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## Record

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## 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%
0.44%
0.48%
0.48%
0.53%
0.53%
0.57%
0.57%
Mid-term
1.30%
1.30%
1.43%
1.43%
1.56%
1.56%
1.69%
1.69%
1.95%
1.95%
2.28%
2.27%
Long-term
1.81%
1.81%
1.99%
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%

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)).
1

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
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

2
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.
3
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%.
4
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
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
3.05
3.06
3.06
3.07
3.07
3.07
3.07
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
3.07
3.07
3.07
3.07
3.06
3.06
3.06
3.06
3.06
3.06
3.06
3.06
3.06
3.06
3.06
3.06
3.06
3.06
3.07
3.07
3.07
3.07
3.07
3.07
3.07
3.07
3.07
3.07
3.07
3.07
3.07
3.07
3.07
3.07
3.07
3.08
3.08
3.08
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
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.08
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
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
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
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
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.09
3.10
3.10
3.10
3.10
3.10
3.10
3.10
3.10
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).

1

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;
or
(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

0

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

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

$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
Total 2021 Ending Inventory

$15,000,000
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

$
0

X’s Unamortized 2021 § 481(a) Adjustment:
2021 § 481(a) Adjustment
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
$
0

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;
(c) Part I;
(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).
(c) Recurring item exception is the
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).
(c) Adoption of recurring item exception. The taxpayer must attach to its Form
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.”
(c) Change made for a taxpayer subject to § 447. The designated automatic
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
(c) change from the overall cash 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.
(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.
(c) Open accounts receivable. For purposes of this section 15.18, an open accounts receivable is any receivable that is
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;
or
(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).

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.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-

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A4341f85a0b755d76. Public record. Not legal advice.