Thursday, May 5, 2016

New List of Automatic Changes

Since the Service severed the list of automatic changes from the procedural rules for automatic method changes, they are now free to more frequently update that list. Today that happened with the release of an advance copy of Revenue Procedure 16-29 (and just in time for the ABA Tax Section's May Meeting.) Practitioners should take care not to rely on this advance copy after the final version is published in the Internal Revenue Bulletin. After May 23rd, when googling Rev. Proc. 16-29, always remember to append "IRB" to the search.

Quick notes:

  1. Effective Date. The new rev proc is generally effective for Forms 3115 filed on or after May 5, 2016. 
  2. Transition Relief. Taxpayers with pending nonautomatic Forms 3115 filed before May 5, 2016 where the change now qualifies as automatic have until June 6, 2016 or, if later, the date of the letter granting or denying consent to make the change, to ask their National Office contact to change to the automatic consent procedures. The National Office will then send an acknowledgement letter. The taxpayer will then have until the earlier of 30 days from the date of that letter or date they must file the Covington copy of the Form 3115. For automatic changes that are now nonautomatic, the transition relief varies depending on the change.
  3. Significant changes.
    • Lots of housekeeping to remove defunct TPR provisions.
    • Changes to comply with section 267(a)(3) now are exempt from the five-year item and five-year overall method eligibility rules.
    • Changes to the PCM under section 1.460-4(b) are now nonautomatic.
    • Changes from all impermissible inventory valuation and identification methods under section 471 are now automatic. 
    • Certain depreciation-related method changes are now scoped out if the taxpayer claimed a tax credit on the item's cost.
    • New changes related to the Retail Inventory Method, section 195 start-up costs, and UNICAP interest capitalization.
    • An extension of the five-year item eligibility waiver for certain changes, mostly TPR-related. 

Wednesday, January 20, 2016

Final thoughts on Liveblogging the IRS TPR Webinar

The Service still dances around the big issue that Rev. Proc. 2015-56 brought to the world's attention, (though it has been discussed among practitioners for quite some time): How does section 263A work with section 263(a)? Is it an independent capitalization provision whose "installation" and "construction" rules trump the rules for repairs under the TPR? If so, how and when?

I expect this issue to be addressed at the ABA Tax Section Midyear Meeting in a couple of weeks, but, given the lack of even informal guidance from the Service, most taxpayers and practitioners will be left wondering how the rules work for some time. Speaking of the ABA Tax Section, the Capital Recovery & Leasing committee hosted a wonderful panel on this issue last fall at the ABA Tax Section Joint Fall Meeting.Unfortunately, the panel did not resolve how the two Code section interact. My impression was that, if taxpayer-favorable guidance is not forthcoming, this issue will be litigated sooner rather than later.

Even More IRS TPR Liveblogging

IRS is now clarifying what most of us took for a mistake in an answer by an IRS presenter at the previous presentation of this webinar. Shingles could be a capitalizable restoration or betterment in certain circumstances. But the replacement of just the shingles often would be a repair.

More liveblogging TPR Webinar

My first question gets answered re: RP 2015-20 and its presumptive use.  Merrill Feldstein says a post-2014 method change would be nonautomatic (until the expiration of the 5-year item eligibility rule) and that only 2014 and later costs would qualify.

To return to the possibility of the presumption being rebuttable, I think that many taxpayers will have a tough time demonstrating that the presumption does not apply. I have thoughts on how to do so, but can't cover while liveblogging.

Liveblogging the IRS TPR Webinar (Pt 3)

Jill El-Bendary of SBSE states that inventoriable items treated as nonincidental materials and supplies under Rev. Proc. 2002-28 are not eligible for the DMSH. The same applies to Rev. Proc. 2001-10.

Liveblogging IRS TPR Webinar (pt 2)

Merrill Feldstein of Chief Counsel says that taxpayers can amend returns back to 2012 to use the higher DMSH threshold if the DMSH was elected on the original return and the taxpayer had in place procedures at the beginning of that year to expense the item under its book policy (and did deduct it for book purposes).

IRS TPR Webinar - Liveblogging

The Service presenter just confirmed that if a taxpayer qualifies to use Rev. Proc. 2015-20 and did nothing, they will be presumed to have elected into its provisions.This isn't the worst case scenario, since the presumption would presumably be rebuttable. It just means that the taxpayer will have to pay for additional factual development to demonstrate that not only that it did nothing, but that it has not changed its methods of accounting if it wants to make a covered method change and take into account pre-2014 amounts in its section 481(a) adjustment.

Tuesday, January 5, 2016

New Automatic Change Form 3115 Mailing Address

On January 4th, 2016, the Service published Internal Revenue Bulletin 2016-1. This issue of the IRB contains Rev. Proc. 2015-1, which provides the general procedural rules for private letter ruling requests, accounting method changes, and other filings. Notable updates include:

  • The nonautomatic accounting method application fee remains the same as last year: $8600.
  • As anticipated based on the draft Form 3115 instructions, automatic method changes have a new mailing address:
          Internal Revenue Service 
          201 West Rivercenter Blvd.
          PIN Team Mail Stop 97
          Covington, KY 41011-1424  
  • Rev. Proc. 2015-13 has been updated to change "Ogden copy" to "Duplicate copy".
        It is not clear whether accounting method change filers should use the new address yet. Section 18 of the revenue procedure provides that it is effective January 4th, 2016. The IRS Form 3115 website, however, has not yet been updated to reflect the new address. I have inquired about the filing address, but I suspect that we will not know the proper filing address until January 20th, during the Service's next TPR webinar.