5-Year Eligibility Limitation Waiver for Tangible Property Regs Extended One Year (Notice 2017-6)

first_imgThe IRS has extended for an additional year the waiver of the 5-year eligibility limitation on making automatic accounting method changes to comply with the tangible property regulations (“repair regulations”) generally provided in Reg. §1.263(a)-1, Reg. §1,263(a)-2, and Reg. §1.263(a)-3) (T.D. 9636 (September 19, 2013)) and certain related final MACRS regulations (T.D. 9689 (August 14, 2014)). As extended, the 5-year eligibility limitation will not apply to changes made for tax years beginning before January 1, 2017.Comment: The 5-year eligibility limitation, which is provided in Section 5.01(1)(f) of Rev. Proc. 2015-13, I.R.B. 2015-5, 419, prohibits a taxpayer from filing a change in 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 any of the five tax years ending with the year of change. If the 5-year eligibility limitation prevents a taxpayer from using the automatic procedure, the taxpayer must file using the nonautomatic procedures described in Rev. Proc. 2015-13. The nonautomatic procedures require actual IRS consent to make the change and the payment of a significant filing fee which is not charged for automatic changes.In the case of the tangible property regulations and related MACRS regulations, the eligibility limitation was temporarily waived and did not apply to changes filed in tax years beginning before January 1, 2016. The one year extension to tax years beginning before January 1, 2017, applies to the following automatic accounting method changes allowed by Rev. Proc. 2016-29, I.R.B. 2016-21, 880:(1) Section 11.08, relating to changes in methods of accounting for tangible property under the final tangible property repair regulations of T.D. 9636 (September 19, 2013).(2) Section 6.14, relating to a change from a permissible to another permissible method of accounting for depreciation of MACRS property under Reg. §1.168(i)-1 (relating to general asset accounts), Reg. §1.168(i)-7 (relating to item accounts), and Reg. §1.168(i)-8 (relating to dispositions), as applicable;(3) Section 6.15, relating to a change in method of accounting for dispositions of a building or structural component under Reg. §1.168(i)-8;(4) 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 Reg. §1.168(i)-8; and(5) Section 6.17, relating to a change in method of accounting for dispositions of tangible depreciable assets in a general asset account under Reg. §1.168(i)-1.The waiver also applies for purposes of the concurrent automatic changes that are specifically referenced in the preceding sections of Rev. Proc. 2016-29.The eligibility rule of Section 5.01(1)(d) of Rev. Proc. 2015-13 is also waived an additional year for Section 11.08 method changes made for tax years beginning before January 1, 2017, to comply with the final tangible property regulations. The Section 5.01(1)(d) eligibility rule prevents a taxpayer from making automatic accounting method changes in its final tax year of business.A taxpayer who filed a Form 3115 before December 20, 2016, to make any of these changes under the advance consent procedure may choose to make the change under the automatic change procedures if the request is still pending with the national office on December 20, 2016, and the taxpayer converts to the automatic procedures before the later of January 19, 2017, or the date the IRS national office rules on the advance consent request. Specific requirements for making the conversion to the automatic consent procedure are provided.Rev. Proc. 2016-29, I.R.B. 2016-21, 880, is modified, effective December 20, 2016.Notice 2017-6, 2017FED ¶46,204Other References:Code Sec. 162CCH Reference – 2016FED ¶8610.143Code Sec. 168CCH Reference – 2016FED ¶11,279.18CCH Reference – 2016FED ¶11,279.337CCH Reference – 2016FED ¶11,279.70Code Sec. 263CCH Reference – 2016FED ¶13,709.105Code Sec. 446CCH Reference – 2016FED ¶20,620.285Tax Research ConsultantCCH Reference – TRC ACCTNG: 21,302.10CCH Reference – TRC BUSEXP: 9,099CCH Reference – TRC DEPR: 15,304.28last_img

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