Revenue Procedure 2022-14
Internal Revenue Service
2022-7 I.R.B. 502
   
   
   
 26 CFR 601.204: Changes in accounting periods and in methods of accounting.      
 (Also Part I, §§ 56, 61, 77, 118, 162, 163, 166, 167, 168, 171, 174, 179D, 194, 195, 197, 248, 263, 263A, 267, 280F, 404, 446, 447, 448, 451, 454, 455, 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, 1.174-3, 1.174-4, 1.179-5, 1.194-1, 1.195-1, 1.197-2, 1.248-1, 1.263(a)-1, 1.263(a)-2, 1.263(a)-3, 1.263(a)-4, 1.263(a)-5, 1.263A-1, 1.263A-2, 1.263A-3, 1.263A-4, 1.263A-7, 1.267(a)-1, 1.280F-6, 1.404(b)-1T, 1.446-1, 1.446-1T, 1.446-2, 1.446-5, 1.446-6, 1.446-7, 1.448-1, 1.448-2, 1.451-1, 1.451-3, 1.451-8, 1.454-1, 1.455-6, 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.)  
   
Rev. Proc. 2022-14 
   
                          
       
       
     
       
       
   
  This revenue procedure provides the List of Automatic Changes to which the automatic change   
procedures in Rev. Proc. 2015-13, 2015-5 I.R.B. 419, as clarified and modified by Rev. Proc.   
2015-33, 2015-24 I.R.B. 1067, and as modified by Rev. Proc. 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, apply. The definitions in section 3   
of Rev. Proc. 2015-13 apply to this revenue procedure.   
     
LIST OF AUTOMATIC CHANGES   
     
SECTION 1. GROSS INCOME (§ 61).01 Up-front Payments for Network Upgrades received by Utilities.   
     
  (1) Description of change. This change applies to a Utility that wants to change its method of   
accounting for Up-front 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 a Generator to finance Network Upgrades to the Utility's Transmission System. For federal   
income tax purposes, if an Up-front Payment is made pursuant to an Interconnection Agreement   
that satisfies all of the conditions of section 5.02 of 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 for the definitions of certain terms for purposes 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, contact   
William E. Blanchard at (202) 317-3900 (not a toll-free number).   
     
SECTION 2. COMMODITY CREDIT LOANS (§ 77).01   Treating amounts received as loans.   
     
  (1)   Description of change. This change applies to a taxpayer that wants to change its method   
of accounting for loans 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   
William Ruane at (202) 317-4718 (not a toll-free number).   
     
SECTION 3. TRADE OR BUSINESS EXPENSES (§ 162).01 Advances made by a lawyer on behalf of clients.   
     
  (1) Description of change. This change applies to a lawyer who advances money to pay for   
costs of litigation or for other expenses on behalf of clients, and who wants to change the method   
of accounting for such advances from treating them as deductible business expenses to treating   
them as loans to clients. This change 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 (9 th    
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 certification to conform   
with Rev. Rul. 2000-4, 2000-1 C.B. 331, as modified by this revenue procedure   
     
  (2) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 3.02 is "3."   
     
  (3) Contact information. For further information regarding a change under this section, contact   
Justin Grill 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. Proc. 2002-12, as modified by this revenue procedure.   
     
  (2) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 3.03 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,   
2004-1 C.B. 1072, as modified by this revenue procedure.   
     
  (2) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 3.04 is "86."   
     
  (3) Contact information. For further information regarding a change under this section, contact   
Alexa Dubert 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 of property specified in Rev.   
Proc. 2011-27 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 of property specified in Rev.   
Proc. 2011-28 requires an adjustment under § 481(a). The § 481(a) adjustment does not include   
any amount attributable to property for which the taxpayer elected to apply the repair 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   
Sophia Wang 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   
Natasha Mulleneaux 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 definitions and the corresponding major   
component definitions described in Rev. Proc. 2013-24.   
     
  (2) Section 481(a) adjustment.   
     
  (a) A taxpayer must take the entire net § 481(a) adjustment into account (whether positive or   
negative) in computing taxable income for the year of change. For 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)..1 1 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 property definitions provided in section 6 of Rev. Proc.   
2015-12;   
     
  (c) Change to use the specific identification method for installations and 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 should file a single Form 3115 that includes   
all of these changes and must enter the designated automatic accounting method change numbers   
for all of these changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev.   
Proc. 2015-13 for information on making concurrent changes.   
     
  (3) Section 481(a) adjustment.   
     
  (a) In general, a change to one or more of the 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   
2018), 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   
Merrill Feldstein at (202) 317-5100 (not a toll-free number).   
     
SECTION 4. BAD DEBTS (§ 166).01 Change from reserve method to specific charge-off method.   
     
  (1) Description of change. This change applies to a taxpayer (other than a bank as defined in   
§ 585(a)(2)) that wants to change its method of accounting for bad debts from a reserve method (or   
other improper method) to a specific charge-off method that complies with § 166. For procedures   
applicable to banks, see § 585(c) and the regulations thereunder and section 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 only applies to a bank (as defined in § 1.166-2(d)(4)(i)) that:   
     
  (a) is subject to supervision by Federal authorities, or by state authorities 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) 317-6945 (not a toll-free number).   
     
SECTION 5. INTEREST EXPENSE (§163) AND AMORTIZABLE BOND PREMIUM (§ 171).01 Revocation of § 171(c) election.   
     
  (1) Description of change. This change applies to a taxpayer that wants to change its method   
of accounting for amortizable bond premium by revoking its § 171(c) election. Under § 171(c), a   
taxpayer that holds certain taxable bonds may elect to amortize any bond premium on the bonds in   
accordance with regulations prescribed by the 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 on the first day of the first taxable year for which the revocation is   
effective (year of change), and to all taxable bonds that are subsequently acquired by the 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   
William E. Blanchard at (202) 317-3900 (not a toll-free number)..02 Change to comply with § 163(e)(3).   
     
  (1) Description of change. This change applies to a taxpayer that wants to change its method   
or methods of 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, or significantly  modified within the meaning of § 1.1001-3 prior to the end of the § 481(a)   
adjustment period. The portion of the remaining § 481(a) adjustment attributable to the debt   
instrument must be taken into account in the taxable year the debt instrument is paid off, retired,   
or significantly modified within the meaning 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 under any additional first year depreciation   
deduction provision of the Code (for example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d)); and   
     
  (iv) that is owned by the taxpayer at the beginning of the year of change (but see section 6.07 of   
this revenue procedure for property disposed of before the year of change).   
     
  (b) Taxpayer has not adopted a method of accounting for the item of property. If a taxpayer does   
not satisfy section 6.01(1)(a)(i) of this revenue procedure for an item of depreciable or amortizable   
property 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 the 1-year depreciable property by filing a Form 3115 for this   
change, provided the § 481(a) adjustment reported on the Form 3115 includes the amount of any   
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 1-year   
depreciable property by filing an amended federal income tax return, or an administrative   
adjustment request under § 6227 (AAR), as applicable, for the property's placed-in-service year   
prior to the date the taxpayer files its federal 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. Proc. 87-56,   
1987-2 C.B. 674 (as clarified and modified by Rev. Proc. 88-22, 1988-1 C.B. 785), or Rev. Proc.   
83-35, 1983-1 C.B. 745, as appropriate, that does not explicitly include § 1250 property (for   
example, asset class 57.0, Distributive Trades and Services);   
     
  (vi) any property for which a taxpayer is revoking a timely valid election, or making a late   
election, under § 167, § 168, § 179, §1400I, § 1400L(c), former § 168, § 13261(g)(2) or (3) of   
the Revenue Reconciliation Act of 1993 (1993 Act), 1993-3 C.B. 1, 128 (relating to amortizable   
§ 197 intangibles), or any additional first year depreciation deduction provision of the Code (for   
example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d)). A taxpayer may request consent to   
revoke or make the election by submitting a request for a letter ruling under Rev. Proc. 2022-1,   
2022-1 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), former § 168, or any additional first year depreciation deduction provision of the   
Code (for example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d))) and a taxpayer is changing the   
useful life of the property. A change in the useful life of property is corrected by adjustments in the   
applicable taxable year provided under § 1.446-1(e)(2)(ii)( d )( 5 )( iv ). However, this section 6.01(1)   
(c)(vii) does not apply if the taxpayer is changing to or from a useful life, recovery period, or   
amortization period that is specifically assigned by the Code (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 of   
accounting under the final tangible 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 first year depreciation   
deduction provision of the Code (for example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d)) (for   
example, a change in the treatment of the space consumed in landfills placed in 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 example, when property is reclassified 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);   
     
  (xvii) any qualified improvement property, as defined  168(e)(6), placed in service by the   
taxpayer after December 31, 2017, to which section 6.19 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 6.21 of this revenue procedure   
applies; or   
     
  (xx) the change in method of accounting specified in section 6.22 of this revenue procedure.   
However, an original Form 3115 for such change in method of accounting may be filed under this   
section 6.01 instead of section 6.22 of this revenue procedure if the duplicate copy was properly   
filed under this section 6.01 before May 11, 2021.   
     
  (2) Certain eligibility rules inapplicable. The eligibility rule in section 5.01(1)(d) of Rev. Proc.   
2015-13, 2015-5 I.R.B. 419, does not apply to this change. If during any of the five taxable years   
ending with the year of change, a taxpayer requested or made a change in method of accounting   
from expensing to capitalizing, or vice  versa, the cost or other basis of an asset, the eligibility rule   
in section 5.01(1)(f) of Rev. Proc. 2015-13 is not applicable to a change under this section 6.01   
for that same asset.   
     
  (3) Additional requirements. A 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 (including a qualified small taxpayer as defined in section   
6.01(4)(b) of this revenue 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 method of accounting, new classification of the item of property, and new   
asset class in, as appropriate, Rev. Proc. 87-56 or Rev. Proc. 83-35. If the taxpayer is the owner   
and lessor of the item of property at issue, the statement of the facts and law supporting the new   
asset class also must describe the business or income-producing activity in which that item of   
property is primarily used by the lessee;   
     
  (iv) to the extent not provided 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(I)(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(I)(3)(G), former   
§ 168(e)(3)(B), or § 168(i)(9), as applicable) will be used for the public utility property subject to   
the Form 3115;   
     
  (B) as of the beginning of the year of change, the taxpayer will adjust its 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   
     
  (C) within 30 calendar days of filing the federal income tax return for the year of change,   
the taxpayer will provide a copy of the completed Form 3115 to any regulatory body having   
jurisdiction over the public utility property subject to the Form 3115;   
     
  (vi) if the taxpayer is changing the classification of an item of§  1250 property placed in service   
after August 19, 1996, to a retail motor fuels outlet under § 168(e)(3)(E)(iii), a statement containing   
the following representation: "For 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 filters), (B) 50 percent or more of the floor space in the item of   
property is devoted to the sale of petroleum products (not including floor space devoted to related   
services, such as oil changes and floor space devoted to nonpetroleum products such as tires and   
oil filters), or (C) the item of § 1250 property is 1,400 square feet or less."; and   
     
  (vii) if the taxpayer is changing the classification of an item of property from § 1250 property   
to § 1245 property under § 168 or former § 168, a statement of the facts and law supporting   
the new § 1245 property classification, and a statement containing the following representation:   
"Each item of depreciable property that is the subject of the Form 3115 filed under section 6.01   
of Rev. Proc. 2022-14 for the year of change beginning [ Insert the date],  and that is reclassified   
from [ Insert, as appropriate: nonresidential real property, residential rental property, qualified    
 leasehold improvement property, qualified restaurant property, qualified retail improvement    
 property, qualified improvement property as defined in§ 168(e)(6) (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) Reduced filing requirement for qualified small taxpayers.   
     
  (a) In general. A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue   
procedure, is required to complete only the following information on Form 3115 (Rev. December   
2018) to make this change:   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I;   
     
  (iv) Part II, all lines except lines 13, 15b, 16c, 17, and 19;   
     
  (v) Part IV, all lines except line 25; and   
     
  (vi) Schedule E.   
     
  (b) Definition of qualified small taxpayer. A "qualified small taxpayer" 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 attributable 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 6.01 applies must reflect the reductions 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 Act) 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 depreciated under § 167(f)(1) and is qualified   
property (as defined in § 168(k)(2) as amended by the TCJA and § 1.168(k)-2), qualified property   
(as defined in § 168(k)(2) as in effect on the day before the date of enactment of the TCJA and   
§ 1.168(k)-1), 50-percent bonus depreciation property (as defined in§  168(k)(4) (as in effect on   
the day before the date of enactment of the Economic Stimulus Act of 2008, Pub. L. No. 110-185,   
122 Stat. 613 (February 13, 2008)) and § 1.168(k)-1), qualified disaster assistance property (as   
defined in § 168(n)(2) (as in effect on the day before the date of enactment of the Tax Technical   
Corrections Act of 2018, Pub. L. No. 115-141, Division U, 132 Stat. 1211 (March 23, 2018)),   
qualified New York Liberty Zone (Liberty Zone) property (as defined in§ 1400L(b)(2) (as in   
effect on the day before the date of enactment of the Tax Technical Corrections Act of 2018) and   
§ 1.1400L(b)-1), qualified Gulf Opportunity Zone (GO Zone) property (as defined 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, 2006-2 C.B. 590, as clarified, modified, and   
amplified by Notice 2007-36, 2007-1 C.B. 1000), specified Gulf Opportunity Zone extension   
property (GO Zone extension property) (as defined in § 1400N(d)(6) (as in effect on the day   
before the date of enactment of the Tax Technical Corrections Act of 2018) and section 4 of Notice   
2007-36), or qualified Recovery Assistance (RA) property (as defined in sections 2.02 and 2.03   
of Notice 2008-67, 2008-32 I.R.B. 307), the depreciation allowable for that computer software   
under § 167(f)(1) is also determined by taking into account the additional first 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 first year depreciation for the computer 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);   
     
  (ii) if the property is qualified property, 50-percent bonus depreciation property, qualified disaster   
assistance property, Liberty Zone property, GO Zone property, GO Zone extension property, or   
RA property, by also taking into account the additional first year depreciation deduction provided   
by § 168(k), § 168(n) (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 election not to deduct the additional first year depreciation (or made a deemed election not   
to deduct the additional first year depreciation; for further guidance, see, for    example, Rev. Proc.   
2002-33, 2002-1 C.B. 963, Rev. Proc. 2003-50, 2003-2 C.B. 119, Notice 2006-77, Notice 2008-   
67, section 5 of Rev. Proc. 2011-26, 2011-16 I.R.B. 664, Rev. Proc. 2015-48, 2015-40 I.R.B. 469,   
or Rev. Proc. 2019-33, 2019-34 I.R.B. 662) for the class of property (as defined 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;   
     
  (iii) if the property is qualified second generation biofuel plant property (as defined in § 168(l)   
(2) and (3)) or qualified cellulosic biofuel plant property (as defined in former§ 168(l)(2) and (3)),   
by also taking into account the additional first year depreciation deduction provided by § 168(l)(1),   
unless the taxpayer made a timely valid election not to deduct the additional first year depreciation   
for the property; and   
     
  (iv) if the property is qualified  reuse and recycling property (as defined in § 168(m)(2)), by   
also taking into account the additional first year depreciation deduction provided by § 168(m)(1),   
unless the taxpayer made a timely valid election not to deduct the additional first year depreciation   
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 example, the straight-line method in former § 168(b)(3)).   
     
  (h) Qualified revitalization building. The depreciation allowable for any taxable year for any   
qualified revitalization building (as defined in § 1400I(b)(1) (as in 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 one-half of any qualified revitalization expenditures (as   
defined in§  1400I(b)(2) 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   
with respect to the qualified revitalization building for the taxable year in which the building   
is placed in service by the taxpayer, the depreciation allowable for the qualified revitalization   
building's placed-in-service year is equal to one-half of the qualified revitalization expenditures   
for the building and the depreciation allowable for the remaining depreciable basis of the qualified   
revitalization building for 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 all of the qualified revitalization expenditures chargeable   
to a capital account with respect to the qualified revitalization building ratably over the 120-month   
period beginning with the month in which the building is placed in service, the depreciation   
allowable for the qualified revitalization expenditures is determined in accordance with this   
election and the depreciation allowable for the remaining depreciable basis of the qualified   
revitalization building is determined using the general depreciation system of § 168(a) or the   
alternative depreciation system of § 168(g), as applicable.   
     
  (i) Qualified New York Liberty Zone leasehold improvement property. The depreciation allowable   
for any taxable year for qualified New York Liberty Zone leasehold improvement property (as   
defined in § 1400L(c)(2) (as in effect on 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 change should   
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all   
the changes included in that Form 3115. If one or more of the changes in that single Form 3115   
generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a   
positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment   
for all the changes that are included in that Form 3115 generating such adjustment and a single   
positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating   
such adjustment. For example, a taxpayer files a single Form 3115 to change the depreciation   
methods, recovery periods, and/or conventions under § 168(a) resulting from the reclassification   
of two computers from nonresidential real property to 5-year property, one office desk from   
nonresidential real property to 7-year property, and two office desks from 5-year property to   
7-year property. On that Form 3115, the taxpayer must provide either (i) a single net § 481(a)   
adjustment that covers all the changes resulting from all of these reclassifications, or (ii) a single   
negative § 481(a) adjustment that covers the changes resulting from the reclassifications of the   
two computers and one office desk from nonresidential real property to 5-year property and 7-year   
property, respectively, and a single positive § 481(a) adjustment that covers the changes resulting   
from the reclassifications of the two office desks from 5-year property to 7-year property.   
     
  (b) A taxpayer making both this change and a change to a UNICAP method under section   
12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of   
change should file a single Form 3115 for both changes, in which case the taxpayer must enter   
the designated automatic accounting method change numbers for both changes on the appropriate   
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making   
concurrent changes. For example, qualified small 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 line 14 and 15, Part IV, and Schedule D, and must include a separate response   
to each line on Form 3115 that is applicable to both changes (such as Part II lines 6b, 7, 8b, 14,   
and, as applicable for this change, Part IV) for which the taxpayer's response is 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 specified in section 6.02(4) of this revenue procedure for the property   
in an account:   
     
  (i) for which the present and proposed methods of accounting for depreciation specified in   
section 6.02(4) of this revenue procedure are permissible methods for the property under § 56(g)   
(4)(A)(iv) (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. 115-141, 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 § 168), or any additional first year depreciation 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, or any additional first year depreciation 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 defined by section 2 of Rev. Proc. 2000-38, 2000-2 C.B.   
310, as modified by Rev. Proc. 2007-16, 2007-1 C.B. 358) for which the taxpayer is changing   
the useful life under the distribution fee period method or the useful life method (both described   
in Rev. Proc. 2000-38). A change in this useful life is corrected by adjustments in the applicable   
taxable year provided under § 1.446-1(e)(2)(ii)( d )( 5 )( iv ).   
     
  (3) Certain eligibility rule 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-years-digits method, the sinking fund method, or the declining-balance method   
using a different proper percentage of the straight-line rate;   
     
  (c) a change from the sum-of-the-years-digits method to the sinking fund method, the declining-   
balance method 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-of-the-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 specifically   
provided in § 1.167(a)-10(b), 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 normal retirement sales, to computing and recognizing gains and   
losses on the sales ( see  Rev. Rul. 70-166, 1970-1 C.B. 44);   
     
  (k) a change from item accounting for specific assets to multiple asset accounting (pooling)   
the same assets, or vice versa;   
     
  (l) a change from one type of multiple asset accounting (pooling) for specific 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 amortizing distributor   
commissions (as defined by 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 commissions (as   
defined by section 2 of Rev. Proc. 2000-38) for which the taxpayer is using the distribution fee   
period method or the useful life method (both described in Rev. Proc. 2000-38).   
     
  (5) Additional requirements. A 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-the-years-digits method of depreciation must be based on the   
remaining useful life of the property as of the beginning of the year of change; or   
     
  (ii) the declining-balance method of depreciation must be based on the useful life of the property   
measured from the placed-in-service date, and not the 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 taxpayer (including a qualified small taxpayer as defined in section   
6.01(4)(b) of 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   
     
  (ii) within 30 calendar days of filing the federal income tax return for the year of change,   
the taxpayer will provide a copy of the completed Form 3115 to any regulatory body having   
jurisdiction over the public utility property subject to the Form 3115.   
     
  (6) Reduced filing requirement for qualified small taxpayers.  A qualified small taxpayer, as   
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following   
information on Form 3115 (Rev. December 2018) to make this change:   
     
  (a) The identification section of page 1 (above Part I);   
     
  (b) The signature section at the bottom of page 1;   
     
  (c) Part I;   
     
  (d) Part II, all lines except lines 13, 15b, 16, 17, and 19;   
     
  (e) Part IV, line 25; and   
     
  (f) Schedule E.   
     
  (7) Section 481(a) adjustment. Because the adjusted basis of the property is not changed as a   
result of a method change made under this section 6.02, no items are being duplicated or omitted.   
Accordingly, a § 481(a) adjustment is neither required nor permitted.   
     
  (8) Concurrent automatic change.   
     
  (a) A taxpayer making this change for more than one asset for the same year of change should   
file a single Form 3115 for all such assets.   
     
  (b) A taxpayer making both this change and a change to a UNICAP method under section   
12.01, 12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of   
change should file a single Form 3115 for both changes, in which case the taxpayer must enter   
the designated automatic accounting method change numbers for both changes on the appropriate   
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making   
concurrent changes. For example, a qualified small taxpayer must include on the single Form   
3115 the information required by section 6.02(6) of this revenue procedure for this change and   
the information required by the lines on Form 3115 applicable to the UNICAP method change,   
including Part II line 14 and 15, Part IV, and Schedule D, and must include a separate response   
to each line on Form 3115 that is applicable to both changes (such as Part II lines 6b, 7, 8b, 14,   
and, as applicable for this change, Part IV) for which the taxpayer's response is 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 Sale, lease, or financing transactions.   
     
  (1) Description of change and scope.   
     
  (a) Applicability. This change applies to a taxpayer that wants to change its method of accounting   
from:   
     
  (i) improperly treating property as sold by the taxpayer to properly treating property as leased   
or financed by the taxpayer;   
     
  (ii) improperly treating property as leased by the taxpayer to properly treating property as sold   
or financed by the taxpayer;   
     
  (iii) improperly treating property as financed by the taxpayer to properly treating 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 rent-to-own contracts   
described in section 3 of Rev. Proc. 95-38, 1995-2 C.B. 397; or   
     
  (ii) a taxpayer that holds assets for sale or lease, if any asset so held is not the subject of a sale   
or lease transaction as of the beginning of the year of change.   
     
  (2) Manner of making the change. 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, or financing transactions as of the beginning of the year of change.   
     
  (3) No ruling on the characterization of any transaction as a sale, lease, or financing transaction.   
The consent granted under section 9 of Rev. Proc. 2015-13 for a change specified in this section   
6.03 is not a determination by the Commissioner that the taxpayer has properly characterized   
any transaction as a sale, lease, or financing transaction and does not create any presumption   
that the proposed characterization of any transaction as a sale, lease, or financing transaction is   
permissible. The director will ascertain whether the taxpayer's characterization of any transaction   
as a sale, lease, or financing transaction is permissible.   
     
  (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 property (as defined in § 1.168(b)-1(a)   
(2)) to the method of accounting provided in § 1.168(i)-1(c)(2)(ii)(I) or § 1.168(i)-1(h)(2), which   
applies when there is a change in the use of MACRS property pursuant to § 1.168(i)-4(d).   
     
  (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 by filing a Form 3115. Alternatively, 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 a 1-year change in use property by filing an amended federal   
income tax return, or an administrative adjustment request under § 6227 (AAR), as applicable,   
for the year of change in the use of such property provided such filing occurs prior to the date the   
taxpayer files 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, 2020-18 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.   
     
  (a) The change is made on a modified cut-off basis (as defined in § 1.446-1(e)(2)(ii)( d )( 5 )( iii ))   
and, thus, the 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) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as   
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following   
information on Form 3115 (Rev. December 2018) to make this change:   
     
  (i) The identification section of page 1 (above Part   
     
  (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 change should   
file a single Form 3115 for 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 change should file a single Form 3115   
for all such changes and must enter the designated automatic accounting method change numbers   
for the changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc.   
2015-13 for information on making 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 depreciation of MACRS property (as defined in § 1.168(b)-1(a)(2)) to the method   
of accounting for depreciation provided in § 1.168(i)-4, which applies when there is a change   
in the use of MACRS property, or (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 1-year change in use property by filing 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 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 property by filing an amended federal income tax return, or   
an administrative adjustment request under § 6227 (AAR), as applicable, for the year of change in   
the use of such property provided such filing occurs prior to the date the taxpayer files 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, 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, 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, 2020-18 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) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as   
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following   
information on Form 3115 (Rev. December 2018) to make this change:   
     
  (a) The identification section of page 1 (above Part I);   
     
  (b) The signature section at the bottom of page 1;   
     
  (c) Part I;   
     
  (d) Part II, all lines except lines 13, 15b, 16, 17, and 19;   
     
  (e) Part IV, all lines except line 25; and   
     
  (f) Schedule E, 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 calculate a § 481(a) adjustment as of the first day of the year of change as if the   
proposed method of accounting had always been used by the taxpayer beginning with the 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 change should   
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all   
the changes included in that Form 3115. If one or more of the changes in that single Form 3115   
generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a   
positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment   
for all the changes that are included in that Form 3115 generating such adjustment and a single   
positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating   
such adjustment.   
     
  (b) A taxpayer 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 change should file a single Form 3115   
for all such changes and must enter the designated automatic accounting method change numbers   
for the changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc.   
2015-13 for information on making 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 Depreciation of qualified non-personal use vans and light trucks.   
     
  (1) Description of change. This change applies to a taxpayer that wants to change the method of   
accounting for depreciation for certain vehicles in accordance with § 1.280F-6(f)(2)(iv). Section   
1.280F-6(f)(2)(iv) applies to a truck or van that is a qualified nonpersonal use vehicle as defined   
under § 1.274-5T(k), was placed in service by the taxpayer before July 7, 2003, and was treated   
by the taxpayer as a passenger automobile under § 1.280F-6T as in effect prior to July 7, 2003. If   
the taxpayer files Form 3115, in accordance with § 1.280F-6(f)(2)(iv), the treatment of the truck   
or van will be changed from property to which § 280F(a) applies to property to which § 280F(a)   
does not apply.   
     
  (2) Reduced filing requirements for qualified small taxpayers. A qualified small taxpayer, as   
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following   
information on Form 3115 (Rev. December 2018) to make this change:   
     
  (a) The identification section of page 1 (above Part I);   
     
  (b) The signature section at the bottom of page 1;   
     
  (c) Part I;   
     
    (d) Part II, all lines except lines 13, 15b, 16, 17, and 19;   
     
  (e) Part IV, all lines except line 25; and   
     
  (f) Schedule E.   
     
  (3) Concurrent automatic change. A taxpayer making this change for more than one asset for   
the same year of change should file a single Form 3115 for all such assets and provide a single   
net § 481(a) adjustment for all the changes included in that Form 3115. If one or more of the   
changes in that single Form 3115 generate a negative § 481(a) adjustment and other changes in   
that same Form 3115 generate a positive § 481(a) adjustment, the 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   
Bernard Harvey at (202) 317-7005 (not a toll-free number)..07 Impermissible to permissible method of accounting for depreciation or amortization for    
 disposed depreciable or amortizable property.   
     
  (1) Description of change. This change applies to a taxpayer that wants to make the change in   
method of accounting for depreciation or amortization (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, in the year of change (as defined in section 6.07(4) of this   
revenue procedure) or any prior taxable year.   
     
  (2) Applicability.   
     
  (a) In general. Except as provided in section 6.07(2)(b) of this revenue procedure, this section   
6.07 applies to a taxpayer that is changing from an impermissible method of accounting for   
depreciation to a permissible method of accounting for depreciation for any item of depreciable or   
amortizable property subject to §§ 167, 168, 197, 1400I, or 1400L(c), to former § 168, or to any   
additional first 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 defined in section   
6.07(4) of this revenue procedure); and   
     
  (ii) for which the taxpayer did not take into account any depreciation allowance, or did take into   
account some depreciation but less than the depreciation allowable (hereinafter, both are referred   
to as "claimed less than the depreciation allowable"), in the year of change (as defined in section   
6.07(4) of this revenue procedure) or any prior taxable year.   
     
  (b) Inapplicability. This section 6.07 does not apply to:   
     
  (i) any property to which § 1016(a)(3) (regarding property held by a tax-exempt organization)   
applies;   
     
  (ii) any property for which a taxpayer is revoking a timely valid depreciation election, or   
making a late depreciation election, under the Code or regulations thereunder, or under other   
guidance 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 exchanged and excess basis (as defined in § 1.168(i)-6(b)(7) and (8), respectively) of the   
replacement MACRS property(as defined in § 1.168(i)-6(b)(1)) as property placed in service by   
the taxpayer at the time of replacement and treat the adjusted depreciable basis of the relinquished   
MACRS property (as defined in§  1.168(i)-6(b)(2)) as being disposed of by the taxpayer at the   
time of disposition.   
     
  (3) Manner of making the change.   
     
  (a) Change made on an original return for the year of change. This change may be made on a   
taxpayer's timely filed (including any extension) original federal tax return for the year of change   
(as defined in section 6.07(4) of this revenue procedure), provided the taxpayer files the original   
Form 3115 in accordance with section 6.03(1)(a) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419.   
     
  (b) Change made on an amended 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 of change (as defined in section 6.07(4) of this revenue   
procedure), provided:   
     
  (i)(A) the taxpayer files the original Form 3115 with the taxpayer's amended federal income tax   
return for the year of change (as defined in section 6.07(4) of this revenue procedure) prior to the   
expiration of the period of limitation for assessment under § 6501(a) for the taxable year in which   
the 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 partnership) files the original Form 3115 with its AAR for   
the year of change (as defined in section 6.07(4) of this revenue procedure) prior to the expiration   
of the applicable period of limitations for making adjustments under § 6235 for the reviewed year   
as defined in § 301.6241-1(a)(8) of the Procedure and Administration Regulations; and   
     
  (ii) the taxpayer's amended federal income tax return, or AAR, as applicable, for the year of   
change (as defined in 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 taxpayer's timely filed amended federal income tax return, or AAR, as applicable, for the   
year of change and must file the required duplicate copy (with signature) of the Form 3115 with   
the IRS in Ogden, UT, no later than when the original Form 3115 is filed with the amended federal   
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 procedure, the filing requirements in   
section 6.03(1)(a) of Rev. Proc. 2015-13 apply.   
     
  (b) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as   
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following   
information on Form 3115 (Rev. December 2018) to make this change:   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I;   
     
  (iv) Part II, all lines except lines 13, 15b, 16, 17, and 19;   
     
  (v) Part IV, all lines except line 25; and   
     
  (vi) Schedule E.   
     
  (7) Section 481(a) adjustment period. A taxpayer must take the entire § 481(a) adjustment into   
account in computing 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 should file a single Form 3115 for all such assets.   
     
  (9) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 6.07 is "107."   
     
  (10) Contact information. For further information regarding a change under this section, contact   
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 that qualifies under § 110;   
     
  (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) Definition. 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:   
     
  (a) If a lessee is filing the Form 3115, 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.   
     
  (b) If a lessor is filing the Form 3115, 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) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as   
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following   
information on Form 3115 (Rev. December 2018) to make this change in accordance with section   
6.08(3)(a) of this revenue procedure:   
     
  (a) The identification section of page I); 1(above Part   
     
  (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 Rev. Proc. 2015-13 for a change   
specified 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 interest 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 should file a single Form 3115 for all such assets.   
     
  (7) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 6.08 is "145."   
     
  (8) Contact information. For further 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) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as   
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following   
information on Form 3115 (Rev. December 2018) to make this change:   
     
  (a) The identification section of page 1 (above Part I);   
     
  (b) The signature section at the bottom of page 1;   
     
  (c) Part I;   
     
  (d) Part II, all lines except lines 13, 15b, 16, 17, and 19;   
     
  (e) Part IV, all lines except line 25; and   
     
  (f) Schedule E.   
     
  (3) Concurrent automatic change. A taxpayer making this change for more than one asset for   
the same year of change should file a single Form 3115 for all such assets and provide a single   
net § 481(a) adjustment for all the changes included in that Form 3115. If one or more of the   
changes in that single Form 3115 generate a negative § 481(a) adjustment and other changes in   
that same Form 3115 generate a positive § 481(a) adjustment, the 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 disposition election specified   
in § 1.168(i)-8(d)(2)(i) to the disposition of a portion of an asset to which the IRS's adjustment (as   
described in § 1.168(i)-8(d)(2)(iii)) pertains.   
     
  (b) Inapplicability. This change does not apply to:   
     
  (i) Any asset of which the disposed portion was a part that is not owned by the taxpayer at the   
beginning of the year of change; or   
     
  (ii) Any partial disposition election specified in § 1.168(i)-8(d)(2)(i) that is not made pursuant to   
§ 1.168(i)-8(d)(2)(iii) (for example, this change does not apply to the partial disposition election   
specified in § 1.168(i)-8(d)(2)(i) that is made pursuant to § 1.168(i)-8(d)(2)(iv)).   
     
  (2) Change in method of accounting. The IRS will treat the making of the late election specified   
in section 6.10(1) of this revenue procedure as a change in method of accounting.   
     
  (3) Certain eligibility rules 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.   
     
  (a) A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is   
required to complete only the following information on Form 3115 (Rev. December 2018) to   
make this change:   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I;   
     
  (iv) Part II, all lines except lines 13, 15b, 16, 17, and 19;   
     
  (v) Part IV, all lines except line 25; and   
     
  (vi) Schedule E.   
     
  (b) A taxpayer (including a qualified small taxpayer) making this change must:   
     
  (i) Apply § 1.168(i)-8(h)(1) and (3) (accounting for asset disposed of);   
     
  (ii) If the asset (as determined under § 1.168(i)-8(c)(4)) of which the disposed portion is a part   
is properly included in one of the asset classes 00.11 through 00.4 of Rev. Proc. 87-56, 1987-2   
C.B. 674, classify the replacement portion of such asset under the same asset class as the disposed   
portion of the asset in the taxable year in which the replacement portion is placed in service by   
the taxpayer;   
     
  (iii) If the taxpayer's present method of accounting is not in accord with § 1.168(i)-8(c)   
(4) (determination of asset disposed of), change to the appropriate asset as determined under   
§ 1.168(i)-8(c)(4);   
     
  (iv) If the taxpayer continues to deduct depreciation for the disposed portion of the asset (as   
determined under § 1.168(i)-8(c)(4)) under the taxpayer's present method of accounting, change   
from 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;   
     
  (B) Within 30 calendar days of filing the federal income tax return for the year of change,   
the taxpayer will provide a copy of the completed Form 3115 to any regulatory body having   
jurisdiction over the public utility property subject to the Form 3115; and   
     
  (C) As of the beginning of the year of change, the taxpayer will adjust its 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 should file a single Form 3115 for all such assets. If the changes for more   
than one asset included in that Form 3115 is specified in section 6.10(1) of this revenue procedure,   
the single Form 3115 should provide a single net § 481(a) adjustment for all such changes. If one   
or more of the changes specified in section 6.10(1) of this revenue procedure in that single Form   
3115 generate a negative § 481(a) adjustment and other changes specified in section 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, 2014-12 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.   
     
  (a) A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is   
required to complete only the following information on Form 3115 (Rev. December 2018) to   
make this change:   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I;   
     
  (iv) Part II, all lines except lines 13, 15b, 16, 17, and 19;   
     
  (v) Part IV, all lines except line 25; and   
     
  (vi) Schedule E.   
     
  (b) If any leasehold improvement is public utility property within the meaning of § 168(i)(10)   
or former § 167(l)(3)(A), a taxpayer (including a qualified small taxpayer) making this change   
must attach to its Form 3115 a statement providing that the taxpayer agrees to the following   
additional terms and conditions:   
     
  (i) A normalization method of 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   
     
  (iii) Within 30 calendar days of filing the federal income tax return for the year of change,   
the taxpayer will provide a copy of the completed Form 3115 to any regulatory body having   
jurisdiction over the public utility property subject to the change.   
     
  (4) Concurrent automatic change.   
     
  (a) A taxpayer making this change for more than one asset for the same year of change should   
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all   
the changes included in that Form 3115. If one or more of the changes in that single Form 3115   
generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a   
positive § 481(a) adjustment, the taxpayer may provide a single 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) for the same year of change should   
file a single Form 3115 for all such changes and must enter the designated automatic accounting   
method change numbers for the changes on the appropriate line on the Form 3115. See section   
6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes. For example, a   
qualified small taxpayer must include on the single Form 3115 the information required by section   
6.11(3)(a) of this revenue procedure for this change and the information required by the lines on   
Form 3115 applicable to the UNICAP method change, including Part II line 14 and 15, Part IV,   
and Schedule D, and must include a separate response to each line on Form 3115 that is applicable   
to both changes (such as Part II lines 6b, 7, 8b, 14, and, as applicable for this change, Part IV) for   
which the taxpayer's response is 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 for depreciation that is specified   
in section 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 (or item accounts) for specific items of MACRS   
property to multiple asset accounts (or pools) for the same assets, or vice  versa, in accordance   
with § 1.168(i)-7;   
     
  (ii) a change from grouping specific items of MACRS property in multiple 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 from the specific identification method   
under § 1.168(i)-8(g)(1) to the first-in, first-out (FIFO) method of accounting under§  1.168(i)-   
8(g)(2)(i) or the modified FIFO method of accounting under § 1.168(i)-8(g)(2)(ii);   
     
  (iv) a change in the method of 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 modified FIFO method of accounting under§ 1.168(i)-8(g)(2)   
(ii) to the specific identification method under§  1.168(i)-8(g)(1);   
     
  (v) a change in the method of identifying which assets in multiple asset accounts or which   
portions of assets have been disposed of by the taxpayer from the FIFO method of accounting   
under § 1.168(i)-8(g)(2)(i) to the modified FIFO method of accounting under § 1.168(i)-8(g)(2)   
(ii), or vice versa;   
     
  (vi) a change in the method of identifying which mass assets (as defined in § 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 specific identification method under § 1.168(i)-8(g)(1) to a mortality dispersion table in   
accordance with § 1.168(i)-8(g)(2)(iii);   
     
  (vii) a change in the method of identifying which mass assets (as defined in§  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 modified FIFO   
method of accounting under § 1.168(i)-8(g)(2)(ii) to a mortality dispersion table in accordance   
with § 1.168(i)-8(g)(2)(iii);   
     
  (viii) a change in the method of identifying which mass assets (as defined in§  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 the specific   
identification method under § 1.168(i)-8(g)(1), the FIFO method of accounting under § 1.168(i)-   
8(g)(2)(i), or the modified FIFO method of accounting under § 1.168(i)-8(g)(2)(ii);   
     
  (ix) if § 1.168(i)-8(f)(2) applies (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--   
     
  (i) a change from grouping specific items of MACRS property in general asset accounts to a   
different grouping of the same assets in general asset accounts in accordance with § 1.168(i)-1(c);   
     
  (ii) a change in the method of identifying which assets or which portions of assets have been   
disposed of by the taxpayer from the specific identification method under § 1.168(i)-1(j)(2)(i)(A)   
to the FIFO method of accounting under § 1.168(i)-1(j)(2)(i)(B) or the modified FIFO method of   
accounting under § 1.168(i)-1(j)(2)(i)(C);   
     
    (iii) a change in the method of 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   
the modified FIFO method of accounting under § 1.168(i)-1(j)(2)(i)(C) to the specific identification   
method under § 1.168(i)-1(j)(2)(i)(A);   
     
  (iv) a change in the method of 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 modified FIFO method of accounting under § 1.168(i)-1(j)(2)(i)(C), or vice versa;   
     
  (v) a change in the method of identifying which mass assets (as defined in§  1.168(i)-1(b)   
(6)) or which portions of mass assets that are in a separate general asset account in accordance   
with § 1.168-1(c)(2)(ii)(H), have been disposed of by the taxpayer from the specific identification   
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 identifying which mass assets (as defined in § 1.168(i)-1(b)(6))   
or which portions of mass assets that are in a separate general asset account in accordance with   
§ 1.168-1(c)(2)(ii)(H), have been disposed of by the taxpayer from the FIFO method of accounting   
under § 1.168(i)-1(j)(2)(i)(B) or the modified FIFO method of accounting 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 identifying which mass assets (as defined in§  1.168(i)-1(b)(6)),   
or which portions of mass assets that are in a separate general asset account in accordance with   
§ 1.168-1(c)(2)(ii)(H), have been disposed of by the taxpayer from a mortality dispersion table in   
accordance with § 1.168(i)-1(j)(2)(i)(D) to the specific identification method under § 1.168(i)-1(j)   
(2)(i)(A), the FIFO method of accounting under § 1.168(i)-1(j)(2)(i)(B), or the modified FIFO   
method of accounting under § 1.168(i)-1(j)(2)(i)(C); or   
     
  (viii) if § 1.168(i)-1(j)(3) applies (basis of a disposed asset or a disposed portion of an asset   
in a general asset account) and it is impracticable from the taxpayer's 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 accounting specified in section 6.12(3)(a)(i) and (ii) and section   
6.12(3)(b)(i) of this revenue procedure are made using a modified cut-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.   
     
  (i) If the change specified in section 6.12(3)(a)(i) of this revenue procedure is a change to a   
single asset account, the new single asset account must include a beginning balance for both the   
unadjusted depreciable basis and the depreciation reserve of the asset included in that single asset   
account.   
     
  (ii) If the change specified in section 6.12(3)(a)(i) or (ii) of this revenue 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.   
     
  (iii) The change specified in section 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 accounting specified in section 6.12(3)(a)(iii), (vi), (ix), and   
(x) and section 6.12(3)(b)(ii), (v), and (viii) of this revenue procedure are made using a cut-off   
method and apply to dispositions occurring on or after the beginning of the year of change.   
     
  (c) Even though the changes in methods of accounting specified in section 6.12(3)(a)(iv), (v),   
(vii), and (viii) and section 6.12(3)(b)(iii), (iv), (vi), and (vii) of this revenue procedure are changes   
from one permissible method of 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 of accounting specified in section 6.12(3)   
(b)(iii), (iv), (vi), and (vii) of this revenue procedure, the § 481(a) adjustment should be zero   
unless § 1.168(i)-1(e)(3) applies to the asset subject to the change.   
     
  (d) A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is   
required to complete only the following information on Form 3115 (Rev. December 2018) to   
make this change:   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I;   
     
  (iv) Part II, all lines except lines 13, 15b, 16, 17, and 19 if the qualified small taxpayer is not   
making a change in method of accounting specified in section 6.12(3)(a)(ix) and (x) and section   
6.12(3)(b)(viii) of this revenue procedure;   
     
  (v) Part II, all lines except lines 13, 15b, 16c, 17, and 19 if the qualified small taxpayer is   
making a change in method of accounting specified in section 6.12(3)(a)(ix) or (x) or section   
6.12(3)(b)(viii) of this revenue procedure;   
     
  (vi) Part IV; and   
     
  (vii) Schedule E.   
     
  (e) If any asset subject to this change is public utility property within the meaning of § 168(i)   
(10), a taxpayer (including a qualified small taxpayer) making this change must attach to its   
Form 3115 a statement providing that the taxpayer agrees to the following additional terms and   
conditions:   
     
  (i) A normalization method of 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 specified in section 6.12(3)(a)(iv), (v), (vii), or (viii) or section   
6.12(3)(b)(iii), (iv), (vi), or (vii) of this revenue procedure made for the public utility property   
subject to the change; and   
     
  (iii) Within 30 calendar days of filing the federal income tax return for the year of change,   
the taxpayer will provide a copy of the completed Form 3115 to any regulatory body having   
jurisdiction over the public utility property subject to the change.   
     
  (f) A taxpayer that met the scope 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) adjustment as of the first day of the year 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 change should   
file a single Form 3115 for all such assets. If the change for more than one asset included in that   
Form 3115 is specified in section 6.12(3)(a)(iv), (v), (vii), or (viii) or section 6.12(3)(b)(iii), (iv),   
(vi), or (vii) of this revenue procedure, the single Form 3115 also should provide a single net   
§ 481(a) adjustment for all such changes. If one or more changes specified in section 6.12(3)(a)   
(iv), (v), (vii), or (viii) or section 6.12(3)(b)(iii), (iv), (vi), or (vii) of this revenue procedure in   
that single Form 3115 generate a negative § 481(a) adjustment and other changes specified in   
section 6.12(3)(a)(iv), (v), (vii), or (viii) or section 6.12(3)(b)(iii), (iv), (vi), or (vii) of this revenue   
procedure in that 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 same year of change should file a single Form 3115 for all such changes   
and must enter the designated automatic accounting method change numbers for the changes   
on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for   
information on making concurrent changes. For example, a qualified small taxpayer must include   
on the single Form 3115 the information required to be completed on Form 3115 by a qualified   
small taxpayer under this revenue 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 I.R.B. 675, applies   
to a taxpayer that wants to make a change in method of accounting that is specified in section   
6.13(3) of this revenue procedure for 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)(1) applies. These specified changes are consistent with §§ 1.168(i)-8(b)   
(2), 1.168(i)-8(c)(4)(ii)(A), (B), and (D), 1.168(i)-8(f), and 1.168(i)-8(g), as applicable. This   
change also affects the determination of gain or loss from disposing of the building, the structural   
component, or the portion of the building (including its structural 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 specified in section 6.13(3)(a) of this revenue 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 specified in section 6.13(3)(a) of this revenue 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 the first sentence in § 1.168(i)-8(d)(1) in a   
taxable year prior to the year of change but under its present method of accounting continues to   
deduct 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 (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 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 transaction described in the first sentence   
in § 1.168(i)-8(d)(1) in a taxable year prior to the year of change but under its present method of   
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 not specified in § 1.168(i)-   
8(g)(1) or (2)(i), (ii), or (iii) (for example, the last-in, first-out (LIFO) method of accounting) to a   
method of accounting specified 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 change specified in section 6.11 of Rev. 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 clarified and modified by Rev. Proc.   
2012-39, 2012-41 I.R.B. 470, Rev. Proc. 2014-17, 2014-12 I.R.B. 661, and Rev. Proc. 2014-54,   
2014-41 I.R.B. 675 (revocation of a general asset account election); (B) the taxpayer made a   
qualifying disposition election under § 1.168(i)-1T(e)(3)(iii) in a taxable year prior to the year of   
change for the 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 illustrate the covered changes specified in 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 a result of any of the events described in the first   
sentence in § 1.168(i)-8(d)(1) that require a partial disposition, a partial disposition election must be made to change from   
depreciating the original roof to recognizing a loss upon its retirement. Pursuant to section 6.13(1)(b)(iv) of this revenue   
procedure, 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 qualified small taxpayer as defined in section 6.01(4)(b) of this   
revenue procedure) making this change must attach to its Form 3115 a statement with the following:   
     
  (i) A description of the assets to which this change applies;   
     
  (ii) If the taxpayer is making a change specified in section 6.13(3)(a) of this 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 change specified in section 6.13(3)(f) of this revenue   
procedure, a description of the methods of identifying which assets have been disposed of under   
the taxpayer's present and proposed methods of accounting;   
     
  (iv) If the taxpayer is making the change specified in section 6.13(3)(h) or (j) of this revenue   
procedure, a description of the methods of determining the 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   
     
  (C) Within 30 calendar days of filing the federal income tax return for the year of change,   
the taxpayer will provide a copy of the completed application to any regulatory body having   
jurisdiction over the public utility property subject to the application.   
     
  (b) A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is   
required to complete only the following information on Form 3115 (Rev. December 2018) to   
make this change:   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I;   
     
  (iv) Part II, all lines except lines 13, 15b, 16, 17, and 19 if the qualified small taxpayer is not   
making a change in method of accounting specified in section 6.13(3)(h) and (j) of this revenue   
procedure;   
     
  (v) Part II, all lines except lines 13, 15b, 16c, 17, and 19 if the qualified small taxpayer is making   
a change in method of accounting specified in section 6.13(3)(h) 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. 2015-13 for a   
change specified in section 6.13(3)(a) of this revenue procedure is not a determination by the   
Commissioner that the taxpayer is using the appropriate asset under § 1.168(i)-8(c)(4) for   
determining what asset is disposed of by the taxpayer and does not create any presumption that   
the proposed asset is permissible under § 1.168(i)-8(c)(4). The director will 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 as of the first day of the year of change 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:   
     
  (i) If the taxpayer is making the change specified in section 6.13(3)(a) of this revenue 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 specified in section 6.13(3)(k) of this revenue procedure;   
or   
     
  (iii) If the taxpayer is a qualified taxpayer as defined section 4.01 of Rev. Proc. 2015-56,   
2015-49 I.R.B. 827, and that is within the scope of section 3 of Rev. Proc. 2015-56, and is making   
the change specified in section 5.02(5)(b) of Rev. Proc. 2015-56 on or before the first taxable year   
that the qualified taxpayer uses the remodel-refresh safe harbor 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. (i) Y, a fiscal year taxpayer with 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 APPENDIX to Rev.   
Proc. 2011-14, as modified by Rev. Proc. 2012-20, 2012-14 I.R.B. 700, Y filed with its federal income tax return for   
the taxable year ended November 30, 2013, a Form 3115 to treat the building as an asset and each structural component   
of the building as a separate asset for disposition purposes and also to change from depreciating the original roof to   
recognizing a loss upon its 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. 2016-29 does not apply. Y   
also decides not to file a 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 section 6.13(3)   
(a) of this revenue procedure, Y files a Form 3115 with its federal income tax return for the 2015 taxable year to change   
to treating the original building (including its original roof and other original structural components) as an asset and the   
replacement roof as a separate asset for 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 change should   
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all   
the changes included in that Form 3115. If one or more of the changes in that single Form 3115   
generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a   
positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment   
for all the changes that are included in that Form 3115 generating such 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 same year of change should file a single Form 3115 for all of such   
changes and must enter the designated automatic accounting method change numbers for the   
changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13   
for information on making concurrent changes. For example, a qualified small taxpayer must   
include on the single Form 3115 the information required to be completed on Form 3115 by a   
qualified small taxpayer under this revenue procedure for each change in method of accounting   
included on that Form 3115. The listed changes are:   
     
  (i) A change under section 6.01 of this revenue procedure;   
     
  (ii) A change under section 6.12 of this revenue procedure;   
     
  (iii) A change under section 6.14 of this revenue procedure; and   
     
  (iv) A change under section 6.15 of this revenue procedure.   
     
  (11) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change to the method of accounting under this section   
6.13 is "205."   
     
  (12) Contact information. For further information regarding a change under this section, contact   
Patrick Clinton at (202) 317-7005 (not a toll-free number)..14 Dispositions of tangible depreciable assets (other than a building or its structural    
 components) (§ 168; § 1.168(i)-8).   
     
  (1) Description of change.   
     
  (a) Applicability. This change, as 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 that is specified in   
section 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. These specified changes are   
consistent with §§ 1.168(i)-8(c)(4)(i), 1.168(i)-8(c)(4)(ii)(C) and (D), 1.168(i)-8(f), and 1.168(i)-   
8(g), as applicable. This change also affects the determination of gain or loss from disposing of   
the § 1245 property, 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 specified in section 6.14(3)(a) of this revenue 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 specified in section 6.14(3)(a) of this revenue 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 the first  sentence in § 1.168(i)-8(d)(1) in a   
taxable year prior to the year of change but under its present method of accounting continues to   
deduct 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 applicable, in a transaction described in the first sentence in § 1.168(i)-8(d)(1)   
in a taxable year prior to the year of change but under its present method of 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 not specified in § 1.168(i)-   
8(g)(1) or (2)(i), (ii), or (iii) (for example, the last-in, first-out (LIFO) method of accounting) to a   
method of accounting specified 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 made the change specified in section 6.11 of Rev. Proc.   
2016-29, section 6.34 of Rev. Proc. 2015-14, or section 6.34 of the APPENDIX to Rev. Proc.   
2011-14 (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 qualified small taxpayer as defined in section 6.01(4)(b) of this   
revenue procedure) making this change must attach to its Form 3115 a statement with the following:   
     
  (i) A description of the assets to which this change applies;   
     
  (ii) If the taxpayer is making a change specified in section 6.14(3)(a) of this 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 change specified in section 6.14(3)(f) of this revenue   
procedure, a description of the methods of identifying which assets have been disposed of under   
the taxpayer's present and proposed methods of accounting;   
     
  (iv) If the taxpayer is making the change specified in section 6.14(3)(h) or (j) of this revenue   
procedure, a description of the methods of determining the 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   
     
  (C) Within 30 calendar days of filing the federal income tax return for the year of change,   
the taxpayer will provide a copy of the completed application to any regulatory body having   
jurisdiction over the public utility property subject to the application.   
     
  (b) A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is   
required to complete only the following information on Form 3115 (Rev. December 2018) to   
make this change:   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I;   
     
  (iv) Part II, all lines except lines 13, 15b, 16, 17, and 19 if the qualified small taxpayer is not   
making a change in method of accounting specified in section 6.14(3)(h) and (j) of this revenue   
procedure;   
     
  (v) Part II, all lines except lines 13, 15b, 16c, 17, and 19 if the qualified small taxpayer is making   
a change in method of accounting specified in section 6.14(3)(h) 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. 2015-13 for a   
change specified in section 6.14(3)(a) of this revenue procedure is not a determination by the   
Commissioner that the taxpayer is using the appropriate asset under § 1.168(i)-8(c)(4) for   
determining what asset is disposed of by the taxpayer and does not create any presumption that   
the proposed asset is permissible under § 1.168(i)-8(c)(4). The director will 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 as of the first day of the year of change 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 specified in section 6.14(3)(a) of this revenue 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 specified in section 6.14(3)(k) of this revenue procedure.   
     
  (b) If section 6.14(7)(a) of this revenue procedure does not apply, see section 7.03 of Rev. Proc.   
2015-13 for the § 481(a) adjustment period.   
     
  (8) No audit protection. A taxpayer calculating a § 481(a) adjustment under section 6.14(6)(b)   
of this revenue 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 change should   
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all   
the changes included in that Form 3115. If one or more of the changes in that single Form 3115   
generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a   
positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment   
for all the changes that are included in that Form 3115 generating such 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 the same year of change should file a single Form 3115 for all of such   
changes and must enter the designated automatic accounting method change numbers for the   
changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13   
for information on making concurrent changes. For example, a qualified small taxpayer must   
include on the single Form 3115 the information required to be completed on Form 3115 by a   
qualified small taxpayer under this revenue procedure for each change in method of accounting   
included on that Form 3115. The listed changes are:   
     
  (i) A change under section 6.01 of this revenue procedure;   
     
  (ii) A change under section 6.12 of this revenue procedure;   
     
  (iii) A change under section 6.13 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 accounting that is specified in section   
6.15(3) of this revenue procedure for disposing of an asset subject to a general asset account   
election under § 168(i)(4) and the regulations thereunder. These specified changes are consistent   
with §§ 1.168(i)-1(e)(1), 1.168(i)-1(e)(2)(viii), and 1.168(i)-1(j), as applicable. This change also   
may affect the determination of gain or loss from disposing of the asset and may affect whether   
the taxpayer must capitalize amounts paid to restore a unit of property (as determined under   
§ 1.263(a)-3(e) or (f)) under § 1.263(a)-3(k).   
     
  (b) Inapplicability. This change does not apply to the following:   
     
  (i) Any asset (as determined under § 1.168(i)-1(e)(2)(viii)) that is not depreciated under   
§ 168 under the taxpayer's present method of accounting and, if applicable, proposed method   
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 method of accounting not specified in § 1.168(i)-1(j)(2)(i)(A), (B), (C), or   
(D) (for example, the last-in, first-out (LIFO) method of accounting) to a method of accounting   
specified in § 1.168(i)-1(j)(2)(i)(A), (B), (C), or (D), as 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 qualified small taxpayer as defined in section 6.01(4)(b) of this   
revenue procedure) making this change must attach to its Form 3115 a statement with the following:   
     
  (i) A description of the assets to which this change applies;   
     
  (ii) If the taxpayer is making the change specified in section 6.15(3)(a) of this revenue procedure,   
a description of the assets for disposition purposes under the taxpayer's present and proposed   
methods of accounting;   
     
  (iii) If the taxpayer is making the change specified in section 6.15(3)(b) of this revenue   
procedure, a description of the methods of identifying which assets have been disposed of under   
the taxpayer's present and proposed methods of accounting;   
     
  (iv) If the taxpayer is making the change specified in section 6.15(3)(d) of this revenue   
procedure, a description of the methods of determining the 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   
     
  (C) Within 30 calendar days of filing the federal income tax return for the year of change,   
the taxpayer will provide a copy of the completed application to any regulatory body having   
jurisdiction over the public utility property subject to the application.   
     
  (b) A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is   
required to complete only the following information on Form 3115 (Rev. December 2018) to   
make this change:   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I;   
     
  (iv) Part II, all lines except lines 13, 15b, 16, 17, and 19 if the qualified small taxpayer is not   
making a change in method of accounting specified in section 6.15(3)(a) and (d) of this revenue   
procedure;   
     
  (v) Part II, all lines except lines 13, 15b, 16c, 17, and 19 if the qualified small taxpayer is making   
a change in method of accounting specified in section 6.15(3)(a) 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. 2015-13 for a   
change specified in section 6.15(3)(a) of this revenue procedure is not a determination by the   
Commissioner that the taxpayer is using the appropriate asset under § 1.168(i)-1(e)(2)(viii) for   
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 specified in section 6.15(3)(a) of this revenue 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   
     
  (iii) If the taxpayer is a qualified taxpayer as defined in section 4.01 of Rev. Proc. 2015-56,   
2015-49 I.R.B. 827, and that is within the scope of section 3 of Rev. Proc. 2015-56, and is making   
the change specified in section 5.02(5)(b) of Rev. Proc. 2015-56 on or before the first taxable year   
that the qualified taxpayer uses the remodel-refresh safe harbor 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. (i) X, a fiscal year taxpayer with 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, as modified by   
Rev. Proc. 2012-20, 2012-14 I.R.B. 700, X filed with its federal tax return for the taxable year ended November 30, 2013,   
a Form 3115 to: (1) make a late general asset account election to include the building (including its structural components)   
placed in service in 2000 in one general asset 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 6.15(3)(a) of this revenue procedure, X files a Form 3115 with its federal income tax return for the   
2015 taxable year to change to treating the building (including its original roof and other original structural 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 change should   
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all   
the changes included in that Form 3115. If one or more of the changes in that single Form 3115   
generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a   
positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment   
for all the changes that are included in that Form 3115 generating such 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 the same year of change should file a single Form 3115 for all of such   
changes and must enter the designated automatic accounting method change numbers for the   
changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13   
for information on making concurrent changes. For example, a qualified small taxpayer must   
include on the single Form 3115 the information required to be completed on Form 3115 by a   
qualified small taxpayer under this revenue procedure for each change in method of accounting   
included on that Form 3115. The listed changes are:   
     
  (i) A change under section 6.01 of this revenue procedure;   
     
  (ii) A change under section 6.12 of this revenue procedure;   
     
  (iii) A change under section 6.13 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.   
     
     
     
     
     
           
 General Asset Accounts:    
     
     
     
     
     
           
   Single Asset Accounts or Multiple Asset Accounts for MACRS Property:      
     
     
     
           
   Dispositions of MACRS Property (not in a general asset account):.17 Depreciation of fiber optic transfer node and fiber optic cable used by a cable system    
 operator (§§ 167 and 168).   
     
     
     
     
     
  (1) Description of change.   
     
     
     
     
     
  (a) Applicability. This change applies to a cable system operator that is within the scope of Rev.   
Proc. 2015-12, 2015-2 I.R.B. 266, and wants to change to the safe harbor method of accounting   
provided in section 8.03 of Rev. Proc. 2015-12 for determining depreciation under §§ 167 and   
168 of a fiber optic transfer node and trunk line consisting of fiber optic cable used in a cable   
distribution network providing one-way and two-way communication services. The safe harbor   
method provided by section 8.03 of Rev. Proc. 2015-12 determines the asset for purposes of   
§§ 167 and 168.   
     
     
     
     
     
  (b) Inapplicability. This change does not apply to the following:   
     
     
     
  (i) any property that is not depreciated under § 168 under the taxpayer's present and proposed   
methods of accounting; or   
     
     
     
     
     
  (ii) any property that is not owned by the taxpayer at the beginning of the year of change.   
     
     
     
  (2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(d) of Rev. Proc.   
2015-13 does not apply to a taxpayer that makes this change.   
     
     
     
  (3) Concurrent automatic change.   
     
     
     
  (a) A taxpayer that wants to make this change for more than one asset for the same year of change   
should file a single Form 3115 for all such assets and provide a single net§  481(a) adjustment   
for all the changes included in that Form 3115. If one or more of the changes in that single Form   
3115 generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate   
a positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment   
for all the changes that are included in that Form 3115 generating such adjustment and a single   
positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating   
such adjustment.   
     
  (b) A taxpayer that wants to make both this change and a change to a UNICAP method under   
section 12.01, 12.02, 12.08, or 12.12 of this revenue procedure, as applicable, for the same year   
of change should file a single Form 3115 for all such changes and must enter the designated   
automatic accounting method change numbers for the changes on the 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 Late elections or revocation of elections under § 168(k)(5), (7), and (10).    
     
  (1) Description of Change.   
     
  (a) Applicability. This change applies to a taxpayer within the scope of Rev. Proc. 2019-33,   
2019-34 I.R.B. 662, that wants to make a late election, or to revoke an election, provided in   
sections 4, 5, and 6 of Rev. Proc. 2019-33 under § 168(k)(5), (7), or (10).   
     
  (b) Inapplicability. The IRS will treat the making of a late election, or the revocation of an   
election, provided in sections 4, 5, and 6 of Rev. Proc. 2019-33 under § 168(k)(5), (7), and (10) as   
a change in method of accounting with a § 481(a) adjustment only for the taxable years specified   
in section 6.18(2) of this revenue procedure. This treatment does not apply to a taxpayer that   
makes these late elections or revocations before or after the time specified in section 6.18(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 this section 6.18 must be made for the   
taxpayer's first, second, or third taxable year succeeding the taxpayer's taxable year beginning   
in 2016 and ending on or after September 28, 2017 (2016 taxable year) or beginning in 2017 and   
ending on or after September 28, 2017 (2017 taxable year).   
     
  (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 this change for the taxpayer's first, second,   
or third taxable year succeeding the taxpayer's 2016 taxable year or 2017 taxable year.   
     
  (4) Concurrent automatic change.   
     
  (a) A taxpayer making this change for more than one specified plant under section 4 of Rev.   
Proc. 2019-33 for the same year of change should file a single Form 3115 for all such specified   
plants. The single Form 3115 must provide a single net § 481(a) adjustment for all such changes.   
     
  (b) A taxpayer making this change for more than one class of property under section 5 of Rev.   
Proc. 2019-33 for the same year of change should file a single Form 3115 for all such classes of   
property. The single Form 3115 must provide a single net § 481(a) adjustment for all such changes.   
     
  (c) A taxpayer making this change for all qualified property under section 6 of Rev. Proc. 2019-   
33 should provide a single net § 481(a) adjustment for all assets that are qualified property.   
     
  (d) A taxpayer making a late election, or revoking an election, under more than one section of   
Rev. Proc. 2019-33 (for example, under sections 4 and 6 of Rev. Proc. 2019-33) for the same year   
of change should file a single Form 3115 for all such changes. The single Form 3115 must provide   
a single net § 481(a) adjustment for all such changes.   
     
  (5) 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 "241."   
     
  (6) Contact information. For further information regarding a change under this section, contact   
Elizabeth Binder at (202) 317-7005 (not a toll-free number)..19 Qualified improvement property 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 of qualified improvement   
property, as defined in § 168(e)(6):   
     
  (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 6.19(1)(b) of this revenue   
procedure for qualified improvement property placed 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 of accounting for the qualified improvement property.    
If a taxpayer does not satisfy section 6.19(1)(a)(ii) of this revenue procedure for an item of   
qualified improvement property because the item of qualified improvement property is placed   
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 the 1-year QIP by filing a Form 3115 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 by filing an amended federal   
income tax return, or an administrative adjustment request under § 6227 (AAR), as applicable,   
for the property's placed-in-service year prior to the date the taxpayer files 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 depreciation for the 1-year QIP by filing 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:   
     
  (i) any qualified improvement property 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 the taxable year in which the qualified improvement property   
is placed in service by the taxpayer, in accordance with Rev. Proc. 2020-22, 2020-18 I.R.B. 745.   
Any changes to depreciation for such qualified 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;   
     
  (ii) any qualified improvement property 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;   
     
  (iii) any qualified improvement 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); or   
     
  (iv) any change in method of accounting to which section 6.21 of this revenue procedure applies.   
     
  (2) Certain eligibility rules temporarily inapplicable. For an item of qualified improvement   
property placed in service by the taxpayer after December 31, 2017, in its taxable year ending in   
2018, 2019, or 2020, 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 this change for the taxpayer's first or second taxable year succeeding   
the taxable year in which the item of qualified improvement property is placed in service by the   
taxpayer.   
     
  (3) Reduced filing requirement. A taxpayer making a change under this section 6.19 is required   
to complete only the following information on Form 3115 (Rev. December 2018):   
     
  (a) The identification section of page 1 (above Part I);   
     
  (b) The signature section at the bottom of page 1;   
     
  (c) Part I;   
     
  (d) Part II, all lines except lines 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.   
     
  (4) Concurrent automatic change.   
     
  (a) A taxpayer making this change for more than one asset for the same year of change should   
file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all the   
changes included in that Form 3115.   
     
  (b) A taxpayer making this change and the change in section 6.01 or 6.20 of this revenue   
procedure for the same year of change should file a single Form 3115 for all such changes and   
must enter the designated automatic accounting method change numbers 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.   
     
  (5) 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 "244."   
     
  (6) Contact information. For further information regarding a change under this section, contact   
Elizabeth Binder at (202) 317-7005 (not a toll-free number)..20 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:   
     
  (i) A taxpayer within the scope of section 4 of Rev. Proc. 2020-25, 2020-19 I.R.B. 785, as   
modified by section 8 of Rev. Proc. 2020-50, 2020-48 I.R.B. 1122, that wants to make a late   
election provided in section 4.02(2) of Rev. Proc. 2020-25 under § 168(g)(7), (k)(5), (k)(7), or   
(k)(10). This change also applies to a taxpayer within the scope of section 5 of Rev. Proc. 2020-   
25 that wants to revoke an election provided in section 5.02(2)(b) of Rev Proc. 2020-25 under   
§ 168(k)(5), (k)(7), or (k)(10); or   
     
  (ii) 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. 2020-50 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.   
     
  (i) The IRS will treat the making of a late election provided in section 4 of Rev. Proc. 2020-   
25 under § 168(g)(7), (k)(5), (k)(7), and (k)(10), or the revocation of an election provided in   
section 5 of Rev. Proc. 2020-25 under § 168(k)(5), (k)(7), and (k)(10), as a change in method of   
accounting with a § 481(a) adjustment only for the taxable years specified in section 6.20(2)(a) of   
this revenue procedure. This treatment does not apply to a taxpayer that makes these late elections   
or revocations before or after the time specified in section 6.20(2)(a) 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 ).   
     
  (ii) 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.   
2020-50, as a change in method of accounting with a § 481(a) adjustment only for the taxable   
years specified in section 6.20(2)(b) of this revenue procedure. This treatment does not apply to a   
taxpayer that makes these late elections or revocations before or after the time specified in section   
6.20(2)(b) 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.   
     
  (a) The change under section 6.20(1)(a)(i) and (b)(i) of this revenue procedure must be made   
for the taxpayer's first or second taxable year succeeding the taxable year in which the taxpayer   
placed in service the property affected by the late election under § 168(g)(7), (k)(5), (k)(7), or (k)   
(10), as applicable, or revocation of the election under § 168(k)(5), (k)(7), or (k)(10), as applicable.   
     
  (b) The change under section 6.20(1)(a)(ii) and (b)(ii) of this revenue procedure must be made   
for the taxpayer's first 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) planted or grafted the specified plant to which   
the late § 168(k)(5) election applies or to which the revocation of the election under § 168(k)(5)   
applies.   
     
  (3) Certain eligibility rules inapplicable.   
     
  (a) 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 6.20(1)(a)(i) and (b)(i) of this revenue procedure for the   
taxpayer's first or second taxable year succeeding the taxable year in which the taxpayer placed   
in service the property affected by the late election under § 168(g)(7), (k)(5), (k)(7), or (k)(10), as   
applicable, or revocation of the election under § 168(k)(5), (k)(7), or (k)(10), as applicable.   
     
  (b) 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 6.20(1)(a)(ii) and (b)(ii) of this revenue procedure   
for the taxpayer's first 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) planted or grafted the specified plant to which   
the late § 168(k)(5) election applies or to which the revocation of the election under § 168(k)(5)   
applies.   
     
  (4) Reduced filing requirement. A taxpayer making a change under this section 6.20 is required   
to complete only the following information on Form 3115 (Rev. December 2018):   
     
  (a) The identification section of page 1 (above Part I);   
     
  (b) The signature section at the bottom of page 1;   
     
  (c) Part I;   
     
  (d) Part II, all lines except lines 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 4 and 5 of Rev. Proc. 2020-25, or under sections 5 and 6 of Rev. Proc. 2020-50, for the   
same year of change must file a single Form 3115 for all such changes. The single Form 3115 must   
provide a single net § 481(a) adjustment for all such changes for all assets placed in service, and   
all specified plants 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.   
     
  (b) A taxpayer making one or more changes under this section 6.20 and the change in section   
6.01, 6.19, or 6.21 of this revenue procedure for the same year of change must file a 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, and all specified   
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   
6.20 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)..21 Change in depreciation as a result of applying the additional first 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 comply with the Final Regulations (as defined in section 2.02(6) of Rev. Proc.   
2020-50), the 2019 final regulations (as defined in section 2.02(2) of Rev. Proc. 2020-50), or   
both the 2019 final regulations and the 2019 proposed regulations (as defined in section 1 of Rev.   
Proc. 2020-50), as applicable, for depreciable property and specified plants within the scope of   
section 4 of Rev. Proc. 2020-50. A change under this section 6.21 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 6.21(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 6.21(4) of this   
revenue procedure. For purposes of this section 6.21, a taxpayer is deemed to change from an   
impermissible method of accounting to a permissible method of accounting when, for the first   
time, the taxpayer changes its method of accounting for depreciation under this section 6.21 for   
depreciable property and specified plants described in section 4.02(1) of Rev. Proc. 2020-50 to   
comply with the Final Regulations, the 2019 final regulations, or both the 2019 final regulations   
and the 2019 proposed regulations. Further, any subsequent time the taxpayer changes its method   
of accounting for depreciation for depreciable property and specified plants described in section   
4.02(1) of Rev. Proc. 2020-50 to comply with the Final Regulations, the 2019 final regulations, or   
both the 2019 final regulations and the 2019 proposed regulations, is a change from a permissible   
method of accounting to another permissible method of accounting under this section 6.21. 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 taxpayer making this change for the property and specified plant within   
the scope of section 4 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of this revenue   
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 and specified plant within   
the scope of section 4 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of this revenue   
procedure, for the taxpayer's first or second taxable year succeeding the taxable year in which the   
taxpayer placed in service such property, or planted or grafted such specified plant, as applicable.   
     
  (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 property and specified   
plant within the scope of section 4.03 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of   
this 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 6.21(3)(b) of   
this revenue procedure for property placed in service or a specified plant planted or grafted in the   
taxable year immediately preceding the year of change).   
     
  (b) If a taxpayer does not satisfy section 6.21(3)(a) of this revenue procedure for depreciable   
property that is within the scope of section 4.03 of Rev. Proc. 2020-50, as modified by section   
6.21(1)(b) of this 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 Property by filing a Form 3115   
for this change in accordance with this section 6.21(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, for a specified plant that is within the   
scope of section 4.03 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of 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 6.21(3) for the 1-year Plant by filing a Form 3115 for this change in accordance with this   
section 6.21(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 Plant by filing an amended federal income tax return, or an administrative adjustment   
request under § 6227 (AAR), as applicable, for the 1-year Property's placed-in-service year   
or 1-year Plant's planting or grafting year, as applicable, prior to the date the taxpayer files its   
federal income 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. Proc. 2020-50, as modified by section 6.21(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 1-year Plant by   
filing an amended federal 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 6.21(3) is made   
with a § 481(a) adjustment. However, consent to make a change in method of accounting under   
this section 6.21 will be granted by the Commissioner only if the taxpayer satisfies section 4.02 of   
Rev. Proc. 2020-50, to the extent relevant. Further, if a taxpayer that has a trade or business with   
floor plan financing indebtedness is applying§ 1.168(k)-2(b)(2)(ii)(G) of the Final Regulations,   
§ 1.168(k)-2(b)(2)(ii)(G) of the 2019 final regulations, or both § 1.168(k)-2(b)(2)(ii)(G) of   
the 2019 final regulations and § 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 6.21 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 for the property and specified   
plant within the scope of section 4.04 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of   
this revenue procedure.   
     
  (b) A change under section 4.04 of Rev. Proc. 2020-50 and this section 6.21(4) is made on a   
cut-off basis. Accordingly, neither the modified cut-off method, as 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 6.21 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) Reduced filing requirement. A taxpayer making a change under this section 6.21 is required   
to complete only the following information on Form 3115 (Rev. December 2018):   
     
  (a) The identification section of page 1 (above Part I);   
     
  (b) The signature section at the bottom of page 1;   
     
  (c) Part I;   
     
  (d) Part II, all lines except lines 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 must file a single Form 3115 for all assets placed in service,   
and all specified plants 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 6.21(3) of this revenue procedure   
and the change in section 6.01, 6.19, or 6.20 of this revenue procedure for the same year of   
change must file a 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, and all specified plants 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.   
     
  (8) Designated automatic accounting method change numbers. The designated automatic   
accounting method change number for (a) a change under section 6.21(3) of this revenue procedure   
is "246", and (b) a change under section 6.21(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)..22 Depreciation of tangible property under § 168(g) by controlled foreign corporations.   
     
  (1) Description of change. This change is applicable to a controlled foreign corporation (as   
defined in § 957(a)) (CFC) that seeks 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 well as its earnings and profits ("E&P") 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 6.22   
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 6.22(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 shareholder files a   
Form 3115 for this change, provided 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 § 1.1502-77(a), if applicable) files an amended federal income tax return   
for the taxable year in which or with which the property's placed-in-service year ends prior to the   
date the shareholder files its 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) Applicability. This change is effective for a Form 3115 filed on or after May 11, 2021, for a   
taxable year of a CFC ending before January 1, 2024.   
     
  (4) Limited period to convert a Form 3115 filed under the non-automatic change procedures in    
 Rev. Proc. 2015-13.   
     
  (a) Eligibility. The designated shareholder may convert a Form 3115 that was properly filed on   
behalf of a CFC under the non-automatic change procedures in Rev. Proc. 2015-13 requesting the   
Commissioner's consent for a change in method of accounting described in this section 6.22 if:   
     
  (i) the CFC is otherwise eligible to use the automatic change procedures in this section 6.22 and   
Rev. Proc. 2015-13 (to the extent the eligibility requirements in Rev. Proc. 2015-13 are not waived   
by this section 6.22), and   
     
  (ii) the Form 3115 was filed before May 11, 2021, and is pending with the national office on   
May 11, 2021.   
     
  (b) Notification procedures. The designated shareholder must notify the national office contact   
person for the Form 3115 (if contact person is unknown, fax the notification to 855-576-2341 or   
send the notification to the address specified in section 9.08(6) of Rev. Proc. 2022-1, 2022-1 I.R.B.   
1 (or its successor)) of the CFC's intent to make the change in method of accounting under the   
automatic change procedures in this section 6.22 and Rev. Proc. 2015-13 before the later of (i)   
June 10, 2021, or (ii) the issuance of a letter ruling granting or denying consent for the change. The   
notification must indicate that the designated shareholder chooses on behalf of the CFC to convert   
the Form 3115 to the automatic change procedures in this section 6.22 and Rev. Proc. 2015-13.   
If the national office is timely and properly notified in accordance with the requirements in this   
paragraph, the national office will send a letter to the designated shareholder acknowledging its   
request and will return the user fee submitted with the Form 3115.   
     
  (c) Resubmission procedures. A designated shareholder converting a Form 3115 to the   
automatic change procedures in this section 6.22 and Rev. Proc. 2015-13 for a change in method   
of accounting described in this section 6.22 must resubmit a Form 3115 that conforms to the   
automatic change procedures, with a copy of the national office letter sent acknowledging the   
request to convert attached, by the earlier of (i) the 30th calendar day after the date of the national   
office's letter acknowledging the request to convert, or (ii) the date the designated shareholder is   
required to file the original Form 3115 under section 6.03(1)(a) 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 Form 3115 will be considered filed as of the date the designated shareholder   
originally filed the converted Form 3115 under the non-automatic change procedures in Rev. Proc.   
2015-13. This paragraph (4) does not extend the date the designated shareholder must file the   
original (converted) Form 3115 under section 6.03(1)(a) of Rev. Proc. 2015-13.   
     
  (d) Agent treated as designated shareholder. For purposes of this section 6.22, in the case of   
a designated shareholder that is a member of a consolidated group, a reference to a designated   
shareholder refers to the agent described in § 1.1502-77(a) with respect to the consolidated group   
of which the designated shareholder is a member.   
     
  (5) Section 481(a) adjustment. A § 481(a) adjustment is required with respect to a change made   
under this section 6.22 for any CFC.   
     
  (6) Certain eligibility rules inapplicable. The eligibility rules in section 5.01(1)(c), (d), (e), and   
(f) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to this change.   
     
  (7) Short Form 3115 in lieu of a standard Form 3115. In accordance with § 1.446-1(e)(3)   
(ii), the requirement in § 1.446-1(e)(3)(i) to file a standard Form 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 6.22. The short Form 3115 (Rev. December 2018) must   
include the following information:   
     
  (a) The identification section of page 1 (above Part I);   
     
  (b) The signature section at the bottom of page 1;   
     
  (c) Part I;   
     
  (d) Part II, all lines except lines 10, 13, 16, and 19;   
     
  (e) Part IV; and   
     
  (f) Schedule E.   
     
  (8) Concurrent automatic changes. A designated shareholder making an accounting method   
change on behalf of a CFC under this section 6.22 with respect to more than one asset for the same   
year of change may file a single short Form 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 characteristics identified, in the Form 3115. Any   
§ 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 characteristics identified, in the Form3115.A§ 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 components) relate to the same qualified business unit (QBU)   
as defined in § 989(a) and § 1.989(a)-1(b);   
     
  (ii) If applicable, the § 481(a) adjustments (or components) relate to the same tested unit, as   
defined in § 1.951A-2(c)(7)(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 limitation   
classification, character, and treatment under section 7.07(2) of Rev. Proc. 2015-13, as modified   
by section 4 of Rev. Proc. 2021-26, 2021-22 I.R.B. 1163, 1167-68.   
     
  (9) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 6.22 is "248."   
     
  (10) Contact information. For further information regarding a change under this section, contact   
Natalie Punchak at (202) 317-6934 (not a toll-free number).   
     
SECTION 7. RESEARCH AND EXPERIMENTAL EXPENDITURES (§ 174).01 Changes to a different method or different amortization period.   
     
  (1) Description of change.   
     
  (a) This change applies to a taxpayer that wants to change the treatment of expenditures that   
qualify as research and experimental expenditures under § 174. Unless otherwise stated, references   
to § 174 in this section 7.01 refer to § 174 as in effect prior to amendment by § 13206 of Public   
Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and Jobs Act   
(TCJA).   
     
  (b) Section174 and the regulations thereunder provide the specific rules for changing a method   
of accounting under § 174 for research and experimental expenditures. Under § 174, a taxpayer   
may treat research and experimental expenditures that are paid or incurred by the taxpayer during   
the taxable year in connection with the taxpayer's trade or business as expenses under § 174(a) or   
as deferred expenses amortizable ratably over a period of not less than 60 months under § 174(b).   
Pursuant to § 1.174-1, research and experimental expenditures that are not treated as expenses or   
deferred expenses under § 174 must be treated as a charge to capital account. Further, § 1.174-   
1 provides that the expenditures to which § 174 applies may relate either to a general research   
program or to a particular project. Finally, §§ 1.174-3(a) and 1.174-4(a)(5) provide that in no   
event will a taxpayer be permitted to apply one method as to part of the expenditures relative to   
a particular project and apply a different method to the balance of the expenditures relating to the   
same project for the same taxable year.   
     
  (c) If a taxpayer has not treated research and experimental expenditures as expenses under   
§ 174(a), § 174(a)(2)(B) and § 1.174-3(b)(2) provide that the taxpayer may, with consent, adopt   
the expense method at any time.   
     
  (d) If a taxpayer has treated research and experimental expenditures as expenses under § 174(a),   
§ 174(a)(3) and § 1.174-3(b)(3) provide that the taxpayer may, with consent, change to a different   
method of treating research and experimental expenditures.   
     
  (e) If a taxpayer has treated research and experimental expenditures as deferred expenses under   
§ 174(b), § 174(b)(2) and § 1.174-4(b)(2) provide that the taxpayer may, with consent, change   
to a different method of treating research or experimental expenditures or to a different period of   
amortization for deferred expenses.   
     
  (2) Applicability.   
     
  (a) In general. This change applies to any taxpayer that is changing:   
     
  (i) from treating research and experimental expenditures for a particular project or projects as   
expenses under § 174(a) to treating such expenditures as deferred expenses under § 174(b), or   
 vice versa;   
     
  (ii) to a different period of amortization for research and experimental expenditures for a   
particular project or projects that are being treated as deferred expenses under § 174(b);   
     
  (iii) from treating research and experimental expenditures for a particular project or projects as   
expenses under § 174(a) or deferred expenses under § 174(b) to treating such expenditures as a   
charge to capital account, or vice versa; or   
     
  (iv) from treating research and experimental expenditures under any provision of the Code   
other than § 174 to treating such expenditures under § 174 and the regulations thereunder.   
     
  (b) Inapplicability. This change does not apply to:   
     
  (i) a change in the treatment of computer software costs under Rev. Proc. 2000-50, 2000-2   
C.B. 601, as modified by Rev. Proc. 2007-16, 2007-1 C.B. 358 (but see section 9 of this revenue   
procedure for making that change);   
     
  (ii) a change in the treatment of Year 2000 costs under Rev. Proc. 97-50, 1997-2 C.B. 525; or   
     
  (iii) any amount paid or incurred in any taxable year for which § 174 as amended by § 13206   
of the TCJA is in effect.   
     
  (3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.   
2015-13, 2015-5 I.R.B. 419, is not applicable to this change.   
     
  (4) Manner of making change.   
     
  (a) This change is made on a cut-off basis and applies to all research and experimental   
expenditures paid or incurred for a particular project or projects on or after the beginning of the   
year of change. See § 174(b)(2), and §§ 1.174-3(a), 1.174-3(b)(2), and 1.174-4(a)(5) for more   
information regarding a cut-off basis. Accordingly, a § 481(a) adjustment is neither permitted nor   
required.   
     
  (b) The requirement under §§ 1.174-3(b)(2), 1.174-3(b)(3), and 1.174-4(b)(2) to file an   
application (that is, a Form 3115) no later than the end of the first taxable year in which the   
different method or different amortization period is to be used is waived for this change. However,   
see section 6.03ofRev.Proc.2015-13forfilingrequirements applicable to a change under this   
section 7.01.   
     
  (c) The consent granted under section 9 of Rev. Proc. 2015-13 satisfies the consent required   
under §§ 174(a)(2)(B), 174(a)(3), and 174(b)(2), and §§ 1.174-3(b)(2), 1.174-3(b)(3), and 1.174-   
4(b)(2).   
     
  (5) Additional requirement. A taxpayer must attach to its Form 3115 a written statement   
providing:   
     
  (a) the information required in § 1.174-3(b)(2) if the taxpayer is changing to treating research   
and experimental expenditures as expenses under § 174(a);   
     
  (b) the information required in § 1.174-3(b)(3) if the taxpayer is changing from treating research   
and experimental expenditures as expenses under § 174(a); or   
     
  (c) the information required in § 1.174-4(b)(2) if the taxpayer is changing from treating research   
and experimental expenditures as deferred expenses under § 174(b) or is changing to a different   
period of amortization for research and experimental expenditures being treated as deferred   
expenses under § 174(b).   
     
  (6) No audit protection. A taxpayer does not receive audit protection under section 8.01 of Rev.   
Proc. 2015-13 in connection with this change. See  section 8.02(2) of Rev. Proc. 2015-13.   
     
  (7) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 7.01 is "17."   
     
  (8) Contact information. For further information regarding a change under this section, contact   
Martha M. Garcia or John M. Deininger at (202) 317-6853 (not a toll-free number).   
     
SECTION 8. ELECTIVE EXPENSING PROVISIONS (§ 179D).01 Deduction for Energy Efficient Commercial Buildings (§ 179D).   
     
  (1) Description of change. This change, as described in Rev. Proc. 2012-39, 2012-41 I.R.B.   
470, applies to a taxpayer that wants to change its method of accounting to deduct under § 179D   
amounts paid or incurred for the installation of energy efficient commercial building property,   
as defined in§  179D(c)(1). The deduction for energy efficient commercial building property is   
subject to the limits of § 179D(b) and must be claimed in the taxable year in which the property is   
placed in service. The basis of the energy efficient commercial building property is reduced by the   
amount of the § 179D deduction taken and the remaining basis of the energy efficient commercial   
building 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 copy filed with the IRS in Ogden, UT, and 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) Certification requirement. 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 3115 a certification as   
required by section 4 of Notice 2006-52, 2006-1 C.B. 1175, or section 5 of Notice 2008-40, 2008-   
1 C.B. 725, to demonstrate that the energy efficient commercial building property has achieved   
the reduction in energy and power costs or in lighting power density necessary to qualify for the   
§ 179D deduction.   
     
  (6) No ruling on qualification. The consent granted under section 9 of Rev. Proc. 2015-13,   
2015-5 I.R.B. 419, for a change provided in this section 8.01 is not a determination by the   
Commissioner that the taxpayer qualifies for a deduction under section 179D. The director will   
ascertain whether the taxpayer qualifies for a deduction under section 179D (including a review of   
the required certifications). See  section 12 of Rev. Proc. 2015-13.   
     
  (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, as modified by Rev. Proc. 2007-16, 2007-1 C.B. 358. Section 5 of Rev. Proc. 2000-50   
describes the methods applicable to the costs of developing computer software. Section 6 of Rev.   
Proc. 2000-50 describes the method 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. In accordance, section 5 of Rev. Proc. 2000-50 (costs of   
developing computer software) does not apply to any amount paid or incurred in any taxable year   
for which § 174 as amended by § 13206 of the TCJA is in effect.   
     
  (2) Scope. This change applies to all costs of computer software as defined in 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" as defined in § 197(c) and the regulations   
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 for which § 174 as amended by § 13206 of the TCJA is in   
effect.   
     
  (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. START-UP EXPENDITURES AND ORGANIZATIONAL FEES (§§ 195, 248, AND 709).01 Start-up expenditures.   
     
  (1) Description of change and scope.   
     
  (a) Applicability. This change applies to a taxpayer that wants to change its method of accounting   
under § 195 to change:   
     
  (i) the characterization of an item as a start-up expenditure;   
     
  (ii) the determination of the taxable year in which the taxpayer begins the active trade or   
business to which the start-up expenditures relate; or   
     
    (iii) the amortization period of a start-up expenditure to 180 months.   
     
  (b) Inapplicability. This change does not apply to:   
     
  (i) start-up expenditures paid or 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 § 1.195-1(b)   
is deemed made has expired.   
     
  (2) No rulings.   
     
  (a) Characterization of item. The consent granted under section 9 of Rev. Proc. 2015-13 for   
a change specified in section 10.01(1)(a)(i) of this revenue procedure is not a determination by   
the Commissioner that the taxpayer has properly 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 specified in section 10.01(1)(a)(ii) of this 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   
§ 1.248-1(c) is deemed made has expired.   
     
  (2) No rulings.   
     
  (a) Characterization of items. The consent granted under section 9 of Rev. Proc. 2015-13 for   
a change specified in section 10.02(1)(a)(i) of this revenue procedure is not a determination by   
the Commissioner that the corporation has properly 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 specified in section 10.02(1)(a)(ii) of this revenue 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) 317-7003 (not a toll-free number)..03 Organization fees under § 709.   
     
  (1) Description of change and scope.   
     
  (a) Applicability. This change applies to a partnership that wants to change its method of   
accounting under § 709 to change:   
     
  (i) the characterization of an item as an organizational expense;   
     
  (ii) the determination of the taxable year in which the partnership begins 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   
§ 1.709-1(b) is deemed made has expired.   
     
  (2) No rulings.   
     
  (a) Characterization of items. The consent granted under section 9 of Rev. Proc. 2015-13 for   
a change specified in section 10.03(1)(a)(i) of this revenue procedure is not a determination by   
the Commissioner that the partnership has properly 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 specified in section 10.03(1)(a)(ii) of this revenue 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   
Meghan Howard at (202) 317-5055 (not a toll-free number).   
     
SECTION 11. CAPITAL EXPENDITURES (§ 263).01 Package design costs.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to a taxpayer that wants to change its method of   
accounting for package design costs that are within the scope of Rev. Proc. 97-35, 1997-2 C.B.   
448, as modified 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 statement to its timely filed Form 3115. The   
statement must provide a description of each package design, the date on which each was placed   
in service, and the cost basis of each (as determined under 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   
Alexa Dubert 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.   
2000-7, 2000-1 C.B. 712, as modified by this revenue procedure, or for removal costs in disposal   
of a depreciable asset, including a partial disposition, as 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 qualified small taxpayer, as defined in section 6.01(4)(b) of   
this revenue procedure, is required to complete only the following information on Form 3115   
(Rev. December 2018):   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I, line 1(a);   
     
  (iv) Part II, all lines except lines 13, 15, 16, 17, and 19, if the change is not to depreciating   
property;   
     
  (v) Part II, all lines except lines 13, 15b, 16, 17, and 19, if the change is to 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 commissions (as defined by section 2 of Rev. Proc. 2000-38, 2002-2 C.B. 310, as   
modified by Rev. Proc. 2007-16, 2007-1 C.B. 358) 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   
Alexa Dubert at (202) 317-7003 (not a toll-free number)..05 Intangibles.   
     
  (1) Description of change. This change applies to a taxpayer that wants to change its treatment   
of an item to a method of accounting permitted by §§ 1.263(a)-4, 1.263(a)-5, and 1.167(a)-3(b).   
See Rev. Proc. 2006-12, 2006-1 C.B. 310, as modified by Rev. Proc. 2006-37, 2006-2 C.B. 499,   
for the specific requirements, information, and documentation required for this change.   
     
  (2) Section 481(a) adjustment. In 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   
     
Stephen Rothandler 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 a   
     
specific type of equipment at the time 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 part that meets the definition of rotable spare parts,   
     
temporary spare parts, or standby emergency spare parts in § 1.162-3(c)(2) or (3), for which   
     
the cost was paid or incurred by the taxpayer in a taxable year beginning on or after January 1,   
     
2014 (or in a taxable year beginning on or after January 1, 2012, if the taxpayer chooses to apply   
     
§ 1.162-3 to amounts paid or 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 spare part that   
in §   
meets the definition of 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.   
     
     
     
  (a) To change a method of accounting under this section 11.07, a taxpayer (including a qualified   
     
small taxpayer as defined in section 6.01(4)(b) of this revenue procedure) must complete Schedule   
   E of Form 3115 for the repairable and reusable spare parts and also attach the following information   
   to the completed Form 3115:   
        
     (i) A description of the repairable and reusable spare parts;   
        
     (ii) A list of related equipment for which the repairable and reusable spare parts are acquired;   
   and   
        
     (iii) A complete description of the method of computing depreciation (for example, depreciation   
   method, recovery period, convention, and applicable asset class under Rev. Proc. 87-56, 1987-2   
   C.B. 674, as clarified and modified by Rev. Proc. 88-22, 1988-1 C.B. 785) that the taxpayer uses   
   for the related equipment for which the repairable and reusable spare parts are acquired.   
        
     (b) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as   
   defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following   
   information on Form 3115 (Rev. December 2018):   
        
     (i) The identification section of page 1 (above Part I);   
        
     (ii) The signature section at the bottom of page 1;   
        
     (iii) Part I;   
        
     (iv) Part II, all lines except lines 13, 15b, 16, 17, and 19; and   
        
     (v) Part IV, all lines except line 25.   
        
     (3) Concurrent automatic change.   
        
     (a) A taxpayer making both this change and a change to a UNICAP method under section 12.01,   
   12.02, 12.08, or 12.12 of this revenue procedure (as applicable) for the same year of change should   
   file a single Form 3115 for both changes, in which case the taxpayer must enter the designated   
   automatic accounting method change numbers for both changes on the appropriate line on that   
   Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for information on   
   making concurrent changes. For example, a qualified small taxpayer, as defined in section 6.01(4)   
   (b) of this revenue 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 line 14 and 15, Part IV, and   
   Schedule D, and must include a separate response to each line on Form 3115 that is applicable to   
   both changes (such as Part II lines 6b, 7, 8b, 14, and, as applicable for this change, Part IV) for   
   which the taxpayer's response is 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 same year of change should file a single Form 3115 for both changes, in   
   which case the taxpayer must enter the designated automatic accounting method change numbers   
   for both changes on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc.   
   2015-13 for information on making concurrent changes. For example, a qualified small taxpayer   
   must include on the single Form 3115 the information required to be completed on Form 3115 by   
   a qualified small taxpayer 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 for the same year of change should file a single Form 3115 for   
   both changes, in which case the taxpayer must enter the designated automatic accounting method   
   change numbers for both changes on the appropriate line on that Form 3115. See section 6.03(1)   
   (b) of Rev. Proc. 2015-13 for information on making concurrent changes. For example, a qualified   
   small taxpayer must include on the single Form 3115 the information required to be completed on   
   Form 3115 by a qualified small taxpayer under this revenue procedure for each change in method   
   of accounting included on that Form 3115.   
        
     (4) Designated automatic accounting method change number. The designated automatic   
   accounting method change number for a change under this section 11.07 is "121".   
        
     (5) Contact information. For further information regarding a change under this section, contact   
   Stephen Rothandler 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 accounting specified in section 11.08(2)   
   of this revenue procedure and permitted under:   
        
     (i) Section 1.162-3, § 1.162-4, § 1.263(a)-1, § 1.263(a)-2, or § 1.263(a)-3 (the final tangible   
   property regulations) for taxable years beginning on or after January 1, 2012; or   
        
     (ii) Section 1.446-1(e)(2)(ii)( d )( 2 ) if the property for which the taxpayer is otherwise changing   
   its method of 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 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) received a payment for specified energy property in lieu of tax credits   
under section 1603 of the American Recovery and Reinvestment Tax Act of 2009, Div. B of Pub.   
L. No. 111-5, 123 Stat. 115 (February 17, 2009), as amended by section 707 of the Tax Relief,   
Unemployment Insurance 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 taxable year in which they are first used in the taxpayer'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 § 1.162-3(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 final tangible property regulations that provides for the   
proposed method, or methods, of accounting to which the taxpayer is changing (for example,   
§ 1.162-3(a), § 1.263(a)-3(i), § 1.263(a)-3(k)); and   
     
  (ii) If the taxpayer is changing any unit(s) of property under § 1.263(a)-3(e) or, in the case   
of a building, is changing the identification of any building structure(s) 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 with a citation to the paragraph of the final 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) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as   
defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following   
information on Form 3115 (Rev. December 2018):   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I, line 1(a);   
     
  (iv) Part II, all lines except lines 13, 15, 16, 17, and 19, if the change is to not depreciating   
property;   
     
  (v) Part II, all lines except line 13, line 15b, 16, 17, and 19, if the change is to depreciating   
property;   
     
  (vi) Part IV, lines 26 and 27; and   
     
  (vii) Schedule E, if applicable.   
     
  (4) Concurrent automatic change.   
     
  (a) A taxpayer making two or more changes in method of accounting pursuant to this section   
11.08 should file a single Form 3115 for all of these changes and must enter the designated   
automatic 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 the same year of change should file a single Form 3115 that includes all of these   
changes and must enter the designated automatic accounting method change numbers for all of   
these changes on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc.   
2015-13 for information on making concurrent changes. For example, a qualified small taxpayer,   
as defined in section 6.01(4)(b) 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 first day of the taxpayer's taxable year of change that takes into account only amounts   
paid or incurred in taxable years beginning on or after January 1, 2014. Optionally, a 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 as of the   
first day of the year of change 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 2018), Part IV, line 26, the total   
§ 481(a) adjustment for each change in method of accounting being made. If the taxpayer is making   
more than one change in method of accounting under the final tangible property regulations, the   
taxpayer (including a qualified small taxpayer) must include on an attachment to Form 3115:   
     
  (i) The information required by Part IV, line 26 of Form 3115 (Rev. December 2018) 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 2018) for each   
change; and   
     
  (iii) The citation to the paragraph of the final tangible property regulations that 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 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.   
     
  (a) Changes under the final tangible property regulations.    
     
             
  (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 to a qualified taxpayer as defined in section 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 Rev.   
Proc. 2015-56, as modified by Rev. Proc. 2020-25, 2020-19 I.R.B. 785, for its qualified costs,   
including the making of a late general asset account election as provided under section 5.02(6)(d)   
of Rev. Proc. 2015-56.   
     
  (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. 2015-56;   
     
  (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. 2015-56 applies to a qualified building (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 qualified building) and the qualified taxpayer 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), as applicable, on or before the first taxable year that the qualified taxpayer uses the   
remodel-refresh safe harbor and takes the entire amount of the § 481(a) adjustment into account   
in computing the qualified taxpayer's taxable income for that year of change, any qualified costs   
paid for that qualified building prior to the first taxable year that the qualified taxpayer or the   
IRS makes the change specified in section 6.13(3)(a) or 6.15(3)(a) of this revenue procedure, as   
applicable, for that qualified building and takes into account the entire 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. 2015-56 applies to a   
qualified building (and, in the case of section 5.02(5)(b), the qualified taxpayer does not make the   
required change on or before the first taxable year that the qualified taxpayer uses the remodel-   
refresh safe harbor), the qualified taxpayer does not receive audit protection under section 8.01 of   
Rev. Proc. 2015-13 in connection with this change for that qualified building. See  section 8.02(2)   
of Rev. Proc. 2015-13.   
     
  (3) Manner of making change.   
     
  (a) Reduced filing requirement for qualified small taxpayers. A qualified small taxpayer, as   
defined in section 6.01(4)(b) of this revenue procedure, may complete only the following   
information on Form 3115 (Rev. December 2018):   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I, line 1(a);   
     
  (iv) Part II, all lines except lines 5, 13, 15, 16, 17, and 19;   
     
  (v) Part IV, lines 25, 26, and 27;   
     
  (vi) Schedule E; and   
     
  (vii) If applicable, the election statement described in section 11.10(3)(b)(ii).   
     
  (b) Late general asset account election.   
     
  (i) In general. If under section 5.02(6)(d) of Rev. Proc. 2015-56 the qualified taxpayer is   
required to make a late general asset account election, the late general asset account election   
change is made using a modified cut-off method 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 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. The qualified taxpayer (including a qualified small taxpayer) must   
attach to its Form 3115 a statement providing that the qualified taxpayer agrees to the following   
additional terms and conditions:   
     
  (A) The qualified taxpayer consents to, and agrees to apply, all of the provisions of§  1.168(i)-1   
to the assets that are subject to the election specified in section 5.02(6)(d) of Rev. Proc. 2015-56;   
and   
     
  (B) Except as provided in § 1.168(i)-1(c)(1)(ii)(A), (e)(3), (g), or (h), the election made by   
the qualified taxpayer under section 5.02(6)(d) of Rev. Proc. 2015-56 is irrevocable and will be   
binding on the qualified taxpayer for computing taxable income for the year of change and for all   
subsequent taxable years with respect to the assets that are subject to this election.   
     
  (c) Cut-off method required for certain changes.   
     
  (i) If section 5.02(4)(c) of Rev. Proc. 2015-56 applies to a qualified building, the change to   
the remodel-refresh safe harbor method of accounting for that qualified building, and any   
improvements to that qualified building, is made using a cut-off method and applies only to   
qualified costs paid or incurred for that qualified building, and any improvements to that qualified   
building, beginning in the year of change for the change made to the remodel-refresh safe harbor   
method of accounting.   
     
  (ii) If section 5.02(5)(b) of Rev. Proc. 2015-56 applies to a qualified building and the qualified   
taxpayer does not change its present method of accounting to be in accord with § 1.168(i)-1(e)   
(2)(viii) or § 1.168(i)-8(c)(4), as applicable, on or before the first taxable year that the qualified   
taxpayer used the remodel-refresh safe harbor and take the entire amount of the § 481(a) adjustment   
into account in computing the qualified taxpayer's taxable income for that year of change, the   
change to the remodel-refresh safe harbor method of accounting for that qualified building, and   
any improvements to that qualified building, is made using a cut-off method and applies only to   
qualified costs paid or incurred for that qualified building, and any improvements to that qualified   
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. A qualified taxpayer changing its method of accounting under this section 11.10   
must apply § 481(a) and take into account any applicable § 481(a) adjustment in the manner   
provided in 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 applies to a qualified   
building, and an improvement to a qualified building (and, in the case of section 5.02(5)(b) of   
Rev. Proc. 2015-56, the qualified taxpayer did not make the required change on or before the first   
taxable year that the qualified taxpayer uses the remodel-refresh safe harbor), for the change to the   
remodel-refresh safe harbor method of accounting for that qualified building and an improvement   
to that qualified building.   
     
  (b) Repair allowance property. A qualified taxpayer changing to the method of accounting   
provided under this section 11.10 must not include in the § 481(a) adjustment any amount   
attributable to property for which the qualified taxpayer elected to apply the repair allowance   
under § 1.167(a)-11(d)(2) for any taxable year in which the repair allowance election was made.   
     
  (c) Statistical sampling. A qualified 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.   
     
  (a) A qualified taxpayer making this change for more than one asset for the same year of change   
should file a single Form 3115 for all such assets. The single Form 3115 must provide a single net   
§ 481(a) adjustment for all such changes.   
     
  (b) A qualified taxpayer making this change, a change under section 6.13(3)(a) of this revenue   
procedure, and any change listed in section 6.12(3)(b) or section 6.15 of this revenue procedure   
for the same year of change should file a single Form 3115 for all such changes and must enter   
the designated automatic accounting method change numbers for the changes on the appropriate   
line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making   
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   
Merrill Feldstein at (202) 317-5100 (not a toll-free number).   
     
SECTION 12. UNIFORM CAPITALIZATION (UNICAP) METHODS (§ 263A).01 Certain uniform capitalization (UNICAP) methods used by resellers and reseller-producers.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to:   
     
  (i) a 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 specifically described in the regulations in the first   
taxable year that it does not qualify as a small business taxpayer;   
     
  (ii) a reseller-producer that wants to change from a permissible UNICAP method for both   
its production and resale activities to a permissible simplified resale method described in   
§ 1.263A-3(d)(3) in any taxable year that it qualifies to use a simplified resale method for both   
its production and resale activities under § 1.263A-3(a)(4) (resellers with de minimis  production   
activities);   
     
  (iii) a reseller-producer that wants to change from a permissible simplified resale method   
described in § 1.263A-3(d)(3) for both its production and resale activities to a permissible UNICAP   
method specifically described in the regulations for both its production and resale activities in the   
first taxable year that it does not qualify to use a simplified resale method for both its production   
and resale activities under § 1.263A-3(a)(4);   
     
  (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 methods)   
specifically described in the regulations, including any necessary changes in the identification of   
costs subject to § 263A that will be accounted for using the proposed method, in any taxable year   
other than the first taxable year that it does not qualify as a small 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 methods) specifically described   
the regulations that the reseller or reseller-producer is already using.   
     
  (b) Inapplicability.   
     
  (i) Self constructed assets. This change does not apply to a taxpayer that wants to use either   
the simplified service cost method, the simplified production method, or the modified simplified   
production 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 ratio election with the simplified   
production method, the modified simplified production method, or the simplified resale    method   
under §§ 1.263A-2(b)(4), 1.263A-2(c)(4), or 1.263A-3(d)(4), respectively; or ( 2 ) wants to revoke   
an election to use a historic absorption ratio with the simplified production method, the modified   
simplified production method, or the simplified resale see   method §§ 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 simplified resale method, simplified production method,    
 or modified simplified production method. This change does not include a change to recharacterize   
section 471 costs, as defined in § 1.263A-1(d)(2), as additional section 263A costs, as defined in   
§ 1.263A-1(d)(3) (or vice versa ) for a taxpayer that uses or is changing to the simplified resale   
method, the simplified production method, or the modified simplified 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).   
     
  (2) Eligibility rule temporarily inapplicable.   
     
  (a) 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.   
     
  (b) Eligibility rule temporarily inapplicable.  The eligibility rule in section 5.01(1)(f) of Rev.   
Proc. 2015-13 does not apply to the changes described in section 12.01(1)(a)(ii)-(vi) of this revenue   
procedure for the taxpayer's first, second or third taxable year ending on or after November 20,   
2018.   
     
  (c) Eligibility rule temporarily inapplicable for certain changes related to cost offset method.   
The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 does not apply to a method change   
under this section 12.01 if:   
     
  (i) the taxpayer made or requested to make a change during any of the five taxable years ending   
with the year of change to recover inventory costs in a taxable year prior to the taxable year in   
which ownership of the inventory is transferred to the customer to offset inclusions under § 451(b)   
and/or 451(c), as applicable;   
     
  (ii) in the case of a taxpayer with an applicable financial statement (AFS), as defined in section   
16.10(1)(b) of this revenue procedure, the taxpayer makes, for the same year of change, a change   
in method of accounting for income from the sale of inventory under section 16.10(2)(a)(iii) of   
this revenue procedure and, to the extent the taxpayer receives advance payments for the sale   
of inventory, section 16.10(2)(a)(iv) of this revenue procedure, or in the case of a taxpayer that   
does not have an AFS, the taxpayer concurrently changes its method of accounting for advance   
payments from the sale of inventory under section 16.10(2)(b)(ii) of this revenue procedure; and   
     
  (iii) the taxpayer makes the change under this section 12.01 for its early application year, as   
defined in section 16.10(4)(c)(i) of this revenue procedure, or if a taxpayer does not apply§  1.451-   
3 and/or § 1.451-8 for a taxable year beginning before January 1, 2021, for the taxpayer's first   
taxable year beginning on or after January 1, 2021.   
     
  (3) Definitions.   
     
  (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.   
     
  (e) "A UNICAP method specifically described in the regulations" does not include any other   
reasonable allocation method within the meaning of § 1.263A-1(f)(4). However, a "UNICAP   
method specifically described in the regulations" 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));   
     
  (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 (§ 1.263A-3(c)(5)(iii)(C));   
     
  (iv) the specific identification method (§ 1.263A-1(f)(2));   
     
  (v) the burden rate method (§ 1.263A-1(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));   
     
  (viii) the step-allocation method (§ 1.263A-1(g)(4)(iii)(B));   
     
  (ix) the simplified service cost method (§ 1.263A-1(h)) (with either a labor-based allocation   
ratio or a production cost allocation ratio);   
     
  (x) the simplified resale method without a historic absorption ratio election (§ 1.263A-3(d));   
     
  (xi) the alternative method to determine amounts of section 471 costs by using a taxpayer's   
financial statement (§ 1.263A-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));   
     
  (xviii) the simplified production method without a historic absorption ratio   
(§ 1.263A-2(b));   
     
  (xix) the modified simplified production 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 modified simplified production method(§ 1.263A-2(c)(3)(iii)(B));   
and   
     
  (xxi) the 90-10 de  minimis  rule to allocate capitalizable mixed service costs under the modified   
simplified production 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 less (adjusted for inflation), as described in§ 448(c), proposed §§ 1.448-   
2(c), or § 1.448-2(c), as applicable. For taxable years beginning in 2019, 2020 and 2021, the   
inflation-adjusted amount is $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. 2020-45, 2020-46 I.R.B. 1016, as applicable. For   
a taxable year beginning in 2022, the inflation-adjusted amount is $27,000,000. See Rev. Proc.   
2021-45, 2021-48 I.R.B. 764.   
     
  (i) "Former small business taxpayer" means a taxpayer that no longer qualifies as a small   
business taxpayer. A former small business taxpayer includes a taxpayer that no longer qualifies   
as a small business taxpayer for the year of change because it is a tax shelter under § 448(d)(3),   
proposed § 1.448-2(b)(2), or § 1.448-2(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) Under examination - certain audit protection exception temporarily inapplicable. For a   
taxpayer's first, second, or third taxable year ending on or after November 20, 2018, the audit   
protection rule in section 8.02(1) of Rev. Proc. 2015-13 does not apply to a change in method   
of accounting made under this section 12.01. However, section 8.02(1) of Rev. Proc. 2015-13   
continues to apply for purposes of determining the § 481(a) adjustment period for a positive   
§ 481(a) adjustment provided in section 7.03(3)(b) 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 12.01 is "22."   
     
  (8) 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):   
     
           
     
           
     
     
     
  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:   
     
     
     
           
     
     
     
   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. 2019-43, prior to modification by Rev. Proc.   
2022-9, 2022-2 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    elected to use the simplified resale method 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:   
     
     
     
           
         X   's Unamortized 2019 § 481(a) Adjustment:   
     
     
     
           
  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) adjustment 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:   
     
     
           
     
     
   X   's Unamortized 2019 § 481(a) Adjustment:   
     
     
           
     
     
  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  satisfied the small business taxpayer exemption under section 263A(i) for 2021   
and may change voluntarily from the UNICAP method to a method that no longer capitalizes costs under § 263A for 2021,   
as provided in section 12.16 of this revenue procedure. To reflect the removal of the additional § 263A costs 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). 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:   
     
     
           
     
     
   X   's Unamortized 2019 § 481(a) Adjustment:   
     
     
           
     
     
   X   's Unamortized 2021 § 481(a) Adjustment:   
     
     
           
     
     
  (9) Contact information. For further information regarding a change under this section, contact   
Megan McLaughlin 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:   
     
  (i) a producer as defined in section 12.01(3)(b) of this revenue procedure or a reseller-producer   
as defined in section 12.01(3)(c) of this revenue procedure that wants to change to a UNICAP   
method (or methods) specifically described in the regulations, including any necessary changes in   
the identification of costs subject to § 263A that will be accounted for using the proposed method,   
in any taxable year other than the first taxable year that it does not qualify as a small business   
taxpayer as defined in section 12.01(3)(h) of this 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 a UNICAP method (or methods) specifically described in the regulations   
that the producer or reseller-producer is already using; or   
     
  (ii) a producer or reseller-producer that is a former small business taxpayer, as defined in section   
12.01(3)(i) of this revenue procedure, that wants to change from not capitalizing costs under   
§ 263A(i) to capitalizing costs under a UNICAP method (or methods) specifically described in the   
regulations in the first taxable year that the taxpayer does not qualify as a small business taxpayer   
as defined in section 12.01(3)(h) of this revenue procedure.   
     
  (b) Inapplicability.   
     
  (i) Self-constructed assets. This change does not apply to a taxpayer that wants to use either   
the simplified service cost method, the simplified production method, or the modified simplified   
production 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 ratio election with the simplified   
production method or the modified simplified production method under §§ 1.263A-2(b)(4) or   
1.263A-2(c)(4), respectively; or ( 2 ) wants to revoke an election to use a historic absorption   
ratio with the simplified production method or the modified simplified production method (see   
§§ 1.263A-2(b)(4)(iii)(B) or 1.263A-2(c)(4), 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 simplified production method or modified simplified    
 production method. This change does not include a change to recharacterize section 471 costs,   
as defined in § 1.263A-1(d)(2), as additional section 263A costs, as defined in § 1.263A-1(d)(3),   
(or vice versa ) for a taxpayer that uses or is changing to the simplified production method or the   
modified simplified 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) Reseller-producer using the simplified resale method. This change does not apply to a   
reseller-producer that uses or is changing to the simplified resale method under § 1.263A-3(d)   
(but see section 12.01(1) of this revenue procedure for certain changes that may be made by a   
reseller-producer).   
     
  (2) Definition. A "UNICAP method specifically described in the regulations" does not include   
the simplified  resale method under §  1.263A-3(d)(4) or any other reasonable allocation method   
within the meaning of § 1.263A-1(f)(4). However, a "UNICAP method specifically 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 (§ 1.263A-1(g)(4)(ii));   
     
     
     
  (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 (§ 1.263A-3(c)(5)(iii)(C));   
     
     
     
  (d) the specific identification method (§ 1.263A-1(f)(2));   
     
     
     
  (e) the burden rate method (§ 1.263A-1(f)(3)(i));   
     
     
     
  (f) the standard cost method (§ 1.263A-1(f)(3)(ii));   
     
     
     
  (g) the direct reallocation method (§ 1.263A-1(g)(4)(iii)(A));   
     
     
  (h) the step-allocation method (§ 1.263A-1(g)(4)(iii)(B));   
     
     
  (i) the simplified service cost method (§ 1.263A-1(h)) (with either a labor-based allocation ratio   
or a production cost allocation ratio);   
     
     
     
  (j) the simplified production method without a historic absorption ratio election (§ 1.263A-2(b));   
     
     
  (k) the alternative method to determine amounts of section 471 costs by using a taxpayer's   
financial statement (§ 1.263A-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));   
     
     
  (q) the de  minimis  rule for certain direct material costs (§ 1.263A-1(d)(2)(iv)(C));   
     
     
  (r) the modified simplified production 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 under the modified simplified production method (§ 1.263A-2(c)(3)(iii)(B));   
and   
     
  (t) the 90-10 de  minimis  rule to allocate capitalizable mixed service costs under the modified   
simplified production 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 temporarily inapplicable.   
     
  (a) 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.   
     
  (b) In general. 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 this section 12.02 for the taxpayer's first, second,   
or third taxable year ending on or after November 20, 2018.   
     
  (c) Eligibility rule temporarily inapplicable for certain changes related to cost offset method.   
The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 does not apply to a method change   
under this section 12.02 if:   
     
  (i) the taxpayer made or requested to make a change during any of the five taxable years ending   
with the year of change to recover inventory costs in a taxable year prior to the taxable year in   
which ownership of the inventory is transferred to the customer to offset inclusions under § 451(b)   
and/or 451(c), as applicable;   
     
  (ii) in the case of a taxpayer with an applicable financial statement (AFS) as defined in section   
16.10(1)(b) of this revenue procedure, the taxpayer makes, for the same year of change, a change   
in method of accounting for income from the sale of inventory under section 16.10(2)(a)(iii) of   
this revenue procedure and, to the extent the taxpayer receives advance payments for the sale   
of inventory, section 16.10(2)(a)(iv) of this revenue procedure, or in the case of a taxpayer that   
does not have an AFS, the taxpayer concurrently changes its method of accounting for advance   
payments from the sale of inventory under section 16.10(2)(b)(ii) of this revenue procedure; and   
     
  (iii) the taxpayer makes the change under this section 12.02 for its early application year, as   
defined in section 16.10(4)(c)(i) of this revenue procedure, or if a taxpayer does not apply § 1.451-   
3 and/or § 1.451-8, as applicable, for a taxable year beginning before January 1, 2021, for the   
taxpayer's first taxable year beginning on or after January 1, 2021.   
     
  (5) Under examination - certain audit protection exception temporarily inapplicable. For a   
taxpayer's first, second, or third taxable year ending on or after November 20, 2018, the audit   
protection rule in section 8.02(1) of Rev. Proc. 2015-13 does not apply to a change in method   
of accounting made under this section 12.02. However, section 8.02(1) of Rev. Proc. 2015-13   
continues to apply for purposes of determining the § 481(a) adjustment period for a positive   
§ 481(a) adjustment provided in section 7.03(3)(b) of Rev. Proc. 2015-13.   
     
  (6) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 12.02 is "23."   
     
  (7) Contact information. For further information regarding a change under this section, contact   
Megan McLaughlin at (202) 317-7007 (not a toll-free number)..03 Impact fees.   
     
  (1) Description of change. This change applies to a taxpayer that incurs impact fees as defined   
in Rev. Rul. 2002-9, 2002-1 C.B. 614, in connection with the construction of a new residential   
rental building that wants to capitalize the costs to the building under §§ 263(a) and 263A. See   
Rev. Rul. 2002-9 for further 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   
Megan McLaughlin 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 for the same year of change may file a single Form 3115 for both changes,   
provided the taxpayer enters the designated automatic change numbers for both changes on the   
appropriate line on that Form 3115, and complies with the ordering rules of § 1.263A-7(b)(2).   
See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for information on making   
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   
Megan McLaughlin 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 for the same year of change may file a single Form 3115 for both changes,   
provided the taxpayer enters the designated automatic accounting method change numbers for   
both changes on the appropriate line on that Form 3115, 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   
Megan McLaughlin 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 defined in   
section 4 of Rev. Proc. 2010-44, 2010-49 I.R.B. 811, that is within the scope of section 3 of Rev.   
Proc. 2010-44 and wants to change its method of 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. 2010-44. A motor vehicle dealership that wants to make an automatic change in   
method of accounting to use one or both safe harbor methods described in section 5 of Rev. Proc.   
2010-44 may make any corresponding changes in the identification of costs subject to § 263A   
that will be accounted for using the proposed method (for example, to remove internal profit   
from inventory costs) or to no longer include negative amounts as additional § 263A costs in the   
numerator of the simplified resale method formula or the simplified production 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   ) under the simplified resale method or the simplified production 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 year may file one Form 3115 to make both   
changes, provided the dealership enters the designated automatic change numbers for all such   
changes in Part I on that Form 3115, and complies with the ordering rules of § 1.263A-7(b)(2).   
See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for information on making   
concurrent changes.   
     
  (3) Multiple adjustments. In the event that a motor vehicle dealership is taking into account a   
§ 481(a) adjustment from another accounting method change in 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   
Megan McLaughlin at (202) 317-7007 (not a toll-free number)..07 Change to not apply § 263A to one or more plants removed from the list of plants that have    
 a preproductive period in excess of 2 years.   
     
  (1) Description of change. This change, as described in Rev. Proc. 2013-20, 2013-14 I.R.B.   
744, applies to a 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 § 1.263A-4(a)(2), to the production of one or more plants that the   
IRS and the Treasury Department have removed from the list of plants that have a nationwide   
weighted average preproductive period in excess of 2 years, or (b) properly elected, pursuant to   
§ 263A(d)(3) and § 1.263A-4(d), to not apply § 263A to the 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) Audit protection. If a taxpayer currently does not apply § 263A to its blackberry, raspberry, or   
papaya plants in a manner that complies with the requirements of § 263A(d)(1) and § 1.263A-4(a)   
(2), the IRS will not raise such method of accounting for a taxable year that ends on or before   
February 15, 2013. Also, if the use of such a method of accounting by a taxpayer is an issue under   
consideration (within the meaning of section 3.08 of Rev. Proc. 2015-13) for taxable years in   
examination, before an Appeals office, or before the U.S. Tax Court in a taxable year that ends on   
or before February 15, 2013, the IRS will not further pursue that issue.   
     
  (3) Manner of making change. A change under this section 12.07 is made with any necessary   
adjustments under § 481(a). For example, the revocation of an election under § 263A(d)(3) results   
in a § 481(a) adjustment that must take into account the change in depreciation from the alternative   
depreciation system to the general depreciation system included within such revocation.   
     
  (4) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 12.07 is "181."   
     
  (5) Contact information. For further 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 defined in section 12.01(3)(b) of this revenue procedure) or a reseller-producer   
(as defined in section 12.01(3)(c) of this revenue procedure) that wants to change to a reasonable   
allocation method within the meaning of § 1.263A-1(f)(4), other than the methods specifically   
described in § 1.263A-1(f)(2) or (3), for self-constructed assets produced during the taxable   
year, including any necessary changes in the identification of costs subject 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 the methods specifically   
described in § 1.263A-1(f)(2) or (3). See section 12.02 of this revenue procedure for a producer or   
reseller-producer that wants to change to a method described in § 1.263A-1(f)(2) or (3).   
     
  (b) Inapplicability. This change does not apply to an allocation method based on the number   
of units produced or an allocation method that does not allocate costs to the units of property   
produced. This change does not apply to a change described in another section of this 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   
Megan McLaughlin 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, 2014-22 I.R.B.   
1060, applies to a taxpayer that wants to change its method of accounting for sales-based royalties   
(as described in § 1.263A-1(e)(3)(ii)(U)( 2 )) that are properly allocable to inventory property:   
     
  (a) From not capitalizing sales-based royalties to capitalizing these costs and allocating them   
entirely to cost of goods sold under a taxpayer's method of 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 uses a simplified method to determine the 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 12.10 that uses   
a simplified method with an historic absorption ratio election (see §§ 1.263A-2(b)(4) and   
1.263A-3(d)(4)) and currently includes, or is changing its method to include, sales-based royalties   
in any part of its historic absorption ratio must revise its previous and current 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 file a single Form 3115 for all 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 12.10   
is "201."   
     
  (5) Contact information. For further information regarding a change under this section, contact   
Andrew Braden at (202) 317-7007 (not a toll-free number)..11 Treatment of Sales-Based Vendor Chargebacks under a Simplified Method.   
     
  (1) Description of change.  This change, as described in Rev. Proc. 2014-33, 2014-22 I.R.B.   
1060, applies to a taxpayer that wants to change its method of accounting to no longer include cost   
adjustments for sales-based vendor chargebacks described in § 1.471-3(e)(1) in the formulas used   
to allocate additional § 263A costs to ending inventory under a simplified method.   
     
  (2) Limitations.   
     
  (a) A taxpayer making this change that uses a simplified method to determine the additional   
§ 263A costs allocable to 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 section 12.11 that uses   
a simplified method with an historic absorption ratio election (see §§ 1.263A-2(b)(4) and   
1.263A-3(d)(4)) and currently includes sales-based vendor chargebacks in any part of its historic   
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 of change may file a single Form 3115 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   
Andrew Braden 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 applies to a foreign person, as defined in Notice 88-104,   
1988-2 C.B. 443, as modified by Notice 89-67, 1989-1 C.B. 723, that is required to capitalize costs   
under § 263A and wants to change its method of accounting to the U.S. ratio method, as described   
in Notice 88-104.   
     
  (b) Manner of making change. A taxpayer requesting a change on behalf of a foreign person   
under section 12.12(1) of this revenue procedure must attach a statement to the Form 3115   
providing the following information:   
     
  (i) Foreign person requirement. A representation that the foreign person is a qualified business   
unit (QBU), as defined in § 1.989(a)-1(b), of a foreign person, or the foreign branch of a U.S.   
person that constitutes a separate QBU, within the meaning of Notice 88-104. If the 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 defined in § 1.989(a)-1(b), of a foreign   
person or the foreign branch of a U.S. person that constitutes a separate QBU, within the meaning   
of Notice 88-104;   
     
  (ii) Description of trade or business. The name and employer identification number (if   
applicable) for each foreign person and an explanation of each trade or business, as defined in   
§ 1.446-1(d), for which a request to change to the U.S. ratio method is being made under this   
section 12.12(1);   
     
  (iii) Applicable U.S. trade or business requirement. The identity of the "applicable U.S. trade or   
business," as defined in Notice 88-104, that the foreign person wishes to use and an explanation   
of how this U.S. trade or business is "the same as, or most similar to" the trade or business   
conducted by the foreign person. If the taxpayer is requesting a change in method of accounting   
for multiple foreign 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. trade or business"   
identified in section 12.12(1)(b)(iii) of this revenue procedure is a trade or business conducted in   
the United States by a "related person," as defined in Notice 88-104, with respect to the foreign   
person requesting a change under this section. If the taxpayer is requesting a change in method   
of accounting for multiple foreign persons, the taxpayer must explain how the "applicable U.S.   
trade or business" identified in section 12.12(1)(b)(iii) of this revenue procedure is a trade or   
business conducted in the United States by a "related person" 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. trade or business   
identified in section 12.12(1)(b)(iii) of this revenue procedure unless consent of the Commissioner   
is obtained to use the U.S. ratio of a different applicable U.S. trade or business under § 446(e) (see   
section 12.12(2) of this 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.   
          
       (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 U.S. trade or   
     business identified in section 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. trade or business, as defined   
     in Notice 88-104, if the foreign person is no longer able to obtain the U.S. ratio from the applicable   
     U.S. trade or business previously identified and if: (A) the U.S. person or 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 requirement set forth   
     in section 12.12(2)(c) of this revenue procedure.   
          
       (b) Other changes in the applicable U.S. trade or business.   
          
       (i) In general. If the foreign person cannot make the change in method of 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 requirement set forth   
in section 12.12(2)(c) of this revenue procedure.   
     
  (c) Short Form 3115 in lieu of a standard Form 3115. In accordance with § 1.446-1(e)(3)(ii), the   
requirement of § 1.446-1(e)(3)(i) to file a standard Form 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   
12.12(2)(a) or 12.12(2)(b) of this revenue procedure. The short Form 3115 (Rev. December 2018)   
must include the following information:   
     
  (i) the identification section of page 1 (above Part I);   
     
  (ii) the signature section at the bottom of page 1;   
     
  (iii) Part I, line 1(a);   
     
  (iv) the information required under section 12.12(1)(b) of this revenue procedure; and   
     
  (v) 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. 2022-14, 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   
Megan McLaughlin 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 simplified method to   
determine the additional § 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 simplified method with   
an historic absorption ratio election (see §§ 1.263A-2(b)(4) and 1.263A-3(d)(4)) and currently   
includes depletion in any part of its historic 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 for the same year of change may file a single Form 3115 for both changes,   
provided the taxpayer enters the designated automatic change numbers for both changes on the   
appropriate line on that Form 3115 and complies with the ordering rules of § 1.263A-7(b)(2). See   
section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.   
     
  (5) Designated automatic accounting method change number.  The designated automatic   
accounting method change number for a change in method of accounting under this section 12.13   
is "215."   
     
  (6) Contact information.  For further information regarding a change under this section, contact   
Andrew Braden 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 accounting for financial reporting purposes, 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 88-89, 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 file a single Form 3115 for all 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 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   
Megan McLaughlin 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, 2018-28 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 December 22, 2027; (iii) satisfies the   
ownership 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 satisfies the ownership test if either: (i) the owner 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   
Megan McLaughlin 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 defined in   
section 12.01(3)(h) of this revenue procedure, that chooses to no longer capitalize costs under   
§ 263A, including for self-constructed assets, pursuant to § 263A(i), proposed § 1.263A-1(j), or   
§ 1.263A-1(j), as applicable.   
     
  (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 taxpayer, as   
defined in section 12.01(3)(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 rules.   
     
  (a) 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), proposed§ 1.263A-1(j) or § 1.263A-1(j), as applicable, to capitalizing costs under   
§ 263A and the accompanying regulations within the prior five taxable years ending with the year   
of change, and such change was made in the first taxable year that the taxpayer did not qualify as   
a small business taxpayer, then such change is disregarded for purposes of section 5.01(f) of Rev.   
Proc. 2015-13, 2015-5 I.R.B. 419.   
     
  (b) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.   
Proc. 2015-13 does not apply to this change for the taxpayer's first, second or third taxable year   
beginning after December 31, 2017. In addition, the eligibility rule in section 5.01(1)(f) of Rev.   
Proc. 2015-13 does not apply to a taxpayer's early application year, or, in the case of a taxpayer   
that does not apply § 1.263A-1(j) in the early application year, the taxpayer's first taxable year   
beginning on or after January 5, 2021. For purposes of this section 12.16, "early application   
year" means the taxable year beginning before January 5, 2021, in which a taxpayer first applies   
§ 1.263A-1(j).   
     
  (4) Reduced filing requirement. A taxpayer is required to complete only the following information   
on Form 3115 (Rev. December 2018) to make this change:   
     
  (a) The identification section of page 1 (above Part I);   
     
  (b) The signature section at the bottom of page 1;   
     
  (c) Part I;   
     
  (d) Part II, all lines except 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),   
proposed § 1.263A-1(j) or § 1.263A-1(j), as applicable, 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 year of change may file a single Form 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 simplified resale method, simplified production method, or    
 the modified simplified production method.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to a taxpayer that uses or is changing to the simplified   
production method, the modified simplified production method, or the simplified resale method   
under §§ 1.263A-2(b), 1.263A-2(c), and 1.263A-3(d), respectively, and that wants to recharacterize   
a section 471 cost, as defined in § 1.263A-1(d)(2), as an additional section 263A cost, as defined   
in § 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 using the modified   
simplified production 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   
§ 1.263A-1(d)(2)(iv), (v), or (vi), § 1.263A-2(b), § 1.263A-2(c), or § 1.263A-3(d).   
     
  (2) Restatement of financial. A taxpayer's restatement of its financial statement does   
not invalidate the taxpayer's method of accounting or change its determination of section 471   
costs in earlier taxable years.   
     
  (3) Certain eligibility rule temporarily 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 for the taxpayer's first,   
second, or third taxable year ending on or after November 20, 2018.   
     
  (4) Reduced filing requirement. A taxpayer is required to complete only the following information   
on Form 3115 (Rev. December 2018) to make this change:   
     
  (a) The identification section of page 1 (above Part I);   
     
  (b) The signature section at the bottom of page 1;   
     
  (c) Part I;   
     
  (d) Part II, all lines except lines 13, 15b, 16c, and 19;   
     
  (e) Part IV, all lines except line 25; and   
     
  (f) Schedule D, all Parts except Part I.   
     
  (5) 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.   
     
  (6) Concurrent automatic changes. A taxpayer making both this change and another automatic   
change under § 263A for the same year of change may file a single Form 3115 for both changes,   
provided the taxpayer enters the designated automatic change numbers for both changes on the   
appropriate line 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.   
     
  (7) Under examination - certain audit protection exception temporarily inapplicable. For a   
taxpayer's first, second, or third taxable year ending on or after November 20, 2018, the audit   
protection rule in section 8.02(1) of Rev. Proc. 2015-13 does not apply to a change in method   
of accounting made under this section 12.17. However, section 8.02(1) of Rev. Proc. 2015-13   
continues to apply for purposes of determining the § 481(a) adjustment period for a positive   
§ 481(a) adjustment provided in section 7.03(3)(b) of Rev. Proc. 2015-13.     
     
  (8) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 12.17 is "237."   
     
  (9) Contact information. For further information regarding a change under this section, contact   
Megan McLaughlin at (202) 317-7007 (not a toll-free number)..18 Revocation of a historic absorption ratio election.   
     
  (1) Description of change. This change applies to a taxpayer that uses the simplified resale   
method with a historic absorption ratio election that wants to revoke its historic absorption ratio   
election and change to the simplified resale method without a historic absorption ratio. This change   
also applies to a taxpayer that uses the simplified production method with a historic absorption   
ratio election that wants to revoke its historic absorption ratio election and change to the simplified   
production method without a historic absorption ratio. This change applies to a revocation of the   
simplified resale method with a historic absorption ratio election or the simplified production   
method with a historic absorption ratio election regardless of whether the year of change is during   
the taxpayer's qualifying period.   
     
  (2) Limited applicability. This change is the exclusive procedure for a taxpayer on the simplified   
production method with a historic absorption ratio election or the simplified resale method with   
a historic absorption ratio election that wants to revoke its historic absorption election under the   
transition rules of §§ 1.263A-2(b)(4)(v)(B) and 1.263A-3(d)(4)(v)(B). This change is applicable   
only for the taxpayer's first, second, or third taxable year ending on or after November 20, 2018.   
A taxpayer that complies with the requirements of this section 12.18 will be deemed to have   
obtained the consent of the Commissioner to make a revocation of its historic absorption ratio   
election under § 446(e).   
     
  (3) Certain eligibility rule temporarily 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 for the taxpayer's first,   
second or third taxable year ending on or after November 20, 2018.   
     
  (4) Manner of making change.   
     
  (a) Cut-off basis. This change is made on a cut-off basis. Accordingly, a § 481(a) adjustment is   
neither permitted nor required.   
     
    (b) Audit protection.   
     
  (i) No audit protection. A taxpayer does not receive audit protection under section 8.01 of Rev.   
Proc. 2015-13 in connection with this change if the taxpayer's revocation of a historic absorption   
ratio election is during a qualifying period or extended qualifying period. See  section 8.02(2) of   
Rev. Proc. 2015-13.   
     
  (ii) Under examination - certain audit protection exception temporarily inapplicable. For a   
taxpayer's first, second, or third taxable year ending on or after November 20, 2018, the audit   
protection rule in section 8.02(1) of Rev. Proc. 2015-13 does not apply to a taxpayer's revocation   
of its historic absorption ratio election as described in this section 12.18 if such revocation is not   
during a qualifying period or extended qualifying period. However, section 8.02(1) of Rev. Proc.   
2015-13 continues to apply for purposes of determining the § 481(a) adjustment period for a   
positive § 481(a) adjustment provided in section 7.03(3)(b) of Rev. Proc. 2015-13.   
     
  (5) Concurrent automatic changes. A taxpayer making both this change and another automatic   
change under § 263A for the same year of change may file a single Form 3115 for both changes,   
provided the taxpayer enters the designated automatic change numbers for both changes on the   
appropriate line 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 12.18 is "238."   
     
  (7) Contact information. For further information regarding a change under this section, contact   
Tom McElroy at (202) 317-7007 (not a toll-free number)..19 Late revocation of elections under § 263A(d)(3).   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to an eligible small business taxpayer within the scope of   
Rev. Proc. 2020-13, 2020-11 I.R.B. 515, that wants to make a late revocation of the election under   
§ 263A(d)(3) provided in section 5.02(2)(b) of Rev. Proc. 2020-13.   
     
  (b) Inapplicability. The IRS will treat the late revocation of an election under § 263A(d)(3)   
that is provided in section 5.02(2)(b) of Rev. Proc. 2020-13 as a change in method of accounting   
with a § 481(a) adjustment only for the taxable years specified in section 12.19(2) of this revenue   
procedure. This treatment does not apply to a taxpayer that makes a late revocation under § 263A(d)   
(3) provided in section 5.02(2)(b) of Rev. Proc. 2020-13 before or after the time specified in   
section 12.19(2) of this revenue procedure, and any such late revocation is not a change in method   
of accounting.   
     
  (2) Time for making the change. The change under this section 12.19 must be made for the   
taxpayer's first, second, or third taxable year beginning after the taxpayer's first taxable year   
beginning in 2018 (2018 taxable year).   
     
  (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 this change for the taxpayer's first, second,   
or third taxable year succeeding the 2018 taxable year.   
     
  (4) Concurrent automatic change. A taxpayer making this change for more than one property   
used predominantly in any farming business of the taxpayer under section 5.02(2)(b) of Rev. Proc.   
2020-13 for the same year of change should file a single Form 3115 for all such farming property.   
The single Form 3115 must provide a single net § 481(a) adjustment for all such changes.   
     
  (5) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change to the method of accounting under this section   
12.19 is "243."   
     
  (6) Contact information. For further information regarding a change under this section, contact   
Anna Gleysteen 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 (as defined in§  957) (CFC) that does not have any United States shareholders (as   
defined in § 951(b)) owning stock of the 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 because it is not qualified stated interest (as defined in§ 1.1273-1(c)). See section 5.02 of   
this revenue procedure for a change to comply with § 163(e)(3) for OID on an obligation held by   
a related foreign person.   
     
  (2) Certain eligibility rules inapplicable. The eligibility rules in sections 5.01(1)(e) and (f) of   
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, do not apply to this change to comply with § 267(a)(3),   
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   
Megan McLaughlin 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  § 404(a)(5) and § 1.404(b)-1T, Q&A 2):   
     
  (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 15 th  day of the 3 rd    
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 15 th  day of the 3 rd  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 15 th  day of   
the 3 rd  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 15 th  day of the 3 rd  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 § 404(a)(6) grace period to a qualified cash or deferred arrangement   
within the meaning of § 401(k) or to a defined contribution 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   
modified by Rev. Rul. 2002-73, 2002-2 C.B. 805.   
     
  (2) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 14.02 is "29."   
     
  (3) Contact information. For further information regarding a change under this section, contact   
John Ricotta at 202-317-4102 or Joyce Kahn at 202-317-4148 (not toll-free numbers).   
     
SECTION 15. METHODS OF ACCOUNTING (§ 446).01 Change in overall method from the cash method to an accrual method.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to a taxpayer that wants to change its overall method of   
accounting from the cash receipts and disbursements method (cash method), as defined in section   
15.01(2)(a) of this revenue procedure, to an accrual method, as defined in section 15.01(2)(b)   
of this revenue procedure. A change under this section 15.01 applies to (1) a taxpayer required   
to make this change by § 448, any other section of the Code or regulations, or in other guidance   
published in the Internal Revenue Bulletin (IRB), 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 to an overall accrual method because it   
is prohibited from using the overall cash method under § 448 may use this section 15.01 regardless   
of whether the year of change is the first taxable year that the taxpayer is required by § 448 to   
change from the cash method, as defined in § 1.448-1(g)(1) ("first  § 448 year"); or a mandatory   
§ 448 year, as defined in proposed§ 1.448-2(g)(1) or § 1.448-2(g)(1), as applicable; or a taxable   
year other than the taxpayer's first § 448 year or mandatory § 448 year, as applicable. Similarly,   
a taxpayer changing to an overall accrual method because it is prohibited from using the overall   
cash method under § 447 may use this section 15.01 regardless of whether the year of change is   
the first taxable 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.   
     
  Additionally, a taxpayer qualifies to change its overall method of accounting from the cash   
method to an accrual method using this section 15.01 even if the taxpayer is also making one or   
more of the following changes in method of accounting for the same year of change:   
     
  (i) adopting the recurring item exception, as defined in section 15.01(2)(c) of this revenue   
procedure, for one or more types of recurring items. See  § 1.461-5(d);   
     
  (ii) adopting or changing to a permissible inventory method of accounting and is either adopting   
this inventory method or qualifies to change to this inventory 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 qualifies to change to this § 263A method using the automatic change   
procedures of Rev. Proc. 2015-13 and a section of this revenue procedure, or the change can be   
made automatically under any section of the Code or regulations, or other guidance published in   
the IRB. See Rev. Rul. 90-38 regarding when a taxpayer may adopt a method of accounting; or   
     
  (iv) adopting or changing to any other special method of accounting (as defined in section   
15.01(2)(d) of this revenue procedure) and is either adopting this special method or qualifies to   
change to this special 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.   
     
  Also, a taxpayer qualifies to use this section 15.01 when that taxpayer, in the taxable year   
immediately preceding the year of change, has used a permissible inventory method for that year,   
and, if that taxpayer was subject to § 263A for that year, has also used a permissible § 263A   
method for that year, and the method(s) continue to be used for the year of change.   
     
  Lastly, for a taxable year beginning after December 31, 2017, or December 31, 2018 in the case   
of specified credit card fees, as defined in§  1.451-3(j)(2), and before January 1, 2021, a taxpayer   
with an applicable financial statement (AFS) that is changing its overall method of accounting   
from the cash method to an accrual method qualifies to use this section 15.01 to comply with   
§ 451(b)(1), and, if applicable, § 451(b)(4), or the proposed regulations under § 1.451-3 (REG-   
104870-18; 84 FR 47191) (proposed § 1.451-3). For a taxable year beginning after December 31,   
2017, or December 31, 2018 in the case of specified credit card fees, a taxpayer with an AFS that   
is changing its overall method of accounting from the cash method to an accrual method qualifies   
to use this section 15.01 to comply with § 1.451-3. For purposes of this section 15.01, the term   
"AFS" is defined under: § 451(b)(3) for a taxpayer making a change to comply with § 451(b);   
proposed § 1.451-3(c)(1) for a taxpayer making a change to comply with proposed § 1.451-3; or   
§ 1.451-3(b)(5) for a taxpayer making a change to comply with § 1.451-3.   
     
  (b) Inapplicability. This change does not apply to:   
     
  (i) a taxpayer that is making a change from a hybrid method of accounting as defined in section   
15.01(2)(e) of this revenue procedure;   
     
  (ii) a taxpayer that is changing its method of accounting for one or more items of income or   
expense, but not its overall method of accounting. See section 15.09 of this revenue procedure   
for a description of accounting method changes from the cash method to an accrual method for   
specific items that are to be made using 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 item(s) of gross income that are subject to § 451 and item(s)   
of gross income that are subject to a special method of accounting, as defined in § 451(b)(2),   
proposed § 1.451-3(c)(5) or § 1.451-3(a)(14), as applicable, including 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 offset method, as defined   
in § 1.451-3(c), if the 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, as defined   
in § 1.451-8(e), for the same year of change by using section 16.10 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 for specified   
fees as defined in proposed § 1.451-3(i)(2) or § 1.451-3(j)(2), as applicable, other than specified   
credit card fees;   
     
  (xi) a taxpayer that wants to make a change in method of accounting for payments within the   
scope of the specified good exception, as defined in§ 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; or   
     
  (xii) a taxpayer with an AFS that makes a change to apply § 1.451-3 for a taxable year that   
begins before January 1, 2021, and fails to comply with the requirements in § 1.451-3(m)(3).   
     
  (2) Definitions.     
     
  (a) Cash method of accounting  is the method identified by § 446(c)(1) and §§ 1.446-1(c)(1)(i),   
1.451-1(a), and 1.461-1(a)(1). In addition, solely for purposes of this section 15.01, a method of   
accounting in which a taxpayer uses an accrual method for purchases and sales of inventories, and   
uses the cash method for computing all other items of income and expense is deemed to be a cash   
method of accounting and not a hybrid method of accounting.   
     
  (b) Accrual method of accounting  is a method identified by§  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  is the method described in § 461(h)(3) and § 1.461-5.   
     
  (d) Special method of accounting  within the meaning of this section 15.01 is a method of   
accounting, other than the cash method, expressly permitted or 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, and a long-term contract method   
under § 460. In contrast, application of the all-events test under a specific set 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.   
     
  (e) Hybrid method of accounting  is a combination of the cash and accrual methods under which   
one or more items of income or expense are reported on the cash method and one or more items of   
income or expense are reported on an accrual method. For purposes of this section 15.01, a hybrid   
method of accounting does not include a method of accounting in which a taxpayer uses an accrual   
method for purchases and sales of inventories and uses the cash method for computing all other   
items of income and expense.   
     
  (3) Manner of making change.   
     
    (a) Section 481(a) adjustment.   
     
  (i) In general. A taxpayer changing its method of accounting under this section 15.01 must   
compute a § 481(a) adjustment. This adjustment must reflect the account 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.   
     
  (ii) Temporary rule for certain S corporation revocations. The rules in this section 15.01(3)   
(a)(ii) apply to an eligible terminated S corporation, as defined in § 481(d)(2), that changes to an   
overall accrual method of accounting in the C corporation's first taxable year after its revocation   
of its election under § 1362(a), and such revocation occurs during the two-year period beginning   
on December 22, 2017.   
     
  (A) Required spread period. Pursuant to § 481(d)(1), an eligible terminated S corporation   
required to change to an overall accrual method as a result of a revocation of its S corporation   
election that changes its method of accounting under this section 15.01 in the C corporation's first   
taxable year after such revocation, takes into account the resulting positive or negative adjustment   
required by § 481(a)(2) ratably during the six-year period beginning with the year of change.   
     
  (B) Optional six-year spread period. An eligible terminated S corporation that is permitted to   
continue to use the overall cash method after the revocation of its S corporation election, and that   
changes to an overall accrual method under this section 15.01 in the C corporation's first taxable   
year after such revocation, may take into account the resulting positive or negative adjustment   
required by § 481(a)(2) ratably during the six-year period beginning with the year of change   
instead of using the adjustment periods provided in section 7.03(1) of Rev. Proc. 2015-13. An   
eligible terminated S corporation that wants to use this six-year spread period must indicate in the   
statement required by Line 26 of Form 3115 (Rev. December 2018) that it is making the change   
in method of accounting with the spread period permitted under this section 15.01(3)(a)(ii)(B) on   
its timely filed Form 3115.   
     
  (iii) Section 481(a) adjustment period for changes relating to specified credit card fees. In the   
case of income from a specified credit card fee, the § 481(a) adjustment period for any qualified   
change in method of accounting is six taxable years (year of change and next five taxable years).   
For purposes of this section 15.01(3)(a)(iii), a qualified change in method of accounting is a   
change in method of accounting for income from a specified credit card fee to a method that is   
required by § 451(b), as added by section 13221 of Public Law 115-97, 131 Stat. 2054 (Dec. 22,   
2017), commonly referred to the Tax Cuts and Jobs Act (TCJA), for such income, but only for   
the taxpayer's first taxable year beginning after December 31, 2018. Accordingly, a taxpayer that   
makes a qualified change in method of accounting as part of its overall method change under   
section 15.01 of this revenue procedure is required to use an adjustment period of six taxable   
years for the portion of the overall § 481(a) adjustment that is attributable to the qualified change   
in method of accounting. The § 481(a) adjustment period for the remainder of the overall § 481(a)   
adjustment required by section 15.01(3)(a)(i) of this revenue procedure is determined without   
regard to the qualified change in method of accounting.   
     
  (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 attach a statement to its Form 3115, Application for    
 Change in Accounting Method    (Rev. December 2018) that provides a description of the proposed   
method(s) under § 1.451-3 to which it is changing. For example, a taxpayer that chooses to apply   
the alternative AFS revenue method in § 1.451-3(b)(2)(ii) must indicate in the statement attached   
to its Form 3115 that it is choosing to comply with the AFS income inclusion rule in § 1.451-3(b)   
(1) by applying the alternative AFS revenue method described in § 1.451-3(b)(2)(ii).   
     
  (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)(e)(ii) of this   
revenue procedure, a taxpayer that is changing from the overall cash method to an overall 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 file a single Form   
3115 for all changes 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 a   
change from the overall cash method to an overall accrual method under this section 15.01 and a   
change to the deferral method for advance payments under section 16.06 or 16.10 of this revenue   
procedure must timely file a 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. 2015-13 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 change to an overall 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. The taxpayer must   
timely file individual Forms 3115 for each change requested. This section 15.01 will govern the   
change to an overall accrual method.   
     
  (e) Concurrent change in accounting method not permitted to be implemented using the    
 automatic change procedures of Rev. Proc. 2015-13 and a section of this revenue procedure, any    
 section of the Code or regulations, or other guidance published in the IRB. A taxpayer that does   
not qualify to change from the overall cash method to an overall accrual method under this section   
15.01 because that 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.   
2015-13. See Rev. Proc. 2022-1, 2022-1 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 first § 448 year or a mandatory § 448 year, as applicable.   
     
  (a) First § 448 year. If the year of change is the first § 448 year for a taxpayer that qualifies to   
make the change from the cash method under the provisions of § 1.448-1(g) and (h) as well as   
this section 15.01, that taxpayer may choose to comply with the requirements and provisions of   
§§ 1.448-1(g) and (h) in addition to the requirements and provisions of this section 15.01. For   
example, if the taxpayer is a hospital, defined in§  1.448-1(g)(2)(ii)(B), and the taxpayer chooses   
to make its change from the cash method for the first § 448 year, as defined in§  1.448-1(g), using   
this section 15.01, the applicable § 481(a) adjustment period is provided by § 1.448-1(g)(2)(ii). If   
a taxpayer chooses not to implement its change from the cash method using this section 15.01, the   
taxpayer must make the change under the provisions of §§ 1.448-1(g) and (h).   
     
  (b) Mandatory § 448 year. For a taxpayer applying proposed § 1.448-2 or § 1.448-2, as   
applicable, if the year of change is a mandatory § 448 year, as defined in proposed § 1.448-   
2(g)(1) or § 1.448-2(g)(1), as applicable, such taxpayer 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 proposed § 1.448-2(g) or § 1.448-2(g), as applicable, in addition   
to the requirements and provisions of this section 15.01.   
     
  (5) Eligibility rules inapplicable.    
     
  (a) Prior change eligibility rule inapplicable. Any prior change to the overall cash method that   
the taxpayer implemented using the provisions of Rev. Proc. 2001-10, as modified by Rev. Proc.   
2011-14, or Rev. Proc. 2002-28, as modified by Rev. Proc. 2011-14, is disregarded for purposes   
of section 5.01(1)(e) of Rev. Proc. 2015-13. Additionally, for a taxpayer making a change from   
the cash method in the first § 448 year, a mandatory § 448 year, or a mandatory § 447 year, 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.   
     
    (b) Eligibility rule temporarily inapplicable for changes to comply with § 451(b). For a taxpayer   
with an AFS that changes to an overall accrual method under this section 15.01 that complies   
with § 451(b)(1), and, if applicable, § 451(b)(4), or proposed § 1.451-3, the eligibility rule in   
section 5.01(1)(e) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, does not apply to such change for the   
taxpayer's first, second or third taxable year beginning after December 31, 2017, provided such   
taxable year begins before January 1, 2021. In addition, for a taxpayer with an AFS that changes   
to an overall accrual method under this section 15.01 that complies with § 1.451-3 for a taxable   
year beginning before January 1, 2021, the eligibility rule in section 5.01(1)(e) of Rev. Proc. 2015-   
13 does not apply to such change for such taxable year. For a taxpayer with an AFS that does not   
apply § 1.451-3 for a taxable year beginning before January 1, 2021, and changes to an overall   
accrual method under this section 15.01 that complies with § 1.451-3 for the first taxable year that   
begins on or after January 1, 2021, the eligibility rule in section 5.01(1)(e) of Rev. Proc. 2015-13   
does not apply to such change for such taxable year.   
     
  (6) No ruling on method used. The consent granted under section 9 of Rev. Proc. 2015-13   
for a change made under this section 15.01 is not a determination by the Commissioner that   
the new method of accounting is a permissible method of accounting under § 451 and does not   
create a presumption that the allocation method used under § 451(b)(4) is a permissible method   
of accounting. The director may ascertain whether the new method of accounting is a permissible   
method of accounting under § 451 and whether the allocation method is permissible under § 451(b)   
(4). This section 15.01(6) does not apply to a taxpayer with an AFS that is making a change to a   
method of accounting permissible under proposed § 1.451-3 or § 1.451-3.   
     
  (7) Designated automatic accounting method change number.    
     
  (a) Change made in the first  448 year §. The designated automatic accounting method change   
number for a change from the cash method to an accrual method in the first § 448 year is "123."   
Entering designated automatic accounting method change number "123" on the appropriate line   
on the Form 3115 fulfills the requirement of § 1.448-1(h)(2)(i) to type or print "Automatic Change   
to Accrual Method - Section 448" at the top of page 1 of the Form 3115.   
     
  (b) 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."   
     
  (c) 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."   
     
  (d) All other changes from the cash method to an overall accrual method. The designated   
automatic accounting method change number for all other changes from the cash method to an   
accrual method under this section 15.01 is "122."   
     
  (8) Contact information. For further information regarding a change under this section, contact   
Megan McLaughlin at 202-317-7007 (not a toll-free number)..02 Multi-year insurance policies for multi-year service warranty contracts.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to a manufacturer, wholesaler, or retailer of motor   
vehicles or other durable 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 intermediary). The classification   
of goods as "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 taxpayer 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) 317-7011 (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.   
1169, as modified by Rev. Proc. 2011-14, 2011-4 I.R.B.330, and as modified and amplified by   
Rev. Proc. 2011-46, 2011-42 I.R.B. 518.   
     
  (b) Inapplicability. This change does not apply to a taxpayer within the scope of sections 3.01(6)   
through 3.01(8) of Rev. Proc. 2006-56,asmodified. Proc. 2011-46. Rev and amplified by   
     
  (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 modified and amplified by Rev. Proc.   
2011-46, is made with a § 481(a) adjustment.   
     
  (b) Changes made on a cut-off basis.   
     
  (i) In general. A change described in section 3.01(4) of Rev. Proc. 2006-56 is made on a   
cut-off basis and the new 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 after the first day of the year   
of change. 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) Special filing rules for changes made under section 5.02 and 5.03 of Rev. Proc. 2011-46, as    
 modified by this revenue 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 5.03 of Rev. Proc. 2011-46, as modified by this revenue procedure.   
     
  (B) Filing rules. In accordance with § 1.446-1(e)(3)(ii), the requirement of § 1.446-1(e)(3)(i)   
to file a Form 3115 is waived and a statement in lieu of a Form 3115 is authorized for this change.   
Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13, the statement   
in lieu of a Form 3115 that is permitted under 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 consent procedures of Rev.   
Proc. 2015-13. However, the requirement to file the duplicate copy, under section 6.03(1)(a) of   
Rev. Proc. 2015-13, is waived. See section 5.02 or 5.03 of Rev. Proc. 2011-46, as applicable, for   
what information is required to be provided on the statement.   
     
  (3) Concurrent change to overall 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 first § 448 year or mandatory § 448 year),   
must file a single Form 3115 for 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. 2015-13 for information on   
making concurrent changes.   
     
  A taxpayer making both an automatic change to, from, or within a NAE method of accounting   
under this section 15.03 and a required change to an overall accrual method under § 448 for the   
taxpayer's first § 448 year, and is either not eligible to make the change to an overall accrual   
method under section 15.01 of this revenue procedure or chooses to make the change to an overall   
accrual method using the procedures of § 1.448-1(h)(2) for the taxpayer' first§ 448 year, must   
make both changes (change to, from, or within a NAE method and change to an overall accrual   
method) on a single Form 3115. The taxpayer must follow the automatic change procedures of   
Rev. Proc. 2015-13 and this section 15.03 for the NAE change, and the procedures of § 1.448-   
1(h)(2) for the change to an overall accrual method for the taxpayer's first  § 448 year except that   
entering the designated automatic accounting method change number "34" on the Form 3115   
fulfills the requirement of § 1.448-1(h)(2) to type or print "Automatic Change to Accrual - Section   
448" at the top of page 1 of the Form 3115. The taxpayer must complete all applicable sections   
of Form 3115, including sections that apply to the change to an overall accrual method and to the   
change to the NAE method and must enter the designated automatic accounting method changes   
numbers for both changes on Form 3115.   
     
  (4) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change to, from, or within a NAE method of accounting   
under this section 15.03 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 short-term consumer loans described in Rev. Proc.   
83-40, 1983-1 C.B. 774, which was obsoleted by Rev. Proc. 97-37, 1997-2 C.B. 455.   
     
  (2) Background.   
     
  (a) A short-term consumer loan is 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 not in excess of five years (with no balloon 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 § 1.1272-1(b) for a description of the constant yield   
method. The Rule of 78's method generally front-loads interest as compared to the constant yield   
method.   
     
  (d) Rev. Proc. 83-40 was obsoleted because, under §§ 1.446-2 and 1.1272-1 (which were   
effective for debt instruments issued on or after April 4, 1994), 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. 2004-36, 2004-1 C.B. 1063. This safe harbor method of accounting applies to a taxpayer   
engaged in the trade or business of film production and to creative property costs (as defined in   
section 2.01 of Rev. Proc. 2004-36) properly written off by the taxpayer under The American   
Institute of Certified Public Accountants Statement 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   
Bernard Harvey 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-efficient manner; (c) the taxpayer's liability for 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 benefit to the   
provider is not a principal purpose of the arrangement; (g) the taxpayer records a liability for the   
payment on its annual statement filed for state regulatory 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 applies to a "bank" as defined in § 1.166-2(d)(4)(i)   
that: (a) uses an overall accrual method of accounting to determine its 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) 317-6945 (not a toll-free number)..08 Change from the cash method to an accrual method for specific items.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to a taxpayer that uses an overall accrual method of   
accounting but has identified a specific item or items of income or 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 from cash to accrual. Such a taxpayer may be eligible   
to change to an overall accrual method using section 15.01 of this revenue procedure.   
     
  (b) Inapplicability. This change does not apply to:   
     
  (i) 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;   
     
  (ii) a cooperative organization described in § 501(c)(12), 521, or 1381;   
     
  (iii) an individual taxpayer, except for activities conducted as a sole proprietorship;   
     
  (iv) a taxpayer engaged in two or more trades or businesses, unless the taxpayer makes this   
change so that the identical accrual method is used for each such trade or business beginning with   
the year of change;   
     
  (v) a change in method of accounting for any payment liability described in § 1.461-4(g);   
     
  (vi) a change in the method of accounting for interest that is not taken into account under   
§ 1.446-2;   
     
  (vii) 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   
     
  (viii) any change that is specifically provided in another section of this revenue procedure.   
     
  (2) Definitions.   
     
  (a) "Cash method of accounting" is the method identified by§  446(c)(1) and §§ 1.446-1(c)(1)   
(i), 1.451-1(a), and 1.461-1(a)(1).   
     
  (b) "Accrual method of accounting" is the method identified  446(c)(2) and §§ 1.446-1(c)   
(1)(ii), 1.451-1(a), and 1.461-1(a)(2).   
     
  (3) Additional requirements. To change a method of accounting under this section 15.08, a   
taxpayer must attach to its completed Form 3115 a full and complete description of each specific   
item for which the change in method of accounting is being made and how the accrual method of   
accounting applies to each item, and list the § 481(a) adjustment, if any, for each item associated   
with the change. The change is fully and completely described if each income and expense   
item is described with specificity 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 completely the specific item for which the change in method of accounting is   
being made. In contrast, a taxpayer that states that it is changing its method of accounting for print   
advertising expenses from the cash method of accounting to an accrual method of accounting,   
describes all of the relevant facts related to the print advertising expenses, and explains how   
the all-events test applies to those facts and when economic performance occurs has fully and   
completely described the item and the change. See section 6.03 of Rev. Proc. 2015-13, 2015-5   
I.R.B. 419, for additional filing requirements.   
     
  (4) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 15.08 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 taxpayer may, in   
certain specified and limited 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 cut-off basis and applies only to qualified advance 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) to file a standard   
Form 3115 is waived and pursuant to section 6.02(2) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, a   
short Form 3115 is authorized for this change. The short Form 3115 (Rev. December 2018) must   
include the following information:   
     
  (i) the identification section of page 1 (above Part I);   
     
  (ii) the signature section at the bottom of page 1;   
     
  (iii) Part I, line 1(a); 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   
David Christensen at (202) 317-7011 (not a toll-free number)..10 Overall cash method for specified transportation industry taxpayers.   
     
  (1) Description of change. This change applies to a "specified transportation industry taxpayer"   
with "average annual gross receipts" of more than the inflation-adjusted amount, as defined in   
section 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 disbursement (cash) method. For a small business taxpayer,   
as defined in section 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) Definitions. For purposes of this section 15.10 the following definitions apply:   
     
  (a) Specified transportation industry taxpayer. A specified transportation industry taxpayer is a   
taxpayer that satisfies the following criteria for the year of change:   
     
  (i) The taxpayer reasonably identifies its "business" (as defined in section 15.10(2)(b) of this   
revenue procedure) as being described in one of the following NAICS subsector codes (first three   
digits 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 a "specified transportation industry taxpayer"   
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 sightseeing transportation activity satisfies the 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 is not a "specified   
transportation industry 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 the rail transportation activity satisfies the 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 of more than   
the inflation-adjusted amount 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 year   
are more than the inflation-adjusted 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 defined consistent with § 1.448-2(c)(2)(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) Inflation-adjusted amount. The inflation-adjusted amount is the dollar amount specified   
§ 448(c)(1), adjusted for inflation. See  § 448(c)(4). For a taxable year beginning in 2019, 2020,   
or 2021, the inflation-adjusted amount is $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. 2020-45, 2020-46 I.R.B. 1016, as   
applicable. For a taxable year beginning in 2022, the inflation-adjusted amount is $27,000,000.   
 See    Rev. Proc. 2021-45, 2021-48 I.R.B. 764.   
     
  (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" is the method identified  446(c)(1) and §§ 1.446-1(c)   
(1)(i), 1.451-1(a), and 1.461-1(a)(1).   
     
  (3) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 15.10 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, which satisfies the description of the NAICS   
subsector code 484. Taxpayer X  determines that its 3-year average annual gross receipts for each prior taxable year have   
been more than the inflation-adjusted amount as defined in section 15.10(2)(f) of this revenue procedure and not in excess   
of $50,000,000. Taxpayer X  qualifies to change to the overall cash method using this section 15.10.   
     
  (5) Contact information. For further information regarding a change under this section, contact   
Megan McLaughlin 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) Definitions. The following definitions apply for purposes of this section 15.11.   
     
  (a) Bank. A bank is described in this section 15.11(2)(a) if the bank:   
     
  (i) is a bank as defined in § 581;   
     
  (ii) is an S corporation as defined in § 1361(a)(1), or a qualified S  subsidiary as   
defined in § 1361(b)(3)(B); 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 is the method identified by § 446(c)(1) and §§ 1.446-1(c)(1)   
(i), 1.451-1(a), and 1.461-1(a)(1).   
     
  (ii) Special methods. A few of the special methods typically used by banks include those   
provided for the accounting treatment of the following items: securities held by a dealer in   
securities as defined in § 475(c)(1) (the mark-to-market method of § 475); securities held by a   
dealer in securities as defined in§  1.471-5 (inventories maintained under § 471 and § 1.446-1(c)   
(2)(i)); hedging transactions (§ 1.446-4); contracts to which § 1256 applies (§ 1256); original issue   
discount on debt instruments (§§ 163(e) and 1271-1275); interest income (including 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 mortgages and any other securities (as defined in§  475(c)   
(2)) held by the bank.   
     
  (3) Additional condition of change. To change to an overall cash/hybrid method under this section   
15.11, 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 considered satisfied if the bank reconciles   
the results obtained under the method used in keeping its books and records and those obtained   
under the method used for federal income tax purposes pursuant to this section 15.11 and the bank   
maintains sufficient records to support such reconciliation. See also  § 1.446-1(a)(4).   
     
  (4) Additional filing requirement. To change to an overall cash/hybrid method under this section   
15.11, a bank must include with its completed Form 3115 a description of each specific item of   
the bank's income or expense that is affected by the change under this section 15.11 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 defined consistent with§  1.448-2(c)(2)(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) 317-6945 (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 disbursement (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 of farming.   
     
  (b) Inapplicability. This change does not apply to a taxpayer that is required to use an accrual   
method pursuant to § 447, or prohibited from using the cash method by § 448.   
     
  (2) Definitions.   
     
  (a) Cash method of accounting is the method defined by§  446(c)(1) and §§ 1.446-1(c)(1)   
(i), 1.451-1(a), and 1.461-1(a)(1). See also §§ 1.61-4 and 1.162-12forspecificrules relating to   
farmers.   
     
  (b) The trade or business of farming is a farming business as defined  by § 263A(e)(4) and the   
regulations thereunder.   
     
  (3) Certain eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(e) of   
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, does not apply to this change for a taxpayer's first, second,   
or third taxable year beginning after December 31, 2017.   
     
  (4) 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.   
     
  (5) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 15.12 is "128."   
     
  (6) Contact information. For further information regarding a change under this section, contact   
Sophia Wang 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. 2008-   
30, 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 115-97 (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 capitalized 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   
Charles W. Culmer 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 the conditions specified in section III.C of Notice 2016-36 are met.   
     
  (b) Safe harbor terminates. This change, as described in Notice 2016-36, applies to a utility that   
is using the safe harbor method of accounting provided in section III.C of Notice 2016-36 and is   
required to terminate that safe harbor method of accounting because of the occurrence of an event   
specified in section 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) Definitions. For purposes of this section 15.15, the terms "utility," "intertie," "dual-use   
intertie," and "generator" are defined in section III.B of Notice 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 the same year of change should   
file a single Form 3115 for all such transfers. The single Form 3115 must provide a single net   
§ 481(a) adjustment for all changes under section 15.15(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, 2016-30 I.R.B.   
164, applies to a taxpayer that holds shares in a money market fund (MMF) as defined in § 1.446-   
7(b)(4) (giving effect to § 1.446-7(c)(5), under which MMF holdings in different accounts are   
treated as different MMFs) and that wants to change its method of accounting for gain or loss on   
the shares from a realization method to the NAV method described in § 1.446-7 or from the NAV   
method to a realization method.   
     
  (2) Certain eligibility rules inapplicable. The eligibility rules in sections 5.01(1)(c), (d), and (f)   
of Rev. Proc. 2015-13 do not apply to this change.   
     
  (3) Definitions.   
     
  (a) "Rule 2a-7" means Rule 2a-7 (17 CFR 270.2a-7) under the Investment Company Act of   
1940.   
     
  (b) "Floating-NAV MMF" means an MMF that is required to value its assets using market   
factors and to round its price per share to the nearest basis point (the fourth decimal place, in the   
case of a fund with a $1.0000 share price) under Rule 2a-7.   
     
  (c) "Stable-NAV MMF" means an MMF that is not a floating-NAV MMF.   
     
  (4) Manner of making change.   
     
  (a) A change to or from the NAV method is made on a cut-off basis. See  § 1.446-7(c)(8).   
Accordingly, a § 481(a) adjustment is neither permitted nor 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 defined  1.446-7(b)(7)) in   
those shares for the year of change equal to the aggregate adjusted basis of the taxpayer's shares   
in the MMF at the end of the 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 first day of the year of change to account 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 computing the ending value (as defined in § 1.446-7(b)(2)) of the shares in that MMF   
for the final computation period (as defined in § 1.446-7(b)(1)) of the taxable year prior to the year   
of change.   
     
  (b) Short Form 3115 in lieu of a standard Form 3115. In accordance with § 1.446-1(e)(3)(ii),   
the requirement of § 1.446-1(e)(3)(i) to file a standard Form 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 revenue procedure, the taxpayer must file a short Form 3115 (Rev. December 2018) that   
includes the following information:   
     
  (i) the identification section of page 1 (above Part I);   
     
  (ii) the signature section at the bottom of page 1;   
     
  (iii) Part I, line 1(a);   
     
  (iv) a statement specifying whether the taxpayer is changing from a realization method to the   
NAV method or from the NAV method to a realization method; and   
     
  (v) a statement specifying the MMF or MMFs to which the change applies, if the change does   
not apply to all MMFs in which the taxpayer holds shares (and, to the extent applicable, whether   
the change applies only to shares of the MMF or MMFs held in a particular account).   
     
  (c) No Form 3115 Required. In 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 without filing a Form 3115 if the following requirements are satisfied:   
     
  (i) the taxpayer has not used the NAV method for shares in the MMF for any taxable year prior   
to the year of change; and   
     
  (ii) prior to the year of change, either   
     
  (A) the taxpayer's basis in each share of the MMF has been at all times equal to the MMF's   
target share price, or   
     
  (B) the taxpayer has not realized any gain or loss with respect to shares in the MMF.   
     
  (5) Multiple changes. A taxpayer making multiple changes under this section 15.16 for the same   
year of change on a short Form 3115 should file a single short Form 3115. The short Form 3115   
will be treated as applying to all shares that the taxpayer holds in any MMF unless the taxpayer   
specifies the MMFs to which the change applies. If the taxpayer specifies an MMF, the short Form   
3115 will be treated as applying to all shares in that MMF held in any account by the taxpayer,   
unless the short Form 3115 specifies the accounts to which the change applies.   
     
  (6) Designated automatic accounting method change number. The designated automatic   
accounting method change 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) 317-6945 (not a toll-free number)..17 Small business taxpayer changing to overall 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 defined in section   
15.17(4)(a) of this 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 from an overall accrual method of accounting to the overall cash method of   
accounting for a trade or business, and is otherwise not prohibited from using the overall cash   
method or required to use another overall method of accounting;   
     
  (b) change from an overall accrual method of accounting for a trade or business 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 from the overall cash method of accounting for a trade or business 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   
to the overall cash/hybrid method under section 15.11 of this revenue procedure if it meets the   
requirements of that section.   
     
  (b) Farmers changing to overall cash method. This change does not apply to a farming business   
changing to the overall 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 overall cash method for a trade or business   
includes amounts attributable to open accounts receivable, as defined in section 15.17(5)(c) of   
this revenue procedure, in income as the amounts are actually or constructively received on the   
receivables.   
     
  (5) Definitions.     
     
  (a) Small business taxpayer. "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.   
     
  (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 of $25,000,000 or less (adjusted for   
inflation), as described in § 448(c), proposed §§ 1.448-2(c), proposed § 1.460-3(b)(3), § 1.448-   
2(c) or § 1.460-3(b)(3), as applicable. For taxable years beginning in 2019, 2020 and 2021, the   
inflation-adjusted amount is $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. 2020-45, 2020-46 I.R.B. 1016, as applicable. For   
a taxable year beginning in 2022, the inflation-adjusted amount is $27,000,000. See Rev. Proc.   
2021-45, 2021-48 I.R.B. 764.   
     
  (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 rules.   
     
  (a) Eligibility rule inapplicable. For a change described in section 15.17(2) of this revenue   
procedure, any prior change in method of accounting to an overall accrual method that was made   
in the taxpayer's first § 448 year (as defined in section 15.01(1)(a) of this revenue procedure), a   
mandatory § 448 year (as defined in proposed § 1.448-2(g)(1) or § 1.448-2(g)(1), as applicable),   
or a mandatory § 447 year (as defined in section 15.01(1)(a) of this revenue procedure), as   
applicable, is disregarded for purposes of section 5.01(1)(e) of Rev. Proc. 2015-13.   
     
  (b) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(e) of Rev.   
Proc. 2015-13 does not apply to this change for a taxpayer's first, second, or third taxable year   
beginning after December 31, 2017. In addition, the eligibility rule in section 5.01(1)(e) of Rev.   
Proc. 2015-13 does not apply to a taxpayer's early application year, or, in the case of a taxpayer that   
does not apply § 1.448-2 in the early application year, the taxpayer's first taxable year beginning   
on or after January 5, 2021. For purposes of this section 15.17, "early application year" means the   
taxable year beginning before January 5, 2021, in which a taxpayer first applies § 1.448-2.   
     
  (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 long-term 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 or after the first day of the year of change. 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 of change may file a single Form 3115 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 overall 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 inventories, 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   
Anna Gleysteen 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 of accounting that is a   
bank as defined in § 581 (or whose primary business is making or managing loans) and wants   
to change its method of accounting to comply with § 451 and § 1.451-1(a) for qualified stated   
interest (as defined in § 1.1273-1(c)) on nonperforming loans.   
     
  (b) Section 1.451-1(a) requires income to be accrued when all the events have occurred that   
fix the right to receive the income and the amount thereof can be determined with reasonable   
accuracy. A taxpayer may not stop accruing qualified stated interest on a nonperforming loan   
for federal income tax purposes merely because payments on the loan are overdue by a certain   
length of time, such as 90 days, even if a federal, state, or other regulatory authority having   
jurisdiction over the taxpayer permits or requires that the overdue interest not be accrued for   
regulatory purposes.   
     
  (c) Under § 451 and § 1.451-1(a), a taxpayer must continue accruing qualified stated interest on   
any nonperforming loan until either (i) the loan is worthless under § 166 and charged off as a bad   
debt, or (ii) the interest is determined to be 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 amount of qualified stated interest on 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) 317-6945 (not a toll-free number)..02 Advance rentals.   
     
  (1) Description of change. This change applies to a taxpayer that wants to change its method   
of accounting for advance 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 reduction (CCR) payments specified in Rev.   
Proc. 2002-36, 2002-1 C.B. 993.   
     
  (2) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 16.04 is "39."   
     
  (3) Contact information. For further information regarding a change under this section, contact   
Bill Ruane at (202) 317-4718 (not a toll-free number)..05 Credit card annual fees.   
     
  (1) Description of change. This change applies to a taxpayer that wants to change its method of   
accounting for credit card annual fees as described in Rev. Rul. 2004-52, 2004-1 C.B. 973, either   
to a method that satisfies the all events test in accordance with Rev. Rul. 2004-52 or to the Ratable   
Inclusion Method for Credit Card Annual Fees that is described in 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 is satisfied. Rev. Proc. 2004-32 provides additional guidance for taxpayers seeking   
to change their methods of accounting for such fees, including guidance with respect to the Ratable   
Inclusion Method for Credit Card Annual Fees. However, a taxpayer may make either change under   
this 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, a taxpayer   
must identify the specific method to which the taxpayer is changing.   
     
  (3) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 16.05 to a method that satisfies   
the all events test in accordance with Rev. Rul. 2004-52 is "80." The designated 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) 317-7053 (not a toll-free number)..06 Advance payments.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to a taxpayer using or changing to an overall accrual   
method of accounting that receives advance payments, as defined in Rev. Proc. 2004-34, 2004-   
1 C.B. 991, as modified and clarified by Rev. Proc. 2011-18, 2011-5 I.R.B. 443, and Rev. Proc.   
2013-29, 2013-33 I.R.B.141, and as modified by Rev. Proc. 2011-14, 2011-4 I.R.B. 330, and   
wants to change to either the full inclusion or deferral method, as described in Rev. Proc. 2004-34,   
other than a taxpayer changing to a method described in section 16.08 of this revenue procedure.   
 See    also  Notice 2018-35, 2018-18 I.R.B. 520, and Announcement 2004-48, 2004-1 C.B. 998.   
     
  (b) Inapplicability.   
     
  (i) In general. This change does not apply to a taxpayer that wants to use the Deferral Method   
for payments described in section 5.02(4)(a) of Rev. Proc. 2004-34 (other than allocable payments   
described in section 5.02(4)(c) of Rev. Proc. 2004-34) or for payments for which a method under   
section 5.02(3)(b)(i) or (iii) of Rev. Proc. 2004-34 applies. The taxpayer must request any such   
change in method of accounting using the non-automatic change procedures in Rev. Proc. 2015-   
13, 2015-5 I.R.B. 419. See  section 8.03 of Rev. Proc. 2004-34.   
     
  (ii) Limited time to make change. This change does not apply to taxable years beginning on or   
after January 1, 2021.   
     
  (2) Certain eligibility rule temporarily 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 changes to a method of   
accounting provided under section 16.06(1)(a) of this revenue procedure for the taxpayer's first or   
second taxable year ending on or after May 9, 2018.   
     
  (3) Concurrent automatic change to an overall accrual method. A taxpayer making both a   
change to its method of accounting for advance payments under this section 16.06 and a change   
to an overall accrual method under section 15.01 of this revenue procedure for the same year   
of change must file a single Form 3115 for both changes and enter the designated 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 section 16.06(1)(a) of this revenue   
procedure to use the full-inclusion method is "83." The designated automatic accounting method   
change number for a change under section 16.06(1)(a) of this revenue procedure to use the deferral   
method is "84."   
     
    (5) Contact information. For further information regarding a change under this section, contact   
Maria Castillo-Valle at (202) 317-7003 (not a toll-free number)..07 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 16.07 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 16.07(2)(b) of this revenue procedure, a taxpayer changing   
its method of accounting under this section 16.07 must take into account a § 481(a) adjustment.   
     
  (b) For retainages received and paid in connection with long term contracts that are exempt   
construction contracts (as defined in § 1.460-3(b)(1)) accounted for using the taxpayer's overall   
accrual method of accounting, this change is made on a cut-off basis and applies only to long-term   
contracts entered into on or 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 16.07 for retainages not   
received under long-term contracts is "130." The designated automatic method change number   
for a change under this section 16.07 for retainages received under long-term contracts is "217."   
A taxpayer making a change under this section 16.07 that has both types of retainages must file a   
single 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) 317-7011 (not a toll-free number)..08 Change in applicable financial 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 that has an applicable financial statement (AFS), as defined   
in section 4.06 of Rev. Proc. 2004-34, 2004-1 C.B. 991, as modified and clarified by Rev. Proc.   
2011-18, 2011-5I.R.B.443,andRev.Proc.2013-29,2013-33I.R.B.141,andasmodifiedby Rev.   
Proc. 2011-14, 2011-4 I.R.B. 330, that: (A) receives advance payments, as defined in section 4   
of Rev. Proc. 2004-34, (B) uses the deferral method described in section 5.02(3)(a) of Rev. Proc.   
2004-34 for including those advance payments in gross income in accordance with its AFS, (C)   
changes the manner in which it recognizes advance payments in revenues in its AFS, and (D) wants   
to change its method of accounting to use the new AFS method of recognizing advance payments   
in revenues in its AFS for determining the extent to which advance payments are included in gross   
income under Rev. Proc. 2004-34. See also  Notice 2018-35, 2018-18 I.R.B. 520.   
     
  (ii) This change applies to a taxpayer that has an AFS, as defined in proposed § 1.451-8(b)(2)   
(REG-104554-18; 84 FR 47191), that: (A) receives advance payments, as defined in proposed   
§ 1.451-8(b)(1); (B) uses the deferral method described in proposed § 1.451-8(c); (C) changes   
the manner in which it recognizes advance payments in revenues in its AFS; and (D) wants to   
change its method of accounting to use the new AFS method of recognizing advance payments in   
revenues in its AFS for determining the extent to which advance payments are included in income   
under proposed § 1.451-8(c).   
     
  (iii) This change applies to a taxpayer with an AFS, as defined in §  451(b)(3), that: (A) includes   
amounts in income in accordance with § 451(b); (B) changes the manner in which the item, or portion   
thereof, is taken into account in revenue in its AFS, as defined in § 451(b)(3), including, if applicable, a   
change in the matter 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 revenue in its AFS for purposes of § 451(b)(1)(A), including, if applicable, a change   
in the manner in which transaction price is allocated for purposes of § 451(b)(4).   
     
  (iv) This change applies to a taxpayer with an AFS, as defined in proposed§ 1.451-3(c)(1) (REG-   
104870-18; 84 FR 47205), that: (A) includes amounts in income in accordance with proposed   
§ 1.451-3; (B) changes the manner in which the item, or portion thereof, is taken into account as   
revenue in its AFS, including, 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 revenue in its AFS   
for purposes of proposed § 1.451-3(b), including, if applicable, a change in the manner in which   
transaction price is allocated for purposes of proposed § 1.451-3(g).   
     
  (v) This change applies to a taxpayer with an AFS, as defined in §  1.451-3(a)(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 revenue, as defined in § 1.451-3(a)   
(4), including, 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).   
     
  (vi) This change applies to a taxpayer with an AFS, as defined in § 1.451-3(a)(5), that: (A)   
receives an advance payment, as defined in § 1.451-8(a)(1); (B) uses the deferral method   
described in § 1.451-8(c); (C) changes the manner in which it recognizes advance payments in   
AFS revenue, as defined in § 1.451-8(a)(4), including, if 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 Rev. Proc. 2004-34. The change described in section 16.08(1)(a)(i) of   
this revenue procedure does not apply to:   
     
  (A) a taxpayer that uses a present method of accounting for advance payments that is not the   
deferral method described in section 5.02(3)(a) of Rev. Proc. 2004-34. For example, this change   
does not apply to a taxpayer that uses the full inclusion method under section 5.01 of Rev. Proc.   
2004-34;   
     
  (B) a taxpayer that wants to change its method for allocating payments under section 5.02(4)   
of Rev. Proc. 2004-34; or   
     
  (C) taxable years beginning on or after January 1, 2021.   
     
  (ii) Changes relating to § 451(b), proposed § 1.451-3, or proposed § 1.451-8. A change described   
in section 16.08(1)(a)(ii), (iii) or (iv) of this revenue procedure does not apply to:   
     
  (A) a taxpayer whose present method of accounting does not comply with § 451(b) or proposed   
§ 1.451-3, as applicable, for a change described in section 16.08(1)(a)(iii) or (iv) of this revenue   
procedure;   
     
  (B) a taxpayer whose present method is not the deferral method under proposed § 1.451-8(c),   
for a change described in section 16.08(1)(a)(ii) of this revenue procedure. For example, this   
change does not apply to a taxpayer that uses the full inclusion method under § 451(c)(1)(A) or   
proposed § 1.451-8(a), or the non-AFS deferral method under proposed § 1.451-8(d);   
     
  (C) a taxpayer that wants to change its method for allocating payments under § 451(c)(1)(D) or   
proposed § 1.451-8(c)(6);   
     
  (D) a taxpayer that wants to change its method for allocating transaction price between   
performance obligations that are accounted for under § 451(b) or proposed § 1.451-3, and   
performance obligations that are accounted for under a special method of accounting, as defined   
in § 451(b)(2) and proposed § 1.451-3(c)(5); or   
     
  (E) taxable years beginning on or after January 1, 2021.   
     
  (iii) Changes relating to § 1.451-3 or § 1.451-8. A change described in section 16.08(1)(a)(v)     
or (vi) of this revenue procedure does not apply to:   
     
  (A) a taxpayer whose present method of accounting is not described in § 1.451-3, for a change   
described in section 16.08(1)(a)(v) of this revenue procedure. A taxpayer that wants to change to   
a method of accounting described in § 1.451-3 must use section 16.10(2)(a)(v) 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 § 1.451-8(c), for a change described in section 16.08(1)(a)(vi) 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 non-AFS 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 taxpayer's restatement of its AFS for financial accounting 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   
taxpayer satisfies the requirement of section 16.08(1)(a)(vi) 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 16.08 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 16.08(2)(a)(i)(B) of this revenue procedure, a   
change made under section 16.08(1)(a)(i), (ii), or (vi) 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 § 1.451-8(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   
16.08(1)(a)(i), (ii), or (vi) 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. 2015-13.   
     
  (ii) Cut-off basis or § 481(a) adjustment for certain changes. A taxpayer that makes a change   
under section 16.08(1)(a)(iii) or (iv) of this revenue procedure as a result of adopting the New   
Standards, as defined in section 16.09(1) of this revenue procedure, in the year of change may   
implement the change with either a § 481(a) adjustment as provided in sections 7.02 and 7.03 of   
Rev. Proc. 2015-13, or on a cut-off basis. If the taxpayer implements the change on a cut-off basis,   
     
  (A) the change applies to contracts entered into on or after the beginning of the year of change;   
     
  (B) all changes made under section 16.08(1)(a)(iii) or (iv) of this revenue procedure for the   
same year of change must be implemented using a cut-off basis; and   
     
  (C) a § 481(a) adjustment is neither permitted nor required.   
     
  (iii) 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. An AFS change to adopt the New Standards, as defined in section 16.09(1)   
of this revenue procedure, is an example of a change in accounting principle.   
     
  (iv) 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 a calendar-year basis and has an AFS, as defined in § 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 2021, B  makes two changes   
in method of accounting to comply with § 1.451-3. Specifically, pursuant to section 16.10(2)(a)(iii)(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 16.10(2)(a)(iii)(C) of this revenue procedure, changes its method of accounting to   
apply the AFS cost offset method. For 2022, B  changes the manner in which income from the sale of computers is taken   
into account as AFS revenue, as defined in § 1.451-3(a)(4), and changes its method of accounting under section 16.08(1)   
(a)(v) 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 2022 under section   
16.08(1)(a)(v) 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)(3)(i) to file a Form   
3115 is waived and a statement in lieu of a Form 3115 is authorized for a change made under this   
section 16.08. Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13,   
2015-5 I.R.B. 419, the statement in lieu of a Form 3115 that is permitted under this section 16.08   
is considered a Form 3115 for purposes of the automatic consent procedures of Rev. Proc. 2015-   
13. However, the requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc.   
2015-13, is waived. 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 identification number (or social security 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 applicant, as defined in applicable guidance, and which change   
the applicant is making under section 16.08(1)(a) of this revenue procedure. See section 4.06 of   
Rev. Proc. 2004-34, § 451(b)(3), proposed § 1.451-8(b)(2), proposed § 1.451-3(c)(1), § 1.451-3(a)   
(5); and/or § 1.451-8(a)(5), as applicable;   
     
  (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 item is reflected on the federal   
income tax 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 16.08 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 16.08 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)..09 Changes in the timing of recognition of income due to the New Standards.   
     
  (1) Description of change. On May 28, 2014, the Financial Accounting Standards Board (FASB)   
and the International Accounting Standards Board (IASB) jointly announced new financial   
accounting standards for revenue recognition entitled "Revenue from Contracts with Customers   
(Topic 606)" (New Standards). See  FASB Update No. 2014-09, and IASB International Financial   
Reporting Standard (IFRS) 15. Under the New Standards, a taxpayer generally recognizes   
revenue for financial accounting purposes when the taxpayer satisfies a performance obligation   
by transferring a promised good or service to a customer, as described in the New Standards.   
     
  (2) Applicability. This change applies to a taxpayer that wants to change its method of   
accounting for the recognition of income for federal income tax purposes to a method under   
the New Standards for: (a) identifying performance obligations, (b) allocating transaction price   
to performance obligations, and/or (c) considering performance obligations satisfied. A taxpayer   
may request a change under this section 16.09 only if the taxpayer's new method of accounting is   
otherwise permissible for federal income tax purposes and the change in method of accounting is   
made for the taxable year in which the taxpayer adopts the New Standards for financial accounting   
purposes.   
     
  (3) Inapplicability. This change does not apply to:   
     
  (a) a change in the manner in which the taxpayer identifies contracts or determines the transaction   
price, including the inclusion and exclusion of variable consideration in the transaction price,   
under the New Standards;   
     
  (b) a change in method of accounting for recognizing income that is made in a year that is   
different from the year that the taxpayer adopts the New Standards;   
     
  (c) a change in method of accounting that does not comply with § 451 or other guidance;   
     
  (d) any change in method of accounting that qualifies under another automatic change described   
in the List of Automatic Changes provided in this revenue procedure (or any successor), even if it   
is described in section 16.09(2) of this revenue procedure, and otherwise satisfies the requirements   
of paragraphs 5.01(1)(a)-(d) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419 (or any successor). The   
taxpayer must request such change(s) in method of accounting by applying the automatic change   
procedures in section 6 of Rev. Proc. 2015-13 (or any successor) and the respective section of Rev.   
Proc. 2022-14 (or any successor);   
     
  (e) any change in the method of accounting for income from a long-term contract, as defined   
in § 460(f), unless the long-term contract is excepted from required use of the percentage-of-   
completion method by § 460(e)(1); or   
     
  (f) an item of gross income that is required to be accounted for under § 451(b) or § 451(c).   
Accordingly, a taxpayer that wants to make a change in method of accounting for an item of gross   
income to comply with § 451(b), the proposed § 451(b) regulations (REG-104870-18; 84 FR   
47205) (proposed § 1.451-3), the proposed § 451(c) regulations (REG-104554-18; 84 FR 47191)   
(proposed § 1.451-8), § 1.451-3 and/or § 1.451-8, as applicable, in the year in which it adopts the   
New Standards is not permitted to do so under this section 16.09. See, however, sections 16.06,   
16.08, or 16.10, as applicable, of this revenue procedure.   
     
  (4) Time for making change. The change under this section 16.09 may only be made for a   
taxable year ending on or before May 10, 2022.   
     
  (5) Manner of making change.   
     
  (a) Cut-off basis or § 481(a) adjustment. A taxpayer making a change under this section 16.09   
may implement the change with either a § 481(a) adjustment as provided in sections 7.02 and   
7.03 of Rev. Proc. 2015-13, or on a cut-off basis. If the taxpayer implements the change on a   
cut-off basis, (i) the taxpayer must allocate any payments received prior to the year of change   
using the taxpayer's former method of accounting, (ii) all changes made under this section 16.09   
must be implemented using a cut-off basis, and (iii) a § 481(a) adjustment is neither permitted   
nor required. Changes under this section 16.09 with regard to taxpayers who are members of   
consolidated groups generally are governed by this section 16.09 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) Reduced filing requirement. A taxpayer making a change under this section 16.09 is required   
to complete only the following information on Form 3115 (Rev. December 2018):   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I;   
     
  (iv) Part II, all lines except lines 13,16c, and 19; and   
     
  (v) Part IV, all lines. For a taxpayer making a change under this section 16.09 using a § 481(a)   
adjustment, the statement required for Line 26 of Form 3115 should list a description of each   
change, the § 481(a) adjustment for each change (or a statement that the change is being made on   
a cut-off basis) and, if applicable, a description of where the item's § 481(a) adjustment is reflected   
on the federal income tax return (line number (or schedule)).   
     
  In addition, the requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc.   
2015-13, is waived.   
     
  (6) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev. Proc.   
2015-13 does not apply to this change for a taxable year ending on or before May 10, 2022.   
     
  (7) No ruling on method used. The consent granted under section 9 of Rev. Proc. 2015-13 for   
a change made under this section 16.09 is not a determination by the Commissioner that the new   
method of accounting is a permissible method of accounting and does not create any presumption   
that the allocation method is a permissible method of accounting under any provision of the Code.   
Further, the consent granted under section 9 of Rev. Proc. 2015-13 for a change made under   
this section 16.09 is not a determination that the amount of income included in taxable income   
using an allocation method described in the New Standards is correct. The director will ascertain   
whether the new method of accounting is a permissible method of accounting and whether the   
allocation method is permissible under the Code (for example, a method that is permitted under   
§ 451).   
     
  (8) Concurrent automatic change. A taxpayer that wants to make one or more changes in   
method of accounting under this section 16.09 may file a single Form 3115 that includes all of the   
changes, must separately state the § 481(a) adjustment for each change made under this section,   
and may not net the § 481(a) adjustments with § 481(a) adjustments from other changes.   
     
  (9) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 16.09 is "231."   
     
  (10) Contact information. For further information regarding a change under this section, contact   
Sharon Horn at (202) 317-7003 (not a toll-free number)..10 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 applicable financial   
statement (AFS) that wants to make certain changes in method of accounting described in section   
16.10(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 16.10(2)(b) of this   
revenue procedure.   
     
  (b) Applicable terms. For this section 16.10, the term "AFS" is defined under proposed § 1.451-   
3(c)(1) (REG-104870-18; 84 FR 47205) for a taxpayer making a change to apply proposed § 1.451-   
3 and/or proposed § 1.451-8 (REG-104554-18; 84 FR 47191), as applicable, or under § 1.451-3(b)   
(5) for a taxpayer making a change to apply § 1.451-3 and/or § 1.451-8, as applicable. 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  §§ 1.451-3(l)(1) and 1.451-   
8(g)(2). In that regard, while §§ 451(b) and (c) and the final regulations use the term "item of   
gross income" to generally refer to income that arises under a specific contract, the term "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) for a taxable year beginning before January 1, 2021, wants to change to a method of   
accounting under proposed § 1.451-3 (including a change for a specified credit card fee under   
proposed § 1.451-3(i) and proposed § 1.1275-2(l));   
     
  (ii) for a taxable year beginning before January 1, 2021, wants to change to a method of   
accounting for advance payments under proposed § 1.451-8(a) or (c);   
     
  (iii) 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)(2)(i) (including   
a change for specified credit card fees under §§ 1.451-3(j)(2) and 1.1275-2(l));   
     
  (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 change for specified credit card fees under §§ 1.451-3(j)(2) and 1.1275(l)) (Alternative AFS   
Revenue Method);   
     
  (C) except as provided in section 16.10(2)(a)(iii)(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 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);   
     
  (E) a change to comply with § 1.451-3(c)(5)(ii) as a result of a concurrent cost-offset related   
inventory method change, as defined in section 5.06 of Rev. 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 16.10(2)(a)(iii)(E) applies whether the taxpayer presently uses a cost   
offset method, including the AFS cost offset method under § 1.451-3(c), or is proposing to make,   
for the same year of change, a change to begin using the AFS cost offset method pursuant to   
section 16.10(2)(a)(iii)(C) of this revenue procedure;   
     
  (F) a change to comply with the transaction price allocation rules in § 1.451-3(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   
     
  (iv) 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);   
     
  (C) a change to the specified goods§  451(c) method described in § 1.451-8(f) to treat payments   
that otherwise qualify for the specified good exception, as defined in § 1.451-8(a)(1)(ii)(H), as   
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 § 1.451-8(c);   
     
  (D) except as provided in section 16.10(2)(a)(iv)(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 § 1.451-8(e)(8)(ii) as a result of a concurrent cost-offset related   
inventory method change, as defined in section 5.06 of Rev. 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 16.10(2)(a)(iv)(F) applies whether the taxpayer presently   
uses a cost offset method, including the advance payment cost offset method under § 1.451-8(e),   
or is proposing to make, for the same year of change, a change to begin using the advance payment   
cost offset method pursuant to section 16.10(2)(a)(iv)(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:   
     
  (i) for a taxable year beginning after December 31, 2017, and before January 1, 2021, wants to   
change to a method of accounting for advance payments under proposed § 1.451-8(a) or (d); 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(d)(3);   
     
  (C) except as provided in section 16.10(2)(b)(ii)(E) 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;   
     
  (D) 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;   
     
  (E) a change to comply with § 1.451-8(e)(8)(ii) as a result of a concurrent cost-offset related   
inventory method change, as defined in section 5.06 of Rev. 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 16.10(2)(b)(ii)(E) applies whether the taxpayer presently uses a cost offset   
method, including the advance payment cost offset method under § 1.451-8(e), or is proposing   
to make, for the same year of change, a change to begin using the advance payment cost offset   
method pursuant to section 16.10(2)(b)(ii)(C) of this revenue procedure; or   
     
  (F) a change to a payment allocation method described in § 1.451-8(d)(4)(ii).   
     
  (3) Inapplicability. Section 16.10(2) of this revenue procedure does not apply to:   
     
  (a) a change in method of accounting to use a special method of accounting, as defined in   
proposed § 1.451-3(c)(5) or § 1.451-3(a)(13), as applicable;   
     
  (b) a change in method of allocating transaction price between item(s) of gross income that are   
accounted for under proposed § 1.451-3 or § 1.451-3, as applicable, and item(s) of gross income   
that are accounted for under a special method of accounting, as defined in proposed § 1.451-3(c)   
(5) or § 1.451-3(a)(14), as applicable, including a change to comply with § 1.451-3(d)(5);   
     
  (c) a change described in section 16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F) or section   
16.10(2)(b)(ii)(E) 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;   
     
  (d) a change described in section 16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F) or section   
16.10(2)(b)(ii)(E) 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 change(s), as defined in section 5.06 of Rev. Proc. 2015-13;   
     
  (e) 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;   
     
  (f) 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));   
     
  (g) 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);   
     
  (h) 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);   
     
  (i) a taxpayer that presently uses the deferral method in § 1.451-8(d)(3) for allocable payments   
described in § 1.451-8(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);   
     
  (j) a taxpayer without an AFS that wants to change its method of accounting for advance   
payments to the deferral method under proposed § 1.451-8(d)(3) or § 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 in a clear reflection of income;   
     
  (k) a change in method of accounting for specified fees, as defined in proposed § 1.451-3(i)(2)   
or § 1.451-3(j)(2), as applicable, other than specified credit fees; card   
     
  (l) a change in method of accounting that qualifies under another automatic change provided in   
this revenue procedure including, for example, a change described in section 16.08 of this revenue   
procedure;   
     
  (m) a change in method of accounting for a liability, as defined in § 1.446-1(c)(1)(ii)(B);   
     
  (n) 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;   
     
  (o) a change in method of accounting for payments within the scope of the specified good   
exception, as defined in § 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; and   
     
  (p) a taxpayer that makes one or more changes under section 16.10(2)(a)(iii) or (iv) of this   
revenue procedure for a taxable year that begins before January 1, 2021, unless the taxpayer   
complies with all the requirements in §§ 1.451-3(m)(3), 1.451-8(h)(2), and 1.1275-2(l)(2)(ii), as   
applicable.   
     
  (4) Manner of making change.   
     
  (a) Short Form 3115. A taxpayer making a change under this section 16.10 for its early   
application year, as defined in section 16.10(4)(c)(i) of this revenue procedure, or in the case   
of a taxpayer that does not apply § 1.451-3 and/or § 1.451-8, as applicable, for a taxable year   
beginning before January 1, 2021, for its first taxable year beginning on or after January 1, 2021,   
is required to complete the following information on Form 3115 (Rev. December 2018), and the   
and the requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc. 2015-13 is   
waived:   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I;   
     
  (iv) Part II, all lines except lines 13, 16c, and 19; and   
     
  (v) Part IV, all lines. For a taxpayer making a change under this section 16.10, the statement   
required for Line 26 of Form 3115 should list the § 481(a) adjustment(s).   
     
  (vi) Schedule B, all lines except line 1e.   
     
  (b) Special rules relating to § 481(a) adjustment or cut-off basis.   
     
  (i) Section 481(a) adjustment period for changes relating to specified credit card fees. In the   
case of income from a specified credit card fee, the § 481(a) adjustment period for any qualified   
change in method of accounting described in this section 16.10(4)(b)(i) is six taxable years,   
including the year of change and next five taxable years. For purposes of the preceding sentence,   
a qualified change in method of accounting is a change in method of accounting for income from   
a specified credit card fee to a method that is required by § 451(b), as added by § 13221 of Public   
Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and Jobs Act   
(TCJA), for such income, but only for the taxpayer's first taxable year beginning after December   
31, 2018. Section 16.10(4)(b)(ii) of this revenue procedure may not be used for a change relating   
to specified credit card fees.   
     
  (ii) Cut-off basis or § 481(a) adjustment.   
     
  (A) In general. Changes under this section 16.10 with regard to taxpayers who are members of   
consolidated groups generally are governed by this section 16.10, 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) Cut-off basis or § 481(a) adjustment for changes made under section 16.10(2)(a)(i) of    
 this revenue procedure when taxpayer is also adopting the New Standards. Except as otherwise   
provided in this section 16.10(4)(b)(ii), a taxpayer making a change described in section 16.10(2)   
(a)(i) of this revenue procedure may implement the change with either a § 481(a) adjustment as   
provided in sections 7.02 and 7.03 of Rev. Proc. 2015-13 or on a cut-off basis provided the year   
of change is the same year that the taxpayer adopts the New Standards, as defined in section 16.09   
of this revenue procedure. A taxpayer described in section 16.10(4)(c)(i)(B) or (C) of this revenue   
procedure that uses the streamlined procedures provided in section 16.10(4)(c) of this revenue   
procedure may not make a change in method of accounting on a cut-off basis. If the taxpayer   
makes a change described in section 16.10(2)(a)(i) of this revenue procedure for the taxable year   
in which it adopts the New Standards and chooses to implement such change on a cut-off basis, ( 1 )   
the change applies to contracts entered into on or after the beginning of the year of change, ( 2 ) all   
changes made under section 16.10(2)(a)(i) of this revenue procedure must be implemented using   
a cut-off basis, and ( 3 ) a § 481(a) adjustment is neither permitted nor required.   
     
  (C) Cut-off basis or § 481(a) adjustment for certain changes under proposed § 1.451-8(c).   
Except as otherwise provided in this section 16.10(4)(b)(ii), a taxpayer that changes its method   
of accounting for advance payments to the deferral method under proposed § 1.451-8(c) (as   
described in section 16.10(2)(a)(ii) of this revenue procedure), may implement the change with   
either a § 481(a) adjustment as provided in sections 7.02 and 7.03 of Rev. Proc. 2015-13 or on a   
cut-off basis. A taxpayer described in section 16.10(4)(c)(i)(B) of this revenue procedure that uses   
the streamlined procedures provided in section 16.10(4)(c) of this revenue procedure may not   
make a change in method of accounting on a cut-off basis. If the taxpayer implements the change   
on a cut-off basis, ( 1 ) the change applies to contracts entered into on or after the beginning of the   
year of change, ( 2 ) all changes made under section 16.10(2)(a)(ii) of this revenue procedure to   
comply with proposed § 1.451-8(c) must be implemented using a cut-off basis, and ( 3 ) a § 481(a)   
adjustment is neither permitted nor required.   
     
  (D) 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. An AFS change to adopt the New Standards, as defined in section 16.09(1)   
of this revenue procedure, is an example of a change in accounting principle.   
     
  (iii) 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 16.10(2)(a)(iii)(C) or (D) of this revenue procedure   
and one or more changes described in section 16.10(2)(a)(iii)(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 16.10(2)(a)(iv)(D) or (E) of this   
revenue procedure and one or more changes described in section 16.10(2)(a)(iv)(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 16.10(2)(b)(ii)(C) or   
(D) of this revenue procedure and one or more changes in method of accounting described in   
section 16.10(2)(b)(ii)(A) or (B) 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 16.10(4)(b)(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 16.10(4)(b)(iii) of this revenue procedure would otherwise apply if the taxpayer were   
eligible to make the change under section 16.10 of this revenue procedure.   
     
  (iv) 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 16.10(2)(a)(iii)(E). A taxpayer that   
makes more than one method change under section 16.10(2)(a)(iii)(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 16.10(4)(b)(iv)(D) of this revenue procedure.     
     
  (B) Required netting rule for changes described in section 16.10(2)(a)(iv)(F). A taxpayer that   
makes more than one method change under section 16.10(2)(a)(iv)(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 16.10(4)(b)(iv)(D) of this revenue procedure.     
     
  (C) Required netting rule for changes described in section 16.10(2)(b)(ii)(E). A taxpayer that   
makes more than one method change under section 16.10(2)(b)(ii)(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 16.10(4)(b)(iv)(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 16.10(2)   
(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)(b)(ii)(E) 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 defined in section   
5.06 of Rev. Proc. 2015-13. 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 16.10(2)(a)   
(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)(b)(ii)(E) of this revenue procedure. If the   
taxpayer must net the § 481(a) adjustments for cost offset changes under section 16.10(4)(b)(iv)   
(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 16.10(4)(b)(iv)(A), (B), or (C), as applicable. This section   
16.10(4)(b)(iv)(D) does not apply if, after applying the netting rules in section 16.10(4)(b)(iv)   
(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 16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)(b)   
(ii)(E) of this revenue procedure is zero as a result, this section 16.10(4)(b)(iv)(D) does not apply.   
     
  (v) Examples. For each of the following examples, the taxpayer uses an accrual method of   
accounting, is on a calendar year, and has an AFS, as defined in§  1.451-3(a)(5). The taxpayer   
implements § 1.451-3 and, if applicable, § 1.451-8, beginning with its 2021 taxable year.     
     
  (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 2021, A  makes multiple changes in method of accounting to apply § 1.451-3. Specifically, A  changes its method   
of accounting for gross income from the sale of computers to apply the AFS income inclusion rule pursuant to section   
16.10(2)(a)(iii)(A) of this revenue procedure and to apply the AFS cost offset method pursuant to section 16.10(2)(a)   
(iii)(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 16.10(2)(a)(iii)(A) of this revenue procedure. Since A  made   
a change described in section 16.10(2)(a)(iii)(C) of this revenue procedure and a change described in section 16.10(2)   
(a)(iii)(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 16.10(4)(b)(iii)(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 16.10(2)(a)(iii)(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 16.10(4)(b)(iv) of this revenue procedure. The facts   
are the same as in Example 1. For 2022, 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 16.10(2)(a)(iii)(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 16.10(2)(a)(iii)(E) of this revenue procedure results in a negative   
§ 481(a) adjustment. Section 16.10(4)(b)(iv)(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) Streamlined method change procedures for certain taxpayers.   
     
  (i) Applicability. The procedures described in this section 16.10(4)(c) may be used by a taxpayer   
to make a change in method of accounting described in section 16.10(2)(a)(iii)(A), (B), (F), and/or   
(G), section 16.10(2)(a)(iv)(A), (B), (C), (G), and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or   
(F) of this revenue procedure for the taxpayer's early application year, provided the taxpayer meets   
the requirements in this section 16.10(4)(c). For purposes of this section 16.10, a taxpayer's "early   
application year" means the taxable year beginning before January 1, 2021, in which a taxpayer   
first applies § 1.451-3 and/or § 1.451-8, as applicable. In addition, in the case of a taxpayer that   
does not apply § 1.451-3 and/or § 1.451-8 for a taxable year beginning before January 1, 2021,   
the procedures described in this section 16.10(4)(c) may be used to make a change in method of   
accounting described in section 16.10(2)(iii)(A), (B), (F), and/or (G), section 16.10(2)(a)(iv)(A),   
(B), (C), (G), and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or (F) of this revenue procedure,   
for the taxpayer's first taxable year beginning on or after January 1, 2021, provided the taxpayer   
meets the requirements in section 16.10(4)(c). A taxpayer may not use the streamlined procedures   
for any change in method of accounting described in section 16.10(2) of this revenue procedure   
if the taxpayer is also making a change in method of accounting described in sections 16.10(2)   
(a)(iii)(C), (D), and/or (E), sections 16.10(2)(a)(iv)(D), (E), and/or (F), or sections 16.10(2)(b)(ii)   
(C), (D), and/or (E) of this revenue procedure for the same year of change. In addition, a taxpayer   
may not use the streamlined procedures if one or more of the inapplicability rules provided in   
section 16.10(3) of this revenue procedure applies to the change. A taxpayer that is otherwise   
permitted to use the streamlined method change procedures in this section 16.10(4)(c) may use   
these streamlined procedures if the taxpayer meets one of the following requirements:   
     
  (A) the taxpayer, other than a tax shelter, as defined in § 448(d)(3), meets the § 448(c) gross   
receipts test (a "small business taxpayer") for the year of change. The taxpayer meets the § 448(c)   
gross receipts test if the taxpayer has average annual gross receipts for the three prior taxable   
years of $25,000,000 or less (adjusted for inflation). See  § 448(c)(4). For a taxable year beginning   
in 2019, 2020, or 2021, the inflation-adjusted amount is $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. 2020-45, 2020-46   
I.R.B. 1016, as applicable. For a taxable year beginning in 2022, the inflation-adjusted amount is   
$27,000,000. See  Rev. Proc. 2021-45, 2021-48 I.R.B. 764;   
     
  (B) the taxpayer is making one or more changes described in section 16.10(2)(a)(iii)(A),   
(B), (F), and/or (G) of this revenue procedure, and the § 481(a) adjustment required by each   
of the changes is zero. A taxpayer that meets this requirement is permitted to make the changes   
described in section 16.10(2)(a)(iii)(A), (B), (F), and/or (G) of this revenue procedure under the   
streamlined method change procedures. Notwithstanding any provisions of this section 16.10, a   
taxpayer making more than one change in method of accounting under section 16.10(2)(a)(iii)   
(A), (B), (F), and/or (G) of this revenue procedure for the same year of change is not permitted   
to net the § 481(a) adjustments to determine if the taxpayer meets the requirements to use the   
streamlined method change procedures. See section 16.10(7)(a) of this revenue procedure for   
more information on making concurrent changes; or   
     
  (C) the taxpayer is making one or more changes described in section 16.10(2)(a)(iv)(A), (B),   
(C), (G), and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or (F) of this revenue procedure,   
and the § 481(a) adjustment required by each of the changes is zero. A taxpayer that meets this   
requirement is permitted to make the changes described in section 16.10(2)(a)(iv)(A), (B), (C),   
(G), and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or (F) of this revenue procedure under the   
streamlined method change procedures. Notwithstanding any provisions of this section 16.10, a   
taxpayer making more than one change in method of accounting under section 16.10(2) for the   
same year of change is not permitted to net the § 481(a) adjustments to determine if the taxpayer   
meets the requirements to use the streamlined method change procedures. See section 16.10(7)(a)   
of this revenue procedure for more information on making concurrent changes.   
     
  (ii) No Form 3115 required. In accordance with § 1.446-1(e)(3)(ii), the requirement of § 1.446-   
1(e)(3)(i) to file a Form 3115 is waived for a taxpayer making a change in method of accounting   
under this section 16.10 using the streamlined method change procedures. Thus, a taxpayer using   
the streamlined method change procedures is not required to file a Form 3115 and is not required   
to attach a separate statement when making a change under this section 16.10.   
     
  (d) 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 16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)   
(b)(ii)(E) of this revenue procedure, as applicable, which corresponds to a cost-offset related   
inventory method change filed under the 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   
16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)(b)(ii)(E) on an amended federal   
income tax return for the cost offset year of change (as defined in section 16.10(4)(d)(ii) of this   
revenue procedure) provided:   
     
  (A) the taxpayer received consent for the cost-offset related inventory method change filed   
under the non-automatic change procedures for the year of change after the time the taxpayer   
was required to file the original Form 3115 for the corresponding cost offset change under section   
16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)(b)(ii)(E) 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   
16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)(b)(ii)(E) 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 16.10(4)(d)(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 change(s) specified in the letter ruling and the   
corresponding cost offset method change(s).   
     
  (ii) Cost offset year of change. For purposes of this section 16.10(4)(d), 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 16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F), or section 16.10(2)   
(b)(ii)(E) of this revenue procedure in accordance with section 16.10(4)(d) of this revenue procedure   
must attach the original Form 3115 to the taxpayer's timely filed amended federal income tax   
return for the cost offset year of change and must file the duplicate copy (with signature) of the   
Form 3115 with the IRS in Ogden, UT, no later than the date the taxpayer timely files the amended   
federal income tax return that implements the cost-offset related inventory method described in   
section 16.10(4)(d)(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 16.10(2)(a)(i), (2)(a)    
 (ii), or (2)(b)(i) of this revenue procedure. Except as otherwise provided in section 16.10(5)(c) of   
this revenue procedure, the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 does not   
apply to a change under section 16.10(2)(a)(i), (a)(ii) or (2)(b)(i) of this revenue procedure for   
a taxpayer's first, second or third taxable year beginning after December 31, 2017, provided the   
taxable year begins before January 1, 2021.   
     
  (b) Eligibility rule temporarily inapplicable for changes under sections 16.10(2)(a)(iii), (2)(a)    
 (iv), or (2)(b)(ii) of this revenue procedure. Except as otherwise provided in section 16.10(5)(c) of   
this revenue procedure, for a taxpayer that applies § 1.451-3 and/or § 1.451-8, 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 16.10(2)(a)(iii), (2)(a)(iv), or (2)(b)(ii) of   
this revenue procedure for a taxpayer's early application year, as defined in section 16.10(4)(c)(i)   
of this revenue procedure. Except as otherwise provided in this section 16.10(5), for a taxpayer   
that does not apply § 1.451-3 and/or § 1.451-8 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 16.10(2)(a)(iii), (2)(a)(iv), or (2)(b)(ii) of this revenue procedure for a taxpayer's   
first taxable year beginning on or after January 1, 2021.   
     
  (c) Changes related to specified credit card fees. The eligibility rule in section 5.01(1)(f) of Rev.   
Proc. 2015-13 does not apply to a specified credit card fee change made under section 16.10(2)   
(a)(i) of this revenue procedure for a taxpayer's first or second taxable year beginning after   
December 31, 2018, provided the taxable year begins before January 1, 2021. In addition, for a   
taxpayer that applies § 1.451-3 and § 1.1275-2(l) for specified credit card fees 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 specified credit card fee change under section 16.10(2)(a)(iii) of this revenue   
procedure for the taxpayer's early application year, as defined in section 16.10(4)(c)(i) of this   
revenue procedure. For a taxpayer that does not apply § 1.451-3 and § 1.1275-2(l) for specified   
credit card fees 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 specified credit card fee change under section   
16.10(2)(a)(iii) of this revenue procedure for the taxpayer's first taxable year beginning on or after   
January 1, 2021.   
     
  (d) 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 16.10(2)(a)(iii)(E), section 16.10(2)(a)(iv)(F) or   
section 16.10(2)(b)(ii)(E) of this revenue procedure.   
     
  (e) Certain changes with § 481(a) adjustment of zero disregarded for eligibility rule. A change   
made under section 16.10(2)(a)(iii)(A), (B), (F) and/or (G), section 16.10(2)(a)(iv)(A), (B), (C),   
(G) and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or (F) of this revenue procedure will be   
disregarded for purposes of section 5.01(1)(f) of Rev. Proc. 2015-13 if the change meets the   
following requirements:   
     
  (i) the change is made for the taxpayer's early application year, as defined in section 16.10(4)   
(c)(i) of this revenue procedure or, in the case of a taxpayer that does not apply § 1.451-3 and/or   
§ 1.451-8 for a taxable year beginning before January 1, 2021, for the taxpayer's first taxable   
beginning on or after January 1, 2021, and   
     
  (ii) the § 481(a) adjustment required to implement the change is zero.   
     
  Notwithstanding any provisions of this section 16.10, a taxpayer that makes more than one   
change in method of accounting described in this section 16.10(5)(e) for the same year of change   
is not permitted to net the § 481(a) adjustments from such changes to determine if the requirement   
in section 16.10(5)(e)(ii) of this revenue procedure is satisfied.   
     
  (f) 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 2020, 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 this revenue procedure to apply the AFS income inclusion rule   
under § 1.451-3(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   
16.10(2)(a)(iii)(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 2020 year of change (taxable year 2021 through 2024) because the 2020 change was for   
the same item.   
     
  (6) Audit protection.   
     
  (a) Streamlined procedures. A taxpayer making a change in method of accounting under this   
section 16.10 using the streamlined method change procedures provided in section 16.10(4)   
(c) of this revenue procedure does not receive audit protection under section 8.01 of Rev. Proc.   
2015-13.   
     
  (b) Taxpayers under examination.   
     
  (i) In general - certain audit protection exception temporarily inapplicable. Except as otherwise   
provided in this section 16.10(6)(b)(ii) and (iii) of this revenue procedure, for a taxpayer's first,   
second or third taxable year beginning after December 31, 2017, and before January 1, 2021,   
section 8.02(1) of Rev. Proc. 2015-13 does not apply to a change in method of accounting made   
under section 16.10(2)(a)(i), (2)(a)(ii) or (2)(b)(i) of this revenue procedure. In addition, except   
as otherwise provided in section 16.10(6)(b)(ii) and (iii) of this revenue procedure, for a taxpayer   
that applies § 1.451-3 and/or § 1.451-8, as applicable, for a taxable year beginning before January   
1, 2021, section 8.02(1) of Rev. Proc. 2015-13, does not apply to change a method of accounting   
made under section 16.10(2)(a)(iii), (2)(a)(iv) or (2)(b)(ii) of this revenue procedure for a taxpayer's   
early application year, as defined in section 16.10(4)(c)(i) of this revenue procedure. Except as   
otherwise provided in section 16.10(6)(b)(ii) and (iii) of this revenue procedure, for a taxpayer   
that does not apply § 1.451-3 or § 1.451-8 for a taxable year beginning before January 1, 2021,   
section 8.02(1) of Rev. Proc. 2015-13 does not apply to a change in method of accounting made   
under section 16.10(2)(a)(iii), (2)(a)(iv), or (2)(b)(ii) of this revenue procedure for a taxpayer's   
first taxable year beginning on or after January 1, 2021. In addition, except as otherwise provided   
in section 16.10(4) of this revenue procedure, section 8.02(1) of Rev. Proc. 2015-13 continues to   
apply for purposes of determining the § 481(a) adjustment period provided in section 7.03(3)(b)   
of Rev. Proc. 2015-13.   
     
  (ii) Changes related to specified credit card fees. Except as otherwise provided in section   
16.10(6)(b)(iii) of this revenue procedure, for a taxpayer's first or second taxable year beginning   
after December 31, 2018, and before January 1, 2021, section 8.02(1) of Rev. Proc. 2015-13 does   
not apply to a change under section 16.10(2)(a)(i) of this revenue procedure for specified credit   
card fees. In addition, except as otherwise provided in section 16.10(6)(b)(iii) of this revenue   
procedure, for a taxpayer that applies § 1.451-3 and § 1.1275-2(l) to specified credit card fees   
for a taxable year beginning before January 1, 2021, section 8.02(1) of Rev. Proc. 2015-13 does   
not apply to a change for specified credit card fees under section 16.10(2)(a)(iii) of this revenue   
procedure for the taxpayer's early application year, as defined in section 16.10(4)(c)(i) of this   
revenue procedure. Except as otherwise provided in section 16.10(6)(b)(iii) of this revenue   
procedure, for a taxpayer that does not apply § 1.451-3 and § 1.1275-2(l) to specified credit card   
fees for a taxable year beginning before January 1, 2021, section 8.02(1) of Rev. Proc. 2015-13   
does not apply to a change for specified credit card fees under section 16.10(2)(a)(iii) of this   
revenue procedure for the taxpayer's first taxable year beginning on or after January 1, 2021.   
In addition, except as otherwise provided in section 16.10(4)(b)(i) of this revenue procedure,   
section 8.02(1) of Rev. Proc. 2015-13 continues to apply for purposes of determining the § 481(a)   
adjustment period provided in section 7.03(3)(b) of Rev. Proc. 2015-13.   
     
  (iii) Exception. Sections 16.10(6)(b)(i) and (ii) of this revenue procedure do not apply to a   
taxpayer that uses the streamlined method change procedures under section 16.10(4)(c) of this   
revenue procedure.   
     
  (iv) No audit protection for certain cost offset changes. For a taxpayer under examination that   
makes a change in method of accounting under section 16.10(2)(a)(iii)(E), section 16.10(a)(iv)   
(F), or section 16.10(2)(b)(ii)(E) 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 filing, the   
taxpayer's method of accounting for the item being changed by the corresponding cost-offset   
related inventory method change, as defined in section 5.06 of Rev. Proc. 2015-13 (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 16.10. A taxpayer that wants to make one or more concurrent   
changes in method of accounting under this section 16.10 may file a single Form 3115 that   
includes all of the changes. Except as otherwise required by section 16.10(4)(b)(iii) 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 481(a) the  § adjustment   
for each change. If a taxpayer makes a concurrent change in method of accounting to allocate   
transaction price and/or payments under section 16.10(2)(a)(i), (iii), or (iv) or section 16.10(2)   
(b)(ii) of this revenue procedure, the taxpayer is required to make the allocation change before   
any other change described in section 16.10(2)(a)(i), (iii), or (iv) or section 16.10(2)(b)(ii) of this   
revenue procedure, as applicable.   
     
  (b) Concurrent cost offset change and cost-offset related inventory method change. See section   
6.03(1)(b) of Rev. Proc. 2015-13 for a taxpayer that makes one or more change(s) under section   
16.10(2)(a)(iii)(E), (a)(iv)(F), or (b)(ii)(E) of this revenue procedure and one or more cost-offset   
related inventory method change(s), as defined in section 5.06 of Rev. Proc. 2015-13, under   
this revenue procedure in the same year of 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 change(s) under section 16.10(2)(a)(iii)(E), (a)(iv)(F), or (b)(ii)   
(E) of this revenue procedure, as applicable. A taxpayer that makes a change under section 16.10(2)   
(a)(iii)(C) and (E) and/or section 16.10(2)(a)(iv)(D) and (F), or section 16.10(2)(b)(ii)(C) and (E)   
of this revenue procedure, as applicable, for the same year of change is required to implement the   
change under section 16.10(2)(a)(iii)(C), 16.10(2)(a)(iv)(D), or 16.10(2)(b)(ii)(C) of this revenue   
procedure, as applicable, before it implements any cost-offset related inventory method change(s),   
as defined in section 5.06 of Rev. Proc. 2015-13, and the change(s) under section 16.10(2)(a)(iii)   
(E), 16.10(2)(a)(iv)(F), or 16.10(2)(b)(ii)(E) of this revenue procedure, as applicable.   
     
  (8) Limited Applicability. Notwithstanding the inapplicability rules in section 16.10(3) of this   
revenue procedure, the changes described in section 16.10(2)(a)(iii)(A) and (B) of this revenue   
procedure are applicable only for taxable years beginning before January 1, 2021, and for a   
taxpayer's first, second or third taxable year beginning after December 31, 2020.   
     
  (9) Designated automatic accounting method change number. See the following tables for the   
designated automatic method change number (DCN) for the changes in method of accounting   
under this section 16.10.   
     
  (a) Changes under proposed §§ 1.451-3 and 1.451-8.   
     
 Timing of Income Recognition - Taxpayer with an AFS:    
     
           
     
 Timing of Income Recognition - Taxpayer without an AFS:      
     
     
     
           
     
     
     
  (b) Changes under the final regulations of §§ 1.451-3 and 1.451-8.   
     
     
     
           
  (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 under this section for OID and specified fees (including specified credit card fees), contact   
Deepan Patel at (202) 317-3423 (not a toll-free number).   
     
SECTION 17. OBLIGATIONS ISSUED AT DISCOUNT (§ 454).01 Series E, EE or I U.S. savings bonds.   
     
  (1) Description of change. This change applies to a taxpayer that uses the overall cash receipts   
and disbursements (cash) method of accounting and that wants to change its method of accounting   
for 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 bond is redeemed, disposed of, or finally 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)(3)(i) to file   
a Form 3115 is waived and a statement in lieu of a Form 3115 is authorized for this change.   
Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13, 2015-5 I.R.B.   
419, the statement in lieu of a Form 3115 that is permitted under this section 17.01 is considered a   
Form 3115 for purposes of the automatic consent procedures of Rev. Proc. 2015-13. However, the   
requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc. 2015-13, is waived.   
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 identification number or social security 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 disposition, redemption, or   
final maturity, whichever is earliest; and   
     
  (vi) a statement that the taxpayer will report all interest on the U.S. savings bonds acquired   
before the year of change when the interest is realized upon disposition, redemption, or final   
maturity, whichever is earliest, with the exception of any interest income previously reported in   
prior taxable years.   
     
  (3) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 17.01 is "131."   
     
  (4) Contact information. For further information regarding a change under this section, contact   
William E. Blanchard at (202) 317-3900 (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 § 1.446-1(e)(3)(i) to file a standard Form 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 procedure. The requirement in § 1.455-6 to file a statement requesting   
consent is satisfied by filing such short Form 3115. The short Form 3115 (Rev. December 2018)   
must include the following information:   
     
  (i) the identification section of page 1 (above Part I);   
     
  (ii) the signature section at the bottom of page 1;   
     
  (iii) Part I, line 1(a);   
     
  (iv) the information described in § 1.455-6(a), as required by § 1.455-6(b); and   
     
  (v) if the taxpayer wants to make a "within 12 months" election under § 1.455-6(c), the   
information described in section § 1.455-6(c)(2).   
     
  (c) Section 455 election made with consent. The consent granted in section 9 of Rev. Proc.   
2015-13, 2015-5 I.R.B. 419, satisfies the consent required under § 455(c)(3) and § 1.455-6(b).   
     
  (3) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 18.01 is "132."   
     
  (4) Contact information. For further 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), as applicable, in the first taxable year it enters into such a contract, but must   
continue to use its exempt contract method of accounting for its existing exempt long-term   
construction contracts. Similarly, in the first taxable year that a taxpayer enters 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 contracts entered into on or after the first day of the year of change. Accordingly,   
a § 481(a) adjustment is neither permitted nor required.   
     
  (4) Certain eligibility rule temporarily 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 for a taxpayer's first, second,   
or third taxable year ending after December 31, 2017.   
     
  (5) Reduced filing requirement. A taxpayer is required to complete only the following information   
on Form 3115 (Rev. December 2018) to make this change:   
     
  (a) The identification section of page 1 (above Part I);   
     
  (b) The signature section at the bottom of page 1;   
     
  (c) Part I;   
     
  (d) Part II, all lines except line 16;   
     
  (e) Part IV, line 25; and   
     
  (f) Schedule D, Part I.   
     
  (6) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 19.01 is "236."   
     
  (7) Contact information. For further information regarding changes under this section, contact   
Innessa Glazman 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 benefits.   
     
  (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 3 rd  party medical provider, no later than the 15 th  day of the 3 rd  calendar month after   
the end of the taxable year of the retirement, and to employees and former employees who have   
filed claims under a workers' compensation act) that are not paid from a welfare benefit fund   
within the meaning of § 419(e) to a method as follows:   
     
  (A) If the taxpayer has a liability to pay an employee for medical expenses incurred by the   
employee, the taxpayer will treat the liability as incurred in the taxable year in which the employee   
files the claim with the employer. See  United States v. General Dynamics Corp., 481 U.S. 239   
(1987), 1987-2 C.B. 134.   
     
  (B) If the taxpayer has a liability to pay a 3 rd  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 should file a single Form 3115 for both changes, in which case the taxpayer must enter   
the designated automatic accounting method change numbers for both changes on the appropriate   
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for   
information on making concurrent changes.   
     
  (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  § 1.446-1(c)(1)   
(ii)). Specifically, a taxpayer may change 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 15 th  day of the 3 rd  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. Rul. 55-446, 1955-2 C.B. 531, as modified 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 should file a single Form 3115 for both changes, in which case the taxpayer must enter   
the designated automatic accounting method change numbers for both changes on the appropriate   
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making   
concurrent changes.   
     
  (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)). Specifically, a taxpayer may change its 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 15 th  day of the 3 rd  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 should file a single Form 3115 for both changes, in which case the taxpayer must enter   
the designated automatic accounting method change numbers for both changes on the appropriate   
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making   
concurrent changes.   
     
  (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 15 th  day of the 3 rd  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 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 file a single Form 3115 for both changes, in which case the taxpayer must enter   
the designated automatic accounting method change numbers for both changes on the appropriate   
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making   
concurrent changes.   
     
  (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 should file a single Form 3115 for both changes, in which case the taxpayer must enter   
the designated automatic accounting method change numbers for both changes on the appropriate   
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for   
information on making concurrent changes.   
     
  (4) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under 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 1.461-4(g)(1) and §   
and (2). If the taxpayer has self-insured liabilities resulting from medical services provided to   
employees who have filed claims under 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 file a single Form 3115, in which case the 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  § 1.461-5(b)); or   
     
  (iii) a taxpayer using an overall accrual method of accounting that wants to change its method   
of accounting for FICA and FUTA taxes to the safe harbor method provided in Rev. Proc. 2008-25,   
2008-1 C.B. 686. Rev. Proc. 2008-25 provides that for purposes of the recurring item exception,   
a taxpayer will be treated as satisfying the requirement in § 1.461-5(b)(1)(i) for its payroll tax   
liability in the same taxable year in which all events have occurred that establish the fact of   
the 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 RRTA taxes (if applicable) as specified in§  461(h)(3) as part of   
this change.   
     
  (3) Concurrent automatic change. A taxpayer making both this change and a change to a   
UNICAP method described in section 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 change should   
file a single Form 3115 for both changes, in which case the taxpayer must enter the designated   
automatic accounting method change numbers for both changes on the appropriate line on that   
Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for information on   
making concurrent changes.   
     
  (4) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under section 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   
Vincent Brodbeck 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. 2007-3, 2007-1 C.B.   
350, that is, all the events needed to establish the fact of the liability occur when (a) the event   
fixing the liability, whether that be the required performance or other event occurs or (b) payment   
is due, whichever happens 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) 317-7003 (not a toll-free number)..07 Rebates and allowances.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to taxpayer using an overall accrual method of accounting   
that wants to change its method of accounting for 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   
Hyowon Lee 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 real   
property taxes that relate to a definite period of time. This change does not apply to a taxpayer's   
first taxable year in which the taxpayer incurs real property taxes, in which case the change is   
made using the provisions of § 1.461-1(c)(3)(i).   
     
  (2) Manner of making change and 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 § 1.461-1(e)(3)(i) to file a standard Form 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 2018)   
must include all of the following information:   
     
  (i) the identification section of page 1 (above Part I);   
     
  (ii) the signature section at the bottom of page 1;   
     
  (iii) Part I, line 1(a); 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. 419, satisfies the consent required under § 461(c)(2)(B) and § 1.461-1(c)   
(3)(ii).   
     
  (3) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 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 the Cal. Rev. & Tax Code, as amended.   
     
  (2) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 20.09 is "154."   
     
  (3) Contact information. For further information regarding a change under this section, contact   
Sharon Horn at (202) 317-7003 (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 of accounting for gift   
cards (as defined by section 4.02 of Rev. Proc. 2011-17, 2011-5 I.R.B. 441) issued as a refund for   
returned goods to treat the transaction as (1) the payment of a cash refund in the amount of the gift   
card, and (2) the sale of a gift card in the amount of the gift card.   
     
  (b) Treatment of proceeds of the deemed sale. A taxpayer must treat the proceeds of the deemed   
sale of a gift card in accordance with the method of 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 for advance payments under Rev. Proc. 2004-34 ( see  section 16.06 of this   
revenue procedure) for the same taxable year of change must file a 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. 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 clarifies the treatment of certain liabilities under the recurring item exception to the   
economic performance requirement under § 461(h)(3) by addressing the application of the "not   
material" and "better 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   
Justin Grill 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   
David Christensen at (202) 317-7011 or Douglas Kim at (202) 317-7003 (not toll-free numbers)..13 Timing of incurring inventory costs.   
     
  (1) Applicability. This change applies 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) if:   
     
  (a) under the taxpayer's present method of accounting, the taxpayer takes one or more inventory   
costs into account in a taxable year prior to the taxable year in which such costs are incurred under   
§ 461 and the regulations thereunder, and recovers such costs in a taxable year prior to the taxable   
year in which ownership of inventory is transferred to the customer to offset income inclusions   
under § 451(b) and/or § 451(c);     
     
  (b) in the case of a taxpayer with an applicable financial statement (AFS), as defined in section   
16.10(1)(b) of this revenue procedure, the taxpayer makes, for the  same year of change, a change   
in method of accounting for income from the sale of inventory under section 16.10(2)(a)(iii) of   
this revenue procedure and, to the extent the taxpayer receives advance payments for the sale   
of inventory, section 16.10(2)(a)(iv) of this revenue procedure, or in the case of a taxpayer that   
does not have an AFS, the taxpayer makes, for the same year of change, a change in method of   
accounting for advance payments from the sale of inventory under section 16.10(2)(b)(ii) of this     
revenue procedure;   
     
  (c) the taxpayer makes, for the same year of change, a change in method of accounting for   
such inventory costs under section 12.01, 12.02, 22.04, 22.10, 22.17, or 22.18 of this revenue   
procedure, as applicable; and   
     
  (d) the taxpayer makes the change for its inventory costs under this section 20.13 for its early   
application year, as defined in section 16.10(4)(c)(i) of this revenue procedure, or if a taxpayer   
does not apply § 1.451-3 and/or § 1.451-8, as applicable, for a taxable year beginning before   
January 1, 2021, for the taxpayer's first taxable year beginning on or after January 1, 2021.   
     
  (2) Inapplicability. This section 20.13 does not apply to a taxpayer that is not on a permissible   
method of accounting for its inventory as required under § 471 and § 263A, as applicable, unless   
the taxpayer changes to a permissible method of accounting under § 471 or § 263A, as applicable,   
for the same year of change.   
     
  (3) 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 20.13(1) of this revenue procedure.   
     
  (4) No ruling on method used. The consent granted under section 9 of Rev. Proc. 2015-13   
for a change made under this section 20.13 is not a determination by the Commissioner that the   
proposed method of accounting is a permissible method of accounting under § 1.461-1(a)(2) and   
§ 1.461-4(d)(4), and does not create a presumption that the proposed method of accounting is   
a permissible method of accounting under a provision of the Code. The director will ascertain   
whether the proposed method is permissible and in accordance with § 1.461-1(a)(2) and § 1.461-   
4(d)(4).   
     
  (5) Concurrent automatic change. A taxpayer that is making a change described in section   
20.13(1) of this revenue procedure and one or more changes described in section 12.01, 12.02,   
22.04, 22.10, 22.17, or 22.18 of this revenue procedure for the same year of change must timely   
file a single Form 3115 for all such changes and must enter the designated automatic accounting   
change numbers for all such changes on the appropriate line of Form 3115. If the taxpayer is   
making a change described in section 20.13(1) of this revenue procedure for one or more inventory   
costs, and a change described in section 12.01, 12.02, 22.04, 22.10, 22.17, or 22.18 of this revenue   
procedure for the same year of change, the taxpayer may 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.   
     
  (6) Designated automatic accounting method change number. The designated automatic method   
change number (DCN) for a change to the method of accounting under this section 20.13 is "256."   
     
  (7) Contact information. For further information regarding a change under this section, contact   
Douglas Kim at (202) 317-7003 (not a toll-free number).   
     
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 for its fixed rent (as defined in § 1.467-1(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 § 1.467-3(a), or the proportional rental accrual method, as described in § 1.467-   
2(a), for their fixed rent; and   
     
  (ii) rental agreements that provide a specific allocation of fixed rent as 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 be a disqualified leaseback or long-term agreement described in § 1.467-3(b).   
     
  (4) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 21.01 is "136."   
     
  (5) Contact information. For further information regarding a change under this section, contact   
William Ruane at (202) 317-4718 (not a toll-free number).   
     
SECTION 22. INVENTORIES (§ 471).01 Cash discounts.   
     
  (1) Description of change. This change applies to a taxpayer that wants to change its method   
of accounting for cash 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   
Andrew Braden 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, 1998-1 C.B. 857,   
as modified by this revenue procedure; or   
     
  (b) a method other than the retail safe harbor method, provided (i) the taxpayer's present method   
of accounting does not estimate inventory shrinkage, and (ii) the taxpayer's proposed method of   
accounting (that estimates inventory shrinkage) clearly reflects income under § 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 (including, for last-in, first-out (LIFO) taxpayers, the method   
of determining inventory shrinkage for, or allocating inventory shrinkage to, each LIFO pool).   
The director or national office subsequently may review whether the proposed method clearly   
reflects the taxpayer's income under § 446(b), notwithstanding any provision of Rev. Proc. 2015-   
13, 2015-5 I.R.B. 419 (or successor). If the director or the national office determines that the   
proposed method of accounting does not clearly reflect the taxpayer's income, the taxpayer will   
be treated as having made a change in method of accounting without obtaining the consent of the   
Commissioner as required by § 446(e). See  sections 2.01(3) and 2.03 of Rev. Proc. 2015-13.   
     
  (4) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 22.02 is "49."   
     
  (5) Contact information. For further information regarding a change under this section, contact   
Andrew Braden 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   
Andrew Braden at (202) 317-7007 (not a toll-free number)..04 Impermissible methods of identification and valuation of inventories.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to a taxpayer that wants to change from an impermissible   
method of identifying or valuing inventories to a permissible method of identifying or valuing   
inventories. For example, a taxpayer:   
     
  (i) using last-in, first-out (LIFO) as its inventory-identification method may change its inventory-   
valuation method from below cost to cost;   
     
  (ii) using an impermissible method of accounting described in §§ 1.471-2(f)(1) through (5) may   
change to a permissible method of accounting that corrects the impermissible method described   
in §§ 1.471-2(f)(1) through (5);   
     
  (iii) using a method that is not in accordance with § 1.471-2(c) may change to a permissible   
method of valuing "subnormal goods" under § 1.471-2(c);   
     
  (iv) changing from a gross profit method. For this purpose, a gross profit method is a method   
in which the taxpayer estimates the cost of goods sold by 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;   
     
  (ii) a taxpayer who meets the definition of a "dealer in securities" under both § 1.471-5 and   
§ 475 because such dealer is required to account for securities, as defined 475, under § 475 in §   
and may not use the rules described in § 1.471-5 for those securities;   
     
  (iii) any change described in another section of this revenue procedure or in other guidance   
published in the Internal Revenue Bulletin, or to any change within the last-in, first-out (LIFO)   
inventory method. For example, this change does not apply to a taxpayer that wants to change to   
a rolling-average method (but see section 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) Permissible method defined. For purposes of this change, a permissible method is an inventory   
method of identification or valuation, or both, specifically permitted by the Code, the regulations,   
or other guidance published in the Internal Revenue Bulletin, or a decision of the United States   
Supreme Court. However, an otherwise permissible inventory method is not permissible under   
this section 22.04 for a specific taxpayer if that taxpayer is prohibited from using that method or   
if that taxpayer is required to use a different method.   
     
  (d) Eligibility rule temporarily inapplicable for certain changes related to cost offset method.   
The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 does not apply to a method change   
under this section 22.04 if:   
     
  (i) the taxpayer made or requested to make a change during any of the five taxable years ending   
with the year of change to recover inventory costs in a taxable year prior to the taxable year in   
which ownership of the inventory is transferred to the customer to offset inclusions under § 451(b)   
and/or § 451(c), as applicable;   
     
  (ii) in the case of a taxpayer with an applicable financial statement (AFS), as defined in section   
16.10(1)(b) of this revenue procedure, the taxpayer makes, for the same year of change, a change   
in method of accounting for income from the sale of inventory under section 16.10(2)(a)(iii) of   
this revenue procedure and, to the extent the taxpayer receives advance payments for the sale   
of inventory, section 16.10(2)(a)(iv) of this revenue procedure, or in the case of a taxpayer that   
does not have an AFS, the taxpayer concurrently changes its method of accounting for advance   
payments from the sale of inventory under section 16.10(2)(b)(ii) of this revenue procedure; and   
     
  (iii) the taxpayer makes the change under this section 22.04 for its early application year, as   
defined in section 16.10(4)(c)(i) of this revenue procedure, or if a taxpayer does not apply § 1.451-   
3 and/or § 1.451-8, as applicable, for a taxable year beginning before January 1, 2021, for the   
taxpayer's first taxable year beginning on or after January 1, 2021.   
     
  (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   
Andrew Braden 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) method specified   
in Rev. Proc. 2003-20, 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 materials,   
work-in-process, and finished 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 permitted method for identification under (and   
as determined and defined in) section 23.01(1)(b) of this revenue procedure for the same year   
of change, should file a single Form 3115 for both changes, provided the taxpayer enters the   
designated automatic accounting method change numbers for both changes on the appropriate   
line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for   
information on making concurrent changes.   
     
  (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   
Andrew Braden 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 modified by Rev. Proc. 2006-14, 2006-1 C.B. 350, for its vehicle   
parts inventory. See Rev. Proc. 2002-17 for further information regarding this change.   
     
  (2) 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   
Andrew Braden 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 year of change may file a single Form 3115 for both changes, provided the taxpayer enters   
the designated automatic accounting method change numbers for both changes on the appropriate   
line on that Form 3115, 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   
Andrew Braden 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, 2007-2 C.B. 110, as modified by this revenue 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   
Stephen Rothandler 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   
advance trade discounts as defined in section 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   
Andrew Braden at (202) 317-7007 (not a toll-free number)..10 Permissible methods of identification and valuation of inventories.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to a taxpayer that wants to change from one permissible   
method of identifying or valuing inventories to another permissible method of identifying or   
valuing inventories. For example, a taxpayer using the first-in, first-out (FIFO) method as its   
inventory-identification method may change its inventory-valuation method from cost to cost or   
market, whichever is lower (LCM), or a taxpayer valuing "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:   
     
  (ii) a taxpayer who meets the definition of a "dealer in securities" under both § 1.471-5 and   
§ 475 because such dealer is required to account for securities, as defined in § 475, under § 475   
and may not use the rules described in § 1.471-5 for those securities;   
     
  (iii) any change described in another section of this revenue procedure or in other guidance   
published in the Internal Revenue Bulletin, or to any change within the last-in, first-out (LIFO)   
inventory method. For example, this change does not apply to a taxpayer that wants to change to   
a rolling-average method (but see section 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) Permissible method. For purposes of this change, a permissible method is an inventory   
method of identification or valuation, or both, specifically permitted 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 this section 22.10 for a specific taxpayer if that taxpayer is prohibited from   
using that method or if that taxpayer is required to use a different method.   
     
  (d) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.   
Proc. 2015-13 does not apply to a method change under this section 22.10 if:   
     
  (i) the taxpayer made or requested to make a change during any of the five taxable years ending   
with the year of change to recover inventory costs in a taxable year prior to the taxable year in   
which ownership of the inventory is transferred to the customer to offset inclusions under § 451(b)   
and/or 451(c), as applicable;   
     
  (ii) in the case of a taxpayer with an applicable financial statement (AFS), as defined in section   
16.10(1)(b) of this revenue procedure, the taxpayer makes, for the same year of change, a change   
in method of accounting for income from the sale of inventory under section 16.10(2)(a)(iii) of   
this revenue procedure and, to the extent the taxpayer receives advance payments for the sale   
of inventory, section 16.10(2)(a)(iv) of this revenue procedure, or in the case of a taxpayer that   
does not have an AFS, the taxpayer concurrently changes its method of accounting for advance   
payments from the sale of inventory under section 16.10(2)(b)(ii) of this revenue procedure; and   
     
  (iii) the taxpayer makes the change under this section 22.10 for its early application year, as   
defined in section 16.10(4)(c)(i) of this revenue procedure, or if a taxpayer does not apply §  1.451-   
3 and/or § 1.451-8, as applicable, for a taxable year beginning before January 1, 2021, for the   
taxpayer's first taxable year beginning on or after January 1, 2021.   
     
  (e) 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   
Andrew Braden at (202) 317-7007 (not a toll-free number)..11 Change in the official used vehicle 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 comparable to those listed in an   
official used vehicle guide as the average wholesale prices for comparable vehicles. See  Rev. Rul.   
67-107, 1967-1 C.B. 115. This change applies to:   
     
  (a) a taxpayer that wants to change from not using an official used vehicle guide to using an   
official used vehicle guide for valuing used vehicles; or   
     
  (b) a taxpayer that wants to change to a different official used vehicle guide for valuing used   
vehicles.   
     
  (2) 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   
Andrew Braden 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 advertising cost is a flat fee per vehicle or a fixed percentage of the invoice price; and (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   
Andrew Braden 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 financial accounting purposes and wants to use the same rolling-average   
method to value inventories for federal income tax purposes in accordance with Rev. Proc. 2008-   
43, 2008-30 C.B. 186, as modified by Rev. Proc. 2008-52, 2008-2 C.B. 587 ( see  section 13).   
     
  (2) 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 books and records contain sufficient information 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   
Andrew Braden 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, 2014-22 I.R.B.   
1060, applies to a taxpayer that wants to change its method of accounting to treat sales-based   
vendor chargebacks as a reduction in cost of goods sold in accordance with § 1.471-3(e)(1).   
     
  (2) 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 year of change may   
file a single Form 3115 for both changes, provided the taxpayer enters the designated automatic   
change numbers for both changes on the appropriate line on 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   
Andrew Braden 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. 2014-48, 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 file a single Form 3115.   
     
  (5) Manner of making change. A taxpayer making a change under this section 22.15 for its first   
or second taxable year 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 cut-off 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 cut-off 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   
Andrew Braden 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   
Andrew Braden at (202) 317-7007 (not a toll-free number)..17 Change from currently deducting inventories to permissible methods of identification and    
 valuation of inventories.   
     
    (1) Description of change.   
     
  (a) Applicability. This change applies to a taxpayer that wants to change from currently   
deducting inventories to a permissible method of identifying and valuing inventories. For   
example, a taxpayer currently deducting inventories may change to using the first-in, first-out   
(FIFO) method as its inventory-identification method and cost or market, whichever is lower   
(LCM), as its inventory-valuation method.   
     
  (b) Inapplicability. This change does not apply to:   
     
  (i) any change for real property or improvements to the real property because real property is   
not inventoriable property under § 1.471-1;   
     
  (ii) a taxpayer who meets the definition of a "dealer in securities" under both§  1.471-5 and   
§ 475 because such dealer is required to account for securities, as defined in § 475, under § 475   
and may not use the rules described in § 1.471-5 for those securities;   
     
  (iii) any change described in another section of this revenue procedure or in other guidance   
published in the Internal Revenue Bulletin, or to any change within the last-in, first-out (LIFO)   
inventory method. For example, this change does not apply to a taxpayer that wants to change to   
a rolling-average method (but see section 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) Permissible method defined. For purposes of this change, a permissible method is an inventory   
method of identification or valuation, or both, specifically permitted 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 this section 22.17 for a specific taxpayer if that taxpayer is prohibited from   
using that method or if that taxpayer is required to use a different method.   
     
  (d) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.   
Proc. 2015-13 does not apply to a method change under this section 22.17 if:   
     
  (i) the taxpayer made or requested to make a change during any of the five taxable years ending   
with the year of change to recover inventory costs in a taxable year prior to the taxable year in   
which ownership of the inventory is transferred to the customer to offset inclusions under § 451(b)   
and/or 451(c), as applicable;   
     
  (ii) in the case of a taxpayer with an applicable financial statement (AFS), as defined in section   
16.10(1)(b) of this revenue procedure, the taxpayer makes, for the same year of change, a change   
in method of accounting for income from the sale of inventory under section 16.10(2)(a)(iii) of   
this revenue procedure and, to the extent the taxpayer receives advance payments for the sale   
of inventory, section 16.10(2)(a)(iv) of this revenue procedure, or in the case of a taxpayer that   
does not have an AFS, the taxpayer concurrently changes its method of accounting for advance   
payments from the sale of inventory under section 16.10(2)(b)(ii) of this revenue procedure; and   
     
  (iii) the taxpayer makes the change under this section 22.17 for its early application year, as   
defined in section 16.10(4)(c)(i) of this revenue procedure, or if a taxpayer does not apply § 1.451-   
3 and/or § 1.451-8, as applicable, for a taxable year beginning before January 1, 2021, for the   
taxpayer's first taxable year beginning on or after January 1, 2021.   
     
  (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   
Andrew Braden 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 defined in   
section 22.18(2) of this revenue procedure, that wants to change its § 471 method of accounting   
for inventory to one of the following methods provided in this section 22.18(1).   
     
  (a) Changes under § 471(c) or proposed § 1.471-1(b). For a taxable year beginning after   
December 31, 2017, and before January 5, 2021, a change to:   
     
  (i) a method that treats inventory as non-incidental materials and supplies (NIMS) under   
§ 471(c)(1)(B)(i);   
     
  (ii) a method that treats inventory as NIMS under proposed § 1.471-1(b)(4);   
     
  (iii) a method that conforms to § 471(c)(1)(B)(ii) by using the taxpayer's method of accounting   
reflected in its applicable financial statements (AFS), as defined in§  451(b)(3), with respect to the   
taxable year, or if the taxpayer does not have an AFS for the taxable year, the books and records of   
the taxpayer prepared in accordance with the taxpayer's accounting procedures; or   
     
  (iv) the AFS section 471(c) method described in proposed § 1.471-1(b)(5), or if the taxpayer   
does not have an AFS for the taxable year, the non-AFS section 471(c) method described in   
proposed § 1.471-1(b)(6).   
     
    (b) Changes to a method under § 1.471-1(b). A change to:   
     
  (i) the section 471(c) NIMS inventory method provided in § 1.471-1(b)(4);   
     
  (ii) the AFS section 471(c) inventory method provided in § 1.471-1(b)(5), for taxpayers with an   
AFS, as defined in § 1.471-1(b)(5)(ii), or   
     
  (iii) the non-AFS section 471(c) inventory method provided in § 1.471-1(b)(6), for taxpayers   
that do not have an AFS, as defined in § 1.471-1(b)(5)(ii).   
     
  (2) Small business taxpayer defined. 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 § 1.471-1(b)(2), or § 1.471-1(b)   
(2), 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 less (adjusted for inflation), as described   
in § 448(c), proposed §§ 1.448-2(c), or § 1.448-2(c), as applicable. For taxable years beginning   
in 2019, 2020 and 2021, the inflation-adjusted gross receipts test amount is $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.   
2020-45, 2020-46 I.R.B. 1016, as applicable. For a taxable year beginning in 2022, the inflation-   
adjusted amount is $27,000,000. See Rev. Proc. 2021-45, 2021-48 I.R.B. 764.   
     
  (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 rules.   
     
  (a) 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),   
proposed § 1.471-1(b) or § 1.471-1(b), as applicable, to accounting for inventory in accordance   
with § 1.471-1(a) within the prior five taxable years ending with the year of change, and such   
change was made in the first taxable year that the taxpayer did not 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.   
     
  (b) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.   
Proc. 2015-13 does not apply to the changes described in this section 22.18 for a taxpayer's first,   
second, or third taxable year beginning after December 31, 2017. In addition, the eligibility rule   
in section 5.01(1)(f) of Rev. Proc. 2015-13 does not apply to a taxpayer's early application year,   
or, in the case of a taxpayer that does not apply § 1.471-1(b) in the early application year, the   
taxpayer's first taxable year beginning on or after January 5, 2021. For purposes of this section   
22.18 "early application year" means the taxable year of change beginning before January 5,   
2021, in which a taxpayer first applies § 1.471-1(b).   
     
  (c) Certain changes with § 481(a) adjustment of zero disregarded for eligibility rule. A change   
made under section 22.18(1)(b) of this revenue procedure will be disregarded for purposes of   
section 5.01(1)(f) of Rev. Proc. 2015-13 if the change meets the following requirements:   
     
  (i) the change is made for the taxpayer's early application year, or, in the case of a taxpayer that   
does not apply § 1.471-1(b) for a taxable year beginning before January 5, 2021, for the taxpayer's   
first taxable year beginning on or after January 5, 2021, and   
     
  (ii) the § 481(a) adjustment required to implement the change is zero.   
     
  (6) Manner of making change.   
     
  (a) Reduced filing requirement. A taxpayer is required to complete only the following information   
on Form 3115 (Rev. December 2018) to make this change:   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I;   
     
  (iv) Part II, all lines except line 16; and   
     
  (v) Part IV, all lines except line 25.   
     
  (b) Streamlined method change procedures for certain taxpayers.   
     
  (i) Applicability. The procedures described in this section 22.18(6)(b) may be used by a taxpayer   
to make a change in method of accounting described in section 22.18(1)(b) for the taxpayer's   
early application year, as defined in section 22.18(5)(b) of this revenue procedure. Additionally,   
in the case of a taxpayer that does not apply § 1.471-1(b) for a taxable year beginning before   
January 5, 2021, the procedures described in this section 22.18(6)(b) may be used to make a   
change in method of accounting described in section 22.18(1)(b) of this revenue procedure in the   
taxpayer's first taxable year beginning on or after January 5, 2021. A taxpayer that is otherwise   
permitted to use the streamlined method change procedures in this section 22.18(6)(b) may   
use these streamlined procedures if the taxpayer is making a change under section 22.18(1)   
(b) of this revenue procedure and the net § 481(a) adjustment required by such change is zero.   
Notwithstanding any provisions of this section 22.18, a taxpayer making more than one change in   
method of accounting under this revenue procedure for the same year of change is not permitted   
to net the § 481(a) adjustments to determine if the taxpayer meets the requirements to use the   
streamlined method change procedures. See section 22.18(8) of this revenue procedure for more   
information on making concurrent changes.   
     
  (ii) No Form 3115 required. In accordance with § 1.446-1(e)(3)(ii), the requirement of § 1.446-   
1(e)(3)(i) to file a Form 3115 is waived for a taxpayer making a change in method of accounting   
under this section 22.18 using the streamlined method change procedures. Thus, a taxpayer using   
the streamlined method change procedures is not required to file a Form 3115 and is not required   
to attach a separate statement when making a change under this section 22.18(6)(b).   
     
  (7) No ruling on certain method of accounting used. The consent granted under section 9 of Rev.   
Proc. 2015-13 for a change made under section 22.18(1)(a)(i) or (iii) of this revenue procedure   
is not a determination by the Commissioner that the proposed inventory method of accounting   
is permissible, and does not create any presumption that the proposed method is a permissible   
method of accounting under a provision of the Code. The director will ascertain whether the   
proposed method is permissible under the Code.   
     
  (8) 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 file a single Form 3115 for all changes 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.   
     
  (9) Designated automatic accounting method change number.   
     
  (a) Change to apply section 471(c) NIMS inventory method, as provided in section 22.18(1)(b)    
 (i) 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)(b)(i)   
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)(ii) or (iii) 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)(ii) or (iii) of this revenue   
procedure is "261."   
     
  (c) All other changes to a method described in section 22.18(1)(a) of this revenue procedure.   
The designated automatic accounting method change number for all other changes to a method   
of accounting for inventory described in section 22.18(1)(a) of this revenue procedure is "235."   
     
  (10) Contact information. For further information regarding a change under this 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 defined in   
section 22.18(2) of this revenue procedure, that:   
     
  (a) for a taxable year beginning after December 31, 2017, and before January 5, 2021, treats its   
inventory as non-incidental materials and supplies (NIMS) under § 471(c)(1)(B)(i) and wants to   
change from one permissible method, as defined in section 22.10(1)(c) of this revenue procedure,   
of identifying or valuing inventories to another permissible method of identifying or valuing   
inventories. For example, a taxpayer that uses specific identification as its inventory identification   
method may change to using the first-in, first-out (FIFO) method for purposes of its NIMS method   
under § 471(c)(1)(B)(i) under this section 22.19;   
     
  (b) uses the section 471(c) NIMS inventory method as provided in § 1.471-1(b)(4) and wants   
to change:   
     
  (i) to a method of identification or valuation permitted by § 1.471-1(b)(4)(ii) such as, for   
example, specific identification, 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).   
     
  (c) for a taxable year beginning after December 31, 2017, and before January 5, 2021, uses   
a method conforming to § 471(c)(1)(B)(ii) by using the taxpayer's method of accounting for   
inventory reflected in its applicable financial statements (AFS), as defined in§ 451(b)(3), with   
respect to the taxable year, or if the taxpayer does not have an AFS for the taxable year, the books   
and records of the taxpayer prepared in accordance with the taxpayer's accounting procedures,   
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, for purposes of applying § 471(c)(1)(B)(ii); or   
     
  (d) uses the AFS section 471(c) inventory method provided in § 1.471-1(b)(5), or if the taxpayer   
does not have an AFS as defined in§  1.471-1(b)(5)(ii) for the taxable year, the non-AFS section   
471(c) inventory method provided in § 1.471-1(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(f) of Rev. Proc. 2015-13 does   
not apply to a change described in section 22.19(1)(c) or 22.19(1)(d) 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)(c) or 22.19(1)(d) 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)(c) or 22.19(1)   
(d) 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)(c) or section 22.19(1)(d) of this revenue   
procedure must take the remaining portion of such prior § 481(a) adjustment into account in the   
year of change.   
     
  (4) Reduced filing requirement. A taxpayer is required to complete only the following information   
on Form 3115 (Rev. December 2018) to make this change:   
     
  (a) The identification section of page 1 (above Part I);   
     
  (b) The signature section at the bottom of page 1;   
     
  (c) Part I;   
     
  (d) Part II, all lines except lines 7, 16b and 16c. In the response to line 16a, include a statement   
§ 448(c) gross receipts test for the year of change. that the taxpayer satisfies the   
     
  (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 same   
year of change may file a single 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)(c) or 22.19(1)(d) 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), proposed § 1.471-1(b)(4), (5), or (6), or   
§ 1.471-1(b)(4), (5) or (6), as applicable, 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, first-out (LIFO)   
inventory method.   
     
  (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 change is being made in the first taxable year that the taxpayer does not qualify   
as a small business taxpayer as defined in section 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 may file a single 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.   
     
  (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 to the specific   
identification method for 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) Permitted method defined. For purposes of this section 23.01, an inventory method   
(identification or valuation, or both) is a permitted method if it is specifically 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 § 471(c), proposed § 1.471-1(b)(4), (5) or (6),   
or § 1.471-1(b)(4), (5) or (6), as applicable, provided the taxpayer is a small business taxpayer as   
defined in section 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.   
     
  (a) Eligibility rules inapplicable.   
     
  (i) The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, does not   
apply for the first taxable year that the taxpayer does not or will not comply with the requirements   
of § 472(e)(2) because the taxpayer has applied or will apply International Financial Reporting   
Standards in its financial statements or because the taxpayer has been acquired by an entity that   
has not or will not use the LIFO method in its financial statements.   
     
  (ii) 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 accompanying regulations within the   
prior five taxable years ending with the year of change, and such change was made in the first   
taxable year that the 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.   
     
  (b) Eligibility rule temporarily inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.   
Proc. 2015-13 does not apply to a taxpayer's early application year, or, in the case of a taxpayer   
that does not apply § 1.471-1(b) in the early application year, the taxpayer's first taxable year   
beginning on or after January 5, 2021. For purposes of this section 23.01, "early application year"   
means the taxable year of change beginning before January 5, 2021, in which a taxpayer first   
applies § 1.471-1(b).   
     
  (3) Limitation on LIFO election. The taxpayer may not re-elect the LIFO inventory method for   
a period of at least five taxable years beginning with the year of change unless, based on a showing   
of unusual and compelling circumstances, consent is specifically granted by the Commissioner to   
change the method of accounting at an earlier time. A taxpayer that wants to re-elect the LIFO   
inventory method within a period of five taxable years (beginning with the year of change) must   
file a Form 3115 in accordance with the non-automatic change procedures in Rev. Proc. 2015-13.   
A taxpayer that wants to re-elect the LIFO inventory method after a period of five taxable years   
(beginning with the year of change) does not file a Form 3115 using the non-automatic change   
procedures in Rev. Proc. 2015-13, but, rather, must file a Form 970 Application To Use LIFO    
 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 is, specific identification; FIFO; retail; etc.   ] method."   
     
  (b) "The proposed method of valuing [ Insert description of inventory goods ] is [ Insert method,    
 as appropriate; that is, cost; LCM; etc.   ]."   
     
  (6) Pool split and partial termination. If a taxpayer must remove goods from a LIFO inventory   
pool because those goods are not within the scope of that pool ( for example, removing resale   
goods from a manufacturing pool), and if the taxpayer wants to change from the LIFO inventory   
method for those removed goods, the 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 taxpayer must file a separate Form 3115 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 cut-off 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 defined in§  312(n)(4)(B) and (C). A taxpayer computing the § 481(a)   
adjustment under this special rule must then compute its ending inventory value for the year of   
change using the proposed method (that is, treat the deemed change from the first-in, first-out   
(FIFO) method to the proposed method on a cut-off basis).   
     
  (8) No ruling on certain method of accounting used. The consent granted under section 9 of   
Rev. Proc. 2015-13 for a change made by a small business taxpayer to an inventory method in   
accordance with § 471(c) under this section 23.01 is not a determination by the Commissioner that   
the proposed inventory method of accounting is permissible and does not create any presumption   
that the proposed method is a permissible method of accounting under a provision of the Code.   
The director will ascertain whether the proposed method is permissible under the Code. This   
section 23.01(8) does not apply to a small business taxpayer that is making a change to a method   
of accounting permissible under proposed § 1.471-1(b) or § 1.471-1(b).   
     
  (9) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 23.01 is "56."   
     
  (10) Contact information. For further information regarding a change under this section, contact   
Andrew Braden at (202) 317-7007 (not a toll-free number)..02 Determining current-year cost under the LIFO inventory method.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to a taxpayer using the LIFO inventory method that wants   
to change its method of determining current-year cost to:   
     
  (i) the actual cost of the goods most recently purchased or produced (most-recent-acquisitions   
method);   
     
  (ii) the actual cost of the goods 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    
§ 1.472-8(e)(2)(ii);   
     
  (iv) the specific identification method; or   
     
  (v) a rolling-average method if the taxpayer uses that rolling-average method in accordance   
with Rev. Proc. 2008-43, 2008-30 I.R.B. 186, as modified by Rev. Proc. 2008-52, 2008-36 I.R.B.   
587 ( see  section 13).   
     
  (b) Inapplicability. This change does not apply to a taxpayer using the lower of cost or market   
method to determine current-year cost. A taxpayer using the lower of cost or market method that   
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 file a single Form 3115 for   
both changes, in which case the taxpayer must enter the designated automatic accounting method   
change numbers for both changes on the appropriate line on that Form 3115. See section 6.03(1)   
(b) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for information on making concurrent changes.   
     
  (4) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 23.02 is "57."   
     
  (5) Contact information. For further information regarding a change under this section, contact   
Andrew Braden at (202) 317-7007 (not a toll-free number)..03 Alternative LIFO inventory method for retail automobile dealers.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to a taxpayer engaged in the trade or 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. 450, as   
modified by Rev. Proc. 2008-23, 2008-1 C.B. 664, for its LIFO inventories of new automobiles   
and new light-duty trucks. Light-duty trucks are trucks with a gross vehicle weight of 14,000   
pounds or less, which also are referred to as class 1, 2, or 3 trucks.   
     
  (b) Inapplicability. This change does not apply to an automobile dealer that uses the inventory   
price index 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 revenue procedure) should file a single Form   
3115 for both changes, in which case the taxpayer must enter the designated automatic accounting   
method change numbers for both changes on the appropriate line on that Form 3115. See section   
6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.   
     
  (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   
Andrew Braden at (202) 317-7007 (not a toll-free number)..04 Used vehicle alternative LIFO method.   
     
  (1) Description of change. This change applies to a taxpayer that sells used 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. 2001-23, 2001-1 C.B. 784, as modified by   
Announcement 2004-16, 2004-1 C.B. 668, and Rev. Proc. 2008-23, 2008-1 C.B. 664.   
     
  (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 must, as part of this change, first change 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. 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.   
     
  (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 base-year cost of all LIFO cost increments at the beginning of the   
year of change in terms of new base-year costs, using the year of change as the new base year,   
and must recompute the indexes for 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 this revenue procedure) should file a single   
Form 3115 for both changes, in which case the taxpayer must enter the designated automatic   
accounting method change numbers for both changes on the appropriate line on that Form 3115.   
See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.   
     
  (6) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 23.04 is "59."   
     
  (7) Contact information. For further information regarding a change under this section, contact   
Andrew Braden at (202) 317-7007 (not a toll-free number)..05 Determining the cost of used vehicles purchased or taken as a trade-in.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to a taxpayer using the LIFO inventory method that wants   
to:   
     
  (i) determine the cost of used vehicles acquired by trade-in using the average wholesale price   
listed by an official used vehicle guide on the date of the trade-in. See  Rev. Rul. 67-107, 1967-1   
C.B. 115. The taxpayer must consistently use the official used vehicle guide selected unless the   
taxpayer receives permission to use a different guide;   
     
  (ii) use a different official used vehicle guide for determining the cost of used vehicles acquired   
by trade-in;   
     
  (iii) determine the cost of used vehicles purchased for cash using the actual purchase price of   
the vehicle; or   
     
  (iv) reconstruct the beginning-of-the-year cost of used vehicles purchased for cash using values   
computed by national auto auction companies based on vehicles purchased for cash. The national   
auto 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   
Andrew Braden at (202) 317-7007 (not a toll-free number)..06 Change to the inventory price index computation (IPIC) method.   
     
  (1) Description of change. This change applies to a taxpayer that wants to change:   
     
  (a) from a non-IPIC LIFO inventory method to the IPIC method in accordance with all relevant   
provisions of § 1.472-8(e)(3); or   
     
  (b) from the IPIC method as described in T.D. 7814, 1982-1 C.B. 84, (March 15, 1982) (the   
old IPIC method) to the IPIC method as described in § 1.472-8(e)(3) ( see  T.D. 8976, 2002-1 C.B.   
421, (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 method to define inventory items to using a total-product-   
cost method to define 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 must, as part of this change, first change 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 of change may file a single Form   
3115 for both changes, provided the taxpayer enters the designated automatic accounting method   
change numbers for both changes on the appropriate line on that Form 3115. See section 6.03(1)   
(b) of Rev. Proc. 2015-13 for information on making concurrent changes.   
     
  (b) A taxpayer making this change and to change its method of pooling to IPIC-method pools   
described in § 1.472-8(b)(4) or § 1.472-8(c)(2) under section 23.07 of this revenue procedure for   
the same year of change may file a single Form 3115, provided the taxpayer enters the designated   
automatic accounting method change numbers for both changes on the appropriate line on that   
Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent   
changes.   
     
  (c) A taxpayer making this change and to change its method of pooling under section 23.10   
of this revenue procedure for the same year of change may file a single Form 3115, provided the   
taxpayer enters the designated automatic accounting method change numbers for both changes   
on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-13 for   
information on making 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   
Andrew Braden at (202) 317-7007 (not a toll-free number)..07 Changes within the inventory price index computation (IPIC) method.   
     
  (1) Description of change. This change applies to a taxpayer using the IPIC method described in   
§ 1.472-8(e)(3) as revised by T.D. 8976, 2002-1 C.B. 421, (new IPIC method) that wants to make   
one or more of the following changes:   
     
  (a) change from the double-extension IPIC method to the link-chain IPIC method, or vice versa.   
See § 1.472-8(e)(3)(iii)(E) for principles concerning the computation of the inventory price index   
under the double-extension IPIC method and the link-chain IPIC method;   
     
  (b) change to or from the 10 percent method. See § 1.472-8(e)(3)(iii)(C) for principles   
concerning the assignment of inventory items to Bureau of Labor Statistics (BLS) categories   
under the IPIC method;   
     
  (c) change to IPIC-method pools described in § 1.472-8(b)(4) or § 1.472-8(c)(2), including a   
change to begin or discontinue applying one or both of the 5 percent pooling rules;   
     
  (d) change to combine or separate pools as a result of the application of a 5 percent pooling rule   
described in § 1.472-8(b)(4) or § 1.472-8(c)(2);   
     
  (e) change its selection of BLS table from Table 3 (Consumer Price Index for All Urban   
Consumers (CPI-U): U.S. city average, detailed expenditure categories) of the monthly CPI   
Detailed Report to Table 9 (Producer price indexes (PPI) and percent changes for commodity   
and 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 price indexes to using final BLS price 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   
Andrew Braden at (202) 317-7007 (not a toll-free number)..08 Changes to the Vehicle-Pool Method.   
     
  (1) Description of change. This change applies to a retail dealer or wholesale 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 of this revenue procedure) should file a single Form 3115 for both changes, in which   
case the taxpayer must enter the designated automatic accounting method change numbers for   
both changes on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015-   
13, 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   
Andrew Braden at (202) 317-7007 (not a toll-free number)..09 Changes within the used vehicle alternative LIFO method.   
     
  (1) Description of change. This change applies to a taxpayer using the "Used Vehicle   
Alternative LIFO Method" as described in Rev. Proc. 2001-23, 2001-1 C.B. 784, as modified by   
Announcement 2004-16, 2004-1 C.B. 668, and Rev. Proc. 2008-23, 2008-1 C.B. 664, that wants   
to change the particular "official used vehicle 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 change in the specific guide category that a taxpayer uses to represent vehicles of   
average condition for purposes of section 4.02(5)(a) of Rev. Proc. 2001-23).   
     
  (2) Manner of making change.   
     
  (a) Cut-off basis. This change is made on a cut-off basis and applies only to the computation of   
ending inventories after the beginning of the year of change. 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   
Andrew Braden at (202) 317-7007 (not a toll-free number)..10 Changes to dollar-value pools of manufacturers.   
     
  (1) Description of change. This change applies to a manufacturer that:   
     
  (a) purchases goods for resale (resale goods) and, thus, must reassign resale goods from the   
pool(s) it maintains for the goods it manufactures to one or more 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 file a separate Form 3115 to change cut-off basis, the taxpayer then may   
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   
Andrew Braden 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) or (f), then   
beginning with the first taxable year for which the election is effective (election year), mark to   
market is the only permissible method of accounting for securities or commodities subject to the   
election. Thus, if the electing taxpayer's method of accounting for its taxable year immediately   
preceding the election year is inconsistent with § 475, the taxpayer is required to change its method   
of accounting to comply with the election. A taxpayer that makes a § 475(e) or (f) election but fails   
to change its method of accounting 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 conditions are satisfied:   
     
  (a) the taxpayer is a commodities dealer, securities trader, or commodities trader that has made   
a valid election under § 475(e) or (f) ( see  section 5.03(1) of Rev. Proc. 99-17) and that is required   
to change its method of accounting to 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); and   
     
  (c) the year of change is the election year.   
     
  (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 (f) election, a taxpayer must file a statement satisfying the requirements in   
section 5.04 of Rev. Proc. 99-17. The taxpayer must file the statement not later than the due date   
(without regard to any extension) of the original federal income tax return for the taxable year   
immediately preceding the election year and must attach the statement either to that return or,   
if applicable, to a request for an extension of time to file that return. For example, if a calendar   
year individual taxpayer wants to make a § 475(e) or (f) election for 2018 (the election year),   
the taxpayer must file the statement on or before April 18, 2018, with the taxpayer's timely filed   
(without regard to any extension) federal income tax return for 2017 or the taxpayer's timely filed   
request for an extension of time to file the 2017 federal income tax return. On the Form 3115   
filed for the year of change, a taxpayer should indicate that the taxpayer has filed the statement in   
compliance with section 5.03(1) of Rev. Proc. 99-17.   
     
  (5) 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.   
     
  (6) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 24.01 is "64."   
     
  (7) Contact information. For further information regarding a change under this section, contact   
Marsha Sabin at (202) 317-6945 (not a toll-free number)..02 Taxpayers requesting to change their method of accounting from the mark-to-market method    
 of accounting described in § 475 to a realization method.   
     
  (1) Description of change. This change applies to any taxpayer requesting permission to change   
its method of accounting for securities or commodities as defined in § 475 from the mark-to-market   
method of accounting described in § 475 to a 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 of accounting under a specific Code section 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   
§ 475 to a realization method. Thus, filing the Notification Statement described in section 24.02(6)   
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 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 (c) below are satisfied:   
     
  (a) the taxpayer is using, properly or improperly, the mark-to-market method of accounting   
described in § 475;   
     
  (b) the taxpayer is requesting 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; and   
     
  (c) the taxpayer meets the requirements of this section 24.02, including the requirement that   
it timely file the Notification Statement described in section 24.02(6) of this revenue procedure.   
     
  (4) 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.   
     
  (5) Manner of making change. This change is made using a cut-off basis and applies only to   
Section 475 Securities, Section 475 Commodities, or both, that are accounted for using the mark-   
to-market method of accounting described in § 475 and for which a change in method is requested   
under this section 24.02. Accordingly, a § 481(a) adjustment is neither permitted nor required.   
     
  Under the cut-off basis, a taxpayer must make a final mark of all Section 475 Securities,   
Section 475 Commodities, or both, that are being marked to market and that are the subject of   
the accounting method change being requested, on the last business day of the year preceding   
the year of change. As a result of the final mark, gain or loss attributable to those securities and   
commodities is also 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 taxpayer holds on the   
first day of the year of change, the taxpayer must make proper adjustment in the amount of any   
subsequently realized gain or loss to take into account adjustments for the gain or loss recognized   
prior to the first day of the year of change pursuant to the use of the mark-to-market method of   
accounting described in § 475 in order to prevent amounts from being duplicated or omitted. Any   
change in value on or after the first day of the year of change will be taken into account using a   
realization method of accounting unless section 24.02(7) of this revenue procedure permits the   
taxpayer to resume a mark-to-market method and the taxpayer resumes a mark-to-market method.   
     
  (6) Notification Statement required. In addition to filing the Form 3115 required under section   
6.03(1) of Rev. Proc. 2015-13, to change to a realization method of accounting under this section   
24.02, a taxpayer must also file a Notification Statement that satisfies the requirements in section   
24.02(6) of this revenue procedure. The Notification Statement must be filed not later than the   
due date (without regard to any extension) of the original federal income tax return for the taxable   
year immediately preceding the year of change and must be attached either to that return or, if   
applicable, to a request for an extension of time to file that return.   
     
  (a) Notification Statement contents. The Notification Statement must contain (1) the name of   
the taxpayer that will change its method of accounting (that is, the applicant), and, if applicable,   
the filer (for example, its parent corporation); (2) a statement that the taxpayer is requesting to   
change its method of accounting from the mark-to-market method of accounting described in   
§ 475 to a realization method; (3) the year of change (both the beginning and ending dates);   
and (4) the types of instruments subject to the method change, that is, Section 475 Securities,   
Section 475 Commodities, or both. If a taxpayer has made an election under § 475(e), (f)(1), or   
(f)(2), the taxpayer must also include a statement revoking the 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) Effect of filing Notification Statement. Once the taxpayer files a Notification 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 the Notification   
Statement for the entire year of change and all subsequent years (unless section 24.02(7)(a) of   
this revenue procedure applies). A taxpayer that files the Notification Statement described in 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(6) will be granted only in unusual and compelling circumstances.   
     
  (7) Additional requirements.   
     
  (a) Resuming the mark-to-market method of accounting. A taxpayer may not use the automatic   
change procedures in Rev. Proc. 2015-13 and section 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 24.02 during any of the five taxable years beginning with the year of change.   
To resume using the mark-to-market method of accounting described in § 475 during this 5-year   
period, a taxpayer must: (i) request the change using the non-automatic change procedures in Rev.   
Proc. 2015-13, (ii) request the change by the date an election for the year of change would be due   
under section 5.03 of Rev. Proc. 99-17, 1999-1 C.B. 503, and (iii) include a statement that satisfies   
all applicable requirements of section 5.04 of Rev. Proc. 99-17.   
     
  (b) Copy of Notification Statement. A taxpayer must attach a copy of the Notification Statement     
required in section 24.02(6) of this revenue procedure to its Form 3115 filed under this section   
24.02.   
     
  (c) No audit protection for valuation. A taxpayer does not receive audit protection under section   
8.01 of Rev. Proc. 2015-13 for the method of valuation used by the taxpayer to determine the fair   
market value of the taxpayer's Section 475 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.   
     
  (8) Designated automatic accounting method change number.  The designated automatic   
accounting method change number for a change under this section 24.02 is "218".   
     
  (9) Contact information.  For further information regarding a change under this section, contact   
Marsha Sabin at (202) 317-6945 (not a toll-free number).   
     
SECTION 25. BANK RESERVES FOR BAD DEBTS (§ 585).01 Changing from the § 585 reserve method to the § 166 specific charge-off method.   
     
  (1) Description of change.   
     
  (a) Applicability. This change applies to a bank (as defined in § 581, including a bank for which   
a qualified subchapter S subsidiary (Qsub) election is filed) that wants to change its method of   
accounting for bad debts from the § 585 reserve method to the § 166 specific charge-off method.   
     
  (b) Inapplicability. This change does not apply to a large bank as defined in § 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 a Qsub election is filed   
will not be prohibited 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 pre-1988 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 a Qsub election is   
filed) cannot use the § 585 reserve method. The filing by a bank of a Form 2553, Election by a    
 Small Business Corporation, or the filing by a bank's parent of Form 8869, Qualified Subchapter    
 S Subsidiary Election, with respect to the bank will constitute an agreement by the bank to change   
its method of accounting for bad debts from the § 585 reserve method to the § 166 specific charge-   
off method effective as of the taxable year for which the S corporation election or Qsub election   
is effective (year of change) in accordance with all of the automatic change procedures of Rev.   
Proc. 2015-13 and this section 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 § 585 reserve method to the § 166 specific charge-off method for the   
first taxable year for which the bank's S corporation election is effective (year of change) may   
elect under § 1361(g) to take into account the amount of the resulting § 481(a) adjustment in   
determining taxable income for the taxable year immediately preceding the year of change. To   
make this election, a bank must (1) file an original and copy of Form 3115 under section 6.03(1)   
of Rev. Proc. 2015-13 (and any other copy required under section 6.03) for the year of change, (2)   
file an additional copy of the Form 3115 with its original (or amended) federal income tax return   
for the taxable year immediately preceding the year of change filed no later than the date the   
original Form 3115 is properly filed under section 6.03(1) of Rev. Proc. 2015-13 (and any other   
copy required under section 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 parent must   
file an original and copy of Form 3115 under section 6.03(1) of Rev. Proc. 2015-13 for the year   
of change. The Qsub bank must file an additional copy of the Form 3115 with its original (or   
amended) federal income tax return for the taxable year immediately preceding the year of change   
filed no later than the date the original Form 3115 is properly filed under section 6.03(1) of Rev.   
Proc. 2015-13, and include the amount of the § 481(a) adjustment in gross income for the taxable   
year immediately preceding the year of change. In the case of a Qsub bank, the Form 3115 should   
indicate that the "filer" is the S corporation parent and the "applicant" is the Qsub bank.   
     
  (iii) The following example illustrates the principles of section 25.01(4)(b) of this revenue   
procedure.   
     
   Example. X, a calendar year taxpayer, is a calendar year bank as defined in § 581 and is not a large bank as defined in   
§ 585(c)(2). For taxable years before 2015, X  accounted for its bad debts under the § 585 reserve method. By March 15,   
2015, X  properly filed a Form 2553 electing to be an S corporation effective January 1, 2015. Pursuant to section 25.01(4)   
(a) of this revenue procedure, the filing of the Form 2553 constituted an agreement by X  to change from the § 585 reserve   
method to the § 166 specific charge-off method for 2015 in accordance 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  must file a Form 3115 for this   
2015 change in duplicate, in accordance with section 6.03(1) of Rev. Proc. 2015-13, by attaching the original Form 3115   
to X 's timely filed (including any extension) original federal income tax return for 2015 and filing a duplicate copy of the   
Form 3115 with the Ogden, UT, office. The amount of X 's § 481(a) adjustment for the change is the amount of X 's bad   
debt reserve as of the close of December 31, 2014. X  wishes to elect under § 1361(g) to include the § 481(a) adjustment   
in income in the taxable year ending December 31, 2014, the taxable year immediately preceding the year of change. To   
make this election, X  must (1) file an original and copy of Form 3115 for the 2015 change under section 6.03(1) of Rev.   
Proc. 2015-13, (2) file an additional copy of that Form 3115 with its original (or amended) federal income tax return for   
2014 filed no later than the date the original Form 3115 is properly filed under section 6.03(1) of Rev. Proc. 2015-14, 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) 317-6945, Laura Fields at (202) 317-6850, or Adrienne Mikolashek at   
(202) 317-6850 (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 insurance company   
that is subject to tax under § 831(a) and determines its premiums earned for insurance contracts   
during the taxable year under § 832(b)(4) in accordance with the provisions of § 1.832-4. The   
automatic change does not apply to an existing Blue Cross or Blue Shield organization or any   
other organization to which § 833 applies.   
     
  (3) Certain eligibility rules 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 Change in qualification as life/nonlife insurance company under § 816.   
     
  (1) Description of change. This change applies to an insurance company that changes from   
being taxed as a life 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 qualification as a life insurance company. The taxpayer   
does not receive either: (a) any audit protection under section 8.01 of Rev. Proc. 2015-13 or (b)   
ruling reliance under section 10 of Rev. Proc. 2015-13 in connection with the consent granted   
under section 9 of Rev. Proc. 2015-13 for a change under this section 26.03 regarding whether the   
taxpayer qualifies as a life insurance company. The director will ascertain whether the taxpayer   
qualifies as a life insurance company.   
     
  (4) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 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 (as defined in § 816(b))) during a taxable   
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) Requirement to file Form 3115. 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 taxpayer must   
file Form 3115 as provided in 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.   
     
           
     
  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   
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   
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  § 1.807-4(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. A taxpayer that files a Form 3115 under this section   
26.04 is required to complete or provide only the following information on Form 3115:   
     
  (i) The identification section of page 1 (above Part I);   
     
  (ii) The signature section at the bottom of page 1;   
     
  (iii) Part I;   
     
  (iv) Part II, 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 of whether the change is reflected 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 basis under this   
section 26.04 may file a single Form 3115 that includes all the changes in basis for the year of   
change. Likewise, a single Form 3115 may be filed for all changes in basis for members of a   
group filing a consolidated return. The 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) 317-6995 (not a toll-free number).   
     
SECTION 27. DISCOUNTED UNPAID LOSSES (§ 846).01 Composite method for discounting unpaid losses.   
     
    (1) Description of change. Section 846 defines "discounted unpaid losses" for purposes of   
computing the insurance 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,   
20022 C.B. 980, section 3.01, clarifies that the composite method of Notice 88 - 100, section V, is   
permitted, but not required; section 3.02 sets forth an alternative method for those taxpayers that   
do not use the composite method of section 3.01. An insurance company using a method provided   
in 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 the specific safe   
harbor method under § 1.446-6(e) to which the taxpayer is changing.   
     
  (3) Designated automatic accounting method change number. The designated automatic   
accounting method change number for a change under this section 28.01 is "79."   
     
  (4) Contact information. For further information regarding a change under this section, contact   
John W. Rogers, III at (202) 317-6895 (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, 1.985-8(c). A taxpayer must attach a   
statement to the Form 3115 representing that it has made the adjustments set forth in § 1.985-5   
or § 1.985-8(c). The statement must also provide the amount of any unrealized 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 and records sufficient to satisfy the director 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   
William E. Blanchard at (202) 317-3900 (not a toll-free number)..02 Proportional method of accounting for OID on a pool of credit card receivables.   
     
  (1) Description of change. This change applies to a taxpayer that wants to change to the   
proportional method of accounting for OID on a pool of credit card receivables as described in   
Rev. Proc. 2013-26, 2013-22 I.R.B. 1160, as modified by Rev. Proc. 2021-35, 2021-35 I.R.B. 355,   
to reflect changes made to the treatment 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 fees, and   
interchange fees (specified credit card fees). Therefore, items subject to the timing rules in § 1.451-   
3, such as specified credit card fees, are excluded from the proportional method. See section 16.10   
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 for specified credit card   
fees to comply 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 of the beginning of the first period in the year of change   
is equal to the unaccrued OID for the pool as of the end of the preceding 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 properly treated as OID (for example, specified credit   
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 Deepan   
Patel at (202) 317-3423 (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 taxpayer on the first day of   
the first taxable year 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   
defined in § 1276(b) less any market discount 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 the bond on and after   
the first day of the year of change is included in income generally upon disposition of the bond.   
 See    § 1276(a). Because a cut-off basis is prescribed for this change, the basis of any bond, adjusted   
for amounts previously included in income during the period of the election, is not affected by the   
revocation.   
     
  (4) Additional requirements. On a statement attached to the Form 3115, the taxpayer must   
provide:   
     
  (a) the reason(s) for revoking the § 1278(b) election (or deemed § 1278(b) election);   
     
  (b) a description of the method by which, and the date on which, the 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   
William E. Blanchard at (202) 317-3900 (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 as defined in   
§ 581, must include in gross 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, 99 th  Cong., 2d Sess. 903 (1986), 1986-3 (Vol. 3) C.B. 903.   
     
  (c) Section 1283(a)(1) generally defines a short-term obligation as any bond, debenture, note   
certificate, or other 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  § 1283(b), as modified by § 1283(c),  to determine   
the daily portions of acquisition discount or OID. In addition, § 1281(a) requires the holder to   
include in gross income any stated interest that is payable on the short-term obligation (other than   
stated interest taken into account to 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   
William E. Blanchard at (202) 317-3900 (not a toll-free number)..02 Stated interest on short-term loans of cash method banks.   
     
  (1) Description of change. This change applies to a bank that uses the cash 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 (10 th  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 (8 th  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   
William E. Blanchard at (202) 317-3900 (not a toll-free number).   
     
EFFECTIVE DATE.01 In general. Except as otherwise provided under this EFFECTIVE DATE section, this   
revenue procedure is effective for a Form 3115 filed on or after January 31, 2022, for a year of   
change ending on or after May 31, 2021, that is filed under the automatic change procedures of   
Rev. Proc. 2015-13, 2015-5 I.R.B. 419, as clarified and modified by Rev. Proc. 2015-33, 2015-24   
I.R.B. 1067, and as modified by Rev. Proc. 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 Form 3115 filed under the non-automatic change procedures    
 in Rev. Proc. 2015-13. Except as provided in section 6.22 of this revenue procedure, section 5.02   
of Rev. Proc. 2021-34, or section 7.02 of Rev. Proc. 2022-09, as applicable, if before January   
31, 2022, a taxpayer properly filed a Form 3115 under the 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 pending with the national office on   
January 31, 2022, the taxpayer may choose to make the change in method of accounting under   
the automatic change procedures in Rev. Proc. 2015-13 if the taxpayer is otherwise eligible to use   
this revenue procedure and the automatic change procedures in Rev. Proc. 2015-13. The taxpayer   
must notify the national office contact person (if unknown, fax the notification to 855-574-9031   
or send the notification to the attention of Control Clerk, CC:ITA, Room 4512 at the address   
specified in section 9.08(6) of Rev. Proc. 2022-1, 2022-1 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) March 2, 2022, or (b) the issuance   
of a letter ruling granting or denying consent for the change. The notification should indicate that   
the taxpayer chooses to convert the Form 3115 to the automatic change procedures in Rev. Proc.   
2015-13. If the taxpayer timely notifies the national office that it chooses to convert the Form 3115   
to the automatic change procedures in Rev. Proc. 2015-13, the national office will send a letter to   
the taxpayer acknowledging its request and will return the user fee submitted with the Form 3115.   
     
  A taxpayer converting a Form 3115 to the automatic change procedures in Rev. Proc. 2015-13   
for a change in method of accounting described in this revenue procedure must resubmit a Form   
3115 that conforms to the automatic change procedures, with a copy of the national office letter   
sent acknowledging the taxpayer's request attached, to the IRS in Ogden, UT by the earlier of (a)   
the 30 th  calendar day after the date of the national office's letter acknowledging the taxpayer's   
request, or (b) the date the taxpayer is required to file the duplicate copy of the Form 3115 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 Form 3115 will be considered filed as of the date the taxpayer originally   
filed the converted Form 3115 under the non-automatic change procedures in Rev. Proc. 2015-13.   
This paragraph (1) does not extend the date the taxpayer must file the original (converted) Form   
3115 under SECTION 6.03(1)(a)(i)(A) of Rev. Proc. 2015-13.   
     
  A Form 3115 filed under the non-automatic change procedures in Rev. Proc. 2015-13 before   
January 31, 2022, for a change in method of accounting described in this revenue procedure, will   
be disregarded for purposes of the prior five year change rules in SECTIONS 5.04 and 5.05 of   
Rev. Proc. 2015-13 if the taxpayer converts the Form 3115 pursuant to this paragraph (1).   
     
  (2) Forms 3115 for changes in methods of accounting that can no longer be filed under the    
 automatic change procedures. Except as provided in subsection.02(2)(a) of this EFFECTIVE   
DATE section, section 5.03 of Rev. Proc. 2021-34, or section 7.02 of Rev. Proc. 2022-09, as   
applicable, the following transition rules apply to the changes in methods of accounting that   
can no longer be filed under the automatic change procedures in Rev. Proc. 2015-13 because of   
changes made in this revenue procedure. An example of such changes in methods of accounting   
is described in subsection.01(10) of the SIGNIFICANT CHANGES section of this revenue   
procedure.   
     
  (a) If before January 31, 2022, a taxpayer properly filed the original, or the duplicate copy,   
of a Form 3115 under the automatic change procedures in Rev. Proc. 2015-13 for a change in   
method of accounting that can no longer be filed under the automatic change procedures in Rev.   
Proc. 2015-13, the taxpayer 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 January 31, 2022, a taxpayer did not properly file the original, or the duplicate   
copy, of a Form 3115 under the automatic change procedures in Rev. Proc. 2015-13 for a change   
in method of accounting that can no longer be filed under the automatic change procedures in   
Rev. Proc. 2015-13, the taxpayer must make that change in method of accounting under the non-   
automatic change procedures in Rev. Proc. 2015-13. Notwithstanding § 1.446-1(e)(3)(i), the   
taxpayer may file a Form 3115 to request the Commissioner'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 January 31, 2022, 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 properly filed the duplicate copy of Form 3115 before    
 January 31, 2022,  for a change that continues to qualify under the automatic change procedures.      
     
  (a) Option to implement change as described in Rev. Proc. 2019-43 or under this revenue    
 procedure. If, before January 31, 2022, a taxpayer properly filed the 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. 2019-43, 2019-48 I.R.B. 1107,   
as modified prior to January 31, 2022, that continues to be eligible for the automatic change   
its timely filed procedures in this revenue procedure, but has not filed  (including extensions)   
original 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. 2019-43 or this revenue   
procedure, but not both.   
     
  (b) Procedures to implement change as described Rev. Proc. 2019-43.  A taxpayer who meets   
the requirements of paragraph (3)(a) and chooses to implement the change as described in Rev.   
Proc. 2019-43 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 copy of the Form 3115 was filed before January 31, 2022, 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. 2022-14, AS PROVIDED IN SECTION.02(3)(c) OF THE EFFECTIVE DATE   
SECTION OF REV. PROC. 2022-14". 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 filed as of   
the date the taxpayer originally filed the duplicate copy of the Form 3115 requesting the change   
under Rev. Proc. 2019-43. This paragraph (3)(c) does not extend the date the taxpayer must file   
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 change under Rec. Proc. 2019-43 was   
filed before January, 31, 2022, 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.   
     
EFFECT ON OTHER DOCUMENTS.01 This revenue procedure amplifies and modifies Rev. Proc. 2019-43, 2019-48 I.R.B. 1107.   
Rev. Proc. 2019-43, as amplified and modified is superseded in part. The second sentence in the   
subsection.01 under the EFFECT ON OTHER DOCUMENTS section of Rev. Proc. 2019-43   
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. 2019-43 are superseded..02 Rev. Proc. 2011-46, 2011-42 I.R.B. 518, is modified as follows:   
     
  (1) Section 5.02(3)(a) is modified to remove the first two sentences in the Manner 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)(3)(i) to file   
a Form 3115 is waived and a statement in lieu of a Form 3115 is authorized for this change.   
Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13, 2015-5 I.R.B.   
419, the statement in lieu of a Form 3115 that is permitted under this paragraph 5.02(3)(a) is   
considered a Form 3115 for purposes of the automatic consent procedures in Rev. Proc. 2015-13.   
However, the requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc. 2015-   
13, is waived.   
     
  (2) Section 5.03(2)(a) is modified to remove the first two sentences in the Manner 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)(3)(i) to file   
a Form 3115 is waived and a statement in lieu of a Form 3115 is authorized for this change.   
Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13, the statement   
in lieu of a Form 3115 that is permitted under this paragraph 5.03(2)(a) is considered a Form 3115   
for purposes of the automatic consent procedures in Rev. Proc. 2015-13. However, the requirement   
to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc. 2015-13, is waived..03 Rev. Rul. 2004-62, 2004-1 C.B. 1072, is modified to remove the second sentence in the   
CHANGE IN METHOD OF ACCOUNTING section and to 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. 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 described in section 3.04 of Rev. Proc. 2022-14, 2022-7 I.R.B. XXX (or   
successor)..04 Rev. Rul. 2000-7, 2000-9 C.B. 712, is modified to remove the fourth sentence 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. 2022-14, 2022-7   
I.R.B. XXX (or successor)..05 Rev. Rul. 2000-4, 2000-1 C.B. 331, is modified to remove the second sentence 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. 2022-14, 2022-7   
I.R.B. XXX (or successor)..06 Rev. Proc. 2007-48, 2007-2 C.B. 110, is modified to remove section 5.06(1) and to substitute   
it with the following 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. 2022-14, 2022-7 I.R.B. XXX (or successor)..07 Rev. Proc. 2007-16, 2007-1 C.B. 358, is modified as follows:   
     
  (1) The second sentence in section 4.01 is modified by substituting "and Rev. Proc. 2015-13,   
2015-5 I.R.B. 419" for "and, as applicable, Rev. Proc. 97-27 or Rev. Proc. 2002-9."   
     
  (2) The first sentence in section 4.02 is modified by:   
     
  (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   
     
  (b) Substituting "(as defined in section 3.19 of Rev. Proc. 2015-13)" for "(as defined in section   
5.02(2) of Rev. Proc. 97-27 or section 5.02 of Rev. Proc. 2002-9, as applicable)".   
     
  (c) Section 4.03 is modified by substituting "Rev. Proc. 2015-13," for "Rev. Proc. 97-27 or Rev.   
Proc. 2002-9, as applicable,".   
     
PAPERWORK REDUCTION ACT   
     
  The collection of information contained in this revenue procedure has been reviewed and   
approved by the Office of Management and Budget under OMB control numbers 1545-0074 for   
individual filers, 1545-0123 for business filers, and 1545-0047 for tax-exempt filers, in 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. This information is necessary and will be used to determine   
whether the taxpayer properly changed to a permitted method of accounting. The collections of   
information are required for the taxpayer to obtain consent to change its method of accounting.   
     
SIGNIFICANT CHANGES.01 Significant changes made by this revenue procedure to the List of Automatic Changes in   
Rev. Proc. 2019-43 include:   
     
  (1) Section 20.01, relating to a taxpayer changing its timing of incurring liabilities for employee   
compensation, is modified to add new paragraph (4) which allows a taxpayer using an overall   
accrual method of accounting to change its method of accounting for taking into account certain   
employee commission liabilities;   
     
  (2) Section 6.01, relating to impermissible to permissible depreciation method changes, is   
modified by removing language in paragraph (1)(c)(viii) and paragraph (1)(c)(xvii) allowing a   
Form 3115 to be filed under 6.01 for certain changes described in sections 6.04, 6.05 and/or 6.19   
of this revenue procedure if the original Form 3115 was filed between specified dates beginning   
and ending before January 31, 2022, because this language is obsolete;   
     
  (3) Section 6.18, relating to late elections or revocation of elections under § 168(k)(5), (7),   
and (10), is modified to clarify the waiver of the eligibility rules in sections 5.01(1)(d) and (f) of   
Rev. Proc. 2015-13 applies for the taxpayer's first, second, or third taxable year succeeding the   
taxpayer's taxable year beginning in 2016 or 2017 and ending on or after September 28, 2017;   
     
  (4) Section 6.19, relating to changes for qualified improvement property placed in service after   
December 31, 2017, is modified by removing language in paragraph (2) providing for a waiver of   
the eligibility rules in section 5.01(d) and section 5.01(f) of Rev. Proc. 2015-13 for changes made   
under section 6.19 for a taxable year for which the original Form 3115 was filed between specified   
dates beginning and ending before January 31, 2022, because this language is obsolete;   
     
  (5) Section 6.20, relating to certain late elections or revocations of elections under sections 168   
and 1502, is modified by removing language in paragraph (2) requiring a changes under 6.20(1)   
(a)(i) and (a)(ii) and (b)(i) and (b)(ii) to be made for a taxable year for which the taxpayer timely   
files an original federal income tax return between specified dates beginning and ending before   
January 31, 2022, because this language is obsolete. Section 6.20 is further modified by removing   
language in paragraph (3) providing for a waiver of the eligibility rules under section 5.01(d) and   
section 5.01(f) of Rev. Proc. 2015-13 for changes made under section 6.20(1)(a)(i) and (a)(ii) and   
(b)(i) and (b)(ii) for a taxable year for which the taxpayer timely files an original federal income   
tax return between specified dates beginning and ending before January 31, 2022, because this   
language is obsolete;   
     
  (6) Section 6.21, relating to changes in depreciation as a result of applying the additional first   
year depreciation regulations, is modified by removing language in paragraph (2)(b) providing   
of a waiver of the eligibility rule in section 5.01(f) of Rev. Proc. 2015-13 for a change for the   
property or specified plant within the scope of section 4 of Rev. Proc. 2020-50 as modified by   
section 6.21(1)(b) of this revenue procedure, where the taxpayer files an original federal income   
tax return between specified dates beginning and ending before January 31, 2022, because this   
language is obsolete;   
     
  (7) Section 6.21, relating to a change in depreciation as a result of applying the additional   
first year depreciation regulations, is modified to clarify paragraph (3)(b) as follows. First, an   
amended federal income tax return, or AAR, as applicable, to change from the impermissible   
method of determining depreciation to the permissible method of determining depreciation for the   
1-year Property or 1-year Plant must be filed prior to the date the taxpayer files its federal income   
tax return for the taxable year succeeding the 1-year Property's placed-in-service year or 1-year   
Plant's planting or grafting year, as applicable. Second, if the 1-year Property or 1-year Plant   
is within the scope of section 4.03 of Rev. Proc. 2020-50, as modified by section 6.21(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   
1-year Plant by filing an amended federal income tax return, or AAR, as applicable, in accordance   
with section 4.03(4)(a) of Rev. Proc. 2020-50;   
     
  (8) Section 6.22, relating to depreciation of tangible property under § 168(g) by controlled   
foreign corporations, is modified to require any § 481(a) adjustment (or component of a § 481(a)   
adjustment) from a change under this section that shares all of the same characteristics as any   
other § 481(a) adjustment (or component) from a change under this section included in the same   
Form 3115 to be provided as a single § 481(a) adjustment on the Form 3115, and any § 481(a)   
adjustment (or component) from a change under this section that does not share all of the same   
characteristics as any other § 481(a) adjustment (or component) from a change under this section   
included in the same Form 3115 to be provided as a separate § 481(a) adjustment on the Form   
3115;   
     
  (9) Section 7.01, relating to a change in method of accounting for the treatment of expenditures   
that qualify as research and experimental expenditures under § 174 as in effect prior to amendment   
by § 13206 of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the   
Tax Cuts and Jobs Act (TCJA), is modified to provide that section 7.01 does not apply to any   
amount paid or incurred in any taxable year for which § 174 as amended by § 13206 of the TCJA   
is in effect;   
     
  (10) Section 9.01, relating to a change in method of accounting for the costs of computer   
software to a method described in Rev. Proc. 2000-50, 2000-2 C.B. 601, as modified by Rev. Proc.   
2007-16, 2007-1 C.B. 358, is modified to provide that section 5 of Rev. Proc. 2000-50 (costs of   
developing computer software) does not apply to any amount paid or incurred in any taxable year   
for which § 174 as amended by § 13206 of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017),   
commonly referred to as the Tax Cuts and Jobs Act (TCJA) is in effect;   
     
  (11) Section 12.01, relating to certain uniform capitalization (UNICAP) methods used by   
resellers and reseller-producers, is modified as follows. First, to provide that section 12.01 applies   
to a taxpayer that uses a historic absorption ratio election with the simplified production method,   
the modified simplified production method, or the simplified resale method and wants to change   
to a different method for determining the additional section 263A costs that must be capitalized   
to ending inventories or other eligible property on hand at the end of the taxable year (that is,   
to a different simplified method or a facts-and-circumstances method). Second, to remove the   
transition rule in section 12.01(1)(b)(ii)(B) because this language is obsolete;   
     
  (12) Section 12.02, relating to certain uniform capitalization (UNICAP) methods used by   
producers and reseller-producers, is modified as follows. First, to provide that section 12.02   
applies to a taxpayer that uses a historic absorption ratio election with the simplified production   
method or the modified simplified production method and wants to change to a different method   
for determining the additional section 263A costs that must be capitalized to ending inventories   
or other eligible property on hand at the end of the taxable year (that is, to a different simplified   
method or a facts-and-circumstances method). Second, to remove the transition rule in section   
12.02(1)(b)(ii)(B) because this language is obsolete;   
     
  (13) Section 12.14, relating to interest capitization, is modified to provide that section 12.14   
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);   
     
  (14) Section 13.01, relating to a taxpayer changing its method of accounting to comply with   
§ 267, is clarified to provide such section 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 (as defined in § 957) (CFC) that does not   
have any United States shareholders (as defined in § 951(b)) owning stock of the CFC within the   
meaning of § 958(a);   
     
  (15) Section 15.10, relating to a specified transportation industry taxpayer that wants to change   
to the overall cash receipts and disbursement (cash) method, has been modified to provide that   
such taxpayer must have average annual gross receipts of more than the inflation-adjusted amount   
provided in § 448(c)(4) and not in excess of $50,000,000;   
     
  (16) Section 15.17, relating to a change to the overall 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, is modified to   
clarify that the acceleration of a § 481(a) adjustment remaining on a prior overall change in   
method of accounting to an accrual method, as provided in section 15.17(7)(a) of this revenue   
procedure, applies to a taxpayer making a change described in section 15.17(2)(a) or (b) of this   
revenue procedure;   
     
  (17) Section 16.10 (formerly section 16.12 of Rev. Proc. 2019-43, as modified by Rev. Proc.   
2021-34), relating to changes in the timing of income recognition under § 451(b) and (c), is   
modified as follows. First, paragraph 16.10(4)(b)(ii)(C) is modified to provide that a taxpayer   
making a change to the full inclusion method under proposed section 1.451-8(a) is not permitted   
to make the change on a cut-off basis. Second, paragraph 16.10(5) is modified to provide that a   
change made under section 16.10(2)(a)(iii)(A), (B), (F) and/or (G), section 16.10(2)(a)(iv)(A),   
(B), (C), (G) and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or (F) will be disregarded for   
purposes of section 5.01(1)(f) of Rev. Proc. 2015-13 if: (i) the change is made for the taxpayer's   
early application year, as defined in section 16.10(4)(c)(i) or, in the case of a taxpayer that does   
not apply § 1.451-3 and/or § 1.451-8 for a taxable year beginning before January 1, 2021, for the   
taxpayer's first taxable year beginning on or after January 1, 2021, and (ii) the § 481(a) adjustment   
required to implement the change is zero;   
     
  (18) Section 16.10 (formerly section 16.12 of Rev. Proc. 2019-43, as modified by Rev. Proc.   
2021-34) is clarified to provide (i) an example on how the 5-year item eligibility rule in section   
5.01(1)(f) of Rev. Proc. 2015-13 applies to changes made under section 16.10 and (ii) the situations   
in which the cost-offset related inventory method changes in sections 16.10(2)(a)(iii)(E), 16.10(2)   
(a)(iv)(F), and 16.10(2)(b)(ii)(E) apply, and to provide guidance regarding the ordering of   
concurrent cost-offset and cost-offset related inventory method changes;   
     
  (19) Section 20.01, relating to a taxpayer changing its timing of incurring liabilities for   
employee compensation, is modified to provide paragraph (1) does not include any amounts for   
medical services that are deferred compensation under § 404;   
     
  (20) Section 20.12, relating to an accrual method taxpayer changing its treatment of Ratable   
Service Contracts to conform to the safe harbor method provided by Rev. Proc. 2015-39, is   
modified to remove paragraph (2), relating to the temporary waiver of the eligibility rule in section   
5.01(1)(f) of Rev. Proc. 2015-13, because the paragraph is obsolete;   
     
  (21) Section 22.18, relating to a small business taxpayer, as defined in section 22.18(2) of this   
revenue procedure, that wants to change its § 471 method of accounting for inventory, is modified   
to add paragraph 22.18(5)(c), providing that a change made under section 22.18(1)(b) of this   
revenue procedure will be disregarded for purposes of section 5.01(1)(f) of Rev. Proc. 2015-13 if:   
(i) the change is made for the taxpayer's early application year, as defined in section 16.10(4)(c)(i)   
or, in the case of a taxpayer that does not apply § 1.471-1(b) for a taxable year beginning before   
January 5, 2021, for the taxpayer's first taxable year beginning on or after January 5, 2021, and   
(ii) the § 481(a) adjustment required to implement the change is zero; and   
     
  (22) Section 26.04, relating to a change in basis of computing reserves under § 807(f), is   
modified as follows. First, paragraphs (2)(a) and (b) are modified to clarify the manner in which a   
nonlife insurance company implements a change in basis of computing life insurance reserves, to   
require the netting of § 481(a) adjustments at the level of each item referred to in § 807(c), and to   
provide that a taxpayer that was an insurance company for the year of change does not accelerate   
a § 481(a) adjustment merely because it changes from a life insurance company to a nonlife   
insurance company or vice versa. Second, paragraph (2)(d)(i), relating to the information required   
to be furnished with a taxpayer's return or on Form 3115, is removed because § 1.801-5(c) has   
been removed by T.D. 9911, 2020-45 I.R.B. 966 (November 2, 2020).   
     
DRAFTING INFORMATION   
     
  The principal author of this revenue procedure is Bruce Chang of the Office of Associate Chief   
Counsel (Income Tax and Accounting). For further information regarding this revenue procedure,   
contact Mr. Chang at (202) 317-4870 (not a toll-free number).   
     
  For further information regarding a specific change in method of accounting 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 the following Offices of   
Associate Chief Counsel: Corporate (CORP), Financial Institutions and Products (FI&P), Income   
Tax & Accounting (IT&A), International (INTL), Passthroughs and Special Industries (P&SI), or   
Employee Benefits, Exempt Organizations, and Employment Taxes (EEE).   
     
     
LIST OF AUTOMATIC CHANGES CONTACT LIST