IRS Issues List of Automatic Accounting Method Changes to Which Automatic Change Procedures Apply


On April 24, 2017, the IRS released Rev. Proc. 2017-30, 2017-17 I.R.B. 18, which provides a list of automatic changes to which the automatic change procedures in Rev. Proc. 2015-13, 2015-5 I.R.B. 419, apply.
The IRS stated that Rev. Proc. 2017-30 makes a number of significant changes to the list of automatic changes in Rev. Proc. 2016-29, 2016-21 I.R.B. 880, including:

•  Modifying § 3.10, relating to a change in the 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, 2013-22 I.R.B. 1142;

• Modifying § 3.11, relating to several changes described in Rev. Proc. 2015-12, 2015-2 I.R.B. 266, by a cable system operator that is within the scope of Rev. Proc. 2015-12;

• Modifying § 12.07, relating to a change to not apply § 263A to one or more plants removed from the list of plants that have a pre-productive period in excess of 2 years;

• Removing § 6.10, relating to late partial disposition elections under Reg.  § 1.168(i)-8(d)(2) for the disposition of a portion of an asset;

• Removing § 6.11, relating to the revocation of the taxpayer's general asset account election made under § 6.32(1)(a)(i) of Rev. Proc. 2015-14, 2015-5 I.R.B. 450, or § 6.32(1)(a)(i) of the appendix to Rev. Proc. 2011-14, 2011-4 I.R.B. 330, or made under Reg. § 1.168(i)-1, § 1.168(i)-1T, or Prop. Reg. § 1.168(i)-1;

• Modifying § 6.12 (now § 6.10 of Rev. Proc. 2017-30), relating to partial dispositions of tangible depreciable assets to which the IRS's adjustment pertains, to provide that this section does not apply to any partial disposition election specified in Reg.  § 1.168(i)-8(d)(2)(i) that is not made pursuant to Reg. § 1.168(i)-8(d)(2)(iii);

• Removing § 6.15(10)(c) (now § 6.13 of this revenue procedure), relating to the disposition of a building or structural component, applied to taxpayers making concurrent automatic changes under § 6.11 and § 6.15 of Rev. Proc. 2016-29, and § 6.16(9)(c) (now § 6.14 of Rev. Proc. 2017-30), relating to dispositions of other tangible depreciable assets, applied to taxpayers making concurrent automatic changes under § 6.11 and § 6.16 of Rev. Proc. 2016-29 because § 6.11 of Rev. Proc. 2016-29 is obsolete;

• Modifying § 6.15(1)(b)(iv) (now § 6.13 of Rev. Proc. 2017-30) and § 6.16(1)(b)(iv) (now § 6.14 of this revenue procedure) to provide that these sections also do not apply to any disposition of a portion of an asset in a transaction described in the last sentence in Reg.  § 1.168(i)-8(d)(1) for which the taxpayer did not make a partial disposition election in accordance with Reg. § 1.168(i)-2(d)(iv);

• Modifying § 6.19 (now § 6.17 of Rev. Proc. 2017-30), relating to a change to the safe harbor method of accounting provided in § 8.03 of Rev. Proc. 2015-12 for determining depreciation under § 167 and § 168 of a fiber optic transfer node and fiber optic cable used by a cable system operator, to remove paragraph (2)(a) relating to the temporary waiver of the eligibility rule in § 5.01(1)(f) of Rev. Proc. 2015-13, because it is obsolete. The waiver of the eligibility rule in § 5.01(1)(d) of Rev. Proc. 2015-13 continues to apply to this change;

• Modifying § 10.01, relating to start-up expenditures to include also a change in the amortization period of a start-up expenditure to 180 months;

• Modifying § 11.08, relating to changes for tangible property, to provide that this section also does not apply to amounts paid or incurred for repair and maintenance costs that the taxpayer is changing from capitalizing to deducting and for which the taxpayer has received a payment for specified energy property in lieu of tax credits under § 1603 of the American Recovery and Reinvestment Tax Act of 2009, Div. B of Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009), as amended by § 707 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312, 124 Stat. 3296 (Dec. 17, 2010);

• Modifying § 12.09, relating to a change in the treatment of acquisition and holding costs for real property acquired through foreclosure;

• Modifying § 12.10, relating to a change for sales-based royalties;

• Modifying § 12.11, relating to a change in the treatment of sales-based vendor chargebacks under a simplified method;

• Modifying § 12.14, to include changes from an improper method of capitalizing interest under Reg.  § 1.263A-8 through  § 1.263A-14 to capitalizing interest in accordance with  Reg. § 1.263A-8 through § 1.263A-14, and to require the statement attached to the Form 3115 to include details regarding the taxpayer's sub-methods of accounting for determining capitalizing interest in accordance with Reg.    § 1.263A-8 through § 1.263A-14;

• Modifying § 20.01(1)(b)(ii), relating to a change from an improper method of inclusion of rental income or expense to inclusion in accordance with the rent allocation to clarify that this section does not apply to rental agreements that provide a specific allocation of fixed rent as described in Reg.  § 1.467-1(c)(2)(ii)(A)(2) that allocate rent to periods other than when such rents are payable;

• Modifying § 21.05, relating to impermissible methods of identification and valuation of inventory to clarify that (a) a taxpayer can make a change under this section if the taxpayer is changing from an impermissible method of identifying or valuing inventories under § 471, and/or an impermissible method described in Reg. § 1.471-2(f)(1) through § 1.471-2(f)(5); (b) a taxpayer cannot make a change under this section to allocate costs to inventory under § 471 nor under § 263A; and (c) a taxpayer cannot make a change under this section if the taxpayer is currently deducting inventories;

• Modifying § 21.11, relating to permissible methods of identification and valuation of inventory, to clarify that a taxpayer cannot make a change under this section to allocate costs to inventory under § 471 nor under § 263A;

• Modifying § 23.01, relating to certain taxpayers that have elected to use the mark-to-market method of accounting under § 475(e) or § 475(f), to provide that the eligibility rule in § 5.01(1)(d) of Rev. Proc. 2015-13 does not apply to this change. The waiver of the eligibility rule in § 5.01(1)(f) of Rev. Proc. 2015-13 continues to apply to this change;

• Modifying § 23.02, relating to taxpayers changing its method of accounting from the mark-to-market method of accounting described in § 475 to a realization method of accounting, to clarify that a change under § 23.02 is not limited to a change required by § 475 (for example, § 23.02 applies to a change from a mark-to-market method of accounting for notional principal contracts providing for non-periodic payments even if the taxpayer is not subject to § 475);

• Modifying § 25.03, relating to change in qualification as life/non-life insurance company, to clarify that this change applies to an insurance company that changes from being treated as a life insurance company under part I of sub-chapter L to being treated as a non-life insurance company under part II of sub-chapter L, or vice versa;

• Modifying § 30.01, relating to the revocation of the § 1278(b) election, to provide that, for purposes of § 30.01, 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; and

• Adding § 10.02, relating to organizational expenditures under § 248, § 10.03, relating to organization fees under § 709, and § 21.18, relating to changes from currently deducting inventory to a permissible method of identifying and valuing inventories, to provide additional changes in method of accounting to be made under the automatic change procedures.

Rev. Proc. 2017-30 modifies:

• Rev. Proc. 2016-29, 2016-21 I.R.B. 880, as modified by Notice 2016-36, 2016-25 I.R.B. 1029, Rev. Proc. 2016-39, 2016-30 I.R.B. 164, and Notice 2017-6, 2017-3 I.R.B. 422. Rev. Proc. 2016-29, as amplified and modified is superseded in part;

• Rev. Proc. 2011-46, 2011-42 I.R.B. 518;

• Rev. Rul. 2004-62, 2004-1 C.B. 1072;

• Rev. Rul. 2000-7, 2000-9 C.B. 712;

• Rev. Rul. 2000-4, 2000-1 C.B. 331; and

• Rev. Proc. 2007-48, 2007-2 C.B. 110.
Rev. Proc. 2017-30 provides transition rules and is generally effective for a Form 3115 filed on or after April 29, 2017, for a year of change ending on or after August 31, 2016, that is filed under the automatic change procedures of Rev. Proc. 2015-13, as clarified and modified by Rev. Proc. 2015-33, 2015-24 I.R.B. 1067, and as modified by Rev. Proc. 2016-1, 2016-1 I.R.B. 1.