of an item as an organizational expenditure is permissible under § 248(b) and
§ 1.248-1(b). The director will ascertain
whether the corporation’s characterization
of an item as an organizational expenditure is permissible.
(b) When the corporation begins business. The consent granted under section 9
of Rev. Proc. 2015-13 for a change specenue procedure is not a determination by
the Commissioner that the corporation
has properly determined the taxable year
in which the corporation begins business
to which the organizational expenditures
relate and does not create any presumption
that the proposed taxable year in which the
corporation begins business to which the
organizational expenditures relate is permissible under § 1.248-1(d). The director
will ascertain whether the corporation’s
determination of the taxable year in which

the corporation begins business to which
the organizational expenditures relate is
permissible.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
10.02 is “228.”
(4) Contact information. For further
information regarding a change under this
section, contact Sharon Horn at (202) 3177003 (not a toll-free number).
.03 Organization fees under § 709.
(1) Description of change and scope.
(a) Applicability. This change applies
to a partnership that wants to change its
method of accounting under § 709 to
change:
(i) the characterization of an item as an
organizational expense;
(ii) the determination of the taxable
year in which the partnership begins business to which the organizational expenses
relate; or
(iii) the amortization period of an organizational expense to 180 months.
(b) Inapplicability. This change does
not apply to:
(i) organizational expenses paid or
incurred before October 23, 2004; or
(ii) organizational expenses paid or
incurred after October 22, 2004, and
before August 17, 2011, if the period of
limitations on assessment of tax for the
taxable year the election under § 1.7091(b) is deemed made has expired.
(2) No rulings.
(a) Characterization of items. The consent granted under section 9 of Rev. Proc.
10.03(1)(a)(i) of this revenue procedure
is not a determination by the Commissioner that the partnership has properly
characterized an item as an organizational
expense and does not create any presumption that the proposed characterization of
an item as an organizational expense is
permissible under § 709(b)(3). The director will ascertain whether the partnership’s
characterization of an item as an organizational expense is permissible.
(b) When the partnership begins business. The consent granted under section 9
of Rev. Proc. 2015-13 for a change specenue procedure is not a determination by
the Commissioner that the partnership has

properly determined the taxable year in
which the partnership begins business to
which the organizational expenses relate
and does not create any presumption that
the proposed taxable year in which the
partnership begins business to which the
organizational expenses relate is permissible under § 1.709-2(c). The director will
ascertain whether the partnership’s determination of the taxable year in which the
partnership begins business to which the
organizational expenses relate is permissible.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
10.03 is “229.”
(4) Contact information. For further
information regarding a change under this
section, contact Elizabeth Zanet at (202)
317-5279 (not a toll-free number).
SECTION 11. CAPITAL
EXPENDITURES (§ 263)
.01 Package design costs.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to change its
method of accounting for package design
costs that are within the scope of Rev.
by Rev. Proc. 98-39, 1998-1 C.B. 1320,
to one of the three alternative methods
of accounting for package design costs
described in section 5 of Rev. Proc. 97-35,
which are: (i) the capitalization method,
(ii) the design-by-design capitalization
and 60-month amortization method, and
(iii) the pool-of-cost capitalization and
48-month amortization method.
(b) Inapplicability. This change does
not apply to a taxpayer that wants to
change to the capitalization method for
costs of developing or modifying any
package design that has an ascertainable
useful life.
(2) Additional requirements. If a taxpayer is changing its method of accounting for package design costs to the capitalization method or the design-by-design
capitalization and 60-month amortization
method, the taxpayer must attach a statestatement must provide a description of
each package design, the date on which

each was placed in service, and the cost
basis of each (as determined under sections 5.01(2) or 5.02(2) of Rev. Proc.
97-35).
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.01 is “19.”
(4) Contact information. For further
information regarding a change under this
section, contact Maria Castillo Valle at
(202) 317-7003 (not a toll-free number).
.02 Line pack gas or cushion gas.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for line pack gas
or cushion gas to a method consistent with
the holding in Rev. Rul. 97-54, 1997-2
C.B. 23. Rev. Rul. 97-54 holds that the
cost of line pack gas or cushion gas is a
capital expenditure under § 263, the cost
of recoverable line pack gas or recoverable cushion gas is not depreciable, and
the cost of unrecoverable line pack gas or
unrecoverable cushion gas is depreciable
under §§ 167 and 168.
(2) Additional requirements. A taxpayer
that changes its method of accounting for
unrecoverable line pack gas or unrecoverable cushion gas under this section 11.02
must change to a permissible method of
accounting for depreciation for the cost of
that gas as part of this change.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.02 is “20.”
(4) Contact information. For further
information regarding a change under this
section, contact Douglas Kim at (202)
317-7003 (not a toll-free number).
.03 Removal costs.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to change its
method of accounting for certain costs in
the retirement and removal of a depreciable asset to conform with Rev. Rul. 2000revenue procedure, or for removal costs in
disposal of a depreciable asset, including
a partial disposition, as described under
§ 1.263(a)-3(g)(2)(i).
(b) Inapplicability. This change does
not apply to a taxpayer that wants to

change its method of accounting for
removal costs in the disposal of a component of a unit of property where the disposal of the component is not a disposition for federal tax purposes. To make that
change, see section 11.08 of this revenue
procedure.
(c) Manner of making change. A qual6.01(4)(b) of this revenue procedure, is
required to complete only the following
information on Form 3115 (Rev. December 2022):
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I, line 1(a);
(iv) Part II, all lines except lines 13,
15, 16, 17, and 19, if the change is not to
depreciating property;
(v) Part II, all lines except lines 13,
15b, 16, 17, and 19, if the change is to
depreciating property;
(vi) Part IV, lines 26 and 27; and
(vii) Schedule E, if applicable.
(2) Additional requirements.
(a) Except for assets for which depreciation is determined in accordance with
§ 1.167(a)-11 (ADR), the taxpayer’s proposed method of treating removal costs
for assets accounted for in a multiple asset
account must be consistent with the taxpayer’s method of treating salvage proceeds. See Rev. Rul. 74-455, 1974-2 C.B.
63. (See section 6.02 of this revenue procedure for changing a taxpayer’s present
method of treating salvage proceeds.)
(b) If this change involves assets that
are public utility property within the
meaning of § 168(i)(10) or former § 167(l)
(3)(A), the taxpayer must comply with the
terms and conditions in section 6.01(3)(b)
(v) of this revenue procedure.
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to this change.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.03 is “21.”
(5) Contact information. For further
information regarding a change under this
section, contact Douglas Kim at (202)
317-7003 (not a toll-free number).

.04 Distributor commissions.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to change from
currently deducting distributor commisProc. 2000-38, 2002-2 C.B. 310, as mod358) to a method of capitalizing and amortizing distributor commissions using the
distribution fee period method, the 5-year
method, or the useful life method (all
described in Rev. Proc. 2000-38).
(b) Inapplicability. This change does
not apply to an amortizable section 197
intangible (including any property for
which a timely election under § 13261(g)
(2) of the Revenue Reconciliation Act of
1993, 1993-3 C.B. 1, 128, was made).
(2) Manner of making change. This
change is made on a cut-off basis and
applies only to distributor commissions
paid or incurred on or after the beginning of the year of change. Accordingly,
a § 481(a) adjustment is neither permitted
nor required.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.04 is “47.”
(4) Contact information. For further
information regarding a change under this
section, contact Maria Castillo Valle at
(202) 317-7003 (not a toll-free number).
.05 Intangibles.
(1) Description of change. This change
applies to a taxpayer that wants to change
its treatment of an item to a method of
accounting permitted by §§ 1.263(a)-4,
1.263(a)-5, and 1.167(a)-3(b). See Rev.
Proc. 2006-12, 2006-1 C.B. 310, as modmation, and documentation required for
this change.
(2) Section 481(a) adjustment. In computing the § 481(a) adjustment for this
change, the taxpayer takes into account
only amounts paid or incurred in taxable
years ending on or after January 24, 2002.
See section 5 of Rev. Proc. 2006-12 for
detailed rules for computing the § 481(a)
adjustment and reporting it on Form 3115.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change

number for a change under this section
11.05 is “78.”
(4) Contact information. For further
information regarding a change under this
section, contact Alicia Lee-Won at (202)
317-7003 (not a toll-free number).
.06 Rotable spare parts safe harbor
method.
(1) Description of change. This change
applies to a taxpayer that maintains a pool
or pools of rotable spare parts that are
primarily used to repair customer-owned
(or customer-leased) equipment under
warranty or maintenance agreements, and
wants to change its method of accounting for the rotable spare parts to the safe
harbor method of accounting provided in
Rev. Proc. 2007-48, 2007-2 C.B. 110. The
taxpayer must meet the requirements in
section 4.01 of Rev. Proc. 2007-48 to use
this safe harbor method of accounting.
(2) Change from safe harbor method.
A taxpayer that is required to change its
method of accounting from the safe harbor
method under section 5.06 of Rev. Proc.
2007-48, must make the change under
section 21.09 of this revenue procedure.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.06 is “109.”
(4) Contact information. For further
information regarding a change under this
section, contact Eugene Kirman at (202)
317-7003 (not a toll-free number).
.07 Repairable and reusable spare
parts.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to change its
method of accounting to treat repairable
and reusable spare parts as depreciable
property to conform with the holdings in
Rev. Rul. 69-200, 1969-1 C.B. 60, and
Rev. Rul. 69-201, 1969-1 C.B. 60. This
change applies to repairable and reusable
spare parts that: are owned by the taxpayer
at the beginning of the year of change; are
used to repair equipment owned by the
taxpayer; are acquired by the taxpayer for
that the related equipment is acquired;
usually have the same useful life as the
related equipment; and have been placed
in service by the taxpayer after 1986. A
taxpayer making a change in method of

accounting under this section 11.07 may
treat its repairable and reusable spare parts
as tangible property for which depreciation is allowable at the time that the related
equipment is placed in service by the taxpayer. The method of computing depreciation for the repairable and reusable spare
parts is the same method of computing
depreciation for the related equipment.
(b) Inapplicability. This change does
not apply to:
(i) A taxpayer that is currently capitalizing and depreciating the cost of its
repairable and reusable spare parts, or
that is currently capitalizing the cost of
its repairable and reusable spare parts
and treating these parts as nondepreciable
property (but see section 6.01 of this revenue procedure for making a change from
an impermissible to a permissible method
of accounting for depreciation);
(ii) A taxpayer that is using an impermissible method of accounting for depreciation for the related equipment for which
the repairable and reusable spare parts are
acquired, unless the taxpayer concurrently
changes its method to use a permissible
method of accounting for depreciation
under section 6 of this revenue procedure;
(iii) A repairable and reusable spare

(a) To change a method of accounting under this section 11.07, a taxpayer

spare parts, temporary spare parts, or
standby emergency spare parts in § 1.1623(c)(2) or (3), for which the cost was paid
or incurred by the taxpayer in a taxable
year beginning on or after January 1, 2014
(or in a taxable year beginning on or after
January 1, 2012, if the taxpayer chooses
to apply § 1.162-3 to amounts paid or
incurred in those taxable years), and for
which the taxpayer did not make the election under § 1.162-3(d) to capitalize and
depreciate such repairable and reusable
spare part; or
(iv) a taxpayer that chooses to apply
§ 1.162-3T to a repairable and reusable

(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19; and
(v) Part IV, all lines except line 25.
(3) Concurrent automatic change.
(a) A taxpayer making both this change
and a change to a UNICAP method under
section 12.01, 12.02, 12.08, or 12.12 of
this revenue procedure (as applicable)

rotable spare parts or temporary spare
parts in § 1.162-3T(c)(2), for which the
cost was paid or incurred by the taxpayer
in a taxable year beginning on or after January 1, 2012, and before January 1, 2014,
and for which the taxpayer did not make
the election under § 1.162-3T(d) to capitalize and depreciate such repairable and
reusable spare part.
(2) Additional requirements.

enue procedure) must complete Schedule
E of Form 3115 for the repairable and
reusable spare parts and also attach the
following information to the completed
Form 3115:
(i) A description of the repairable and
reusable spare parts;
(ii) A list of related equipment for
which the repairable and reusable spare
parts are acquired; and
(iii) A complete description of the
method of computing depreciation (for
example, depreciation method, recovery
period, convention, and applicable asset
class under Rev. Proc. 87-56, 1987-2 C.B.
Proc. 88-22, 1988-1 C.B. 785) that the
taxpayer uses for the related equipment
for which the repairable and reusable
spare parts are acquired.
(b)
-

of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2022):

a single Form 3115 for both changes, in
which case the taxpayer must enter the
designated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, for information on
making concurrent changes. For examin section 6.01(4)(b) of this revenue procedure, must include on the single Form
3115 the information required by section
11.07(2)(b) of this revenue procedure and

the information required by the lines on
Form 3115, applicable to the UNICAP
method change, including Part II, lines 14
and 15, Part IV, and Schedule D, and must
include a separate response to each line
on Form 3115 that is applicable to both
changes (such as Part II lines 6b, 7, 8b,
14, and, as applicable for this change, Part
IV) for which the taxpayer’s response is
different for this change and the change to
a UNICAP method.
(b) A taxpayer making both this
change and a change to a permissible
method of accounting for depreciation
for repairable and reusable spare parts,
or for the related equipment for which
the repairable and reusable spare parts
are acquired, under section 6 of this revenue procedure (as applicable) for the

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.07 is “121.”
(5) Contact information. For further
information regarding a change under this
section, contact Eugene Kirman at (202)
317-7003 (not a toll-free number).
.08 Tangible property.
(1) Description of change.
(a) Applicability. This change, as
described in Rev. Proc. 2014-16, 2014-9
I.R.B. 606, applies to a taxpayer that wants
to make a change to a method of accountenue procedure and permitted under:
(i) Section 1.162-3, § 1.162-4,
§ 1.263(a)-1, § 1.263(a)-2, or § 1.263(a)-3

Form 3115 for both changes, in which
case the taxpayer must enter the designated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent

for taxable years beginning on or after
January 1, 2012; or
(ii) Section 1.446-1(e)(2)(ii)(d)(2) if
the property for which the taxpayer is otherwise changing its method of accounting
under this section is depreciable under
either the present or the proposed method
of accounting.
(b) Inapplicability. This change does
not apply to:
(i) A taxpayer that wants to change its
method of accounting for dispositions of
depreciable property, including a change
in the asset disposed of (but see sections
6.10, 6.13, 6.14, and 6.15 of this revenue
procedure);
(ii) Amounts paid or incurred for certain materials and supplies that the taxpayer has elected to capitalize and depreciate under § 1.162-3(d);
(iii) Amounts paid or incurred to which
the taxpayer has elected to apply the de
minimis safe harbor under § 1.263(a)-1(f);
(iv) Amounts paid or incurred for
employee compensation or overhead that
the taxpayer has elected to capitalize
under § 1.263(a)-2(f)(2)(iv)(B);
(v) Amounts paid or incurred to which
the taxpayer has elected to apply the
safe harbor for small taxpayers under
§ 1.263(a)-3(h);
(vi) Amounts paid or incurred for
repair and maintenance costs that the
taxpayer has elected to capitalize under
§ 1.263(a)-3(n);
(vii) Amounts paid or incurred to facilitate the acquisition or disposition of assets

taxpayer must include on the single Form
3115 the information required to be comtaxpayer under this revenue procedure
for each change in method of accounting
included on that Form 3115.
(c) A taxpayer making this change also
may establish pools for the repairable
and reusable spare parts or may identify
disposed repairable and reusable spare
parts in accordance with section 6.12 of
this revenue procedure. A taxpayer making both this change and the change under
section 6.12 of this revenue procedure
a single Form 3115 for both changes, in
which case the taxpayer must enter the
designated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
taxpayer must include on the single Form
3115 the information required to be comtaxpayer under this revenue procedure
for each change in method of accounting
included on that Form 3115.

that constitute a trade or business (but see
section 10.05 of this revenue procedure);
or
(viii) Amounts paid or incurred for
repair and maintenance costs that the taxpayer is changing from capitalizing to
deducting and for which the taxpayer has
(A) claimed a federal income tax credit,
(B) elected to apply § 168(k)(4) (as in
effect on the day before the date of enactment of Public Law 115-97, 131 Stat. 2054
(Dec. 22, 2017), commonly referred to as
the Tax Cuts and Jobs Act (TCJA)), or (C)
property in lieu of tax credits under section 1603 of the American Recovery and
Reinvestment Tax Act of 2009, Div. B of
Pub. L. No. 111-5, 123 Stat. 115 (February
17, 2009), as amended by section 707 of
the Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of
2010, Pub. L. No. 111-312, 124 Stat. 3296
(December 17, 2010).
(2) Covered changes. This section
11.08 only applies to the following
changes in methods of accounting:
(a) A change to deducting amounts paid
or incurred to acquire or produce non-incidental materials and supplies in the taxtaxpayer’s operations or consumed in the
taxpayer’s operations in accordance with
§§ 1.162-3(a)(1) and 1.162-3(c)(1);
(b) A change to deducting amounts
to acquire or produce incidental materials and supplies in the taxable year in
which paid or incurred in accordance with
§§ 1.162-3(a)(2) and 1.162-3(c)(1);
(c) A change to deducting amounts paid
or incurred to acquire or produce non-incidental rotable and temporary spare parts
in the taxable year which the taxpayer
disposes of the parts in accordance with
§§ 1.162-3(a)(3) and 1.162-3(c)(2);
(d) A change to the optional method
of accounting for rotable and temporary
spare parts in accordance with § 1.1623(e);
(e) A change to deducting amounts paid
or incurred for repair and maintenance in
accordance with § 1.162-4, including a
change, if any, in identifying the unit of
property under § 1.263(a)-3(e) or, in the
case of a building, identifying the building structure or building systems under
§ 1.263(a)-3(e)(2) for purposes of making
the change to deducting the amounts;

(f) A change to capitalizing amounts
paid or incurred for improvements to
tangible property in accordance with
§ 1.263(a)-3 and, if depreciable, to depreciating such property under § 167 or § 168,
including a change, if any, in identifying
the unit of property under § 1.263(a)-3(e)
or, in the case of a building, identifying
the building structure or building systems
under § 1.263(a)-3(e)(2) for purposes
of making the change to capitalizing the
amounts;
(g) A change by a dealer in property
to deduct amounts paid or incurred for
commissions and other costs that facilitate
the sale of property in accordance with
§ 1.263(a)-1(e)(2);
(h) A change by a non-dealer in property to capitalizing amounts paid or
incurred for commissions and other costs
that facilitate the sale of property in accordance with § 1.263(a)-1(e);
(i) A change to capitalizing amounts
paid or incurred to acquire or produce
property in accordance with § 1.263(a)2, and if depreciable, to depreciating such
property under § 167 or § 168;
(j) A change to deducting amounts paid
or incurred in the process of investigating or otherwise pursuing the acquisition
of real property if the amounts meet the
requirements of § 1.263(a)-2(f)(2)(iii);
and
(k) A change to the optional regulatory
accounting method in accordance with
§ 1.263(a)-3(m) to determine whether
amounts paid or incurred to repair, maintain, or improve tangible property are
treated as deductible expenses or capital
expenditures.
(3) Manner of making change.
(a) Form 3115. In addition to the other
information required on line 14 of Form
3115, the taxpayer must include the following:
(i) The citation to the paragraph of the
provides for the proposed method, or
methods, of accounting to which the taxpayer is changing (for example, § 1.1623(a), § 1.263(a)-3(i), § 1.263(a)-3(k)); and
(ii) If the taxpayer is changing any
unit(s) of property under § 1.263(a)-3(e)
or, in the case of a building, is changing the
or building system(s) under § 1.263-3(e)
(2) for purposes of determining whether

amounts are deducted as repair and maintenance costs under section § 1.162-4 or
capitalized as improvement costs under
§ 1.263(a)-3, the taxpayer must include a
detailed description of the unit(s) of property, building structure(s), or buildings
system(s) used under its present method
of accounting and a detailed description
of the unit(s) of property, building structure(s), and building system(s) under its
proposed method of accounting, together
tangible property regulations under which
the unit of property is permitted.
(iii) A taxpayer changing its method
of accounting under this section 11.08 to
capitalizing amounts paid or incurred and
to depreciating such property under § 167
or § 168, as applicable, must complete
Schedule E of Form 3115.
(b)
-

of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2022):
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I, line 1(a);
(iv) Part II, all lines except lines 13,
15, 16, 17, and 19, if the change is to not
depreciating property;
(v) Part II, all lines except line 13, line
15b, 16, 17, and 19, if the change is to
depreciating property;
(vi) Part IV, lines 26 and 27; and
(vii) Schedule E, if applicable.
(4) Concurrent automatic change.
(a) A taxpayer making two or more
changes in method of accounting pursingle Form 3115 for all of these changes
and must enter the designated automatic
accounting method change numbers for
all of these changes on the appropriate line
on the Form 3115.
(b) A taxpayer making both one or
more changes in method of accounting
pursuant to this section 11.08 and a change
to a UNICAP method under section 12 of
this revenue procedure (as applicable) for
gle Form 3115 that includes all of these
changes and must enter the designated
automatic accounting method change

numbers for all of these changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent

of this revenue procedure, must include
on the single Form 3115 the information
required by section 11.08(3)(b) of this
revenue procedure for this change and the
information required by the lines on Form
3115, applicable to the UNICAP method
change, including Part II lines 14 and 15,
Part IV, and Schedule D, and must include
a separate response to each line on Form
3115 that is applicable to both changes
(such as Part II lines 6b, 7, 8b, 14, and,
as applicable for this change, Part IV) for
which the taxpayer’s response is different
for this change and the change to a UNICAP method.
(5) Section 481(a) adjustment.
(a) In general. Except as provided in
section 11.08(5)(b) of this revenue procedure, a taxpayer changing to a method of
accounting provided in this section 11.08
must apply § 481(a) and take into account
any applicable § 481(a) adjustment in the
manner provided in section 7.03 of Rev.
Proc. 2015-13.
(b) Limited adjustment for certain
changes.
(i) Final tangible property regulations. A
taxpayer changing to a method of accounting under § 1.162-3 (except § 1.162-3(e)),
§ 1.263(a)-2(f)(2)(iii), § 1.263(a)-2(f)(3)
(ii), § 1.263(a)-3(m), § 1.263A-1(e)(2)(i)
(A), and § 1.263A-1(e)(3)(ii)(E) is required
to calculate a § 481(a) adjustment as of the
change that takes into account only amounts
paid or incurred in taxable years beginning
on or after January 1, 2014. Optionally, a
taxpayer may take into account amounts
paid or incurred in taxable years beginning
on or after January 1, 2012.
(ii) Small business exception. A taxpayer that met the scope requirements of
section 4 of Rev. Proc. 2015-20, 2015-9
I.R.B. 694, and that changed its method
of accounting under section 10.11(3)(a) of
Rev. Proc. 2015-14 (which is now section
11.08(2) of this revenue procedure) by following section 5 of Rev. Proc. 2015-20 is
required to calculate a § 481(a) adjustment
that takes into account only amounts paid

or incurred in taxable years beginning on
or after January 1, 2014.
(c) Itemized listing on Form 3115. A
taxpayer changing to a method of accounting provided in this section 11.08 must
include on Form 3115 (Rev. December
2022), Part IV, line 26, the total § 481(a)
adjustment for each change in method of
accounting being made. If the taxpayer is
making more than one change in method
property regulations, the taxpayer (includinclude on an attachment to Form 3115:
(i) The information required by Part
IV, line 26 of Form 3115 (Rev. December 2022) for each change in method of
accounting (including the amount of the
§ 481(a) adjustment for each change in
method of accounting, which includes the
portion of the § 481(a) adjustment attributable to UNICAP);

(ii) The information required by Part
II, line 14 of Form 3115 (Rev. December
2022) for each change; and
(iii) The citation to the paragraph of
provides for each proposed method of
accounting.
(d) Repair allowance property. A taxpayer changing to a method of accounting
provided by § 1.263(a)-3 under this section 11.08 must not include in the § 481(a)
adjustment any amount attributable to property for which the taxpayer elected to apply
the repair allowance under § 1.167(a)-11(d)
(2) for any taxable year in which the repair
allowance election was made.
(e) Statistical Sampling. Except for any
change in accounting method for which a
taxpayer is required to compute a § 481(a)
adjustment under section 11.08(5)(b) of
this revenue procedure, a taxpayer changing its method of accounting under this

Description of Change
A change to deducting amounts paid or incurred for repair and maintenance
or a change to capitalizing amounts paid or incurred for improvements to
tangible property and, if depreciable, to depreciating such property under
§ 167 or § 168. Includes a change, if any, in the method of identifying the
unit of property, or in the case of a building, identifying the building structure or building systems for the purpose of making this change.
Change to the regulatory accounting method.
Change to deducting non-incidental materials and supplies when used or
consumed.
Change to deducting incidental materials and supplies when paid or incurred.
Change to deducting non-incidental rotable and temporary spare parts when
disposed of.
Change to the optional method for rotable and temporary spare parts.
Change by a dealer in property to deduct commissions and other costs that
facilitate the sale of property.
Change by a non-dealer in property to capitalizing commissions and other
costs that facilitate the sale of property.
Change to capitalizing acquisition or production costs and, if depreciable, to
depreciating such property under § 167 or § 168.
Change to deducting certain costs for investigating or pursuing the acquisition of real property (whether and which).

section 11.08 may use statistical sampling
in determining the § 481(a) adjustment by
following the guidance provided in Rev.
Proc. 2011-42, 2011-37 I.R.B. 318.
(6) No audit protection. A taxpayer calculating a § 481(a) adjustment under section 11.08(5)(b)(ii) of this revenue procedure that takes into account only amounts
paid or incurred in taxable years beginning on or after January 1, 2014, does not
receive audit protection under section 8.01
of Rev. Proc. 2015-13 for amounts subject to a change under this section 11.08
that are paid or incurred in taxable years
beginning before January 1, 2014. See
section 5.02 of Rev. Proc. 2015-20.
(7) Designated automatic accounting method change number. See the
following table for the designated automatic accounting method change numbers (DCN) for the changes in method of
accounting under this section 11.08.

DCN

Citation

184

§§ 1.162-4, 1.263(a)-3

185

§ 1.263(a)-3(m)

186

§ 1.162-3(a)(1), (c)(1)

187

§ 1.162-3(a)(2), (c)(1)

188

§ 1.162-3(a)(3), (c)(2)

189

§ 1.162-3(e)

190

§ 1.263(a)-1(e)(2)

191

§ 1.263(a)-1(e)(1)

192

§ 1.263(a)-2

193

§ 1.263(a)-2(f)(2)(iii)

(8) Contact information. For further
information regarding a change under this
section, contact Douglas Kim at (202)
317-7003 (not a toll-free number).
.09 Railroad track structure expenditures.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for railroad track
structures to:
(a) the safe harbor method provided in
Rev. Proc. 2002-65, 2002-2 C.B. 700; or
(b) the safe harbor method provided in
Rev. Proc. 2001-46, 2001-2 C.B. 263.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
11.09 is “213.”
(3) Contact information. For further
information regarding a change under this
section, contact Douglas Kim at (202)
317-7003 (not a toll-free number).
.10 Remodel-refresh safe harbor
method.
(1) Description of change.
(a) Applicability. This change applies
tion 4.01 of Rev. Proc. 2015-56, 2015-49
I.R.B. 827, and within the scope of Rev.
Proc. 2015-56 that wants to change to
the remodel-refresh safe harbor method
of accounting provided in section 5.02 of
Proc. 2020-25, 2020-19 I.R.B. 785, for
of a late general asset account election as
provided under section 5.02(6)(d) of Rev.
Proc. 2015-56.
(b) Inapplicability. This change does
not apply to the following:
(i) The revocation of a partial disposition election that is made pursuant to section 5.02(4)(b)(ii)(B) of Rev. Proc. 201556;
(ii) A change in determination of the
asset disposed of described in section
5.02(5) of Rev. Proc. 2015-56 (which is
made under section 6.13(3)(a) or 6.15(3)(a)
of this revenue procedure, as applicable).
See section 11.10(5)(b) of this revenue procedure for making the change under section
6.13(3)(a) or 6.15(3)(a) of this revenue procedure as a concurrent change;
(iii) The making of a late general asset
account election not provided under section 5.02(6)(d) of Rev. Proc. 2015-56;

(iv) If section 5.02(4)(c) of Rev.
Proc. 2015-56 applies to a qualified
building (partial disposition election
made in a prior year and the qualified
taxpayer did not revoke such election
within the time and in the manner provided in section 5.02(4)(b)(ii) of Rev.
Proc. 2015-56), any qualified costs paid
for that qualified building prior to the
year of change for a Form 3115 filed to
make the change to the remodel-refresh
safe harbor method of accounting under
this section 11.10; or
(v) If section 5.02(5)(b) of Rev. Proc.
ing (recognized gain or loss under
§ 1.168(i)-1 or § 1.168(i)-8, or in a taxable year beginning before January 1,
2012, for disposition of a component of a
payer did not make the required change in
method of accounting to be in accord with
§ 1.168(i)-1(e)(2)(viii) or § 1.168-8(c)(4),

remodel-refresh safe harbor and takes the
entire amount of the § 481(a) adjustment
taxpayer’s taxable income for that year of

6.13(3)(a) or 6.15(3)(a) of this revenue
procedure, as applicable, for that qualentire amount of the § 481(a) adjustment
in computing taxable income for the year
of change.
(2) No audit protection. If section
5.02(4)(c) or 5.02(5)(b) of Rev. Proc.

only the following information on Form
3115 (Rev. December 2022):
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I, line 1(a);
(iv) Part II, all lines except lines 5, 13,
15, 16, 17, and 19;
(v) Part IV, lines 25, 26, and 27;
(vi) Schedule E; and
(vii) If applicable, the election statement described in section 11.10(3)(b)(ii).
(b) Late general asset account election.
(i) In general. If under section 5.02(6)
taxpayer is required to make a late general asset account election, the late general asset account election change is made
which the unadjusted depreciable basis
and the depreciation reserve of the asset
as of the beginning of the year of change
are accounted for using the new method of
accounting. The late general asset account
election change requires the general asset
account to include a beginning balance
for both the unadjusted depreciable basis
and the depreciation reserve. The beginning balance for the unadjusted depreciable basis of each general asset account is
equal to the sum of the unadjusted depreciable bases as of the beginning of the
year of change for all assets included in
that general asset account. The beginning
balance of the depreciation reserve of each
general asset account is equal to the sum
of the greater of the depreciation allowed
or allowable as of the beginning of the
year of change for all assets included in
that general asset account.
(ii) Election statement

(and, in the case of section 5.02(5)(b),
the remodel-refresh safe harbor), the qualtection under section 8.01 of Rev. Proc.
2015-13 in connection with this change
See section
8.02(2) of Rev. Proc. 2015-13.
(3) Manner of making change.
(a)
-

of this revenue procedure, may complete

taxpayer) must attach to its Form 3115 a
payer agrees to the following additional
terms and conditions:
to, and agrees to apply, all of the provisions of § 1.168(i)-1 to the assets that are
5.02(6)(d) of Rev. Proc. 2015-56; and
(B) Except as provided in § 1.168(i)-1(c)
(1)(ii)(A), (e)(3), (g), or (h), the election
section 5.02(6)(d) of Rev. Proc. 2015-56
is irrevocable and will be binding on the

income for the year of change and for all
subsequent taxable years with respect to
the assets that are subject to this election.
(c) Cut-off method required for certain
changes.
(i) If section 5.02(4)(c) of Rev. Proc.

in the case of section 5.02(5)(b) of Rev.
not make the required change on or before
payer uses the remodel-refresh safe harbor), for the change to the remodel-refresh
safe harbor method of accounting for that

the change to the remodel-refresh safe
harbor method of accounting for that
(b) Repair allowance property. A qualcut-off method and applies only to qual-

accounting provided under this section
11.10 must not include in the § 481(a)
adjustment any amount attributable to

year of change for the change made to the
remodel-refresh safe harbor method of
accounting.
(ii) If section 5.02(5)(b) of Rev. Proc.

elected to apply the repair allowance
under § 1.167(a)-11(d)(2) for any taxable
year in which the repair allowance election was made.
(c) Statistical sampling
taxpayer changing its method of accounting under this section 11.10 may use
statistical sampling in determining the
§ 481(a) adjustment only by following
the sampling procedures provided in Rev.
Proc. 2011-42, 2011-37 I.R.B. 318.
(5) Concurrent automatic change.

its present method of accounting to be in
accord with § 1.168(i)-1(e)(2)(viii) or
§ 1.168(i)-8(c)(4), as applicable, on or
safe harbor and take the entire amount of
the § 481(a) adjustment into account in
able income for that year of change, the
change to the remodel-refresh safe harbor
building, and any improvements to that

building, beginning in the year of change
for the change made to comply with
§ 1.168(i)-1(e)(2)(viii) or § 1.168(i)-8(c)
(4), as applicable. See section 6.13(3)(a)
and section 6.15(3)(a) of this revenue procedure, as applicable.
(4) Section 481(a) adjustment.
(a) In general
changing its method of accounting under
this section 11.10 must apply § 481(a) and
take into account any applicable § 481(a)
adjustment in the manner provided in section 7.03 of Rev. Proc. 2015-13. However,
a § 481(a) adjustment is neither required
nor permitted for the late general asset
account election under section 5.02(6)(d)
of Rev. Proc. 2015-56 or, if section 5.02(4)
(c) or 5.02(5)(b) of Rev. Proc. 2015-56

SECTION 12. UNIFORM
CAPITALIZATION (UNICAP)
METHODS (§ 263A)
.01 Certain uniform capitalization
(UNICAP) methods used by resellers and
reseller-producers.
(1) Description of change.
(a) Applicability. This change applies
to:
(i) a reseller that is a former small
business taxpayer, or a reseller-producer
that is a former small business taxpayer,
that wants to change from a permissible
non-UNICAP inventory capitalization
method to a permissible UNICAP method
ify as a small business taxpayer;
(ii) a reseller-producer that wants to
change from a permissible UNICAP
method for both its production and resale
resale method described in § 1.263A-3(d)

change for more than one asset for the

its production and resale activities under
§ 1.263A-3(a)(4) (resellers with de minimis production activities);
(iii) a reseller-producer that wants to

Form 3115 for all such assets. The single Form 3115 must provide a single net
§ 481(a) adjustment for all such changes.

resale method described in § 1.263A-3(d)
(3) for both its production and resale activities to a permissible UNICAP method

change, a change under section 6.13(3)
(a) of this revenue procedure, and any
change listed in section 6.12(3)(b) or section 6.15 of this revenue procedure for the

for both its production and resale activi-

Form 3115 for all such changes and must
enter the designated automatic accounting
method change numbers for the changes
on the appropriate line on the Form 3115.
See section 6.03(1)(b) of Rev. Proc. 201513 for information on making concurrent
changes.
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 11.10 is
“222.”
(7) Contact information. For further
information regarding a change under this
section, contact Samuel Terhaar at (202)
317-5100 (not a toll-free number).

for both its production and resale activities under § 1.263A-3(a)(4);
(iv) a reseller that wants to change its
permissible UNICAP method to include a
special reseller cost allocation rule;
(v) a reseller or reseller-producer that
wants to change to a UNICAP method (or
ulations, including any necessary changes
§ 263A that will be accounted for using
the proposed method, in any taxable year
not qualify as a small business taxpayer;
or
(vi) a reseller or reseller-producer that
wants to change from not capitalizing a
cost subject to § 263A to capitalizing that
cost under a UNICAP method (or meth-

tions that the reseller or reseller-producer
is already using.
(b) Inapplicability.
(i) Self constructed assets. This change
does not apply to a taxpayer that wants

production method. This change does not
include a change to recharacterize section

(vi) Direct reallocation or step-allocation methods. This change does not apply
to a taxpayer that wants to change either
to or from the direct reallocation method
or the step-allocation method under
§§ 1.263A-1(g)(4)(iii)(A) and 1.263A1(g)(4)(iii)(B), respectively.
(vii) Election or revocation of election to
use 90-10 de minimis rule. This change does
not apply to a taxpayer that presently uses
the direct reallocation method or the step-allocation method under §§ 1.263A-1(g)(4)
(iii)(A) and 1.263A-1(g)(4)(iii)(B), respectively, and (1) wants to elect the 90-10 de
minimis rule, under § 1.263A-1(g)(4)(ii), to
allocate a mixed service department’s costs
to resale activities; or (2) wants to revoke an
election to use the 90-10 de minimis rule to
allocate a mixed service department’s costs
to resale activities.
(2) Eligibility rule inapplicable. The
eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
does not apply to the change described in
section 12.01(1)(a)(i) of this revenue procedure.
(3)
.
(a) “Reseller” means a taxpayer
that acquires real or personal property
described in § 1221(a)(1) for resale.
(b) “Producer” means a taxpayer that
produces real or tangible personal property.
(c) “Reseller-producer” means a taxpayer that is both a producer and a reseller.
(d) “Permissible UNICAP method”
means a method of capitalizing costs that
is permissible under § 263A.

in § 1.263A-1(d)(3) (or vice versa) for a
taxpayer that uses or is changing to the sim-

described in the regulations” does not
include any other reasonable allocation
method within the meaning of § 1.263A1(f)(4). However, a “UNICAP method

production method. See section 12.17 of
this revenue procedure for certain changes
to recharacterize section 471 costs as additional section 263A costs (or vice versa).
(v) Revocation of election under
§ 263A(d)(3). This change does not apply
to a taxpayer that wants to revoke its
election under § 263A(d)(3) not to have
§ 263A apply to certain plants produced
by the taxpayer in a farming business. But
see Rev. Proc. 2020-13, 2020-11 I.R.B.
515, for the procedures to revoke an election under § 263A(d)(3).

includes:
(i) the 90-10 de minimis rule to allocate a mixed service department’s costs
to resale activities (§ 1.263A-1(g)(4)(ii))
(but see paragraph (1)(b)(vii) of this section);
(ii) the 1/3 - 2/3 rule to allocate labor
costs of personnel to purchasing activities
(§ 1.263A-3(c)(3)(ii)(A));
(iii) the 90-10 de minimis rule to allocate a dual-function storage facility’s costs
to property acquired for resale (§ 1.263A3(c)(5)(iii)(C));

method for self-constructed assets under
§§ 1.263A-1(h)(2)(i)(D), 1.263A-2(b)(2)
(i)(D), and 1.263A-2(c)(2), respectively.
(ii) Election or revocation of election
to use a historic absorption ratio. This
change does not apply to a taxpayer that
(1) wants to make a historic absorption
method under §§ 1.263A-2(b)(4), 1.263A2(c)(4), or 1.263A-3(d)(4), respectively;
or (2) wants to revoke an election to use
a historic absorption ratio with the simplisee §§ 1.263A-2(b)(4)
(iii)(B), 1.263A-2(c)(4), or 1.263A-3(d)
(4)(iii)(B), respectively).
(iii) Interest capitalization. This change
does not apply to a change in method of
accounting for interest capitalization (but
see section 12.14 of this revenue procedure).
(iv) Recharacterizing costs under the
-

(§ 1.263A-1(f)(2));
(v) the burden rate method (§ 1.263A1(f)(3)(i));
(vi) the standard cost method
(§ 1.263A-1(f)(3)(ii));
(vii) the direct reallocation method
(§ 1.263A-1(g)(4)(iii)(A)) (but see paragraphs (1)(b)(vi) and (vii) of this section);
(viii) the step-allocation method
(§ 1.263A-1(g)(4)(iii)(B)) (but see paragraphs (1)(b)(vi) and (vii) of this section);
(§ 1.263A-1(h)) (with either a labor-based
allocation ratio or a production cost allocation ratio);
out a historic absorption ratio election
(§ 1.263A-3(d));
(xi) the alternative method to determine
amounts of section 471 costs by using a
1(d)(2)(iii));
(xii) the method to determine amounts
of section 471 costs by using the amounts
incurred in the taxable year for federal
income tax purposes (§ 1.263A-1(d)(2)(i));
(xiii) the safe harbor method for certain
variances and under- or over- applied burdens (§ 1.263A-1(d)(2)(v));
(xiv) the removal of one or more costs
from section 471 costs as required in
§ 1.263A-1(d)(2)(vi);
(xv) the removal of one or more costs
from section 471 costs using negative
adjustments to additional section 263A
costs as permitted in § 1.263A-1(d)(3)(ii)
(B);
(xvi) the de minimis rule for certain
direct labor costs (§ 1.263A-1(d)(2)(iv)
(B));
(xvii) the de minimis rule for certain
direct material costs (§ 1.263A-1(d)(2)
(iv)(C));
method without a historic absorption ratio
election (§ 1.263A-2(b));
tion method without a historic absorption
ratio election (§ 1.263A-2(c));
(xx) the direct material costs or pre-production labor costs allocation methods for
capitalizable mixed service costs under the
(§ 1.263A-2(c)(3)(iii)(B)); and
(xxi) the 90-10 de minimis rule to allocate capitalizable mixed service costs

method (§ 1.263A-2(c)(3)(iii)(C)).
(f) “Special reseller cost allocation
rule” means the 90-10 de minimis rule
to allocate a mixed service department’s
costs to property acquired for resale
(§ 1.263A-1(g)(4)(ii)), the 1/3 – 2/3 rule
to allocate labor costs of personnel to
purchasing activities (§ 1.263A-3(c)(3)
(ii)(A)), and the 90-10 de minimis rule
to allocate a dual-function storage facility’s costs to property acquired for resale
(§ 1.263A-3(c)(5)(iii)(C)).
(g) “Permissible non-UNICAP inventory capitalization method” means a
method of capitalizing inventory costs
that is permissible under § 471.
(h) “Small business taxpayer” means
a taxpayer, other than a tax shelter under
§ 448(d)(3), proposed § 1.448-2(b)(2), or
§ 1.448-2(b)(2), as applicable, that meets
the § 448(c) gross receipts test as provided
in § 448(c), proposed § 1.263A-1(j), or
§ 1.263A-1(j), as applicable. The § 448(c)
gross receipts test is met if a taxpayer has
average annual gross receipts for the three
prior taxable years of $25,000,000 or
in § 448(c), proposed §§ 1.448-2(c),
or § 1.448-2(c), as applicable. For taxable years beginning in 2019, 2020 and
$26,000,000. See Rev. Proc. 2018-57,
2018-49 I.R.B. 827, Rev. Proc. 2019-44,
2019-47 I.R.B. 1093, or Rev. Proc. 202045, 2020-46 I.R.B. 1016, as applicable.
For a taxable year beginning in 2022, the
See Rev. Proc. 2021-45, 2021-48 I.R.B.
764. For a taxable year beginning in
$29,000,000. See Rev. Proc. 2022-38,
2022-45 I.R.B. 445. For a taxable year
amount is $30,000,000. See Rev. Proc.
2023-34, 2023-48 I.R.B. 1287.
(i) “Former small business taxpayer”
as a small business taxpayer. A former
small business taxpayer includes a taxbusiness taxpayer for the year of change
because it is a tax shelter under § 448(d)
(3), proposed § 1.448-2(b)(2), or § 1.4482(b)(2), as applicable.
(4) Section 481(a) adjustment
period. Except as otherwise provided

in this section 12.01(4), beginning with
the year of change, a taxpayer changing
its method of accounting for costs under
section 12.01(1)(a)(ii) or 12.01(1)(a)
(iii) of this revenue procedure generally
must take any applicable net positive
§ 481(a) adjustment for such change
into account ratably over the same number of taxable years, not to exceed four,
that the taxpayer used its former method
of accounting. A taxpayer changing its
method of accounting for costs under
section 12.01(1)(a)(i), 12.01(1)(a)(iv),
12.01(1)(a)(v), or 12.01(1)(a)(vi) of
this revenue procedure must take any
applicable net positive § 481(a) adjustment for such change into account as
provided in section 7.03 of Rev. Proc.
2015-13.
(5) Multiple changes. A taxpayer making both this change and another change
in method of accounting for the same year
of change must comply with the ordering
rules of § 1.263A-7(b)(2).
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.01 is “22.”
(7) Example. The following example
illustrates the principles of this section
12.01 and 12.16 for small business taxpayers and former small business taxpayers.
X is a C corporation incorporated on January 2,
2017, that adopted a taxable year ending December
31 and an overall accrual method of accounting.
X is a reseller of personal property. To determine
whether X is a small business taxpayer, as provided
in section 12.01(3)(h) of this revenue procedure, X
calculated its average annual gross receipts for the
three taxable years (or fewer, if applicable) immediately preceding the taxable year being analyzed
as shown in the table below, in accordance with
§ 1.263A-1(j):
Example – Average AGR Calculation

Current

Average Annual Gross
Receipts for the Three
Preceding the Current

2017

0

2018

24,000,000

2019

27,000,000

2020

27,000,000

2021

25,000,000

Furthermore, X adopted the dollar-value LIFO
inventory method and has the following LIFO inventory balances determined without considering the
effects of the UNICAP method:
Example – Inventory Balance Calculation

Beginning

Ending

2017

$10,000,000

$11,000,000

2018

11,000,000

12,000,000

2019

12,000,000

13,000,000

2020

13,000,000

14,000,000

2021

14,000,000

15,000,000

X was not required to use the UNICAP method
for 2017 and 2018 because its average annual gross
receipts for such years made X a small reseller, as
described in section 12.01(3)(b) of Rev. Proc. 20192022-2 I.R.B. 310 for 2017, and a small business taxpayer, as described in section 12.01(3)(h) of this revenue procedure, for 2018. X was required by § 263A
to change to the UNICAP method for 2019 because
its average annual gross receipts for the three taxable
years immediately preceding 2019 were $27,000,000,
which exceeded the $26,000,000 threshold permitted by the small business taxpayer exemption under
§ 263A(i). Assume that X was required to capitalize
$800,000 of “additional § 263A costs” to the cost of
its 2019 beginning inventory because of this change
in inventory method. In addition, X was required to
include one-fourth of the § 481(a) adjustment when
computing taxable income for each of the four taxable years beginning with 2019. Thus, X was required
to include a $200,000 positive § 481(a) adjustment in
its 2019 taxable income.
X
without a historic absorption ratio election under
§ 1.263A-3(d)(3) for determining the amount of
additional § 263A costs to be capitalized to each
LIFO layer. Assume that X was required to add
$100,000 of additional § 263A costs to the cost of
its 2019 ending inventory because of the $1,000,000
increment for 2019.

X’s 2019 Ending Inventory:
Description

Amount

Beginning Inventory (Without UNICAP costs)
2019 Increment

$12,000,000
1,000,000

Additional § 263A Costs in Beginning Inventory

800,000

Additional § 263A Costs in 2019 Increment

100,000

Total 2019 Ending Inventory

$13,900,000

X’s Unamortized 2019 § 481(a) Adjustment:
Description

Amount

2019 § 481(a) Adjustment

$800,000

Amount included in 2019 Taxable Income

<200,000>

Unamortized 2019 § 481(a) Adjustment—12/31/19

Because X’s average annual gross receipts of
$27,000,000 for the three taxable years immediately
preceding 2020 exceeded the $26,000,000 threshold,
X failed to qualify for the small business taxpayer

exemption for 2020 and was required to continue
using the UNICAP method for its inventory costs.
Furthermore, X was required to include $200,000
of the unamortized 2019 positive § 481(a) adjust-

$600,000

ment in its 2020 taxable income. Assume that X was
required to add $100,000 of additional § 263A costs
to the cost of its 2020 ending inventory because of
the $1,000,000 increment for 2020.

X’s 2020 Ending Inventory:
Description

Amount

Beginning Inventory (With UNICAP costs)
2020 Increment

$13,900,000
1,000,000

Additional § 263A Costs in 2020 Increment

100,000

Total 2020 Ending Inventory

$15,000,000

X’s Unamortized 2019 § 481(a) Adjustment:
Description

Amount

Unamortized 2019 § 481(a) Adjustment—12/31/19
Amount Included in 2020 Taxable Income
Unamortized 2019 § 481(a) Adjustment—12/31/20

Because X’s average annual gross receipts of
$25,000,000 for the three taxable years immediately
preceding 2021 did not exceed the $26,000,000 threshold, X
under section 263A(i) for 2021 and may change voluntarily from the UNICAP method to a method that

$600,000
<200,000>

no longer capitalizes costs under § 263A for 2021, as
provided in section 12.16 of this revenue procedure.
from the cost of its 2021 beginning inventory, X must
compute a corresponding § 481(a) adjustment, which
is a negative $1,000,000 ($14,000,000 - $15,000,000).

$400,000

The entire amount of this negative § 481(a) adjustment is included in X’s taxable income for 2021. In
addition, X must take the $400,000 remaining portion
of the unamortized 2019 § 481(a) adjustment into
account in its taxable income for 2021, as provided in
section 12.16(5) of this revenue procedure.

X’s 2021 Ending Inventory:
Description
Inventory (With UNICAP costs) Beginning
2021 Increment

Amount
$15,000,000
1,000,000

2021 § 481(a) Adjustment

<1,000,000>

Total 2021 Ending Inventory

$15,000,000

X’s Unamortized 2019 § 481(a) Adjustment:
Description

Amount

Unamortized 2019 § 481(a) Adjustment—12/31/20

$400,000

Amount included in 2021 Taxable Income

<400,000>

Unamortized 2019 § 481(a) Adjustment—12/31/21

$

0

X’s Unamortized 2021 § 481(a) Adjustment:
Amount

Description

2021 § 481(a) Adjustment

$<1,000,000>

Amount included in 2021 Taxable Income

1,000,000

Unamortized 2021 § 481(a) Adjustment—12/31/21

$

(8) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.02 Certain uniform capitalization
(UNICAP) methods used by producers
and reseller-producers.
(1) Description of change.
(a) Applicability. This change applies
to:

12.01(3)(h) of this revenue procedure.
(b) Inapplicability.
(i) Self-constructed assets. This change

method for self-constructed assets under
§§ 1.263A-1(h)(2)(i)(D), 1.263A-2(b)(2)

12.01(3)(b) of this revenue procedure or
12.01(3)(c) of this revenue procedure that
wants to change to a UNICAP method (or
-

§ 263A that will be accounted for using

(ii) Election or revocation of election
to use a historic absorption ratio. This
(1) wants to make a historic absorption
production method under §§ 1.263A-2(b)
2)
wants to revoke an election to use a his-

revenue procedure. This change includes
a change from not capitalizing a cost subject to § 263A to capitalizing that cost for
a producer or a reseller-producer under
-

using; or
(ii) a producer or reseller-producer that
nue procedure, that wants to change from
not capitalizing costs under § 263A(i) to
capitalizing costs under a UNICAP method

2(b)(4)(iii)(B) or 1.263A-2(c)(4), respec(iii) Interest capitalization. This change
accounting for interest capitalization (but
see section 12.14 of this revenue procedure).
(iv) Recharacterizing costs under the
. This change
does not include a change to recharac§ 1.263A-1(d)(2), as additional section
(3), (or vice versa

0

duction method. See section 12.17 of this
revenue procedure for certain changes to
recharacterize section 471 costs as additional section 263A costs (or vice versa).
(v) Reseller-producer using the simpli. This change does not

under § 1.263A-3(d) (but see section
12.01(1) of this revenue procedure for
reseller-producer).
(vi) Direct reallocation or step-allocation methods
to or from the direct reallocation method
or the step-allocation method under
§§ 1.263A-1(g)(4)(iii)(A) and 1.263A(vii) Election or revocation of election
to use 90-10 de minimis rule. This change
uses the direct reallocation method or the
step-allocation method under §§ 1.263A1(g)(4)(iii)(A) and 1.263A-1(g)(4)(iii)(B),
90-10 de minimis rule, under § 1.263A1(g)(4)(ii), to allocate a mixed service
department’s costs to production or resale
activities; or (2) wants to revoke an election to use the 90-10 de minimis rule to
allocate a mixed service department’s
costs to production or resale activities.
(2)
. A “UNICAP method

other reasonable allocation method within
the meaning of § 1.263A-1(f)(4). How-

(q) the de minimis rule for certain direct
material costs (§ 1.263A-1(d)(2)(iv)(C));

described in the regulations” includes:
(a) the 90-10 de minimis rule to allocate a mixed service department’s costs to
production or resale activities (§ 1.263A1(g)(4)(ii)) (but see paragraph (1)(b)(vii)
of this section);
(b) the 1/3 - 2/3 rule to allocate labor
costs of personnel to purchasing activities
(§ 1.263A-3(c)(3)(ii)(A));
(c) the 90-10 de minimis rule to allocate
a dual-function storage facility’s costs to
property acquired for resale (§ 1.263A3(c)(5)(iii)(C));

method without a historic absorption ratio
election (§ 1.263A-2(c)(3));
(s) the direct material costs or pre-production labor costs allocation methods
for capitalizable mixed service costs

(§ 1.263A-1(f)(2));
(e) the burden rate method (§ 1.263A1(f)(3)(i));
(f) the standard cost method (§ 1.263A1(f)(3)(ii));
(g) the direct reallocation method
(§ 1.263A-1(g)(4)(iii)(A)) (but see paragraphs (1)(b)(vi) and (vii) of this section);
(h) the step-allocation method
(§ 1.263A-1(g)(4)(iii)(B)) (but see paragraphs (1)(b)(vi) and (vii) of this section);
(§ 1.263A-1(h)) (with either a labor-based
allocation ratio or a production cost allocation ratio);
without a historic absorption ratio election
(§ 1.263A-2(b));
(k) the alternative method to determine
amounts of section 471 costs by using a
1(d)(2)(iii));
(l) the method to determine amounts
of section 471 costs by using the amounts
incurred in the taxable year for federal
income tax purposes (§ 1.263A-1(d)(2)
(i));
(m) the safe harbor method for certain
variances and under- or over-applied burdens (§ 1.263A-1(d)(2)(v));
(n) the removal of one or more costs
from section 471 costs as required in
§ 1.263A-1(d)(2)(vi);
(o) the removal of one or more costs
from section 471 costs using negative
adjustments to additional section 263A
costs as permitted in § 1.263A-1(d)(3)(ii)
(B);
(p) the de minimis rule for certain direct
labor costs (§ 1.263A-1(d)(2)(iv)(B));

method (§ 1.263A-2(c)(3)(iii)(B)); and
(t) the 90-10 de minimis rule to allocate capitalizable mixed service costs
method (§ 1.263A-2(c)(3)(iii)(C)).
(3) Multiple changes. A taxpayer making both this change and another change
in method of accounting in the same year
of change must comply with the ordering
rules of § 1.263A-7(b)(2).
(4) Eligibility rule inapplicable. The
eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, does
not apply to a change described in section
12.02(1)(a)(ii) of this revenue procedure.
(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.02 is “23.”
(6) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.03 Impact fees.
(1) Description of change. This change
applies to a taxpayer that incurs impact
2002-1 C.B. 614, in connection with the
construction of a new residential rental
building that wants to capitalize the costs
to the building under §§ 263(a) and 263A.
See Rev. Rul. 2002-9 for further information.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.03 is “25.”
(3) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.04 Change to capitalizing environmental remediation costs under § 263A.
(1) Description of change. This
change applies to a taxpayer that wants
to change its method of accounting for

environmental remediation costs from
a method that does not comply with the
holding in Rev. Rul. 2004-18, 2004-1
C.B. 509, to capitalizing them to inventory under § 263A.
(2) Concurrent automatic changes.
A taxpayer making both this change and
another automatic change under § 263A
gle Form 3115 for both changes, provided
the taxpayer enters the designated automatic change numbers for both changes
on the appropriate line on that Form 3115,
and complies with the ordering rules of
§ 1.263A-7(b)(2). See section 6.03(1)(b)
of Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
for information on making concurrent
changes.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.04 is “77.”
(4) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.05 Change in allocating environmental remediation costs under § 263A.
(1) Description of change. This change
applies to a taxpayer that capitalizes environmental remediation costs to inventory
under § 263A, but allocates these costs to
inventory using a method of accounting
that does not comply with the holding in
Rev. Rul. 2005-42, 2005-2 C.B. 67, and
wants to change to allocating these costs
to inventory produced during the taxable
year in which the costs are incurred under
§ 263A. See Rev. Rul. 2005-42 for further
information.
(2) Concurrent automatic changes.
A taxpayer making both this change and
another automatic change under § 263A
gle Form 3115 for both changes, provided
the taxpayer enters the designated automatic accounting method change numbers
for both changes on the appropriate line
on that Form 3115, and complies with the
ordering rules of § 1.263A-7(b)(2). See
section 6.03(1)(b) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, for information on
making concurrent changes.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change

number for a change under this section
12.05 is “92.”
(4) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.06 Safe harbor methods under § 263A
for certain dealerships of motor vehicles.
(1) Description of change. This change
applies to a motor vehicle dealership, as
44, 2010-49 I.R.B. 811, that is within the
scope of section 3 of Rev. Proc. 201044 and wants to change its method of
accounting to (1) treat its sales facility as
a retail sales facility or (2) be treated as
a reseller without production activities, as
described in section 5 of Rev. Proc. 201044. A motor vehicle dealership that wants
to make an automatic change in method
of accounting to use one or both safe harbor methods described in section 5 of Rev.
Proc. 2010-44 may make any correspondsubject to § 263A that will be accounted
for using the proposed method (for examtory costs) or to no longer include negative amounts as additional § 263A costs
tion method formula. However, except
as provided in the preceding sentence, a
change under this section does not include
a change for purposes of recharacterizing “§ 471 costs” as “additional § 263A
costs” (or vice versa
method.
(2) Concurrent automatic changes. A
motor vehicle dealership making an automatic change to one or both safe harbor
methods described in section 5 of Rev.
Proc. 2010-44 and another automatic
change under § 263A for the same taxable
changes, provided the dealership enters
the designated automatic change numbers
for all such changes in Part I on that Form
3115, and complies with the ordering rules
of § 1.263A-7(b)(2). See section 6.03(1)
(b) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, for information on making concurrent changes.
(3) Multiple adjustments. In the event
that a motor vehicle dealership is taking into account a § 481(a) adjustment

from another accounting method change
in addition to the § 481(a) adjustment
required by a change to a safe harbor
method described in section 5 of Rev.
Proc. 2010-44, the § 481(a) adjustments
must be taken into account separately.
For example, a motor vehicle dealership
that changed to comply with § 263A in
2009 and was required to take its § 481(a)
adjustment into account over four years
must continue to take into account that
adjustment over the remainder of that
four year § 481(a) adjustment period even
though the dealership changed to a safe
harbor method described in section 5 of
Rev. Proc. 2010-44 in 2010 and has an
additional § 481(a) adjustment required
by that change.
(4) Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change to treat certain
sales facilities as retail sales facilities as
described in section 5.01 of Rev. Proc.
2010-44 is “150.” The designated automatic accounting method change number
for a change to be treated as a reseller
without production activities as described
in section 5.02 of Rev. Proc. 2010-44 is
“151.”
(5) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.07 Change to not apply § 263A to one
or more plants removed from the list of
plants that have a preproductive period in
excess of 2 years.
(1) Description of change. This change,
as described in Rev. Proc. 2013-20, 201314 I.R.B. 744, applies to a taxpayer that
is not a corporation, partnership, or tax
shelter required to use an accrual method
of accounting under § 447 or § 448(a)(3),
and either (a) wants to not apply § 263A,
pursuant to § 263A(d)(1) and § 1.263A4(a)(2), to the production of one or more
plants that the IRS and the Treasury
Department have removed from the list
of plants that have a nationwide weighted
average preproductive period in excess of
2 years, or (b) properly elected, pursuant
to § 263A(d)(3) and § 1.263A-4(d), to not
apply § 263A to the production of a plant
or plants that have been removed from
the list of plants that have a nationwide
weighted average preproductive period

in excess of 2 years, and wishes to revoke
its § 263A(d)(3) election with respect to
those plants. See Notice 2013-18, 2013-14
I.R.B. 742, or its successor.
(2) Manner of making change. A
change under this section 12.07 is made
with any necessary adjustments under
§ 481(a). For example, the revocation of
an election under § 263A(d)(3) results in
a § 481(a) adjustment that must take into
account the change in depreciation from
the alternative depreciation system to
the general depreciation system included
within such revocation.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.07 is “181.”
(4) Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).
.08 Change to a reasonable allocation
method described in § 1.263A-1(f)(4) for
self-constructed assets.
(1) Description of change.
(a) Applicability. This change, as
described in Rev. Proc. 2014-16, 2014-9
I.R.B. 606, applies to a producer (as
revenue procedure) or a reseller-proof this revenue procedure) that wants to
change to a reasonable allocation method
within the meaning of § 1.263A-1(f)
described in § 1.263A-1(f)(2) or (3), for
self-constructed assets produced during
the taxable year, including any necessubject to § 263A that will be accounted
for using the proposed method. This section 12.08 also includes a change from
not capitalizing a cost subject to § 263A
to capitalizing that cost for a producer
or reseller-producer under a reasonable
allocation method within the meaning
of § 1.263A-1(f)(4) that the producer
or reseller-producer is already using
for self-constructed assets, other than
§ 1.263A-1(f)(2) or (3). See section 12.02
of this revenue procedure for a producer
or reseller-producer that wants to change
to a method described in § 1.263A-1(f)
(2) or (3).

(b) Inapplicability. This change does
not apply to an allocation method based
on the number of units produced or an
allocation method that does not allocate
costs to the units of property produced.
This change does not apply to a change
described in another section of this revenue procedure or in other guidance published in the Internal Revenue Bulletin.
For example, this change does not apply
to a change described in section 12.01 or
12.02 of this revenue procedure.
(2) No ruling on reasonableness of
method. The consent granted in section
9 of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, for this change is not a determination
by the Commissioner that the taxpayer is
using a reasonable allocation method for
costs subject to § 263A and does not create
any presumption that the proposed allocation method is permissible. The director will ascertain whether the taxpayer’s
allocation method is reasonable within the
meaning of § 1.263A-1(f)(4).
(3) Multiple changes. A taxpayer making both this change and another change
in method of accounting under section
11.08 of this revenue procedure for the
same year of change must comply with the
ordering rules of § 1.263A-7(b)(2).
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.08 is “194.”
(5) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.09 Real property acquired through
foreclosure.
(1) Applicability. This change, as
described in Rev. Proc. 2014-16, 2014-9
I.R.B. 606, applies to a taxpayer that
capitalizes costs under § 263A(b)(2)
and § 1.263A-3(a)(1) to real property
acquired through foreclosure, or similar
transaction, where the taxpayer wants to
change its method of accounting 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 § 263A(b)(2) and
§ 1.263A-3(a)(1). To qualify for this
change in method of accounting, a taxpayer must:

(a) originate, or acquire and hold for
investment, loans that are secured by real
property; and
(b) acquire the real property that
secures the loans at a foreclosure sale, by
deed in lieu of foreclosure, or in another
similar transaction.
(2) Inapplicability. This change does
not apply to costs capitalized under
§ 263A(b)(1) and § 1.263A-2(a)(1) by the
taxpayer to the acquired real property as a
result of production activities.
(3) Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change under this section
12.09 is “195.”
(4) Contact information. For further
information regarding a change under this
section, contact Roy Hirschhorn at (202)
317-7007 (not a toll-free number).
.10 Sales-Based Royalties.
(1) Description of change. This change,
as described in Rev. Proc. 2014-33, 201422 I.R.B. 1060, applies to a taxpayer that
wants to change its method of accounting
for sales-based royalties (as described in
§ 1.263A-1(e)(3)(ii)(U)(2)) that are properly allocable to inventory property:
(a) From not capitalizing sales-based
royalties to capitalizing these costs
and allocating them entirely to cost of
goods sold under a taxpayer’s method of
accounting;
(b) From not capitalizing sales-based
royalties to capitalizing these costs and
allocating them to inventory property
under a taxpayer’s method of accounting;
(c) From capitalizing sales-based royalties and allocating these costs to inventory property to allocating them entirely to
cost of goods sold; or
(d) From capitalizing sales-based royalties and allocating these costs entirely
to cost of goods sold to allocating them to
inventory property.
(2) Limitations.
(a) A taxpayer may not make a change
in method of accounting under this section
12.10 if the taxpayer wants to change to
capitalizing sales-based royalties and allocating them to inventory property using
another reasonable allocation method
within the meaning of § 1.263A-1(f)(4).
(b) A taxpayer making the changes
described in section 12.10(1)(a) or
12.10(1)(c) of this revenue procedure that

additional § 263A costs allocable to inventory property on hand at year end must
remove sales-based royalties allocated to
cost of goods sold from the formulas used
to allocate additional § 263A costs to ending inventory in the same manner that the
taxpayer included these amounts in the
formulas.
(c) A taxpayer making a change in
method of accounting under this section
a historic absorption ratio election (see
§§ 1.263A-2(b)(4) and 1.263A-3(d)(4))
and currently includes, or is changing its
method to include, sales-based royalties
in any part of its historic absorption ratio
must revise its previous and current historic absorption ratios. To revise its historic absorption ratios, the taxpayer must
apply its proposed method of accounting
during the test period, during all recomputation years, and during all updated
test periods to determine the § 471 costs
and additional § 263A costs that were
incurred. The revised historic absorption
ratios must be used to revalue beginning
inventory and must be accounted for in
the taxpayer’s § 481(a) adjustment. The
taxpayer must use a method described in
§ 1.263A-7(c) to revalue beginning inventory.
(3) Concurrent automatic changes.
A taxpayer making a change under this
section 12.10 and one or more automatic
changes in method of accounting under
§ 263A for the same year of change may
provided the taxpayer enters the designated automatic change numbers for all
changes on the appropriate line on the
Form 3115 and complies with the ordering rules of § 1.263A–7(b)(2). See section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for changes in method of accounting under this section 12.10 is “201.”
(5) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).
.11 Treatment of Sales-Based Vendor
.

(1) Description of change. This change,
as described in Rev. Proc. 2014-33, 201422 I.R.B. 1060, applies to a taxpayer that
wants to change its method of accounting
to no longer include cost adjustments for
sales-based vendor chargebacks described
in § 1.471-3(e)(1) in the formulas used to
allocate additional § 263A costs to ending
(2) Limitations.
(a) A taxpayer making this change that
the additional § 263A costs allocable to
inventory property on hand at year end
must remove sales-based vendor chargebacks from the formulas used to allocate
additional § 263A costs to ending inventory in the same manner that the taxpayer
included these amounts in the formulas.
(b) A taxpayer making a change in
method of accounting under this secwith a historic absorption ratio election
(see §§ 1.263A-2(b)(4) and 1.263A-3(d)
(4)) and currently includes sales-based
vendor chargebacks in any part of its
historic absorption ratio must revise its
previous and current historic absorption
ratio(s). To revise its historic absorption ratios, the taxpayer must apply its
proposed method of accounting during
the test period, during all recomputation years, and during all updated test
periods to determine the § 471 costs
and additional § 263A costs that were
incurred. The revised historic absorption
ratios must be used to revalue beginning
inventory and must be accounted for in
the taxpayer’s § 481(a) adjustment. The
taxpayer must use a method described
in § 1.263A-7(c) to revalue beginning
inventory.
(3) Concurrent automatic changes. A
taxpayer making both this change and one
or more automatic changes under § 263A,
or both this change and the change
described in section 21.15 of this revenue procedure for the same taxable year
for both changes, provided the taxpayer
enters the designated automatic change
numbers for all changes on the appropriate line on the Form 3115 and complies
with the ordering rules of § 1.263A-7(b)
(2). See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making concurrent changes.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for changes in method of accounting under this section 12.11 is “202.”
(5) Contact information. For further
information regarding a change under
this section, contact Michael Supanick at
(202) 317-7007 (not a toll-free number).
.12 U.S. ratio method.
(1) Change to the U.S. ratio method.
(a) Description of change. This change

or most similar to” the trade or business
conducted by the foreign person. If the
taxpayer is requesting a change in method
of accounting for multiple foreign persons,
the taxpayer must identify the “applicable
U.S. trade or business” for each foreign
person, and explain how the respective
U.S. trade or business is “the same as, or
most similar to” the trade or business conducted by the foreign person; and
(iv) Relationship requirement. An
explanation of how the “applicable U.S.

Notice 88-104, 1988-2 C.B. 443, as mod-

12.12(1)(b)(iii) of this revenue procedure is a trade or business conducted in
the United States by a “related person,”

that is required to capitalize costs under
§ 263A and wants to change its method
of accounting to the U.S. ratio method, as
described in Notice 88-104.
(b) Manner of making change. A taxpayer requesting a change on behalf of a
foreign person under section 12.12(1) of
this revenue procedure must make the
change in accordance with the requirements set forth in section 12.12(1)(c) of
this revenue procedure, and must attach a
statement to the Form 3115 providing the
following information:
(i) Foreign person requirement. A representation that the foreign person is a
in § 1.989(a)-1(b), of a foreign person, or
the foreign branch of a U.S. person that
constitutes a separate QBU, within the
meaning of Notice 88-104. If the taxpayer is requesting a change in method of
accounting on behalf of multiple foreign
persons, please provide a representation
that each foreign person is a QBU, as
person or the foreign branch of a U.S.
person that constitutes a separate QBU,
within the meaning of Notice 88-104;
(ii) Description of trade or business.
number (if applicable) for each foreign
person and an explanation of each trade
which a request to change to the U.S. ratio
method is being made under this section
12.12(1);
(iii) Applicable U.S. trade or business
requirement. The identity of the “appliin Notice 88-104, that the foreign person
wishes to use and an explanation of how
this U.S. trade or business is “the same as,

to the foreign person requesting a change
under this section. If the taxpayer is
requesting a change in method of accounting for multiple foreign persons, the taxpayer must explain how the “applicable
tion 12.12(1)(b)(iii) of this revenue procedure is a trade or business conducted in
the United States by a “related person” for
purposes of Notice 88-104 for each foreign person requesting a change in method
of accounting. Use § 267(b) or § 707(b),
as applicable, to explain the relationship.
(c) Additional requirements.
(i) A foreign person must continue to
use the U.S. ratio of the applicable U.S.
12.12(1)(b)(iii) of this revenue procedure
unless consent of the Commissioner is
obtained to use the U.S. ratio of a different
applicable U.S. trade or business under
§ 446(e) (see section 12.12(2) of this revenue procedure);
(ii) In the case of a controlled foreign
corporation, the controlling U.S. shareholder, or in the case of a foreign branch
of a U.S. person, the U.S. person, must
maintain records of the U.S. ratio used by
each foreign person to calculate the additional § 263A costs capitalized to property
produced and property acquired for resale
for the year of change and for subsequent
taxable years for each foreign person
requesting a change in method of accounting under this section 12.12. In the case
of a controlled foreign partnership, the
U.S. partner must maintain records of the
U.S. ratio used by each foreign person to
calculate the additional § 263A costs capitalized to property produced and property

acquired for resale for the year of change
and for subsequent taxable years for each
foreign person requesting a change in
method of accounting under this section
12.12(1).
(iii) The § 481(a) adjustment is computed in the manner provided in Notice
88-104;
(iv) The U.S. ratio is determined, and
the ratio is applied to the costs of property
produced or property acquired for resale
incurred by the foreign person, in accordance with Notice 88-104; and
(v) If any foreign person is unable to
obtain a U.S. ratio from the applicable
12.12(1)(b)(iii) of this revenue procedure,
or is otherwise no longer eligible to use
the U.S. ratio method, the foreign person
is no longer permitted to use the U.S. ratio
method. However, the foreign person is
not ineligible to use the U.S. ratio method
if the foreign person is able to obtain a
U.S. ratio from a different applicable U.S.
trade or business, and changes the applicable U.S. trade or business pursuant to
section 12.12(2) of this revenue procedure or under the non-automatic change
procedures of this revenue procedure, as
applicable. If a foreign person is no longer eligible to use the U.S. ratio method,
it is required to change its method of
accounting to a method that complies with
§§ 263A and 471 using either the automatic change procedures of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, and sections
12.01, 12.02, or 12.08, as applicable, of
this revenue procedure or the non-automatic change procedures of Rev. Proc.
2015-13.
(2) Change within U.S. ratio method.
This change applies to a foreign person
currently using the U.S. ratio method that
wants to use the U.S. ratio of a different
applicable U.S. trade or business for purposes of applying the U.S. ratio method
as described in section 12.12(2)(a) or
12.12(2)(b) of this revenue procedure.
(a) Required change in the applicable
U.S. trade or business.
(i) In general. A foreign person is permitted to change its method of accounting
under this section 12.12(2)(a) to use the
U.S. ratio of a different applicable U.S.
88-104, if the foreign person is no longer able to obtain the U.S. ratio from the

applicable U.S. trade or business previor related person in which the applicable
U.S. trade or business is conducted terminates its existence; (B) the foreign person
is no longer related, within the meaning of
§ 267(b) or § 707(b), to the U.S. person
or related person in which the applicable
U.S. trade or business is conducted; or (C)
the U.S. person or related person ceases to
conduct the applicable U.S. trade or business.
(ii) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13 does not apply to
the change described in section 12.12(2)
(a) of this revenue procedure.
(iii) Manner of making change. A foreign person making a change in method
of accounting under this section 12.12(2)
(a) must make the change in accordance
with the requirements set forth in section
12.12(2)(c) and (d) of this revenue procedure.
(b) Other changes in the applicable
U.S. trade or business.
(i) In general. If the foreign person
cannot make the change in method of
accounting described in section 12.12(2)
(a) of this revenue procedure, or there is
more than one U.S. trade or business that
can reasonably be considered the “same
as, or most similar to” the foreign person’s trade or business, the foreign person is permitted to change its method of
accounting under this section 12.12(2)(b)
to use the U.S. ratio of a different applicable U.S. trade or business.
(ii) Manner of making change. A foreign person making a change in method
of accounting under this section 12.12(2)
(b) must make the change in accordance
with the requirements set forth in section
12.12(2)(c) and (d) of this revenue procedure.
(c) Section 481(a) adjustment. The
§ 481(a) adjustment is computed in the
manner provided in Notice 88-104.
(d) Short Form 3115 in lieu of a standard
Form 3115. In accordance with § 1.4461(e)(3)(ii), the requirement of § 1.446waived and pursuant to section 6.02(2) of
Rev. Proc. 2015-13, a short Form 3115
is authorized for a change described in
section 12.12(2)(a) or 12.12(2)(b) of this
revenue procedure. The short Form 3115

(Rev. December 2022) must include the
following information:
(above Part I);
(ii) the signature section at the bottom
of page 1;
(iii) Part I, line 1(a);
(iv) Part IV, all lines except Line 25;
(v) the information required under
section 12.12(1)(b) of this revenue procedure; and
(vi) a statement that the change in
method of accounting is made under section 12.12(2)(a) or 12.12(2)(b) of Rev.
Proc. 2024-23, as applicable.
(3) Designated automatic accounting
method change numbers. The designated
automatic accounting method change
number for a change under this section
12.12 is “214.”
(4) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.13 Depletion.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for depletion
to treat these amounts as an indirect cost
that is only properly allocable to property
that has been sold (that is, for purposes of
determining gain or loss on the sale of the
property) under § 1.263A-1(e)(3)(ii)(J).
(2) Limitation.
(a) A taxpayer making this change in
method of accounting that uses a simtional § 263A costs allocable to inventory property on hand at year end must
remove depletion allocated to cost of
goods sold from the formulas used to
allocate additional § 263A costs to ending inventory in the same manner that
the taxpayer included these amounts in
the formulas.
(b) A taxpayer making this change in
method of accounting that uses a simpliratio election (see §§ 1.263A-2(b)(4) and
1.263A-3(d)(4)) and currently includes
depletion in any part of its historic absorption ratio must revise its previous and current historic absorption ratios. To revise
its historic absorption ratios, the taxpayer must apply its proposed method of
accounting during the test period, during
all recomputation years, and during all

updated test periods to determine the § 471
costs and additional § 263A costs that were
incurred. The revised historic absorption
ratios must be used to revalue beginning
inventory and must be accounted for in
the taxpayer’s § 481(a) adjustment. The
taxpayer must use a method described in
§ 1.263A-7(c) to revalue beginning inventory.
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to this change.
(4) Concurrent automatic changes.
A taxpayer making both this change and
another automatic change under § 263A
gle Form 3115 for both changes, provided
the taxpayer enters the designated automatic change numbers for both changes
on the appropriate line on that Form 3115
and complies with the ordering rules of
§ 1.263A–7(b)(2). See section 6.03(1)(b)
of Rev. Proc. 2015-13 for information on
making concurrent changes.
(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change in method of accounting under this section 12.13 is “215.”
(6) Contact information. For further
information regarding a change under
this section, contact Michael Supanick at
(202) 317-7007 (not a toll-free number).
.14 Interest capitalization.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to change its
method of accounting for interest from
not capitalizing any interest, capitalizing
interest in accordance with its method of
poses, or applying an improper method
of capitalizing interest under §§ 1.263A-8
through -14, with respect to the production of designated property, to capitalizing
interest with respect to the production of
designated property in accordance with
§§ 1.263A-8 through -14.
(b) Inapplicability. This change does
not apply to a taxpayer that wants to
change its method of accounting for
interest from either capitalizing interest
to not capitalizing interest or not capitalizing interest to capitalizing interest for
improvements that involve the associated
property rules in § 1.263A-11(e)(1)(ii)(B).

(2) Manner of making change. A taxpayer requesting a change under this section 12.14 must attach a statement to the
Form 3115 with the following information:
(a) Representations as to the following:
(i) The taxpayer’s method is in accordance with the avoided cost method under
§ 1.263A-9; and
(ii) The taxpayer will comply with
§ 1.263A-14 and Notice 88-99, 1988-2
C.B. 422, should the taxpayer incur
average excess expenditures allocable to
related persons; and
(b) Details with respect to the taxpayer’s sub-methods of accounting for determining capitalizable interest in accordance with §§ 1.263A-8 through -14 (for
example, whether the taxpayer elects to
not trace debt under § 1.263A-9(d); the
computation period(s) used under the new
method; and whether the taxpayer will
suspend the capitalization of interest for
units of property for which production has
ceased for at least 120 consecutive days as
determined under § 1.263A-12(g)).
(3) Concurrent automatic changes.
A taxpayer making a change under this
section 12.14 and one or more automatic
changes in method of accounting under
§ 263A for the same year of change may
provided the taxpayer enters the designated automatic change numbers for all
changes on the appropriate line on the
Form 3115 and complies with the ordering rules of § 1.263A-7(b)(2). See section
6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change in method of accounting under this section 12.14 is “224.”
(5) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.15 Change to not apply § 263A to
replanting costs for lost or damaged citrus
plants pursuant to § 263A(d)(2)(C).
(1) Description of change.
(a) In general. This change, as
described in Rev. Proc. 2018-35, 201828 I.R.B. 204, applies to a taxpayer, other
than the owner described in § 263A(d)(2)
(A), that: (i) paid or incurred replanting

costs of citrus plants after the loss or damage of citrus plants by reason of freezing
temperatures, disease, drought, pests, or
casualty, as described in § 263A(d)(2)(A);
(ii) paid or incurred the replanting costs
after December 22, 2017, and on or before
ership test provided in section 12.15(1)(b)
of this revenue procedure; and (iv) wants
to change its method of accounting from
applying § 263A to citrus plant replanting costs to not applying § 263A to those
costs, pursuant to § 263A(d)(2)(C).
(b) Ownership test. The taxpayer satowner described in § 263A(d)(2)(A) has
an equity interest of not less than 50 percent in the replanted citrus plants at all
times during the taxable year in which
the taxpayer paid or incurred amounts for
replanting costs, and the taxpayer holds
any part of the remaining equity interest;
or (ii) the taxpayer acquired the entirety of
the equity interest of the owner described
in § 263A(d)(2)(A) in the land on which
the lost or damaged citrus plants were
located at the time of the loss or damage,
and the replanting is on such land.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to this change.
(3) Section 481(a) adjustment. A taxpayer making a change under this section
12.15 calculates a § 481(a) adjustment by
taking into account only amounts paid or
incurred after December 22, 2017, and on
or before December 22, 2027.
(4) Multiple changes. A taxpayer making both this change and another change
in method of accounting in the same year
of change must comply with the ordering
rules of § 1.263A-7(b)(2).
(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.15 is “232.”
(6) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.16 Small business taxpayer exception
from requirement to capitalize costs under
§ 263A.
(1) Description of change. This change
applies to a small business taxpayer, as

enue procedure, that chooses to no longer
capitalize costs under § 263A, including
for self-constructed assets, pursuant to
§ 263A(i) and § 1.263A-1(j).
(2) Inapplicability.
(a) Home construction contracts. This
change does not apply to a taxpayer not
required by § 460(e)(1) to capitalize costs
under § 263A for home construction contracts, and that wants to make a change to
no longer capitalize costs under section
263A. See section 19.01 of this revenue
procedure to make this change.
(b) Election under § 263A(d)(3). This
change does not apply to a small business
(h) of this revenue procedure, that elected
under § 263A(d)(3) not to have § 263A
apply to certain plants produced by the
taxpayer in a farming business and wants
to revoke its § 263A(d)(3) election and
change to a method of accounting that no
longer capitalizes costs under § 263A. But
see Rev. Proc. 2020-13, 2020-11 I.R.B.
511.
(3) Eligibility rule inapplicable. For a
change described in section 12.16(1) of
this revenue procedure, if the taxpayer
changed from not capitalizing costs under
§ 263A in accordance with § 263A(i) and
§ 1.263A-1(j) to capitalizing costs under
§ 263A and the accompanying regulations
with the year of change, and such change
taxpayer did not qualify as a small business taxpayer, then such change is disregarded for purposes of section 5.01(1)(f)
of Rev. Proc. 2015-13, 2015-5 I.R.B. 419.
(4)
. A taxpayer is required to complete only the following information on Form 3115 (Rev.
December 2022) to make this change:
(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;
(d) Part II, all lines except line 16; and
(e) Part IV, all lines except line 25.
(5) Acceleration of § 481 adjustment.
If a taxpayer making a change described
in section 12.16(1) of this revenue procedure has a § 481(a) adjustment remaining
on a prior change in method of accounting
from not capitalizing costs under § 263A in

accordance with § 263A(i) and § 1.263A1(j) to capitalizing costs under § 263A
and the accompanying regulations, then it
must take the remaining portion of such
prior § 481(a) adjustment into account in
the year of change.
(6) Concurrent automatic changes. A
small business taxpayer making a change
under this section 12.16 and a change
under sections 15.17, 22.18 and/or 22.19
of this revenue procedure for the same
3115 for such changes, provided the taxpayer enters the designated automatic
accounting method change number for
each change on the appropriate line of the
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes.
(7) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.16 is “234.”
(8) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.17 Recharacterizing costs under the
production method.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that uses or is changing to

§§ 1.263A-2(b), 1.263A-2(c), and
1.263A-3(d), respectively, and that wants
to recharacterize a section 471 cost, as
§ 1.263A-1(d)(3), or vice versa, in accordance with the characterization requirements of § 1.263A-1(d)(2) and (d)(3). For
example, this change applies to a taxpayer
method that treats a direct cost of property
produced or property acquired for resale
as an additional section 263A cost and that
wants to change to characterize the direct
cost as a section 471 cost, as required by
§ 1.263A-1(d)(2)(ii).
(b) Inapplicability. This change
does not apply to a change in method of
accounting that is described in another

section of this revenue procedure or in
other guidance published in the IRB. For
example, this change does not apply to
a taxpayer that wants to make a change
described in section 12.01 or 12.02 of this
revenue procedure, such as a change to
use the methods described in § 1.263A1(d)(2)(iv), (v), or (vi), § 1.263A-2(b),
§ 1.263A-2(c), or § 1.263A-3(d).
(2)
.
statement does not invalidate the taxpayer’s method of accounting or change its
determination of section 471 costs in earlier taxable years.
(3)
. A taxpayer is required to complete only the following information on Form 3115 (Rev.
December 2022) to make this change:
(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;
(d) Part II, all lines except lines 13,
15b, 16c, and 19;
(e) Part IV, all lines except line 25; and
(f) Schedule D, all Parts except Part I.
(4) Limitation. If a taxpayer making
this change in method of accounting uses
a historic absorption ratio election under
§§ 1.263A-2(b)(4), 1.263A-2(c)(4), or
1.263A-3(d)(4)), and the change in the
characterization of cost(s) under this section 12.17 affects any part of the taxpayer’s historic absorption ratio, the taxpayer
must revise its previous and current historic absorption ratios. To revise its historic absorption ratios, the taxpayer must
apply its proposed method of accounting
during the test period, during all recomputation years, and during all updated test
periods to determine the section 471 costs
and additional section 263A costs that
were incurred. The revised historic absorption ratios must be used to revalue beginning inventory and must be accounted for
in the taxpayer’s § 481(a) adjustment. The
taxpayer must use a method described in
§ 1.263A-7(c) to revalue beginning inventory.
(5) Concurrent automatic changes.
A taxpayer making both this change and
another automatic change under § 263A
gle Form 3115 for both changes, provided
the taxpayer enters the designated auto-

matic change numbers for both changes
on the appropriate line of that Form 3115
and complies with the ordering rules of
§ 1.263A-7(b)(2). See section 6.03(1)(b)
of Rev. Proc. 2015-13 for information on
making concurrent changes.
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
12.17 is “237.”
(7) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
SECTION 13. LOSSES, EXPENSES
AND INTEREST WITH RESPECT
TO TRANSACTIONS BETWEEN
RELATED TAXPAYERS (§ 267)
.01 Change to comply with § 267.
(1) Description of change. This
change applies to a taxpayer that wants
to change its method or methods of
accounting to comply with the requirements of § 267, and, to clarify, this change
also applies to a taxpayer that, by reason
of the exception in § 1.267(a)-3(c)(4),
wants to change its method of accounting
with respect to the deduction of amounts
owed to a controlled foreign corporation
have any United States shareholders (as
CFC within the meaning of § 958(a).
However, this change does not apply to a
change for original issue discount (OID),
including stated interest that is OID
tion 5.02 of this revenue procedure for
a change to comply with § 163(e)(3) for
OID on an obligation held by a related
foreign person.
(2) Certain eligibility rules inapplicable. The eligibility rules in sections
5.01(1)(e) and (f) of Rev. Proc. 201513, 2015-5 I.R.B. 419, do not apply to
this change to comply with § 267(a)(3),
including a change by reason of the exception in § 1.267(a)-3(c)(4).
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
13.01 is “26.”

(4) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number). For
further information regarding a change to
comply with § 267(a)(3), contact Anisa
Afshar at (202) 317-6934 (not a toll-free
number).
SECTION 14. DEFERRED
COMPENSATION (§ 404)
.01 Deferred compensation.
(1) Description of change. This change
applies to a taxpayer using an overall
accrual method of accounting that wants
to change its method of accounting to treat
bonuses or vacation pay as follows (see
(a) Applicability.
(i) Bonuses.
(A) Bonuses not subject to capitalization under § 263A. If by the end of the taxable year all the events have occurred that
establish the fact of the liability to pay a
bonus and the amount of the liability can be
determined with reasonable accuracy (see
§ 1.446-1(c)(1)(ii)), and the bonus is otherwise deductible, but the bonus is received
by the employee after the 15th day of the
3rd calendar month after the end of that taxable year, to treat the bonus as deductible in
the taxable year of the employer in which
or with which ends the taxable year of the
employee in which the bonus is includible
in the gross income of the employee; or
(B) Bonuses that are subject to capitalization under § 263A. If by the end of the
taxable year all the events have occurred
that establish the fact of the liability to pay
a bonus and the amount of the liability can
be determined with reasonable accuracy
(see § 1.446-1(c)(1)(ii)), and the bonus
is otherwise deductible (without regard
to § 263A), but the bonus is received by
the employee after the 15th day of the 3rd
calendar month after the end of that taxable year, to treat the bonus as capitalizable (within the meaning of § 1.263A-1(c)
(3)) in the taxable year of the employer
in which or with which ends the taxable
year of the employee in which the bonus
is includible in the gross income of the
employee.
(ii) Vacation pay.
(A) Vacation pay not subject to capitalization under § 263A. If by the end of the

taxable year all the events have occurred
that establish the fact of the liability to
pay vacation pay and the amount of the
liability can be determined with reasonable accuracy (see § 1.446-1(c)(1)(ii)),
and the vacation pay is otherwise deductible but the vacation pay is received by the
employee after the 15th day of the 3rd calendar month after the end of that taxable
year, to treat the vacation pay as deductible in the taxable year of the employer
in which the vacation pay is paid to the
employee; or
(B) Vacation pay that is subject to capitalization under § 263A. If by the end
of the taxable year all the events have
occurred that establish the fact of the liability to pay vacation pay and the amount
of the liability can be determined with reasonable accuracy (see § 1.446-1(c)(1)(ii)),
and the vacation pay is otherwise deductible (without regard to § 263A), but the
vacation pay is received by the employee
after the 15th day of the 3rd calendar month
after the end of that taxable year, to treat
the vacation pay as capitalizable (within
the meaning of § 1.263A-1(c)(3)) in the
taxable year of the employer in which the
vacation pay is paid to the employee.
(b) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations thereunder to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
14.01 if the taxpayer is not capitalizing
these costs, unless the taxpayer concurrently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue procedure (as applicable).
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
14.01 is “28.”
(3) Contact information. For further
information regarding a change under this
section, contact Thomas Scholz at (202)
317-5600 (not a toll-free number).
.02 Grace period contributions.
(1) Description of change. This change
applies to a taxpayer that wants to cease
deducting contributions made during the
cash or deferred arrangement within the

tribution plan as matching contributions
with the meaning of § 401(m) when the
contributions are attributable to compensation earned by plan participants after the
end of a taxable year as required by Rev.
Rul. 2002-46, 2002-2 C.B. 117, as mod805.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
14.02 is “29.”
(3) Contact information. For further
information regarding a change under this
section, contact John Ricotta at 202-3174102 or Joyce Kahn at 202-317-4148 (not
toll-free numbers).
SECTION 15. METHODS OF
ACCOUNTING (§ 446)
.01 Change in overall method from the
cash method, or from an accrual method
with regard to purchases and sales of
inventories and the cash method for all
other items, to an accrual method.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to change its overall method of accounting from the cash
receipts and disbursements method (cash
method), or from an accrual method with
regard to purchases and sales of inventories and the cash method for computing
all other items of income and expense, to
an accrual method. A change under this
section 15.01 applies to (1) a taxpayer
required to make this change by § 448,
any other section of the Code or regulations, or in other guidance published in the
Internal Revenue Bulletin (IRB), and (2) a
taxpayer that wants to make this change
but is not required to do so by § 448, any
other section of the Code or regulations,
or in other guidance published in the IRB.
A taxpayer changing its overall method of
accounting to an accrual method because
it is prohibited from using the cash method
under § 448 may use this section 15.01
regardless of whether the year of change
is required by § 448 to change from the
(1) (“mandatory § 448 year”), or a taxable
year other than the taxpayer’s mandatory

§ 448 year. Similarly, a taxpayer changing its overall method of accounting to an
accrual method because it is prohibited
from using the cash method under § 447
may use this section 15.01 regardless of
able year that the taxpayer is required by
§ 447 to change from the cash method or
a subsequent taxable year in which the
taxpayer is newly subject to § 447 after
previously making a change in method
of accounting that complies with § 447
(“mandatory § 447 year”), or a taxable
year other than a mandatory § 447 year,
as applicable.
change its overall method of accounting to
an accrual method using this section 15.01
even if the taxpayer is also making one or
more of the following changes in method
of accounting for the same year of change:
(i) adopting the recurring item excepthis revenue procedure, for one or more
types of recurring items. See § 1.461-5(d);
(ii) adopting or changing to a permissible inventory method of accounting and
is either adopting this inventory method
method using the automatic change procedures of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, and a section of this revenue procedure, or the change can be made automatically under any section of the Code or
regulations, or other guidance published
in the IRB. See Rev. Rul. 90-38, 1990-1
C.B. 57, regarding when a taxpayer may
adopt a method of accounting;
(iii) adopting or changing to a permissible § 263A method of accounting and
is either adopting this § 263A method or
using the automatic change procedures of
Rev. Proc. 2015-13 and a section of this
revenue procedure, or the change can be
made automatically under any section of
the Code or regulations, or other guidance
published in the IRB. See Rev. Rul. 90-38
regarding when a taxpayer may adopt a
method of accounting; or
(iv) adopting or changing to any other
in section 15.01(2)(d) of this revenue procedure) and is either adopting this special
cial method using the automatic change
procedures of Rev. Proc. 2015-13 and a

section of this revenue procedure, or the
change can be made automatically under
any section of the Code or regulations, or
other guidance published in the IRB. See
Rev. Rul. 90-38 regarding when a taxpayer may adopt a method of accounting.
section 15.01 when that taxpayer, in the
taxable year immediately preceding the
year of change, has used a permissible
inventory method for that year, and, if that
taxpayer was subject to § 263A for that
year, has also used a permissible § 263A
method for that year, and the method(s)
continue to be used for the year of change.
Lastly, a taxpayer with an applicable
§ 1.451-3(a)(5), that is changing its overall method of accounting to an accrual
to comply with § 1.451-3.
(b) Inapplicability. This change does
not apply to:
(i) a taxpayer that uses any combination
of the cash method and an accrual method
as its present overall method of accounting
other than an accrual method with respect
to purchases and sales of inventories and
the cash method for computing all other
items of income and expense;
(ii) a taxpayer that is changing its
method of accounting for one or more
items of income or expense, but not its
overall method of accounting. See section 15.09 of this revenue procedure for a
description of accounting method changes
from the cash method to an accrual method
the automatic change procedures of Rev.
Proc. 2015-13 and that section;
(iii) a taxpayer that is required by the
Code, regulations, or other guidance published in the IRB to use a special method
such as, for example, an inventory method,
a § 263A method, or a long-term contract
method, in the year of change and fails to
adopt or change to that method;
(iv) a taxpayer that has included in
its § 481(a) adjustment any amount of
deferred compensation that is described
under § 457A(d)(3) that is attributable
to services performed before January 1,
2009;
(v) a taxpayer that is engaged in two
or more trades or businesses, unless that
taxpayer makes this change for each trade
or business so that the identical accrual

method is used for each trade or business
beginning with the year of change;
(vi) a cooperative organization
described in §§ 501(c)(12), 521, or 1381;
(vii) an individual taxpayer, except for
activities conducted as a sole proprietorship;
(viii) a taxpayer with an AFS that wants
to make a change in method of accounting
for allocating transaction price between
an item of gross income that is subject to
§ 451 and an item of gross income that is
subject to a special method of accounting,
a change to comply with the transaction
price allocation rules in § 1.451-3(d)(5);
(ix) a taxpayer with an AFS that
wants to change to use the AFS cost offthe taxpayer receives advance payments
from the sale of inventory and does not
also make a concurrent change to apply
the advance payment cost offset method,
year of change by using section 16.08
of this revenue procedure, or a taxpayer
with an AFS that wants to change to use
the advance payment cost offset method
if the taxpayer is required to include gross
income from the sale of inventory under
§ 1.451-3 and does not also make a change
to apply the AFS cost offset method;
(x) a taxpayer with an AFS that wants
to make a change in method of accounting

fees; or
(xi) a taxpayer that wants to make a
change in method of accounting for pay-

(1)(ii), if the proposed method of accounting is to include such payments in gross
income under § 1.451-3 in one or more
taxable years following the taxable year
of receipt.
(2)
.
(a) Cash method. The cash method is
§ 446(c)(1) and §§ 1.446-1(c)(1)(i), 1.4511(a), and 1.461-1(a)(1). See also § 1.61-

rules relating to farmers’ expenses.
(b) Accrual method. An accrual method
§ 446(c)(2) and §§ 1.446-1(c)(1)(ii),

1.451-1(a), 1.451-3, and 1.461-1(a)(2).
For a taxable year beginning after December 31, 2017, for which the taxpayer has
an AFS, the all events test under § 451(b)
(1)(C) and § 1.451-1(a) for any 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. See § 451(b)(1) and § 1.451-3(b).
(c) Recurring item exception. The
recurring item exception is the method
described in § 461(h)(3) and § 1.461-5.
(d) Special method of accounting. A
special method of accounting within the
meaning of this section 15.01 is a method
of accounting, other than the cash method,
expressly permitted or required by the
Code, regulations, or in other guidance
published in the IRB, that deviates from
the tax accrual accounting rules of §§ 446,
451, 461, and the regulations thereunder. For purposes of this section 15.01, a
deferral method under § 451(c) and the
regulations thereunder is deemed to be a
special method of accounting. Examples
of special methods of accounting include
the installment method of accounting
under § 453, the mark-to-market method
under § 475, a long-term contract method
under § 460, and the crop method under
§ 1.162-12. In contrast, application of
facts is not a special method of accounting. See, for example, Rev. Rul. 69-314,
1969-1 C.B. 139 concerning the treatment
of retainages.
(3) Manner of making change.
(a) Section 481(a) adjustment. A taxpayer changing its overall method of
accounting under this section 15.01
must compute a § 481(a) adjustment.
receivables, account payables, inventory, and any other item determined to be
necessary in order to prevent items from
being duplicated or omitted. However, the
adjustment does not include any item of
income accrued but not received that was
worthless or partially worthless, within
the meaning of § 166(a), on the last day
of the year immediately prior to the year
of change.
(b) Change to comply with § 1.451-3.
A taxpayer that uses section 15.01(1)(a)
of this revenue procedure to comply with
§ 1.451-3 must also complete Line 3 of
Schedule B of Form 3115, Application

for Change in Accounting Method (Rev.
December 2022).
(c) Adoption of recurring item exception. The taxpayer must attach to its Form
3115 a statement describing the types of
liabilities for which the recurring item
exception will be used.
(d) Concurrent automatic change to a
special method.
(i) Generally only one Form 3115
required. Except as provided in section
15.01(3)(d)(ii) of this revenue procedure,
a taxpayer that is changing its overall
method of accounting to an accrual method
under this section 15.01 and changing to
one or more special methods, as permitted
under section 15.01(1)(a)(ii), (iii), or (iv)
of this revenue procedure, must timely
and must enter the designated automatic
accounting method change numbers for
all changes on the appropriate line of
Form 3115. For example, a taxpayer making both an overall change in method of
accounting from the cash method to an
accrual method under this section 15.01
and a change to the deferral method for
advance payments under section 16.08 of
single Form 3115 for both changes and
enter the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc. 201513 for information on making concurrent
changes.
(ii) Two Forms 3115 required when a
concurrent change is being implemented
under section 32.01 of this revenue procedure for short-term obligations. When a
taxpayer subject to § 1281 is changing its
method of accounting for interest income
on short-term obligations as part of the
overall change in method of accounting to an accrual method under this section 15.01, that taxpayer must request
the change for the interest income under
section 32.01 of this revenue procedure.
Forms 3115 for each change requested.
This section 15.01 will govern the overall change in method of accounting to an
accrual method.
(e) Concurrent change in accounting
method not permitted to be implemented
using the automatic change procedures
of Rev. Proc. 2015-13 and a section of

this revenue procedure, any section of the
Code or regulations, or other guidance
published in the IRB. A taxpayer that does
not qualify to change its overall method
of accounting to an accrual method under
this section 15.01 because that taxpayer
is concurrently changing to a method of
accounting that may not be implemented
using the automatic change procedures of
Rev. Proc. 2015-13 and a section of this
revenue procedure, any section of the
Code or regulations, or other guidance
published in the IRB, must timely request
both changes using the non-automatic
change procedures in Rev. Proc. 201513. See Rev. Proc. 2024-1, 2024-1 I.R.B.
1 (or successor), for more information
on whether one Form 3115 is required to
request the changes, and for information
on the appropriate user fee.
(4) Change made in the taxpayer’s
mandatory § 448 year. If the year of
change is a mandatory § 448 year, as
makes the change from the cash method
to an accrual method under the provisions
of this section 15.01 and must comply
with all the requirements and provisions
of § 1.448-2(g), in addition to the requirements and provisions of this section 15.01.
(5) Prior change eligibility rule inapplicable. Any prior overall accounting
method change to the cash method that
the taxpayer implemented using the provisions of Rev. Proc. 2001-10, as modi-

14, is disregarded for purposes of section
5.01(1)(e) of Rev. Proc. 2015-13. Additionally, for a taxpayer making a change
from the cash method in a mandatory
§ 448 year, a mandatory § 447 year, or in
an accrual method for purchases and sales
of inventories as a result of becoming a
in section 12.01(3)(i) of this revenue procedure, and having to apply § 1.446-1(c)
(2)(i), as applicable, any prior change to
the overall cash method is disregarded
for purposes of section 5.01(1)(e) of Rev.
Proc. 2015-13.
(6) Designated automatic accounting
method change number.
(a) Change made in the mandatory
§ 448 year. The designated automatic
accounting method change number for a

change from the cash method to an accrual
method in the mandatory § 448 year is
“257.”
(b) Change made for a taxpayer subject to § 447. The designated automatic
accounting method change number for a
change from the cash method to an accrual
method for a taxpayer subject to § 447
under this section 15.01 is “258.”
(c) All other changes under this section
15.01. The designated automatic accounting method change number for all other
changes from the cash method or from an
accrual method with regard to purchases
and sales of inventories and the cash
method for computing all other items of
income and expense to an accrual method
under this section 15.01 is “122.”
(7) Contact information. For further
information regarding a change under this
section, contact Mia Romano at 202-3177007 (not a toll-free number).
.02 Multi-year insurance policies for
multi-year service warranty contracts.
(1) Description of change.
(a) Applicability. This change applies
to a manufacturer, wholesaler, or retailer
of motor vehicles or other durable consumer goods that wants to change its
method of accounting for insurance costs
paid or incurred to insure its risks under
multi-year service warranty contracts to
the method described in section 15.02(2)
of this revenue procedure. Multi-year
service warranty contracts to which this
change applies include only those separately priced contracts sold by a manufacturer, wholesaler, or retailer also selling the motor vehicles or other durable
consumer goods underlying the contracts
(to the ultimate customer or to an inter“durable consumer goods” for purposes of
this change depends on the common usage
of the goods, rather than the purchaser’s
actual intended use of the goods.
(b) Inapplicability. This change does
not apply to a taxpayer that covers its risks
under its multi-year service warranty contracts through arrangements not constituting insurance.
(2) Description of method. If a taxpayer purchases a multi-year service
warranty insurance policy (in connection
with its sale of multi-year service warranty contracts to customers) by paying a
lump-sum premium in advance, the tax-

payer must capitalize the amount paid or
incurred and may only obtain deductions
for that amount by prorating (or amortizing) it over the life of the insurance policy
(whether the cash method or an accrual
method of accounting is used to account
for service warranty transactions).
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.02 is “31.”
(4) Contact information. For further
information regarding a change under this
section, contact David Sill at (202) 3177011 (not a toll-free number).
.03 Nonaccrual-experience method.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to make one or
more of the changes in method of accounting to, from, or within a nonaccrual-experience (NAE) method of accounting that
are described in sections 3.01(1) through
(5) of Rev. Proc. 2006-56, 2006-2 C.B.

I.R.B. 518.
(b) Inapplicability. This change does
not apply to a taxpayer within the scope of
sections 3.01(6) through 3.01(8) of Rev.
by Rev. Proc. 2011-46.
(2) Manner of making the change.
(a) Changes made with a § 481(a)
adjustment. A change in method of
accounting described in section 3.01(1),
(2), (3), or (5) of Rev. Proc. 2006-56, as
2011-46, is made with a § 481(a) adjustment.
(b) Changes made on a cut-off basis.
(i) In general. A change described in
section 3.01(4) of Rev. Proc. 2006-56 is
made on a cut-off basis and the new applicable period applies only to the taxpayer’s NAE calculation of its uncollectible
amount for the year of change and for
subsequent years. Moreover, a change
described in sections 5.02 and 5.03 of
Rev. Proc. 2011-46 is made on a cut-off
basis and the proposed method applies
only to accounts receivable earned on or
Accordingly, a § 481(a) adjustment is neither permitted nor required for a change

described in section 3.01(4) of Rev. Proc.
2006-56 or in section 5.02 or 5.03 of Rev.
Proc. 2011-46.
(ii)
made under section 5.02 and 5.03 of Rev.
procedure.
(A) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a change in method
of accounting made under section 5.02 or
this revenue procedure.
(B) Filing rules. In accordance with
§ 1.446-1(e)(3)(ii), the requirement of
waived and a statement in lieu of a Form
3115 is authorized for this change. Notin section 3.07 of Rev. Proc. 2015-13, the
statement in lieu of a Form 3115 that is
permitted under section 5.02 or 5.03 of
Rev. Proc. 2011-46 and this section 15.03
is considered a Form 3115 for purposes
of the automatic change procedures of
Rev. Proc. 2015-13. However, the requiretion 6.03(1)(a) of Rev. Proc. 2015-13, is
waived. See section 5.02 or 5.03 of Rev.
Proc. 2011-46, as applicable, for what
information is required to be provided on
the statement.
(3) Concurrent change to overall
accrual method and a NAE method of
accounting. A taxpayer making both an
automatic change to, from, or within a
NAE method of accounting under this
section 15.03 and an automatic change to
an overall accrual method under section
15.01 of this revenue procedure (whether
or not it is the taxpayer’s mandatory § 448
both changes. The taxpayer must complete all applicable sections of Form 3115,
including sections that apply to the change
to an overall accrual method and to the
change to a NAE method, and must enter
the automatic accounting method change
numbers for both changes on Form 3115.
See section 6.03(1)(b) of Rev. Proc. 201513 for information on making concurrent
changes.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to, from, or within

a NAE method of accounting under this
section 15.03 is “35.”
(5) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.04 Interest accruals on short-term
consumer loans—Rule of 78’s method.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting from the Rule of
78’s method to the constant yield method
for stated interest (including stated interest
that is original issue discount) on shortterm consumer loans described in Rev.
Proc. 83-40, 1983-1 C.B. 774, which was
obsoleted by Rev. Proc. 97-37, 1997-2
C.B. 455.
(2) Background.
(a) A short-term consumer loan is
described in Rev. Proc. 83-40, provided:
(i) the loan is a self-amortizing loan
that requires level payments, at regular
intervals at least annually, over a period
loon payment at the end of the loan term);
and
(ii) the loan agreement between the
borrower and the lender provides that
interest is earned, or upon the prepayment
of the loan interest is treated as earned, in
accordance with the Rule of 78’s method.
(b) In general, the Rule of 78’s method
allocates interest over the term of a loan
based, in part, on the sum of the periods’
digits for the term of the loan. See Rev.
Rul. 83-84, 1983-1 C.B. 97, for a description of the Rule of 78’s method.
(c) In general, the constant yield
method allocates interest and original
issue discount over the term of a loan
based on a constant yield. See § 1.12721(b) for a description of the constant yield
method. The Rule of 78’s method generally front-loads interest as compared to
the constant yield method.
(d) Rev. Proc. 83-40 was obsoleted
because, under §§ 1.446-2 and 1.1272-1
(which were effective for debt instruments
issued on or after April 4, 1994), taxpayers generally must account for stated
interest and original issue discount on a
debt instrument (loan) by using a constant
yield method. As a result, the Rule of 78’s
method is no longer an acceptable method
of accounting for federal income tax purposes.

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.04 is “71.”
(4) Contact information. For further
information regarding a change under this
section, contact William E. Blanchard at
(202) 317-3900 (not a toll-free number).
.05 Film producer’s treatment of certain creative property costs.
(1) Description of change. This change
applies to a taxpayer that wants to change
the method of accounting for creative
property costs to the safe harbor method
provided by section 5 of Rev. Proc. 200436, 2004-1 C.B. 1063. This safe harbor
method of accounting applies to a taxpayer engaged in the trade or business of

Proc. 2004-36) properly written off by the
taxpayer under The American Institute of
of Position (SOP) 00-2, “Accounting for
Producers or Distributors of Film.”
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.05 is “85.”
(3) Contact information. For further
information regarding a change under this
section, contact Christian Lagorio at (202)
317-7005 (not a toll-free number).
.06 Deduction of incentive payments to
health care providers.
(1) Description of change. This change
applies to a taxpayer that wants to change
to the method of accounting for provider
incentive payments under which those payments are included in discounted unpaid
losses without regard to § 404, as provided in Rev. Proc. 2004-41, 2004-2 C.B.
90. A payment by a taxpayer to a health
care provider is a “provider incentive payment,” and thus eligible for this treatment,
if (a) the taxpayer is taxable as an insurance company under Part II of subchapter
L; (b) the payment is made pursuant to a
written agreement the purpose of which
is to encourage participating health care
providers to provide quality health care
to the taxpayer’s subscribers in a cost-effor the payment is dependent on the attainment of one or more preestablished goals

during a performance period consisting
of not more than 12 consecutive months;
(d) the terms of the arrangement pursuant
to which the payment is made are established unilaterally by the taxpayer, and are
not negotiated with the health care providers; (e) the taxpayer normally makes payments to health care providers under the
arrangement within 12 months after the
close of the performance period; (f) deferring the receipt of income by the health
care provider or otherwise providing a tax
purpose of the arrangement; (g) the taxpayer records a liability for the payment
latory purposes, and includes this liability
in the determination of discounted unpaid
losses under § 846; and (h) the health care
provider is not an employee, and is not
providing health care as an agent, of the
taxpayer. See Rev. Proc. 2004-41.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.06 is “90.”
(3) Contact information. For further
information regarding a change under
this section, contact Rebecca L. Baxter at
(202) 317-6995 (not a toll-free number).
.07 Change by bank for uncollected
interest.
(1) Description of change. This change
2(d)(4)(i) that: (a) uses an overall accrual
method of accounting to determine its
taxable income for federal income tax
purposes; (b) is subject to supervision by
Federal authorities, or by state authorities
maintaining substantially equivalent standards; (c) has uncollected interest other
than interest described in § 1.446-2(a)(2);
and (d) has six or more years of collection
experience. Under the safe harbor method
of accounting provided by section 4 of
Rev. Proc. 2007-33, 2007-1 C.B. 1289,
a bank determines for each taxable year
the amount of uncollected interest (other
than interest described in § 1.446-2(a)(2))
for which it is considered to have a reasonable expectancy of payment by multiplying: (a) the total accrued (determined
under § 1.446-2) but uncollected interest
for the year, by (b) the bank’s “recovery
percentage” (determined under section
4.02 of Rev. Proc. 2007-33) for that year.

Solely for purposes of this safe harbor,
the bank is not considered to have a reasonable expectancy of payment for the
excess, if any, of the accrued but uncollected interest over the expected collection amount determined using the bank’s
recovery percentage. The bank includes
in gross income the portion of accrued
but uncollected interest for which it has
a reasonable expectancy of payment. The
bank excludes from income the portion of
accrued but uncollected interest for which
it has no reasonable expectancy of payment.
(2) Recovery percentage. Subject to
the limitations and conditions in Rev.
Proc. 2007-33, sections 4.02(2), (3), and
(4), a bank determines its recovery percentage for each taxable year by dividing:
(a) total payments that the bank received
on loans (including principal and interest) during the 5 taxable years immediately preceding the taxable year, by (b)
total amounts that were due and payable
to the bank on loans during the same 5
taxable years. The recovery percentage
cannot exceed 100 percent and must be
calculated to at least four decimal places.
The data used in the recovery percentage
must take into account acquisitions and
dispositions. If a bank acquires the major
portion of a trade or business of another
person (predecessor) or the major portion
of a separate unit of a trade or business
of a predecessor, then in applying Rev.
Proc. 2007-33 for any taxable year ending on or after the acquisition, the data
from preceding taxable years of the predecessor attributable to the portion of the
trade or business acquired, if available,
must be used in determining the bank’s
recovery percentage. If a bank disposes
of a major portion of a trade or business
or the major portion of a separate unit of a
trade or business, and the bank furnished
the acquiring person the information necessary for the computations required by
Rev. Proc. 2007-33, then in applying the
revenue procedure for any taxable year
ending on or after the disposition, the
data from preceding taxable years attributable to the disposed portion of the trade
or business may not be used in determining the bank’s recovery percentage.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change

number for a change under this section
15.07 is “108.”
(4) Contact information. For further
information regarding a change under this
section, contact K. Scott Brown at (202)
317-4423 (not a toll-free number).
.08 Change from the cash method to an
.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that uses an overall accrual

expense (or both) that are being accounted
for on the cash method of accounting. This
change does not apply to a taxpayer that
is changing its overall method of accounting to an accrual method. Such a taxpayer
may be eligible to change using section
15.01 of this revenue procedure.
(b) Inapplicability. This change does
not apply to:
(i) a taxpayer that presently uses an
accrual method with respect to purchases
and sales of inventories and the cash
method for all other items (but see section
15.01 of this revenue procedure);
(ii) a taxpayer that will not have all
items of income and expense on an accrual
method subsequent to the change under
this section 15.08;
(iii) a cooperative organization
described in § 501(c)(12), 521, or 1381;
(iv) an individual taxpayer, except for
activities conducted as a sole proprietorship;
(v) a taxpayer engaged in two or more
trades or businesses, unless the taxpayer
makes this change so that the identical
accrual method is used for each such trade
or business beginning with the year of
change;
(vi) a change in method of accounting for any payment liability described in
§ 1.461-4(g);
(vii) a change in the method of
accounting for interest that is not taken
into account under § 1.446-2;
(viii) a taxpayer that has included in
its § 481(a) adjustment any amount of
deferred compensation that is described
under § 457A(d)(3) that is attributable
to services performed before January 1,
2009; and
vided in another section of this revenue
procedure.

(2)
.
(a) “Cash method of accounting” is
and §§ 1.446-1(c)(1)(i), 1.451-1(a), and
1.461-1(a)(1).
(b) “Accrual method of accounting” is
§§ 1.446-1(c)(1)(ii), 1.451-1(a), 1.4513, and 1.461-1(a)(2). For a taxable year
beginning after December 31, 2017, for
which the taxpayer has an AFS, the all
events test under § 451(b)(1)(C) and
§ 1.451-1(a) for any 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. See § 451(b)
(1) and § 1.451-3(b).
(3) Additional requirements. To
change a method of accounting under
this section 15.08, a taxpayer must attach
to its completed Form 3115 a full and
item for which the change in method of
accounting is being made and how the
accrual method of accounting applies to
each item, and list the § 481(a) adjustment, if any, for each item associated
with the change. The change is fully and
completely described if each income and
and how the all-events test (and the economic performance requirement, if applicable) applies to each item is described
under the facts and circumstances of the
taxpayer’s trade or business. For example, a taxpayer that merely states that
it is changing its accounting method
for advertising expenses from the cash
method to an accrual method, recites the
regulations under § 1.461-1(a)(2), and
enters the associated § 481(a) adjustment has failed to describe fully and
the change in method of accounting is
being made. In contrast, a taxpayer that
states that it is changing its method of
accounting for print advertising expenses
from the cash method of accounting to an
accrual method of accounting, describes
all of the relevant facts related to the print
advertising expenses, and explains how
the all-events test applies to those facts
and when economic performance occurs
has fully and completely described the
item and the change. See section 6.03 of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.08 is “124.”
(5) Contact information. For further
information regarding a change under this
section, contact Douglas Kim at (202)
317-7003 (not a toll-free number).
.09 Multi-year service warranty contracts.
(1) Description of change.
(a) Applicability. This change applies
to a manufacturer, wholesaler, or retailer
of motor vehicles or other durable consumer goods that uses an overall accrual
method of accounting and wants to change
to the service warranty income method
described in section 5 of Rev. Proc. 97-38,
1997-2 C.B. 479. Under the service warranty income method, a qualifying taxited circumstances, include a portion of
an advance payment related to the sale of
a multi-year service warranty contract in
gross income generally over the life of the
service warranty obligation.
(b) Inapplicability. This change does
not apply to a taxpayer not within the
scope of Rev. Proc. 97-38.
(2) Manner of making change and
designated automatic accounting method
change number.
(a) This change is made on a cutadvance payments for multi-year service
warranty contracts on or after the beginning of the year of change. Accordingly,
a § 481(a) adjustment is neither permitted
nor required.
(b) In accordance with § 1.446-1(e)(3)
(ii), the requirement of § 1.446-1(e)(3)(i)
pursuant to section 6.02(2) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, a short Form
3115 is authorized for this change. The
short Form 3115 (Rev. December 2022)
must include the following information:
(above Part I);
(ii) the signature section at the bottom
of page 1;
(iii) Part I, line 1(a); and
(iv) the information required under section 6.03 of Rev. Proc. 97-38, except that
the statement under section 6.03(2) (that
the taxpayer agrees to all of the terms and

conditions of the revenue procedure) also
should refer to Rev. Proc. 2015-13.
(3) Additional requirement. A taxpayer
changing to the service warranty income
method of accounting under this section
15.09 must satisfy the annual reporting
requirement set forth in section 6.04 of
Rev. Proc. 97-38.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.09 is “125.”
(5) Contact information. For further
information regarding a change under
this section, contact Morgan Lawrence at
(202) 317-7011 (not a toll-free number).
.10
transportation industry taxpayers.
(1) Description of change. This change
industry taxpayer” with “average annual
15.10(2)(f) of this revenue procedure, and
not in excess of $50,000,000 that wants
to change to the overall cash receipts and
disbursements (cash) method. For a small
15.17(4)(a) of this revenue procedure, see
section 15.17 of this revenue procedure
for a change to the overall cash method.
(2)
. For purposes of this
apply:
(a)
taxpayer

-

following criteria for the year of change:
(i) The taxpayer reasonably identi15.10(2)(b) of this revenue procedure) as
being described in one of the following
of the six-digit NAICS codes):
(A) Air Transportation, Rail Transportation, Water Transportation, Truck
Transportation, Transit and Ground Passenger Transportation, or Scenic and Sightseeing Transportation, within the meaning of
NAICS subsector codes 481-485 and 487; or
(B) Support Activities for Transportation within the meaning of NAICS subsector code 488.
(ii) The taxpayer is not prohibited
from using the overall cash method under
§ 448.

(b) Business. A taxpayer may use any
reasonable method of applying the relevant facts and circumstances to determine its business. A business may consist
of several activities, which may or may
not be related. For example, a taxpayer
engaged in transportation activities may
provide various services such as transporting air cargo and then subsequently trucking the cargo throughout a metropolitan
area to warehouses and wholesale/retail
stores. However, each activity within a
taxpayer’s business must individually satisfy the description of a NAICS subsector
code in section 15.10(2)(a)(i)(A) or (B)
of this revenue procedure. For example,
a sightseeing bus operator that sells box
lunches in connection with its tours is not
payer” because one of the two activities
of its business (food sales) does not satisfy the description of a NAICS subsector
code in section 15.10(2)(a)(i)(A) or (B) of
this revenue procedure. While the sightthe description of the NAICS subsector
code in section 15.10(2)(a)(i)(A) of this
revenue procedure, the food sales activity does not satisfy the description of any
NAICS subsector code in section 15.10(2)
(a)(i)(A) or (B) of this revenue procedure,
and thus, the taxpayer’s business fails to
meet the criteria of section 15.10(2)(a)
(i). Similarly, a train operator who operates a dining car where meals are served
taxpayer” because one of the two activities of its business (food service) does not
satisfy the description of a NAICS subsector code in section 15.10(2)(a)(i)(A)
or (B) of this revenue procedure. While
description of a NAICS subsector code in
section 15.10(2)(a)(i)(A) of this revenue
procedure, the food service activity does
not satisfy the description of any NAICS
subsector code in section 15.10(2)(a)(i)
(A) or (B) of this revenue procedure, and
thus, the taxpayer’s business fails to meet
the criteria of section 15.10(2)(a)(i).
(c) Average annual gross receipts. A
taxpayer has average annual gross receipts
and not in excess of $50,000,000 if the
taxpayer’s average annual gross receipts
for the three prior taxable-year period
ending with the applicable prior taxable

amount and do not exceed $50,000,000.
If a taxpayer has not been in existence
for three prior taxable years, the taxpayer
must determine its average annual gross
receipts for the number of years (including short taxable years) that the taxpayer
has been in existence. See § 448(c)(3)(A).
(d) Gross receipts. Gross receipts is
(iv). Thus, gross receipts for a taxable year
equal all receipts that must be recognized
under the method of accounting actually
used by the taxpayer for that taxable year
for federal income tax purposes. See also
§ 448(c)(3)(C).
(e) Aggregation of gross receipts. For
purposes of computing gross receipts
under section 15.10(2)(d) of this revenue
procedure, all taxpayers treated as a single
employer under § 52(a) or (b) or § 414(m)
or (o) (or that would be treated as a single
employer under these sections if the taxpayers had employees) will be treated as
a single taxpayer. However, when transactions occur between taxpayers that are
treated as a single taxpayer by the previous sentence, gross receipts arising from
these transactions will not be treated as
gross receipts for purposes of the average annual gross receipts limitation. See
§ 448(c)(2) and § 1.448-2(c)(2)(ii).
(f)
. The

See § 448(c)(4). For a taxable
year beginning in 2019, 2020, or 2021, the
See Rev. Proc. 2018-57, 2018-49 I.R.B.
827, Rev. Proc. 2019-44, 2019-47 I.R.B.
1093, or Rev. Proc. 2020-45, 2020-46
I.R.B. 1016, as applicable. For a taxable
justed amount is $27,000,000. See Rev.
Proc. 2021-45, 2021-48 I.R.B. 764. For a
tion-adjusted amount is $29,000,000. See
Rev. Proc. 2022-38, 2022-45 I.R.B. 445.
For a taxable year beginning in 2024, the
See Rev. Proc. 2023-34, 2023-48 I.R.B.
1287.
(g) Treatment of short taxable year.
In the case of a short taxable year, a taxpayer’s gross receipts must be annualized
by multiplying the gross receipts for the
short taxable year by 12 and then dividing

the result by the number of months in the
short taxable year. See § 448(c)(3)(B) and
§ 1.448-2(c)(2)(iii).
(h) Treatment of predecessors. Any reference to a taxpayer in this section 15.10
includes a reference to any predecessor of
that taxpayer. See § 448(c)(3)(D).
(i) Cash method. The “cash method”
and §§ 1.446-1(c)(1)(i), 1.451-1(a), and
1.461-1(a)(1).
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.10 is “126.”
(4) Example. Taxpayer X is an LLC and taxed
for federal income tax purposes as a partnership.
Taxpayer X does not have any C corporations as
partners and Taxpayer X is not a tax shelter within
the meaning of § 448(d)(3). Taxpayer X’s business
consists of short-haul trucking among various cities
within State Y
NAICS subsector code 484. Taxpayer X determines
that its 3-year average annual gross receipts for each
(f) of this revenue procedure and not in excess of
$50,000,000. Taxpayer X
overall cash method using this section 15.10.

(5) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).
.11 Change to overall cash/hybrid
method for certain banks.
(1) Description of change.
(a) Applicability. This change applies
to a bank described in section 15.11(2)
(a) of this revenue procedure that wants to
change to an overall cash/hybrid method
described in section 15.11(2)(b) of this
revenue procedure.
(b) Inapplicability. A bank’s change to
an overall cash/hybrid method under this
section 15.11 does not include any change
in the accounting treatment of an item for
which the bank uses a special method (as
described in section 15.11(2)(b) of this
revenue procedure) before the change,
or is required to use a special method, or
will use a special method after the change.
A bank may not change the accounting
treatment of such an item under this section 15.11. Any change in the accounting
treatment of such an item must be made
under an applicable section of this revenue procedure, under the non-automatic
change procedures of Rev. Proc. 2015-13,

2015-5 I.R.B. 419, or under another guidance published in the Internal Revenue
Bulletin, as appropriate.
(2)
tions apply for purposes of this section
15.11.
(a) Bank. A bank is described in this
section 15.11(2)(a) if the bank:

(3) Additional condition of change. To
change to an overall cash/hybrid method
under this section 15.11, a bank must
comply with the following additional condition. In addition to complying with the
terms and conditions set forth in section
7 of Rev. Proc. 2015-13, the bank must
keep its books and records for the year of
change and for subsequent taxable years
on an overall cash/hybrid method allowed
by this section 15.11. This condition is

and
(iii) has average annual gross receipts
(computed as described in section 15.11(5)
of this revenue procedure) not in excess of
$50,000,000.
(b) Overall cash/hybrid method. An
overall cash/hybrid method is the use of
a combination of accounting methods
under which some items of income or
expense are reported on the cash receipts
and disbursements method (cash method)
and other items of income or expense are
reported on methods permitted or required
for the accounting treatment of special
items (special methods).
(i) Cash method. The cash method

the results obtained under the method
used in keeping its books and records and
those obtained under the method used for
federal income tax purposes pursuant to
this section 15.11 and the bank maintains
ciliation. See also § 1.446-1(a)(4).
(4)
. To
change to an overall cash/hybrid method
under this section 15.11, a bank must
include with its completed Form 3115 a

and §§ 1.446-1(c)(1)(i), 1.451-1(a), and
1.461-1(a)(1).
(ii) Special methods. A few of the special methods typically used by banks
include those provided for the accounting
treatment of the following items: securities
§ 475(c)(1) (the mark-to-market method of
§ 475); securities held by a dealer in secumaintained under § 471 and § 1.446-1(c)
(2)(i)); hedging transactions (§ 1.446-4);
contracts to which § 1256 applies (§ 1256);
original issue discount on debt instruments (§§ 163(e) and 1271-1275); interest
income (including acquisition discount
and original issue discount) on short-term
obligations (§§ 1281-1283); and stripped
debt instruments (§ 1286). For example,
a bank that regularly purchases or originates mortgages in the ordinary course of
its business and engages in more than negligible sales of those mortgages generally
is a dealer in securities under § 475(c)(1)
and § 1.475(c)-1(c) and thus must use the
mark-to-market method of § 475 for mortin § 475(c)(2)) held by the bank.

bank’s income or expense that is affected by
the change under this section 15.11 and, for
each such item, identify the following: the
method of accounting under which the bank
reports that item for federal income tax purposes immediately before the change; and
the amount of the § 481(a) adjustment associated with changing that item to the cash
method under this section 15.11.
(5) Computation of average annual
gross receipts. For purposes of section
15.11(2)(a)(iii) of this revenue procedure,
a bank’s average annual gross receipts
are computed as described in this section
15.11(5).
(a) Average annual gross receipts. A
bank has average annual gross receipts not
in excess of $50,000,000 if, for each prior
taxable year ending on or after December
31, 2006, the bank’s average annual gross
receipts for the three prior taxable-year
period ending with the applicable prior
taxable year do not exceed $50,000,000. If
a bank has not been in existence for three
prior taxable years, the bank must determine its average annual gross receipts for
the number of years (including short taxable years) that the bank has been in existence. See § 448(c)(3)(A).
(b) Gross receipts. Gross receipts is
(iv). Thus, gross receipts for a taxable year
equal all receipts that must be recognized

under the method of accounting actually
used by the bank for that taxable year for
federal income tax purposes. See also
§ 448(c)(3)(C).
(c) Aggregation of gross receipts. For
purposes of computing gross receipts
under section 15.11(5)(b) of this revenue
procedure, all taxpayers treated as a single
employer under § 52(a) or (b) or § 414(m)
or (o) (or that would be treated as a single employer under these sections if the
taxpayers had employees) will be treated
as a single taxpayer (that is, a single
bank). However, when transactions occur
between taxpayers that are treated as a
single taxpayer by the previous sentence,
gross receipts arising from these transactions will not be treated as gross receipts
for purposes of the average annual gross
receipts limitation. See § 448(c)(2) and
§ 1.448-2(c)(2)(ii).
(d) Treatment of short taxable year. In
the case of a short taxable year, a bank’s
gross receipts must be annualized by multiplying the gross receipts for the short
taxable year by 12 and then dividing the
result by the number of months in the
short taxable year. See § 448(c)(3)(B) and
§ 1.448-2(c)(2)(iii).
(e) Treatment of predecessors. Any
reference to a bank or taxpayer in section 15.11(5) of this revenue procedure
includes a reference to any predecessor of
that bank or taxpayer. See § 448(c)(3)(D).
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.11 is “127.”
(7) Contact information. For further
information regarding a change under this
section, contact K. Scott Brown at (202)
317-4423 (not a toll-free number).
.12 Change to overall cash method for
farmers.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer engaged in the trade or business of farming that wants to change to the
overall cash receipts and disbursements
(cash) method. If a taxpayer is engaged
in more than one trade or business, this
change applies only to the taxpayer’s trade
or business for which the change is being
made.
(b) Inapplicability. This change does
not apply to a taxpayer that is required to

use an accrual method pursuant to § 447,
or prohibited from using the cash method
by § 448.
(2)
.
(a) Cash method of accounting is
§§ 1.446-1(c)(1)(i), 1.451-1(a), and 1.461rules relating to farmers’ income; § 1.162farmers’ expenses.
(b) The trade or business of farming is a
(4) and § 1.263A-4(a)(5).
(3) Manner of making change. Generally, a taxpayer changing its method of
accounting under this section 15.12 must
compute a § 481(a) adjustment. However, if the taxpayer is changing from the
crop method, that portion of the change is
made using a cut-off basis under which
expenses reported on the crop method and
not deducted prior to the year of change
are deducted in the year the related crop
is sold.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.12 is “128.”
(5) Contact information. For further
information regarding a change under this
section, contact Daniyal Husain at (202)
317-5100 (not a toll-free number).
.13 Nonshareholder contributions to
capital under § 118.
(1) Description of change.
(a) Water and sewerage disposal utilities under § 118(c) (as in effect on the
day before the date of enactment of Public Law 115-97, 131 Stat. 2054 (Dec. 22,
2017) (“former § 118(c)”)).
(i) This change applies to a regulated public utility described in former
§ 118(c) that wants to change its method
of accounting for payments received from
customers as customer connection fees,
which are not contributions to the capital
of the regulated public utility within the
meaning of former § 118(c), from excluding the payments from gross income as
nontaxable contributions to capital under
§ 118 to including the payments in gross
income under § 61. See Rev. Rul. 200830, 2008-1 C.B. 1156.
(ii) This change applies to a regulated
public utility described in former § 118(c)

that wants to change its method of accounting for payments or property received
that are contributions in aid of construction under former § 118(c) and § 1.118-2
and that meet the requirements of former
§ 118(c)(1)(B) and (c)(1)(C) from including the payments or the fair market value
of the property in gross income under § 61
to excluding the payments or the fair market value of the property from income as
nontaxable contributions to capital under
§ 118(a).
(b) Other payments or property
received. This change applies to a taxpayer that wants to change its method
of accounting for payments or property received (other than the payments
received by a public utility described
in former § 118(c) that are addressed
in section 15.13(1)(a)(i) of this revenue
procedure) that do not constitute contributions to the capital of the taxpayer
within the meaning of § 118 and the
regulations thereunder, from excluding
the payments or the fair market value of
the property from gross income as nontaxable contributions to capital under
§ 118 to including the payments or the
fair market value of the property in gross
income under § 61.
(2) Inapplicability. The change
described in section 15.13(1)(a)(ii) of this
revenue procedure does not apply to contributions made after December 22, 2017,
the date of enactment of Public Law 11597 (commonly referred to as the Tax Cuts
and Jobs Act).
(3) Additional requirement. A taxpayer
that is making a change described in section 15.13(1)(a)(i) or (1)(b) of this revenue procedure must complete Schedule E
of Form 3115 for the depreciable property
to which the change relates (as well as all
other relevant portions of the Form 3115).
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.13 is “129.”
(5) Contact information. For further
information regarding a change under this
section, contact David H. McDonnell at
(202) 317-4137 (not a toll-free number).
.14 Debt issuance costs.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for capital-

ized debt issuance costs to comply with
§ 1.446-5, which provides rules for allocating the costs over the term of the debt.
This change also applies to a taxpayer that
wants to change its method of accounting
for capitalized debt issuance costs from
one permissible method to another permissible method under the last sentence
in § 1.446-5(b)(2) if the total original
issue discount determined for purposes of
§ 1.446-5 is de minimis.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.14 is “148.”
(3) Contact information. For further
information regarding a change under this
section, contact Jonathon A. LaPlante at
(202) 317-6945 (not a toll-free number).
.15 Transfers of interties under the
safe harbor described in Notice 2016-36
(§ 118).
(1) Description of change.
(a) Safe harbor applicable. This
change, as described in Notice 2016-36,
2016-25 I.R.B. 1029, applies to a utility
that wants to change to the safe harbor
method of accounting provided in section
III.C of Notice 2016-36 for the treatment
under § 118 of a transfer of an intertie,
including a dual-use intertie, by a generator to a utility. Under this safe harbor
method of accounting, such a transfer
will not be treated as gross income under
§ 118(a) or a contribution in aid of construction (CIAC) under § 118(b) if all of
Notice 2016-36 are met.
(b) Safe harbor terminates. This
change, as described in Notice 2016-36,
applies to a utility that is using the safe
harbor method of accounting provided
in section III.C of Notice 2016-36 and
is required to terminate that safe harbor method of accounting because of the
IV of Notice 2016-36. The occurrence of
such event will require the utility to recognize income as a consequence of the
transfer of an intertie, including a dual-use
intertie, to the utility by a generator.
(2)
. For purposes of this
section 15.15, the terms “utility,” “intertie,” “dual-use intertie,” and “generator”
2016-36.

(3) Certain eligibility rules inapplicable. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, do not apply to a utility
making a change under this section 15.15.
(4) Manner of making change.
(a) The change in method of accounting under section 15.15(1)(a) of this revenue procedure is made with a § 481(a)
adjustment.
(b) The change in method of accounting
under section 15.15(1)(b) of this revenue
procedure is made using a cut-off method
and applies to a transfer of an intertie,
including a dual-use intertie, by a generator
to a utility made on or after the beginning
of the taxable year in which the safe harbor
method of accounting terminates.
(5) Concurrent automatic change. A
utility making a change under this section
15.15 for more than one transfer of an
intertie, including a dual-use intertie, for
gle Form 3115 for all such transfers. The
single Form 3115 must provide a single
net § 481(a) adjustment for all changes
under section 15.15(1)(a) of this revenue
procedure.
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the methods of
accounting under this section 15.15 is
“226.”
(7) Contact information. For further
information regarding a change under
this section, contact Barbara Campbell at
(202) 317-4137 (not a toll-free number).
.16 Change to or from the net asset
value (NAV) method.
(1) Description of change. This change,
as described in Rev. Proc. 2016-39, 201630 I.R.B. 164, applies to a taxpayer that
holds shares in a money market fund
ing effect to § 1.446-7(c)(5), under which
MMF holdings in different accounts are
treated as different MMFs) and that wants
to change its method of accounting for
gain or loss on the shares from a realization method to the NAV method described
in § 1.446-7 or from the NAV method to a
realization method.
(2) Certain eligibility rules inapplicable. The eligibility rules in sections
5.01(1)(c), (d), and (f) of Rev. Proc. 201513 do not apply to this change.

(3)
.
(a) “Rule 2a-7” means Rule 2a-7 (17
CFR 270.2a-7) under the Investment
Company Act of 1940.
(b) “Floating-NAV MMF” means an
MMF that is required to value its assets
using market factors and to round its price
per share to the nearest basis point (the
fourth decimal place, in the case of a fund
with a $1.0000 share price) under Rule
2a-7.
(c) “Stable-NAV MMF” means an
(4) Manner of making change.
(a) A change to or from the NAV
method is made on a cut-off basis. See
§ 1.446-7(c)(8). Accordingly, a § 481(a)
adjustment is neither permitted nor
required. A taxpayer making a change to
or from the NAV method for shares in an
MMF applies the new method only to the
computation of gain or loss on the shares
beginning with the year of change. Under
§ 1.446-7(b)(7)(ii), a taxpayer changing to
the NAV method takes a starting basis (as
for the year of change equal to the aggregate adjusted basis of the taxpayer’s shares
in the MMF at the end of the immediately
preceding taxable year. A taxpayer changing from the NAV method to a realization
method for shares in an MMF must adjust
the basis in the shares beginning on the
for gain or loss previously recognized
under the NAV method. Accordingly, the
taxpayer generally takes a basis in each
MMF share at the beginning of the year
of change equal to the fair market value
of that share under § 1.446-7(b)(3) used
in § 1.446-7(b)(2)) of the shares in that

a short Form 3115 (Rev. December 2022)
that includes the following information:
(above Part I);
(ii) the signature section at the bottom
of page 1;
(iii) Part I, line 1(a);
(iv) a statement specifying whether the
taxpayer is changing from a realization
method to the NAV method or from the
NAV method to a realization method; and
(v) a statement specifying the MMF
or MMFs to which the change applies, if
the change does not apply to all MMFs in
which the taxpayer holds shares (and, to
the extent applicable, whether the change
applies only to shares of the MMF or
MMFs held in a particular account).
(c) No Form 3115 Required. In accordance with § 1.446-1(e)(3)(ii), a taxpayer
changing to the NAV method for shares
in a stable-NAV MMF may change to the
NAV method on a federal tax return with-

(i) the taxpayer has not used the NAV
method for shares in the MMF for any taxable year prior to the year of change; and
(ii) prior to the year of change, either
(A) the taxpayer’s basis in each share
of the MMF has been at all times equal to
the MMF’s target share price, or
(B) the taxpayer has not realized any
gain or loss with respect to shares in the
MMF.
(5) Multiple changes. A taxpayer making multiple changes under this section
15.16 for the same year of change on a
Form 3115. The short Form 3115 will be
treated as applying to all shares that the
taxpayer holds in any MMF unless the

year prior to the year of change.
(b) Short Form 3115 in lieu of a standard Form 3115. In accordance with
§ 1.446-1(e)(3)(ii), the requirement of

MMF, the short Form 3115 will be treated
as applying to all shares in that MMF held
in any account by the taxpayer, unless the

3115 is waived and, pursuant to section
6.02(2) of Rev. Proc. 2015-13, a short
Form 3115 is authorized for a taxpayer
changing from a realization method to the
NAV method, or changing from the NAV
method to a realization method, for shares
in an MMF. Unless the change meets the
requirements of section 15.16(4)(c) of this

which the change applies.
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
15.16 is “227.”
(7) Contact Information. For further
information regarding a change under this

section, contact Grace Cho at (202) 3176945 (not a toll-free number).
.17 Small business taxpayer changing
the overall method of accounting to the
cash method, or to a method of accounting
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.
(1) Description of change. This change
applies to a small business taxpayer, as
revenue procedure, that wants to make a
change in method of accounting described
in section 15.17(2) of this revenue procedure. This change includes a change
to account for any exempt construction
contracts described in § 1.460-3(b)(1)(ii)
under the cash method or, in the case of
an exempt construction contract described
in § 1.460-3(b)(1)(ii) that includes the
sale of inventory, a method of accounting
that uses an accrual method for purchases
and sales of such inventory and the cash
method for computing all other items of
income and expense from such contract. A
small business taxpayer may be required
to use a method of accounting other than
the cash method for one or more items of
income or expense under certain provisions of the Code or regulations, including, for example §§ 475 and 1272.
(2) Applicability. This change applies
to a small business taxpayer that wants to:
(a) change the overall method of
accounting for a trade or business from
an accrual method to the cash method
of accounting, and is otherwise not prohibited from using the cash method or
required to use another overall method of
accounting;
(b) change the overall method of
accounting for a trade or business from an
accrual method to an accrual method for
purchases and sales of inventories (inventories) and the cash method for computing
all other items of income and expense, and
is otherwise not prohibited from using the
cash method under § 448 or required to
use another overall method of accounting,
such as an accrual method under § 447; or
(c) change the overall method of
accounting for a trade or business from
the cash method to an accrual method
for purchases and sales of inventories
(inventories) and the cash method for

computing all other items of income and
expense, and is otherwise not prohibited
from using the cash method under § 448
or required to use another overall method
of accounting, such as an accrual method
under § 447.
(3) Inapplicability. This change does
not apply to the following:
(a) Banks changing to hybrid method.
This change does not apply to a bank
described in section 15.11(2)(a) of this
revenue procedure. However, such a
bank may be eligible to change its overall
method of accounting to the cash/hybrid
method under section 15.11 of this revenue procedure if it meets the requirements
of that section.
(b) Farmers changing to the cash
method. This change does not apply to
a farming business changing its overall
method of accounting to the cash method.
See, however, section 15.12 of this revenue procedure.
(4) Special rules for open accounts
receivable. Notwithstanding § 1001 and
the accompanying regulations, a small
business taxpayer that uses the cash
method as the overall method of accounting for a trade or business includes
amounts attributable to open accounts
(c) of this revenue procedure, in income as
the amounts are actually or constructively
received on the receivables.
(5)
.
(a) Small business taxpayer. “Small
business taxpayer” means a taxpayer,
other than a tax shelter under § 448(d)
(3) and § 1.448-2(b)(2) that meets the
§ 448(c) gross receipts test.
(b) Section 448(c) gross receipts test.
The § 448(c) gross receipts test is met
if a taxpayer has average annual gross
receipts for the three prior taxable years
tion), as described in § 448(c) and § 1.4482(c) or § 1.460-3(b)(3), as applicable. For
tion-adjusted amount is $27,000,000. See
Rev. Proc. 2021-45, 2021-48 I.R.B. 764.
For a taxable year beginning in 2023, the
See Rev. Proc. 2022-38, 2022-45 I.R.B.
445. For a taxable year beginning in
$30,000,000. See Rev. Proc. 2023-34,
2023-48 I.R.B. 1287.

(c) Open accounts receivable. For
purposes of this section 15.17, an open
accounts receivable is any receivable that
is due in full in 120 days or less and that is
not subject to § 475.
(6) Eligibility rule inapplicable. For a
change described in section 15.17(2) of
this revenue procedure, any prior change
in the overall method of accounting to an
accrual method that was made in the taxin § 1.448-2(g)(1)), or a mandatory § 447
this revenue procedure), as applicable,
is disregarded for purposes of section
5.01(1)(e) of Rev. Proc. 2015-13.
(7) Manner of making change.
(a) Acceleration of § 481(a) adjustment.
If a taxpayer making a change described
in section 15.17(2)(a) or (b) of this revenue procedure has a § 481(a) adjustment remaining on a prior overall change
in method of accounting to an accrual
method, then it must take the remaining
portion of such prior § 481(a) adjustment
into account in the year of change;
(b) Cut-off basis for exempt longterm contracts. A change to account for
exempt construction contracts described
in § 1.460-3(b)(1)(ii) under this section
15.17 is made on a cut-off basis and
applies only to contracts entered into on
Accordingly, a § 481(a) adjustment is neither permitted nor required.
(8) Concurrent automatic changes. A
small business taxpayer making a change
under this section 15.17 and a change
under section 12.16, 22.18 and/or 22.19 of
this revenue procedure for the same year
for such changes, provided the taxpayer
enters the designated automatic accounting method change numbers for each
change on the appropriate line of Form
3115. See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making concurrent changes.
(9) Designated automatic accounting
method change number.
(a) Change to the cash method. The
designated automatic accounting method
change number for a change under section
15.17(2)(a) of this revenue procedure is
“233.”
(b) Change to a method of accounting
that uses an accrual method for invento-

ries, and the cash method for computing
all other items of income and expense. The
designated automatic accounting method
change number for a change under section
15.17(2)(b) or (c) of this revenue procedure is “259.”
(10) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
SECTION 16. TAXABLE YEAR OF
INCLUSION (§ 451)
.01 Accrual of interest on nonperforming loans.
(1) Description of change.
(a) This change applies to a taxpayer using an overall accrual method
in § 581 (or whose primary business is
making or managing loans) and wants to
change its method of accounting to comply with § 451 and § 1.451-1(a) for quali1(c)) on nonperforming loans.
(b) Section 1.451-1(a) requires income
to be accrued when all the events have
income and the amount thereof can be
determined with reasonable accuracy. A
stated interest on a nonperforming loan
for federal income tax purposes merely
because payments on the loan are overdue by a certain length of time, such as 90
days, even if a federal, state, or other regulatory authority having jurisdiction over
the taxpayer permits or requires that the
overdue interest not be accrued for regulatory purposes.
(c) Under § 451 and § 1.451-1(a), a
stated interest on any nonperforming loan
until either (i) the loan is worthless under
§ 166 and charged off as a bad debt, or (ii)
the interest is determined to be uncollectible. In order for interest to be determined
uncollectible, the taxpayer must substantiate, taking into account all the facts and
circumstances, that it has no reasonable
expectation of payment of the interest.
This substantiation requirement is applied
on a loan-by-loan basis.
(d) A taxpayer that changes its method
of accounting under this section 16.01
must do so for all of its loans.

(2) Section 481(a) adjustment. In general, the § 481(a) adjustment for a method
change under this section 16.01 represents
the taxpayer’s nonperforming loans outstanding as of the beginning of the year
of change that should have been accrued
under § 451 and § 1.451-1(a) and was not
accrued. Interest for which the taxpayer,
as of the beginning of the year of change,
has no reasonable expectation of payment
is not taken into account in determining
the amount of the § 481(a) adjustment.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.01 is “36.”
(4) Contact information. For further
information regarding a change under this
section, contact K. Scott Brown at (202)
317-4423 (not a toll-free number).
.02 Advance rentals.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for advance rentals (other than advance rentals subject
to § 467 and the regulations thereunder)
to include such advance rentals in gross
income in the taxable year received. See
§ 1.61-8(b).
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.02 is “37.”
(3) Contact information. For further
information regarding a change under this
section, contact Daniel Cassano at (202)
317-7011 (not a toll-free number).
.03 State or local income or franchise
tax refunds.
(1) Description of change. This change
applies to a taxpayer using an overall accrual method of accounting that
receives a state or local income or franchise tax refund and wants to accrue the
refund in the taxable year the taxpayer
receives payment or notice that the claim
has been approved, whichever is earlier,
as provided in Rev. Rul. 2003-3, 2003-1
C.B. 252.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.03 is “38.”

(3) Contact information. For further
information regarding a change under this
section, contact Daniel Cassano at (202)
317-7011 (not a toll-free number).
.04 Capital Cost Reduction Payments.
(1) Description of change. This change
applies to a taxpayer that purchases motor
vehicles subject to leases and assumes
the associated leases from the vehicles’
dealers and wants to use the safe harbor
method of accounting for capital cost
Rev. Proc. 2002-36, 2002-1 C.B. 993.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.04 is “39.”
(3) Contact information. For further
information regarding a change under this
section, contact Michael Finn at (202)
317-4718 (not a toll-free number).
.05 Credit card annual fees.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for credit card
annual fees as described in Rev. Rul.
2004-52, 2004-1 C.B. 973, either to a
accordance with Rev. Rul. 2004-52 or to
the Ratable Inclusion Method for Credit
Card Annual Fees that is described in section 4 of Rev. Proc. 2004-32, 2004-1 C.B.
988. Rev. Rul. 2004-52 holds that credit
card annual fees are not interest for federal income tax purposes and that such
fees are includible in income by the card
issuer when the all events test under § 451
additional guidance for taxpayers seeking
to change their methods of accounting for
such fees, including guidance with respect
to the Ratable Inclusion Method for Credit
Card Annual Fees. However, a taxpayer
may make either change under this revenue procedure only if the taxpayer uses
an overall accrual method of accounting
for federal income tax purposes and issues
credit cards to, and receives annual fees
from, cardholders under agreements that
allow each cardholder to use a credit card
to access a revolving line of credit to make
purchases of goods and services and, if so
authorized, to obtain cash advances.
(2) Manner of making change. In completing its Form 3115 to make this change,

method to which the taxpayer is changing.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
events test in accordance with Rev. Rul.
2004-52 is “80.” The designated automatic accounting method change number
for a change under this section 16.05 to
the Ratable Inclusion Method for Credit
Card Annual Fees is “81.”
(4) Contact information. For further
information regarding a change under this
section, contact Kate Sleeth at (202) 3177053 (not a toll-free number).
.06 Retainages.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer using an overall accrual
method of accounting that wants to
change its method of accounting for treating retainages to a method consistent with
the holding in Rev. Rul. 69-314, 1969-1
C.B. 139. A taxpayer changing its method
of accounting for retainages under this
section 16.06 must treat all retainages,
that is both receivables and payables, in
the same manner.
(b) Inapplicability. This change does
not apply to retainages (receivables and
payables) for long-term contracts that
must be accounted for under the percentage-of-completion method (PCM) under
§ 460. Nor does this change apply to
long-term contracts otherwise accounted
for under the PCM or long-term contracts
accounted for under exempt percentage-of-completion method or the completed contract method. For the treatment
of retainages under such methods, see
§§ 1.460-4(b)(4)(i)(A) and 1.460-4(d)(3).
(2) Manner of making change.
(a) Except as provided in section
16.06(2)(b) of this revenue procedure, a
taxpayer changing its method of accounting under this section 16.06 must take into
account a § 481(a) adjustment.
(b) For retainages received and paid
in connection with long term contracts
that are exempt construction contracts
for using the taxpayer’s overall accrual
method of accounting, this change is made
on a cut-off basis and applies only to longterm contracts entered into on or after

the beginning of the year of change. See
§ 1.460-1(c)(2) for a description of when
a contract is treated as “entered into.”
Accordingly, a § 481(a) adjustment is neither permitted nor required.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.06 for retainages not received under
long-term contracts is “130.” The designated automatic method change number
for a change under this section 16.06
for retainages received under long-term
contracts is “217.” A taxpayer making a
change under this section 16.06 that has
Form 3115 and enter both change numbers on the appropriate line on Form 3115.
(4) Contact information. For further
information regarding a change under this
section, contact Peter Cohn at (202) 3177011 (not a toll-free number).
.07
statements (AFS) for purposes of applying
certain revenue recognition methods of
accounting.
(1) Description of change.
(a) Applicability.
(i) This change applies to a taxpayer
(5), that: (A) includes amounts in income
in accordance with § 1.451-3; (B) changes
the manner in which the item, or portion
thereof, is taken into account as AFS reveing, if applicable, a change in the manner
in which transaction price is allocated to
performance obligations; and (C) wants
to change its method of accounting to
use the new AFS method of taking into
account the item, or portion thereof, in
AFS revenue for purposes of § 1.451-3(b)
(1), including, if applicable, a change in
the manner in which transaction price is
allocated for purposes of § 1.451-3(d).
(ii) This change applies to a taxpayer
(5), that: (A) receives an advance payment,
deferral method described in § 1.451-8(c);
(C) changes the manner in which it recognizes advance payments in AFS revenue,
applicable, a change in the manner in which
payments are allocated to performance
obligations; and (D) wants to change its

method of accounting to use the new AFS
method of recognizing advance payments
in AFS revenue for purposes of determining the extent to which advance payments
are included in income under § 1.451-8,
including, if applicable, a change in the
manner in which payments are allocated
for purposes of § 1.451-8(c)(8).
(b) Inapplicability.
(i) Changes relating to § 1.451-3 or
§ 1.451-8. A change described in section
16.07(1)(a)(i) or (ii) of this revenue procedure does not apply to:
(A) a taxpayer whose present method
of accounting is not described in § 1.4513, for a change described in section
16.07(1)(a)(i) of this revenue procedure. A
taxpayer that wants to change to a method
of accounting described in § 1.451-3 must
use section 16.08(2)(a)(i) of this revenue
procedure to make such change;
(B) a taxpayer whose present method
of accounting for advance payments is
not the deferral method under § 1.4518(c), for a change described in section
16.07(1)(a)(ii) of this revenue procedure.
For example, this change does not apply
to a taxpayer that uses the full inclusion
method under § 1.451-8(b) or the nonAFS deferral method under § 1.451-8(d).
However, this change does apply to a
taxpayer that uses both the cost offset
method under § 1.451-8(e) and the deferral method under § 1.451-8(c);
(C) a taxpayer that wants to change its
method for allocating payments described
in § 1.451-8(c)(8)(iii); or
(D) a taxpayer that wants to change its
method for allocating transaction price for
contracts described in § 1.451-3(d)(5).
(c) Restatements of AFS. A taxpayaccounting presentation does not affect
the propriety of the taxpayer’s method
of accounting for revenue recognized in
the prior taxable year(s). For example,
if the taxpayer properly uses the deferral method described in § 1.451-8(c) for
including advance payments in gross
income in accordance with its AFS, the
tion 16.07(1)(a)(ii) of this revenue procedure even if the AFS for that taxable
year is later restated and may change its
method of accounting under this section
16.07 if it is otherwise eligible.
(2) Manner of making change.

(a) Cut-off basis or a § 481(a) adjustment.
(i) Cut-off basis for certain changes.
(A) In general. Except as provided in
section 16.07(2)(a)(i)(B) of this revenue
procedure, a change made under section
16.07(1)(a)(ii) of this revenue procedure
is made on a cut-off basis and applies to
advance payments received by the taxpayer on or after the beginning of the year
of change. Accordingly, any advance payments received prior to the year of change
(prior advance payments) are accounted
for under the taxpayer’s former method
of accounting, and any advance payments
received in the year of change and in subsequent taxable years are accounted for under
the taxpayer’s new method of accounting.
A taxpayer that changes its method of allocating payments for purposes of § 1.4518(c)(8)(i) must allocate any payments
received prior to the year of change using
the taxpayer’s former method of accounting. Accordingly, a § 481(a) adjustment is
neither permitted nor required.
(B) Section 481(a) adjustment for certain changes. If a taxpayer makes a change
under section 16.07(1)(a)(ii) of this revenue procedure, and the AFS treatment of
prior advance payments in the year of
change or a subsequent taxable year is
relevant for purposes of determining the
amount of such payments that is required
to be included in gross income in the year
of change or a subsequent taxable year,
the taxpayer must implement the change
with a § 481(a) adjustment as provided in
sections 7.02 and 7.03 of Rev. Proc. 201513.
(ii) Computing § 481(a) adjustments
when the year of change is a year in
which the taxpayer implements a change
in accounting principle with a retained
earnings adjustment. If the year of change
is a year in which the taxpayer implements a change in accounting principle
for AFS purposes, including a change
in the method of applying an accounting principle for AFS purposes, and the
change in accounting principle is implemented with a retained earnings adjustment that is taken into account during the
year of change, the taxpayer is required to
treat such adjustment as being taken into
account in the taxable year prior to the
year of change for purposes of computing
the § 481(a) adjustment.

(iii) Example. Computing a § 481(a) adjustment
when the taxpayer presently uses the AFS cost offset
method - related accounts. B is in the trade or business of selling computers. B uses an accrual method
of accounting and computes Federal income tax on
§ 1.451-3(a)(5). B is not under examination within
the meaning of section 3.18 of Rev. Proc. 2015-13.
B does not receive advance payments. For 2022,
B makes two changes in method of accounting to
tion 16.08(2)(a)(i)(A) of this revenue procedure, B
changes its method of accounting for gross income
from the sale of computers to apply the AFS income
inclusion rule and, pursuant to section 16.08(2)(a)(i)
(C) of this revenue procedure, changes its method of
accounting to apply the AFS cost offset method. For
2023, B changes the manner in which income from
the sale of computers is taken into account as AFS
its method of accounting under section 16.07(1)(a)
(i) of this section to use the new AFS method. However, B continues to use the AFS cost offset method.
In computing the § 481(a) adjustment resulting from
the change to the new method of computing AFS
revenue for 2023 under section 16.07(1)(a)(i) of this
revenue procedure, B must take into account its continued use of the AFS cost offset method. See section
3.15 of Rev. Proc. 2015-13.

(b) In accordance with § 1.446-1(e)
(3)(ii), the requirement of § 1.446-1(e)
a statement in lieu of a Form 3115 is
authorized for a change made under this
nition of Form 3115 in section 3.07 of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
the statement in lieu of a Form 3115 that
is permitted under this section 16.07 is
considered a Form 3115 for purposes of
the automatic change procedures of Rev.
Proc. 2015-13. However, the requiresection 6.03(1)(a) of Rev. Proc. 2015-13,
is waived. The statement attached to the
taxpayer’s return for the year of change
must include the following information
for each applicant:
(i) the designated automatic accounting
change number for this change, which is
“153;”
(ii) the applicant’s name, employer
number in the case of an individual), and
type of applicant, as would be provided
had a Form 3115 been required;
(iii) the year of change (both the beginning and ending dates);
(iv) the type of AFS used by the appliand which change the applicant is making
under section 16.07(1)(a) of this revenue

procedure. See § 1.451-3(a)(5) and/or
§ 1.451-8(a)(5);
(v) a detailed and complete description of each item affected by the change
in AFS revenue recognition and the line
number (or schedule) where the affected
return for the year of change, and if applicable, the § 481(a) adjustment for each
change; and
(vi) a detailed description of the basis
used for AFS revenue recognition (that is,
the method the taxpayer uses in its AFS)
both before and after the AFS change.
(c) Concurrent automatic change. A
taxpayer may make more than one change
under this section 16.07 on the same
statement in lieu of a Form 3115 for the
same year of change. The taxpayer must
separately provide all of the information
required for each change on that statement.
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13 does not apply
to this change.
(4) No audit protection. A taxpayer
does not receive audit protection under
section 8.01 of Rev. Proc. 2015-13 for this
change. See section 8.02(2) of Rev. Proc.
2015-13.
(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
16.07 is “153.”
(6) Contact information. For further
information regarding a change under this
section, contact Maria Castillo Valle at
(202) 317-7003 (not a toll-free number).
.08 Changes in the timing of income
recognition under § 451(b) and (c).
(1) Description of change.
(a) In general. This change applies to
an accrual method taxpayer with an applito make certain changes in method of
accounting described in section 16.08(2)
(a) of this revenue procedure. This change
also applies to a taxpayer without an AFS
that wants to make certain changes in
method of accounting described in section
16.08(2)(b) of this revenue procedure.
(b) Applicable terms. For this section
16.08, the term “AFS” has the meaning
set forth in § 1.451-3(b)(5). Additionally,
because a change to comply with §§ 1.451-

3, 1.451-8, and/or 1.1275-2(l), as applicable, is a change in method of accounting
to which the provisions of § 446 and the
accompanying regulations apply, the item
being changed to comply with §§ 1.451-3,
1.451-8, and/or 1.1275-2(l), as applicable,
is determined by applying § 446 and the
accompanying regulations. See §§ 1.4513(l)(1) and 1.451-8(g)(2). In that regard,
regulations use the term “item of gross
income” to generally refer to income that
“item of gross income” is not synonymous
with the terms “item” or “material item”
as used throughout the regulations under
§ 446.
(2) Applicability.
(a) Taxpayer with an AFS. This change
applies to an accrual method taxpayer
with an AFS that:
(i) wants to make one of the following
changes under § 1.451-3:
(A) a change to comply with the AFS
income inclusion rule in § 1.451-3(b)
under which the taxpayer determines the
amount of an item of gross income that
is treated as “taken into account as AFS
revenue” by making the AFS revenue
adjustments provided in § 1.451-3(b)
credit card fees under §§ 1.451-3(j)(2) and
1.1275-2(l)) (but see paragraph (8) of this
section);
(B) a change to comply with the AFS
income inclusion rule in § 1.451-3(b)
under which the taxpayer determines the
amount of the item of gross income that
is “taken into account as AFS revenue” by
making the AFS revenue adjustments provided in § 1.451-3(b)(2)(ii) (including a
§§ 1.451-3(j)(2) and 1.1275(l)) (Alternative AFS Revenue Method) (but see paragraph (8) of this section);
(C) except as provided in section
16.08(2)(a)(i)(E) of this section, a change
to apply the AFS cost offset method in
§ 1.451-3(c) 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 § 1.451-3(b);
(D) a change from applying a cost
offset method, including the AFS cost
offset method in § 1.451-3(c), to not
applying a cost offset method to deter-

mine 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
§ 1.451-3(b);
(E) a change to comply with § 1.4513(c)(5)(ii) as a result of a concurrent
cost-offset related inventory method
Proc. 2015-13 (or successor), or because
the taxpayer determines its cost of goods
in progress offset by reference to costs
that the taxpayer has impermissibly capitalized and/or allocated under its present
method of accounting for inventory. This
section 16.08(2)(a)(i)(E) applies if the taxpayer presently uses a cost offset method,
including the AFS cost offset method
under § 1.451-3(c). This section 16.08(2)
(a)(i)(E) does not apply if the taxpayer is
proposing to make, for the same year of
change, a change to begin using the AFS
cost offset method pursuant to section
16.08(2)(a)(i)(C) of this revenue procedure;
(F) a change to comply with the transaction price allocation rules in § 1.4513(d); or
(G) a change to a method of accounting
described in § 1.451-3(h)(4) when a taxpayer’s AFS covers mismatched reportable periods; or
(ii) wants to make one of the following changes in method of accounting for
advance payments under § 1.451-8:
(A) a change to the full inclusion
method provided in § 1.451-8(b);
(B) a change to the deferral method
provided in § 1.451-8(c);
§ 451(c) method described in § 1.4518(f) to treat payments that otherwise

advance payments and account for such
payments either under the full inclusion
method provided in § 1.451-8(b) or under
the deferral method provided in § 1.4518(c);
(D) except as provided in section
16.08(2)(a)(ii)(F) of this revenue procedure, a change to apply the advance payment cost offset method in § 1.451-8(e)
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

§ 1.451-8(b) or the deferral method in
§ 1.451-8(c), as applicable;
(E) a change from applying a cost offset
method, including the advance payment
cost offset method in § 1.451-8(e), to not
applying a 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 § 1.451-8(b)
or the deferral method in § 1.451-8(c), as
applicable;
(F) a change to comply with § 1.4518(e)(8)(ii) as a result of a concurrent
cost-offset related inventory method
Proc. 2015-13 (or successor), or because
the taxpayer presently determines its cost
of goods in progress offset by reference to
costs that the taxpayer has impermissibly
capitalized and/or allocated under its present method of accounting for inventory.
This section 16.08(2)(a)(ii)(F) applies if
the taxpayer presently uses a cost offset
method, including the advance payment
cost offset method under § 1.451-8(e).
This section 16.08(2)(a)(ii)(F) does not
apply if the taxpayer is proposing to make,
for the same year of change, a change to
begin using the advance payment cost offset method pursuant to section 16.08(2)(a)
(ii)(D) of this revenue procedure;
(G) a change to a method of accounting
described in § 1.451-8(c)(7), which refers
to the methods described in § 1.451-3(h)
(4), when a taxpayer’s AFS covers mismatched reporting periods; or
(H) a change to comply with the payment allocation rules in § 1.451-8(c)(8).
(b) Taxpayer without an AFS. This
change applies to a taxpayer that does not
have an AFS that wants to make one of the
following changes in method of accounting for advance payments under § 1.4518:
(i) a change to the full inclusion method
provided in § 1.451-8(b);
(ii) a change to the deferral method
provided in § 1.451-8(d)(3);
(iii) except as provided in section
16.08(2)(b)(v) of this revenue procedure, a
change to apply the advance payment cost
offset method in § 1.451-8(e) 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 § 1.451-8(b) or

the deferral method in § 1.451-8(d)(3), as
applicable;
(iv) a change from applying a cost offset
method, including the advance payment
cost offset method in § 1.451-8(e), to not
applying a 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 § 1.451-8(b) or
the deferral method in § 1.451-8(d)(3), as
applicable;
(v) a change to comply with § 1.4518(e)(8)(ii) as a result of a concurrent
cost-offset related inventory method
Proc. 2015-13 (or successor), or because
the taxpayer determines its cost of goods
in progress offset by reference to costs
that the taxpayer has impermissibly capitalized and/or allocated under its present
method of accounting for inventory. This
section 16.08(2)(b)(v) applies if the taxpayer presently uses a cost offset method,
including the advance payment cost offset
method under § 1.451-8(e). This section
16.08(2)(b)(v) does not apply if the taxpayer is proposing to make, for the same
year of change, a change to begin using
the advance payment cost offset method
pursuant to section 16.08(2)(b)(iii) of this
revenue procedure; or
(vi) a change to a payment allocation
method described in § 1.451-8(d)(4)(ii).
(3) Inapplicability. Section 16.08(2) of
this revenue procedure does not apply to:
(a) a change to comply with the all
events test in § 1.451-1(a);
(b) a change in method of accounting
to use a special method of accounting, as
(c) a change in method of allocating transaction price between an item of
gross income that is accounted for under
§ 1.451-3 and an item of gross income that
is accounted for under a special method
(14), including a change to comply with
§ 1.451-3(d)(5);
(d) a change described in section
16.08(2)(a)(i)(E), section 16.08(2)(a)(ii)
(F) or section 16.08(2)(b)(v) of this revenue procedure, as applicable, if, immediately after such change is made, the
taxpayer’s method of accounting for cost
offsets does not otherwise comply with
the AFS cost offset method under § 1.451-

3(c) and/or the advance payment cost offset method under § 1.451-8(e), as applicable;
(e) a change described in section
16.08(2)(a)(i)(E), section 16.08(2)(a)
(ii)(F) or section 16.08(2)(b)(v) of this
revenue procedure, including a change
to comply with § 1.451-3(c)(5)(ii) or
§ 1.451-8(e)(8)(ii) because the taxpayer
determines its cost of goods in progress
offset by reference to costs that the taxpayer has impermissibly capitalized and/
or allocated under its present method of
accounting for inventory, unless the taxpayer makes, for the same year of change,
the cost-offset related inventory method
Rev. Proc. 2015-13;
(f) a change to use the AFS cost offset
method if the taxpayer receives advance
payments from the sale of inventory and
does not also make a change to apply the
advance payment cost offset method, or a
change to use the advance payment cost
offset method if the taxpayer is required
to include gross income from the sale of
inventory under § 1.451-3 and does not
also make a change to apply the AFS cost
offset method;
(g) a change to use the deferral method
in § 1.451-8(c) for allocable payments
described in § 1.451-8(c)(8)(iii)(A) (other
than allocable payments described in
§ 1.451-8(c)(8)(iii)(B));
(h) a taxpayer that presently uses the
deferral method in § 1.451-8(c) for allocable payments described in § 1.451-8(c)(8)
(iii)(A) that wants to change its payment
allocation method to an allocation method
that is not described in § 1.451-8(c)(8)(iii)
(B);
(i) a change to use the deferral method
in § 1.451-8(d)(3) for allocable payments
described in § 1.451-8(d)(4)(i) other than
either allocable payments described in
§ 1.451-8(d)(4)(ii) or allocable payments
that are wholly attributable to two or more
items described in § 1.451-8(a)(1)(i)(C);
(j) a taxpayer that presently uses the
deferral method in § 1.451-8(d)(3) for
allocable payments described in § 1.4518(d)(4)(i) that wants to change its payment
allocation method to an allocation method
that is not described in § 1.451-8(d)(4)(ii);
(k) a taxpayer without an AFS that
wants to change its method of accounting for advance payments to the defer-

ral method under § 1.451-8(d)(3) under
which the taxpayer determines the extent
to which an advance payment is earned by
using the following: (i) a statistical basis
if adequate data are available to the taxpayer; or (ii) the use of any other basis that
in the opinion of the Commissioner results
(l) a change in method of accounting

fees;
(m) a change in method of accounting
change provided in this revenue procedure including, for example, a change
described in section 16.07 of this revenue
procedure;
(n) a change in method of accounting
(1)(ii)(B);
(o) a change in a taxpayer’s mismatched reporting periods method
described in § 1.451-3(h)(4) if the taxpayer uses the deferral method for advance
payments under § 1.451-8(c) and does
not also change to the same mismatched
reporting periods method for purposes of
accounting for advance payments pursuant to § 1.451-8(c)(7) for the same year
of change; or, if applicable, a change in
a taxpayer’s mismatched reporting periods method pursuant to § 1.451-8(c)(7)
if the taxpayer uses the deferral method
for advance payments under § 1.451-8(c)
and does not also change to the same mismatched reporting periods method for
purposes of § 1.451-3(h)(4) for the same
year of change; and
(p) a change in method of accounting for payments within the scope of the
§ 1.451-8(a)(1)(ii), if the proposed method
of accounting is to include such payments
in gross income under § 1.451-3 in one or
more taxable years following the taxable
year of receipt.
(4) Manner of making change.
(a) Special rules relating to § 481(a)
adjustment.
(i) Section 481(a) adjustment generally.
(A) Members of a consolidated group.
Changes under this section 16.08 with
regard to taxpayers who are members of
consolidated groups generally are governed by this section 16.08, rather than by

§ 1.1502-17(b)(2) (applicable to changes
in the application of the timing rules of
§ 1.1502-13 in accounting for intercompany transactions (within the meaning of
§ 1.1502-13(b)(1)(i)). See § 1.1502-17(a)
and (b)(1).
(B) Computing § 481(a) adjustments
when the year of change is a year in
which the taxpayer implements a change
in accounting principle with a retained
earnings adjustment. If the year of change
is a year in which the taxpayer implements a change in accounting principle
for AFS purposes, including a change
in the method of applying an accounting principle for AFS purposes, and the
change in accounting principle is implemented with a retained earnings adjustment that is taken into account during the
year of change, the taxpayer is required to
treat such adjustment as being taken into
account in the taxable year prior to the
year of change for purposes of computing
the § 481(a) adjustment.
(ii) Netting of the § 481(a) adjustment.
(A) Required netting for changes made
under § 1.451-3 related to inventory sales.
A taxpayer that makes a change described
in section 16.08(2)(a)(i)(C) or (D) of
this revenue procedure and one or more
changes described in section 16.08(2)(a)
(i)(A), (B), and/or (G) of this revenue procedure for gross income from inventory
sales for the same year of change must
provide a single net § 481(a) adjustment
for all such changes. The § 481(a) adjustment period described in section 7.03 of
Rev. Proc. 2015-13 is determined based
on the net § 481(a) adjustment.
(B) Required netting for changes made
under § 1.451-8 related to inventory sales
for taxpayers with an AFS. A taxpayer
that makes a change described in section
16.08(2)(a)(ii)(D) or (E) of this revenue procedure and one or more changes
described in section 16.08(2)(a)(ii)(A),
(B), (C), and/or (G) of this revenue procedure for advance payments from the sale
of inventory for the same year of change
must provide a single net § 481(a) adjustment for all such changes. The § 481(a)
adjustment period described in section
7.03 of Rev. Proc. 2015-13 is determined
based on the net § 481(a) adjustment.
(C) Required netting for changes made
under § 1.451-8 related to inventory sales
for taxpayers without an AFS. A taxpayer

that makes a change described in section
16.08(2)(b)(iii) or (iv) of this revenue
procedure and one or more changes in
method of accounting described in section
16.08(2)(b)(i) or (ii) of this revenue procedure for advance payments from the sale
of inventory for the same year of change
must provide a single net § 481(a) adjustment for all such changes. The § 481(a)
adjustment period described in section
7.03 of Rev. Proc. 2015-13 is determined
based on the net § 481(a) adjustment.
(D) Required netting for non-automatic
method changes under § 1.451-3 and/or
§ 1.451-8 related to inventory sales. The
rules in section 16.08(4)(a)(iii) of this revenue procedure generally will apply to a
non-automatic change under § 1.451-3
and/or § 1.451-8 for which the netting
rules of section 16.08(4)(a)(iii) of this
revenue procedure would otherwise apply
if the taxpayer were eligible to make the
change under section 16.08 of this revenue procedure.
(iii) Special § 481(a) adjustment rules
for cost offset method change(s) under
§ 1.451-3 and/or § 1.451-8 made with
corresponding cost-offset related inventory method change(s).
(A) Required netting rule for changes
described in section 16.08(2)(a)(i)(E). A
taxpayer that makes more than one method
change under section 16.08(2)(a)(i)(E)
of this revenue procedure for the same
year of change must provide a single net
§ 481(a) adjustment for all such changes.
The § 481(a) adjustment period for this
net § 481(a) adjustment is determined by
applying the rules in section 16.08(4)(a)
(iii)(D) of this revenue procedure.
(B) Required netting rule for changes
described in section 16.08(2)(a)(ii)(F). A
taxpayer that makes more than one method
change under section 16.08(2)(a)(ii)(F)
of this revenue procedure for the same
year of change must provide a single net
§ 481(a) adjustment for all such changes.
The § 481(a) adjustment period for this
net § 481(a) adjustment is determined by
applying the rules in section 16.08(4)(a)
(iii)(D) of this revenue procedure.
(C) Required netting rule for changes
described in section 16.08(2)(b)(v) of this
revenue procedure. A taxpayer that makes
more than one method change under section 16.08(2)(b)(v) of this revenue procedure for the same year of change must

provide a single net § 481(a) adjustment
for all such changes. The § 481(a) adjustment period for this net § 481(a) adjustment is determined by applying the rules
in section 16.08(4)(a)(iii)(D) of this revenue procedure.
(D) Special § 481(a) adjustment
period. For purposes of sections 7.02 and
7.03 of Rev. Proc. 2015-13, the § 481(a)
adjustment period for a cost offset change
described in section 16.08(2)(a)(i)(E), section 16.08(2)(a)(ii)(F), or section 16.08(2)
(b)(v) of this revenue procedure, whether
the § 481(a) adjustment is positive or negative, is the same as the § 481(a) adjustment
period for the corresponding cost-offset related inventory method change, as

Proc. 2021-34. The rules of section 7.02
and 7.03 of Rev. Proc. 2015-13, including
the short period rule and the accelerated
adjustment period rules, apply to determine the § 481(a) adjustment period for
the § 481(a) adjustment for the cost-offset
related inventory method change, which
is used to determine the § 481(a) adjustment period for a positive or negative
§ 481(a) adjustment for the corresponding
cost offset change described in section
16.08(2)(a)(i)(E), section 16.08(2)(a)(ii)
(F), or section 16.08(2)(b)(v) of this revenue procedure. If the taxpayer must net
the § 481(a) adjustments for cost offset
changes under section 16.08(4)(a)(iii)(A),
(B), or (C) of this revenue procedure, as
applicable, the § 481(a) adjustment period
for any such net § 481(a) adjustment is the
same as the § 481(a) adjustment period
for the corresponding cost-offset related
inventory method changes, determined
by netting the § 481(a) adjustments from
such corresponding cost-offset related
inventory method changes. The requirement that the taxpayer net the § 481(a)
adjustments for such corresponding
cost-offset related inventory method
changes is solely for purposes of determining the § 481(a) adjustment period for
the net § 481(a) adjustment determined
under section 16.08(4)(a)(iii)(A), (B), or
(C), as applicable. This section 16.08(4)
(a)(iii)(D) does not apply if, after applying the netting rules in section 16.08(4)
(a)(iii)(A), (B), or (C), as applicable, the
§ 481(a) adjustment for the corresponding
cost offset change(s) is zero. For example,

if the taxpayer makes a cost-offset related
inventory method change that is implemented on a cut-off basis and the § 481(a)
adjustment for the taxpayer’s corresponding change described in section 16.08(2)
(a)(i)(E), section 16.08(2)(a)(ii)(F), or
section 16.08(2)(b)(v) of this revenue
procedure is zero as a result, this section
16.08(4)(a)(iii)(D) does not apply.
(iv) Special § 481(a) adjustment rules
when eligibility waiver under section
16.08(5)(a) of this revenue procedure
applies.
(A) Accelerated adjustment period for
certain prior method changes. If a taxpayer uses the eligibility waiver under
section 16.08(5)(a) of this revenue procedure to make a change described in section 16.08(2)(a)(i), (ii), or (2)(b) of this
revenue procedure and has a remaining
§ 481(a) adjustment from a prior change
for the same item that was made under
section 16.10(2)(a)(iii), (iv), or (2)(b)(ii)
of Rev. Proc. 2022-14 (or its predecessor
or successor), the taxpayer must take the
remaining balance of such prior § 481(a)
adjustment into account in computing taxable income in the taxable year of change.
(B) Special 1-year positive § 481(a)
adjustment period when eligibility waiver
under section 16.08(5)(a) of this revenue
procedure applies. If a taxpayer uses the
eligibility waiver under section 16.08(5)
(a) of this revenue procedure to make a
change described in section 16.08(2)(a)
(i), (ii), or (2)(b) of this revenue procedure
that results in a positive § 481(a) adjustment (current change) and also made a
prior change for that same item under
section 16.10(2)(a)(iii), (iv), or (2)(b)(ii)
of Rev. Proc. 2022-14 (or its predecessor
or successor) that resulted in a negative
§ 481(a) adjustment, the taxpayer must
take the positive § 481(a) adjustment
into account in full in computing taxable
income for the taxable year of change.
(v) Examples. For each of the following examples, the taxpayer uses an accrual
ending October 31, and has an AFS, as
(A) Example 1. Netting rules. A is engaged in a
single trade or business of selling and servicing computers. A is not under examination within the meaning of section 3.18 of Rev. Proc. 2015-13. A does not
receive advance payments. For its 2024 taxable year,
A makes multiple changes in method of accountA changes its

method of accounting for gross income from the sale
of computers to apply the AFS income inclusion rule
pursuant to section 16.08(2)(a)(i)(A) of this revenue
procedure and to apply the AFS cost offset method
pursuant to section 16.08(2)(a)(i)(C) of this revenue
procedure. A also changes its method of accounting
for gross income from computer services to apply
the AFS income inclusion rule pursuant to section
16.08(2)(a)(i)(A) of this revenue procedure. Since A
made a change described in section 16.08(2)(a)(i)(C)
of this revenue procedure and a change described in
section 16.08(2)(a)(i)(A) of this revenue procedure
for gross income from computer sales for the same
year of change, A must net the § 481(a) adjustments
resulting from these changes in the manner required
by section 16.08(4)(a)(ii)(A) of this revenue procedure. The § 481(a) adjustment resulting from A’s
change in method of accounting for income from
computer services under section 16.08(2)(a)(i)(A)
of this revenue procedure is not netted with the
§ 481(a) adjustments resulting from the computer
sales method changes.
(B) Example 2. Special § 481(a) adjustment
period under section 16.08(4)(a)(iii) of this revenue
procedure. The facts are the same as in Example 1.
For its 2024 taxable year, A changes its inventory
method under section 12.01 of this revenue procedure and, as a result, also changes its cost offset
method to comply with § 1.451-3(c)(5)(ii) pursuant
to section 16.08(2)(a)(i)(E) of this revenue procedure. The cost-offset related inventory method
change under section 12.01 of this revenue procedure results in a positive § 481(a) adjustment that is
spread over four taxable years under section 7.01 and
7.03 of Rev. Proc. 2015-13. The cost offset method
change under section 16.08(2)(a)(i)(E) of this revenue procedure results in a negative § 481(a) adjustment. Section 16.08(4)(a)(iii)(D) of this revenue
procedure requires A to spread the negative § 481(a)
adjustment over four taxable years consistent with
the § 481(a) adjustment period for the concurrent
cost-offset related inventory method change under
section 12.01 of this revenue procedure.
(C) Example 3. Prior positive § 481(a) adjustment. B is engaged in a single trade or business of
selling computers. B is not under examination within
the meaning of section 3.18 of Rev. Proc. 2015-13.
B does not receive advance payments. B’s present
method of accounting for gross income from computer sales is to recognize such gross income in
the taxable year in which it receives payment from
its customers. For its 2022 taxable year, B made a
change in method of accounting for gross income
from the sale of computers under section 16.08(2)
(a)(i)(A) of Rev. Proc. 2023-24 to apply the AFS

a positive § 481(a) adjustment.
For its 2023 taxable year, B uses the eligibility
waiver under section 16.08(5)(a) of this revenue procedure to make a change under section 16.08(2)(a)(i)
(C) of this revenue procedure to apply the AFS cost
offset method under § 1.451-3(c) for gross income
from the sale of computers (second method change).
B’s second method change results in a negative
§ 481(a) adjustment, which is taken into account in
full in computing taxable income for the 2023 taxable year. B

method change are for the same item. Accordingly,
pursuant to section 16.08(4)(a)(iv)(A) of this revenue procedure, B must take the remaining balance of
change into account in computing taxable income for
the 2023 taxable year.
(D) Example 4. Current positive section § 481(a)
adjustment. C is engaged in a single trade or business of selling computers. C is not under examination within the meaning of section 3.18 of Rev. Proc.
2015-13. C does not receive advance payments. C’s
present method of accounting for gross income from
computer sales is to recognize such gross income in
the taxable year in which it receives payment from
its customers. For the 2022 taxable year, C made a
change in method of accounting for gross income
from the sale of computers under section 16.08(2)(a)
(i)(A) of Rev. Proc. 2023-24 to apply the AFS income
inclusion rule under § 1.451-3(b), and a change for
gross income from the sale of computers under section 16.08(2)(a)(i)(C) of Rev. Proc. 2023-24 to apply
two method changes). C was required to net the
§ 481(a) adjustments resulting from C
changes, and this resulted in a net negative § 481(a)
adjustment for C’s 2022 taxable year. For 2023, C
makes a change in method of accounting for gross
income from the sale of computers under section
16.08(2)(a)(i)(D) of this revenue procedure to no
longer apply the cost offset method, which results
in a positive § 481(a) adjustment (third method
change). C’s 2022 and 2023 changes in method of
accounting pertain to the same item. Accordingly,
pursuant to section 16.08(4)(a)(iv)(B) of this revenue procedure, C must take the entire amount of its
positive § 481(a) adjustment from its third method
change into account in computing taxable income for
its 2023 taxable year.

(b) Certain cost offset changes made
on an amended return.
(i) In general. Notwithstanding section 6.03(1)(a) of Rev. Proc. 2015-13, a
taxpayer making a change described in
section 16.08(2)(a)(i)(E), section 16.08(2)
(a)(ii)(F), or section 16.08(2)(b)(v) of
this revenue procedure, as applicable,
which corresponds to a cost-offset related
non-automatic change procedures of Rev.
Proc. 2015-13 for the same year of change
may make the corresponding cost offset
change described in section 16.08(2)(a)
(i)(E), section 16.08(2)(a)(ii)(F), or section 16.08(2)(b)(v) on an amended federal
income tax return for the cost offset year
(b)(ii) of this revenue procedure) provided:
(A) the taxpayer received consent for
the cost-offset related inventory method
change procedures for the year of change
after the time the taxpayer was required to

sponding cost offset change under section
16.08(2)(a)(i)(E), section 16.08(2)(a)(ii)
(F), or section 16.08(2)(b)(v) of this revenue procedure, as applicable, in accordance with section 6.03(1)(a)(i)(A) of
Rev. Proc. 2015-13 for the cost offset year
of change;
(B) the taxpayer timely signs and
returns the Consent Agreement for the
non-automatic corresponding cost-offset
related inventory method change in accordance with section 11.03(2)(c)(i) of Rev.
Proc. 2015-13, and timely implements
such non-automatic change in accordance
with section 11.03(2)(c)(ii)(A) or (B) of
Rev. Proc. 2015-13;
(C) the taxpayer implements the corresponding cost offset method change
described in section 16.08(2)(a)(i)(E),
section 16.08(2)(a)(ii)(F), or section
16.08(2)(b)(v) of this revenue procedure,
as applicable, on the same amended federal income tax return that the taxpayer
implements the cost-offset related inventory method change described in section
16.08(4)(b)(i)(A) of this revenue procedure; and
(D) the taxpayer’s amended federal
income tax return for the year of change
includes any adjustments to taxable
income or tax liability resulting from the
change(s) in method of accounting for
the cost-offset related inventory method
and the corresponding cost offset method
change(s).
(ii) Cost offset year of change. For purposes of this section 16.08(4)(b), a taxpayer’s cost offset year of change is the same
year of change that the taxpayer received
consent under the non-automatic change
procedures for the cost-offset inventory
related change.
(iii) Filing requirements. Notwithstanding section 6.03(1)(a) of Rev. Proc.
2015-13, a taxpayer making a change
under section 16.08(2)(a)(i)(E), section
16.08(2)(a)(ii)(F), or section 16.08(2)(b)
(v) of this revenue procedure in accordance with section 16.08(4)(b) of this revenue procedure must attach the original
amended federal income tax return for the
the duplicate copy (with signature) of the
Form 3115 with the IRS in Ogden, UT, no

the amended federal income tax return
that implements the cost-offset related
inventory method described in section
16.08(4)(b)(i)(A) of this revenue procedure, as provided in section 11.03(2)(c)(ii)
(A) or (B) of Rev. Proc. 2015-13.
(5) Eligibility rules inapplicable.
(a) Eligibility rule temporarily inapplicable for changes under sections
16.08(2)(a)(i), (2)(a)(ii), or (2)(b) of
this revenue procedure. For a taxpayer
that did not apply § 1.451-3, § 1.451-8,
and/or § 1.1275-2(l), as applicable, for
a taxable year beginning before January
1, 2021, the eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13 does not
apply to a change under section 16.08(2)
(a)(i), (2)(a)(ii), or (2)(b) of this revenue
taxable year beginning on or after January 1, 2021. For a taxpayer that applied
§ 1.451-3, § 1.451-8, and/or § 1.12752(l), as applicable, for a taxable year
beginning before January 1, 2021, the eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 does not apply to a change
under section 16.08(2)(a)(i), (2)(a)(ii), or
(2)(b) of this revenue procedure for the
taxpayer’s second taxable year beginning
on or after January 1, 2021.
(b) Certain cost offset method changes.
The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13 does not apply
to a change under section 16.08(2)(a)(i)
(E), section 16.08(2)(a)(ii)(F), or section
16.08(2)(b)(v) of this revenue procedure.
(c) Example. Application of section 5.01(1)(f) of
Rev. Proc. 2015-13. B, a calendar year taxpayer, is
engaged in a single trade or business of selling computers. B is not under examination within the meaning of section 3.18 of Rev. Proc. 2015-13. B does
not receive advance payments. B presently recognizes gross income from the sale of computers in the
taxable year it begins manufacturing the computer
without regard to whether there is a contract with a
customer, and does not apply a cost offset method.
For 2021, B makes a change in method of accounting
for gross income from the sale of computers under
section 16.10(2)(a)(iii)(A) of Rev. Proc. 2022-14 to
apply the AFS income inclusion rule under § 1.4513(b). Unless a waiver of eligibility applies, section
5.01(1)(f) of Rev. Proc. 2015-13 applies to prevent B
from automatically changing its method of accounting for gross income from the sale of computers
under section 16.08(2)(a)(i)(C) of this revenue procedure to apply the AFS cost offset method under
§ 1.451-3(c) for any of the four taxable years succeeding the 2021 year of change (taxable year 2022
through 2025) because the 2021 change was for the
same item.

(6) No audit protection for taxpayers
under examination for certain cost offset changes. For a taxpayer under examination that makes a change in method
of accounting under section 16.08(2)(a)
(i)(E), section 16.08(a)(ii)(F), or section
16.08(2)(b)(v) of this revenue procedure,
the taxpayer does not receive audit protection under section 8.01 of Rev. Proc.
2015-13 for such change if, at the time of
ing for the item being changed by the
corresponding cost-offset related inven-

by section 4.02 of Rev. Proc. 2021-34 (or
successor), is an issue under consideration for the taxable year under examination. However, if the taxpayer ultimately
receives audit protection for the corresponding cost-offset related inventory
method change under section 8.02(1)(f)
of Rev. Proc. 2015-13, then the preceding
sentence does not apply and the normal
audit protection rules in section 8 of Rev.
Proc. 2015-13 apply.
(7) Concurrent automatic changes.
(a) Changes under this section 16.08
and change to overall accrual method. A
taxpayer that wants to make one or more
concurrent changes in method of accounting under this section 16.08 and a change
in overall method of accounting to an
accrual method under section 15.01 of
this revenue procedure for the same year
that includes all of the changes. Except as
otherwise required by section 16.08(4)(a)
(ii) of this revenue procedure, the taxpayer
may not net the § 481(a) adjustment from
one change with the § 481(a) adjustment
from another change, and must separately
state the § 481(a) adjustment for each
change. If a taxpayer makes a concurrent
change in method of accounting to allocate transaction price and/or payments
under section 16.08(2)(a)(i), (ii), or section 16.08(2)(b) of this revenue procedure, the taxpayer is required to make the
allocation change before any other change
described in section 16.08(2)(a)(i), (ii), or
section 16.08(2)(b) of this revenue procedure, as applicable.
(b) Concurrent cost-offset related
inventory method change and change to
apply a cost offset method. A taxpayer that
implements a cost-offset related inventory

by section 4.02 of Rev. Proc. 2021-34) in
the same year of change it implements a
change(s) to apply a cost offset method
under section 16.08(2)(a)(i)(C), section
16.08(2)(a)(ii)(D), or section 16.08(2)(b)
(iii) of this revenue procedure, is required
to implement the cost-offset related inventory method change(s) before it implements the change to apply a cost offset
method under section 16.08(2)(a)(i)(C),
section 16.08(2)(a)(ii)(D), or section
16.08(2)(b)(iii)) of this revenue procedure, as applicable.
(c) Concurrent cost-offset related
inventory method change and corresponding change to cost offset method.
See section 6.03(1)(b) of Rev. Proc. 201513 for a taxpayer that makes one or more
change(s) under section 16.08(2)(a)(i)(E),
(a)(ii)(F), or (b)(v) of this revenue procedure and one or more cost-offset related
section 5.06 of Rev. Proc. 2015-13, under
this revenue procedure in the same year
Form 3115 that includes both the cost-offset related inventory method change and
the corresponding cost offset change.

Additionally, such taxpayer is required to
implement the cost-offset related inventory method change(s) under this revenue
procedure before it implements the corresponding cost offset change(s) under section 16.08(2)(a)(i)(E), (a)(ii)(F), or (b)(v)
of this revenue procedure, as applicable.
(d) Examples. For each of the following examples, the taxpayer is on a calendar year, uses an accrual method of
§ 1.451-3(a)(5).
(i) Example 1. Ordering Rule: Cost-Offset
Related Inventory Method Change Before Change to
Cost Offset Method. A is engaged in a single trade
or business of manufacturing and selling computers.
A is not under examination within the meaning of
section 3.18 of Rev. Proc. 2015-13. A uses the AFS
income inclusion rule to account for gross income
from the sale of computers and uses the deferral
method to account for advance payments received
from the sale of computers. A makes multiple
cally, A changes its method of accounting to apply
the AFS cost offset method and the advance payment
cost offset method pursuant to sections 16.08(2)(a)(i)
(C) and 16.08(2)(a)(ii)(D) of this revenue procedure.
A also changes its UNICAP method under section
12.02 of this revenue procedure. Pursuant to section
16.08(7)(b) of this revenue procedure, A is required
to implement the UNICAP method change under
section 12.02 before it implements the changes to the
AFS cost offset method and advance payment cost

Changes related to § 1.451-3 other than cost offset
Changes related to cost offset under § 1.451-3, except concurrent
cost-offset related inventory method changes
Changes related to the deferral method for advance payments - § 1.451-8
other than cost offset

offset method under sections 16.08(2)(a)(i)(C) and
16.08(2)(a)(ii)(D).
(ii) Example 2. Ordering Rule: Cost-Offset Related
Inventory Method Change Before Corresponding
Change to Cost Offset Method. The facts are the same
as in Example 1. A makes multiple changes in method
of accounting in 2024. A changes its UNICAP method
under section 12.02 of this revenue procedure. A also
makes a corresponding change to the AFS cost offset
method under section 16.08(2)(a)(i)(E) and a corresponding change to the advance payment cost offset
method section 16.08(2)(a)(ii)(F) of this revenue procedure. Pursuant to section 16.08(7)(c) of this revenue
procedure, A is required to implement the UNICAP
method change under section 12.02 before it implements the corresponding change to the AFS cost offset
method under section 16.08(2)(a)(i)(E) and the corresponding change to the advance payment cost offset
method under section 16.08(2)(a)(ii)(F).

(8) Limited applicability. Notwithstanding the inapplicability rules in section 16.08(3) of this revenue procedure,
the changes described in section 16.08(2)
(a)(i)(A) and (B) of this revenue procedure are applicable only for a taxpayer’s
ning after December 31, 2020.
(9) Designated automatic accounting
method change number. See the following
table for the designated automatic method
change number (DCN) for the changes in
method of accounting under this section
16.08.

16.08(2)(a)(i)(A), (B), (F), (G)

250

16.08(2)(a)(i)(C), (D)

251

16.08(2)(a)(ii)(B), (C), (G) and (H),
16.08(2)(b)(ii) or (vi)

252

Changes related to cost offset under § 1.451-8, except concurrent
cost-offset related inventory method changes
Changes related to full-inclusion method under § 1.451-8(b)

16.08(2)(a)(ii)(D), (E), 16.08(2)(b)(iii)
or (iv)
16.08(2)(a)(ii)(A) and (C), 16.08(2)(b)(i)

Changes related to cost offsets resulting from concurrent cost-offset
related inventory changes

16.08(2)(a)(i)(E), 16.08(2)(a)(ii)(F), and
16.08(2)(b)(v)

(10) Contact information. For further
information regarding a change under
this section, contact Sharon Horn at (202)
317-7003 (not a toll-free number). For
further information regarding a change

contact Chris Lieu at (202) 317-6945 (not
a toll-free number).

SECTION 17. OBLIGATIONS ISSUED
AT DISCOUNT (§ 454)
.01 Series E, EE or I U.S. savings
bonds.
(1) Description of change. This change
applies to a taxpayer that uses the overall cash receipts and disbursements (cash)
method of accounting and that wants to

253
254
255

change its method of accounting for interest income on Series E, EE, or I U.S. savings bonds. However, this change only
applies to a taxpayer that previously made
an election under § 454 to report as interest income the increase in redemption
price on a bond occurring in a taxable
year, and that now wants to report this
income in the taxable year in which the

matures, whichever is earliest.
(2) Manner of making change and
designated automatic accounting method
change number.
(a) This change is made on a cut-off
basis and is effective for any increase
in redemption price occurring after the
beginning of the year of change for all
Series E, EE and I U.S. savings bonds
held by the taxpayer on or after the beginning of the year of change. Accordingly,
a § 481(a) adjustment is neither permitted
nor required.
(b) In accordance with § 1.446-1(e)
(3)(ii), the requirement of § 1.446-1(e)
statement in lieu of a Form 3115 is authorized for this change. Notwithstanding the
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
the statement in lieu of a Form 3115 that
is permitted under this section 17.01 is
considered a Form 3115 for purposes of
the automatic change procedures of Rev.
Proc. 2015-13. However, the requiretion 6.03(1)(a) of Rev. Proc. 2015-13, is
waived. The statement must include the
following information:
(i) the designated automatic accounting
method change number for this change,
which is “131”;
(ii) the taxpayer’s name and employer
number, as applicable;
(iii) the year of change (both the beginning and ending dates);
(iv) the Series E, EE or I U.S. savings
bonds for which this change in accounting
method is requested;
(v) a statement that the taxpayer will
report all interest on any U.S. savings
bonds acquired during or after the year of
change when the interest is realized upon
whichever is earliest; and
(vi) a statement that the taxpayer will
report all interest on the U.S. savings
bonds acquired before the year of change
when the interest is realized upon disposiever is earliest, with the exception of any
interest income previously reported in
prior taxable years.
(3) Designated automatic accounting
method change number. The designated

automatic accounting method change
number for a change under this section
17.01 is “131.”
(4) Contact information. For further
information regarding a change under this
section, contact Steven Harrison at (202)
317-6842 (not a toll-free number).
SECTION 18. PREPAID
SUBSCRIPTION INCOME (§ 455)
.01 Prepaid subscription income.
(1) Description of change. This change
applies to a taxpayer using an overall
accrual method of accounting that wants
to change its method of accounting for
prepaid subscription income to the method
described in § 455 and the regulations
thereunder, including an eligible taxpayer
that wants to make the “within 12 months”
election under § 1.455-2.
(2) Manner of making change and
designated automatic accounting method
change number.
(a) Cut-off basis. This change is made
on a cut-off basis and applies only to prepaid subscription income received on or
after the beginning of the year of change.
The taxpayer must continue to account
for prepaid subscription income received
prior to the year of change under the taxpayer’s present method of accounting.
Accordingly, a § 481(a) adjustment is neither permitted nor required.
(b) Short Form 3115 in lieu of a standard Form 3115. In accordance with
§ 1.446-1(e)(3)(ii), the requirement of
3115 is waived and, pursuant to section
6.02(2) of Rev. Proc. 2015-13, a short Form
3115 is authorized for a change described
in section 18.01(a) of this revenue proce-

Form 3115 (Rev. December 2022) must
include the following information:
(above Part I);
(ii) the signature section at the bottom
of page 1;
(iii) Part I, line 1(a);
(iv) the information described in
§ 1.455-6(a), as required by § 1.455-6(b);
and
(v) if the taxpayer wants to make
a “within 12 months” election under

§ 1.455-6(c), the information described in
section § 1.455-6(c)(2).
(c) Section 455 election made with
consent. The consent granted in section
9 of Rev. Proc. 2015-13, 2015-5 I.R.B.
§ 455(c)(3) and § 1.455-6(b).
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
18.01 is “132.”
(4) Contact information. For further
information regarding a change under this
section, contact Patrick Clinton at (202)
317-7005 (not a toll-free number).
SECTION 19. SPECIAL RULES FOR
LONG-TERM CONTRACTS (§ 460)
.01 Small business taxpayer exceptions
from requirement to account for certain
long-term contracts under § 460 or to
capitalize costs under § 263A for certain
home construction contracts.
(1) Description of change. This change
applies to a taxpayer that (a) wants to
change its method of accounting for
exempt long-term construction contracts described in § 460(e)(1)(B) from
the percentage-of-completion method of
accounting described in § 1.460-4(b) to
an exempt contract method of accounting
described in § 1.460-4(c); or (b) chooses
to stop capitalizing costs under § 263A
for home construction contracts described
in § 460(e)(1)(A) and meets the requirements of § 460(e)(1)(B)(i) and (ii).
(2) Inapplicability. A taxpayer can use
a method of accounting for its exempt
long-term contracts that is different from
the method used for contracts that are
not exempt. Thus, a taxpayer must use
the percentage-of-completion method of
accounting for nonresidential long-term
construction contracts that do not meet the
requirements of § 460(e)(1)(B), proposed
§ 1.460-3(b)(1)(ii), or § 1.460-3(b)(1)(ii),
enters into such a contract, but must continue to use its exempt contract method of
accounting for its existing exempt longterm construction contracts. Similarly, in
into a nonresidential long-term construction contract that meets the requirements
of § 460(e)(1)(B), proposed § 1.460-3(b)

(1)(ii), or § 1.460-3(b)(1)(ii), as applicable, the taxpayer can use a permissible
exempt contract method of accounting for
such a contract. Rev. Rul. 92-28, 1992-1
C.B. 153. Accordingly, only a taxpayer
who previously adopted the percentage-of-completion method of accounting for exempt long-term construction
contracts and wants to change to another
permissible exempt contract method of
accounting is required to request consent
to change under this section 19.01. Similarly, a taxpayer that enters into a home
construction contract described in § 460(e)
(1)(A) and that meets the requirements of
§ 460(e)(1)(B)(i) and (ii) requires consent
to change its method of accounting to not
capitalize costs under § 263A only if the
taxpayer has previously applied § 263A
to home construction contracts exempt
from the capitalization requirement under
§ 460(e)(1).
(3) Manner of making change. This
change is made on a cut-off basis and
applies only to long-term construction
day of the year of change. Accordingly, a
§ 481(a) adjustment is neither permitted
nor required.
(4)
. A taxpayer is required to complete only the following information on Form 3115 (Rev.
December 2022) to make this change:
(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;
(d) Part II, all lines except line 16;
(e) Part IV, line 25; and
(f) Schedule D, Part I.
(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
19.01 is “236.”
(6) Contact information. For further
information regarding changes under this
section, contact Innessa Glazman at (202)
317-7006 (not a toll-free number).
.02 Change to rely on the interim guidance provided in section 8 of Notice 202363, 2023-39 I.R.B. 919.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting under § 460 to
rely on the interim guidance provided

in section 8 of Notice 2023-63, 2023-39
I.R.B. 919, so that the costs allocable to
a long-term contract accounted for using
the PCM include amortization deductions

and section 4.02(2) of Notice 2023-63, as
applicable, under §174(a)(2)(B), rather
than the capitalized amount of such
expenditures, and the amortization deductions for such expenditures are treated as
incurred for purposes of determining the
percentage of contract completion in the
taxable year the amortization is deducted.
For purposes of determining the percentage of contract completion, estimated total
allocable contract costs include either (1)
all amortization of SRE expenditures that
son of the performance of the long-term
contract, or (2) only that portion of such
amortization expected to be incurred and
deducted during the term of the contract.
required to report any portion of the contract price not previously reported by the
taxable year following the taxable year in
which the contract is completed, notwithstanding that some portion of the SRE
expenditures remain unamortized. See
§ 460(b)(1).
(2) Inapplicability. This change does
not apply to:
(a) A change in method of accounting under § 460 with respect to expenditures capitalized under § 59(e)(2)(B), or
under § 174(b) prior to its amendment by
§ 13206(a) of the TCJA.
(b) A change in method of accounting
for independent research and developwhich are not allocable contract costs.
(c) Any contract not accounted for
under the PCM, as described in § 460(b)
(1) and § 1.460-4(b)(2), as of the beginning of the year of change.
(3) Manner of making change.
(a) Cut-off basis. A change under section 19.02(1) of this revenue procedure for
after December 31, 2021, applies to the
§ 460 treatment of SRE expenditures paid
or incurred in taxable years beginning
after December 31, 2021. Accordingly,
such change is made on a cut-off basis,
and applies to all long-term contracts for
which an SRE expenditure is an allocable

contract cost, including long-term contracts entered into before the beginning
of the year of change. A taxpayer making
this change does not recompute its taxable
income under § 1.460-4(b) for any taxable
year beginning on or before December 31,
2021.
(b)
cut-off basis.
(i) In general. Except as provided in
section 19.02(3)(b)(ii) of this revenue procedure, a change under section 19.02(1) of
this revenue procedure for a year of change
after December 31, 2021, is made with a
into account the § 460 treatment of SRE
expenditures paid or incurred in taxable
years beginning after December 31, 2021.
Such change applies to all long-term contracts for which an SRE expenditure is an
allocable contract cost, including longterm contracts entered into before the
beginning of the year of change.
(ii)
§ 481(a) adjustment. If a change described
in section 19.02(3)(b)(i) of this revenue
adjustment that is negative, the taxpayer
may instead choose to implement the
change on a cut-off basis.
(4) Certain eligibility rules inapplicable. The eligibility rules in section 5.01(1)
(d) and (f) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, do not apply to a change
described in section 19.02(1) of this revor second taxable year beginning after
December 31, 2021.
(5) Limited audit protection. A taxpayer does not receive audit protection
under section 8.01 of Rev. Proc. 2015-13
for a change under section 19.02(1) of
this revenue procedure with respect to the
§ 460 treatment of expenditures paid or
incurred in taxable years beginning on or
before December 31, 2021.
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under section 19.02
of this revenue procedure is “271.”
(7) Contact information. For further
information regarding a change under
section 19.02 of this revenue procedure,
contact John Aramburu at (202) 317-7006
(not a toll-free number).

SECTION 20. TAXABLE YEAR
INCURRED (§ 461)
In general. Applicable provisions of
the Code, regulations and other guidance
published in the Internal Revenue Bulletin may prescribe the manner in which
a taxpayer takes into account a liability
that has been incurred. For example, for
a taxpayer with inventories and subject to
§ 263A, the taxpayer must include direct
and indirect costs in inventory costs,
which may be recovered through cost of
goods sold. See § 1.263A-1(e)(2)(i)(B).
A taxpayer may not rely on any provision
in this section 20 to take a current year
deduction if another applicable provision
requires the taxpayer to take the liability
into account in a year other than the year
incurred.
.01 Timing of incurring liabilities for
employee compensation.
(1) Self-insured employee medical ben.
(a) Description of change.
(i) Applicability. This change applies
to a taxpayer using an overall accrual
method of accounting that wants to change
its method of accounting for self-insured
liabilities (including any amounts not
covered by insurance, such as a “deductible” amount under an insurance policy)
relating to employee medical expenses
(including liabilities resulting from medical services provided to retirees whom the
employer reimburses for the cost of medical services, or for whom the employer
directly pays a third party medical provider, no later than the 15th day of the 3rd
calendar month after the end of the taxable
year of the retirement, and to employees
claims under a workers’ compensation
act) that are not paid from a welfare benea method as follows:
(A) If the taxpayer has a liability to
pay an employee for medical expenses
incurred by the employee, the taxpayer
will treat the liability as incurred in the
the claim with the employer. See United
States v. General Dynamics Corp., 481
U.S. 239 (1987), 1987-2 C.B. 134.
(B) If the taxpayer has a liability to pay
a third party for medical services provided
to its employees, the taxpayer will treat

the liability as incurred in the taxable year
in which the services are provided.
(ii) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations thereunder to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
20.01(1) if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue procedure (as applicable).
(b) Concurrent automatic change. A
taxpayer making both this change and a
change to a UNICAP method described in
section 20.01(1)(a)(ii) of this revenue procedure under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable) for the same year of change
changes, in which case the taxpayer must
enter the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc. 201513, 2015-5 I.R.B. 419, for information on
making concurrent changes.
(c) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.01(1) is “42.”
(2) Bonuses.
(a) Description of change.
(i) Applicability. This change applies to
a taxpayer using an overall accrual method
of accounting that wants to change its
method of accounting to treat bonuses as
incurred in the taxable year in which all
events have occurred that establish the
fact of the liability to pay a bonus and the
amount of the liability can be determined
with reasonable accuracy (see § 1.446change its method of accounting under
this section 20.01(2) to one of the following methods:
(A) If all the events that establish the
fact of the liability to pay a bonus have
occurred by the end of the taxable year in
which the related services are provided,
and the bonus is received by the employee
no later than the 15th day of the 3rd calendar month after the end of the taxable year

in which the related services are provided,
the taxpayer will treat the bonus liability
as incurred in that taxable year. See Rev.
by Rev. Rul. 61-127, 1961-2 C.B. 36.
(B) If all the events that establish the
fact of the liability to pay a bonus occur
in the taxable year subsequent to the taxable year in which the related services are
provided, the taxpayer will treat the bonus
liability as incurred in such subsequent
taxable year.
(ii) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations thereunder to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
20.01(2) if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue procedure (as applicable).
(b) Concurrent automatic change. A
taxpayer making both this change and a
change to a UNICAP method described in
section 20.01(2)(a)(ii) of this revenue procedure under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable) for the same year of change
changes, in which case the taxpayer must
enter the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc. 201513 for information on making concurrent
changes.
(c) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.01(2) is “133.”
(3) Vacation pay, sick pay, and severance pay.
(a) Description of change.
(i) Applicability. This change applies
to a taxpayer using an overall accrual
method of accounting that wants to
change its method of accounting to treat
vacation pay, sick pay, and severance pay
as incurred in the taxable year in which all
events have occurred that establish the fact
of the liability to pay vacation pay, sick
pay, and severance pay and the amount of

the liability can be determined with reasonable accuracy (see § 1.446-1(c)(1)(ii)).
method of accounting under this section
20.01(3) to one of the following methods:
(A) If all the events that establish
the fact of the liability to pay vacation
pay, sick pay, and severance pay have
occurred by the end of the taxable year
in which the related services are provided, the vacation pay, sick pay, and
severance pay vests in the taxable year
the related services are provided, and
the vacation pay, sick pay, and severance pay is received by the employee no
later than the 15th day of the 3rd calendar
month after the end of the taxable year in
which the related services are provided,
the taxpayer will treat the vacation pay,
sick pay, and severance pay liability as
incurred in the taxable year in which the
related services are provided.
(B) If all the events that establish the
fact of the liability to pay vacation pay,
sick pay, and severance pay occur in the
taxable year subsequent to the taxable
year in which the related services are provided, the taxpayer will treat the vacation
pay, sick pay, and severance pay liability
as incurred in such subsequent taxable
year.
(ii) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations thereunder to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
20.01(3) if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue procedure (as applicable).
(b) Concurrent automatic change. A
taxpayer making both this change and a
change to a UNICAP method described in
section 20.01(3)(a)(ii) of this revenue procedure under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable) for the same year of change
changes, in which case the taxpayer must
enter the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc. 2015-

13 for information on making concurrent
changes.
(c) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.01(3) is “134.”
(4) Commissions.
(a) Description of change.
(i) Applicability. This change applies
to a taxpayer using an overall accrual
method of accounting that wants to
change its method of accounting to treat
commissions as incurred in the taxable
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 (see § 1.446-1(c)(1)(ii)). Specifically, a taxpayer may change its method
of accounting under this section 20.01(4)
to one of the following methods:
(A) If all the events that establish the
fact of the liability to pay a commission
have occurred by the end of the taxable
year in which the related services are provided, and the commission is received by
the employee no later than the 15th day of
the 3rd calendar month after the end of the
taxable year in which the related services
are provided, the taxpayer will treat the
commission liability as incurred in that
taxable year.
(B) If all the events that establish the
fact of the liability to pay a commission
occur in the taxable year subsequent to the
taxable year in which the related services
are provided, the taxpayer will treat the
commission liability as incurred in such
subsequent taxable year.
(ii) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations thereunder to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
20.01(4) if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue procedure (as applicable).
(b) Concurrent automatic change. A
taxpayer making both this change and a
change to a UNICAP method described in
section 20.01(4)(a)(ii) of this revenue pro-

cedure under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable) for the same year of change
changes, in which case the taxpayer must
enter the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc. 201513 for information on making concurrent
changes.
(c) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.01(4) is “249.”
(5) Contact information. For further
information regarding a change under this
section, contact Maria Castillo Valle or
Alicia Lee-Won at (202) 317-7003 (not a
toll-free number).
.02 Timing of incurring liabilities for
real property taxes, personal property
taxes, state income taxes, and state franchise taxes.
(1) Background. A taxpayer using an
overall accrual method of accounting
generally incurs a liability in the taxable
year that all the events have occurred
that establish the fact of the liability, the
amount of the liability can be determined
with reasonable accuracy, and economic
performance has occurred with respect to
the liability. See § 1.446-1(c)(1)(ii). Under
§ 1.461-4(g)(6), if the liability of the taxpayer is to pay a tax, economic performance occurs as the tax is paid to the government authority that imposed the tax.
(2) Description of change.
(a) Applicability. This change applies
to a taxpayer using an overall accrual
method of accounting that wants to change
its method of accounting to:
(i) treat liabilities (for which the all
events test of § 461(h)(4) is otherwise
met) for real property taxes, personal
property taxes, state income taxes, or state
franchise taxes as incurred in the taxable
year in which the taxes are paid, under
§ 461 and § 1.461-4(g)(6);
(ii) account for real property taxes, personal property taxes, state income taxes,
or state franchise taxes under the recurring
item exception method under § 461(h)(3)
and § 1.461-5(b)(1); or
(iii) revoke an election under § 461(c)
(ratable accrual election).

(b) Inapplicability. This change does
not apply to:
(i) a taxpayer’s liability for a tax subject to the limitation on acceleration of
accrual of taxes under § 461(d); or
(ii) a taxpayer that is required under
§ 263A and the regulations thereunder to
capitalize the costs with respect to which
the taxpayer wants to change its method
of accounting under this section 20.02 if
the taxpayer is not capitalizing these costs,
unless the taxpayer concurrently changes
its method to capitalize these costs in
conjunction with a change to a UNICAP
method under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable).
(3) Concurrent automatic change. A
taxpayer making both this change and a
change to a UNICAP method described in
section 20.02(2)(b)(ii) of this revenue procedure under section 12.01, 12.02, 12.08,
or 12.12 of this revenue procedure (as
applicable) for the same year of change
changes, in which case the taxpayer must
enter the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc. 201513, 2015-5 I.R.B. 419, for information on
making concurrent changes.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.02 is “43.”
(5) Contact information. For further
information regarding a change under this
section, contact Christine Merson at (202)
317-5100 (not a toll-free number).
.03 Timing of incurring liabilities
under a workers’ compensation act, tort,
breach of contract, or violation of law.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer using an overall accrual
method of accounting that wants to change
its method of accounting for self-insured
liabilities (including any amounts not covered by insurance, such as a “deductible”
amount under an insurance policy) arising
under any workers’ compensation act or
out of any tort, breach of contract, or violation of law, to treating the liability for
the workers’ compensation, tort, breach
of contract, or violation of law as being

incurred in the taxable year in which all
the events have occurred that establish
the fact of the liability, the amount of the
liability can be determined with reasonable accuracy, and payment is made to
the person to which the liability is owed.
See § 461 and § 1.461-4(g)(1) and (2). If
the taxpayer has self-insured liabilities
resulting from medical services provided
a workers compensation act, the taxpayer
may change its method of accounting for
those liabilities under section 20.01(1) of
this revenue procedure (if the taxpayer is
otherwise eligible).
(b) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations thereunder to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
20.03 if the taxpayer is not capitalizing
these costs, unless the taxpayer concurrently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue procedure (as applicable).
(2) Concurrent automatic change. A
taxpayer making both this change and
change to either a method provided in section 20.01(1) of this revenue procedure for
self-insured employee medical expenses
or a UNICAP method described in section 20.03(1)(b) of this revenue procedure under section 12.01, 12.02, 12.08, or
12.12 of this revenue procedure (as applicable) for the same year of change should
taxpayer must enter the designated automatic accounting method change numbers
for each change on the appropriate line on
that Form 3115. See section 6.03(1)(b) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
for information on making concurrent
changes.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.03 is “44.”
(4) Contact information. For further
information regarding a change under this
section, contact Christine Merson at (202)
317-5100 (not a toll-free number).
.04 Timing of incurring certain liabilities for payroll taxes.

(1) Description of change.
(a) Applicability. This change applies
to:
(i) an employer using an overall accrual
method of accounting that wants to change
its method of accounting for:
(A) FICA and FUTA taxes to a method
consistent with the holding in Rev. Rul.
96-51, 1996-2 C.B. 36. Rev. Rul. 96-51
permits an accrual method employer to
take into account in Year 1, under the all
events test of § 461, its otherwise deductible FICA and FUTA 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; and
(B) state unemployment taxes and,
in the event the taxpayer is an employer
within the meaning of the Railroad Retirement Tax Act (RRTA) (see § 3231(a)),
RRTA taxes to a method under which the
taxpayer may take into account in Year 1
its otherwise deductible state unemployment taxes and railroad retirement taxes
(if applicable) imposed with respect to
year-end wages properly accrued in Year
1, but paid in Year 2, if the requirements
of the recurring item exception are met
(including the requirement that, as of the
end of the taxable year, all events have
occurred that establish the fact of the liability and the amount of the liability can
be determined with reasonable accuracy,
see § 1.461-5(b));
(ii) an accrual method employer that
utilizes a method of accounting for FICA
and FUTA taxes that is consistent with the
holding in Rev. Rul. 96-51 and wants to
change its method of accounting for state
unemployment taxes and, in the event the
employer is an employer within the meaning of RRTA (see § 3231(a)), RRTA taxes
to a method under which the taxpayer may
take into account in Year 1 its otherwise
deductible state unemployment taxes and
railroad retirement taxes (if applicable)
imposed with respect to year-end wages
properly accrued in Year 1, but paid in
Year 2, if the requirements of the recurring item exception are met (including
the requirement that, as of the end of the
taxable year, all events have occurred that
establish the fact of the liability and the
amount of the liability can be determined
with reasonable accuracy, see § 1.4615(b)); or

(iii) a taxpayer using an overall accrual
method of accounting that wants to change
its method of accounting for FICA and
FUTA taxes to the safe harbor method provided in Rev. Proc. 2008-25, 2008-1 C.B.
686. Rev. Proc. 2008-25 provides that for
purposes of the recurring item exception,
a taxpayer will be treated as satisfying the
requirement in § 1.461-5(b)(1)(i) for its
payroll tax liability in the same taxable
year in which all events have occurred that
establish the fact of the related compensation liability and the amount of the related
compensation liability can be determined
with reasonable accuracy.
(b) Inapplicability. This change does
not apply to a taxpayer that is required
under § 263A and the regulations thereunder to capitalize the costs with respect
to which the taxpayer wants to change its
method of accounting under this section
20.04 if the taxpayer is not capitalizing
these costs, unless the taxpayer concurrently changes its method to capitalize
these costs in conjunction with a change
to a UNICAP method under section 12.01,
12.02, 12.08, or 12.12 of this revenue procedure (as applicable).
(2) Recurring item exception. A taxpayer that previously has not changed to
or adopted the recurring item exception
for FICA taxes, FUTA taxes, state unemployment taxes, and RRTA taxes (if applicable) must change to the recurring item
exception method for FICA taxes, FUTA
taxes, state unemployment taxes, and
§ 461(h)(3) as part of this change.
(3) Concurrent automatic change. A
taxpayer making both this change and a
change to a UNICAP method described
in section 20.04(1)(b) of this revenue
procedure under section 12.01, 12.02,
12.08, or 12.12 of this revenue procedure (as applicable) for the same year of
both changes, in which case the taxpayer
must enter the designated automatic
accounting method change numbers for
both changes on the appropriate line on
that Form 3115. See section 6.03(1)(b) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
for information on making concurrent
changes.
(4) Designated automatic accounting method change number. The designated automatic accounting method

change number for a change under section
20.04(1)(a)(i) or (ii) of this revenue procedure is “45.” The designated automatic
accounting method change number for a
change under section 20.04(1)(a)(iii) of
this revenue procedure is “113.”
(5) Contact information. For further
information regarding a change under this
section, contact James Williford at (202)
317-5100 (not a toll-free number).
.05 Cooperative advertising.
(1) Description of change. This change
applies to a taxpayer using an overall
accrual method of accounting that wants
to change its method of accounting for
cooperative advertising costs to a method
consistent with the holding in Rev. Rul.
98-39, 1998-2 C.B. 198. Rev. Rul. 98-39
generally provides that, under the all
events test of § 461, an accrual method
manufacturer’s liability to pay a retailer
for cooperative advertising services is
incurred in the year in which the services
are performed, provided the manufacturer
is able to reasonably estimate this liability, and even though the retailer does not
submit the required claim form until the
following year.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.05 is “46.”
(3) Contact information. For further
information regarding a change under this
section, contact Clifford Sovich at (202)
317-5100 (not a toll-free number).
.06 Timing of incurring certain liabilities for services or insurance.
(1) Description of change. This change
applies to a taxpayer using an overall
accrual method of accounting that is currently treating the mere execution of a
contract for services or insurance as establishing the fact of the liability under § 461
and wants to change from that method of
accounting for liabilities for services or
insurance to comply with Rev. Rul. 20073, 2007-1 C.B. 350, that is, all the events
needed to establish the fact of the liability
ity, whether that be the required performance or other event occurs or (b) payment is due, whichever happens earliest.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change

number for a change under this section
20.06 is “106.”
(3) Contact information. For further
information regarding a change under this
section, contact Sharon Horn at (202) 3177003 (not a toll-free number).
.07 Rebates and allowances.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer using an overall accrual
method of accounting that wants to change
its method of accounting for treating its
liability for rebates and allowances to the
recurring item exception method under
§ 461(h)(3) and § 1.461-5.
(b) Inapplicability. This change does
not apply to a taxpayer’s liability to pay
a refund.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.07 is “135.”
(3) Contact information. For further
information regarding a change under this
section, contact Elizabeth Choi at (202)
317-5100 (not a toll-free number).
.08 Ratable accrual of real property
taxes.
(1) Description of change. This change
applies to a taxpayer using an overall
accrual method of accounting that wants
to change its method of accounting for real
property taxes to the method described
in § 461(c) and § 1.461-1(c)(1) (ratable
accrual election). This change applies to
period of time. This change does not apply
the taxpayer incurs real property taxes, in
which case the change is made using the
provisions of § 1.461-1(c)(3)(i).
(2) Manner of making change and
designated automatic accounting method
change number.
(a) Cut-off basis. This change is made
on a cut-off basis and applies only to real
property taxes accrued on or after the
beginning of the year of change. Any real
property taxes accrued prior to the year
of change are accounted for under the
taxpayer’s former method of accounting.
See § 1.461-1(c)(6), Examples (2) – (5).
Accordingly, a § 481(a) adjustment is neither permitted nor required.
(b) Short Form 3115 in lieu of a standard Form 3115. In accordance with

§ 1.446-1(e)(3)(ii), the requirement in
3115 is waived and, pursuant to section
6.02(2) of Rev. Proc. 2015-13, a short
Form 3115 is authorized with respect to
a taxpayer making a change under this
section 20.08. The taxpayer’s short Form
3115 (Rev. December 2022) must include
all of the following information:
(above Part I);
(ii) the signature section at the bottom
of page 1;
(iii) Part I, line 1(a); and
(iv) the information described in
§ 1.461-1(c)(3)(ii)(a) through (f).
(c) Section 461 election made with consent. The consent granted under section
9 of Rev. Proc. 2015-13, 2015-5 I.R.B.
§ 461(c)(2)(B) and § 1.461-1(c)(3)(ii).
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.08 is “149.”
(4) Contact information. For further
information regarding a change under this
section, contact Daniel Cassano at (202)
317-7011 (not a toll-free number).
.09 California Franchise Taxes.
(1) Description of change. This change
applies to a taxpayer using an overall
accrual method of accounting that wants to
change its method of accounting for California franchise taxes to a method consistent with the holding in Rev. Rul. 2003-90,
2003-2 C.B. 353. Rev. Rul. 2003-90 provides that for taxable years beginning on or
after January 1, 2000, a taxpayer that uses
an accrual method of accounting incurs a
liability for California franchise tax for
federal income tax purposes in the taxable
year following the taxable year in which the
California franchise tax is incurred under
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.09 is “154.”
(3) Contact information. For further
information regarding a change under this
section, contact Sharon Horn at (202) 3177003 (not a toll-free number).
.10 Gift cards issued as a refund for
returned goods.

(1) Description of change.
(a) Applicability. This change applies
to a taxpayer using an overall accrual
method of accounting that sells goods at
retail and that wants to change its method
section 4.02 of Rev. Proc. 2011-17, 2011-5
I.R.B. 441) issued as a refund for returned
goods to treat the transaction as (1) the
payment of a cash refund in the amount of
the gift card, and (2) the sale of a gift card
in the amount of the gift card.
(b) Treatment of proceeds of the
deemed sale. A taxpayer must treat the
proceeds of the deemed sale of a gift card
in accordance with the method of accounting it otherwise employs for sales of gift
cards.
(2) Concurrent automatic change. A
taxpayer making both this change and an
automatic change to the deferral method
under section 16.08 of this revenue procedure for the same taxable year of change
changes and enter the designated automatic accounting method change numbers
for both changes on the appropriate line
on that Form 3115. See section 6.03(1)(b)
of Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
for information on making concurrent
changes.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.10 is “156.”
(4) Contact information. For further
information regarding a change under this
section, contact Alicia Lee-Won at (202)
317-7003 (not a toll-free number).
.11 Timing of incurring liabilities
under the recurring item exception to the
economic performance rules.
(1) Description of change. This change
applies to a taxpayer using an overall
accrual method of accounting that wants
to conform to any of the holdings in Rev.
Rul. 2012-1, 2012-2 I.R.B. 255, which
ties under the recurring item exception
to the economic performance requirement under § 461(h)(3) by addressing
the application of the “not material” and
“better matching” requirements, and distinguishes contracts for the provision of
services from insurance and warranty
contracts.

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
20.11 is “161.”
(3) Contact information. For further
information regarding a change under this
section, contact Aliza Schechet at (202)
317-7003 (not a toll-free number).
.12 Economic performance safe harbor
for ratable service contracts.
(1) Description of change. This change
applies to an accrual method taxpayer that
wants to change its treatment of Ratable
Service Contracts to conform to the safe
harbor method provided by Rev. Proc.
2015-39, 2015-33 I.R.B. 195.
(2) Designated automatic accounting method change number. The designated automatic accounting method
change number for changes in methods
of accounting under this section 20.12 is
“220.”
(3) Contact information. For further
information regarding a change under this
section, contact Douglas Kim at (202)
317-7003 (not a toll-free number).
.13 Alternative Cost Method.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for common
improvement costs either to (1) use the
Alternative Cost Method in accordance
with Rev. Proc. 2023-9; or (2) discontinue
using the alternative cost method under
Rev. Proc. 92-29 (92-29 alternative cost
method) and instead account for common improvement costs using an accrual
method of accounting under § 461.
(2) Applicability. This change applies
to a taxpayer:
(a) that wants to change to the Alternative Cost Method described in Rev. Proc.
2023-9, for all of its qualifying projects
within a trade or business, including taxpayers that want to change their method
of allocating adjustments to the estimated
cost of common improvements for all of
their qualifying projects within a trade or
business;
taxable year beginning after December
31, 2022, in the same trade or business,
uses the 92-29 alternative cost method for
one or more qualifying projects that are
in progress and an accrual method under
§ 461 to account for common improvement

costs for one or more qualifying projects
that are in progress (legacy rule). For purposes of this section, a qualifying project
is in progress if the developer has sold at
least one unit in the project in a prior taxable year (or in the case of a developer that
uses the completed contract method, has
completed at least one contract in the project in a prior taxable year) and holds units
in the project available for sale during the
taxable year. In this situation, the taxpayer
is not required to change to the Alternative
Cost Method for such qualifying projects
in progress using an accrual method under
§ 461 as long as all new qualifying projects in the trade or business are accounted
for using the Alternative Cost Method in
accordance with Rev. Proc. 2023-9; or
able year beginning after December 31,
2022, wants to change from the 92-29
alternative cost method to an accrual
method under § 461 for all of its qualifying projects in a trade or business.
(3) Inapplicability.
(a) This change does not apply to a taxpayer that is using the
Alternative Cost Method described in
Rev. Proc. 2023-9 that wants to change its
method of allocating the estimated cost of
common improvements among the benein case of a taxpayer using the completed
contract method described in § 1.460-4(d)
(CCM), a taxpayer that wants to change
its method of allocating the estimated cost
of common improvements among all the
of Rev. Proc. 2023-9, in the qualifying
project).
(b) This change does not apply to a
taxpayer that wants to change its method
of accounting for determining the alternative cost limitation in section 5.04 of
Rev. Proc. 2023-9. The inapplicability
rule described in this section 20.13(3)(b)
is effective for any taxable year followDecember 31, 2022.
(c) This change does not apply to a
taxpayer that is presently using an impermissible method for incurring common
improvement costs under § 461 and that
wants to change its method of accounting for common improvement costs to
the Alternative Cost Method described
in Rev. Proc. 2023-9. The inapplicability

rule described in this section 20.13(3)(c)
is effective for any taxable year followDecember 31, 2022.
(4) Short Form 3115 in lieu of a standard Form 3115 for certain taxpayers.
(a) Applicability. The procedures
described in section 20.13(4)(b) may be
used by a taxpayer to make a change in
method of accounting described in section
taxable year beginning after December
31, 2022, provided the taxpayer otherwise
meets the requirements of this section
20.13(4)(a). A taxpayer may use a short
Form 3115 in lieu of a standard Form 3115
only if the § 481(a) adjustment required
by such change is zero, and the taxpayer
either: (1) is currently using the 92-29
alternative cost method for all qualifying
projects and wants to change to the Alternative Cost Method in accordance with
Rev. Proc. 2023-9 for all trades or businesses with such qualifying projects for
after December 31, 2022; or (2) wants to
apply the legacy rule described in section
20.13(2)(b) of this revenue procedure to
change to the Alternative Cost Method
in accordance with Rev. Proc. 2023-9 for
after December 31, 2022.
(b) Short Form 3115. A taxpayer making a change under section 20.13(4)(a) for
after December 31, 2022, is required to
complete only the following information
on Form 3115 (Rev. 2018):
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I, line 1(a); and
(iv) For taxpayers using the legacy
rule, Part II, line 16(a) identifying any
qualifying projects in progress for which
the taxpayer used the 92-29 alternative
cost method and any qualifying projects in
progress for which taxpayer will continue
to use an accrual method of accounting.
(5) Section 481(a) adjustment. The
taxpayer is required to compute a single
§ 481(a) adjustment for each trade or business for which a change described in section 20.13(2)(a)-(c) is made.
(6) Eligibility rule temporarily inapplicable. The eligibility rule in sec-

tion 5.01(1)(f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to the
changes described in this section 20.13 for
after December 31, 2022.
(7) Examples. The following examples
illustrate the application of the Alternative Cost Method in accordance with Rev.
Proc. 2023-9.
(a) Example 1. (i) Facts. Developer, a calendar
year taxpayer that uses an overall accrual method of
accounting, is in the business of developing residential subdivisions. As of December 31, 2022, Developer has two subdivision projects in progress in its
only trade or business, Project A and Project B; both
in section 4.01 of Rev. Proc. 2023-9. Developer sold
year. Developer requested consent to use the 92-29
alternative cost method for Project A in 2022. Developer has not requested consent to use the 92-29 alternative cost method for Project B.
(ii) Application of the Alternative Cost Method in
accordance with Rev. Proc. 2023-9 for all qualifying
projects. Developer wants to use the Alternative Cost
Method for both qualifying projects. Developer must
matic change in method of accounting procedures of
this section 20.13 to begin using the Alternative Cost
Method for both qualifying projects and must calculate a single § 481(a) adjustment for such change.
(b) Example 2. Application of the legacy rule.
The facts are the same as in Example 1, except that
Developer wants to use the Alternative Cost Method
for Project A but not for Project B. Pursuant to section 20.13 of this revenue procedure, Developer
does not have to apply the Alternative Cost Method
to Project B. However, if the Developer applies the
Alternative Cost Method for Project A, then Developer must also apply the Alternative Cost Method to
all new qualifying projects in its trade or business
for taxable years beginning after December 31,
2022. Developer must also calculate the § 481(a)
adjustment resulting from changing the method of
accounting for the trade or business, if any.

(8) Designated automatic accounting
method change number.
(a) Change to the Alternative Cost
Method in accordance with Rev. Proc.
2023-9. The designated automatic
accounting method change number for
a change to the Alternative Cost Method
in accordance with section 20.13(2)(a) is
“266.”
(b) Legacy rule. The designated automatic accounting method change number
for a taxpayer that wants to apply the legacy rule described in section 20.13(2)(b)
ning after December 31, 2022, is “267.”
(c) Change to an accrual method.
The designated automatic accounting
method change number for a change to an

accrual method in accordance with section
year beginning after December 31, 2022,
is “268.”
(9) Contact information. For further
information regarding a change under this
section 20.13, contact Maria Castillo Valle
at (202) 317-7003 (not a toll-free number).

automatic accounting method change
number for a change under this section
21.01 is “136.”
(5) Contact information. For further
information regarding a change under this
section, contact Michael Finn at (202)
317-4718 (not a toll-free number).
SECTION 22. INVENTORIES (§ 471)

SECTION 21. RENT (§ 467)
.01 Change from an improper method
of inclusion of rental income or expense
to inclusion in accordance with the rent
allocation.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that:
(i) is a party to § 467 rental agreements
(within the meaning of § 1.467-1(c)(1) for
rental agreements entered into after May
18, 1999, and § 467(d) for all other agreements); and
(ii) except as provided in section
21.01(1)(b)(ii) of this revenue procedure,
wants to change its method of accounting
1(d)(2)) to the rent allocation method provided in § 1.467-1(d)(2)(iii).
(b) Inapplicability. This change does
not apply to:
(i) rental agreements for which taxpayers are required to use the constant rental
accrual method, as described in § 1.4673(a), or the proportional rental accrual
method, as described in § 1.467-2(a), for
(ii) rental agreements that provide
described in § 1.467-1(c)(2)(ii)(A)(2) that
allocate rent to periods other than when
such rents are payable.
(2) Additional requirements. The taxpayer must attach to its Form 3115 a copy
of one of its § 467 rental agreements to
be covered by this automatic change (or at
least the pages of the agreement relating
to the manner in which rent is allocated).
(3) Audit protection limited. Any audit
protection under section 8 of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, does not apply
to this change for any § 467 rental agreement determined by the Commissioner to
agreement described in § 1.467-3(b).
(4) Designated automatic accounting
method change number. The designated

.01 Cash discounts.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for cash discounts (that is, discounts granted for
timely payment) when they 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 (the “gross invoice method”), to a
method of reducing the cost of the goods
by the cash discounts and deducting as an
expense any discounts not taken (the “net
invoice method”), or vice versa. See Rev.
Rul. 73-65, 1973-1 C.B. 216.
(2) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Computation of § 481(a) adjustment for changes to net invoice method. In
the case of a taxpayer changing from the
gross invoice method to the net invoice
method, a negative § 481(a) adjustment
is required to prevent duplications arising
from the fact that the gross invoice method
reported income upon timely payment for
some or all of the goods that remain in
inventory, and a positive § 481(a) adjustment is required to prevent omissions
arising from the fact that the gross invoice
method included the invoice price, unadjusted for the cash discounts, of some or
all goods in cost of goods sold and the
discount will be earned by payment in a
subsequent taxable year. The net § 481(a)
adjustment is computed by deducting the
“Applicable Discount” at the beginning
of the year of change from the “Available
Discount” at the beginning of the year of
change. The Available Discount is equal
to the difference between the accounts

payable balance under the gross invoice
method and the net invoice method. The
Applicable Discount is equal to the difference between the beginning inventory
value under the gross invoice method and
the net invoice method.
Example. Taxpayer’s accounts payable balance
at the beginning of the year of change was $1,000
under the gross invoice method and $980 under the
net invoice method. Taxpayer’s inventory value was
$3,000 under the gross invoice method and $2,955
under the net invoice method. The Available Discount is $20 ($1,000 - $980) and the Applicable Discount is $45 ($3,000 - $2,955). Thus, Taxpayer’s net
§ 481(a) adjustment is a negative $25 ($20 - $45).

(4) Computation of § 481(a) adjustment for changes to gross invoice method.
In the case of a taxpayer changing from
the net invoice method to the gross invoice
method, a positive § 481(a) adjustment is
required to prevent omissions arising from
the fact that the net invoice method did
not report income upon timely payment
for some or all of the goods that remain
in inventory, and a negative § 481(a)
adjustment is required to prevent duplications arising from the fact that the net
invoice method included the invoice price,
adjusted for the cash discounts, of some
or all goods in cost of goods sold and the
discount will be earned by payment in a
subsequent taxable year. The net § 481(a)
adjustment can be computed by deducting
the “Available Discount” at the beginning
of the year of change from the “Applicable
Discount” at the beginning of the year of
change. The Available Discount is equal
to the difference between the accounts
payable balance under the gross invoice
method and the net invoice method. The
Applicable Discount is equal to the difference between the beginning inventory
value under the gross invoice method and
the net invoice method.
Example. Taxpayer’s accounts payable balance
at the beginning of the year of change was $980
under the net invoice method and $1,000 under the
gross invoice method. Taxpayer’s inventory value
was $2,955 under the net invoice method and $3,000
under the gross invoice method. The Applicable
Discount is $45 ($3,000 - $2,955) and the Available
Discount is $20 ($1,000 - $980). Thus, Taxpayer’s
net § 481(a) adjustment is a positive $25 ($45 - $20).

(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.01 is “48.”
(6) Contact information. For further
information regarding a change under

this section, contact Michael Supanick at
(202) 317-7007 (not a toll-free number).
.02 Estimating inventory “shrinkage.”
(1) Description of change. This change
applies to a taxpayer that wants to change
to a method of accounting for estimating
inventory shrinkage in computing ending
inventory, using:
(a) the “retail safe harbor method”
described in section 4 of Rev. Proc. 98-29,
enue procedure; or
(b) a method other than the retail safe
harbor method, provided (i) the taxpayer’s present method of accounting does
not estimate inventory shrinkage, and
(ii) the taxpayer’s proposed method of
accounting (that estimates inventory
§ 446(b).
(2) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Additional requirements. If the
taxpayer wants to change to a method of
accounting for inventory shrinkage other
than the retail safe harbor method, the
taxpayer must attach to its Form 3115 a
statement setting forth a detailed description of all aspects of the proposed method
of estimating inventory shrinkage (includers, the method of determining inventory
shrinkage for, or allocating inventory
shrinkage to, each LIFO pool). The direcreview whether the proposed method
under § 446(b), notwithstanding any
provision of Rev. Proc. 2015-13, 2015-5
I.R.B. 419 (or successor). If the director
proposed method of accounting does not
taxpayer will be treated as having made a
change in method of accounting without
obtaining the consent of the Commissioner as required by § 446(e). See sections 2.01(3) and 2.03 of Rev. Proc. 201513.
(4) Designated automatic accounting
method change number. The designated

automatic accounting method change
number for a change under this section
22.02 is “49.”
(5) Contact information. For further
information regarding a change under
this section, contact Michael Supanick at
(202) 317-7007 (not a toll-free number).
.03 Qualifying volume-related trade
discounts.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting to treat qualifying volume-related trade discounts as
a reduction in the cost of merchandise
purchased at the time the discount is recognized in accordance with § 1.471-3(b).
A “qualifying volume-related trade discount” means a discount satisfying the
following criteria:
(a) the taxpayer receives or earns the
discount based solely upon the purchase
of a particular volume of the merchandise
to which the discount relates;
(b) the taxpayer is neither obligated
nor expected to perform or provide any
services in exchange for the discount; and
(c) the discount is not a reimbursement of any expenditure incurred or to be
incurred by the taxpayer.
(2) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Section 481(a) adjustment. The
net § 481(a) adjustment attributable to
the change is computed in a manner similar to the computation of a net § 481(a)
adjustment in the case of a change to the
net invoice method of accounting for cash
discounts. See section 22.01(2) of this revenue procedure.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.03 is “53.”
(5) Contact information. For further
information regarding a change under
this section, contact Michael Supanick at
(202) 317-7007 (not a toll-free number).
.04
cation and valuation of inventories.
(1) Description of change.

(a) Applicability. This change applies
to a taxpayer that wants to change from
an impermissible method of identifying
or valuing inventories to a permissible
method of identifying or valuing inventories. For example, a taxpayer:

change its inventory-valuation method
from below cost to cost;
(ii) using an impermissible method
of accounting described in §§ 1.471-2(f)
(1) through (5) may change to a permissible method of accounting that corrects
the impermissible method described in
§§ 1.471-2(f)(1) through (5);
(iii) using a method that is not in accordance with § 1.471-2(c) may change to a
permissible method of valuing “subnormal goods” under § 1.471-2(c);

a method in which the taxpayer estimates
the cost of goods sold by reducing its gross
sales by a percentage “mark-up” from
cost. The estimated cost of goods sold is
subtracted from the sum of the beginning
inventory and purchases and the result is
used as the ending inventory; or
(v) changing from a method of determining market that is not in accordance
with § 1.471-4. For this purpose, an example of a method of determining market
that is not in accordance with § 1.471-4
is where a taxpayer, under ordinary circumstances, determines the market value
of purchased merchandise using judgment
factors, and not using the prevailing current bid price on the inventory date for the
particular merchandise in the volume in
which it is usually purchased by the taxpayer.
(b) Inapplicability. This change does
not apply to:
(i) any change for real property or
improvements to the real property because
real property is not inventoriable property
under § 1.471-1;
tion of a “dealer in securities” under both
§ 1.471-5 and § 475 because such dealer
is required to account for securities, as
use the rules described in § 1.471-5 for
those securities;
(iii) any change described in another
section of this revenue procedure or in

other guidance published in the Internal
Revenue Bulletin, or to any change within
method. For example, this change does not
apply to a taxpayer that wants to change
to a rolling-average method (but see section 22.13 of this revenue procedure) or
to a taxpayer that accounts for inventory,
or proposes to account for inventory,
under § 471(c), proposed § 1.471-1(b),
or § 1.471-1(b), as applicable. For taxable years beginning on or after January
5, 2021, a taxpayer is required to comply
with § 1.471-1(b);
(iv) any change to a method of allocating costs to inventory under § 471 or any
change to a method under § 263A (but see
sections 12.01 and 12.02 of this revenue
procedure); or
(v) a taxpayer that is currently deducting inventories (but see section 22.17 of
this revenue procedure).
(c)
. For purposes of this change, a permissible method

the Code, the regulations, or other guidance
published in the Internal Revenue Bulletin,
or a decision of the United States Supreme
Court. However, an otherwise permissible
inventory method is not permissible under
that taxpayer is prohibited from using that
method or if that taxpayer is required to use
a different method.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.04 is “54.”
(3) Contact information. For further
information regarding a change under
this section, contact Michael Supanick at
(202) 317-7007 (not a toll-free number).
.05 Core Alternative Valuation Method.
(1) Description of change.
(a) Applicability. This change applies
to a remanufacturer and rebuilder of motor
vehicle parts and a reseller of remanufactured and rebuilt motor vehicle parts
that use the cost or market, whichever is
lower (LCM), inventory valuation method
to value their inventory of cores held for
remanufacturing or sale and wants to use
the Core Alternative Valuation (CAV)
2003-1 C.B. 445.

(b) Inapplicability. This change does
not apply to a taxpayer that:
(i) values its inventory of cores at
cost, including a taxpayer using the LIFO
inventory method, unless the taxpayer
concurrently changes, under section 6.02
of Rev. Proc. 2003-20, from cost to the
LCM method for its cores, including labor
and overhead related to the cores in raw
goods; or
(ii) accounts for inventory, or proposes
to account for inventory, under § 471(c),
proposed § 1.471-1(b), or § 1.471-1(b),
as applicable. For taxable years beginning
on or after January 5, 2021, a taxpayer is
required to comply with § 1.471-1(b).
(2) Concurrent automatic change. A
taxpayer making both this change and
(i) a change from the cost method to the
LCM method under section 22.10 of this
revenue procedure, or (ii) a change from
the LIFO inventory method to a permit-

23.01(1)(b) of this revenue procedure for
gle Form 3115 for both changes, provided
the taxpayer enters the designated automatic accounting method change numbers
for both changes on the appropriate line
on that Form 3115. See section 6.03(1)(b)
of Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
for information on making concurrent
changes.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.05 is “55.”
(4) Contact information. For further
information regarding a change under this
section, contact Adam Kobler at (202)
317-7007 (not a toll-free number).
.06 Replacement cost for automobile
dealers’ parts inventory.
(1) Description of change. This change
applies to a taxpayer that is engaged in the
trade or business of selling vehicle parts
at retail, that is authorized under an agreement with one or more vehicle manufacturers or distributors to sell new automobiles or new light, medium, or heavy-duty
trucks, and that wants to use the replacement cost method described in section 4 of
Rev. Proc. 2002-17, 2002-1 C.B. 676, as

C.B. 350, for its vehicle parts inventory.
See Rev. Proc. 2002-17 for further information regarding this change.
(2) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Manner of making change. This
change is made on a cut-off basis and
applies only to the computation of ending inventories on or after the beginning
of the year of change. Accordingly, a
§ 481(a) adjustment is neither permitted
nor required.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.06 is “63.”
(5) Contact information. For further
information regarding a change under this
section, contact Adam Kobler at (202)
317-7007 (not a toll-free number).
.07 Replacement cost for heavy equipment dealers’ parts inventory.
(1) Description of change. This change
applies to a heavy equipment dealer that
is engaged in the trade or business of selling heavy equipment parts at retail, that is
authorized under an agreement with one
or more heavy equipment manufacturers
or distributors to sell new heavy equipment, and that wants to use the replacement cost method described in section 4 of
Rev. Proc. 2006-14, 2006-1 C.B. 350, for
its heavy equipment parts inventory.
(2) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Manner of making the change. This
change is made on a cut-off basis and
applies only to the computation of ending
inventories after the beginning of the year
of change. Accordingly, a § 481(a) adjustment is neither permitted nor required.
(4) Concurrent automatic change. A
taxpayer making both this change and
another automatic change in method of

accounting under § 263A (see section 12
of this revenue procedure) for the same
3115 for both changes, provided the taxpayer enters the designated automatic
accounting method change numbers for
both changes on the appropriate line on
that Form 3115, and complies with the
ordering rules of § 1.263A-7(b)(2).
(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.07 is “96.”
(6) Contact information. For further
information regarding a change under this
section, contact Adam Kobler at (202)
317-7007 (not a toll-free number).
.08 Rotable spare parts.
(1) Description of change. This change
applies to a taxpayer that is using the safe
harbor method of accounting to treat its
rotable spare parts as depreciable assets
in accordance with Rev. Proc. 2007-48,
enue procedure, and wants to change its
method of accounting to treat its rotable
spare parts as inventoriable items. This
change also applies to a taxpayer who is
treating its rotable spare parts as depreciable assets in a manner similar to the
safe harbor method described in Rev.
Proc. 2007-48, and wants to change its
method of accounting to treat its rotable
spare parts as inventoriable items. A taxpayer changing its method of accounting
for rotable spare parts under this section 22.08, must use a proper inventory
method to identify and value its rotable
spare parts.
(2) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Eligibility rule inapplicable. The
eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, does
not apply to a taxpayer that is required to
make the change in method of accounting pursuant to section 5.06 of Rev. Proc.
2007-48.
(4) Designated automatic accounting
method change number. The designated

automatic accounting method change
number for a change under this section
22.08 is “110.”
(5) Contact information. For further
information regarding a change under this
section, contact Eugene Kirman at (202)
317-7003 (not a toll-free number).
.09 Advance Trade Discount Method.
(1) Description of change. This change
applies to a taxpayer that wants to use
the Advance Trade Discount Method
described in Rev. Proc. 2007-53, 2007-2
C.B. 233.
(2) Applicability. This change in
method of accounting applies to a taxpayer using an overall accrual method of
accounting that is required to use an inventory method of accounting, that maintains
inventories as provided in § 471 and the
regulations thereunder, and that receives
tion 4.03 of Rev. Proc. 2007-53.
(3) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.09 is “111.”
(5) Contact information. For further
information regarding a change under this
section, contact Adam Kobler at (202)
317-7007 (not a toll-free number).
.10
tion and valuation of inventories.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to change from
one permissible method of identifying or
valuing inventories to another permissible
method of identifying or valuing inventories. For example, a taxpayer using

change its inventory-valuation method
from cost to cost or market, whichever
is lower (LCM), or a taxpayer valuing
“subnormal” goods at cost may change
its valuation method to another permissible method of valuing “subnormal goods”
under § 1.471-2(c).

(b) Inapplicability. This change does
not apply to:
(i) any change for real property or
improvements to the real property because
real property is not inventoriable property
under § 1.471-1;
tion of a “dealer in securities” under both
§ 1.471-5 and § 475 because such dealer
is required to account for securities, as
use the rules described in § 1.471-5 for
those securities;
(iii) any change described in another
section of this revenue procedure or in
other guidance published in the Internal
Revenue Bulletin, or to any change within
method. For example, this change does not
apply to a taxpayer that wants to change
to a rolling-average method (but see section 22.13 of this revenue procedure) or
to a taxpayer that accounts for inventory,
or proposes to account for inventory,
under § 471(c), proposed § 1.471-1(b),
or § 1.471-1(b), as applicable. For taxable years beginning on or after January
5, 2021, a taxpayer is required to comply
with § 1.471-1(b); or
(iv) any change to a method of allocating costs to inventory under § 471 or any
change to a method under § 263A (but see
sections 12.01 and 12.02 of this revenue
procedure).
(c)
. For
purposes of this change, a permissible
method is an inventory method of identipermitted for inventories by the Code,
the regulations, or other guidance published in the Internal Revenue Bulletin, or
a decision of the United States Supreme
Court. However, an otherwise permissible
inventory method is not permissible under
that taxpayer is prohibited from using that
method or if that taxpayer is required to
use a different method.
(d) Permissible method determination. The eligibility waiver under section
22.10(1)(d) of this revenue procedure is
not a determination by the Commissioner
that the taxpayer’s present method of
accounting described in section 22.10(1)
(d)(i) of this revenue procedure is a permissible method of accounting. The
method of accounting described in section

22.10(1)(d)(i) of this revenue procedure
is not a permissible method of accounting
for any taxable year in which §§ 1.451-3
and 1.451-8 are applicable.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.10 is “137.”
(3) Contact information. For further
information regarding a change under this
section, contact Adam Kobler at (202)
317-7007 (not a toll-free number).
.11
guide utilized in valuing used vehicles.
(1) Description of change. Used vehicles taken in trade as part payment on the
sale of vehicles by a dealer may be valued for inventory purposes at valuations
used vehicle guide as the average wholesale prices for comparable vehicles. See
Rev. Rul. 67-107, 1967-1 C.B. 115. This
change applies to:
(a) a taxpayer that wants to change

guide for valuing used vehicles; or
(b) a taxpayer that wants to change to
valuing used vehicles.
(2) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.11 is “138.”
(4) Contact information. For further
information regarding a change under this
section, contact Adam Kobler at (202)
317-7007 (not a toll-free number).
.12 Invoiced advertising association
costs for new vehicle retail dealerships.
(1) Description of change. This change
applies to a taxpayer that is engaged in
the trade or business of retail sales of
new automobiles or new light-duty trucks
(“dealership”) that wants to discontinue
capitalizing certain advertising costs as
acquisition costs under § 1.471-3(b). The

change applies to advertising costs that
meet the following criteria: (a) the dealership must pay this advertising fee when
acquiring vehicles from the manufacturer;
(b) the advertising costs are separately
coded and included in the manufacturer’s
invoice cost of the new vehicle; (c) the

(d) the fees collected by the manufacturer
are paid to local advertising associations
that promote and advertise the manufacturer’s products in the dealership’s market area. Under the proposed method, the
dealership will exclude advertising costs
that meet the above criteria from the cost
of new vehicles and deduct the advertising
costs under § 162 as the advertising services are provided to the dealership. See
§ 1.461-4(d)(2)(i).
(2) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.12 is “139.”
(4) Contact information. For further
information regarding a change under this
section, contact Adam Kobler at (202)
317-7007 (not a toll-free number).
.13 Rolling-average method of
accounting for inventories.
(1) Description of change. This change
applies to a taxpayer that uses a rolling-average method to value inventories for
to use the same rolling-average method to
value inventories for federal income tax
purposes in accordance with Rev. Proc.
by Rev. Proc. 2008-52, 2008-2 C.B. 587
(see section 13).
(2) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b). See, however,

section 22.17 of this revenue procedure
for certain changes.
(3) Manner of making change. This
change is made on a cut-off basis and is
applied only to the computation of ending inventories after the beginning of the
year of change. However, if the taxpayer’s
mation to compute a § 481(a) adjustment,
the taxpayer may choose to implement
the change with a § 481(a) adjustment as
provided in sections 7.02 and 7.03 of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.13 is “114.”
(5) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).
.14 Sales-Based Vendor Chargebacks.
(1) Description of change. This change,
as described in Rev. Proc. 2014-33, 201422 I.R.B. 1060, applies to a taxpayer that
wants to change its method of accounting
to treat sales-based vendor chargebacks as
a reduction in cost of goods sold in accordance with § 1.471-3(e)(1).
(2) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Concurrent automatic changes. A
taxpayer making both this change and the
change described in section 12.10 of this
revenue procedure for the same taxable
for both changes, provided the taxpayer
enters the designated automatic change
numbers for both changes on the appropriate line on the Form 3115, and complies
with the ordering rules of § 1.263A-7(b)
(2). See section 6.03(1)(b) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, for information on making concurrent changes.
(4) Designated automatic accounting method change number. The designated automatic accounting method
change number for changes in methods
of accounting under this section 22.14 is
“203.”

(5) Contact information. For further
information regarding a change under
this section, contact Michael Supanick at
(202) 317-7007 (not a toll-free number).
.15 Certain changes to the cost complement of the retail inventory method.
(1) Description of change. This
change, as described in Rev. Proc. 201448, 2014-36 I.R.B. 527, applies to a taxpayer using the retail inventory method
that wants to make one of the following
changes:
(a) From adjusting to not adjusting the
numerator of the cost complement by the
amount of an allowance, discount, or price
rebate that is required under § 1.471-3(e)
to reduce only cost of goods sold;
(b) From adjusting to not adjusting the
denominator of the cost complement for
temporary markups and markdowns;
(c) In the case of a retail LCM taxpayer, to computing the cost complement
using a method described in § 1.471-8(b)
(3), including changes from a method
described in § 1.471-8(b)(3) to another
method described in § 1.471-8(b)(3); or
(d) In the case of a retail cost taxpayer,
from not adjusting to adjusting the denominator of the cost complement for permanent markups and markdowns.
(2) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Effective date. This section 22.15 is
effective for taxable years beginning after
December 31, 2014.
(4) Multiple changes. A taxpayer making multiple changes under this section
22.15 for the same year of change should
(5) Manner of making change. A taxpayer making a change under this section
beginning after December 31, 2014, may
use either a § 481(a) adjustment as provided in sections 7.02 and 7.03 of Rev.
Proc. 2015-13 or implement the change on
a cut-off basis. If the taxpayer uses a cutoff basis, the change applies only to the
computation of ending inventories after
the beginning of the year of change, and
a § 481(a) adjustment is neither permitted

nor required if a change is made on a cutoff basis.
(6) Designated automatic accounting method change number. The designated automatic accounting method
change number for changes in methods
of accounting under this section 22.15 is
“204.”
(7) Contact information. For further
information regarding a change under
this section, contact Michael Supanick at
(202) 317-7007 (not a toll-free number).
.16 Certain changes within the retail
inventory method.
(1) Description of change. This change
applies to a taxpayer 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 taxable year.
(2) Inapplicability. This change does
not apply to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after
January 5, 2021, a taxpayer is required to
comply with § 1.471-1(b).
(3) Designated automatic accounting method change number. The designated automatic accounting method
change number for changes in methods
of accounting under this section 22.16 is
“225.”
(4) Contact information. For further
information regarding a change under
this section, contact Michael Supanick at
(202) 317-7007 (not a toll-free number).
.17 Change from currently deducting
inventories to permissible methods of
.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to change from
currently deducting inventories to a permissible method of identifying and valuing
inventories. For example, a taxpayer currently deducting inventories may change to

cost or market, whichever is lower (LCM),
as its inventory-valuation method.
(b) Inapplicability. This change does
not apply to:
(i) any change for real property or
improvements to the real property because

real property is not inventoriable property
under § 1.471-1;
tion of a “dealer in securities” under both
§ 1.471-5 and § 475 because such dealer
is required to account for securities, as
use the rules described in § 1.471-5 for
those securities;
(iii) any change described in another
section of this revenue procedure or in
other guidance published in the Internal Revenue Bulletin, or to any change
tory method. For example, this change
does not apply to a taxpayer that wants
to change to a rolling-average method
(but see section 22.13 of this revenue
procedure) or to a taxpayer that accounts
for inventory, or proposes to account
for inventory, under § 471(c), proposed
§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on
or after January 5, 2021, a taxpayer is
required to comply with § 1.471-1(b).
See, however, section 22.18, 22.19 or
22.20 of this revenue procedure, as applicable; or
(iv) any change to a method of allocating costs to inventory under § 471 or any
change to a method under § 263A (but see
sections 12.01 and 12.02 of this revenue
procedure).
(c)
. For
purposes of this change, a permissible
method is an inventory method of identipermitted for inventories by the Code,
the regulations, or other guidance published in the Internal Revenue Bulletin, or
a decision of the United States Supreme
Court. However, an otherwise permissible
inventory method is not permissible under
that taxpayer is prohibited from using that
method or if that taxpayer is required to
use a different method.
(2) Designated automatic accounting method change number. The designated automatic accounting method
change number for changes in methods
of accounting under this section 22.17 is
“230.”
(3) Contact information. For further
information regarding a change under this
section, contact Adam Kobler at (202)
317-7007 (not a toll-free number).

.18 Small business taxpayer § 471(c)
inventory methods.
(1) Description of change. This change
applies to a small business taxpayer, as
procedure, that wants to change its § 471
method of accounting for inventory to one
of the following methods:
(a) the section 471(c) non-incidental
materials and supplies (NIMS) inventory
method provided in § 1.471-1(b)(4);
(b) the AFS section 471(c) inventory
method provided in § 1.471-1(b)(5), for
§ 1.471-1(b)(5)(ii), or
(c) the non-AFS section 471(c) inventory method provided in § 1.471-1(b)(6),
for taxpayers that do not have an AFS, as
(2)
.
Small business taxpayer means a taxpayer,
other than a tax shelter under § 448(d)(3)
and § 1.448-2(b)(2) that meets the § 448(c)
gross receipts test as provided in § 448(c)
and § 1.471-1(b)(2). The § 448(c) gross
receipts test is met if a taxpayer has average
annual gross receipts for the three prior taxable years of $25,000,000 or less (adjusted
§ 1.448-2(c). For a taxable year beginning
is $27,000,000. See Rev. Proc. 2021-45,
2021-48 I.R.B. 764. For a taxable year
amount is $29,000,000. See Rev. Proc.
2022-38, 2022-45 I.R.B. 445. For a taxable
justed amount is $30,000,000. See Rev.
Proc. 2023-34, 2023-48 I.R.B. 1287.
(3) Inapplicability. This change does
not apply to:
(i) any change described in section
22.19 of this revenue procedure; or
(ii) any change from the LIFO inventory method under § 472. See however,
section 23.01 of this revenue procedure.
(4) Acceleration of § 481 adjustment.
If a taxpayer making a change under this
section 22.18 has a § 481(a) adjustment
remaining on a prior change in method
of accounting to account for inventory in
accordance with § 1.471-1(a), then it must
take the remaining portion of such prior
§ 481(a) adjustment into account in the
year of change.
(5) Eligibility rule inapplicable. For a
change described in section 22.18(1) of

this revenue procedure, if the taxpayer
changed from accounting for inventory
in accordance with § 471(c) and § 1.4711(b) to accounting for inventory in accordance with § 1.471-1(a) within the prior

section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.19 Changes within a § 471(c) inventory method.
(1) Description of change. This change
applies to a small business taxpayer, as

change, and such change was made in the
qualify as a small business taxpayer, then
such prior change is disregarded for purposes of section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419.
(6)
. A taxpayer is required to complete only the following information on Form 3115 (Rev.
December 2022) to make this change:
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except line 16; and
(v) Part IV, all lines except line 25.
(7) Concurrent automatic changes.
A taxpayer making a change under this
section 22.18 and a change under section
15.17 and/or 12.16 of this revenue procedure for the same year of change may
provided the taxpayer enters the designated automatic change numbers for the
changes on the appropriate line of Form
3115. See section 6.03(1)(b) of Rev. Proc.
2015-13 for information on making concurrent changes.
(8) Designated automatic accounting
method change number.
(a) Change to apply section 471(c)
NIMS inventory method, as provided in
section 22.18(1)(a) of this revenue procedure. The designated automatic accounting method change number for a change to
apply the section 471(c) NIMS inventory
method as provided in section 22.18(1)(a)
of this revenue procedure is “260.”
(b) Change to apply AFS section
471(c) inventory method or non-AFS section 471(c) inventory method, as provided
in section 22.18(1)(b) or (c) of this revenue procedure. The designated automatic
accounting method change number for a
change to apply the AFS section 471(c)
method or the non-AFS section 471(c)
method provided in section 22.18(1)(b) or
(c) of this revenue procedure is “261.”
(10) Contact information. For further
information regarding a change under this

procedure, that:
(a) uses the section 471(c) NIMS
inventory method as provided in § 1.4711(b)(4) and wants to change:
uation permitted by § 1.471-1(b)(4)(ii)
tion, FIFO, cost or average cost;
(ii) its allocation method to a method
permitted by § 1.471-1(b)(4)(iii); or
(iii) to capitalize a direct cost of property produced or acquired for resale, or to
deduct an indirect cost of property produced or acquired for resale, as provided
in § 1.471-1(b)(4)(ii); or
(b) uses the AFS section 471(c) inventory method provided in § 1.471-1(b)(5),
or if the taxpayer does not have an AFS
taxable year, the non-AFS section 471(c)
inventory method provided in § 1.4711(b)(6), and wants to change the manner in
which it accounts for inventory in its AFS
or books and records, as applicable; and is
required to use such method of accounting for inventory in its AFS or its books
and records, as applicable, in applying the
AFS section 471(c) inventory method in
§1.471-1(b)(5), or the non-AFS section
471(c) inventory method in § 1.471-1(b)
(6), as applicable.
(2) Eligibility rules.
(a) Eligibility rule inapplicable. The
eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 does not apply to a change
described in section 22.19(1)(b) of this
revenue procedure.
(3) Section 481(a) adjustment period.
Beginning with the year of change, a
taxpayer making a change described in
section 22.19(1)(b) of this revenue procedure must take any applicable net positive § 481(a) adjustment for such change
into account ratably over the same number of taxable years, not to exceed four,
that the taxpayer used its former method
of accounting. Additionally, a taxpayer
making a change described in section
22.19(1)(b) of this revenue procedure that
has a § 481(a) adjustment remaining on a

prior change in method of accounting that
is described in section 22.19(1)(b) of this
revenue procedure must take the remaining portion of such prior § 481(a) adjustment into account in the year of change.
(4)
. A taxpayer is required to complete only the following information on Form 3115 (Rev.
December 2022) to make this change:
(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;
(d) Part II, all lines except lines 7,
16b and 16c. In the response to line 16a,
include a statement that the taxpayer satisyear of change.
(e) Part IV, all lines except line 25; and
(f) Schedule D, Part II, lines 1-3.
(5) Concurrent automatic changes. A
taxpayer that wants to make one or more
concurrent changes in method of accounting under this section 22.19 or wants to
make a change under this section 22.19
and a change under sections 15.17 or
12.16 of this revenue procedure for the
Form 3115 for such changes, provided the
taxpayer enters the designated automatic
accounting method change numbers for
each change on the appropriate lines of
the Form 3115. See section 6.03(1)(b) of
Rev. Proc. 2015-13 for more information
on making concurrent changes.
(6) No audit protection. A taxpayer
making a change in method of accounting
for inventory under section 22.19(1)(b) of
this revenue procedure does not receive
audit protection under section 8.01 of Rev.
Proc. 2015-13.
(7) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.19 is “262.”
(8) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
.20 Change from a small business taxpayer § 471(c) inventory method to an
inventory method under § 471(a).
(1) Description of change. This change
applies to a taxpayer that wants to change
from using a small business taxpayer

inventory method under § 471(c) and
§ 1.471-1(b)(4), (5) or (6) to accounting
for inventory in accordance with § 471(a)
and § 1.471-1(a).
(2) Inapplicability. This change does
not apply to any change within the last-in,
(3) Eligibility rule inapplicable. The
eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, does
not apply to a change described in section
22.20(1) of this revenue procedure if such
year that the taxpayer does not qualify as a
tion 22.18(2) of this revenue procedure.
(4) Concurrent automatic changes. A
taxpayer making a change under this section 22.20 and a change under sections
12.01 or 12.02 and/or 15.01 of this revenue procedure for the same year of change
changes, provided the taxpayer enters the
designated automatic accounting method
change numbers for each change on the
appropriate lines of the Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for more information on making concurrent changes.
(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
22.20 is “263.”
(6) Contact information. For further
information regarding a change under this
section, contact Livia Piccolo at (202)
317-7007 (not a toll-free number).
SECTION 23. LAST-IN, FIRST-OUT
(LIFO) INVENTORIES (§ 472)
.01 Change from the LIFO inventory
method.
(1) Description of change.
(a) In general. This change applies to a
taxpayer that wants to:
(i) change from the LIFO inventory
method for all its LIFO inventory or for
the entire content of one or more dollar-value pools; and
(ii) change to a permitted method or
methods as determined in section 23.01(1)
(b) of this revenue procedure.
(b) Method to be used.
(i) Determining the permitted method
to be used. A taxpayer may change to one

or more non-LIFO inventory methods for
the LIFO inventories that are the subject
of this accounting method change, but
only if the selected non-LIFO method is a
permitted method for the inventory goods
to which it will be applied. For example,
a heavy equipment dealer may change
new heavy equipment inventories and the
replacement cost method, as described in
Rev. Proc. 2006-14, 2006-1 C.B. 350, for
heavy equipment parts inventories.
(ii)
. For purposes of this section 23.01, an inventory
cally permitted for the inventory goods by
the Code, the regulations, or other guidance published in the Internal Revenue
Bulletin, or a decision of the United States
Supreme Court and if the taxpayer is neither prohibited from using that method
nor required to use a different inventory method for those inventory goods.
A permitted method includes a method
described in § 1.471-1(b)(4), (5) or (6),
as applicable, provided the taxpayer is a
tion 22.18(2) of this revenue procedure.
(iii) Determining permitted method.
Whether an inventory method is a permitted method is determined without regard
to the types and amounts of costs capitalized under the taxpayer’s method of computing inventory cost. See § 263A and the
regulations thereunder, which govern the
types and amounts of costs required to be
included in inventory cost for taxpayers
subject to those provisions.
(2) Eligibility rules inapplicable.
(a) The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
year that the taxpayer does not or will not
comply with the requirements of § 472(e)
(2) because the taxpayer has applied or
will apply International Financial Reportbecause the taxpayer has been acquired by
an entity that has not or will not use the
(b) For a change by a small business
taxpayer to a permitted method described
in the last sentence of section 23.01(1)
(b)(ii) of this revenue procedure, if the
taxpayer changed from accounting for
inventory in accordance with § 471(c),

proposed § 1.471-1(b) or § 1.471-1(b), as
applicable, to accounting for inventory
in accordance with § 472 and the accomtaxable years ending with the year of
change, and such change was made in the
qualify as a small business taxpayer, then
such change is disregarded for purposes
of section 5.01(1)(f) of Rev. Proc. 201513.
(3) Limitation on LIFO election. The
taxpayer may not re-elect the LIFO inventaxable years beginning with the year of
change unless, based on a showing of
unusual and compelling circumstances,
Commissioner to change the method of
accounting at an earlier time. A taxpayer
that wants to re-elect the LIFO inventory
years (beginning with the year of change)
the non-automatic change procedures in
Rev. Proc. 2015-13. A taxpayer that wants
to re-elect the LIFO inventory method
ning with the year of change) does not
change procedures in Rev. Proc. 2015-13,
Application To Use LIFO Inventory Method, in
accordance with § 1.472-3.
(4) Effect of subchapter S election by
corporation. See section 7.03(4)(b) and
(c) of Rev. Proc. 2015-13.
(5) Additional requirements. The taxpayer must complete the following statements and attach them to its Form 3115.
If the taxpayer will use different methods
for different inventory goods to which the
change applies, the taxpayer must complete the statements for each of those different types of inventory goods.
(a) “The proposed method of identifying [Insert description of inventory goods]
is the [Insert method, as appropriate; that
etc.] method.”
(b) “The proposed method of valuing
[Insert description of inventory goods] is
[Insert method, as appropriate; that is,
cost; LCM; etc.].”
(6) Pool split and partial termination.
If a taxpayer must remove goods from a
LIFO inventory pool because those goods

are not within the scope of that pool (for
example, removing resale goods from a
manufacturing pool), and if the taxpayer
wants to change from the LIFO inventory
method for those removed goods, the taxpayer may split the pool pursuant to section 23.10 of this revenue procedure and
then may change from the LIFO method
pursuant to this section 23.01. See section
23.10(2) of this revenue procedure. The
for each such change.
(7) Section 481(a) adjustment required.
(a) General rule. A taxpayer changing
from a LIFO inventory method must compute a § 481(a) adjustment for the year
of change. See section 7.02 of Rev. Proc.
2015-13.
(b) Special rule for changes that would
otherwise be implemented on a cut-off
basis. If a taxpayer is changing from the
LIFO inventory method to a method of
accounting that is implemented on a cutoff basis under another section of this revenue procedure (see, for example, sections
22.06, 22.07, and 22.13 of this revenue
procedure), the taxpayer’s § 481(a) adjustment is “the LIFO recapture amount” as
payer computing the § 481(a) adjustment
under this special rule must then compute
its ending inventory value for the year of
change using the proposed method (that is,

method on a cut-off basis).
(8) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
23.01 is “56.”
(9) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).
.02 Determining current-year cost
under the LIFO inventory method.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer using the LIFO inventory
method that wants to change its method of
determining current-year cost to:
(i) the actual cost of the goods most
recently purchased or produced (most-recent-acquisitions method);
(ii) the actual cost of the goods purchased or produced during the taxable

year in the order of acquisition (earliest-acquisitions method);
(iii) the average unit cost equal to the
aggregate actual cost of all the goods purchased or produced throughout the taxable
year divided by the total number of units
so purchased or produced. See § 1.4728(e)(2)(ii);
or
(v) a rolling-average method if the taxpayer uses that rolling-average method
in accordance with Rev. Proc. 2008-43,
Proc. 2008-52, 2008-36 I.R.B. 587 (see
section 13).
(b) Inapplicability. This change does
not apply to a taxpayer using the lower of
cost or market method to determine current-year cost. A taxpayer using the lower
of cost or market method that valued
inventory below cost may not change to
a proper cost valuation under this section
23.02.
(2) Manner of making change. This
change is made using a cut-off basis and
applies only to the computations of current-year cost after the beginning of the
year of change. Accordingly, a § 481(a)
adjustment is neither permitted nor
required.
(3) Concurrent change to a rolling-average method. A taxpayer making both
a change to a rolling-average method
of determining current-year cost for its
LIFO inventory under this section 23.02
and a change to a rolling-average method
of accounting for non-LIFO inventories
under Rev. Proc. 2008-43 (see section
22.13 of this revenue procedure) should
in which case the taxpayer must enter the
designated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, for information on
making concurrent changes.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
23.02 is “57.”
(5) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).

.03 Alternative LIFO inventory method
for retail automobile dealers.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer engaged in the trade or
business of retail sales of new automobiles or new light-duty trucks (“automobile dealer”) that wants to change to the
“Alternative LIFO method” described in
section 4 of Rev. Proc. 97-36, 1997-2 C.B.
2008-1 C.B. 664, for its LIFO inventories
of new automobiles and new light-duty
trucks. Light-duty trucks are trucks with a
gross vehicle weight of 14,000 pounds or
less, which also are referred to as class 1,
2, or 3 trucks.
(b) Inapplicability. This change does
not apply to an automobile dealer that
uses the inventory price index computation (IPIC) method for goods other than
new automobiles, new light-duty trucks,
parts and accessories, used automobiles,
and used trucks.
(2) Manner of making change.
(a) Cut-off basis. This change is made
using a cut-off basis and applies only to
the computation of ending inventories
after the beginning of the year of change.
See section 5.03(6) of Rev. Proc. 97-36
for more information regarding a cut-off
basis. Accordingly, a § 481(a) adjustment
is neither permitted nor required.
(b) Concurrent change from IPIC
method. An automobile dealer using the
IPIC method that also has parts and accessories, used automobiles, or used light-duty
trucks (other goods) inventory may incorporate a change, using a cut-off basis, from
IPIC to another acceptable LIFO method
for those other goods into this change.
When changing from IPIC to a dollar-value
LIFO method for its other goods, the automobile dealer must establish separate
inventory pools for new automobiles and
new light-duty trucks, unless the automobile dealer also concurrently changes to the
Vehicle-Pool Method (see section 23.08 of
this revenue procedure). Further, the automobile dealer must establish a separate
inventory pool for the parts and accessories. See section 6.03(1)(b) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, for information on making concurrent changes.
(c) Additional requirements. An automobile dealer also must comply with the
following:

(i) the conditions in section 5.03 of
Rev. Proc. 97-36; and
(ii) for an automobile dealer changing
from the IPIC method under this section
23.03, the automobile dealer also must
attach to its Form 3115 a schedule setting
forth the classes of goods for which the
automobile dealer has elected to use the
LIFO method and the accounting method
changes being made under this section
23.03 for each class of goods.
(3) Concurrent change to the Vehicle-Pool Method. A taxpayer making both
a change to the Alternative LIFO Method
under this section 23.03 and a change to
the Vehicle-Pool Method under Rev. Proc.
2008-23 (see section 23.08 of this reve3115 for both changes, in which case the
taxpayer must enter the designated automatic accounting method change numbers
for both changes on the appropriate line
on that Form 3115. See section 6.03(1)(b)
of Rev. Proc. 2015-13 for information on
making concurrent changes.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
23.03 is “58.”
(5) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).
.04 Used vehicle alternative LIFO
method.
(1) Description of change. This change
applies to a taxpayer that sells used automobiles and used light-duty trucks (“used
vehicle dealers”) that wants to change
to the “Used Vehicle Alternative LIFO
Method” as described in Rev. Proc.
by Announcement 2004-16, 2004-1 C.B.
668, and Rev. Proc. 2008-23, 2008-1 C.B.
664.
(2) Additional requirements. A taxpayer making this change must comply
with the additional conditions set forth in
section 5.04 of Rev. Proc. 2001-23.
(3) Manner of making change.
(a) Cut-off basis. This change is made
on a cut-off basis, which requires that the
value of the taxpayer’s used automobile
and used light-duty truck inventory at the
beginning of the year of change must be
the same as the value of that inventory

at the end of the preceding taxable year,
plus cost restorations, if any, required by
section 5.04(5) of Rev. Proc. 2001-23.
Accordingly, a § 481(a) adjustment is neither permitted nor required.
(b) Bargain purchase. If the taxpayer
has previously improperly accounted for
a bulk bargain purchase, the taxpayer
its method of accounting to comply with
Hamilton Industries, Inc. v. Commissioner,
97 T.C. 120 (1991), and compute a § 481(a)
adjustment for that part of the change. See
Announcement 91-173, 1991-47 I.R.B.
29. Upon examination, if a taxpayer has
properly changed under this section 23.04
except for complying with this section
23.04(3)(b), an examining agent may not
deny the taxpayer the change. However,
the taxpayer does not receive audit protection under section 8.01 of Rev. Proc. 201513, 2015-5 I.R.B. 419, with respect to the
improper method of accounting for the bargain purchase. See section 8.02(2) of Rev.
Proc. 2015-13. Accordingly, the examining
agent may make any necessary adjustments
in any year for which the period of limitations on assessment and collection of tax is
open to effect compliance with Hamilton
Industries, Inc.
(c) New base year. In effecting a
change to the Used Vehicle Alternative
LIFO Method under this revenue procedure, the taxpayer must retain any LIFO
inventory cost increments previously
determined and the value of those increments. Instead of using the earliest taxable
year for which the taxpayer adopted LIFO
as the base year, the taxpayer must use the
year of change as the new base year in
determining the value of all existing LIFO
cost increments for the year of change and
later taxable years. (The cumulative index
at the beginning of the year of change is
1.00). The taxpayer must restate the baseyear cost of all LIFO cost increments at
the beginning of the year of change in
terms of new base-year costs, using the
year of change as the new base year, and
must recompute the indexes for previously determined inventory increments
accordingly. The new base-year cost of a
pool is equal to the total current-year cost
of all the vehicles in the pool.
(d) Form 3115. A completed Form
3115 includes the completion of Part I of
Schedule C.

(4) Concurrent change from IPIC
method. A used vehicle dealer using
the IPIC method that also has parts and
accessories, new automobiles, or new
light-duty trucks (other goods) inventory
may incorporate a change, using a cut-off
basis, from IPIC to another acceptable
LIFO method for those other goods into
this change. When changing from IPIC to
a dollar-value LIFO method for its other
goods, the used vehicle dealer must establish separate inventory pools for new automobiles and new light-duty trucks, unless
the used vehicle dealer also concurrently
changes to the Vehicle-Pool Method (see
section 23.08 of this revenue procedure).
Further, the used vehicle dealer must
establish a separate inventory pool for the
parts and accessories. See section 6.03(1)
(b) of Rev. Proc. 2015-13 for information
on making concurrent changes.
(5) Concurrent change to the Vehicle-Pool Method. A taxpayer making both
a change to the Used Vehicle Alternative
LIFO Method under this section 23.04 and
a change to the Vehicle-Pool Method under
Rev. Proc. 2008-23 (see section 23.08 of
gle Form 3115 for both changes, in which
case the taxpayer must enter the designated
automatic accounting method change numbers for both changes on the appropriate
line on that Form 3115. See section 6.03(1)
(b) of Rev. Proc. 2015-13 for information
on making concurrent changes.
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
23.04 is “59.”
(7) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).
.05 Determining the cost of used vehicles purchased or taken as a trade-in.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer using the LIFO inventory
method that wants to:
(i) determine the cost of used vehicles
acquired by trade-in using the average
vehicle guide on the date of the trade-in.
See Rev. Rul. 67-107, 1967-1 C.B. 115.
The taxpayer must consistently use the

the taxpayer receives permission to use a
different guide;
cle guide for determining the cost of used
vehicles acquired by trade-in;
(iii) determine the cost of used vehicles
purchased for cash using the actual purchase price of the vehicle; or
(iv) reconstruct the beginning-of-theyear cost of used vehicles purchased for
cash using values computed by national
auto auction companies based on vehicles purchased for cash. The national auto
auction company selected must be consistently used.
(b) Inapplicability. This change does
not apply to a taxpayer that adopted or
changed to the Used Vehicle Alternative
LIFO Method (see section 23.04 of this
revenue procedure).
(2) Manner of making change. This
change is made on a cut-off basis and
applies only to used vehicles acquired
on or after the beginning of the year of
change. Accordingly, a § 481(a) adjustment is neither permitted nor required.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
23.05 is “60.”
(4) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).
.06 Change to the inventory price index
computation (IPIC) method.
(1) Description of change. This change
applies to a taxpayer that wants to change:
(a) from a non-IPIC LIFO inventory
method to the IPIC method in accordance
with all relevant provisions of § 1.4728(e)(3); or
(b) from the IPIC method as described
in T.D. 7814, 1982-1 C.B. 84, (March 15,
1982) (the old IPIC method) to the IPIC
method as described in § 1.472-8(e)(3)
(see T.D. 8976, 2002-1 C.B. 421, (January
8, 2002)) (the new IPIC method), which
includes the following required changes
(if applicable):
(i) from using 80% of the inventory
price index (IPI) to using 100% of the IPI
to determine the base-year cost and dollar-value of a LIFO pool(s);
(ii) from using a weighted arithmetic mean to using a weighted harmonic

mean to compute an IPI for a dollar-value
pool(s); and
(iii) from using a components-of-cost

inventory items.
(2) Manner of making change. This
change is made on a cut-off basis and
applies only to the computation of ending
inventories after the beginning of the year
of change. Accordingly, a § 481(a) adjustment is neither permitted nor required.
(3) Bargain purchase. If the taxpayer
has previously improperly accounted for
a bulk bargain purchase, the taxpayer
its method of accounting to comply with
Hamilton Industries, Inc. v. Commissioner, 97 T.C. 120 (1991), and compute
a § 481(a) adjustment for that part of
the change. See Announcement 91-173,
1991-47 I.R.B. 29. Upon examination, if
a taxpayer has properly changed under
this section 23.06 except for complying with section 23.06(3) of this revenue
procedure, an examining agent may not
deny the taxpayer the change. However,
the taxpayer does not receive audit protection under section 8.01 of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, with respect
to the improper method of accounting for
the bargain purchase. See section 8.02(2)
of Rev. Proc. 2015-13. Accordingly, the
examining agent may make any necessary adjustments in any year for which the
period of limitations on assessment and
collection of tax is open to effect compliance with Hamilton Industries, Inc.
(4) Concurrent automatic changes.
(a) A taxpayer making this change
and to change its method of determining
current-year cost under section 23.02 of
this revenue procedure for the same year
for both changes, provided the taxpayer
enters the designated automatic accounting method change numbers for both
changes on the appropriate line on that
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes.
(b) A taxpayer making this change and
to change its method of pooling to IPICmethod pools described in § 1.472-8(b)
(4) or § 1.472-8(c)(2) under section 23.07
of this revenue procedure for the same

3115, provided the taxpayer enters the
designated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.
(c) A taxpayer making this change and
to change its method of pooling under section 23.10 of this revenue procedure for
Form 3115, provided the taxpayer enters
the designated automatic accounting
method change numbers for both changes
on the appropriate line on that Form 3115.
See section 6.03(1)(b) of Rev. Proc. 201513 for information on making concurrent
changes.
(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
23.06 is “61.”
(6) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).
.07 Changes within the inventory price
index computation (IPIC) method.
(1) Description of change. This change
applies to a taxpayer using the IPIC
method described in § 1.472-8(e)(3) as
revised by T.D. 8976, 2002-1 C.B. 421,
(new IPIC method) that wants to make
one or more of the following changes:
(a) change from the double-extension IPIC method to the link-chain IPIC
method, or vice versa. See § 1.472-8(e)
(3)(iii)(E) for principles concerning the
computation of the inventory price index
under the double-extension IPIC method
and the link-chain IPIC method;
(b) change to or from the 10 percent
method. See § 1.472-8(e)(3)(iii)(C) for
principles concerning the assignment of
inventory items to Bureau of Labor Statistics (BLS) categories under the IPIC
method;
(c) change to IPIC-method pools
described in § 1.472-8(b)(4) or § 1.4728(c)(2), including a change to begin or
discontinue applying one or both of the 5
percent pooling rules;
(d) change to combine or separate
pools as a result of the application of a 5
percent pooling rule described in § 1.4728(b)(4) or § 1.472-8(c)(2);

(e) change its selection of BLS table
from Table 3 (Consumer Price Index for
All Urban Consumers (CPI-U): U.S. city
average, detailed expenditure categories)
of the monthly CPI Detailed Report to
Table 9 (Producer price indexes (PPI) and
percent changes for commodity and service groupings and individual items, not
seasonally adjusted) of the monthly PPI
Detailed Report (formerly, Table 6), or
vice versa. See § 1.472-8(e)(3)(iii)(B)(2)
for principles concerning the selection of
a BLS table under the IPIC method;
(f) change the assignment of one or
more inventory items to BLS categories
under either Table 3 (CPI-U): U.S. City
average, detailed expenditure categories)
of the monthly CPI Detailed Report or
Table 9 (PPI and percent changes for commodity and service groupings and individual items, not seasonally adjusted) of the
monthly PPI Detailed Report (formerly,
Table 6). See § 1.472-8(e)(3)(iii)(C) for
principles concerning the assignment of
inventory items to BLS categories under
the IPIC method. As part of this change,
a taxpayer may separate a reassigned
item from an inappropriate pool and combine the reassigned item with items in an
appropriate pool. See § 1.472-8(g)(2) for
principles concerning the manner of combining and separating dollar-value pools;
(g) change the representative month
when necessitated because of a change
in taxable year or a change in method of
determining current-year cost made pursuant to section 23.02 of this revenue
procedure. See § 1.472-8(e)(3)(iii)(B) for
principles concerning the determination
of a representative month under the IPIC
method. A change in method of determining current-year cost and a change of the
representative month may be made using
a single Form 3115, provided the taxpayer
enters the designated automatic accounting method change numbers for both
changes on the appropriate line on that
Form 3115;
(h) change from using preliminary BLS
indexes to compute an inventory price
index, or vice versa. See § 1.472-8(e)(3)
(iii)(D)(2) for principles concerning the
selection of BLS price indexes under the
IPIC method; and
(i) change from using a representative
appropriate month to using an appropriate

month. See § 1.472-8(e)(3)(iii)(B)(3) for
principles concerning the selection of an
appropriate month.
(2) Certain eligibility rule inapplicable.
The eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
does not apply to the changes described
in sections 23.07(1)(d), (f) in the case of
a taxpayer using the 10 percent method
described in § 1.472-8(e)(3)(iii)(C)(2),
and (g) of this revenue procedure.
(3) Manner of making change.
(a) Cut-off basis. These changes are
made on a cut-off basis and apply only
to the computation of ending inventories
after the beginning of the year of change.
Accordingly, a § 481(a) adjustment is neither permitted nor required.
(b) New base year. A taxpayer that
changes pursuant to sections 23.07(1)(a),
(b), and (e) of this revenue procedure must
establish a new base year in the year of
change.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
23.07 is “62.”
(5) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).
.08 Changes to the Vehicle-Pool
Method.
(1) Description of change. This change
applies to a retail dealer or wholesale distributor (“reseller”) of cars and light-duty
trucks that wants to change to the “Vehicle-Pool Method” as described in Rev.
Proc. 2008-23, 2008-1 C.B. 664.
(2) Manner of making change.
(a) Cut-off basis. This change is made
on a cut-off basis and applies only to the
computation of ending inventories after
the beginning of the year of change.
Accordingly, a § 481(a) adjustment is neither permitted nor required. A reseller that
changes its method of pooling under Rev.
Proc. 2008-23 and this section 23.08 must
comply with § 1.472-8(g).
(b) New base year. Instead of using the
earliest taxable year for which the reseller
adopted the LIFO method for any items in
a pool, the reseller must use the year of
change as the base year when determining
the LIFO value of that pool for the year of
change and subsequent taxable years (that

is, the cumulative index at the beginning
of the year of change is 1.00). The reseller
must restate the base-year cost of all layers of increment in a pool at the beginning
of the year of change in terms of new
base-year cost. For an example of establishing a new base year, see § 1.472-8(e)
(3)(iv)(B)(1)(ii).
(3) Concurrent change to the Alternative LIFO Method or the Used Vehicle Alternative LIFO Method. A reseller
making both a change to the Vehicle-Pool
Method under this section 23.08 and a
change to the Alternative LIFO Method
under Rev. Proc. 97-36 (see section 23.03
of this revenue procedure) or the Used
Vehicle Alternative LIFO Method under
Rev. Proc. 2001-23 (see section 23.04
a single Form 3115 for both changes, in
which case the taxpayer must enter the
designated automatic accounting method
change numbers for both changes on the
appropriate line on that Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, for information on
making concurrent changes.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
23.08 is “112.”
(5) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).
.09 Changes within the used vehicle
alternative LIFO method.
(1) Description of change. This change
applies to a taxpayer using the “Used
Vehicle Alternative LIFO Method” as
described in Rev. Proc. 2001-23, 2001-1
2004-16, 2004-1 C.B. 668, and Rev. Proc.
2008-23, 2008-1 C.B. 664, that wants to
cle guide” utilized by the taxpayer in connection with the Used Vehicle Alternative
LIFO Method or any change in the precise
manner of its utilization (for example, a
a taxpayer uses to represent vehicles of
average condition for purposes of section
4.02(5)(a) of Rev. Proc. 2001-23).
(2) Manner of making change.
(a) Cut-off basis. This change is made
on a cut-off basis and applies only to the

computation of ending inventories after
the beginning of the year of change.
Accordingly, a § 481(a) adjustment is neither permitted nor required.
(b) New base year. A taxpayer that
changes its method pursuant to this section 23.09 must establish a new base year
in the year of change.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
23.09 is “140.”
(4) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).
.10 Changes to dollar-value pools of
manufacturers.
(1) Description of change. This change
applies to a manufacturer that:
(a) purchases goods for resale (resale
goods) and, thus, must reassign resale
goods from the pool(s) it maintains for
the goods it manufactures to one or more
resale pools;
(b) wants to change from using multiple pools described in § 1.472-8(b)(3) to
using natural business unit (NBU) pools
described in § 1.472-8(b)(1), or vice
versa; or
(c) wants to reassign items in NBU
pools described in § 1.472-8(b)(1) into the
same number or a greater number of NBU
pools.
(2) Manner of making change. This
change is made on a cut-off basis and
applies only to the computation of ending
inventories after the beginning of the year
of change. Accordingly, a § 481(a) adjustment is neither permitted nor required. A
taxpayer that changes its method of pooling pursuant to this section 23.10 must
combine or separate pools as required by
§ 1.472-8(g). If a taxpayer splits a pool
into two or more permissible pools pursuant to this section 23.10, which must
be implemented on a cut-off basis, the
3115 to change from the LIFO inventory
method for one or more of the resulting
pools pursuant to section 23.01 of this
revenue procedure, which must be implemented with a § 481(a) adjustment.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change

number for a change under this section
23.10 is “141.”
(4) Contact information. For further
information regarding a change under
this section, contact Mia Romano at (202)
317-7007 (not a toll-free number).
SECTION 24. MARK-TO-MARKET
ACCOUNTING METHODS (Including
§ 475 )
.01 Commodities dealers, securities
traders, and commodities traders electing to use the mark-to-market method of
accounting under § 475(e) or (f).
(1) Description of change. This
change applies to certain taxpayers that
have elected to use the mark-to-market
method of accounting under § 475(e) or
(f). Under § 475(e) and (f) and Rev. Proc.
99-17, 1999-1 C.B. 503, if a taxpayer
makes a timely election under § 475(e)
able year for which the election is effective (election year), mark to market is the
only permissible method of accounting
in § 475(c)(2), subject to the election.
Thus, if the electing taxpayer’s method
of accounting for its taxable year immediately preceding the election year for
securities or commodities subject to the
election is inconsistent with § 475, the
taxpayer is required to change its method
of accounting to comply with the election
dures in section 24.01(5) of this revenue procedure. A taxpayer that makes a
§ 475(e) or (f) election but fails to change
its method of accounting under the procedures in section 24.01(5) of this revenue
procedure to comply with that election is
using an impermissible method. See section 4 of Rev. Proc. 99-17.
(2) Applicability. This change applies
to a taxpayer if all of the following condi(a) the taxpayer is a commodities
dealer, securities trader, or commodities
trader that has made a valid election under
§ 475(e) or (f) (see section 5.03(1) of Rev.
Proc. 99-17) and that is required to change
its method of accounting to comply with
the election;
(b) the method of accounting to which
the taxpayer changes is in accordance with
its election under § 475(e) or (f);

(c) the year of change is the election
year; and
(d) the taxpayer has not revoked a
previous § 475(e) or (f) election, whichyears ending with the election year. (If this
condition is not met, the taxpayer must
request the change to resume using the
mark-to-market method under the procedures in section 24.01(7) of this revenue
procedure.)
(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to this change.
(4) Election under Rev. Proc. 99-17.
In accordance with section 5.03(1) of
Rev. Proc. 99-17, to make a § 475(e) or
ment satisfying the requirements in section 5.04 of Rev. Proc. 99-17 (Election
Election Statement not later than the due
date (without regard to any extension) of
the original federal income tax return for
the taxable year immediately preceding
the election year and must attach the Election Statement either to that return or, if
applicable, to a request for an extension
a calendar year individual taxpayer wants
to make a § 475(e) or (f) election for 2024
the Election Statement on or before April
(without regard to any extension) federal
income tax return for 2023 or the taxpay-

return.
(5)

. In

described in section 24.01(4) of this revenue procedure, unless the election year is
owns securities or commodities, whichever is applicable, a Form 3115 is required
return for the year of change (the election
year) in accordance with the procedures
in section 6.03(1) of Rev. Proc. 2015-13.
On the Form 3115, a taxpayer should indition Statement in compliance with section
5.03(1) of Rev. Proc. 99-17.
(6) Limited § 301.9100 relief. Section
301.9100-3 relief for failure to comply

with the requirements of this section 24.01
will be granted only in unusual and compelling circumstances.
(7) Section 475(e) or (f) election made
vious election. If a taxpayer has revoked a
taxable years ending with the election year
for a new § 475(e) election, then the taxpayer may not use the automatic change
procedures in Rev. Proc. 2015-13 and this
section 24.01 to resume using the markto-market method of accounting pursuant
to the new § 475(e) election. Similarly, if
a taxpayer has revoked a previous § 475(f)
ending with the election year for a new
§ 475(f) election, then the taxpayer may
not use the automatic change procedures
in Rev. Proc. 2015-13 and this section
24.01 to resume using the mark-to-market method of accounting pursuant to the
new § 475(f) election. To resume using
the mark-to-market method of accounting described in § 475 during this 5-year
the due date described in section 5.03 of
Rev. Proc. 99-17, an Election Statement
5.04 of Rev. Proc. 99-17 and (ii) request a
change in method of accounting using the
non-automatic change procedures in Rev.
Proc. 2015-13.
(8)
years of making a § 475(e) or (f) election requires a non-automatic change.
If a taxpayer wants to revoke a § 475(e)
or (f) election, whichever is applicable,
the year of change for the election (the
election year), the taxpayer must follow
the non-automatic change procedures in
section 24.02(9) of this revenue procedure
to make the change.
(9) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
24.01 is “64.”
(10) Contact information. For further
information regarding a change under this
section, contact Grace Cho at (202) 3176945 (not a toll-free number).
.02 Taxpayers requesting to change
their method of accounting from the markto-market method of accounting described
in § 475 to a realization method.

(1) Description of change. This change
applies to any taxpayer requesting permission to change its method of accounting
§ 475 from the mark-to-market method of
accounting described in § 475 to a realization method of accounting. For example, this section 24.02 applies when a taxpayer is required to change its method of
accounting to a realization method after
revoking an election under § 475(e), (f)
(1), or (f)(2). This change is not limited to
a change required by § 475 (for example,
this section 24.02 applies to a change from
a mark-to-market method of accounting
for notional principal contracts providing
for nonperiodic payments even if the taxpayer is not subject to § 475) and, in such
a case, references to § 475 in this section
24.02 are interpreted accordingly. For purposes of this section 24.02, a change to a
realization method of accounting includes
a change in which the taxpayer also is
required to use a mark-to-market method
tion to account for all or some of the taxpayer’s securities or commodities (for
example, § 1256 for commodities).
(2) Exclusive procedure. The procedure set forth in this section 24.02 is the
exclusive procedure for changing a taxpayer’s method of accounting from the
mark-to-market method described in
in section 24.02(7) of this revenue procedure is the exclusive manner of revoking a § 475(e), (f)(1), or (f)(2) election.
Moreover, any taxpayer requesting permission to change to a realization method
must follow the procedures described in
this section 24.02 (including the requirement) and other applicable provisions of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
to request consent to change its method
of accounting for securities described in
§ 475(c)(2) (Section 475 Securities), commodities described in § 475(e)(2) (Section
475 Commodities), or both.
(3) Applicability. This change applies
to a taxpayer if all of the following conditions in paragraphs (a) through (d) below
(a) the taxpayer is using, properly or
improperly, the mark-to-market method
of accounting described in § 475;

(b) the taxpayer is requesting permission to change to a realization method of
accounting and report gains or losses from
the disposition of Section 475 Securities,
Section 475 Commodities, or both, under
§ 1001;
(c) the taxpayer meets the requirements of this section 24.02, including the
24.02(7) of this revenue procedure; and
(d) the taxpayer has not changed to a
mark-to-market method for Section 475
Securities, Section 475 Commodities, or
both, whichever are applicable, within the

or loss attributable to those securities and
commodities is also recognized on the last
business day of the year preceding the year
of change. In the case of any Section 475
Security or Section 475 Commodity that a
of change, the taxpayer must make proper
adjustment in the amount of any subsequently realized gain or loss to take into
account adjustments for the gain or loss
of change pursuant to the use of the markto-market method of accounting described
in § 475 in order to prevent amounts from
being duplicated or omitted. Any change

change. (If this condition is not met, the
taxpayer must request the change from a
mark-to-market method to a realization
method under the procedures in section
24.02(9) of this revenue procedure).
(4) Inapplicability. This change does
not apply to a dealer in securities, as
rities must request a change from a markto-market method to a realization method
under the non-automatic change procecable requirements of section 24.02(7)
of this revenue procedure, including the

of change will be taken into account using
a realization method of accounting unless
section 24.02(10) of this revenue procedure permits the taxpayer to resume a
mark-to-market method and the taxpayer
resumes a mark-to-market method.
(7)
. In

will be made on a cut-off basis in the same
manner as described in section 24.02(6) of
this revenue procedure.
(5) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(d) of Rev. Proc. 2015-13 does not apply
to this change.
(6) Manner of making change. This
change is made using a cut-off basis and
applies only to Section 475 Securities,
Section 475 Commodities, or both, that
are accounted for using the mark-to-market method of accounting described in
§ 475 and for which a change in method
is requested under this section 24.02.
Accordingly, a § 481(a) adjustment is neither permitted nor required.
Under the cut-off basis, a taxpayer must
rities, Section 475 Commodities, or both,
that are being marked to market and that
are the subject of the accounting method
change being requested, on the last business day of the year preceding the year of

regard to any extension) of the original
federal income tax return for the taxable
year immediately preceding the year of
change and must be attached either to that
return or, if applicable, to a request for an

under section 6.03(1) of Rev. Proc. 201513, to change to a realization method of
accounting under this section 24.02, a

in section 24.02(7) of this revenue proce-

example, a calendar year individual taxpayer who wishes to revoke a § 475(e) or
(f) election for the 2024 taxable year must
the requirements of section 24.02(7) on or
Statement must be attached to the taxpayer’s original federal income tax return for
the 2023 taxable year or to a request for an

described in § 475 to a realization method;
(3) the year of change (both the beginning
and ending dates); and (4) the types of
instruments subject to the method change,
that is, Section 475 Securities, Section 475
Commodities, or both. If a taxpayer has
made an election under § 475(e), (f)(1),
or (f)(2), the taxpayer must also include a
statement revoking the taxpayer’s section
475 election or elections for the Section
475 Securities, Section 475 Commodities,
or both, for which a change in accounting
method is sought.
(b)
ment
tion Statement for the year of change, a
realization method of accounting is the
only permissible method of accounting for Section 475 Securities, Section
475 Commodities, or both, described in
year of change and all subsequent years
(unless section 24.02(10) of this revenue

this section 24.02 but fails to change its
method of accounting using the procedures described in Rev. Proc. 2015-13 and
this section 24.02 is using an impermissible method.
(c) Limited § 301.9100 relief. Section
301.9100 relief for failure to comply with
the requirements of this section 24.02(7)
will be granted only in unusual and compelling circumstances.
(8) Additional requirements.
(a)
. In
ment described in section 24.02(7) of
this revenue procedure, a Form 3115
income tax return for the year of change in
accordance with the procedures described
in section 6.03(1) of Rev. Proc. 2015-13.
(b)
.A
taxpayer must attach a copy of the Noti24.02(7) of this revenue procedure to its

(a)

.

(1) the name of the taxpayer that will
change its method of accounting (that is,
(for example, its parent corporation); (2)
a statement that the taxpayer is requesting
to change its method of accounting from
the mark-to-market method of accounting

(c) No audit protection for valuation.
A taxpayer does not receive audit protection under section 8.01 of Rev. Proc.
2015-13 for the method of valuation used
by the taxpayer to determine the fair market value of the taxpayer’s Section 475
Securities, Section 475 Commodities, or
both, for a taxable year prior to the year of

change, or for a failure to comply with the
requirements in Rev. Proc. 99-17 to properly elect the mark-to-market method. See
section 8.02(2) of Rev. Proc. 2015-13.
(9) Change from a mark-to-market

section, contact Grace Cho at (202) 3176945 (not a toll-free number).

taxable years of changing to the mark-tomarket method requires a non-automatic
change. If a taxpayer wants to change
from a mark-to-market method to a realization method for Section 475 Securities,
Section 475 Commodities, or both, within

.01 Changing from the § 585 reserve

of change in which the taxpayer changed
to the mark-to-market method for the same
item, the automatic change procedures of
Rev. Proc. 2015-13 and this section 24.02
do not apply. Instead, the taxpayer must
request the change from a mark-to-market method to a realization method under
the non-automatic change procedures in
requirements of section 24.02(7) of this
revenue procedure, including the timely
on a cut-off basis as described in section
24.02(6) of this revenue procedure.
(10) Resuming the mark-to-market
method of accounting. A taxpayer may
not use the automatic change procedures
in Rev. Proc. 2015-13 and section 24.01
of this revenue procedure to resume using
the mark-to-market method of accounting
described in § 475 for the Section 475
Securities, Section 475 Commodities, or
both, that are the subject of the method
change being requested using this section
beginning with the year of change. To
resume using the mark-to-market method
of accounting described in § 475 during
this 5-year period, a taxpayer must: (i)
section 5.03 of Rev. Proc. 99-17, an Elecments of section 5.04 of Rev. Proc. 99-17
and (ii) request a change in method of
accounting using the non-automatic
change procedures in Rev. Proc. 2015-13.
(11) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
24.02 is “218.”
(12) Contact information. For further
information regarding a change under this

SECTION 25. BANK RESERVES FOR
BAD DEBTS (§ 585)

method.
(1) Description of change.
(a) Applicability. This change applies

wants to change its method of accounting for bad debts from the § 585 reserve
method.
(b) Inapplicability. This change does
§ 585(c)(2).
(2) Certain eligibility rule inapplicable. A bank that changed from the § 593
reserve method under § 593(g) to the
§ 585 reserve method is not prohibited
under section 5.01(1)(f) of Rev. Proc.
2015-13, 2015-5 I.R.B. 419, from changing its method of accounting for bad debts
under this section 25.01 solely because
of the § 593(g) change. A bank for which
hibited under section 5.01(1)(f) of Rev.
Proc. 2015-13 from changing its method
of accounting for bad debts under this section 25.01 solely because of the deemed
liquidation of the bank arising from a
Qsub election.
(3) Section 481(a) adjustment. Generally, the amount of the § 481(a) adjustment for a change in method of accounting under this section 25.01 is the amount
of the bank’s reserve for bad debts as of
the close of the taxable year immediately
before the year of change. However, the
amount of the § 481(a) adjustment does
not include the amount of a bank’s pre1988 reserves (as described in § 593(g)
(2)(A)(ii), without taking into account
§ 593(g)(2)(B)) if the bank changed in a
prior year from the § 593 reserve method
to the § 585 reserve method and § 593(g)
applied to that change. The deemed liquidation of a bank occurring solely because
its parent makes a Qsub election does
not accelerate the § 481(a) adjustment.
In accordance with section 7.03(4)(a) of
Rev. Proc. 2015-13, a bank that ceases to

be a bank under § 581 must accelerate its
§ 481(a) adjustment.
(4) Change from § 585 required when
electing S corporation status.
(a) General rule. A bank electing S
corporation status (or a bank for which

of a Form 2553, Election by a Small Business Corporation
parent of Form 8869,
ter S Subsidiary Election, with respect to
the bank will constitute an agreement by
the bank to change its method of accounting for bad debts from the § 585 reserve
method effective as of the taxable year
for which the S corporation election or
Qsub election is effective (year of change)
in accordance with all of the automatic
change procedures of Rev. Proc. 201513 and this section 25.01. The resulting
§ 481(a) adjustment is recognized built-in
gain under § 1374, unless the bank elects
under § 1361(g) and section 25.01(4)
(b) of this revenue procedure to take the
§ 481(a) adjustment into account in determining taxable income for the taxable
year immediately preceding the year of
change. See § 1.1374-4(d).
(b) Election to include § 481(a) adjustment in taxable year immediately preceding the year of change.
(i) Election requirements. A bank that
changes its method of accounting for bad
debts under this section 25.01, from the

year for which the bank’s S corporation
election is effective (year of change) may
elect under § 1361(g) to take into account
the amount of the resulting § 481(a)
adjustment in determining taxable income
for the taxable year immediately preceding the year of change. To make this eleccopy of Form 3115 under section 6.03(1)
of Rev. Proc. 2015-13 (and any other copy
required under section 6.03) for the year of
Form 3115 with its original (or amended)
federal income tax return for the taxable
year immediately preceding the year of

section 6.03(1) of Rev. Proc. 2015-13
(and any other copy required under sec-

tion 6.03) and (3) include the amount of
the § 481(a) adjustment in gross income
for the taxable year immediately preceding the year of change. The bank must
attach a statement to the original and both
copies of Form 3115 stating that the bank
elects under § 1361(g) to take the § 481(a)
adjustment into account in determining
taxable income for the taxable year immediately preceding the year of change.
(ii) Special rule for Qsub banks. In the
case of a Qsub bank, the S corporation par3115 under section 6.03(1) of Rev. Proc.
2015-13 for the year of change. The Qsub
Form 3115 with its original (or amended)
federal income tax return for the taxable
year immediately preceding the year of

section 6.03(1) of Rev. Proc. 2015-13, and
include the amount of the § 481(a) adjustment in gross income for the taxable year
immediately preceding the year of change.
In the case of a Qsub bank, the Form 3115
poration parent and the “applicant” is the
Qsub bank.
(iii) The following example illustrates
the principles of section 25.01(4)(b) of
this revenue procedure.
Example. X, a calendar year taxpayer, is a calen-

before 2015, X accounted for its bad debts under the
§ 585 reserve method. By March 15, 2015, X proption effective January 1, 2015. Pursuant to section
the Form 2553 constituted an agreement by X to
change from the § 585 reserve method to the § 166
with all of the automatic change procedures of Rev.
Proc. 2015-13, and the applicable provisions of this
section 25.01. Thus, for example, X
3115 for this 2015 change in duplicate, in accordance with section 6.03(1) of Rev. Proc. 2015-13, by
attaching the original Form 3115 to X
(including any extension) original federal income

X’s § 481(a) adjustment for the change is the amount
of X’s bad debt reserve as of the close of December 31, 2014. X wishes to elect under § 1361(g) to
include the § 481(a) adjustment in income in the
taxable year ending December 31, 2014, the taxable
year immediately preceding the year of change. To
make this election, X
copy of Form 3115 for the 2015 change under sectional copy of that Form 3115 with its original (or

later than the date the original Form 3115 is properly
and (3) include the amount of its § 481(a) adjustment
in gross income in its return for 2014. X must attach
a statement to the original and both copies of Form
3115 stating that X elects under § 1361(g) to take the
§ 481(a) adjustment into account in determining taxable income for 2014, the taxable year immediately
preceding the year of change.

(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
25.01 is “66.”
(6) Contact information. For further
information regarding a change under this
section, contact K. Scott Brown at (202)
317-4423 or Laura Fields at (202) 3176850 (not toll-free numbers).
SECTION 26. INSURANCE
COMPANIES (§§ 807, 816, 832, 833)
.01 Safe harbor method of accounting
for premium acquisition expenses.
(1) Description of change. Rev. Proc.
2002-46, 2002-2 C.B. 105, sets forth a safe
harbor method of accounting for premium
acquisition expenses of certain non-life
insurance companies. Under this method,
an insurance company is permitted to treat
as premium acquisition expenses incurred
for the taxable year an amount equal to
the sum of (a) the amount of premium
acquisition expenses paid during the taxable year; (b) the difference between the
unpaid premium acquisition expenses
shown on the company’s annual statement
for the taxable year and the unpaid premium acquisition expenses shown on the
company’s annual statement for the preceding taxable year; and (c) the difference
between the amount of the insurance company’s pro forma premium acquisition
expenses at the end of the taxable year and
the company’s pro forma premium acquisition expenses at the end of the preceding taxable year. The amount taken into
account as a net increase in the pro forma
premium acquisition expenses, however,
cannot exceed the insurance company’s
unearned premium reserve offset amount
for that year. A special rule applies to premium acquisition expenses with respect to
certain contracts with installment premiums. See Rev. Proc. 2002-46.
(2) Applicability. The automatic change
in this section 26.01 applies to any insur-

ance company that is subject to tax under
§ 831(a) and determines its premiums
earned for insurance contracts during the
taxable year under § 832(b)(4) in accordance with the provisions of § 1.832-4.
The automatic change does not apply to an
existing Blue Cross or Blue Shield organization or any other organization to which
§ 833 applies.
(3) Certain eligibility rules inapplicable. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, do not apply to this
change.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
26.01 is “67.”
(5) Contact information. For further
information regarding a change under
this section, contact Rebecca L. Baxter at
(202) 317-6995 (not a toll-free number).
.02 Certain changes in method of
accounting for organizations to which
§ 833 applies.
(1) Description of change. This change
applies to an existing Blue Cross or Blue
Shield organization within the meaning of
§ 833(c)(2), or an organization described
in § 833(c)(3), that is required to change
its method of accounting for unearned
premiums by reason of failing to meet the
Medical Loss Ratio (MLR) requirements
of § 833(c)(5), or by reason of meeting
the MLR requirements of § 833(c)(5)
after failing to meet those requirements
in a prior year. See Notice 2011-4, 2011-2
I.R.B. 282.
(2) Certain eligibility rules inapplicable. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, do not apply to this
change.
(3) Accelerated § 481(a) adjustment
period in certain situations. In addition
to the circumstances set forth in section 7.03(4) of Rev. Proc. 2015-13, the
§ 481 adjustment period provided in section 7.03 of Rev. Proc. 2015-13 will be
accelerated in the event a taxpayer with
a remaining balance of a § 481(a) adjustment that arose by reason of a change in
method of accounting described in this
section 26.02 is required to effect another
change in method of accounting described
in this section 26.02. Thus, for example,

a taxpayer that fails to satisfy the requirements of § 833(c)(5) and as a result has a
positive § 481(a) adjustment, is required
to accelerate the remaining balance, if
any, of that adjustment in a subsequent
taxable year in which the taxpayer meets
the requirements of § 833(c)(5).
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
26.02 is “155.”
(5) Contact information. For further
information regarding this section, contact
Rebecca L. Baxter at (202) 317-6995 (not
a toll-free number).
.03
life insurance company under § 816.
(1) Description of change. This change
applies to an insurance company that
changes from being taxed as a life insurance company under part I of subchapter
L to being taxed as a non-life insurance
company under part II of subchapter L,
or vice versa. Whether an insurance company is taxed under § 801 as a life insurance company under part I of subchapter
L is determined under § 816.
(2) Certain eligibility rules inapplicable. The eligibility rules in sections
5.01(1)(d) and (f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, do not apply to this
change.
(3) No audit protection or ruling on
.
The taxpayer does not receive either: (a)
any audit protection under section 8.01 of
Rev. Proc. 2015-13 or (b) ruling reliance
under section 10 of Rev. Proc. 2015-13
in connection with the consent granted
under section 9 of Rev. Proc. 2015-13 for
a change under this section 26.03 regardlife insurance company. The director will
a life insurance company.

(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
26.03 is “219.”
(5) Contact information. For further
information regarding a change under
this section, contact Rebecca L. Baxter at
(202) 317-6995 (not a toll-free number).
.04 Changes in basis of computing
reserves under § 807(f).
(1) Description of change and applicability. This automatic change applies
to a change in basis of computing any
item referred to in § 807(c), as described
in § 807(f), by a life insurance company
or by an insurance company that is not a
life insurance company (nonlife insurance
company). See § 1.807-4.
(2) Manner of making change.
(a)(i) Life insurance companies. If a life
insurance company changes its basis of
computing any item referred to in § 807(c)
during a taxable year (year of change),
then for purposes of applying § 807(a) and
(b) with respect to contracts issued before
the year of change, the amount of the item
at the close of the year of change attributable to those contracts is computed on
the old basis and the amount of the item
at the opening of the succeeding taxable
year attributable to those contracts is computed on the new basis. The amount of
such item attributable to contracts issued
during the year of change and thereafter
must be computed on the new basis. See
§ 1.807-4(c)(1).
(ii) Nonlife insurance companies. If
a nonlife insurance company changes
its basis of computing an item referred
to in § 807(c)(1) (life insurance reserves
year (year of change), then for purposes
of applying § 832(b)(4), (A) for the year
of change, life insurance reserves at the
end of the year of change with respect to

contracts issued before the year of change
are computed on the old basis and (B) for
the year following the year of change, life
insurance reserves at the end of the preceding taxable year with respect to contracts issued before the year of change are
computed on the new basis. Life insurance
reserves attributable to contracts issued
during the year of change and thereafter
must be computed on the new basis. See
§ 1.807-4(c)(2).
(iii)
.A
taxpayer that changes its basis of computing any item referred to in § 807(c)
is subject to the procedures that apply to
obtain the automatic consent of the Commissioner to change a method of accounting. Under these procedures, (A) the taxin this section 26.04, (B) the taxpayer
will receive audit protection for taxable
years prior to the year of change as provided in section 8 of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, in connection with the
change, and (C) the § 481(a) adjustment
period generally will be one taxable year
(year of change) for a negative § 481(a)
adjustment and four taxable years (year of
change and next three taxable years) for
a positive § 481(a) adjustment in accordance with section 7.03(1) of Rev. Proc.
2015-13.
(iv) Examples. The following examples each
illustrate the rules of sections 26.04(2)(a)(i) and (ii)
of this revenue procedure in two situations: (A) a
change in basis in computing life insurance reserves
(reserves) for contracts issued prior to the year of
change that results in an increase in the reserves
at the end of the year of change (negative § 481(a)
adjustment) and (B) a change in basis in computing reserves for contracts issued prior to the year
of change that results in a decrease in the reserves
at the end of the year of change (positive § 481(a)
adjustment). The following table summarizes the
reserve amounts for contracts issued before the year
of change.

Reserve amounts.
Description

Old Basis

End of Year Prior to Year of Change

100

End of Year of Change

105

New Basis
(Negative § 481(a) Adjustment)

New Basis
(Positive § 481(a) Adjustment)

109

101

End of Year Following Year of Change

112

104

Section 481(a) Adjustment

105-109=(4)

105-101=4

A. Example 1. The taxpayer is a life insurance
company. Under section 26.04(2)(a)(i) of this revenue procedure, reserves for contracts issued before
the year of change are reported under the old basis
at the close of the year of change and under the new
basis at the beginning of the year following the year
of change; reserves for contracts issued during the
year of change and thereafter are computed under the
new basis. The remainder of this example describes
only the deductions and income inclusions relating
to reserves for contracts issued before the year of
change.
Deduction for a net increase in reserves for the
year of change. In both the negative and positive
§ 481(a) adjustment situations, the company must
take $105 of reserves into account (on the old basis)
at the end of the year of change, resulting in a $5
increase in reserves ($105-$100) and a corresponding deduction for a net increase in reserves for the
year of change.
Negative § 481(a) adjustment situation. As
described in section 26.04(2)(a)(iii) of this revenue procedure, the negative § 481(a) adjustment of
$4 ($109-$105) is taken into account in the year of
change, such that the company recognizes a deduction for an increase in reserves under § 807(f) of $4
in the year of change. This results in total deductions
in the year of change of $9 ($5+$4).
At the beginning of the following year, the company must take $109 of reserves into account (new
basis) and the deduction for the net increase in
reserves for that year is $3 ($112-$109).
Positive § 481(a) adjustment situation. As
described in section 26.04(2)(a)(iii) of this revenue
procedure, the positive § 481(a) adjustment of $4
($101-$105) is taken into account over four taxable
years, such that the company recognizes additional
income from a decrease in reserves under § 807(f)
of $1 (1/4th of the § 481(a) adjustment) in the year
of change. This results in a net reduction in taxable
income in the year of change of $4 ($5-$1).
At the beginning of the following year, the company takes $101 of reserves into account (new basis),
and the deduction for the net increase in reserves for
that year is $3 ($104-$101). The company also recognizes another 1/4th of the § 481(a) adjustment,
resulting in a $1 increase in income due to a decrease
in reserves under § 807(f) and a net reduction in taxable income of $2 ($3-$1) in that year. The remaining $2 of the § 481(a) adjustment is recognized as a
$1 increase in income due to a decrease in reserves
under § 807(f) in each of the two remaining years of
the § 481(a) adjustment period.
B. Example 2. The taxpayer is a nonlife insurance company. Under section 26.04(2)(a)(ii) of this
revenue procedure, reserves at the end of the year
of change with respect to contracts issued before the
year of change are computed under the old basis for
the year of change and under the new basis for the
taxable year following the year of change; reserves
for contracts issued during the year of change and
thereafter are computed under the new basis. The
remainder of this example only relates to reserves for
contracts issued before the year of change.
Effect on premiums earned in year of change.
In both the negative and positive § 481(a) adjustment situations, the company must add to the result
obtained under § 832(b)(4)(A) the $100 of reserves

on outstanding business at the end of the preceding
taxable year and then deduct the $105 of reserves
(computed under the old basis) on outstanding business at the end of the year of change.
Negative § 481(a) adjustment situation. As
described in section 26.04(2)(a)(iii) of this revenue procedure, the negative § 481(a) adjustment of
$4 ($109-$105) is taken into account in the year of
change, such that the company recognizes an additional reduction in premiums earned of $4 in the year
of change. This results in a total reduction in premiums earned of $9 ($5+$4).
In the taxable year after the year of change,
the reserves on outstanding business at the end of
the preceding year are $109 (computed on the new
basis) and the net reduction in premiums earned is
$3 ($109-$112).
Positive § 481(a) adjustment situation. As
described in section 26.04(2)(a)(iii) of this revenue
procedure, the positive § 481(a) adjustment of $4
($101-$105) is taken into account over four taxable
years, such that the company recognizes an additional $1 (1/4th of the § 481(a) adjustment) increase
in premiums earned in the year of change. This
results in a net reduction in premiums earned in the
year of change of $4 ($5-$1).
In the taxable year after the year of change,
the reserves on outstanding business at the end of
the preceding year are $101 (computed on the new
basis) and the net reduction in premiums earned is $3
($101-$104). The company also recognizes another
1/4th of the § 481(a) adjustment, resulting in an
additional $1 increase in premiums earned and a net
reduction in premiums earned of $2 ($3-$1) in that
year. The remaining $2 of the § 481(a) adjustment
is recognized as a $1 increase in premiums earned
in each of the two remaining years of the § 481(a)
adjustment period.

(b) Section 481(a) adjustment.
(i) Computation of § 481(a) adjustment at end of year. In general, a change
in basis of computing any item referred to
in § 807(c) requires an adjustment under
§ 481(a). The § 481(a) adjustment is computed as of the end of the year of change
and is only with respect to contracts issued
before the year of change. See § 1.8074(b)(1).
(ii) Number of § 481(a) adjustments.
Multiple changes during the same taxable
year in methods, assumptions, or factors,
each of which alone would constitute a
change in basis of computing any item
referred to in § 807(c), are considered
a single change in basis, and the effects
of such multiple changes are netted and
treated as a single net negative § 481(a)
adjustment or net positive § 481(a) adjustment. A separate § 481(a) adjustment must
be determined for each item referred to in
§ 807(c) and each such § 481(a) adjustment must be taken into account separately.

(iii) Loss of company status. If for any
taxable year a taxpayer that was an insurance company for the year of change is
no longer an insurance company, then the
taxpayer must take into account in the preceding taxable year (that is, the last taxable year it was an insurance company)
the balance of any § 481(a) adjustment. A
taxpayer that was an insurance company
for the year of change does not accelerate the balance of any § 481(a) adjustment
merely because it changes from a life
insurance company to a nonlife insurance
company or because it changes from a
nonlife insurance company to a life insurance company. See § 1.807-4(b)(2).
(c) No ruling protection for year of
change or subsequent years. The consent granted under section 9 of Rev. Proc.
2015-13 for a change under this section
26.04 is not a determination by the Commissioner that the new basis of computing
any item referred to in § 807(c) is a permissible basis of computing such item and
does not create any presumption that the
new basis is a permissible basis of computing such item. The director may ascertain whether the new method of accounting is a permissible method of accounting.
Thus, a taxpayer that changes its basis of
computing any item referred to in § 807(c)
under this section 26.04 may be required
to change or modify that basis of computing such item for the year of change or
any subsequent year if it is determined by
the Commissioner that the basis to which
the taxpayer changed does not meet the
requirements of federal income tax law.
(d) Information required to be furnished
(Rev. December 2022) under this section
26.04 is required to complete or provide
only the following information on Form
3115:
(above Part I);
(ii) The signature section at the bottom of
page 1;
(iii) Part I;
(iv) Part II, lines 4, 5, 6a-d, 7a-b, 8a-d, 9,
11a-c, 12, 17, and 18;
(v) The following information, in lieu of
completing Part II, line 14:
The item in § 807(c) to which the
change in basis relates,
The type of contract to which the
change relates,

If a life insurance reserve, a
description of the applicable tax
reserve method (e.g., Commissioners’ Reserve Valuation Method or
Commissioners’ Annuity Reserve
Valuation Method),
A description of the change in
basis,
A description of the reason for
the change in basis, including (i)
whether the change results from a
change in the method prescribed
by the National Association of
Insurance Commissioners or from
another change (such as a change
in assumption for mortality, morbidity, or interest rate), regardless
on an annual statement and (ii)
whether the change results from a
prior incorrect application of federal income tax law and the nature
of such incorrect application.
(vi) Part IV. (The taxpayer may indicate
that the § 481(a) adjustment is an estimate
or is to be determined.)
(e) Concurrent automatic changes. A
taxpayer that makes multiple changes in
a single Form 3115 that includes all the
changes in basis for the year of change.
for all changes in basis for members of a
information required by section 26.04(2)
(d) of this revenue procedure is required
for each separate change for each member
of the group.
(f) Certain eligibility rule inapplicable.
The eligibility rule in section 5.01(1)(f)
of Rev. Proc. 2015-13 does not apply to a
change under this section 26.04.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
26.04 is “240.”
(4) Contact information. For further
information regarding a change under this
section, contact Dan Phillips at (202) 3176995 (not a toll-free number).
SECTION 27. DISCOUNTED UNPAID
LOSSES (§ 846)
.01 Composite method for discounting
unpaid losses.

(1) Description of change. Section
for purposes of computing the insurance
company taxable income of certain insurance companies. Notice 88-100, 1988-2
C.B. 439, section V, sets forth a composite method for computing unpaid losses
with respect to accident years not separately stated on the NAIC annual statement. Rev. Proc. 2002-74, 2002-2 C.B.
posite method of Notice 88-100, section
V, is permitted, but not required; section
3.02 sets forth an alternative method for
those taxpayers that do not use the composite method of section 3.01. An insurance company using a method provided
in section 3.01 or 3.02 of Rev. Proc.
2002-74 to compute discounted unpaid
losses, must use the same method to
compute discounted estimated salvage
recoverable. An insurance company that
currently uses a permissible method of
accounting for discounted unpaid losses
may change its method of accounting to
or from the composite method of Notice
88-100, section V, without the consent of
the Commissioner. This change applies
to insurance companies that are required
to discount unpaid losses under § 846.
See Rev. Proc. 2002-74.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
27.01 is “68.”
(3) Contact information. For further
information regarding a change under
this section, contact Rebecca L. Baxter at
(202) 317-6995 (not a toll-free number).
SECTION 28. REAL ESTATE
MORTGAGE INVESTMENT
CONDUIT (REMIC) (§§ 860A-860G)
.01 REMIC inducement fees.
(1) Description of change. A taxpayer
that receives an inducement fee in connection with becoming the holder of a noneconomic residual interest in a REMIC must
take that fee into account over the remaining expected life of the applicable REMIC
in accordance with § 1.446-6. This change
applies to a taxpayer that seeks to change
from any method of accounting for such
inducement fees to one of the safe harbor
methods provided under § 1.446-6(e)(1)-

(2). See Rev. Proc. 2004-30, 2004-1 C.B.
950, for additional guidance relating to
this change.
(2) Manner of making change. A taxpayer making this change must identify
§ 1.446-6(e) to which the taxpayer is
changing.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
28.01 is “79.”
(4) Contact information. For further
information regarding a change under this
section, contact K. Scott Brown at (202)
317-4423 (not a toll-free number).
SECTION 29. FUNCTIONAL
CURRENCY (§ 985)
.01 Change in functional currency.
(1) Description of change. This
change applies to a taxpayer that wants
to change its functional currency or
the functional currency of a qualified
business unit (QBU) of the taxpayer.
The preceding sentence does not apply
to a QBU of a taxpayer described in
§ 1.985-1(b)(1)(iii).
(2) Manner of making change. A taxpayer making this change must make
all necessary adjustments required by
such change. See §§ 1.985-5, 1.9858(c). A taxpayer must attach a statement to the Form 3115 representing
that it has made the adjustments set
forth in § 1.985-5 or § 1.985-8(c). The
statement must also provide the amount
of any unrealized exchange gain or loss
required to be taken into account pursuant to § 1.985-5 or § 1.985-8(c) and
the date on which a taxpayer took such
amount into account. Finally, the statement must provide a detailed and complete description of any other adjustments required pursuant to § 1.985-5 or
§ 1.985-8(c).
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
29.01 is “70.”
(4) Contact information. For further
information regarding a change under
this section, contact Peter Merkel at (202)
317-4919 (not a toll-free number).

SECTION 30. ORIGINAL ISSUE
DISCOUNT (§§ 1272, 1273)
.01 De minimis original issue discount
(OID).
(1) Description of change. This change
applies to a taxpayer that wants to change
to the principal-reduction method of
accounting described in section 5 of Rev.
Proc. 97-39, 1997-2 C.B. 485. The principal-reduction method of accounting is
an aggregate method of accounting for de
minimis OID (discount) on certain loans
originated by the taxpayer.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to this change.
(3) Description. The principal-reduction method of accounting is a permissible
method for use by taxpayers to account
for discount on one or more categories of
loans described in section 4.02 or 4.03 of
Rev. Proc. 97-39. If the principal-reduction method is used to account for any
loans in a category of loans, the method
must be used for the entire category of
loans. The principal-reduction method
applies only to loans described in section
3 of Rev. Proc. 97-39.
(4) Manner of making change.
(a) This change is made on a cut-off basis
and applies only to loans described in section 3 of Rev. Proc. 97-39 that were acquired
on or after the beginning of the year of
change. Accordingly, a § 481(a) adjustment
is neither permitted nor required.
(b) The taxpayer must maintain books
tor that old and new loans have been adequately segregated.
(5) Additional requirements. On a
statement attached to the Form 3115, the
taxpayer must:
(a) identify the categories of loans to
which the proposed method will apply;
and
(b) describe any “additional categories” permitted under section 4.03 of Rev.
Proc. 97-39.
(6) No audit protection. A taxpayer
does not receive audit protection under
section 8.01 of Rev. Proc. 2015-13 in
connection with this change. See section
8.02(2) of Rev. Proc. 2015-13.
(7) Designated automatic accounting
method change number. The designated

automatic accounting method change
number for a change under this section
30.01 is “72.”
(8) Contact information. For further
information regarding a change under this
section, contact K. Scott Brown at (202)
317-4423 (not a toll-free number).
.02 Proportional method of accounting
for OID on a pool of credit card receivables.
(1) Description of change. This change
applies to a taxpayer that wants to change
to the proportional method of accounting
for OID on a pool of credit card receivables as described in Rev. Proc. 2013Rev. Proc. 2021-35, 2021-35 I.R.B. 355,
of certain credit card fees by § 451(b),
as amended by Public Law 115-97, 131
Stat. 2054 (Dec. 22, 2017), commonly
referred to as the Tax Cuts and Jobs Act
(TCJA), and §§ 1.451-3 and 1.1275-2(l).
The proportional method of accounting
applies to OID and certain amounts that
would not otherwise be treated as OID
(for example, market discount or bond
premium). Under § 1.1275-2(l), OID does
not include items that are subject to the
timing rules in § 1.451-3, such as credit
card late fees, credit card cash advance
card fees). Therefore, items subject to the
timing rules in § 1.451-3, such as speciproportional method. See section 16.08 of
this revenue procedure for the procedures
by which a taxpayer, including a taxpayer
using the proportional method of accounting, can change its method of accounting
with § 451(b), as amended by the TCJA,
and §§ 1.451-3 and 1.1275-2(l).
(2) Manner of making change.
(a) This change is made on a cut-off
basis. Accordingly, a § 481(a) adjustment
is neither required nor permitted.
(b) The unaccrued OID for the pool as
year of change is equal to the unaccrued
OID for the pool as of the end of the preceding taxable year under the taxpayer’s
previous method of accounting for OID
on the pool, reduced by any amounts representing charges or fees that are not propcredit card fees).

(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
30.02 is “183.”
(4) Contact information. For further
information regarding this section, please
contact Chris Lieu at (202) 317-6945 (not
a toll-free number).
SECTION 31. MARKET DISCOUNT
BONDS (§ 1278)
.01 Revocation of § 1278(b) election.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for market discount bonds by revoking its § 1278(b)
election. Under § 1278(b), a taxpayer may
elect a method of accounting under which
market discount is currently included
in gross income for the taxable years to
which the discount is attributable. See
Rev. Proc. 92-67, 1992-2 C.B. 429, for the
procedures to make a § 1278(b) election
(including a deemed § 1278(b) election for
certain taxable years). For purposes of this
section 31.01, a taxpayer also is treated as
having made a deemed § 1278(b) election
for a taxable year if, for one or more market discount bonds that were acquired by
the taxpayer during that taxable year, the
taxpayer includes in gross income on the
tax return for that taxable year and on the
tax return for the following taxable year
the market discount attributable to each
taxable year, other than as a result of a disposition of the bond or a partial principal
payment on the bond. The procedures for
revoking a § 1278 election were formerly
provided in section 7 of Rev. Proc. 92-67.
(2) Revocation of election. The revocation of a § 1278(b) election (or a deemed
§ 1278(b) election) applies to all market
discount bonds that are held by the taxyear for which the revocation is effective (year of change), and to all market
discount bonds that are subsequently
acquired by the taxpayer. If a § 1278(b)
election (or a deemed § 1278(b) election)
is revoked, then for purposes of § 1278(a),
accrued market discount with respect to
any bond previously subject to the election means accrued market discount as
count included in income while the bond

was subject to the § 1278(b) election (or
the deemed § 1278(b) election).
(3) Manner of making change. This
change is made on a cut-off basis and
applies only to market discount accruing
on or after the beginning of the year of
change. Accordingly, a § 481(a) adjustment
is neither permitted nor required. Market
discount accruing on a bond prior to the
year of change was currently included in
income and market discount accruing on
year of change is included in income generally upon disposition of the bond. See
§ 1276(a). Because a cut-off basis is prescribed for this change, the basis of any
bond, adjusted for amounts previously
included in income during the period of the
election, is not affected by the revocation.
(4) Additional requirements. On a
statement attached to the Form 3115, the
taxpayer must provide:
(a) the reason(s) for revoking the
§ 1278(b) election (or deemed § 1278(b)
election);
(b) a description of the method by
which, and the date on which, the taxpayer
made the § 1278(b) election (or deemed
§ 1278(b) election) that is being revoked;
and
(c) a statement that, after the revocation, the taxpayer will not make a constant
interest rate election for any bond that has
been subject to the § 1278(b) election (or
deemed § 1278(b) election) being revoked
and for which a constant interest rate election was not effective in the year of acquisition.
(5) Audit protection. A taxpayer may
receive audit protection, as provided
in section 8.01 of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, in connection with this
change. Any audit protection applicable
to this change under section 8.01 of Rev.
Proc. 2015-13 does not preclude the Commissioner from examining the method
used by the taxpayer to determine the
amount of accrued market discount under
§ 1276(b) for a taxable year prior to the
year of change.
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
31.01 is “73.”
(7) Contact information. For further
information regarding a change under this

section, contact Matthew P. Howard at
(202) 317-7053 (not a toll-free number).
SECTION 32. SHORT-TERM
OBLIGATIONS (§ 1281)
.01 Interest income on short-term obligations.
(1) Description of change.
(a) This change applies to a taxpayer that wants to change its method
of accounting to comply with § 1281 for
interest income on short-term obligations.
(b) Under § 1281, a holder of certain
short-term obligations, including a bank
income any accrued interest income on
such obligations, regardless of the holder’s overall method of accounting. Section
1281 applies to all types of interest income,
including acquisition discount, original
issue discount (OID), and stated interest.
See S. Rep. No. 99-313, 99th Cong., 2d
Sess. 903 (1986), 1986-3 (Vol. 3) C.B. 903.
(c) Section 1283(a)(1) generally

evidence of indebtedness that matures in
one year or less from its issue date.
(d) Under §§ 1281(a) and 1283(c), a
holder of a short-term obligation subject
to § 1281 must include in gross income an
amount equal to the sum of the daily portions of the acquisition discount or OID,
whichever is applicable, on the obligation
for each day during the taxable year that
the obligation is held by the holder. See
determine the daily portions of acquisition
discount or OID. In addition, § 1281(a)
requires the holder to include in gross
income any stated interest that is payable
on the short-term obligation (other than
stated interest taken into account to determine the amount of the acquisition discount or OID) as it accrues.
(2) Section 481(a) adjustment period.
A taxpayer must take the entire § 481(a)
adjustment into account in computing taxable income for the year of change.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
32.01 is “74.”
(4) Contact information. For further
information regarding a change under

this section, contact Jonathan LaPlante at
(202) 317-6945 (not a toll-free number).
.02 Stated interest on short-term loans
of cash method banks.
(1) Description of change. This
change applies to a bank that uses the
cash receipts and disbursements (cash)
method of accounting as its overall
accounting method and that wants to
change its method of accounting from
accruing stated interest on short-term
loans made in the ordinary course of
business to using the cash method for
that interest. For example, see Security
State Bank v. Commissioner, 214 F.3d
1254 (10th Cir. 2000), aff ’g 111 T.C. 210
(1998), acq., 2001-1 C.B. xix; and Security Bank Minnesota v. Commissioner,
994 F.2d 432 (8th Cir. 1993), aff’g 98 T.C.
33 (1992), in which the courts held that
§ 1281 does not apply to short-term loans
made by a cash method bank in the ordinary course of its business.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to this change.
(3) Section 481(a) adjustment period. A
taxpayer making this change must take the
entire § 481(a) adjustment into account in
computing taxable income for the year of
change.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
32.02 is “75.”
(5) Contact information. For further
information regarding a change under
this section, contact Jonathan LaPlante at
(202) 317-6945 (not a toll-free number).
EFFECTIVE DATE
.01 In general. Except as otherwise
provided under this EFFECTIVE DATE
section, this revenue procedure is effec30, 2024, for a year of change ending on
under the automatic change procedures of
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, as

by Rev. Proc. 2021-34, 2021-35 I.R.B.
337, Rev. Proc. 2021-26, 2021-22 I.R.B.
1163, Rev. Proc. 2017-59, 2017-48 I.R.B.

543, and section 17.02(b) and (c) of Rev.
Proc. 2016-1, 2016-1 I.R.B. 1.
.02 Transition rules. The following
transition rules apply:
(1) Limited time period to convert a
change procedures in Rev. Proc. 201513. If, before April 30, 2024, a taxpayer
non-automatic change procedures in Rev.
Proc. 2015-13 requesting the Commissioner’s consent for a change in method
of accounting described in this revenue
procedure, and the Form 3115 is pend2024, the taxpayer may choose to make
the change in method of accounting under
the automatic change procedures in Rev.
Proc. 2015-13 if the taxpayer is otherwise
eligible to use this revenue procedure and
the automatic change procedures in Rev.
Proc. 2015-13. The taxpayer must notify

tion of Control Clerk, CC:ITA, Room
9.08(6) of Rev. Proc. 2024-1, 2024-1
I.R.B. 1 (or its successor) for the Form
3115 of the taxpayer’s intent to make the
change in method of accounting under
the automatic change procedures in Rev.
Proc. 2015-13 before the later of (a) May
30, 2024, or (b) the issuance of a letter
ruling granting or denying consent for
cate that the taxpayer chooses to convert
the Form 3115 to the automatic change
procedures in Rev. Proc. 2015-13. If

3115 to the automatic change procedures
will send a letter to the taxpayer acknowledging its request and will return the user
fee submitted with the Form 3115.
A taxpayer converting a Form 3115 to
the automatic change procedures in Rev.
Proc. 2015-13 for a change in method of
accounting described in this revenue procedure must resubmit a Form 3115 that
conforms to the automatic change proceletter sent acknowledging the taxpayer’s
request attached, to the IRS in Ogden, UT
by the earlier of (a) the 30th calendar day
-

ter acknowledging the taxpayer’s request,
or (b) the date the taxpayer is required to
under SECTION 6.03(1)(a)(i)(B) of Rev.
Proc. 2015-13. See SECTION 6.03(3) of
Rev. Proc. 2015-13 regarding additional
required copies of Form 3115.
For purposes of the eligibility rules in
SECTION 5 of Rev. Proc. 2015-13, the
duplicate copy of the timely resubmitted

converted Form 3115 under the non-automatic change procedures in Rev. Proc.
2015-13. This paragraph (1) does not
original (converted) Form 3115 under
SECTION 6.03(1)(a)(i)(A) of Rev. Proc.
2015-13.
tomatic change procedures in Rev. Proc.
2015-13 before April 30, 2024, for a
change in method of accounting described
in this revenue procedure, will be disrechange rules in SECTIONS 5.04 and 5.05
of Rev. Proc. 2015-13 if the taxpayer converts the Form 3115 pursuant to this paragraph (1).
(2) Forms 3115 for changes in methods
under the automatic change procedures.
Except as provided in subsection .02(2)
(a) of this EFFECTIVE DATE section,
the following transition rules apply to the
changes in methods of accounting that
change procedures in Rev. Proc. 2015-13
because of changes made in this revenue
procedure. Examples of such changes in
methods of accounting are described in
subsection .01(8) and (9) of the SIGNIFICANT CHANGES section of this revenue
procedure.
(a) If before April 30, 2024, a taxpayer
copy, of a Form 3115 under the automatic
change procedures in Rev. Proc. 2015-13
for a change in method of accounting that
change procedures in Rev. Proc. 2015-13,
the taxpayer may continue to make that
change in method of accounting under
the automatic change procedures in Rev.
Proc. 2015-13 for the year of change.
The taxpayer is not required to resubmit
a duplicate copy of the Form 3115 to the

IRS in Ogden, UT under section 6.03(1)
(a)(i)(B) of Rev. Proc. 2015-13.
(b) If before April 30, 2024, a taxpayer
duplicate copy, of a Form 3115 under
the automatic change procedures in Rev.
Proc. 2015-13 for a change in method
under the automatic change procedures
in Rev. Proc. 2015-13, the taxpayer must
make that change in method of accounting under the non-automatic change procedures in Rev. Proc. 2015-13. Notwithstanding § 1.446-1(e)(3)(i), the taxpayer
missioner’s consent to change the method
of accounting under the non-automatic
change procedures in Rev. Proc. 2015-13
for the taxpayer’s last taxable year ending
before April 30, 2024, on or before the
due date of the federal income tax return
for that taxable year. Solely for purposes
of this paragraph (2)(b), the due date of
the taxpayer’s federal income tax return
includes extensions, notwithstanding that
the taxpayer may not have extended the
due date.
(3) Transition rule for taxpayers that
3115 before April 30, 2024, for a change
that continues to qualify under the automatic change procedures.
(a) Option to implement change as
described in Rev. Proc. 2023-24 or under
this revenue procedure. If, before April
duplicate copy of the Form 3115, pursuant
to section 6.03(1)(a)(i)(B) of Rev. Proc.
2015-13, requesting consent to change
its method of accounting for a change
described in Rev. Proc. 2023-24, 202330, 2024, that continues to be eligible for
the automatic change procedures in this
nal Federal income tax return for the year
of change implementing the change, the
taxpayer may choose to implement the
change as described in either Rev. Proc.
2023-24 or this revenue procedure, but not
both.
(b) Procedures to implement change
as described in Rev. Proc. 2023-24. A
taxpayer who meets the requirements of
paragraph (3)(a) and chooses to implement the change as described in Rev.

Proc. 2023-24 is not required to resubmit
a duplicate copy of the Form 3115 to the
IRS in Ogden, UT. However, if requested
by the Director, the taxpayer must provide
written substantiation that the duplicate
April 30, 2024, pursuant to section 6.03(1)
(a)(i)(B) of Rev. Proc. 2015-13. Such
written substantiation may include proof
of mailing or faxing, as appropriate, of the
duplicate copy of the Form 3115.
(c) Procedures to implement the
change as described in this revenue procedure. A taxpayer who meets the requirements of paragraph (3)(a) and chooses
to implement the change as described in
this revenue procedure, must resubmit
a duplicate copy (with signature) of the
Form 3115 to the IRS in Ogden, UT for
the year of change under this revenue
procedure, pursuant to the requirements
of section 6.03(1)(a)(i)(B) of Rev. Proc.
2015-13. The resubmitted duplicate copy
must include the following statement
on the top of page 1 of the Form 3115:
“FILED UNDER REV. PROC. 2024-23,
AS PROVIDED IN SECTION .02(3)(c)
OF THE EFFECTIVE DATE SECTION
OF REV. PROC. 2024-23”. For purposes
of the eligibility rules in section 5 of Rev.
Proc. 2015-13, the duplicate copy of the
resubmitted Form 3115 will be considered

requesting the change under Rev. Proc.
2023-24. This paragraph (3)(c) does not
either the resubmitted duplicate copy or
original Form 3115 under section 6.03(1)
(a) of Rev. Proc. 2015-13. If requested by
the Director, the taxpayer must provide
written substantiation that the duplicate
copy of the Form 3115 requesting the
before April 30, 2024, pursuant to section
6.03(1)(a)(i)(B) of Rev. Proc. 2015-13.
Such written substantiation may include
proof of mailing or faxing, as appropriate,
of the duplicate copy of the Form 3115.

under the EFFECT ON OTHER DOCUMENTS section of Rev. Proc. 2023-24
remains in effect (that is, the second sentences in sections 14.01 and 14.02, and
sections 14.04, 14.05, 14.06, and 14.07
of Rev. Proc. 2011-14, 2011-4 I.R.B. 330,
remain in effect). All other sections of
Rev. Proc. 2023-24 are superseded.
.02 Rev. Proc. 2011-46, 2011-42 I.R.B.

ner of Making Change section and to substitute the following three new sentences
in its place:
(a) In accordance with § 1.446-1(e)(3)
(ii), the requirement under § 1.446-1(e)
statement in lieu of a Form 3115 is authorized for this change. Notwithstanding the
Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
the statement in lieu of a Form 3115 that is
permitted under this paragraph 5.02(3)(a)
is considered a Form 3115 for purposes of
the automatic change procedures in Rev.
Proc. 2015-13. However, the requiretion 6.03(1)(a) of Rev. Proc. 2015-13, is
waived.
ner of Making Change section and to substitute the following three new sentences
in its place:
(a) In accordance with § 1.446-1(e)(3)
(ii), the requirement under § 1.446-1(e)
statement in lieu of a Form 3115 is authorized for this change. Notwithstanding the
Rev. Proc. 2015-13, the statement in lieu
of a Form 3115 that is permitted under
this paragraph 5.03(2)(a) is considered a
Form 3115 for purposes of the automatic
change procedures in Rev. Proc. 2015-13.
cate copy, under section 6.03(1)(a) of Rev.
Proc. 2015-13, is waived.
.03 Rev. Rul. 2004-62, 2004-1 C.B.

EFFECT ON OTHER DOCUMENTS

I.R.B. 1207. Rev. Proc. 2023-24, as ampliThe second sentence in the subsection .01

sentence in the CHANGE IN METHOD
OF ACCOUNTING section and to substitute the following new two sentences in its
place:
A taxpayer that wants to change its
method of accounting to comply with this

revenue ruling must follow the automatic
change procedures in Rev. Proc. 201513, 2015-5 I.R.B. 419, (or successor) if
the taxpayer is eligible to request such
consent under the automatic change procedures therein. The eligibility rules in
section 5.01(1) of Rev. Proc. 2015-13 (or
successor) apply to a change in method of
accounting described in section 3.04 of
Rev. Proc. 2024-23, 2024-23 I.R.B. 1334
(or successor).
.04 Rev. Rul. 2000-7, 2000-9 C.B. 712,
of the paragraph in the APPLICATION
section and to substitute the following
new fourth sentence:
A taxpayer that wants to change its
method of accounting to conform with
the holding in this revenue ruling must
follow the automatic change procedures
in Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
(or successor) if the taxpayer is eligible to
request such consent under the automatic
change procedures therein, except that
the eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13 (or successor) does
not apply to a change described in section 11.03 of Rev. Proc. 2024-23, 2024-23
I.R.B. 1334 (or successor).
.05 Rev. Rul. 2000-4, 2000-1 C.B. 331,
of the paragraph in the APPLICATION
section, and to substitute the following
two new sentences in that paragraph in its
place:
A taxpayer that wants to change its
method of accounting to conform with the
holding in this revenue ruling must follow
the automatic change procedures in Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, (or successor) if the taxpayer is eligible to request
such consent under the automatic change
procedures therein. The eligibility rules in
section 5.01(1) of Rev. Proc. 2015-13 (or
successor) apply to a change in method
of accounting under section 3.02 of Rev.
Proc. 2024-23, 2024-23 I.R.B. 1334 (or
successor).
.06 Rev. Proc. 2007-48, 2007-2 C.B.
and to substitute it with the following sentence:
The eligibility rule in section 5.01(1)(f)
of Rev. Proc. 2015-13, 2015-5 I.R.B. 419,
(or successor) does not apply to a change
in method of accounting described in section 5.06 of Rev. Proc. 2007-48, and made

under section 22.08 of Rev. Proc. 202423, 2024-23 I.R.B. 1334 (or successor).
.07 Rev. Proc. 2007-16, 2007-1 C.B.

accounting. The collections of information are required for the taxpayer to obtain
consent to change its method of accounting.

(1) The second sentence in section 4.01
SIGNIFICANT CHANGES
2015-13, 2015-5 I.R.B. 419” for “and, as
applicable, Rev. Proc. 97-27 or Rev. Proc.
2002-9.”

(a) Substituting “the non-automatic
change or automatic change procedures of
Rev. Proc. 2015-13” for “Rev. Proc. 97-27
or Rev. Proc. 2002-9, as applicable,”; and
tion 3.19 of Rev. Proc. 2015-13)” for “(as
97-27 or section 5.02 of Rev. Proc. 20029, as applicable)”.
stituting “Rev. Proc. 2015-13,” for “Rev.
Proc. 97-27 or Rev. Proc. 2002-9, as applicable,”.
.08 Rev. Proc. 2000-50, 2000-2 C.B.
incurred in taxable years beginning after
December 31, 2021, as follows:
(1) Section 5.01 is removed as obsolete.
lowing sentence: Reserved.

revenue procedure to the List of Automatic Changes in Rev. Proc. 2023-24
include:
(1) The following sections are removed
because these sections are obsolete:
(a) Section 7.01, relating to changes to
a different method or different amortization period for research and experimental
expenditures;
(b) Section 12.18, relating to late revocation of elections under § 263A(d)(3);
and
(c) Section 20.13, relating to an accrual
method taxpayer that wants to change its
method of accounting for one or more
inventory costs to treat such costs as
incurred in accordance with § 1.461-1(a)
(2) and 1.461-4(d)(4);
(2) Section 3.12, relating to a taxpayer
that wants to change its treatment of natural gas transmission and distribution property costs to use the natural gas transmission and distribution property safe harbor
method of accounting (NGSH Method)

references to section 5.
PAPERWORK REDUCTION ACT
The collection of information contained in this revenue procedure has been
Management and Budget under OMB
control numbers 1545-0074 for individ-

accordance with the Paperwork Reduction Act (44 U.S.C. 3507(d)). An agency
may not conduct or sponsor, and a person
is not required to respond to, a collection
of information unless the collection of
information displays a valid OMB control
number. The collections of information in
this revenue procedure are in sections 3,
5, 6, 7, 8, 9, 11, 12, 15, 16, 17, 18, 20, 21,
22, 23, 24, 25, 26, 29, 30, 31, and .02(3)
of the EFFECTIVE DATE section. This
information is necessary and will be used
to determine whether the taxpayer properly changed to a permitted method of

follows. First, by adding new paragraph
3.12(8) to allow a taxpayer changing to
the NGSH Method to choose to treat a
second taxable year ending after May 1,
able year ending after May 1, 2023, solely
for purposes of the special rule under
section 5.08(3)(a) of Rev. Proc. 2023-15.
to provide that if the taxpayer’s change to
the NGSH Method described in Rev. Proc.
2023-15 applies to any asset that is public utility property within the meaning of
§ 168(i)(1), then the taxpayer will adjust
its deferred tax reserve account or similar
account in the taxpayer’s regulatory books
of account by the amount of the deferral
of federal income tax liability associated
with the § 481(a) adjustment applicable
to the public utility property subject to the
Form 3115 if such amount is no longer
being normalized for regulatory purposes
by the taxpayer;

(3) Section 6.01, relating to changing
from an impermissible to a permissible
method of accounting for depreciation
the second sentence of section 6.01(1)(c)
(xx), providing that the change in method
of accounting under section 6.21 could be

before May 11, 2021, because this language is obsolete;
(4) Section 6.18, relating to changing
from an impermissible to a permissible
method of accounting for an item of qualby removing paragraph (2), providing a
temporary waiver of the eligibility rule in
sections 5.01(1)(d) and 5.01(1)(f) of Rev.
Proc. 2015-13, because this language is
obsolete;
(5) Section 6.19, relating to certain late
elections under §§ 168 and 1502 or revocation of certain elections under § 168,
Rev. Proc. 2020-25, 2020-19 I.R.B. 785,
because these references as used in section 6.19 are obsolete;
(6) Section 6.21, relating to depreciation of tangible property under § 168(g) by
controlled foreign corporations, is modiparagraph (3) to permit CFCs to continue
to change their depreciation method to the
alternative depreciation system (ADS) in
§ 168(g) under the automatic change procedures of Rev. Proc. 2015-13 (regardless
of whether the CFC’s historic depreciation
method was permissible or impermissible);
(7) Section 7.01, relating to a changing the method of accounting for SRE
as follows. First, new section 7.01(2)(c)
is added to clarify that section 7.01(1)(a)
of this revenue procedure does not apply
to a change to rely on interim guidance
provided in sections 8 and 9 of Notice

provide that the eligibility rule in section
5.01(1)(d) of Rev. Proc. 2015-13 (relator business) does not apply to a change
described in section 7.01(1)(a) of this
or second taxable year beginning after

December 31, 2021. Third, section 7.01(5)
may make a change described in section
7.01(1)(a) of this revenue procedure for
its second taxable year beginning after
December 31, 2021, regardless of whether
the taxpayer made a change for the same
after December 31, 2021. Fourth, section
payer does not receive audit protection
under section 8.01 of Rev. Proc. 201513 for a change under section 7.01(1)(a)
of this revenue procedure in the second
taxable year beginning after December
31, 2021, with respect to expenditures
beginning after December 31, 2021, if
the taxpayer did not change its method of
accounting under section 7.01(1)(a) in an
taxable year beginning after December 31,
to provide that the designated automatic
accounting method change number for all
changes under section 7.01 of this revenue
procedure is “265”;
(8) Section 12.01, relating to certain
uniform capitalization (UNICAP) methods used by resellers and reseller-produc12.01(2)(b), providing a temporary waiver
of the eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13, is removed
because this language is obsolete. Second, to add section 12.01(1)(b)(vi) to provide that the change under section 12.01
does not apply to a taxpayer changing to
or from the direct reallocation method
or the step-allocation method. Instead,
this change must be requested under the
non-automatic change procedures provided in Rev. Proc. 2015-13. Third, to add
new section 12.01(1)(b)(vii) to provide
that the change under section 12.01 does
not apply to a taxpayer using the direct
reallocation method or step-allocation
method that wishes to either make an election or revoke an election to use the 90-10
de minimis rule to allocate a mixed service department’s costs to resale activities.
Instead, this change must be requested
under the non-automatic change procedures provided in Rev. Proc. 2015-13;
(9) Section 12.02, relating to certain
uniform capitalization (UNICAP) methods used by producers and reseller-produc-

12.02(4)(b), providing a temporary waiver
of the eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13, is removed
because this language is obsolete. Second,
section 12.02(1)(b)(vi) is added to provide that the change under section 12.02
does not apply to a taxpayer changing to
or from the direct reallocation method
or the step-allocation method. Instead,
this change must be requested under the
non-automatic change procedures provided in Rev. Proc. 2015-13. Third, new
section 12.02(1)(b)(vii) is added to provide that the change under section 12.02
does not apply to a taxpayer using the
direct reallocation method or step-allocation method that wishes to either make an
election or revoke an election to use the
90-10 de minimis rule to allocate a mixed
service department’s costs to production
or resale activities. Instead, this change
must be requested under the non-automatic change procedures provided in Rev.
Proc. 2015-13;
(10) Section 12.07, relating to a change
not to apply § 263A to one or more plants
removed from the list of plants that
have a preproductive period in excess
tion 12.07(2), providing audit protection
that applies to blackberry, raspberry, and
papaya plants for taxable years that end on
or before February 15, 2013, because this
language is obsolete;
(11) Section 12.16, relating to the small
taxpayer exception from the requirement
to capitalize costs under section 263A,
(b), providing a temporary waiver of the
eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13 for certain taxpayers,
because this language is obsolete.
(12) Section 15.01, relating to changes
in overall method from the cash receipts
and disbursements method (cash method)
remove section 15.01(5)(b), providing a
temporary waiver of the eligibility rule
in section 5.01(1)(e) of Rev. Proc. 201513 for changes to comply with §451(b),
because this language is obsolete;
(13) Section 15.17, relating to small
business taxpayers changing the overall method of accounting to the cash
method or to a method of accounting in
which the small business taxpayer uses an

accrual method for purchases and sales of
inventories and uses the cash method of
accounting for computing all other items
remove section 15.17(6)(b), providing a
temporary waiver of the eligibility rule in
section 5.01(1)(e) of Rev. Proc. 2015-13
for certain taxpayers, because this language is obsolete;
(14) Section 16.08, relating to changes
in the timing of income recognition under
(a) is added, to clarify that a change
under section 16.02 does not apply to
a change to comply with the all events
test in § 1.451-1(a). Instead, this change
must be requested under the non-automatic change procedures provided in Rev.
Proc. 2015-13. Second, section 16.08 is
relating to short Form 3115, because it is
to remove section 16.08(4)(c), relating to
streamlined method change procedures
for certain taxpayers, because it is obsoremove section 16.08(5)(c), relating to
certain changes with a § 481(a) adjustment of zero being disregarded for eligibility rules, because it is obsolete. Fifth,
tion 16.08(6)(a), relating to audit protection for taxpayers using the streamlined
method change procedures, because it is
to remove section 16.08(6)(b)(i), relating
to audit protection for taxpayers under
examination, because it is obsolete. Seventh, section 16.08(7)(b), which provides
an ordering rule for concurrent cost-offset related inventory method changes and
changes to apply a cost offset method, is
a cost-offset related inventory method
change(s) and a change to the AFS cost
offset method or advance payment cost
offset method in the same year of change
to make the cost-offset related inventory
(a)(i)(E), 16.08(2)(a)(ii)(F) and 16.08(2)
(b)(v), which provide corresponding
changes to a cost offset method as a result
of cost-offset related inventory method
to taxpayers presently using a cost offset
method, consistent with the new ordering

rule. Eighth, the ordering rule for concurrent cost-offset related inventory method
changes and corresponding changes to
a cost offset method in section 16.08(7)
(b) has been moved to a new section
16.08(7)(c); section 16.08(7)(c) is also

the cost-offset related inventory method
change and the corresponding cost offset change. Ninth, section 16.08(7)(d) is
added to provide examples to illustrate
the operation of the ordering rules which
require a taxpayer to make a cost-offset
related inventory method change before
a change to apply a cost offset method
and a cost-offset related inventory method
change before a corresponding change to
a cost offset method;
(15) Section 19.02, regarding changes
in method of accounting under § 460 to
rely on the interim guidance provided
in section 8 of Notice 2023-63, 2023-39
the eligibility rule in section 5.01(1)(d) of
Rev. Proc. 2015-13 (relating to changes in
not apply to a change described in section
19.02(1) of this revenue procedure for
beginning after December 31, 2021;
(16) Section 22.04, relating to a taxpayer that wants to change from an impermissible method of identifying or valuing inventories to a permissible method
of identifying or valuing inventories, is
providing a temporary waiver of the eligibility rule in section 5.01(1)(f) of Rev.
Proc. 2015-13 for certain changes related

to a cost offset method, because this language is obsolete;
(17) Section 22.10, relating to changes

by removing section 22.10(1)(d), providing a temporary waiver of the eligibility
rule in section 5.01(1)(f) of Rev. Proc.
2015-13 for certain changes related to a
cost offset method, because this language
is obsolete;
(18) Section 22.17, relating to changes
from currently deducting inventories to

removing section 22.10(1)(d), providing
a temporary waiver of the eligibility rule
in section 5.01(1)(f) of Rev. Proc. 2015-13
for certain changes related to a cost offset
method, because this language is obsolete;
(19) Section 22.18, relating to a change
by a small business taxpayer to certain
§ 471 methods of accounting, is modiand (c), providing a temporary waiver of
the eligibility rule in section 5.01(1)(f) of
Rev. Proc. 2015-13 for certain changes, is
removed because the language is obsolete.
Second, section 22.18 (6)(b), providing
streamlined method change procedures
for certain taxpayers, is removed because
this language is obsolete;
(20) Section 23.01, relating to certain
changes from the LIFO inventory method,
23.01(2)(b), providing a temporary waiver
of the eligibility rule in section 5.01(1)(f)
of Rev. Proc. 2015-13 for certain changes,
is removed because the language is obsolete. Second, section 23.01(8), denying ruling protection in certain cases, is

removed because this language is obsolete; and
(21) Section 24.02, relating to taxpayers requesting to change their method
of accounting from the mark-to-market
method of accounting described in § 475
provide that a dealer in securities making such change under the non-automatic
change procedures in Rev. Proc. 2015-13

of section 24.02(7) of this revenue procements.
DRAFTING INFORMATION
The principal author of this revenue
of Associate Chief Counsel (Income Tax
and Accounting). For further information
regarding this revenue procedure, contact
Mr. Chang at (202) 317-4870 (not a tollfree number).
For further information regarding a
ing in this revenue procedure, contact
the individual listed in the “Contact Person(s)” section located at the end of each
section of the revenue procedure (numbers are not toll-free) or see the CONTACT LIST at the end of this revenue procedure. The contact person is with one of
Counsel: Corporate (CORP), Financial

(INTL), Passthroughs and Special IndusExempt Organizations, and Employment
Taxes (EEE).

LIST OF AUTOMATIC CHANGES CONTACT LIST

Section

Designated
Automatic Accounting

1.01

91

Contact Name
William E. Blanchard

2.01
3.01
3.02

1
2
3

Michael Finn
Alicia Lee-Won
Alicia Lee-Won

(202) 317-4718
(202) 317-7003
(202) 317-7003

3.03
3.04

4
86

Renay France
Maria Castillo Valle

(202) 317-7003
(202) 317-7003

3.05
3.06

See § 11.08
See § 11.08

See § 11.08
See § 11.08

See § 11.08
See § 11.08

3.07
3.08

158
159

Ian Heminsley
Samuel Terhaar

(202) 317-5100
(202) 317-5100

3.09
3.10
3.11

160
182
208, 209

Nathaniel Kupferman
Morgan Lawrence
Elizabeth Boone

(202) 317-5100
(202) 317-7011
(202) 317-5100

3.12

269

Kasey A. Place
Merrill Feldstein

(202) 317-5100
(202) 317-5100

4.01
4.02

5
211

Renay France
K. Scott Brown

(202) 317-7003
(202) 317-4423

5.01
5.02

16
212

Steven Harrison
Anisa Afshar

(202) 317-6842
(202) 317-6934

6.01
6.02
6.03

7
8
10

James Liechty
Bruce Chang
Edward Schwartz

(202) 317-7005
(202) 317-7005
(202) 317-7006

6.04
6.05

87
88

Elizabeth Binder
Elizabeth Binder

(202) 317-7005
(202) 317-7005

6.06
6.07

89
107

C. Dylan Durham
James Liechty

(202) 317-7005
(202) 317-7005

6.08
6.09

145
157

Elizabeth Binder
Charles Magee

(202) 317-7005
(202) 317-7005

6.10
6.11
6.12

198
199
200

Patrick Clinton
Patrick Clinton
Patrick Clinton

(202) 317-7005
(202) 317-7005
(202) 317-7005

6.13
6.14

205
206

Patrick Clinton
Patrick Clinton

(202) 317-7005
(202) 317-7005

6.15
6.16

207

Patrick Clinton
Summary of changes related to
dispositions of MACRS property

(202) 317-7005

6.17
6.18

210
244

Charles Magee
Elizabeth Binder

(202) 317-7005
(202) 317-7005

6.19
6.20
6.21

245
246, 247
248

Elizabeth Binder
Elizabeth Binder
Melinda Harvey

(202) 317-7005
(202) 317-7005
(202) 317-6934

6.22

264

James Liechty

(202) 317-7005

(202) 317-3900

INTL

INTL

Section

Designated
Automatic Accounting

7.01

265

Contact Name
Bruce Chang

(202) 317-7005

8.01
9.01

152
18

Charles Hyde
Bruce Chang

(202) 317-5214
(202) 317-7005

10.01
10.02

223
228

Elizabeth Binder
Sharon Horn

(202) 317-7005
(202) 317-7003

10.03
11.01
11.02

229
19
20

Elizabeth Zanet
Maria Castillo Valle
Douglas Kim

(202) 317-5279
(202) 317-7003
(202) 317-7003

11.03
11.04

21
47

Douglas Kim
Maria Castillo Valle

(202) 317-7003
(202) 317-7003

11.05
11.06

78
109

Alicia Lee-Won
Eugene Kirman

(202) 317-7003
(202) 317-7003

11.07
11.08

121
184-193

Eugene Kirman
Douglas Kim

(202) 317-7003
(202) 317-7003

11.09
11.10
12.01

213
222
22

Douglas Kim
Samuel Terhaar
Livia Piccolo

(202) 317-7003
(202) 317-5100
(202) 317-7007

12.02
12.03

23
25

Livia Piccolo
Livia Piccolo

(202) 317-7007
(202) 317-7007

12.04
12.05

77
92

Livia Piccolo
Livia Piccolo

(202) 317-7007
(202) 317-7007

12.06
12.07

150, 151
181

Livia Piccolo
Patrick Clinton

(202) 317-7007
(202) 317-7005

12.08
12.09
12.10

194
195
201

Livia Piccolo
Roy Hirschhorn
Mia Romano

(202) 317-7007
(202) 317-7007
(202) 317-7007

12.11
12.12

202
214

Michael Supanick
Livia Piccolo

(202) 317-7007
(202) 317-7007

12.13
12.14

215
224

Michael Supanick
Livia Piccolo

(202) 317-7007
(202) 317-7007

12.15
12.16

232
234

Livia Piccolo
Livia Piccolo

(202) 317-7007
(202) 317-7007

12.17
13.01

237
26

Livia Piccolo
Livia Piccolo
Anisa Afshar

(202) 317-7007
(202) 317-7007
(202) 317-6934

INTL

14.01
14.02

28
29

Thomas Scholz
John Ricotta

(202) 317-5600
(202) 317-4102

EEE
EEE

122, 123, 257, 258

Joyce Kahn
Mia Romano

(202) 317-4148
(202) 317-7007

EEE

15.01
15.02
15.03

31
34, 35

David Sill
Livia Piccolo

(202) 317-7011
(202) 317-7007

15.04
15.05

71
85

William E. Blanchard
Christian Lagorio

(202) 317-3900
(202) 317-7005

Section

Designated
Automatic Accounting

15.06

90

Contact Name
Rebecca L. Baxter

(202) 317-6995

15.07
15.08

108
124

K. Scott Brown
Douglas Kim

(202) 317-4423
(202) 317-7003

15.09
15.10

125
126

Morgan Lawrence
Mia Romano

(202) 317-7011
(202) 317-7007

15.11
15.12
15.13

127
128
129

K. Scott Brown
Daniyal Husain
David H. McDonnell

(202) 317-4423
(202) 317-5100
(202) 317-4137

15.14
15.15

148
226

Jonathan A. LaPlante
Barbara Campbell

(202) 317-6945
(202) 317-4137

15.16
15.17

227
233, 259

Grace Cho
Livia Piccolo

(202) 317-6945
(202) 317-7007

16.01
16.02

36
37

K. Scott Brown
Daniel Cassano

(202) 317-4423
(202) 317-7011

16.03
16.04
16.05

38
39
80, 81

Daniel Cassano
Michael Finn
Kate Sleeth

(202) 317-7011
(202) 317-4718
(202) 317-7053

16.06
16.07

130, 217
153

Peter Cohn
Maria Castillo Valle

(202) 317-7011
(202) 317-7003

16.08

239, 242, 250-255
FIP questions only

Sharon Horn
Chris Lieu

(202) 317-7003
(202) 317-6945

17.01
18.01

131
132

Steven Harrison
Patrick Clinton

(202) 317-6842
(202) 317-7005

19.01
19.02
20.01

236
271
42, 133, 134, 249

Innessa Glazman
John Aramburu
Maria Castillo Valle

(202) 317-7006
(202) 317-7006
(202) 317-7003

20.02

43

Alicia Lee-Won
Christine Merson

(202) 317-7003
(202) 317-5100

20.03
20.04

44
45, 113

Christine Merson
James Williford

(202) 317-5100
(202) 317-5100

20.05
20.06

46
106

Clifford Sovich
Sharon Horn

(202) 317-5100
(202) 317-7003

20.07
20.08
20.09

135
149
154

Elizabeth Choi
Daniel Cassano
Sharon Horn

(202) 317-5100
(202) 317-7011
(202) 317-7003

20.10
20.11

156
161

Alicia Lee-Won
Aliza Schechet

(202) 317-7003
(202) 317-7003

20.12
20.13

220
266-268

Douglas Kim
Maria Castillo Valle

(202) 317-7003
(202) 317-7003

21.01
22.01

136
48

Michael Finn
Michael Supanick

(202) 317-4718
(202) 317-7007

22.02
22.03

49
53

Michael Supanick
Michael Supanick

(202) 317-7007
(202) 317-7007

Section

Designated
Automatic Accounting

22.04

54

Contact Name
Michael Supanick

(202) 317-7007

22.05
22.06

55
63

Adam Kobler
Adam Kobler

(202) 317-7007
(202) 317-7007

22.07
22.08

96
110

Adam Kobler
Eugene Kirman

(202) 317-7007
(202) 317-7003

22.09
22.10
22.11

111
137
138

Adam Kobler
Adam Kobler
Adam Kobler

(202) 317-7007
(202) 317-7007
(202) 317-7007

22.12
22.13

139
114

Adam Kobler
Mia Romano

(202) 317-7007
(202) 317-7007

22.14
22.15

203
204

Michael Supanick
Michael Supanick

(202) 317-7007
(202) 317-7007

22.16
22.17

225
230

Michael Supanick
Adam Kobler

(202) 317-7007
(202) 317-7007

22.18
22.19
22.20

235, 260, 261
262
263

Livia Piccolo
Livia Piccolo
Livia Piccolo

(202) 317-7007
(202) 317-7007
(202) 317-7007

23.01
23.02

56
57

Mia Romano
Mia Romano

(202) 317-7007
(202) 317-7007

23.03
23.04

58
59

Mia Romano
Mia Romano

(202) 317-7007
(202) 317-7007

23.05
23.06

60
61

Mia Romano
Mia Romano

(202) 317-7007
(202) 317-7007

23.07
23.08
23.09

62
112
140

Mia Romano
Mia Romano
Mia Romano

(202) 317-7007
(202) 317-7007
(202) 317-7007

23.10
24.01

141
64

Mia Romano
Grace Cho

(202) 317-7007
(202) 317-6945

24.02
25.01

218
66

Grace Cho
K. Scott Brown

(202) 317-6945
(202) 317-4423

26.01

67

Laura Fields
Rebecca L. Baxter

(202) 317-6850
(202) 317-6995

26.02
26.03
26.04

155
219
240

Rebecca L. Baxter
Rebecca L. Baxter
Dan Phillips

(202) 317-6995
(202) 317-6995
(202) 317-6995

27.01
28.01

68
79

Rebecca L. Baxter
K. Scott Brown

(202) 317-6995
(202) 317-4423

29.01
30.01

70
72

Peter Merkel
K. Scott Brown

(202) 317-4919
(202) 317-4423

30.02
31.01

183
73

Chris Lieu
Matthew P. Howard

(202) 317-6945
(202) 317-7053

32.01
32.02

74
75

Jonathan LaPlante
Jonathan LaPlante

(202) 317-6945
(202) 317-6945

INTL