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.

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.

Cumulative Bulletin Past Editions Available via GPO

PDF versions of the 1919-2008 Cumulative Bulletins are now available for free on the GPO website. Just search for <title:"Internal Revenue Cumulative Bulletin"> at the GPO website. How come the most important free resources seldom get mentioned?

Suggested FAQs for the IRS - TPR

Recently, another practitioner informed his peers that the Service is collecting suggested questions for its FAQ on the Tangible Property Regulations. Below the fold are questions I have collected from many practitioners online and in practice. If you have additional questions you would like for me to submit, please comment on this post or email me directly. The comments are moderated, so your post may not show up immediately.

The Final Tangible Property Capitalization Regs (Presenter Vignettes)

I've fallen off my promised posting schedule to work on more important projects. One of these projects involves guidance on the final tangible property capitalization regulations. As part of this process, I have been collecting incorrect statements from professionals presenting on this topic. I won't name names, but here are some of the more interesting ones.

• The de minimis expensing is made once and is irrevocable. It is made once each year and is irrevocable for that year. You still have to file the election every year.
• If you do not file method changes in tax year 2014, you will permanently lose tax deductions. Only timing differences qualify for method change treatment. If you fail to file a method change application in 2014, your clients will still get the deductions. It may not be when and how they would like them, but they will still get their deductions. Even if a change is made under audit, since these are timing differences, the agent would be required to follow Rev. Proc. 2002-18 and make the change on a method change basis in the earliest open year.
• The automatic method changes will not be available after tax year 2014. The automatic method change for late partial disposition elections will not be available after tax year 2014. It will still be available in later years by filing a private letter ruling request. Otherwise, the only things slated to expire are the scope waivers. In general, scope waivers permit an automatic change in circumstances where it would ordinarily be prohibited. For example, if a taxpayer changed its Unit of Property definitions in 2012, the waiver of the five-year item scope rule allows it to make an automatic change in 2014. For the most part, these waivers are only relevant to taxpayers under exam or big taxpayers who have already made method changes in these areas. The automatic changes themselves are not going anywhere. 
• If you do nothing, your taxpayers will have a zero dollar expensing threshold. This is the most puzzling comment I have run across. Most taxpayers already have an expensing policy for book and tax purposes where they expense items costing less than a set dollar amount. To change from that is an accounting method change, which would need advance consent from the Service under Rev. Proc. 97-27. If a client does nothing, they would continue to follow their existing method and would need to prove clear-reflection-of-income under prior law if examined. After all, the de minimis expensing safe harbor is just a safe harbor.

The point of the above anecdotes is not to ridicule any speaker, but rather to correct some of the disinformation floating around out there. After all, it's hard enough to get right as it is. Also, everything I've said above can be substantiated by the regulations, revenue procedures, or informal, public comments by Treasury or Chief Counsel. Good luck.

New Series

Having restarted my blog with a practitioner-to-practitioner focus, I am launching a series of posts based on my experiences interacting with other tax practitioners online and in real life. These posts will address frequently asked questions and common misconceptions in the area of tax accounting methods and credits.

IRS to Restaurants: Comply with UNICAP!

On September 26, 2014, the Service released Chief Counsel Advice 201439001 on restaurants' UNICAP compliance. Historically, few restaurants complied with UNICAP. This led to LB&I examining a number of restaurants on this issue.  In this memo, Chief Counsel advised the Field that restaurants willing to adopt a reasonable facts-and-circumstances UNICAP method should not be required to use the Simplified Production Method.