Accounting Method Change Procedures Under the Tangible Property Regs.

Editor: Alistair M. Nevius, J.D.

From the IRS

The IRS issued the second part of the guidance on accounting method changes under the so-called repair regulations, which govern the treatment of expenditures incurred in acquiring, producing, or improving tangible assets (Rev. Proc. 2014-17, modifying and superseding Rev. Proc. 2012-20). The first part of the updated procedures on accounting method changes for the repair regulations was issued at the end of January (see News Notes, “Repair Regs. Accounting Method Change Guidance Issued,” 45 The Tax Adviser 226 (April 2014)).

Several sections of the repair regulations require taxpayers to secure the IRS’s consent before changing to an accounting method provided for in the regulations. The revenue procedure generally sets rules for obtaining automatic consent to change to those accounting methods provided in the repair regulations.

The revenue procedure both amends existing accounting method change procedures found in Rev. Proc. 2011-14 and provides new procedures consistent with the repair regulations.

Rev. Proc. 2014-17 covers the automatic change procedures for:

• Depreciation of leasehold improvements;
• Changing from a permissible to another permissible method of accounting for depreciation of MACRS property;
• Disposition of a building or structural component;
• Dispositions of tangible depreciable assets (other than a building or its structural components);
• Dispositions of tangible depreciable assets in a general asset account;
• General asset account elections;
• Revocations of a general asset account election; and
• Partial dispositions of tangible depreciable assets to which an IRS adjustment under Prop. Regs. Sec. 1.168(i)-8(d)(2)(iii) pertains.

Each of the above accounting method changes has separate detailed rules for implementing it. The changes share the requirement that Form 3115, Application for Change in Accounting Method, be sent to the Ogden, Utah, office instead of the national office and the requirement to use a single form when making a concurrent automatic change.