Eligibility Rule Waiver Extended for Taxpayers Adopting Repair Regs.

By Sally P. Schreiber, J.D.

In Notice 2017-6, the IRS announced a one-year extension of the waiver of the eligibility rule set out in Section 5.01(1)(f) of Rev. Proc. 2015-13 for making certain automatic changes in accounting methods under the tangible property (T.D. 9636) and depreciation and disposition regulations (T.D. 9689). The waiver now applies to any tax year beginning before Jan. 1, 2017.

Section 5.01(1)(f) provides that the automatic accounting method change procedures may not be used if the taxpayer has made or requested a change for the same item during any of the five tax years ending with the year of change. This generally prevents taxpayers from using the automatic change procedures to change the treatment of the same item more than once within a five-year period.

To ease the transition to the final tangible property and final depreciation and disposition regulations, the IRS provided a waiver of the Section 5.01(1)(f) five-year eligibility rule in Rev. Proc. 2016-29. Specifically, the following sections of Rev. Proc. 2016-29 waived the rule for any change of accounting method permitted under these sections for any tax year beginning before Jan. 1, 2016:

  • Section 6.14, relating to a change from a permissible to another permissible method of accounting for depreciation of MACRS property under Regs. Secs. 1.168(i)-1, 1.168(i)-7, and 1.168(i)-8;
  • Section 6.15, relating to a change in method of accounting for dispositions of a building or structural component under Regs. Sec. 1.168(i)-8;
  • Section 6.16, relating to a change in method of accounting for dispositions of tangible depreciable assets (other than a building or its structural components) under Regs. Sec 1.168(i)-8;
  • Section 6.17, relating to a change in method of accounting for dispositions of tangible depreciable assets in a general asset account under Regs. Sec. 1.168(i)-1; and
  • Section 11.08, relating to changes in methods of accounting for tangible property under the final tangible property regulations.

The notice modifies these sections of Rev. Proc. 2016-29 to extend the waiver of the eligibility rule in Section 5.01(1)(f) to any tax year beginning before Jan. 1, 2017.

Under a transition rule, the IRS also said that taxpayers that have filed applications for nonautomatic changes in their accounting methods for the matters addressed in the notice before Dec. 20, 2016, that were still pending on Dec. 20, 2016, can choose to convert their request to an automatic change by following the procedures in the “Effective Date” section of Rev. Proc. 2016-29 as modified by the notice. The notice modifies subsection .02(1) of the “Effective Date” section in Rev. Proc. 2016-29 by replacing May 5, 2016, with the date Dec. 20, 2016, and replacing June 6, 2017, with the date Jan. 19, 2017.

Sally P. Schreiber (sschreiber@aicpa.org) is a Tax Adviser senior editor.

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