The Internal Revenue Service (IRS) recently issued Notice 2017-6 allowing taxpayers the ability to continue to file an automatic method change to adopt the final tangible property and disposition regulations. The Notice allows a one-year extension of the waiver of the five-year eligibility rule as set forth in Section 5.01(1)(f) of Revenue Procedure 2015-13 on making automatic accounting method changes under the IRS’s Final Tangible Property regulations (T.D. 9636) and related Modified Accelerated Cost Recovery System (MACRS) regulations (T.D. 9689). The waiver applies to any tax year beginning before January 1, 2017.
Prior to the issuance of this Notice, the IRS issued Revenue Procedure 2016-29, which temporarily waived the eligibility rule for changes filed in tax years beginning before January 1, 2016. Accordingly, taxpayers will now have the ability to make changes on their 2016 tax returns utilizing the automatic consent procedures.
Generally, the five-year eligibility rule would prevent a taxpayer from filing a change in the accounting method for an item using the automatic consent procedures if the taxpayer made or requested an accounting method change for the same item during the course of the five tax years ending with the year of change. Accordingly, a taxpayer would need to file using the non-automatic procedures described in Revenue Procedure 2015-13, which would require IRS consent to make the change as well as a filing fee for the non-automatic change.
Accordingly, this waiver will now allow taxpayers that need to make additional changes in complying with the above noted regulations to do so by using the automatic consent procedures without consent and a filing fee.
Applicable Sections Under Revenue Procedure 2016-29
Notice 2017-6 applies to the automatic accounting method changes allowed by Revenue Procedure 2016-29 under the following sections:
- Section 6.14: Change from a permissible method to another permissible method of accounting for depreciation under § 1.168(i)-1 (general asset accounts), § 1.168(i)-7 (item accounts), and § 1.168(i)-8 (dispositions), as applicable – Accounting Method Change 7;
- Section 6.15: Change in method of accounting for dispositions of a building or structural components under § 1.168(i)-8 – Accounting Method Change 205;
- Section 6.16: Change in method of accounting for dispositions of tangible depreciable assets (other than a building or structural components) under § 1.168(i)-8 – Accounting Method Change 206;
- Section 6.17: Change in method of accounting for dispositions of tangible depreciable assets in a general asset account under § 1.168(i)-1 – Accounting Method Change 207; and
- Section 11.08: Change in methods of accounting for tangible property under the final tangible property repair regulations (T.D. 9636) – Accounting Method Change 184.
An automatic accounting method change(s) (i.e., Form 3115) can be filed on, or before, the extended due date of the tax return.
TECHNICAL INFORMATION CONTACT:
John M. Belpedio