The IRS in late February issued the second part of 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 (Rev. Proc. 2014-16; see “Tax Practice Corner: Automatic Consent for Changing Accounting Methods Under the ‘Repair Regs.,’ ” JofA, April 2014, page 58).
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 procedures generally set rules for obtaining automatic consent to change to those accounting methods provided in the repair regulations.
The revenue procedures both amend existing accounting method change procedures in Rev. Proc. 2011-14 and provide 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.
For a description of the de minimis safe harbor under the repair regulations for acquisition or production of tangible personal property, see “Tax Practice Corner: The De Minimis Safe Harbor Under the Repair Regulations."
By Sally P. Schreiber, J.D., a JofA