These synopses are intended only as aids to the reader in

Agency decision

Ask Donna

What actually matters in this document.

Text

HIGHLIGHTS

OF THIS ISSUE

Bulletin No. 2022–2

January 10, 2022

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

ADMINISTRATIVE

Notice 2022-1, page 304.

This notice directs lenders or servicers of student loans

that they should not file information returns or furnish payee statements under section 6050P of the Internal Revenue

Code (Code) to report the discharge of student loans when

the discharge is excluded from gross income under section

108(f)(5) of the Code, as amended by the American Rescue

Plan Act of 2021 (ARP), Pub. L. 117-2, 135 Stat. 4 (March

11, 2021), for taxable years 2021 to 2025.

EMPLOYEE PLANS

Notice 2022-2, page 304.

This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for

November 2021 used under § 417(e)(3)(D), the 24-month

average segment rates applicable for November 2021, and

the 30-year Treasury rates, as reflected by the application of

§ 430(h)(2)(C)(iv).

EXCISE TAX

Notice 2022-4, page 309.

Sections 4375 and 4376, added to the Code by the

Affordable Care Act, impose a fee on issuers of specified health insurance policies and plan sponsors of

applicable self-insured health plans to help fund the

Patient-Centered Outcomes Research Trust Fund

(PCORTF). This notice provides that the adjusted applicable dollar amount that applies for determining the

PCORTF fee for policy years and plan years ending on

or after October 1, 2021 and before October 1, 2022,

Finding Lists begin on page ii.

is $2.79. This adjusted applicable dollar amount has

been determined using the percentage increase in the

projected per capita amount of the National Health Expenditures published by HHS in March 2020.

INCOME TAX

Notice 2022-3, page 308.

This notice provides the optional 2022 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business,

charitable, medical, or moving expense purposes. This

notice also provides the amount taxpayers must use

in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the

maximum standard automobile cost that may be used

in computing the allowance under a fixed and variable

rate plan. Additionally, this notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal

use in calendar year 2022 for which employers may

use the fleet-average valuation rule in § 1.61-21(d)(5)(v)

of the Income Tax Regulations or the vehicle cents-permile valuation rule in § 1.61-21(e).

Rev. Proc. 2022-9, page 310.

Rev. Proc. 2022-9 modifies Rev. Proc. 2019-43, 201948 I.R.B. 1107, as modified by Rev. Proc. 2021-34,

2021-35 I.R.B. 337, to provide procedures under §

446 of the Internal Revenue Code (Code) and § 1.4461(e) of the Income Tax Regulations to obtain automatic

consent to change methods of accounting to comply

with the final regulations under §§ 263A, 448, 460

and 471 of the Code issued on January 5, 2021 (T.D.

9942). This revenue procedure also modifies Rev. Proc.

2018-40, 2018-34 I.R.B. 320, to remove the option of

netting the remaining portion of a § 481(a) adjustment

that resulted from a prior method change. This revenue

procedure also provides procedures for taxpayers to

revoke an election made under proposed § 1.448-2(b)

(2)(i)(B) for taxable years beginning on or after January

5, 2021, or in the case of taxpayer that early applies

the final regulations, for taxable years in which the final

regulations are applicable.

Rev. Rul. 2022-1, page 301.

Federal rates; adjusted federal rates; adjusted federal

long-term rate, and the long-term tax exempt rate. For

purposes of sections 382, 1274, 1288, 7872 and other sections of the Code, tables set forth the rates for

January 2022. Table 7 contains the average of the applicable federal mid-term rates (based on annual compounding) for the 60-month periods ending December

31, 2019, December 31, 2020, and December 31,

2021, for purposes of section 7702(f)(11).

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

January 10, 2022

Bulletin No. 2022–2

Part I

Section 1274.—

Determination of Issue

Price in the Case of Certain

Debt Instruments Issued for

Property

(Also Sections 42, 280G, 382, 467, 468, 482, 483,

1288, 7520, 7702, 7872.)

Rev. Rul. 2022-1

This revenue ruling provides various

prescribed rates for federal income tax

purposes for January 2022 (the current

month). Table 1 contains the short-term,

mid-term, and long-term applicable feder-

Annual

AFR

110% AFR

120% AFR

130% AFR

0.44%

0.48%

0.53%

0.57%

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

1.30%

1.44%

1.57%

1.70%

1.96%

2.29%

AFR

110% AFR

120% AFR

130% AFR

1.82%

2.00%

2.18%

2.36%

Short-term adjusted AFR

Mid-term adjusted AFR

Long-term adjusted AFR

Bulletin No. 2022–2

al rates (AFR) for the current month for

purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the

short-term, mid-term, and long-term adjusted applicable federal rates (adjusted

AFR) for the current month for purposes

of section 1288(b). Table 3 sets forth the

adjusted federal long-term rate and the

long-term tax-exempt rate described in

section 382(f). Table 4 contains the appropriate percentages for determining the

low-income housing credit described in

section 42(b)(1) for buildings placed in

service during the current month. However, under section 42(b)(2), the applicable

percentage for non-federally subsidized

new buildings placed in service after July

30, 2008, shall not be less than 9%. Table

5 contains the federal rate for determining

the present value of an annuity, an interest

for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520. Table 6 contains the

deemed rate of return for transfers made

during calendar year 2022 to pooled income funds described in section 642(c)(5)

that have been in existence for less than

3 taxable years immediately preceding

the taxable year in which the transfer was

made. Finally, Table 7 contains the average of the applicable federal mid-term

rates (based on annual compounding) for

the 60-month periods ending December

31, 2019, December 31, 2020, and December 31, 2021, for purposes of section

7702(f)(11).

REV. RUL. 2022-1 TABLE 1

Applicable Federal Rates (AFR) for January 2022

Period for Compounding

Semiannual

Quarterly

Short-term

0.44%

0.48%

0.53%

0.57%

Mid-term

1.30%

1.43%

1.56%

1.69%

1.95%

2.28%

2.27%

Long-term

1.81%

1.99%

2.17%

2.16%

2.35%

2.34%

Annual

0.33%

0.99%

1.37%

REV. RUL. 2022-1 TABLE 2

Adjusted AFR for January 2022

Period for Compounding

Semiannual

0.33%

0.99%

1.37%

301

Quarterly

0.33%

0.99%

1.37%

Monthly

0.44%

0.48%

0.53%

0.57%

1.30%

1.43%

1.55%

1.68%

1.94%

2.27%

1.80%

1.98%

2.16%

2.34%

Monthly

0.33%

0.99%

1.37%

January 10, 2022

REV. RUL. 2022-1 TABLE 3

Rates Under Section 382 for January 2022

Adjusted federal long-term rate for the current month

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal

long-term rates for the current month and the prior two months.)

1.37%

1.45%

REV. RUL. 2022-1 TABLE 4

Appropriate Percentages Under Section 42(b)(1) for January 2022

Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July

30, 2008, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit

7.36%

Appropriate percentage for the 30% present value low-income housing credit

3.15%

REV. RUL. 2022-1 TABLE 5

Rate Under Section 7520 for January 2022

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,

or a remainder or reversionary interest

REV. RUL. 2022-1 TABLE 6

Deemed Rate for Transfers to Pooled Income Funds During 2022

Deemed rate of return for transfers during 2022 to pooled income funds that have been in existence for less than

3 taxable years

1.6%

REV. RUL. 2022-1 TABLE 7

Average of the Applicable Federal Mid-Term Rates for 2019, 2020, 2021

For purposes of section 7702(f)(11), the average of the applicable federal mid-term rates (based on annual compounding) for the

60-month periods ending December 31, 2019, December 31, 2020, and December 31, 2021, are:

60-month period ending December 31, 2019

2.00% rounded to 2%

60-month period ending December 31, 2020

1.82% rounded to 2%

60-month period ending December 31, 2021

1.72% rounded to 2%

Section 42.—Low-Income

Housing Credit

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

January 2022. See Rev. Rul. 2022-1, page 301.

Section 280G.—Golden

Parachute Payments

Section 382.—Limitation

on Net Operating Loss

Carryforwards and

Certain Built-In Losses

Following Ownership

Change

Section 467.—Certain

Payments for the Use of

Property or Services

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

January 2022. See Rev. Rul. 2022-1, page 301.

The adjusted applicable federal long-term rate

is set forth for the month of January 2022. See

Rev. Rul. 2022-1, page 301.

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

January 2022. See Rev. Rul. 2022-1, page 301.

January 10, 2022

302

Bulletin No. 2022–2

Section 468.—Special

Rules for Mining and Solid

Waste Reclamation and

Closing Costs

The applicable federal short-term rates are set

forth for the month of January 2022. See Rev. Rul.

2022-1, page 301.

Section 482.—Allocation

of Income and Deductions

Among Taxpayers

Section 483.—Interest on

Certain Deferred Payments

Section 7520.—Valuation

Tables

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

January 2022. See Rev. Rul. 2022-1, page 301.

The applicable federal mid-term rates are set

forth for the month of January 2022. See Rev. Rul.

2022-1, page 301.

Section 1288.—Treatment

of Original Issue Discount

on Tax-Exempt Obligations

Section 7872.—Treatment

of Loans With BelowMarket Interest Rates

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of

January 2022. See Rev. Rul. 2022-1, page 301.

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

January 2022. See Rev. Rul. 2022-1, page 301.

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

January 2022. See Rev. Rul. 2022-1, page 301.

Bulletin No. 2022–2

303

January 10, 2022

Part III

Instructions for Lenders

and Loan Servicers

Regarding Certain

Discharged Student Loans

Notice 2022-1

SECTION 1: PURPOSE

This notice directs lenders or servicers

of student loans that they should not file

information returns or furnish payee statements under section 6050P of the Internal

Revenue Code (Code) to report the discharge of certain student loans when the

discharge is excluded from gross income

under section 108(f)(5) of the Code, as

amended by the American Rescue Plan

Act of 2021 (ARP), Pub. L. 117-2, 135

Stat. 4 (March 11, 2021), for taxable years

2021 to 2025.

SECTION 2: BACKGROUND

Section 9675(a) of the ARP amended

section 108 of the Code, Income from discharge of indebtedness, to provide a special rule for discharges of certain student

loan debt under section 108(f)(5). Under

this special rule, gross income does not include any amount which would otherwise

be includible in gross income by reason

of the discharge (in whole or in part) after

December 31, 2020, and before January

1, 2026, of loans provided for postsecondary educational expenses, whether the

loan was provided through the educational institution or directly to the borrower.

Such loans must have been made, insured,

or guaranteed by the United States, or an

instrumentality or agency thereof, a State,

territory, or possession of the United

States, or the District of Columbia, or any

political subdivision thereof, or an eligible educational institution. Additionally,

certain private education loans and loans

made by certain educational organizations

qualify for this special rule.

SECTION 3: INFORMATION

REPORTING

Generally, section 6050P of the Code

and §§ 1.6050P-1 and 1.6050P-2 of the

Income Tax Regulations require an applicable entity (as defined in section

6050P(c)(1)) that discharges at least

$600 of a borrower’s indebtedness to

file a Form 1099-C, Cancellation of

Debt, with the Internal Revenue Service

(IRS), and to furnish a payee statement

to the borrower. For purposes of this

reporting requirement, § 1.6050P-1(c)

provides that “indebtedness” means any

amount owed to an applicable entity,

including stated principal, fees, stated

interest, penalties, administrative costs,

and fines.

When all or a portion of a student

loan described in section 108(f)(5) is

discharged after December 31, 2020 and

before January 1, 2026, an applicable

entity is not required to, and should not,

file a Form 1099-C information return

with the IRS or furnish a payee statement

to the borrower under section 6050P as

a result of the discharge. The filing of

an information return with the IRS, although not required, could result in the

issuance of an underreporter notice (IRS

Letter CP2000) to the borrower through

the IRS’s Automated Underreporter program, and the furnishing of a payee statement to the borrower could cause confusion for a taxpayer with a tax-exempt

discharge of debt.

SECTION 4: DRAFTING

INFORMATION

The principal author of this announcement is Blaise Dusenberry of the Office of

the Associate Chief Counsel (Procedure

and Administration). For further information regarding this announcement, contact

Blaise Dusenberry at (202) 317-6845 (not

a toll-free number).

Update for Weighted

Average Interest Rates,

Yield Curves, and Segment

Rates

Notice 2022-2

This notice provides guidance on the

corporate bond monthly yield curve, the

corresponding spot segment rates used

under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the

Internal Revenue Code. In addition, this

notice provides guidance as to the interest

rate on 30-year Treasury securities under

§ 417(e)(3)(A)(ii)(II) as in effect for plan

years beginning before 2008 and the 30year Treasury weighted average rate under

§ 431(c)(6)(E)(ii)(I).

YIELD CURVE AND SEGMENT

RATES

Section 430 specifies the minimum

funding requirements that apply to single-employer plans (except for CSEC

plans under § 414(y)) pursuant to § 412.

Section 430(h)(2) specifies the interest rates that must be used to determine

a plan’s target normal cost and funding

target. Under this provision, present value is generally determined using three

24-month average interest rates (“segment rates”), each of which applies to

cash flows during specified periods. To

the extent provided under § 430(h)(2)

(C)(iv), these segment rates are adjusted

by the applicable percentage of the 25year average segment rates for the period

ending September 30 of the year preceding the calendar year in which the plan

year begins.1 However, an election may

be made under § 430(h)(2)(D)(ii) to use

the monthly yield curve in place of the

segment rates.

Notice 2007-81, 2007-44 I.R.B. 899,

provides guidelines for determining the

monthly corporate bond yield curve, and

Pursuant to § 433(h)(3)(A), the 3rd segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount

of the full funding limitation under § 433(c)(7)(C)).

January 10, 2022

304

Bulletin No. 2022–2

the 24-month average corporate bond

segment rates used to compute the target

normal cost and the funding target. Consistent with the methodology specified in

Notice 2007-81, the monthly corporate

bond yield curve derived from November

2021 data is in Table 2021-11 at the end

of this notice. The spot first, second, and

third segment rates for the month of November 2021 are, respectively, 1.02, 2.72,

and 3.08

Applicable Month

December 2021

2020-40 I.R.B. 789, and Notice 2021-54,

2021-41 I.R.B. 457, respectively.

24-MONTH AVERAGE CORPORATE

BOND SEGMENT RATES

The three 24-month average corporate

bond segment rates applicable for December 2021 without adjustment for the 25year average segment rate limits are as

follows:

24-Month Average Segment Rates Without 25-Year Average Adjustment

First Segment

Second Segment

0.92

2.62

25-YEAR AVERAGE SEGMENT

RATES

Section 9706(a) of the American Rescue Plan Act of 2021, Pub. L. No. 117-2

(ARP), which was enacted on March 11,

2021, changes the 25-year average segment rates and the applicable minimum

and maximum percentages used under

§ 430(h)(3)(C)(iv) of the Code to adjust

the 24-month average segment rates.2

Prior to this change, the applicable minimum and maximum percentages were

90% and 110% for a plan year beginning

in 2020, and 85% and 115% for a plan

For Plan Years

Beginning In

The 24-month average segment rates

determined under § 430(h)(2)(C)(i)

through (iii) must be adjusted pursuant to

§ 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average

segment rates.

The 25-year average segment rates

for plan years beginning in 2020, 2021

and 2022 were published in Notice 201951, 2019-41 I.R.B. 866, Notice 2020-72,

year beginning in 2021, respectively. After this change, the applicable minimum

and maximum percentages are 95% and

105% for a plan year beginning in 2020,

2021, or 2022. In addition, pursuant to

this change, any 25-year average segment rate that is less than 5% is deemed

to be 5%.3

Pursuant to § 9706(c)(1) of ARP, these

changes apply with respect to plan years

beginning on or after January 1, 2020.

However, § 9706(c)(2) of ARP provides

that a plan sponsor may elect not to have

these changes apply to any plan year beginning before January 1, 2022.4

Third Segment

3.29

The adjusted 24-month average segment rates set forth in the chart below

reflect § 430(h)(2)(C)(iv) of the Code as

amended by § 9706(a) of ARP. These adjusted 24-month average segment rates

apply only for plan years for which an

election under § 9706(c)(2) of ARP is not

in effect. For a plan year for which such

an election does not apply, the 24-month

averages applicable for December 2021,

adjusted to be within the applicable minimum and maximum percentages of the

corresponding 25-year average segment

rates in accordance with § 430(h)(2)(C)

(iv) of the Code, are as follows:

Adjusted 24-Month Average Segment Rates

Applicable

First

Second

Month

Segment

Third

Segment

2020

December 2021

4.75

5.50

6.27

2021

December 2021

4.75

5.36

6.11

2022

December 2021

4.75

5.18

5.92

The adjusted 24-month average segment rates set forth in the chart below do

not reflect the changes to § 430(h)(2)(C)

(iv) of the Code made by § 9706(a) of

ARP. These adjusted 24-month average

segment rates apply only for plan years for

which an election under § 9706(c)(2) of

ARP is in effect. For a plan year for which

such an election applies, the 24-month

Section 80602 of the Infrastructure Investment and Jobs Act, Pub. L. 117-58, makes further changes to the time periods for which specified applicable minimum and maximum percentages

apply.

Pursuant to this change, the 25-year averages of the first segment rate for 2020, 2021, and 2022 are increased to 5.00% because those 25-year averages as originally published are below

5.00%.

This election may be made either for all purposes for which the amendments under § 9706 of ARP apply or solely for purposes of determining the adjusted funding target attainment percentage under § 436 of the Code for the plan year.

Bulletin No. 2022–2

305

January 10, 2022

averages applicable for December 2021,

adjusted to be within the applicable min-

imum and maximum percentages of the

corresponding 25-year average segment

rates in accordance with § 430(h)(2)(C)

(iv) of the Code, are as follows:

Pre-ARP Adjusted 24-Month Average Segment Rates

Applicable

First

Second

Month

Segment

For Plan Years

Beginning In

Third

Segment

2020

December 2021

3.64

5.21

5.94

2021

December 2021

3.32

4.79

5.47

30-YEAR TREASURY SECURITIES

INTEREST RATES

Section 431 specifies the minimum

funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum

amount for the full-funding limitation

described in § 431(c)(6)(A), based on the

plan’s current liability. Section 431(c)(6)

(E)(ii)(I) provides that the interest rate

used to calculate current liability for this

purpose must be no more than 5 percent

above and no more than 10 percent below

the weighted average of the rates of interest on 30-year Treasury securities during

the four-year period ending on the last

day before the beginning of the plan year.

Notice 88-73, 1988-2 C.B. 383, provides

guidelines for determining the weighted

average interest rate. The rate of interest

on 30-year Treasury securities for November 2021 is 1.94 percent. The Service

determined this rate as the average of

the daily determinations of yield on the

30-year Treasury bond maturing in August 2051 determined each day through

November 9, 2021, and the yield on the

30-year Treasury bond maturing in November 2051 determined each day for the

balance of the month. For plan years beginning in December 2021, the weighted

average of the rates of interest on 30-year

Treasury securities and the permissible

range of rates used to calculate current

liability are as follows:

For Plan Years

Beginning In

Treasury Weighted Average Rates

30-Year Treasury

Weighted Average

Permissible Range

90% to 105%

December 2021

2.14

1.92 to 2.24

under § 417(e)(3)(D) are segment rates

computed without regard to a 24-month

average. Notice 2007-81 provides guidelines for determining the minimum pres-

ent value segment rates. Pursuant to that

notice, the minimum present value segment rates determined for November 2021

are as follows:

MINIMUM PRESENT VALUE

SEGMENT RATES

In general, the applicable interest rates

Month

November 2021

Minimum Present Value Segment Rates

First Segment

Second Segment

1.02

2.72

DRAFTING INFORMATION

The principal author of this notice is

Tom Morgan of the Office of the Asso-

January 10, 2022

ciate Chief Counsel (Employee Benefits,

Exempt Organizations, and Employment

Taxes). However, other personnel from

the IRS participated in the development

306

Third Segment

3.08

of this guidance. For further information

regarding this notice, contact Mr. Morgan

at 202-317-6700 or Osmundo Bernabe at

626-927-1344 (not toll-free numbers).

Bulletin No. 2022–2

Table 2021-11

Monthly Yield Curve for November 2021

Derived from November 2021 Data

Maturity

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

19.5

20.0

Yield

0.24

0.47

0.68

0.86

1.02

1.15

1.27

1.39

1.50

1.62

1.73

1.85

1.96

2.08

2.18

2.29

2.38

2.47

2.56

2.63

2.70

2.76

2.81

2.86

2.90

2.93

2.96

2.99

3.01

3.02

3.04

3.05

3.06

3.07

Bulletin No. 2022–2

Maturity

20.5

21.0

21.5

22.0

22.5

23.0

23.5

24.0

24.5

25.0

25.5

26.0

26.5

27.0

27.5

28.0

28.5

29.0

29.5

30.0

30.5

31.0

31.5

32.0

32.5

33.0

33.5

34.0

34.5

35.0

35.5

36.0

36.5

37.0

37.5

38.0

38.5

39.0

39.5

40.0

Yield

3.07

3.06

3.07

3.08

Maturity

40.5

41.0

41.5

42.0

42.5

43.0

43.5

44.0

44.5

45.0

45.5

46.0

46.5

47.0

47.5

48.0

48.5

49.0

49.5

50.0

50.5

51.0

51.5

52.0

52.5

53.0

53.5

54.0

54.5

55.0

55.5

56.0

56.5

57.0

57.5

58.0

58.5

59.0

59.5

60.0

Yield

3.08

3.09

307

Maturity

60.5

61.0

61.5

62.0

62.5

63.0

63.5

64.0

64.5

65.0

65.5

66.0

66.5

67.0

67.5

68.0

68.5

69.0

69.5

70.0

70.5

71.0

71.5

72.0

72.5

73.0

73.5

74.0

74.5

75.0

75.5

76.0

76.5

77.0

77.5

78.0

78.5

79.0

79.5

80.0

Yield

3.09

Maturity

80.5

81.0

81.5

82.0

82.5

83.0

83.5

84.0

84.5

85.0

85.5

86.0

86.5

87.0

87.5

88.0

88.5

89.0

89.5

90.0

90.5

91.0

91.5

92.0

92.5

93.0

93.5

94.0

94.5

95.0

95.5

96.0

96.5

97.0

97.5

98.0

98.5

99.0

99.5

100.0

Yield

3.09

3.10

January 10, 2022

2022 Standard Mileage

Rates

Notice 2022-3

SECTION 1. PURPOSE

This notice provides the optional 2022

standard mileage rates for taxpayers to use

in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes. This notice also provides the amount

taxpayers must use in calculating reductions to basis for depreciation taken under

the business standard mileage rate, and the

maximum standard automobile cost that

may be used in computing the allowance

under a fixed and variable rate (FAVR)

plan. Additionally, this notice provides the

maximum fair market value (FMV) of employer-provided automobiles first made

available to employees for personal use in

calendar year 2022 for which employers

may use the fleet-average valuation rule

in § 1.61-21(d)(5)(v) of the Income Tax

Regulations or the vehicle cents-per-mile

valuation rule in § 1.61-21(e).

SECTION 2. BACKGROUND

Rev. Proc. 2019-46, 2019-49 I.R.B.

1301, provides rules for computing the deductible costs of operating an automobile

for business, charitable, medical, or moving expense purposes, and for substantiating, under § 274(d) of the Internal Revenue

Code and § 1.274-5, the amount of ordinary

and necessary business expenses of local

transportation or travel away from home.

Taxpayers using the standard mileage rates

must comply with Rev. Proc. 2019-46.

However, a taxpayer is not required to use

the substantiation methods described in

Rev. Proc. 2019-46, but instead may substantiate using actual allowable expense

amounts if the taxpayer maintains adequate

records or other sufficient evidence.

An independent contractor conducts

an annual study for the Internal Revenue

Service of the fixed and variable costs of

operating an automobile to determine the

standard mileage rates for business, medical, and moving use reflected in this notice. The standard mileage rate for charitable use is set by § 170(i).

January 10, 2022

Longstanding regulations under § 61

provide special valuation rules for employer-provided automobiles. The amount

that must be included in the employee’s

income and wages for the personal use of

an employer-provided automobile generally is determined by reference to the automobile’s FMV. If an employer chooses

to use a special valuation rule, the special

value is treated as the FMV of the benefit

for income tax and employment tax purposes. Section 1.61-21(b)(4). Two such

special valuation rules, the fleet-average

valuation rule and the vehicle cents-permile valuation rule, are set forth in § 1.6121(d)(5)(v) and § 1.61-21(e), respectively. These two special valuation rules are

subject to limitations, including that they

may be used only in connection with automobiles having values that do not exceed

a maximum amount set forth in the regulations.

SECTION 3. STANDARD MILEAGE

RATES

The standard mileage rate for transportation or travel expenses is 58.5 cents per

mile for all miles of business use (business standard mileage rate). See section 4

of Rev. Proc. 2019-46. However, § 11045

of the Tax Cuts and Jobs Act, Public Law

115-97, 131. Stat. 2054 (December 22,

2017) (the “TCJA”) suspends all miscellaneous itemized deductions that are subject

to the two-percent of adjusted gross income floor under § 67, including unreimbursed employee travel expenses, for taxable years beginning after December 31,

2017, and before January 1, 2026. Thus,

the business standard mileage rate provided in this notice cannot be used to claim

an itemized deduction for unreimbursed

employee travel expenses during the suspension. Notwithstanding the foregoing

suspension of miscellaneous itemized

deductions, deductions for expenses that

are deductible in determining adjusted

gross income are not suspended. For example, members of a reserve component

of the Armed Forces of the United States

(Armed Forces), state or local government

officials paid on a fee basis, and certain

performing artists are entitled to deduct

unreimbursed employee travel expenses

as an adjustment to total income on line

11 of Schedule 1 of Form 1040 (2021),

308

not as an itemized deduction on Schedule A of Form 1040 (2021), and therefore

may continue to use the business standard

mileage rate.

The standard mileage rate is 14 cents

per mile for use of an automobile in rendering gratuitous services to a charitable

organization under § 170. See section 5 of

Rev. Proc. 2019-46.

The standard mileage rate is 18 cents

per mile for use of an automobile: (1) for

medical care described in § 213; or (2) as

part of a move for which the expenses are

deductible under § 217(g). See section

5 of Rev. Proc. 2019-46. Section 11049

of the TCJA suspends the deduction for

moving expenses for taxable years beginning after December 31, 2017, and before

January 1, 2026. However, the suspension

does not apply to members of the Armed

Forces on active duty who move pursuant

to a military order and incident to a permanent change of station. Thus, except

for taxpayers to whom § 217(g) applies,

the standard mileage rate provided in this

notice is not applicable for the use of an

automobile as part of a move occurring

during the suspension.

SECTION 4. BASIS REDUCTION

AMOUNT

For automobiles a taxpayer uses for

business purposes, the portion of the business standard mileage rate treated as depreciation is 25 cents per mile for 2018, 26

cents per mile for 2019, 27 cents per mile

for 2020, 26 cents per mile for 2021, and

26 cents per mile for 2022. See section

4.04 of Rev. Proc. 2019-46.

SECTION 5. MAXIMUM STANDARD

AUTOMOBILE COST

For purposes of computing the allowance under a FAVR plan, the standard

automobile cost may not exceed $56,100

for automobiles (including trucks and

vans). See section 6.02(6) of Rev. Proc.

2019-46.

SECTION 6. MAXIMUM VALUE

OF EMPLOYER-PROVIDED

AUTOMOBILES

For purposes of the fleet-average valuation rule in § 1.61-21(d)(5)(v) and the

Bulletin No. 2022–2

vehicle cents-per-mile valuation rule in

§ 1.61-21(e), the maximum FMV of automobiles (including trucks and vans) first

made available to employees in calendar

year 2022 is $56,100.

SECTION 7. EFFECTIVE DATE

This notice is effective for: (1) deductible transportation expenses paid

or incurred on or after January 1, 2022;

(2) mileage allowances or reimbursements paid to a charitable volunteer or

a member of the Armed Forces to whom

§ 217(g) applies: (a) on or after January

1, 2022, and (b) for transportation expenses the charitable volunteer or such

member of the Armed Forces pays or

incurs on or after January 1, 2022; and

(3) for purposes of the maximum FMV

of employer-provided automobiles for

which employers may use the fleet-average valuation rule in §1.61-21(d)(5)

(v) or the vehicle cents-per-mile rule

in §1.61-21(e), automobiles first made

available to employees for personal use

on or after January 1, 2022.

SECTION 8. EFFECT ON OTHER

DOCUMENTS

Notice 2021-02 is superseded.

DRAFTING INFORMATION

The principal author of this notice is

Christian Lagorio of the Office of Associate Chief Counsel (Income Tax and

Accounting). For further information on

this notice regarding the use of an employee-provided automobile, contact Mr.

Lagorio at (202) 317-7005 (not a tollfree number). For further information

on this notice regarding the use of an

employer-provided automobile, contact

Stephanie Caden of the Office of Associate Chief Counsel (Employee Benefits,

Exempt Organizations, and Employment

Taxes), at (202) 317-4774 (not a toll-free

number).

Sections 4375 & 4376 –

Insured and Self-Insured

Health Plans

Adjusted Applicable Dollar

Amount for Fee Imposed by

Sections 4375 and 4376

Notice 2022-4

I. PURPOSE

This notice provides the adjusted applicable dollar amount to be multiplied by

the average number of covered lives for

purposes of calculating the fee imposed

by sections 4375 and 4376 of the Internal

Revenue Code for policy years and plan

years that end on or after October 1, 2021,

and before October 1, 2022.

II. BACKGROUND

Section 4375 imposes a fee on the issuer of a specified health insurance policy for each policy year ending after September 30, 2012, and before October 1,

2029. Section 4376 imposes a fee on the

plan sponsor of an applicable self-insured

health plan for each plan year ending after

September 30, 2012, and before October

1, 2029. The fee imposed by sections 4375

and 4376 helps to fund the Patient-Centered Outcomes Research Trust Fund

(PCORTF) and is calculated using the average number of lives covered under the

policy or plan and the applicable dollar

amount for that policy year or plan year.

Under sections 4375(a) and 4376(a), the

applicable dollar amount is $2 for policy

and plan years ending on or after October 1, 2013, and before October 1, 2014.1

See Treas. Reg. §§ 46.4375-1(c)(4) and

46.4376-1(c)(3).

Under sections 4375(d) and 4376(d)

and §§ 46.4375-1(c)(4) and 46.4376-1(c)

(3), the applicable dollar amount for policy years and plan years ending in any

Federal fiscal year beginning on or after

October 1, 2014, is increased based on

increases in the projected per capita

amount of National Health Expenditures.

Specifically, the applicable dollar

amount is the sum of—

(i) The applicable dollar amount for the

policy year or plan year ending in the

previous Federal fiscal year; plus

(ii) The amount equal to the product of—

(A) The applicable dollar amount

for the policy year or plan year

ending in the previous Federal

fiscal year; and

(B) The percentage increase in the

projected per capita amount of the

National Health Expenditures,

as most recently released by

the Department of Health and

Human Services (HHS) before

the beginning of the Federal

fiscal year.

Notice 2020-84, 2020-51 IRB 1645,

provides that the adjusted applicable dollar amount for policy years and plan years

that end on or after October 1, 2020, and

before October 1, 2021 is $2.66.

III. ADJUSTED APPLICABLE

DOLLAR AMOUNT

The applicable dollar amount that must

be used to calculate the fee imposed by

sections 4375 and 4376 for policy years

and plan years that end on or after October 1, 2021, and before October 1, 2022,

is $2.79. Because HHS did not publish

updated National Health Expenditures

tables for fiscal year 2021, this year’s fee

is calculated using last year’s projections.

This is consistent with the statutory requirement under sections 4375(d)(2) and

4376(d)(2) that the increase to the PCORI

fee be determined by “the percentage increase in the projected per capita amount

of National Health Expenditures, as most

recently published by the Secretary before

the beginning of the fiscal year.” Therefore, the increase to the PCORI fee is calculated by multiplying the adjusted applicable dollar amount for policy years and

The applicable dollar amount is $1 for policy and plan years ending before October 1, 2013.

Bulletin No. 2022–2

309

January 10, 2022

plan years ending in the previous Federal

fiscal year, $2.66, by the projected percentage increase of the projected per capita amount of National Health Expenditures for fiscal year 2021, as last published

by HHS on March 19, 2020. See https://

www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html, Table 3.

The percentage increase is calculated

based on data from the same table that the

prior year’s fee was based on but using

data for different years.

IV. EFFECTIVE DATE

This notice is effective for policy years

and plan years ending on or after October 1, 2021, and before October 1, 2022.

V. DRAFTING INFORMATION

The principal author of this notice is

William Fischer of the Office of Associate Chief Counsel (Employee Benefits,

Exempt Organizations, and Employment

Taxes). For further information regarding

this notice, contact Mr. Fischer at 202–

317–5500 (not a toll-free number).

26 CFR 601.204: Changes in accounting periods

and methods of accounting.

(Also Part 1, §§ 263A, 446, 447, 448, 460, 471,

1.263A-1, 1.446-1, 1.448-1T, 1.460-1, 1.471-1,

1.481-1.)

Rev. Proc. 2022-9

SECTION 1. PURPOSE

This revenue procedure modifies Rev.

Proc. 2019-43, 2019-48 I.R.B. 1107, as

modified by Rev. Proc. 2021-34, 202135 I.R.B. 337, to provide procedures under § 446 of the Internal Revenue Code

(Code) and § 1.446-1(e) of the Income

Tax Regulations to obtain automatic consent of the Commissioner of the Internal

Revenue (Commissioner) to change methods of accounting to comply with the final

regulations under §§ 263A, 448, 460 and

471 of the Code issued on January 5, 2021

(T.D. 9942). This revenue procedure also

modifies Rev. Proc. 2018-40, 2018-34

I.R.B. 320, to remove the option of netting

the remaining portion of a § 481(a) adjust-

January 10, 2022

ment that resulted from a prior method

change. This revenue procedure also provides procedures for taxpayers to revoke

an election made under proposed § 1.4482(b)(2)(i)(B) for taxable years beginning

on or after January 5, 2021, or in the case

of taxpayer that early applies the final regulations, for taxable years in which the final regulations are applicable.

SECTION 2. BACKGROUND

.01 On December 22, 2017, section

13102 of Public Law 115-97, 131 Stat.

2054, 2113, commonly referred to as the

Tax Cuts and Jobs Act (TCJA) amended

§ 448 of the Code by increasing the gross

receipts test amount for eligibility to use

the cash receipts and disbursement method (cash method) to $25,000,000 (adjusted for inflation). It also amended § 447 to

incorporate by reference the gross receipts

test of § 448 and amended §§ 263A, 460,

and 471 by modifying the exemptions

from the requirements to apply certain

method of accounting rules for cost capitalization, long-term contracts, and inventories for eligible taxpayers. The amendments to §§ 263A, 447, 448, and 471

generally apply to taxable years beginning

after December 31, 2017. The amendments to § 460 apply to contracts entered

into after December 31, 2017, in taxable

years ending after December 31, 2017.

For taxable years beginning in 2019, 2020

and 2021, the inflation-adjusted gross receipts test amount is $26,000,000. See

Rev. Proc. 2018-57, 2018-49 I.R.B. 827,

Rev. Proc. 2019-44, 2019-47 I.R.B. 1093,

and Rev. Proc. 2020-45, 2020-46 I.R.B.

1016, for the inflation-adjusted gross receipts test amount for taxable years beginning in 2019, 2020, and 2021, or their successor(s) for the inflation adjusted amount

for taxable years beginning after 2021.

.02 On August 20, 2018, the Department of the Treasury (Treasury Department) and the Internal Revenue Service

(IRS) published Rev. Proc. 2018-40,

which provides administrative procedures

for an eligible taxpayer to obtain the automatic consent of the Commissioner to

change its methods of accounting to reflect the TCJA modifications to §§ 263A,

448, 460, and 471. Rev. Proc. 2018-40

also requested comments for future guidance regarding the implementation of the

310

TCJA modifications to §§ 263A, 448, 460,

and 471.

.03 On August 5, 2020, the Treasury

Department and the IRS published a

notice of proposed rulemaking (REG132766-18) in the Federal Register (85

FR 47508), correction published in the

Federal Register (85 FR 58307) on September 18, 2020, containing proposed

regulations under §§ 263A, 448, 460, and

471 (proposed regulations). In response to

comments received on Rev. Proc. 201840, proposed § 1.448-2(b)(2)(iii)(B) provided an election to use allocations made

in the immediately preceding taxable year,

instead of the current taxable year’s allocations, when determining if more than

35 percent of losses of a venture are allocated to limited partners or limited entrepreneurs for purposes of the syndicate

definition under proposed § 1.448-2(b)(2)

(i)(B). The election could be revoked only

with the written consent of the Commissioner and could not be revoked earlier

than the fifth taxable year following the

first taxable year for which it was made,

absent extraordinary circumstances. The

final regulations under § 1.448-2(b)(2)(i)

(B) modified the election by making it an

irrevocable annual election.

.04 On January 5, 2021, the Treasury

Department and the IRS issued final regulations under §§ 263A, 448, 460 and

471 in the Federal Register (86 FR 254),

correction published in the Federal Register (86 FR 32185) on June 17, 2021,

to implement the statutory amendments

made by section 13102 of the TCJA (final regulations). The final regulations under §§ 263A, 448, and 471 are applicable

for taxable years beginning on or after

January 5, 2021, and the final regulations

under § 460 are applicable for contracts

entered into in taxable years beginning on

or after January 5, 2021. However, a taxpayer may apply the final regulations for a

taxable year beginning after December 31,

2017, and before January 5, 2021 (or, in

the case of final regulations under § 460,

for contracts entered into after December

31, 2017, in a taxable year ending after

December 31, 2017, and before January

5, 2021), provided that if the taxpayer

applies any aspect of the final regulations

under a particular Code provision, the taxpayer must follow all the applicable rules

contained in the final regulations that re-

Bulletin No. 2022–2

late to that Code provision for such taxable year and all subsequent taxable years,

and must follow the administrative procedures for filing a change in method of accounting in accordance with § 1.446-1(e)

(3)(ii). For example, a taxpayer that wants

to early apply § 1.263A-1(j) to be exempt

from capitalizing costs under section

263A must also early apply § 1.448-2 to

determine whether it is eligible for the exemption under § 1.263A-1(j) and whether

it is eligible to use the cash method under

§ 448. Alternatively, a taxpayer may rely

on the proposed regulations for a taxable

year beginning after December 31, 2017,

and before January 5, 2021, provided that

if the taxpayer relies on any aspect of the

proposed regulations under a particular

Code provision, the taxpayer must follow

all of the applicable rules contained in the

proposed regulations that relate to that

Code provision for such taxable year, and

follow the administrative procedures for

filing a change in method of accounting in

accordance with § 1.446-1(e)(3)(ii).

.05 Except as otherwise provided by

the Code or the regulations, § 446(e) and

§ 1.446-1(e)(2) require a taxpayer to secure the consent of the Commissioner

before changing a method of accounting

for Federal income tax purposes. Sections

263A(i)(3), 448(d)(7), 460(e)(2)(B) and

471(c)(4) of the Code provide that certain

changes in method of accounting related

to the small business taxpayer exemptions

are made with the consent of the Secretary. Nonetheless, a taxpayer still must

follow the applicable administrative procedures to make such changes. See, e.g.,

Capital One Financial Corporation and

Subsidiaries v. Commissioner of Internal

Revenue, 130 T.C. 147, 157 (2008).

.06 The preamble to the final regulations indicates that the Treasury Department and the IRS intend to issue procedural guidance that specifies the changes

in method of accounting under the final

regulations that are eligible for automatic

consent, potentially including changes in

method of accounting that would otherwise be ineligible for automatic consent

as a result of the prior 5-year change eligibility limitations in sections 5.01(1)

(e) and (f) of Rev. Proc. 2015-13, 2015-5

I.R.B. 419. The Treasury Department and

the IRS have determined that taxpayers

that are optionally changing their methods

Bulletin No. 2022–2

of accounting are distinguishable from

taxpayers that are required by the Code

to change their methods of accounting

(because they no longer qualify for the

small business taxpayer exemptions) and

taxpayers that were previously required

by the Code to change their methods of

accounting, but subsequently requalify

for the small business taxpayer exemptions. Accordingly, section 3 of this revenue procedure contains automatic consent

procedures with special terms and conditions for taxpayers that are required by the

Code to change their methods of accounting and for taxpayers that were required

by the Code to change their methods of

accounting, but subsequently requalify for

the small business taxpayer exemptions.

Section 3 also provides the applicable administrative procedures for taxpayers that

are optionally changing their methods of

accounting under the final regulations.

.07 Section 1.446-1(e)(3)(ii) authorizes

the Commissioner to prescribe administrative procedures that provide the terms

and conditions necessary for a taxpayer to

obtain consent to a change in method of

accounting. Rev. Proc. 2015-13, as clarified and modified by Rev. Proc. 2015-33,

2015-24 I.R.B. 1067, as modified by Rev.

Proc. 2016-1, 2016-1 I.R.B. 1, Rev. Proc.

2017-59, 2017-48 I.R.B. 543, Rev. Proc.

2021-26, 2021-22 I.R.B. 1163, and Rev.

Proc. 2021-34 provides the general procedures by which a taxpayer may obtain

automatic consent of the Commissioner

to a change in method of accounting described in the List of Automatic Changes,

as defined in section 3.09 of Rev. Proc.

2015-13. Section 6.03(1) of Rev. Proc.

2015-13 sets forth the application procedures for timely filing a change in method

of accounting under the automatic change

procedures. Such procedural guidance

provides that a taxpayer may not request,

or otherwise make, a retroactive change

in method of accounting on an amended

federal income tax return, unless specifically authorized by the Commissioner or

by statute. See section 2.05 of Rev. Proc.

2015-13. A taxpayer that chooses to early

apply the final regulations under §§ 263A,

448, and 471 to, or rely on the proposed

regulations under §§ 263A, 448, and 471

for, a taxable year beginning before January 5, 2021, or, in the case of the proposed and final regulations under § 460,

311

for contracts entered into after December

31, 2017, in a taxable year ending after

December 31, 2017, and before January

5, 2021, must follow the rules for changes

in method of accounting under § 446, the

accompanying regulations, and the applicable procedural guidance, as described

above. Accordingly, such taxpayer cannot

change its method(s) of accounting to early apply the final regulations or rely on the

proposed regulations on an amended federal income tax return.

.08 As modified, Rev. Proc. 2019-43

contains the current List of Automatic

Changes, which includes the modifications made by Rev. Proc. 2018-40. The

List of Automatic Changes provides procedures by which a taxpayer may obtain

automatic consent of the Commissioner

for changes in methods of accounting,

including for small business taxpayers to

implement the statutory changes made by

the TCJA under §§ 263A, 447, 448, 460,

and 471.

.09 Section 3 of this revenue procedure

modifies Rev. Proc. 2019-43, as modified

by Rev. Proc. 2021-34, to provide:

(1) automatic changes in method of

accounting under sections 12.16, 15.18,

19.01, 22.19 and 23.01 for certain small

business taxpayers that want to apply a

small business taxpayer exemption method under the final regulations;

(2) automatic changes in method of

accounting under sections 15.01, 15.04

and 22.21 for taxpayers that no longer

qualify to apply a small business taxpayer exemption method under the final

regulations, and automatic changes under 12.01 and 12.02 for taxpayers that no

longer qualify to apply a small business

taxpayer exemption method under the final regulations and wish to change to a

UNICAP method specifically described

in the regulations;

(3) a modified procedure under section 12.01 for reseller-producers changing from a permissible simplified resale

method to be consistent with other changes under that section by allowing such

taxpayers to change only to a permissible

UNICAP method specifically described in

the regulations;

(4) an automatic change in method of

accounting under section 15.01 for taxpayers that want to make a change from

a method of accounting that uses an ac-

January 10, 2022

crual method for purchases and sales of

inventories and uses the cash method for

computing all other items of income and

expense to an overall accrual method;

(5) automatic changes in method of

accounting under section 15.18 for certain small business taxpayers that want to

make a change to a method of accounting

in which a small business taxpayer uses an

accrual method for purchases and sales of

inventories and uses the cash method for

computing all other items of income and

expense;

(6) for the removal and reservation of

sections 15.03 and 22.03;

(7) simplified procedures for a small

business taxpayer by moving certain inventory method changes provided in sections 22.01 through 22.18 into sections

22.19, 22.20 and 22.21, as applicable; and

(8) a new section 22.20 relating to

changes within a small business taxpayer’s section 471(c) inventory method.

.10 Section 4 of this revenue procedure

modifies Rev. Proc. 2018-40 by removing

section 3.04 which relates to the option of

netting prior § 481(a) adjustments resulting from prior method changes.

.11 Section 5 of this revenue procedure

provides procedures to revoke an election

made under proposed § 1.448-2(b)(2)(i)

(B) for taxable years beginning on or after

January 5, 2021, or in the case of taxpayer

that early applies the final regulations, for

taxable years in which the final regulations are applicable.

SECTION 3. MODIFICATIONS TO

REV. PROC. 2019-43, AS MODIFIED

BY REV. PROC. 2021-34.

.01 Modifications to section 12.01 of

Rev. Proc. 2019-43, as modified by Rev.

Proc. 2021-34.

(1) Section 12.01(1)(a) of Rev. Proc.

2019-43 is modified to remove divisions

(i) and (ii) and redesignate existing divisions (iii) through (vii) as divisions (ii)

through (vi), respectively, and to add a

new division (i) to read as follows:

(i) a reseller that is a former small

business taxpayer, or a reseller-producer

that is a former small business taxpayer

that wants to change from a permissible

non-UNICAP inventory capitalization

method to a permissible UNICAP method

specifically described in the regulations in

January 10, 2022

the first taxable year that it does not qualify as a small business taxpayer;

(2)

Newly-redesignated

section

12.01(1)(a)(iii) of Rev. Proc. 2019-43 is

modified to read as follows:

(iii) a reseller-producer that wants to

change from a permissible simplified resale method described in § 1.263A-3(d)

(3) for both its production and resale activities to a permissible UNICAP method

specifically described in the regulations

for both its production and resale activities in the first taxable year that it does not

qualify to use a simplified resale method

for both its production and resale activities under § 1.263A‑3(a)(4);

(3)

Newly-redesignated

section

12.01(1)(a)(v) of Rev. Proc. 2019-43 is

modified to read as follows:

(v) a reseller or reseller-producer that

wants to change to a UNICAP method (or

methods) specifically described in the regulations, including any necessary changes in the identification of costs subject to

§ 263A that will be accounted for using

the proposed method, in any taxable year

other than the first taxable year that it does

not qualify as a small business taxpayer;

(4) Section 12.01(1)(b)(ii)(A) of Rev.

Proc. 2019-43 is modified to remove the

last sentence.

(5) Section 12.01(1)(b)(v) of Rev. Proc.

2019-43 is modified to read as follows:

(v) Revocation of election under

§ 263A(d)(3). This change does not apply to a taxpayer that wants to revoke its

election under § 263A(d)(3) not to have

§ 263A apply to certain plants produced

by the taxpayer in a farming business. But

see Rev. Proc. 2020-13, 2020-11 I.R.B.

515, for the procedures to revoke an election under § 263A(d)(3).

(6) Section 12.01(2)(a) and (b) of Rev.

Proc. 2019-43 is modified to read as follows:

(a) Eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.

Proc. 2015-13, 2015-5 I.R.B. 419, does

not apply to the change described in section 12.01(1)(a)(i) of this revenue procedure.

(b) Eligibility rule temporarily inapplicable. The eligibility rule in section

5.01(1)(f) of Rev. Proc. 2015-13 does not

apply to the changes described in section

12.01(1)(a)(ii)-(vi) of this revenue pro-

312

cedure for the taxpayer’s first, second or

third taxable year ending on or after November 20, 2018.

(7) Section 12.01(3) of Rev. Proc.

2019-43 is modified by removing subparagraphs (b) and (c), redesignating

subparagraphs (d) through (i) as subparagraphs (b) through (g), respectively, and

adding new subparagraphs (h) and (i) to

read as follows:

(h) “Small business taxpayer” means

a taxpayer, other than a tax shelter under

§ 448(d)(3), proposed § 1.448-2(b)(2), or

§ 1.448-2(b)(2), as applicable, that meets

the gross receipts test as provided in section 448(c), proposed § 1.263A‑1(j), or

§ 1.263A‑1(j), as applicable. The § 448(c)

gross receipts test is met if a taxpayer

has average annual gross receipts for the

three prior taxable years of $25,000,000

or less (adjusted for inflation), as described in § 448(c), proposed §§ 1.4482(c), or § 1.448-2(c), as applicable. For

taxable years beginning in 2019, 2020

and 2021, the inflation-adjusted amount

is $26,000,000. See Rev. Proc. 2018-57,

2018-49 I.R.B. 827, Rev. Proc. 2019-44,

2019-47 I.R.B.1093 and Rev. Proc. 202045, 2020-46 I.R.B. 1016, for the inflation-adjusted gross receipts test amount

for taxable years beginning in 2019, 2020,

and 2021, or their successor(s) for the inflation adjusted amount for taxable years

beginning after 2021.

(i) “Former small business taxpayer”

means a taxpayer that no longer qualifies

as a small business taxpayer. A former

small business taxpayer includes a taxpayer that no longer qualifies as a small

business taxpayer for the year of change

because it is a tax shelter under § 448(d)

(3), proposed § 1.448-2(b)(2), or § 1.4482(b)(2), as applicable.

(8) Section 12.01(4) of Rev. Proc.

2019-43 is modified to read as follows:

(4) Section 481(a) adjustment period. Except as otherwise provided in this

section 12.01(4), beginning with the year

of change, a taxpayer changing its method of accounting for costs under section

12.01(1)(a)(ii) or 12.01(1)(a)(iii) of this

revenue procedure generally must take

any applicable net positive § 481(a) adjustment for such change into account

ratably over the same number of taxable

years, not to exceed four, that the taxpayer used its former method of accounting.

Bulletin No. 2022–2

A taxpayer changing its method of accounting for costs under section 12.01(1)

(a)(i), 12.01(1)(a)(iv), 12.01(1)(a)(v), or

12.01(1)(a)(vi) of this revenue procedure

must take any applicable net positive

§ 481(a) adjustment for such change into

account as provided in section 7.03 of

Rev. Proc. 2015-13.

(9) The first section 12.01(8) of Rev.

Proc. 2019-43, entitled “Example”, is

modified to read as follows:

(8) Example. The following example illustrates

the principles of this section 12.01 and 12.16 for

small business taxpayers and former small business

taxpayers.

X is a C corporation incorporated on January 2,

2017, that adopted a taxable year ending December

31 and an overall accrual method of accounting. X is

a reseller of personal property. To determine whether

X is a small business taxpayer, as provided in section

12.01(3)(h) of this revenue procedure, X calculated

its average annual gross receipts for the three taxable

years (or fewer, if applicable) immediately preceding

the taxable year being analyzed as shown in the table

below, in accordance with § 1.263A-1(j):

Current

Taxable

Year

Average Annual Gross

Receipts for the Three Taxable

Years Immediately Preceding the

Current Taxable Year

2017

2018

24,000,000

2019

27,000,000

2020

27,000,000

2021

25,000,000

Furthermore, X adopted the dollar-value LIFO

inventory method and has the following LIFO inventory balances determined without considering the

effects of the UNICAP method:

Beginning

Ending

2017

$10,000,000

$11,000,000

2018

11,000,000

12,000,000

2019

12,000,000

13,000,000

2020

13,000,000

14,000,000

2021

14,000,000

15,000,000

X was not required to use the UNICAP method

for 2017 and 2018 because its average annual gross

receipts for such years made X a small reseller, as

described in section 12.01(3)(b) of Rev. Proc. 201943, prior to modification by Rev. Proc. 2022-9,

2022-2 I.R.B. ___, for 2017, and a small business

taxpayer, as described in section 12.01(3)(h) of

this revenue procedure, for 2018. X was required

by § 263A to change to the UNICAP method for

2019 because its average annual gross receipts for

the three taxable years immediately preceding 2019

were $27,000,000, which exceeded the $26,000,000

threshold permitted by the small business taxpayer

exemption under § 263A(i). Assume that X was required to capitalize $800,000 of “additional § 263A

costs” to the cost of its 2019 beginning inventory

because of this change in inventory method. In addition, X was required to include one-fourth of the

§ 481(a) adjustment when computing taxable income

for each of the four taxable years beginning with

2019. Thus, X was required to include a $200,000

positive § 481(a) adjustment in its 2019 taxable income.

X elected to use the simplified resale method

without a historic absorption ratio election under

§ 1.263A-3(d)(3) for determining the amount of additional § 263A costs to be capitalized to each LIFO

layer. Assume that X was required to add $100,000 of

additional § 263A costs to the cost of its 2019 ending

inventory because of the $1,000,000 increment for

2019.

X’s 2019 Ending Inventory:

Beginning Inventory (Without UNICAP costs)

2019 Increment

Additional § 263A Costs in Beginning Inventory

Additional § 263A Costs in 2019 Increment

Total 2019 Ending Inventory

$12,000,000

1,000,000

800,000

100,000

$13,900,000

X’s Unamortized 2019 § 481(a) Adjustment:

2019 § 481(a) Adjustment

Amount included in 2019 Taxable Income

Unamortized 2019 § 481(a) Adjustment—12/31/19

Because X’s average annual gross receipts of

$27,000,000 for the three taxable years immediately

preceding 2020 exceeded the $26,000,000 threshold,

X failed to qualify for the small business taxpayer

$800,000

<200,000>

600,000

exemption for 2020 and was required to continue

using the UNICAP method for its inventory costs.

Furthermore, X was required to include $200,000 of

the unamortized 2019 positive § 481(a) adjustment

in its 2020 taxable income. Assume that X was required to add $100,000 of additional § 263A costs to

the cost of its 2020 ending inventory because of the

$1,000,000 increment for 2020.

X’s 2020 Ending Inventory:

Beginning Inventory (With UNICAP costs)

2020 Increment

Additional § 263A Costs in 2020 Increment

Total 2020 Ending Inventory

$13,900,000

1,000,000

100,000

$15,000,000

X’s Unamortized 2019 § 481(a) Adjustment:

Unamortized 2019 § 481(a) Adjustment—12/31/19

Amount Included in 2020 Taxable Income

Unamortized 2019 § 481(a) Adjustment—12/31/20

Because X’s average annual gross receipts of

$25,000,000 for the three taxable years immediately

preceding 2021 did not exceed the $26,000,000 thresh-

Bulletin No. 2022–2

old, X satisfied the small business taxpayer exemption

under section 263A(i) for 2021 and may change voluntarily from the UNICAP method to a method that

313

$600,000

<200,000>

$400,000

no longer capitalizes costs under § 263A for 2021, as

provided in section 12.16 of this revenue procedure.

To reflect the removal of the additional § 263A costs

January 10, 2022

from the cost of its 2021 beginning inventory, X must

compute a corresponding § 481(a) adjustment, which

is a negative $1,000,000 ($14,000,000 - $15,000,000).

The entire amount of this negative § 481(a) adjustment is included in X’s taxable income for 2021. In

addition, X must take the $400,000 remaining portion

of the unamortized 2019 § 481(a) adjustment into account in its taxable income for 2021, as provided in

section 12.16(5) of this revenue procedure.

X’s 2021 Ending Inventory:

Beginning Inventory (With UNICAP costs)

2021 Increment

2021 § 481(a) Adjustment <Negative>

Total 2021 Ending Inventory

$15,000,000

1,000,000

<1,000,000>

$15,000,000

X’s Unamortized 2019 § 481(a) Adjustment:

Unamortized 2019 § 481(a) Adjustment—12/31/20

Amount included in 2021 Taxable Income

Unamortized 2019 § 481(a) Adjustment—12/31/21

$400,000

<400,000>

X’s Unamortized 2021 § 481(a) Adjustment:

2021 § 481(a) Adjustment <Negative>

Amount included in 2021 Taxable Income

Unamortized 2021 § 481(a) Adjustment—12/31/21

(10) The second section 12.01(8) of

Rev. Proc. 2019-43, entitled “Contact information,” is modified to renumber the

paragraph as new paragraph (9), and redesignated paragraph (9) is modified to

read as follows:

(9) Contact information. For further

information regarding a change under this

section, contact Megan McLaughlin at

(202) 317-7007 (not a toll-free number).

.02 Modification to section 12.02 of

Rev. Proc. 2019-43, as modified by Rev.

Proc. 2021-34.

(1) Section 12.02(1)(a) of Rev. Proc.

2019-43 is modified to read as follows:

(a) Applicability. This change applies

to:

(i) a producer as defined in section

12.01(3)(b) of this revenue procedure or

a reseller-producer as defined in section

12.01(3)(c) of this revenue procedure that

wants to change to a UNICAP method (or

methods) specifically described in the regulations, including any necessary changes in the identification of costs subject to

§ 263A that will be accounted for using

the proposed method, in any taxable year

other than the first taxable year that it does

not qualify as a small business taxpayer

as defined in section 12.01(3)(h) of this

revenue procedure. This change includes

a change from not capitalizing a cost subject to § 263A to capitalizing that cost for

a producer or a reseller-producer under

a UNICAP method (or methods) specifically described in the regulations that the

January 10, 2022

$<1,000,000>

1,000,000

producer or reseller-producer is already

using; or

(ii) a producer or reseller-producer that

is a former small business taxpayer, as defined in section 12.01(3)(i) of this revenue

procedure, that wants to change from not

capitalizing costs under § 263A(i) to capitalizing costs under a UNICAP method

(or methods) specifically described in the

regulations in the first taxable year that

the taxpayer does not qualify as a small

business taxpayer as defined in section

12.01(3)(h) of this revenue procedure.

(2) Section 12.02(4) of Rev. Proc.

2019-43, as modified by Rev. Proc. 202134, is modified to redesignate subparagraphs (a) and (b) as (b) and (c), respectively, and add a new subparagraph (a) to

read as follows:

(a) Eligibility rule inapplicable. The eligibility rule in section 5.01(1)(f) of Rev.

Proc. 2015-13, 2015-5 I.R.B. 419, does

not apply to a change described in section

12.02(1)(a)(ii) of this revenue procedure.

.03 Modifications to section 12.08 of

Rev. Proc. 2019-43. The first sentence of

section 12.08(1)(a) of Rev. Proc. 2019-43

is modified to read as follows:

This change, as described in Rev.

Proc. 2014-16, 2014-9 I.R.B. 606, applies to a producer (as defined in section

12.01(3)(b) of this revenue procedure) or

a reseller-producer (as defined in section

12.01(3)(c) of this revenue procedure)

that wants to change to a reasonable allocation method within the meaning of

314

§ 1.263A-1(f)(4), other than the methods

specifically described in § 1.263A-1(f)

(2) or (3), for self-constructed assets produced during the taxable year, including

any necessary changes in the identification of costs subject to § 263A that will be

accounted for using the proposed method.

.04 Modifications to section 12.16 of

Rev. Proc. 2019-43. Section 12.16 of Rev.

Proc. 2019-43 is modified to read as follows:

(1) Description of change. This change

applies to a small business taxpayer, as

defined in section 12.01(3)(h) of this revenue procedure, that chooses to no longer

capitalize costs under § 263A, including

for self-constructed assets, pursuant to

§ 263A(i), proposed § 1.263A-1(j), or

§ 1.263A-1(j), as applicable.

(2) Inapplicability.

(a) Home construction contracts. This

change does not apply to a taxpayer not

required by § 460(e)(1) to capitalize costs

under § 263A for home construction contracts, and that wants to make a change to

no longer capitalize costs under section

263A. See section 19.01 of this revenue

procedure to make this change.

(b) Election under § 263A(d)(3). This

change does not apply to a small business

taxpayer, as defined in section 12.01(3)(h)

of this revenue procedure, that elected under § 263A(d)(3) not to have § 263A apply

to certain plants produced by the taxpayer

in a farming business and wants to revoke

its § 263A(d)(3) election and change to a

Bulletin No. 2022–2

method of accounting that no longer capitalizes costs under § 263A. But see Rev.

Proc. 2020-13, 2020-11 I.R.B. 511.

(3) Eligibility rules.

(a) Eligibility rule inapplicable. For a

change described in section 12.16(1) of

this revenue procedure, if the taxpayer

changed from not capitalizing costs under § 263A in accordance with § 263A(i),

proposed § 1.263A-1(j) or § 1.263A-1(j),

as applicable, to capitalizing costs under

§ 263A and the accompanying regulations

within the prior five taxable years ending

with the year of change, and such change

was made in the first taxable year that the

taxpayer did not qualify as a small business taxpayer, then such change is disregarded for purposes of section 5.01(f) of

Rev. Proc. 2015-13, 2015-5 I.R.B. 419.

(b) Eligibility rule temporarily inapplicable. The eligibility rule in section

5.01(1)(f) of Rev. Proc. 2015-13 does not

apply to this change for the taxpayer’s

first, second or third taxable year beginning after December 31, 2017. In addition,

the eligibility rule in section 5.01(1)(f) of

Rev. Proc. 2015-13 does not apply to a

taxpayer’s early application year, or, in

the case of a taxpayer that does not apply § 1.263A-1(j) in the early application

year, the taxpayer’s first taxable year beginning on or after January 5, 2021. For

purposes of this section 12.16, “early application year” means the taxable year beginning before January 5, 2021, in which a

taxpayer first applies § 1.263A-1(j).

(4) Reduced filing requirement. A taxpayer is required to complete only the following information on Form 3115 (Rev.

December 2018) to make this change:

(a) The identification section of page 1

(above Part I);

(b) The signature section at the bottom

of page 1;

(d) Part II, all lines except line 16; and

(e) Part IV, all lines except line 25.

(5) Acceleration of § 481 adjustment.

If a taxpayer making a change described

in section 12.16(1) of this revenue procedure has a § 481(a) adjustment remaining

on a prior change in method of accounting

from not capitalizing costs under § 263A

in accordance with § 263A(i), proposed

§ 1.263A-1(j) or § 1.263A-1(j), as applicable, to capitalizing costs under § 263A

and the accompanying regulations, then it

Bulletin No. 2022–2

must take the remaining portion of such

prior § 481(a) adjustment into account in

the year of change.

(6) Concurrent automatic changes. A

small business taxpayer making a change

under this section 12.16 and a change under sections 15.18, 22.19 and/or 22.20 of

this revenue procedure for the same year

of change may file a single Form 3115 for

such changes, provided the taxpayer enters the designated automatic accounting

method change number for each change

on the appropriate line of the Form 3115.

See section 6.03(1)(b) of Rev. Proc. 201513 for information on making concurrent

changes.

(7) Designated automatic accounting

method change number. The designated automatic accounting method change

number for a change under this section

12.16 is “234.”

(8) Contact information. For further

information regarding a change under this

section, contact Livia Piccolo at (202)

317-7007 (not a toll-free call).

.05 Modifications to section 15.01 of

Rev. Proc. 2019-43, as modified by Rev.

Proc. 2021-34, related to changes in overall method from cash method to an accrual method. Section 15.01 is modified to

read as follows:

.01 Change in overall method from the

cash method to an accrual method.

(1) Description of change.

(a) Applicability. This change applies

to a taxpayer that wants to change its overall method of accounting from the cash

receipts and disbursements method (cash

method), as defined in section 15.01(2)(a)

of this revenue procedure, to an accrual

method, as defined in section 15.01(2)(b)

of this revenue procedure. A change under

this section 15.01 applies to (1) a taxpayer

required to make this change by § 448, any

other section of the Code or regulations, or

in other guidance published in the Internal

Revenue Bulletin (IRB), as well as to (2)

a taxpayer that wants to make this change

but is not required to do so by § 448, any

other section of the Code or regulations,

or in other guidance published in the IRB.

A taxpayer changing to an overall accrual

method because it is prohibited from using the overall cash method under § 448

may use this section 15.01 regardless of

whether the year of change is the first

taxable year that the taxpayer is required

315

by § 448 to change from the cash method, as defined in § 1.448-1(g)(1) (“first

§ 448 year”); or a mandatory § 448 year,

as defined in proposed § 1.448-2(g)(1) or

§ 1.448-2(g)(1), as applicable; or a taxable

year other than the taxpayer’s first § 448

year or mandatory § 448 year, as applicable. Similarly, a taxpayer changing to an

overall accrual method because it is prohibited from using the overall cash method under § 447 may use this section 15.01

regardless of whether the year of change

is the first taxable year that the taxpayer

is required by § 447 to change from the

cash method or a subsequent taxable year

in which the taxpayer is newly subject to

§ 447 after previously making a change in

method of accounting that complies with

§ 447 (“mandatory § 447 year”), or a taxable year other than a mandatory § 447

year, as applicable.

Additionally, a taxpayer qualifies to

change its overall method of accounting

from the cash method to an accrual method using this section 15.01 even if the taxpayer is also making one or more of the

following changes in method of accounting for the same year of change:

(i) adopting the recurring item exception, as defined in section 15.01(2)(c) of

this revenue procedure, for one or more

types of recurring items. See § 1.461-5(d);

(ii) adopting or changing to a permissible inventory method of accounting and is

either adopting this inventory method or

qualifies to change to this inventory method using the automatic change procedures

of Rev. Proc. 2015-13, 2015-5 I.R.B. 419,

and a section of this revenue procedure,

or the change can be made automatically

under any section of the Code or regulations, or other guidance published in the

IRB. See Rev. Rul. 90-38, 1990-1 C.B.

57, regarding when a taxpayer may adopt

a method of accounting;

(iii) adopting or changing to a permissible § 263A method of accounting and

is either adopting this § 263A method or

qualifies to change to this § 263A method

using the automatic change procedures of

Rev. Proc. 2015-13 and a section of this

revenue procedure, or the change can be

made automatically under any section of

the Code or regulations, or other guidance

published in the IRB. See Rev. Rul. 9038 regarding when a taxpayer may adopt a

method of accounting; or

January 10, 2022

(iv) adopting or changing to any other

special method of accounting (as defined

in section 15.01(2)(d) of this revenue

procedure) and is either adopting this

special method or qualifies to change to

this special method using the automatic

change procedures of Rev. Proc. 2015-13

and a section of this revenue procedure,

or the change can be made automatically

under any section of the Code or regulations, or other guidance published in

the IRB. See Rev. Rul. 90-38 regarding

when a taxpayer may adopt a method of

accounting;

Also, a taxpayer qualifies to use this

section 15.01 when that taxpayer, in the

taxable year immediately preceding the

year of change, has used a permissible inventory method for that year, and, if that

taxpayer was subject to § 263A for that

year, has also used a permissible § 263A

method for that year, and the method(s)

continue to be used for the year of change.

Lastly, for a taxable year beginning after December 31, 2017, or December 31,

2018 in the case of specified credit card

fees, as defined in § 1.451-3(j)(2), and before January 1, 2021, a taxpayer with an

applicable financial statement (AFS) that

is changing its overall method of accounting from the cash method to an accrual

method qualifies to use this section 15.01

to comply with § 451(b)(1), and, if applicable, § 451(b)(4), or the proposed regulations under § 1.451-3 (REG-104870-18;

84 FR 47191) (proposed § 1.451-3). For a

taxable year beginning after December 31,

2017, or December 31, 2018 in the case of

specified credit card fees, a taxpayer with

an AFS that is changing its overall method

of accounting from the cash method to an

accrual method qualifies to use this section 15.01 to comply with § 1.451-3. For

purposes of this section 15.01, the term

“AFS” is defined under: § 451(b)(3) for a

taxpayer making a change to comply with

§ 451(b); proposed § 1.451-3(c)(1) for a

taxpayer making a change to comply with

proposed § 1.451-3; or § 1.451-3(b)(5) for

a taxpayer making a change to comply

with § 1.451-3.

(b) Inapplicability. This change does

not apply to:

(i) a taxpayer that is making a change

from a hybrid method of accounting as defined in section 15.01(2)(e) of this revenue

procedure;

January 10, 2022

(ii) a taxpayer that is changing its method of accounting for one or more items

of income or expense, but not its overall

method of accounting. See section 15.09

of this revenue procedure for a description of accounting method changes from

the cash method to an accrual method for

specific items that are to be made using

the automatic change procedures of Rev.

Proc. 2015-13 and that section;

(iii) a taxpayer that is required by the

Code, regulations, or other guidance published in the IRB to use a special method

such as, for example, an inventory method, a § 263A method, or a long-term contract method, in the year of change and

fails to adopt or change to that method;

(iv) a taxpayer that has included in its

§ 481(a) adjustment any amount of deferred compensation that is described under § 457A(d)(3) that is attributable to services performed before January 1, 2009;

(v) a taxpayer that is engaged in two

or more trades or businesses, unless that

taxpayer makes this change for each trade

or business so that the identical accrual

method is used for each trade or business

beginning with the year of change;

(vi) a cooperative organization described in §§ 501(c)(12), 521, or 1381;

(vii) an individual taxpayer, except for

activities conducted as a sole proprietorship;

(viii) a taxpayer with an AFS that

wants to make a change in method of accounting for allocating transaction price

between item(s) of gross income that are

subject to § 451 and item(s) of gross income that are subject to a special method

of accounting, as defined in § 451(b)(2),

proposed § 1.451-3(c)(5) or § 1.451-3(a)

(14), as applicable, including a change to

comply with the transaction price allocation rules in § 1.451-3(d)(5);

(ix) a taxpayer with an AFS that wants

to change to use the AFS cost offset method, as defined in § 1.451-3(c), if the taxpayer receives advance payments from the

sale of inventory and does not also make

a concurrent change to apply the advance

payment cost offset method, as defined in

§ 1.451-8(e), for the same year of change

by using section 16.12 of this revenue

procedure, or a taxpayer with an AFS that

wants to change to use the advance payment cost offset method if the taxpayer is

required to include gross income from the

316

sale of inventory under § 1.451-3 and does

not also make a change to apply the AFS

cost offset method;

(x) a taxpayer with an AFS that wants

to make a change in method of accounting

for specified fees as defined in proposed

§ 1.451-3(i)(2) or § 1.451-3(j)(2), as applicable, other than specified credit card

fees;

(xi) a taxpayer that wants to make a

change in method of accounting for payments within the scope of the specified

good exception, as defined in § 1.451‑8(a)

(1)(ii), if the proposed method of accounting is to include such payments in gross

income under § 1.451-3 in one or more

taxable years following the taxable year

of receipt; or

(xii) a taxpayer with an AFS that makes

a change to apply § 1.451-3 for a taxable

year that begins before January 1, 2021,

and fails to comply with the requirements

in § 1.451-3(m)(3).

(2) Definitions.

(a) Cash method of accounting is the

method identified by § 446(c)(1) and

§§ 1.446-1(c)(1)(i), 1.451-1(a), and 1.4611(a)(1). In addition, solely for purposes of

this section 15.01, a method of accounting

in which a taxpayer uses an accrual method for purchases and sales of inventories,

and uses the cash method for computing

all other items of income and expense is

deemed to be a cash method of accounting

and not a hybrid method of accounting.

(b) Accrual method of accounting is

a method identified by § 446(c)(2) and

§§ 1.446-1(c)(1)(ii), 1.451-1(a), 1.4513, and 1.461-1(a)(2). For a taxable year

beginning after December 31, 2017, for

which the taxpayer has an AFS, the all

events test under § 451(b)(1)(C) and

§ 1.451-1(a) for any item of gross income,

or portion thereof, is met no later than

when that item, or portion thereof, is taken

into account as AFS revenue. See § 451(b)

(1) and § 1.451-3(b).

method described in § 461(h)(3) and

§ 1.461-5.

(d) Special method of accounting within the meaning of this section 15.01 is a

method of accounting, other than the cash

method, expressly permitted or required

by the Code, regulations, or in other guidance published in the IRB, that deviates

from the tax accrual accounting rules of

Bulletin No. 2022–2

§§ 446, 451, 461, and the regulations

thereunder. For purposes of this section

15.01, a deferral method under § 451(c)

and the regulations thereunder is deemed

to be a special method of accounting. Examples of special methods of accounting

include the installment method of accounting under § 453, the mark-to-market method under § 475, and a long-term

contract method under § 460. In contrast,

application of the all-events test under a

specific set of facts is not a special method

of accounting. See, for example, Rev. Rul.

69-314, 1969-1 C.B. 139 concerning the

treatment of retainages.

(e) Hybrid method of accounting is

a combination of the cash and accrual

methods under which one or more items

of income or expense are reported on

the cash method and one or more items

of income or expense are reported on an

accrual method. For purposes of this section 15.01, a hybrid method of accounting

does not include a method of accounting

in which a taxpayer uses an accrual method for purchases and sales of inventories

and uses the cash method for computing

all other items of income and expense.

(3) Manner of making change.

(a) Section 481(a) adjustment.

(i) In general. A taxpayer changing its

method of accounting under this section

15.01 must compute a § 481(a) adjustment. This adjustment must reflect the

account receivables, account payables,

inventory, and any other item determined

to be necessary in order to prevent items

from being duplicated or omitted. However, the adjustment does not include any

item of income accrued but not received

that was worthless or partially worthless,

within the meaning of § 166(a), on the last

day of the year immediately prior to the

year of change.

(ii) Temporary rule for certain S corporation revocations. The rules in this

section 15.01(3)(a)(ii) apply to an eligible terminated S corporation, as defined

in § 481(d)(2), that changes to an overall

accrual method of accounting in the C

corporation’s first taxable year after its

revocation of its election under § 1362(a),

and such revocation occurs during the

two-year period beginning on December

22, 2017.

(A) Required spread period. Pursuant

to § 481(d)(1), an eligible terminated S

Bulletin No. 2022–2

corporation required to change to an overall accrual method as a result of a revocation of its S corporation election that

changes its method of accounting under

this section 15.01 in the C corporation’s

first taxable year after such revocation,

takes into account the resulting positive or

negative adjustment required by § 481(a)

(2) ratably during the six-year period beginning with the year of change.

(B) Optional six-year spread period.

An eligible terminated S corporation that

is permitted to continue to use the overall cash method after the revocation of its

S corporation election, and that changes

to an overall accrual method under this

section 15.01 in the C corporation’s first

taxable year after such revocation, may

take into account the resulting positive or

negative adjustment required by § 481(a)

(2) ratably during the six-year period beginning with the year of change instead

of using the adjustment periods provided

in section 7.03(1) of Rev. Proc. 2015-13.

An eligible terminated S corporation that

wants to use this six-year spread period

must indicate in the statement required

by Line 26 of Form 3115 (Rev. December 2018) that it is making the change in

method of accounting with the spread period permitted under this section 15.01(3)

(a)(ii)(B) on its timely filed Form 3115.

(iii) Section 481(a) adjustment period

for changes relating to specified credit

card fees. In the case of income from a

specified credit card fee, the § 481(a) adjustment period for any qualified change

in method of accounting is six taxable

years (year of change and next five taxable years). For purposes of this section

15.01(3)(a)(iii), a qualified change in

method of accounting is a change in method of accounting for income from a specified credit card fee to a method that is

required by § 451(b), as added by section

13221 of Public Law 115-97, 131 Stat.

2054 (Dec. 22, 2017), commonly referred

to the Tax Cuts and Jobs Act (TCJA), for

such income, but only for the taxpayer’s

first taxable year beginning after December 31, 2018. Accordingly, a taxpayer that

makes a qualified change in method of

accounting as part of its overall method

change under section 15.01 of this revenue procedure is required to use an adjustment period of six taxable years for the

portion of the overall § 481(a) adjustment

317

that is attributable to the qualified change

in method of accounting. The § 481(a) adjustment period for the remainder of the

overall § 481(a) adjustment required by

section 15.01(3)(a)(i) of this revenue procedure is determined without regard to the

qualified change in method of accounting.

(b) Change to comply with § 1.451-3.

A taxpayer that uses section 15.01(1)(a)

of this revenue procedure to comply with

§ 1.451-3 must attach a statement to its

Form 3115, Application for Change in Accounting Method (Rev. December 2018)

that provides a description of the proposed

method(s) under § 1.451-3 to which it is

changing. For example, a taxpayer that

chooses to apply the alternative AFS revenue method in § 1.451-3(b)(2)(ii) must

indicate in the statement attached to its

Form 3115 that it is choosing to comply

with the AFS income inclusion rule in

§ 1.451-3(b)(1) by applying the alternative AFS revenue method described in

§ 1.451-3(b)(2)(ii).

3115 a statement describing the types of

liabilities for which the recurring item exception will be used.

(d) Concurrent automatic change to a

special method.

(i) Generally only one Form 3115 required. Except as provided in section

15.01(3)(e)(ii) of this revenue procedure, a

taxpayer that is changing from the overall

cash method to an overall accrual method

under this section 15.01 and changing to

one or more special methods, as permitted

under section 15.01(1)(a)(ii), (iii), or (iv)

of this revenue procedure, must timely file

a single Form 3115 for all changes and

must enter the designated automatic accounting method change numbers for all

changes on the appropriate line of Form

3115. For example, a taxpayer making

both a change from the overall cash method to an overall accrual method under this

section 15.01 and a change to the deferral

method for advance payments under section 16.07 or 16.12 of this revenue procedure must timely file a single Form 3115

for both changes and enter the designated automatic accounting method change

numbers for both changes on the appropriate line on that Form 3115. See section

6.03(1)(b) of Rev. Proc. 2015-13 for information on making concurrent changes.

January 10, 2022

(ii) Two Forms 3115 required when a

concurrent change is being implemented

under section 32.01 of this revenue procedure for short-term obligations. When a

taxpayer subject to § 1281 is changing its

method of accounting for interest income

on short-term obligations as part of the

change to an overall accrual method under this section 15.01, that taxpayer must

request the change for the interest income

under section 32.01 of this revenue procedure. The taxpayer must timely file

individual Forms 3115 for each change

requested. This section 15.01 will govern

the change to an overall accrual method.

(e) Concurrent change in accounting

method not permitted to be implemented

using the automatic change procedures

of Rev. Proc. 2015-13 and a section of

this revenue procedure, any section of

the Code or regulations, or other guidance published in the IRB. A taxpayer

that does not qualify to change from the

overall cash method to an overall accrual

method under this section 15.01 because

that taxpayer is concurrently changing to

a method of accounting that may not be

implemented using the automatic change

procedures of Rev. Proc. 2015-13 and a

section of this revenue procedure, any section of the Code or regulations, or other

guidance published in the IRB, must timely request both changes using the non-automatic change procedures in Rev. Proc.

2015-13. See Rev. Proc. 2021-1, 2021-1

I.R.B. 1 (or successor), for more information on whether one Form 3115 is required

to request the changes, and for information on the appropriate user fee.

(4) Change made in the taxpayer’s first

§ 448 year or a mandatory § 448 year, as

applicable.

(a) First § 448 year. If the year of

change is the first § 448 year for a taxpayer that qualifies to make the change from

the cash method under the provisions of

§ 1.448-1(g) and (h) as well as this section 15.01, that taxpayer may choose to

comply with the requirements and provisions of §§ 1.448-1(g) and (h) in addition

to the requirements and provisions of this

section 15.01. For example, if the taxpayer is a hospital, defined in § 1.448-1(g)(2)

(ii)(B), and the taxpayer chooses to make

its change from the cash method for the

first § 448 year, as defined in § 1.448-1(g),

using this section 15.01, the applicable

January 10, 2022

§ 481(a) adjustment period is provided by

§ 1.448-1(g)(2)(ii). If a taxpayer chooses not to implement its change from the

cash method using this section 15.01, the

taxpayer must make the change under the

provisions of §§ 1.448-1(g) and (h).

(b) Mandatory § 448 year. For a taxpayer applying proposed § 1.448-2 or

§ 1.448-2, as applicable, if the year of

change is a mandatory § 448 year, as

defined in proposed § 1.448-2(g)(1) or

§ 1.448-2(g)(1), as applicable, such taxpayer makes the change from the cash

method to an accrual method under the

provisions of this section 15.01, and must

comply with all the requirements and

provisions of proposed § 1.448-2(g) or

§ 1.448-2(g), as applicable, in addition

to the requirements and provisions of this

section 15.01.

(5) Eligibility rules inapplicable.

(a) Prior change eligibility rule inapplicable. Any prior change to the overall

cash method that the taxpayer implemented using the provisions of Rev. Proc. 200110, as modified by Rev. Proc. 2011-14, or

Rev. Proc. 2002-28, as modified by Rev.

Proc. 2011-14, is disregarded for purposes

of section 5.01(1)(e) of Rev. Proc. 201513. Additionally, for a taxpayer making a

change from the cash method in the first

§ 448 year, a mandatory § 448 year, or a

mandatory § 447 year, as applicable, any

prior change to the overall cash method is disregarded for purposes of section

5.01(1)(e) of Rev. Proc. 2015-13.

(b) Eligibility rule temporarily inapplicable for changes to comply with § 451(b).

For a taxpayer with an AFS that changes

to an overall accrual method under this

section 15.01 that complies with § 451(b)

(1), and, if applicable, § 451(b)(4), or

proposed § 1.451-3, the eligibility rule in

section 5.01(1)(e) of Rev. Proc. 2015-13,

2015-5 I.R.B. 419, does not apply to such

change for the taxpayer’s first, second or

third taxable year beginning after December 31, 2017, provided such taxable year

begins before January 1, 2021. In addition,

for a taxpayer with an AFS that changes to

an overall accrual method under this section 15.01 that complies with § 1.451-3 for

a taxable year beginning before January 1,

2021, the eligibility rule in section 5.01(1)

(e) of Rev. Proc. 2015-13 does not apply

to such change for such taxable year. For

a taxpayer with an AFS that does not ap-

318

ply § 1.451-3 for a taxable year beginning

before January 1, 2021, and changes to an

overall accrual method under this section

15.01 that complies with § 1.451-3 for the

first taxable year that begins on or after

January 1, 2021, the eligibility rule in section 5.01(1)(e) of Rev. Proc. 2015-13 does

not apply to such change for such taxable

year.

(6) No ruling on method used. The

consent granted under section 9 of Rev.

Proc. 2015-13 for a change made under

this section 15.01 is not a determination

by the Commissioner that the new method of accounting is a permissible method

of accounting under § 451 and does not

create a presumption that the allocation

method used under § 451(b)(4) is a permissible method of accounting. The director may ascertain whether the new method

of accounting is a permissible method of

accounting under § 451 and whether the

allocation method is permissible under

§ 451(b)(4). This section 15.01(6) does

not apply to a taxpayer with an AFS that is

making a change to a method of accounting permissible under proposed § 1.451-3

or § 1.451-3.

(7) Designated automatic accounting

method change number.

(a) Change made in the first § 448 year.

The designated automatic accounting

method change number for a change from

the cash method to an accrual method

in the first § 448 year is “123.” Entering

designated automatic accounting method

change number “123” on the appropriate

line on the Form 3115 fulfills the requirement of § 1.448-1(h)(2)(i) to type or print

“Automatic Change to Accrual Method –

Section 448” at the top of page 1 of the

Form 3115.

(b) Change made in the mandatory

§ 448 year. The designated automatic

accounting method change number for a

change from the cash method to an accrual method in the mandatory § 448 year is

“257.”

accounting method change number for a

change from the cash method to an accrual method for a taxpayer subject to § 447

under this section 15.01 is “258.”

(d) All other changes from the cash

method to an overall accrual method. The

designated automatic accounting method

Bulletin No. 2022–2

change number for all other changes from

the cash method to an accrual method under this section 15.01 is “122.”

(8) Contact information. For further

information regarding a change under this

section, contact Megan McLaughlin at

(202) 317-7007 (not a toll-free number).

.06 Modifications to section 15.03 of

Rev. Proc. 2019-43, related to taxpayers

changing to overall cash method. Section

15.03 of Rev. Proc. 2019-43 is modified to

read as follows:

.03 Reserved.

.07 Modifications to section 15.04 of

Rev. Proc. 2019-43, related to nonaccrual-experience method. Section 15.04(3) of

Rev. Proc. 2019-43 is modified to read as

follows:

(3) Concurrent change to overall accrual method and a NAE method of accounting. A taxpayer making both an automatic change to, from, or within a NAE

method of accounting under this section

15.04 and an automatic change to an overall accrual method under section 15.01 of

this revenue procedure (whether or not it

is the taxpayer’s first § 448 year or mandatory § 448 year), must file a single Form

3115 for both changes. The taxpayer must

complete all applicable sections of Form

3115, including sections that apply to the

change to an overall accrual method and

to the change to a NAE method, and must

enter the automatic accounting method change numbers for both changes on

Form 3115. See section 6.03(1)(b) of Rev.

Proc. 2015-13 for information on making

concurrent changes.

A taxpayer making both an automatic

change to, from, or within a NAE method of accounting under this section 15.04

and a required change to an overall accrual method under § 448 for the taxpayer’s

first § 448 year, and is either not eligible

to make the change to an overall accrual

method under section 15.01 of this revenue procedure or chooses to make the

change to an overall accrual method using the procedures of § 1.448-1(h)(2) for

the taxpayer’ first § 448 year, must make

both changes (change to, from, or within

a NAE method and change to an overall

accrual method) on a single Form 3115.

The taxpayer must follow the automatic

change procedures of Rev. Proc. 2015-13

and this section 15.04 for the NAE change,

and the procedures of § 1.448-1(h)(2) for

Bulletin No. 2022–2

the change to an overall accrual method

for the taxpayer’s first § 448 year except

that entering the designated automatic

accounting method change number “34”

on the Form 3115 fulfills the requirement

of § 1.448-1(h)(2) to type or print “Automatic Change to Accrual – Section 448”

at the top of page 1 of the Form 3115.

The taxpayer must complete all applicable sections of Form 3115, including sections that apply to the change to an overall

accrual method and to the change to the

NAE method and must enter the designated automatic accounting method changes

numbers for both changes on Form 3115.

.08 Modifications to section 15.18 of

Rev. Proc. 2019-43, related to small business taxpayer changing to overall cash

method. Section 15.18 of Rev. Proc. 201943 is modified to read as follows:

.18 Small business taxpayer changing

to overall cash method, or to a method

of accounting in which a small business

taxpayer uses an accrual method for purchases and sales of inventories and uses

the cash method for computing all other

items of income and expense.

(1) Description of change. This change

applies to a small business taxpayer, as

defined in section 15.18(4)(a) of this

revenue procedure, that wants to make a

change in method of accounting described

in section 15.18(2) of this revenue procedure. This change includes a change

to account for any exempt construction

contracts described in § 1.460-3(b)(1)(ii)

under the cash method or, in the case of

an exempt construction contract described

in § 1.460-3(b)(1)(ii) that includes the sale

of inventory, a method of accounting that

uses an accrual method for purchases and

sales of such inventory and the cash method for computing all other items of income

and expense from such contract. A small

business taxpayer may be required to use a

method of accounting other than the cash

method for one or more items of income

or expense under certain provisions of the

Code or regulations, including, for example §§ 475 and 1272.

(2) Applicability. This change applies

to a small business taxpayer that wants to:

(a) change from an overall accrual

method of accounting to the overall cash

method of accounting for a trade or business, and is otherwise not prohibited from

using the overall cash method or required

319

to use another overall method of accounting;

(b) change from an overall accrual

method of accounting for a trade or business to an accrual method for purchases

and sales of inventories (inventories) and

the cash method for computing all other

items of income and expense, and is otherwise not prohibited from using the cash

method under § 448 or required to use another overall method of accounting, such

as an accrual method under § 447; or

to an accrual method for purchases and

sales of inventories (inventories) and the

cash method for computing all other items

of income and expense and is otherwise

not prohibited from using the cash method under § 448 or required to use another

overall method of accounting, such as an

accrual method under § 447.

(3) Inapplicability. This change does

not apply to the following:

(a) Banks changing to hybrid method.

This change does not apply to a bank described in section 15.12(2)(a) of this revenue procedure. However, such a bank may

be eligible to change to the overall cash/

hybrid method under section 15.12 of this

revenue procedure if it meets the requirements of that section.

(b) Farmers changing to overall cash

method. This change does not apply to a

farming business changing to the overall

cash method. See, however, section 15.13

of this revenue procedure.

(4) Special rules for open accounts receivable. Notwithstanding § 1001 and the

accompanying regulations, a small business taxpayer that uses the overall cash

method for a trade or business includes

amounts attributable to open accounts receivable, as defined in section 15.18(5)(c)

of this revenue procedure, in income as

the amounts are actually or constructively

received on the receivables.

(5) Definitions.

(a) Small business taxpayer. “Small

business taxpayer” means a taxpayer, other than a tax shelter under § 448(d)(3),

proposed § 1.448-2(b)(2), or § 1.448-2(b)

(2), as applicable, that meets the § 448(c)

gross receipts test.

(b) Section 448(c) gross receipts test.

The § 448(c) gross receipts test is met if

a taxpayer has average annual gross re-

January 10, 2022

ceipts for the three prior taxable years of

$25,000,000 or less (adjusted for inflation), as described in § 448(c), proposed

§§ 1.448‑2(c), proposed § 1.460-3(b)

(3), § 1.448-2(c) or § 1.460-3(b)(3), as

applicable. For taxable years beginning

in 2019, 2020 and 2021, the inflation-adjusted amount is $26,000,000. See Rev.

Proc. 2018-57, 2018-49 I.R.B. 827, Rev.

Proc. 2019-44, 2019- 47 I.R.B.1093

and Rev. Proc. 2020-45, 2020-46 I.R.B.

1016, for the inflation-adjusted gross receipts test amount for taxable years beginning in 2019, 2020, and 2021, or their

successor(s) for the inflation adjusted

amount for taxable years beginning after

2021.

due in full in 120 days or less and that is

not subject to § 475.

(6) Eligibility rules.

(a) Eligibility rule inapplicable. For a

change described in section 15.18(2) of

this revenue procedure, any prior change

in method of accounting to an overall accrual method that was made in the taxpayer’s first § 448 year (as defined in section

15.01(1)(a) of this revenue procedure), a

mandatory § 448 year (as defined in proposed § 1.448-2(g)(1) or § 1.448-2(g)(1),

as applicable)), or a mandatory § 447 year

(as defined in section 15.01(1)(a) of this

revenue procedure), as applicable, is disregarded for purposes of section 5.01(1)

(e) of Rev. Proc. 2015-13.

(b) Eligibility rule temporarily inapplicable. The eligibility rule in section

5.01(1)(e) of Rev. Proc. 2015-13 does not

apply to this change for a taxpayer’s first,

second, or third taxable year beginning after December 31, 2017. In addition, the eligibility rule in section 5.01(1)(e) of Rev.

Proc. 2015-13 does not apply to a taxpayer’s early application year, or, in the case

of a taxpayer that does not apply § 1.448-2

in the early application year, the taxpayer’s first taxable year beginning on or after

January 5, 2021. For purposes of this section 15.18, “early application year” means

the taxable year beginning before January

5, 2021, in which a taxpayer first applies

§ 1.448-2.

(7) Manner of making change.

(a) Acceleration of § 481(a) adjustment. If a taxpayer making a change to the

January 10, 2022

cash method under this section 15.18 has

a § 481(a) adjustment remaining on a prior

overall change in method of accounting to

an accrual method, then it must take the

remaining portion of such prior § 481(a)

adjustment into account in the year of

change.

(b) Cut-off basis for exempt long-term

contracts. A change to account for exempt construction contracts described

in § 1.460-3(b)(1)(ii) under this section

15.18 is made on a cut-off basis and applies only to contracts entered into on or

after the first day of the year of change.

Accordingly, a § 481(a) adjustment is neither permitted nor required.

(8) Concurrent automatic changes. A

small business taxpayer making a change

under this section 15.18 and a change under section 12.16, 22.19 and/or 22.20 of

this revenue procedure for the same year

of change may file a single Form 3115 for

such changes, provided the taxpayer enters the designated automatic accounting

method change numbers for each change

on the appropriate line of Form 3115. See

section 6.03(1)(b) of Rev. Proc. 2015-13

for information on making concurrent

changes.

(9) Designated automatic accounting

method change number.

(a) Change to overall cash method. The

designated automatic accounting method

change number for a change under section

15.18(2)(a) of this revenue procedure is

“233.”

(b) Change to a method of accounting

that uses an accrual method for inventories, and the cash method for computing

all other items of income and expense. The

designated automatic accounting method

change number for a change under section

15.18(2)(b) or (c) of this revenue procedure is “259.”

(10) Contact information. For further

information regarding a change under this

section, contact Anna Gleysteen at (202)

317-7007 (not a toll-free number).

.09 Modifications to section 19.01 of

Rev. Proc. 2019-43, related to small business taxpayer exceptions from requirement to account for certain long-term

contracts under § 460 or to capitalize

costs under § 263A for certain home construction contracts.

(1) Section 19.01(1) of Rev. Proc.

2019-43 is modified to read as follows:

320

(1) Description of change. This change

applies to a taxpayer that (a) wants to

change its method of accounting for exempt long-term construction contracts

described in § 460(e)(1)(B) from the

percentage-of-completion method of accounting described in § 1.460-4(b) to an

exempt contract method of accounting

described in § 1.460-4(c); or (b) chooses

to stop capitalizing costs under § 263A

for home construction contracts described

in § 460(e)(1)(A) and meets the requirements of § 460(e)(1)(B)(i) and (ii).

(2) Section 19.01(2) of Rev. Proc.

2019-43 is removed in its entirety, and

sections 19.01(3) through 19.01(8) are

redesignated as sections 19.01(2) through

19.01(7), respectively.

(3)

Newly-redesignated

section

19.01(2) of Rev. Proc. 2019-43 is modified to read as follows:

(2) Inapplicability. A taxpayer can use

a method of accounting for its exempt

long-term contracts that is different from

the method used for contracts that are

not exempt. Thus, a taxpayer must use

the percentage-of-completion method of

accounting for nonresidential long-term

construction contracts that do not meet the

requirements of § 460(e)(1)(B), proposed

§1.460-3(b)(1)(ii), or §1.460-3(b)(1)(ii),

as applicable, in the first taxable year it

enters into such a contract, but must continue to use its exempt contract method of

accounting for its existing exempt longterm construction contracts. Similarly, in

the first taxable year that a taxpayer enters

into a nonresidential long-term construction contract that meets the requirements

of § 460(e)(1)(B), proposed §1.460-3(b)

(1)(ii), or §1.460-3(b)(1)(ii), as applicable, the taxpayer can use a permissible

exempt contract method of accounting for

such a contract. Rev. Rul. 92-28, 1992-1

C.B. 153. Accordingly, only a taxpayer who previously adopted the percentage-of-completion method of accounting

for exempt long-term construction contracts and wants to change to another permissible exempt contract method of accounting is required to request consent to

change under this section 19.01. Similarly,

a taxpayer that enters into a home construction contract described in § 460(e)

(1)(A) and that meets the requirements of

§ 460(e)(1)(B)(i) and (ii) requires consent

to change its method of accounting to not

Bulletin No. 2022–2

capitalize costs under § 263A only if the

taxpayer has previously applied § 263A

to home construction contracts exempt

from the capitalization requirement under

§ 460(e)(1).

(4)

Newly-redesignated

section

19.02(3) of Rev. Proc. 2019-43 is modified to read as follows:

(3) Manner of making change. This

change is made on a cut-off basis and

applies only to long-term construction

contracts entered into on or after the first

day of the year of change. Accordingly, a

§ 481(a) adjustment is neither permitted

nor required.

.10 Modification to section 22.01 of

Rev. Proc. 2019-43, related to cash discounts. Section 22.01 of Rev. Proc. 201943 is modified to redesignate sections

22.01(2) through 22.01(5) as sections

22.01(3) through (6), respectively, and to

add new section 22.01(2) to read as follows:

(2) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b).

.11 Modification to section 22.02 of

Rev. Proc. 2019-43, related to estimating

inventory “shrinkage”. Section 22.02 of

Rev. Proc. 2019-43 is modified to redesignate 22.02(2) through 22.02(4) as 22.02(3)

through 22.02(5), respectively, and to add

new section 22.02(2) to read as follows:

(2) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b).

.12 Modifications to section 22.03 of

Rev. Proc. 2019-43, related to small taxpayer exception from requirement to account for inventories under § 471. Section

22.03 of Rev. Proc. 2019-43 is modified to

read as follows:

.03 Reserved.

.13 Modifications to section 22.04 of

Rev. Proc. 2019-43, related to qualifying

volume-related trade discounts. Section

22.04 of Rev. Proc. 2019-43 is modified to

Bulletin No. 2022–2

redesignate sections 22.04(2) through (4)

as sections 22.04(3) through (5), respectively, and to add to new section 22.04(2)

to read as follows:

(2) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b).

.14 Modification to section 22.05 of

Rev. Proc. 2019-43, as modified by Rev.

Proc. 2021-34, related to impermissible

methods of identification and valuation

of inventories. Section 22.05(1)(b)(iii) of

Rev. Proc. 2019-43, as modified by Rev.

Proc. 2021-34, is modified to read as follows:

(iii) any change described in another

section of this revenue procedure or in other guidance published in the Internal Revenue Bulletin, or to any change within the

last-in, first-out (LIFO) inventory method.

For example, this change does not apply to

a taxpayer that wants to change to a rolling-average method (but see section 22.14

of this revenue procedure) or to a taxpayer

that accounts for inventory, or proposes

to account for inventory, under § 471(c),

proposed § 1.471-1(b), or § 1.471-1(b), as

applicable. For taxable years beginning on

or after January 5, 2021, a taxpayer is required to comply with § 1.471-1(b);

.15 Modification to section 22.06 of

Rev. Proc. 2019-43, related to core alternative valuation method. Section 22.06(1)

(b) of Rev. Proc. 2019-43 is modified to

read as follows:

(b) Inapplicability. This change does

not apply to a taxpayer that:

(i) values its inventory of cores at cost,

including a taxpayer using the LIFO inventory method, unless the taxpayer concurrently changes, under section 6.02 of

Rev. Proc. 2003-20, from cost to the LCM

method for its cores, including labor and

overhead related to the cores in raw materials, work-in-process, and finished goods;

(ii) accounts for inventory, or proposes

to account for inventory, under § 471(c),

proposed § 1.471-1(b), or § 1.471-1(b), as

applicable. For taxable years beginning on

or after January 5, 2021, a taxpayer is required to comply with § 1.471-1(b).

321

.16 Modification to section 22.07 of

Rev. Proc. 2019-43, related to replacement

cost for automobile dealers’ parts inventory. Section 22.07 of Rev. Proc. 2019-43 is

modified to redesignate sections 22.07(2)

through (4) as sections 22.07(3) through

(5), respectively, and to add new section

22.07(2) to read as follows:

(2) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b).

.17 Modification to section 22.08 of

Rev. Proc. 2019-43, related to replacement cost for heavy equipment dealers’

parts inventory. Section 22.08 of Rev.

Proc. 2019-43 is modified to redesignate

sections 22.08(2) through (5) as sections

22.08(3) through (6), respectively, and to

add new section 22.08(2) to read as follows:

(2) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b).

.18 Modification to section 22.09 of

Rev. Proc. 2019-43, related to rotable

spare parts. Section 22.09 of Rev. Proc.

2019-43 is modified to redesignate sections 22.09(2) through (4) as sections

22.09(3) through (5), respectively, and to

add to new section 22.09(2) to read as follows:

(2) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b).

.19 Modification to section 22.10 of

Rev. Proc. 2019-43, related to advance

trade discount method. Section 22.10 of

Rev. Proc. 2019-43 is modified to redesignate sections 22.10(3) through (4) as sections 22.10(4) through (5), respectively,

and to add new section 22.10(3) to read

as follows:

January 10, 2022

(3) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b).

.20 Modification to section 22.11 of

Rev. Proc. 2019-43, as modified by Rev.

Proc. 2021-34, related to permissible

methods of identification and valuation

of inventories. Section 22.11(1)(b)(iii) of

Rev. Proc. 2019-43, as modified by Rev.

Proc. 2021-34, is modified to read as follows:

(iii) any change described in another

section of this revenue procedure or in other guidance published in the Internal Revenue Bulletin, or to any change within the

last-in, first-out (LIFO) inventory method.

For example, this change does not apply to

a taxpayer that wants to change to a rolling-average method (but see section 22.14

of this revenue procedure) or to a taxpayer

that accounts for inventory, or proposes

to account for inventory, under § 471(c),

proposed § 1.471-1(b), or § 1.471-1(b),

as applicable. For taxable years beginning

on or after January 5, 2021, a taxpayer is

required to comply with § 1.471-1(b); or

.21 Modification to section 22.12 of

Rev. Proc. 2019-43, related to change in

the official used vehicle guide utilized in

valuing used vehicles. Section 22.12 of

Rev. Proc. 2019-43 is modified to redesignate sections 22.12(2) through (3) as sections 22.12(3) through (4), respectively,

and to add new section 22.12(2) to read

as follows:

(2) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b).

.22 Modification to section 22.13 of

Rev. Proc. 2019-43, related to invoiced

advertising association costs for new vehicle retail dealerships. Section 22.13 of

Rev. Proc. 2019-43 is modified to redesignate sections 22.13(2) through (3) as sections 22.13(3) through (4), respectively,

and to add new section 22.13(2) to read

as follows:

January 10, 2022

(2) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b).

.23 Modification to section 22.14 of

Rev. Proc. 2019-43, related to rolling-average method of accounting for inventories. Section 22.14(1) of Rev. Proc. 201943 is modified to redesignate sections

22.14(2) through (4) as sections 22.14(3)

through (5), respectively, and to add new

section 22.14(2) to read as follows:

(2) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b). See, however, section 22.18 of this revenue procedure

for certain changes.

.24 Modification to section 22.15 of

Rev. Proc. 2019-43, related to sales-based

vendor chargebacks. Section 22.15 of

Rev. Proc. 2019-43 is modified to redesignate sections 22.15(2) through (4) as sections 22.15(3) through (5), respectively,

and to add new section 22.15(2) to read

as follows:

(2) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b).

.25 Modification to section 22.16 of

Rev. Proc. 2019-43, related to certain

changes to the cost complement of the

retail inventory method. Section 22.16 of

Rev. Proc. 2019-43 is modified to redesignate sections 22.16(2) through (6) as sections 22.16(3) through (7), respectively,

and to add new section 22.16(2) to read

as follows:

(2) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or af-

322

ter January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b).

.26 Modification to section 22.17 of

Rev. Proc. 2019-43, related to certain

changes within the retail inventory method. Section 22.17 of Rev. Proc. 2019-43 is

modified to redesignate sections 22.17(2)

through (3) as sections 22.17(3) through

(4), respectively, and to add new section

22.17(2) to read as follows:

(2) Inapplicability. This change does

not apply to a taxpayer that accounts

for inventory, or proposes to account

for inventory, under § 471(c), proposed

§ 1.471-1(b), or § 1.471-1(b), as applicable. For taxable years beginning on or after January 5, 2021, a taxpayer is required

to comply with § 1.471-1(b).

.27 Modification to section 22.18 of

Rev. Proc. 2019-43, as modified by Rev.

Proc. 2021-34, related to change from

currently deducting inventories to permissible methods of identification and valuation of inventories. Section 22.18(1)(b)

(iii) of Rev. Proc. 2019-43, as modified by

Rev. Proc. 2021-34, is modified to read as

follows:

(iii) any change described in another

section of this revenue procedure or in other guidance published in the Internal Revenue Bulletin, or to any change within the

last-in, first-out (LIFO) inventory method.

For example, this change does not apply to

a taxpayer that wants to change to a rolling-average method (but see section 22.14

of this revenue procedure) or to a taxpayer

that accounts for inventory, or proposes

to account for inventory, under § 471(c),

proposed § 1.471-1(b), or § 1.471-1(b),

as applicable. For taxable years beginning

on or after January 5, 2021, a taxpayer is

required to comply with § 1.471-1(b). See,

however, section 22.19, 22.20 or 22.21 of

this revenue procedure, as applicable; or

.28 Modifications to section 22.19 of

Rev. Proc. 2019-43, related to small business taxpayer exception from requirement

to account for inventories under § 471.

Section 22.19 of Rev. Proc. 2019-43 is

modified to read as follows:

.19 Small business taxpayer § 471(c)

inventory methods.

(1) Description of change. This change

applies to a small business taxpayer, as defined in section 22.19(2) of this revenue

procedure, that wants to change its § 471

method of accounting for inventory to one

Bulletin No. 2022–2

of the following methods provided in this

section 22.19(1).

(a) Changes under § 471(c) or proposed § 1.471-1(b). For a taxable year

beginning after December 31, 2017, and

before January 5, 2021, a change to:

(i) a method that treats inventory as

non-incidental materials and supplies

(NIMS) under § 471(c)(1)(B)(i);

(ii) a method that treats inventory as

NIMS under proposed § 1.471-1(b)(4);

(iii) a method that conforms to § 471(c)

(1)(B)(ii) by using the taxpayer’s method

of accounting reflected in its applicable

financial statements (AFS), as defined in

§ 451(b)(3), with respect to the taxable

year, or if the taxpayer does not have an

AFS for the taxable year, the books and

records of the taxpayer prepared in accordance with the taxpayer’s accounting procedures; or

(iv) the AFS section 471(c) method described in proposed § 1.471-1(b)(5), or if

the taxpayer does not have an AFS for the

taxable year, the non-AFS section 471(c)

method described in proposed § 1.4711(b)(6).

(b) Changes to a method under § 1.4711(b). A change to:

(i) the section 471(c) NIMS inventory

method provided in § 1.471-1(b)(4);

(ii) the AFS section 471(c) inventory method provided in § 1.471-1(b)(5),

for taxpayers with an AFS, as defined in

§ 1.471-1(b)(5)(ii), or

(iii) the non-AFS section 471(c) inventory method provided in § 1.471-1(b)(6),

for taxpayers that do not have an AFS, as

defined in § 1.471-1(b)(5)(ii).

(2) Small business taxpayer defined.

Small business taxpayer means a taxpayer, other than a tax shelter under § 448(d)

(3), proposed § 1.448-2(b)(2), or § 1.4482(b)(2), as applicable, that meets the gross

receipts test as provided in § 448(c), proposed § 1.471-1(b)(2), or § 1.471-1(b)(2),

as applicable. The § 448(c) gross receipts

test is met if a taxpayer has average annual

gross receipts for the three prior taxable

years of $25,000,000 or less (adjusted

for inflation), as described in § 448(c),

proposed §§ 1.448‑2(c), or § 1.448-2(c),

as applicable. For taxable years beginning in 2019, 2020 and 2021, the inflation-adjusted gross receipts test amount

is $26,000,000. See Rev. Proc. 2018-57,

2018-49 I.R.B. 827, Rev. Proc. 2019-

Bulletin No. 2022–2

44, 2019- 47 I.R.B.1093, and Rev. Proc.

2020-45, 2020-46 I.R.B. 1016, for the inflation-adjusted gross receipts test amount

for taxable years beginning in 2019, 2020,

and 2021, or their successor(s) for the inflation adjusted amount for taxable years

beginning after 2021.

(3) Inapplicability. This change does

not apply to:

(i) any change described in section

22.20 of this revenue procedure; or

(ii) any change from the LIFO inventory method under § 472. See however,

section 23.01 of this revenue procedure.

(4) Acceleration of § 481 adjustment.

If a taxpayer making a change under this

section 22.19 has a § 481(a) adjustment

remaining on a prior change in method of

accounting to account for inventory in accordance with § 1.471-1(a), then it must

take the remaining portion of such prior

§ 481(a) adjustment into account in the

year of change.

(5) Eligibility rules.

(a) Eligibility rule inapplicable. For a

change described in section 22.19(1) of

this revenue procedure, if the taxpayer

changed from accounting for inventory

in accordance with § 471(c), proposed

§ 1.471-1(b) or § 1.471-1(b), as applicable, to accounting for inventory in accordance with § 1.471-1(a) within the prior

five taxable years ending with the year of

change, and such change was made in the

first taxable year that the taxpayer did not

qualify as a small business taxpayer, then

such prior change is disregarded for purposes of section 5.01(1)(f) of Rev. Proc.

2015-13, 2015-5 I.R.B. 419.

(b) Eligibility rule temporarily inapplicable. The eligibility rule in section

5.01(1)(f) of Rev. Proc. 2015-13 does not

apply to the changes described in this section 22.19 for a taxpayer’s first, second,

or third taxable year beginning after December 31, 2017. In addition, the eligibility rule in section 5.01(1)(f) of Rev. Proc.

2015-13 does not apply to a taxpayer’s

early application year, or, in the case of a

taxpayer that does not apply § 1.471-1(b)

in the early application year, the taxpayer’s first taxable year beginning on or after

January 5, 2021. For purposes of this section 22.19 “early application year” means

the taxable year of change beginning before January 5, 2021, in which a taxpayer

first applies § 1.471-1(b).

323

(6) Manner of making change.

(a) Reduced filing requirement. A taxpayer is required to complete only the following information on Form 3115 (Rev.

December 2018) to make this change:

(i) The identification section of page 1

(above Part I);

(ii) The signature section at the bottom

of page 1;

(iii) Part I;

(iv) Part II, all lines except line 16; and

(v) Part IV, all lines except line 25.

(b) Streamlined method change procedures for certain taxpayers.

(i) Applicability. The procedures described in this section 22.19(6)(b) may be

used by a taxpayer to make a change in

method of accounting described in section 22.19(1)(b) for the taxpayer’s early application year, as defined in section

22.19(5)(b) of this revenue procedure.

Additionally, in the case of a taxpayer that

does not apply § 1.471-1(b) for a taxable

year beginning before January 5, 2021,

the procedures described in this section

22.19(6)(b) may be used to make a change

in method of accounting described in section 22.19(1)(b) of this revenue procedure

in the taxpayer’s first taxable year beginning on or after January 5, 2021. A taxpayer that is otherwise permitted to use the

streamlined method change procedures

in this section 22.19(6)(b) may use these

streamlined procedures if the taxpayer is

making a change under section 22.19(1)

(b) of this revenue procedure and the net

§ 481(a) adjustment required by such

change is zero. Notwithstanding any provisions of this section 22.19, a taxpayer

making more than one change in method

of accounting under this revenue procedure for the same year of change is not

permitted to net the § 481(a) adjustments

to determine if the taxpayer meets the requirements to use the streamlined method

change procedures. See section 22.19(8)

of this revenue procedure for more information on making concurrent changes.

(ii) No Form 3115 required. In accordance with § 1.446-1(e)(3)(ii), the

requirement of § 1.446-1(e)(3)(i) to file

a Form 3115 is waived for a taxpayer

making a change in method of accounting

under this section 22.19 using the streamlined method change procedures. Thus,

a taxpayer using the streamlined method

change procedures is not required to file a

January 10, 2022

Form 3115 and is not required to attach a

separate statement when making a change

under this section 22.19(6)(b).

(7) No ruling on certain method of accounting used. The consent granted under section 9 of Rev. Proc. 2015-13 for a

change made under section 22.19(1)(a)(i)

or (iii) of this revenue procedure is not a

determination by the Commissioner that

the proposed inventory method of accounting is permissible, and does not create any

presumption that the proposed method is

a permissible method of accounting under

a provision of the Code. The director will

ascertain whether the proposed method is

permissible under the Code.

(8) Concurrent automatic changes.

A taxpayer making a change under this

section 22.19 and a change under section

15.18 and/or 12.16 of this revenue procedure for the same year of change may file

a single Form 3115 for all changes provided the taxpayer enters the designated

automatic change numbers for the changes on the appropriate line of Form 3115.

See section 6.03(1)(b) of Rev. Proc. 201513 for information on making concurrent

changes.

(9) Designated automatic accounting

method change number.

(a) Change to apply section 471(c)

NIMS inventory method, as provided

in section 22.19(1)(b)(i) of this revenue

procedure. The designated automatic accounting method change number for a

change to apply the section 471(c) NIMS

inventory method as provided in section

22.19(1)(b)(i) of this revenue procedure is

“260.”

(b) Change to apply AFS section

471(c) inventory method or non-AFS

section 471(c) inventory method, as provided in section 22.19(1)(b)(ii) or (iii) of

this revenue procedure. The designated

automatic accounting method change

number for a change to apply the AFS

section 471(c) method or the non-AFS

section 471(c) method provided in section 22.19(1)(b)(ii) or (iii) of this revenue

procedure is “261.”

accounting method change number for all

other changes to a method of accounting

for inventory described in section 22.19(1)

(a) of this revenue procedure, is “235.”

January 10, 2022

(10) Contact information. For further

information regarding a change under this

section, contact Livia Piccolo at (202)

317-7007 (not a toll-free number).

.29 Section 22 of Rev. Proc. 2019-43 is

modified to add new section 22.20 to read

as follows:

.20 Changes within a section 471(c) inventory method.

(1) Description of change. This change

applies to a small business taxpayer, as defined in section 22.19(2) of this revenue

procedure, that:

(a) for a taxable year beginning after

December 31, 2017, and before January

5, 2021, treats its inventory as non-incidental materials and supplies (NIMS) under § 471(c)(1)(B)(i) and wants to change

from one permissible method, as defined

in section 22.11(1)(c) of this revenue procedure, of identifying or valuing inventories to another permissible method of

identifying or valuing inventories. For example, a taxpayer that uses specific identification as its inventory identification

method may change to using the first-in,

first-out (FIFO) method for purposes of its

NIMS method under § 471(c)(1)(B)(i) under this section 22.20;

(b) uses the section 471(c) NIMS inventory method as provided in § 1.4711(b)(4) and wants to change:

(i) to a method of identification or valuation permitted by § 1.471-1(b)(4)(ii)

such as, for example, specific identification, FIFO, cost or average cost;

(ii) its allocation method to a method

permitted by § 1.471-1(b)(4)(iii); or

(iii) to capitalize a direct cost of property produced or acquired for resale, or to

deduct an indirect cost of property produced or acquired for resale, as provided

in § 1.471-1(b)(4)(ii).

December 31, 2017, and before January

5, 2021, uses a method conforming to

§ 471(c)(1)(B)(ii) by using the taxpayer’s method of accounting for inventory

reflected in its applicable financial statements (AFS), as defined in § 451(b)(3),

with respect to the taxable year, or if the

taxpayer does not have an AFS for the

taxable year, the books and records of

the taxpayer prepared in accordance with

the taxpayer’s accounting procedures,

and wants to change the manner in which

it accounts for inventory in its AFS or

324

books and records, as applicable; and is

required to use such method of accounting

for inventory in its AFS or its books and

records, as applicable, for purposes of applying § 471(c)(1)(B)(ii); or

(d) uses the AFS section 471(c) inventory method provided in § 1.471-1(b)(5),

or if the taxpayer does not have an AFS as

defined in § 1.471-1(b)(5)(ii) for the taxable year, the non-AFS section 471(c) inventory method provided in § 1.471-1(b)

(6), and wants to change the manner in

which it accounts for inventory in its AFS

or books and records, as applicable; and is

required to use such method of accounting for inventory in its AFS or its books

and records, as applicable, in applying the

AFS section 471(c) inventory method in

§1.471-1(b)(5), or the non-AFS section

471(c) inventory method in § 1.471-1(b)

(6), as applicable.

(2) Eligibility rules.

(a) Eligibility rule inapplicable. The

eligibility rule in section 5.01(f) of Rev.

Proc. 2015-13 does not apply to a change

described in section 22.20(1)(c) or

22.20(1)(d) of this revenue procedure.

(3) Section 481(a) adjustment period.

Beginning with the year of change, a taxpayer making a change described in section 22.20(1)(c) or 22.20(1)(d) of this revenue procedure must take any applicable

net positive § 481(a) adjustment for such

change into account ratably over the same

number of taxable years, not to exceed four,

that the taxpayer used its former method of

accounting. Additionally, a taxpayer making a change described in section 22.20(1)

that has a § 481(a) adjustment remaining

on a prior change in method of accounting

that is described in section 22.20(1)(c) or

section 22.20(1)(d) of this revenue procedure must take the remaining portion of

such prior § 481(a) adjustment into account

in the year of change.

(4) Reduced filing requirement. A taxpayer is required to complete only the following information on Form 3115 (Rev.

December 2018) to make this change:

(a) The identification section of page 1

(above Part I);

(b) The signature section at the bottom

of page 1;

(d) Part II, all lines except lines 7, 16b

and 16c. In the response to line 16a, in-

Bulletin No. 2022–2

clude a statement that the taxpayer satisfies the § 448(c) gross receipts test for the

year of change.

(e) Part IV, all lines except line 25; and

(f) Schedule D, Part II, lines 1-3.

(5) Concurrent automatic changes. A

taxpayer that wants to make one or more

concurrent changes in method of accounting under this section 22.20 or wants to

make a change under this section 22.20

and a change under sections 15.18 or

12.16 of this revenue procedure for the

same year of change may file a single

Form 3115 for such changes, provided the

taxpayer enters the designated automatic

accounting method change numbers for

each change on the appropriate lines of

the Form 3115. See section 6.03(1)(b) of

Rev. Proc. 2015-13 for more information

on making concurrent changes.

(6) No audit protection. A taxpayer

making a change in method of accounting

for inventory under section 22.20(1)(c)

or 22.20(1)(d) of this revenue procedure

does not receive audit protection under

section 8.01 of Rev. Proc. 2015-13.

(7) Designated automatic accounting

method change number. The designated automatic accounting method change

number for a change under this section

22.20 is “262.”

(8) Contact information. For further

information regarding a change under this

section, contact Livia Piccolo at (202)

317-7007 (not a toll-free number).

.30 Section 22 of Rev. Proc. 2019-43 is

modified to add new section 22.21 to read

as follows:

.21 Change from a small business taxpayer § 471(c) inventory method to an inventory method under § 471(a).

(1) Description of change. This change

applies to a taxpayer that wants to change

from using a small business taxpayer inventory method under § 471(c), proposed

§ 1.471-1(b)(4), (5), or (6), or § 1.471‑1(b)

(4), (5) or (6), as applicable, to accounting

for inventory in accordance with § 471(a)

and § 1.471-1(a).

(2) Inapplicability. This change does

not apply to any change within the last-in,

first-out (LIFO) inventory method.

(3) Eligibility rule inapplicable. The

eligibility rule in section 5.01(1)(f) of Rev.

Proc. 2015-13, 2015-5 I.R.B. 419, does

not apply to a change described in section

22.21(1) of this revenue procedure if such

Bulletin No. 2022–2

change is being made in the first taxable

year that the taxpayer does not qualify as a

small business taxpayer as defined in section 22.19(2) of this revenue procedure.

(4) Concurrent automatic changes. A

taxpayer making a change under this section 22.21 and a change under sections

12.01 or 12.02 and/or 15.01 of this revenue procedure for the same year of change

may file a single Form 3115 for such

changes, provided the taxpayer enters the

designated automatic accounting method

change numbers for each change on the

appropriate lines of the Form 3115. See

section 6.03(1)(b) of Rev. Proc. 2015-13

for more information on making concurrent changes.

(5) Designated automatic accounting

method change number. The designated automatic accounting method change

number for a change under this section

22.21 is “263.”

(6) Contact information. For further

information regarding a change under this

section, contact Livia Piccolo at (202)

317-7007 (not a toll-free number).

.31 Modifications to section 23.01 of

Rev. Proc. 2019-43.

(1) Section 23.01(1)(b)(ii) of Rev. Proc.

2019-43 is modified to add a new sentence at the end of the paragraph to read

as follows: “A permitted method includes

a method described in § 471(c), proposed

§ 1.471-1(b)(4), (5) or (6), or § 1.471-1(b)

(4), (5) or (6), as applicable, provided the

taxpayer is a small business taxpayer as

defined in section 22.19(2) of this revenue

procedure.”

(2) Section 23.01(2) of Rev. Proc.

2019-43 is modified to read as follows:

(2) Eligibility rules.

(a) Eligibility rules inapplicable.

(i) The eligibility rule in section 5.01(1)

(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.

419, does not apply for the first taxable

year that the taxpayer does not or will not

comply with the requirements of § 472(e)

(2) because the taxpayer has applied or

will apply International Financial Reporting Standards in its financial statements or

because the taxpayer has been acquired by

an entity that has not or will not use the

LIFO method in its financial statements.

(ii) For a change by a small business

taxpayer to a permitted method described

in the last sentence of section 23.01(1)

(b)(ii) of this revenue procedure, if the

325

taxpayer changed from accounting for

inventory in accordance with § 471(c),

proposed § 1.471-1(b) or § 1.471-1(b),

as applicable, to accounting for inventory in accordance with § 472 and the accompanying regulations within the prior

five taxable years ending with the year

of change, and such change was made

in the first taxable year that the taxpayer

did not qualify as a small business taxpayer, then such change is disregarded

for purposes of section 5.01(1)(f) of Rev.

Proc. 2015-13.

(b) Eligibility rule temporarily inapplicable. The eligibility rule in section

5.01(1)(f) of Rev. Proc. 2015-13 does

not apply to a taxpayer’s early application year, or, in the case of a taxpayer that

does not apply § 1.471-1(b) in the early

application year, the taxpayer’s first taxable year beginning on or after January 5,

2021. For purposes of this section 23.01,

“early application year” means the taxable

year of change beginning before January

5, 2021, in which a taxpayer first applies

§ 1.471-1(b).

(3) Section 23.01 of Rev. Proc. 201943 is modified to redesignate existing

paragraphs (8) and (9) as paragraph (9)

and (10), respectively, and add a new

paragraph (8) to read as follows:

(8) No ruling on certain method of accounting used. The consent granted under section 9 of Rev. Proc. 2015-13 for a

change made by a small business taxpayer to an inventory method in accordance

with § 471(c) under this section 23.01 of

this revenue procedure is not a determination by the Commissioner that the proposed inventory method of accounting

is permissible and does not create any

presumption that the proposed method is

a permissible method of accounting under a provision of the Code. The director will ascertain whether the proposed

method is permissible under the Code.

This section 23.01(8) does not apply to

a small business taxpayer that is making

a change to a method of accounting permissible under proposed § 1.471-1(b) or

§ 1.471-1(b).

SECTION 4. MODIFICATION TO REV.

PROC. 2018-40

Section 3.04 of Rev. Proc. 2018-40 is

removed in its entirety.

January 10, 2022

SECTION 5. REVOCATION OF

ELECTION UNDER PROPOSED

§ 1.448-2(b)(2)(iii)(B)

.01 Scope. Section 5 of this revenue

procedure applies to a taxpayer that applied proposed § 1.448-2 for a taxable

year beginning after December 31, 2017,

and before January 5, 2021, made an election under proposed § 1.448-2(b)(2)(iii)

(B), and either:

(1) chooses not to early apply the final

regulations under § 1.448-2 for a taxable

year beginning after December 31, 2017,

and before January 5, 2021; or

(2) chooses to early apply the final regulations under § 1.448-2 for a taxable year

beginning after December 31, 2017, and

before January 5, 2021, and all subsequent

taxable years.

.02 Consent granted to revoke proposed syndicate election.

(1) In general. The Commissioner

grants a taxpayer described in section

5.01(1) or 5.01(2) of this revenue procedure consent to revoke its election made

under proposed § 1.448-2(b)(2)(iii)(B),

provided the taxpayer revokes the election

in the time and manner described in section 5.02(2) or 5.02(3) of this revenue procedure, as applicable. Proposed § 1.4482(b)(2)(iii)(B) permits a taxpayer to elect

to use the allocated taxable income or

loss of the immediately preceding taxable

year to determine whether the taxpayer is

a syndicate for purposes of § 448(d)(3)

for the current taxable year. The election

under proposed § 1.448-2(b)(2)(iii)(B)

applies to the election year and all subsequent taxable years, unless the Commissioner provides the taxpayer with consent

to revoke the election.

(2) Taxable years beginning on or after

January 5, 2021. For a taxpayer described

in section 5.01(1) of this revenue procedure, its election under proposed § 1.4482(b)(2)(iii)(B) is automatically revoked

beginning with the taxpayer’s first taxable year beginning on or after January 5,

2021, and for all subsequent taxable years.

Beginning with the taxpayer’s first taxable

year beginning on or after January 5, 2021,

a taxpayer is required to apply § 1.448-2,

and follow the time and manner of making

the annual election provided in § 1.4482(b)(2)(iii)(B)(2), as applicable. For example, a taxpayer that wants to make an

January 10, 2022

annual election under § 1.448-2(b)(2)(iii)

(B)(2) for its first taxable year beginning

on or after January 5, 2021 must attach a

statement to its timely filed original Federal income tax return, including extensions, for such taxable year indicating that

the taxpayer is making the election under

§1.448-2(b)(2)(iii)(B). See § 1.448-2(b)

(2)(iii)(B)(2). In addition, notwithstanding

section 5.02(3) of this revenue procedure,

for a taxpayer that early applies the final

regulations under § 1.448-2 for a taxable

year beginning before January 5, 2021,

the election under proposed § 1.448-2(b)

(2)(iii)(B) is automatically revoked for all

taxable years beginning on or after January 5, 2021. However, see section 5.02(3)

of this revenue procedure for procedures

to revoke such election for a taxable year

beginning before January 5, 2021.

(3) For taxable years beginning after

December 31, 2017, and before January

5, 2021. The Commissioner provides

deemed consent to a taxpayer described

in section 5.01(2) of this revenue procedure to revoke its election made under

proposed § 1.448-2(b)(2)(iii)(B) for the

taxpayer’s taxable year beginning after

December 31, 2017, and before January 5,

2021, and for all subsequent taxable years

if a taxpayer described in section 5.01(2)

of this revenue procedure uses one of the

following procedures to indicate the taxpayer is applying § 1.448-2 for such taxable years:

(a) Makes an election under § 1.4482(b)(2)(iii)(B)(2). Attaches a statement

to its timely filed original Federal income

tax return, including extensions, for the

taxpayer’s taxable year beginning after

December 31, 2017, and before January

5, 2021, indicating that the taxpayer is applying § 1.448-2 in T.D. 9942 (86 FR 254)

and making the election under §1.448-2(b)

(2)(iii)(B). See § 1.448-2(b)(2)(iii)(B)(2).

(b) Does not make an election under

§ 1.448-2(b)(iii)(B)(2). A taxpayer described in section 5.01(2) of this revenue

procedure that does not wish to make an

election under § 1.448-2(b)(iii)(B)(2) for

the first taxable year it applies the final

regulations contained in T.D. 9942, has

the consent of the Commissioner to revoke its election under proposed § 1.4482(b)(2)(iii)(B) beginning with the first

taxable year in which the taxpayer applies

the final regulations (T.D. 9942) and for

326

all subsequent taxable years if the taxpayer attaches a statement to its timely

filed Federal income tax return, including

extensions, for such taxable year, which

states that the taxpayer:

(i) is applying § 1.448-2 of T.D. 9942

for the taxable year and all subsequent

taxable years;

(ii) is not making an election under

§ 1.448-2(b)(2)(iii)(B) for the taxable

year.

change applying T.D. 9942 (86 FR 254).

Timely files a Form 3115, Application for

Change in Accounting Method, with the

taxpayer’s timely filed original Federal

income tax return to change to a method

of accounting to comply with the final

regulations contained in T.D. 9942 for a

taxable year beginning after December 31,

2017, and before January 5, 2021, under

sections 12.01, 12.02, 12.16, 15.01, 15.04,

15.18, 19.01, 22.19, 22.20, 22.21 or 23.01

of Rev. Proc. 2019-43, as modified by section 3 this revenue procedure, using the

automatic change procedures in Rev. Proc.

2015-13 (or successor). A taxpayer that

applies any aspect of the final regulations

under a particular Code provision must

follow all the applicable rules contained

in the regulations that relate to that Code

provision for such taxable year and subsequent taxable years, including § 1.448-2

to determine whether the taxpayer is eligible for the exemption. See, for example, a change in method of accounting

described in section 12.16 (see method

under § 1.263A-1(j)), 22.18 (see methods

under § 1.471-1(b)) or 22.19 (see method

under § 1.471-1(b)(5)) of Rev. Proc. 201943. The filing of a Form 3115 under this

section 5.02(3)(b) only revokes the election made under proposed § 1.448-2(b)(2)

(iii)(B) but does not satisfy the election

requirements of § 1.448-2(b)(2)(iii)(B)(2)

for a taxable year. A taxpayer that wants

to make an election under § 1.448-2(b)(2)

(iii)(B) for a taxable year must follow the

time and manner of making the election

in accordance with § 1.448-2(b)(2)(iii)(B)

(2).

SECTION 6. EFFECT ON OTHER

DOCUMENTS

This revenue procedure modifies and

amplifies Rev. Proc. 2019-43.

Bulletin No. 2022–2

This revenue procedure modifies section 3 of Rev. Proc. 2018-40 to remove

section 3.04 of Rev. Proc. 2018-40 in its

entirety.

SECTION 7. EFFECTIVE DATE

.01 In general. Except as otherwise

provided under this section 7, this revenue

procedure is effective for a Form 3115

filed on or after December 16, 2021.

.02 Transition rule.

(1) Certain inapplicability paragraph

disregarded for a limited time. If, on or

before December 16, 2021, a taxpayer properly filed the duplicate copy of a

Form 3115 under the automatic change

procedures in Rev. Proc. 2015-13 for a

change in method of accounting described

in sections 22.01, 22.02, or 22.04 through

22.18 of Rev. Proc. 2019-43, before the

modifications made by this revenue procedure, and the change in method of accounting is also described in sections

22.19 or 22.20 of Rev. Proc. 2019-43, as

modified by this revenue procedure, then

the inapplicability paragraph that prevents

a taxpayer that accounts for inventory under section § 471(c), proposed § 1.4711(b), or § 1.471-1(b) from making an automatic change in method of accounting

under sections 22.01, 22.02 and 22.04

through 22.18 of Rev. Proc. 2019-43 will

be disregarded.

(2) Limited time period to convert a

Form 3115 filed under the non-automatic change procedures in Rev. Proc. 201513. If on or before December 16, 2021,

a taxpayer properly filed a Form 3115

under the non-automatic change procedures in Rev. Proc. 2015-13 requesting

the Commissioner’s consent for a change

in method of accounting described in section 3 of this revenue procedure, and the

Form 3115 is pending with the national

office on December 16, 2021, the taxpayer may choose to make the change in

method of accounting under the automatic

change procedures in Rev. Proc. 2015-13

if the taxpayer is otherwise eligible to use

this revenue procedure and the automatic

change procedures in Rev. Proc. 2015-13.

The taxpayer must notify the national office contact person for the Form 3115 (if

unknown, see section 9.08(6) of Rev. Proc.

2021-1, 2021-1 I.R.B. 1, 51 (or any successor)) of the taxpayer’s intent to make

Bulletin No. 2022–2

the change in method of accounting under

this revenue procedure before the later of:

(a) January 18, 2022, or (b) the issuance

of a letter ruling granting or denying consent for the revocation. The notification

should indicate that the taxpayer chooses

to convert the Form 3115 to the automatic

change procedures in Rev. Proc. 2015-13.

If the taxpayer timely notifies the national

office that it chooses to convert the Form

3115 to the automatic change procedures

in Rev. Proc. 2015-13, the national office

will send a letter to the taxpayer acknowledging its request and will return the user

fee submitted with the Form 3115.

A taxpayer converting a Form 3115 to

the automatic change procedures in Rev.

Proc. 2015-13 for a change in method of

accounting described in this revenue procedure must resubmit a Form 3115 that

conforms to the automatic change procedures, with a copy of the national office

letter sent acknowledging the taxpayer’s

request attached, to the IRS in accordance

with section 9.06 of Rev. Proc. 2021-1 (or

its successor), by the earlier of (a) the 60th

calendar day after the date of the national

office’s letter acknowledging the taxpayer’s request, or (b) the date the taxpayer

is required to file the duplicate copy of

the Form 3115 under section 6.03(1)(a)

(i)(B) of Rev. Proc. 2015-13. See section

6.03(3) of Rev. Proc. 2015-13 regarding

additional required copies of Form 3115.

The duplicate copy of the timely resubmitted Form 3115 filed in accordance with

this section 7.02(2) will be considered

filed as of the date the taxpayer originally

filed the converted Form 3115 under the

non-automatic change procedures in Rev.

Proc. 2015-13. This section 7.02(2) does

not extend the date the taxpayer must file

the original (converted) Form 3115 under section 6.03(1)(a)(i)(A) of Rev. Proc.

2015-13.

(3) Forms 3115 for changes in methods

of accounting that can no longer be filed

under the automatic change procedures.

The following transition rules apply to

the changes in method of accounting that

can no longer be filed under the automatic

change procedures in Rev. Proc. 2015-13

because of changes made in this revenue

procedure.

(a) If before December 16, 2021, a taxpayer properly filed the duplicate copy of

a Form 3115 under the automatic change

327

procedures in Rev. Proc. 2015-13 for a

change in method of accounting that can

no longer be filed under the automatic

change procedures in Rev. Proc. 201513 as a result of modifications made by

this revenue procedure, the taxpayer may

make that change in method of accounting

under the automatic change procedures in

Rev. Proc. 2015-13 for the year of change.

(b) If before December 16, 2021, a taxpayer did not properly file the original, or

the duplicate copy, of a Form 3115 under

the automatic change procedures in Rev.

Proc. 2015-13 for a change in method

of accounting that can no longer be filed

under the automatic change procedures

in Rev. Proc. 2015-13, the taxpayer must

make that change in method of accounting

under the non-automatic change procedures in Rev. Proc. 2015-13.

SECTION 8. PAPERWORK

REDUCTION ACT

The collection of information contained in this revenue procedure has been

submitted to the Office of Management

and Budget for review under OMB control number 1545-0123 in accordance with

the Paperwork Reduction Act (44 U.S.C.

3507(d)). An agency may not conduct or

sponsor, and a person is not required to

respond to, a collection of information

unless the collection of information displays a valid OMB control number. The

collection of information in this revenue

procedure is in section 5.02(3)(b). This

information is necessary and will be used

to determine whether the taxpayer properly revokes its election under proposed

§ 1.448-2(b)(2)(iii)(B)(2) in accordance

with the time and manner provided in this

revenue procedure. The collections of information are required for the taxpayer to

obtain consent revoke its election under

proposed § 1.448-2(b)(2)(iii)(B)(2).

SECTION 9. DRAFTING

INFORMATION

The principal author of this revenue

procedure is Anna Gleysteen of the Office

of Associate Chief Counsel (Income Tax

and Accounting). For further information

regarding this revenue procedure, contact

Livia Piccolo at (202) 317-7007 (not a

toll-free number).

January 10, 2022

Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as “rulings”) that

have an effect on previous rulings use the

following defined terms to describe the

effect:

Amplified describes a situation where

no change is being made in a prior published position, but the prior position is

being extended to apply to a variation of

the fact situation set forth therein. Thus, if

an earlier ruling held that a principle applied to A, and the new ruling holds that

the same principle also applies to B, the

earlier ruling is amplified. (Compare with

modified, below).

Clarified is used in those instances

where the language in a prior ruling is being made clear because the language has

caused, or may cause, some confusion. It

is not used where a position in a prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously published ruling and points out an essential

difference between them.

Modified is used where the substance

of a previously published position is being

changed. Thus, if a prior ruling held that a

principle applied to A but not to B, and the

new ruling holds that it applies to both A

and B, the prior ruling is modified because

it corrects a published position. (Compare

with amplified and clarified, above).

Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions.

This term is most commonly used in a ruling

that lists previously published rulings that

are obsoleted because of changes in laws or

regulations. A ruling may also be obsoleted

because the substance has been included in

regulations subsequently adopted.

Revoked describes situations where the

position in the previously published ruling

is not correct and the correct position is

being stated in a new ruling.

Superseded describes a situation where

the new ruling does nothing more than

restate the substance and situation of a

previously published ruling (or rulings).

Thus, the term is used to republish under

the 1986 Code and regulations the same

position published under the 1939 Code

and regulations. The term is also used

when it is desired to republish in a single

ruling a series of situations, names, etc.,

that were previously published over a

period of time in separate rulings. If the

new ruling does more than restate the substance of a prior ruling, a combination of

terms is used. For example, modified and

superseded describes a situation where the

substance of a previously published ruling

is being changed in part and is continued

without change in part and it is desired to

restate the valid portion of the previously published ruling in a new ruling that is

self contained. In this case, the previously

published ruling is first modified and then,

as modified, is superseded.

Supplemented is used in situations in

which a list, such as a list of the names of

countries, is published in a ruling and that

list is expanded by adding further names

in subsequent rulings. After the original

ruling has been supplemented several

times, a new ruling may be published that

includes the list in the original ruling and

the additions, and supersedes all prior rulings in the series.

Suspended is used in rare situations to

show that the previous published rulings

will not be applied pending some future

action such as the issuance of new or

amended regulations, the outcome of cases in litigation, or the outcome of a Service study.

Abbreviations

The following abbreviations in current

use and formerly used will appear in

material published in the Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

E.O.—Executive Order.

ER—Employer.

Bulletin No. 2022–2

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contributions Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statement of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

January 10, 2022

Numerical Finding List1

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