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. 

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