These synopses are intended only as aids to the reader in

Agency decision

Ask Donna

What actually matters in this document.

Text

HIGHLIGHTS

OF THIS ISSUE

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.

INCOME TAX

Rev. Proc. 2023-24, page 1207.

Revenue Procedure 2023-24 updates the List of Automatic

Procedures as established in Treasury and IRS guidance

for taxpayer-initiated requests for changes in methods of

accounting. An “automatic change” is a change in method

of accounting for which the taxpayer is eligible under section 5.01(1) of Revenue Procedure 2015-13 for requesting the Commissioner’s consent for the requested year of

change.

Finding Lists begin on page ii.

Bulletin No. 2023–28

July 10, 2023

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 Unpublished rulings will not be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.

July 10, 2023

Bulletin No. 2023–28

Part III

26 CFR 601.204: Changes in accounting periods and in methods of accounting.

(Also Part I, §§ 56, 61, 77, 118, 162, 163, 166, 167, 168, 171, 174, 179D, 181, 194, 195, 197, 248, 263, 263A, 267, 280F, 404, 446, 447, 448, 451, 454, 455, 460,

461, 467, 471, 472, 475, 481, 585, 709, 807, 816, 832, 833, 846, 860A-860G, 861, 904, 953, 985, 1272, 1273, 1278, 1281, 1363, 1400I, 1400L, 1400N; 1.61-1,

1.61-4, 1.61-8, 1.77-1, 1.77-2, 1.118-2, 1.162-1, 1.162-3, 1.162-4, 1.162-11, 1.162-12, 1.166-1, 1.166-2, 1.166-4, 1.167(a)-2, 1.167(a)-3(b), 1.167(a)-4, 1.167(a)-7,

1.167(a)-8, 1.167(a)-11, 1.167(a)-14, 1.167(e)-1, 1.168(d)-1, 1.168(i)-1, 1.168(i)-4, 1.168(i)-6, 1.168(i)-7, 1.168(i)-8, 1.168(k)-1, 1.168(k)-2, 1.171-4, 1.174-1, 1.1743, 1.174-4, 1.179-5, 1.181-2, 1.194-1, 1.195-1, 1.197-2, 1.248-1, 1.263(a)-1, 1.263(a)-2, 1.263(a)-3, 1.263(a)-4, 1.263(a)-5, 1.263A-1, 1.263A-2, 1.263A-3, 1.263A-4,

1.263A-7, 1.267(a)-1, 1.280F-6, 1.404(b)-1T, 1.446-1, 1.446-1T, 1.446-2, 1.446-5, 1.446-6, 1.446-7, 1.448-1, 1.448-2, 1.451-1, 1.451-3, 1.451-8, 1.454-1, 1.455-6,

1.460-1, 1.460-3, 1.460-4, 1.461-1, 1.461-4, 1.461-5, 1.467-1, 1.471-1, 1.471-2, 1.471-3, 1.471-4, 1.471-5, 1.471-8, 1.472-1, 1.472-2, 1.472-6, 1.472-8, 1.481-1,

1.481-4, 1.709-1, 1.709-2, 1.832-4, 1.832-5, 1.860A-6, 1.861-18, 1.985-5, 1.985-8, 1.1016-3, 1.1245-3, 1.1272-1, 1.1273-1, 1.1273-2, 1.1275-2, 1.1363-2, 1.1374-4,

1.1400L(b)-1, 1.1502-68.)

Rev. Proc. 2023-24

LIST OF AUTOMATIC CHANGES��1212

SECTION 1. GROSS INCOME (§ 61) ��1212

.01 Up-front Payments for Network Upgrades received by Utilities ��1212

SECTION 2. COMMODITY CREDIT LOANS (§ 77)��1212

.01 Treating amounts received as loans��1212

SECTION 3. TRADE OR BUSINESS EXPENSES (§ 162)��1212

.01 Advances made by a lawyer on behalf of clients ��1212

.02 ISO 9000 Costs��1212

.03 Restaurant or tavern smallwares packages��1212

.04 Timber grower fertilization costs ��1212

.05 Materials and supplies��1213

.06 Repair and maintenance costs��1213

.07 Wireline network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011-27��1213

.08 Wireless network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011-28��1213

.09 Method of accounting under Rev. Proc. 2011-43 for taxpayers in the business of transporting, delivering, or selling

electricity��1213

.10 Method of accounting under Rev. Proc. 2013-24 for taxpayers in the business of generating steam or electric power.��1213

.11 Cable network asset capitalization methods of accounting under Rev. Proc. 2015-12��1213

.12 Natural gas transmission and distribution property method of accounting under Rev. Proc. 2023-15��1214

SECTION 4. BAD DEBTS (§ 166)��1217

.01 Change from reserve method to specific charge-off method ��1217

.02 Conformity election by bank after previous election automatically revoked��1217

SECTION 5. INTEREST EXPENSE (§ 163) AND AMORTIZABLE BOND PREMIUM (§ 171)��1218

.01 Revocation of § 171(c) election ��1218

.02 Change to comply with § 163(e)(3) ��1218

SECTION 6. DEPRECIATION OR AMORTIZATION (§ 56(a)(1), 167, 168, 197, 280F(a), or 1502, OR FORMER

§ 56(g)(4)(A), 168, 1400I, 1400L, or 1400N(d))��1218

.01 Impermissible to permissible method of accounting for depreciation or amortization��1218

.02 Permissible to permissible method of accounting for depreciation ��1223

.03 Sale, lease, or financing transactions��1225

.04 Change in general asset account treatment due to a change in the use of MACRS property��1226

.05 Change in method of accounting for depreciation due to a change in the use of MACRS property ��1227

.06 Depreciation of qualified non-personal use vans and light trucks��1227

.07 Impermissible to permissible method of accounting for depreciation or amortization for disposed depreciable or

amortizable property��1228

.08 Tenant construction allowances ��1229

Bulletin No. 2023–28

1207

July 10, 2023

.09

.10

.11

.12

.13

.14

.15

.16

.17

.18

.19

.20

.21

.22

Safe harbor method of accounting for determining the depreciation of certain tangible assets used by wireless

telecommunications carriers under Rev. Proc. 2011-22��1230

Partial dispositions of tangible depreciable assets to which the IRS’s adjustment pertains (§ 168; § 1.168(i)-8)��1230

Depreciation of leasehold improvements (§§ 167, 168, and 197; § 1.167(a)-4)��1231

Permissible to permissible method of accounting for depreciation of MACRS property (§ 168; §§ 1.168(i)-1,

1.168(i)-7, and 1.168(i)-8)��1232

Disposition of a building or structural component (§ 168; § 1.168(i)-8) ��1234

Dispositions of tangible depreciable assets (other than a building or its structural components) (§ 168; § 1.168(i)-8)��1237

Dispositions of tangible depreciable assets in a general asset account (§ 168(i)(4); § 1.168(i)-1)��1240

Summary of certain changes in methods of accounting related to dispositions of MACRS property��1242

Depreciation of fiber optic transfer node and fiber optic cable used by a cable system operator (§§ 167 and 168)��1244

Qualified improvement property placed in service after December 31, 2017 (§ 168)��1244

Certain late elections under §§ 168 and 1502 or revocation of certain elections under § 168 (§ 168(g)(7), (k)(5), (k)

(7), and (k)(10); §§ 1.168(k)-2 and 1.1502-68)��1245

Change in depreciation as a result of applying the additional first year depreciation regulations (§ 168(k);

§§ 1.168(k)-2 and 1.1502-68)��1246

Depreciation of tangible property under § 168(g) by controlled foreign corporations. ��1248

Late elections under § 168(j)(8), § 168(l)(3)(D), and § 181(a)(1).��1248

SECTION 7. RESEARCH AND EXPERIMENTAL EXPENDITURES (§ 174)��1249

.01 Changes to a different method or different amortization period��1249

.02 Specified Research or Experimental Expenditures��1250

SECTION 8. ELECTIVE EXPENSING PROVISIONS (§ 179D) ��1252

.01 Deduction for Energy Efficient Commercial Buildings (§ 179D) ��1252

SECTION 9. COMPUTER SOFTWARE EXPENDITURES (§§ 162, 167, and 197) ��1252

.01 Computer software expenditures��1252

SECTION 10. START-UP EXPENDITURES AND ORGANIZATIONAL FEES (§§ 195, 248 AND 709)��1252

.01 Start-up expenditures��1252

.02 Organizational expenditures under § 248��1253

.03 Organization fees under § 709��1253

SECTION 11. CAPITAL EXPENDITURES (§ 263) ��1254

.01 Package design costs��1254

.02 Line pack gas or cushion gas��1254

.03 Removal costs��1254

.04 Distributor commissions��1255

.05 Intangibles��1255

.06 Rotable spare parts safe harbor method.��1255

.07 Repairable and reusable spare parts ��1255

.08 Tangible property ��1256

.09 Railroad track structure expenditures��1259

.10 Remodel-refresh safe harbor method ��1259

SECTION 12. UNIFORM CAPITALIZATION (UNICAP) METHODS (§ 263A)��1261

.01 Certain uniform capitalization (UNICAP) methods used by resellers and reseller-producers��1261

.02 Certain uniform capitalization (UNICAP) methods used by producers and reseller-producers��1264

.03 Impact fees ��1265

.04 Change to capitalizing environmental remediation costs under § 263A��1265

.05 Change in allocating environmental remediation costs under § 263A��1265

.06 Safe harbor methods under § 263A for certain dealerships of motor vehicles��1265

.07 Change to not apply § 263A to one or more plants removed from the list of plants that have a preproductive period

in excess of 2 years.��1266

.08 Change to a reasonable allocation method described in § 1.263A-1(f)(4) for self-constructed assets��1266

.09 Real property acquired through foreclosure��1267

July 10, 2023

1208

Bulletin No. 2023–28

.10

.11

.12

.13

.14

.15

.16

.17

.18

Sales-Based Royalties��1267

Treatment of Sales-Based Vendor Chargebacks under a Simplified Method��1267

U.S. ratio method ��1268

Depletion��1269

Interest capitalization ��1270

Change to not apply § 263A to replanting costs for lost or damaged citrus plants pursuant to § 263A(d)(2)(C) ��1270

Small business taxpayer exception from requirement to capitalize costs under § 263A ��1270

Recharacterizing costs under the simplified resale method, simplified production method, or the modified

simplified production method��1271

Late revocation of elections under § 263A(d)(3) ��1272

SECTION 13. LOSSES, EXPENSES AND INTEREST WITH RESPECT TO TRANSACTIONS BETWEEN

RELATED TAXPAYERS (§ 267)��1272

.01 Change to comply with § 267��1272

SECTION 14. DEFERRED COMPENSATION (§ 404)��1272

.01 Deferred compensation��1272

.02 Grace period contributions ��1273

SECTION 15. METHODS OF ACCOUNTING (§ 446)��1273

.01 Change in overall method from the cash method, or from an accrual method with regard to purchases and sales of

inventories and the cash method for all other items, to an accrual method ��1273

.02 Multi-year insurance policies for multi-year service warranty contracts��1275

.03 Nonaccrual-experience method��1276

.04 Interest accruals on short-term consumer loans—Rule of 78’s method��1276

.05 Film producer’s treatment of certain creative property costs��1277

.06 Deduction of incentive payments to health care providers��1277

.07 Change by bank for uncollected interest. ��1277

.08 Change from the cash method to an accrual method for specific items ��1278

.09 Multi-year service warranty contracts��1278

.10 Overall cash method for specified transportation industry taxpayers��1279

.11 Change to overall cash/hybrid method for certain banks ��1280

.12 Change to overall cash method for farmers��1281

.13 Nonshareholder contributions to capital under § 118��1281

.14 Debt issuance costs��1282

.15 Transfers of interties under the safe harbor described in Notice 2016-36 (§ 118).��1282

.16 Change to or from the net asset value (NAV) method.��1282

.17 Small business taxpayer changing the overall method of accounting to the 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��1283

SECTION 16. TAXABLE YEAR OF INCLUSION (§ 451)��1284

.01 Accrual of interest on nonperforming loans��1284

.02 Advance rentals��1284

.03 State or local income or franchise tax refunds ��1285

.04 Capital Cost Reduction Payments��1285

.05 Credit card annual fees ��1285

.06 Retainages��1285

.07 Change in applicable financial statements (AFS) for purposes of applying certain revenue recognition methods of

accounting. ��1285

.08 Changes in the timing of income recognition under § 451(b) and (c) ��1287

SECTION 17. OBLIGATIONS ISSUED AT DISCOUNT (§ 454)��1294

.01 Series E, EE or I U.S. savings bonds��1294

SECTION 18. PREPAID SUBSCRIPTION INCOME (§ 455)��1294

.01 Prepaid subscription income��1294

Bulletin No. 2023–28

1209

July 10, 2023

SECTION 19. SPECIAL RULES FOR LONG-TERM CONTRACTS (§ 460) ��1294

.01 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 ��1294

SECTION 20. TAXABLE YEAR INCURRED (§ 461) ��1294

.01 Timing of incurring liabilities for employee compensation��1295

(1) Self-insured employee medical benefits��1295

(2) Bonuses��1295

(3) Vacation pay, sick pay, and severance pay ��1296

(4) Commissions ��1296

.02 Timing of incurring liabilities for real property taxes, personal property taxes, state income taxes, and

state franchise taxes��1297

.03 Timing of incurring liabilities under a workers’ compensation act, tort, breach of contract, or violation of law ��1297

.04 Timing of incurring certain liabilities for payroll taxes ��1298

.05 Cooperative advertising��1298

.06 Timing of incurring certain liabilities for services or insurance��1299

.07 Rebates and allowances��1299

.08 Ratable accrual of real property taxes��1299

.09 California Franchise Taxes��1299

.10 Gift cards issued as a refund for returned goods��1299

.11 Timing of incurring liabilities under the recurring item exception to the economic performance rules ��1300

.12 Economic performance safe harbor for ratable service contracts��1300

.13 Timing of incurring inventory costs��1300

.14 Alternative Cost Method��1300

SECTION 21. RENT (§ 467)��1302

.01 Change from an improper method of inclusion of rental income or expense to inclusion in accordance with

the rent allocation ��1302

SECTION 22. INVENTORIES (§ 471)��1302

.01 Cash discounts��1302

.02 Estimating inventory “shrinkage”��1303

.03 Qualifying volume-related trade discounts��1303

.04 Impermissible methods of identification and valuation of inventories. ��1303

.05 Core Alternative Valuation Method ��1304

.06 Replacement cost for automobile dealers’ parts inventory��1304

.07 Replacement cost for heavy equipment dealers’ parts inventory��1305

.08 Rotable spare parts ��1305

.09 Advance Trade Discount Method��1305

.10 Permissible methods of identification and valuation of inventories.��1305

.11 Change in the official used vehicle guide utilized in valuing used vehicles��1306

.12 Invoiced advertising association costs for new vehicle retail dealerships ��1306

.13 Rolling-average method of accounting for inventories��1307

.14 Sales-Based Vendor Chargebacks��1307

.15 Certain changes to the cost complement of the retail inventory method ��1307

.16 Certain changes within the retail inventory method��1307

.17 Change from currently deducting inventories to permissible methods of identification and valuation of inventories.��1308

.18 Small business taxpayer § 471(c) inventory methods. ��1308

.19 Changes within a § 471(c) inventory method. ��1309

.20 Change from a small business taxpayer § 471(c) inventory method to an inventory method under § 471(a).��1310

SECTION 23. LAST-IN, FIRST-OUT (LIFO) INVENTORIES (§ 472) ��1310

.01 Change from the LIFO inventory method��1310

.02 Determining current-year cost under the LIFO inventory method��1311

.03 Alternative LIFO inventory method for retail automobile dealers��1312

.04 Used vehicle alternative LIFO method��1312

.05 Determining the cost of used vehicles purchased or taken as a trade-in��1313

July 10, 2023

1210

Bulletin No. 2023–28

.06

.07

.08

.09

.10

Change to the inventory price index computation (IPIC) method ��1313

Changes within the inventory price index computation (IPIC) method��1314

Changes to the Vehicle-Pool Method��1315

Changes within the used vehicle alternative LIFO method ��1315

Changes to dollar-value pools of manufacturers��1315

SECTION 24. MARK-TO-MARKET ACCOUNTING METHOD (Including § 475)��1316

.01 Commodities dealers, securities traders, and commodities traders electing to use the mark-to-market method of

accounting under § 475(e) or (f)��1316

.02 Taxpayers requesting to change their method of accounting from the mark-to-market method of accounting

described in § 475 to a realization method��1317

SECTION 25. BANK RESERVES FOR BAD DEBTS (§ 585)��1318

.01 Changing from the § 585 reserve method to the § 166 specific charge-off method��1318

SECTION 26. INSURANCE COMPANIES (§§ 807, 816, 832, 833)��1319

.01 Safe harbor method of accounting for premium acquisition expenses��1319

.02 Certain changes in method of accounting for organizations to which § 833 applies��1320

.03 Change in qualification as life/nonlife insurance company under § 816 ��1320

.04 Changes in basis of computing reserves under § 807(f)��1320

SECTION 27. DISCOUNTED UNPAID LOSSES (§ 846)��1322

.01 Composite method for discounting unpaid losses��1322

SECTION 28. REAL ESTATE MORTGAGE INVESTMENT CONDUIT (REMIC) (§§ 860A-860G)��1322

.01 REMIC Inducement Fees ��1322

SECTION 29. FUNCTIONAL CURRENCY (§ 985)��1323

.01 Change in functional currency ��1323

SECTION 30. ORIGINAL ISSUE DISCOUNT (§§ 1272, 1273)��1323

.01 De minimis original issue discount (OID) ��1323

.02 Proportional method of accounting for OID on a pool of credit card receivables ��1323

SECTION 31. MARKET DISCOUNT BONDS (§ 1278)��1324

.01 Revocation of § 1278(b) election ��1324

SECTION 32. SHORT-TERM OBLIGATIONS (§ 1281)��1324

.01 Interest income on short-term obligations��1324

.02 Stated interest on short-term loans of cash method banks ��1325

EFFECTIVE DATE��1325

EFFECT ON OTHER DOCUMENTS��1326

PAPERWORK REDUCTION ACT��1327

SIGNIFICANT CHANGES��1327

DRAFTING INFORMATION��1331

LIST OF AUTOMATIC CHANGES CONTACT LIST��1332

Bulletin No. 2023–28

1211

July 10, 2023

This revenue procedure provides the

List of Automatic Changes to which the

automatic change procedures in Rev.

Proc. 2015-13, 2015-5 I.R.B. 419, as clarified and modified by Rev. Proc. 2015-33,

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

Rev. Proc. 2021-34, 2021-35 I.R.B. 337,

by Rev. Proc. 2021-26, 2021-22 I.R.B.

1163, by Rev. Proc. 2017-59, 2017-48

I.R.B. 543, and by section 17.02(b) and

1, apply. The definitions in section 3 of

Rev. Proc. 2015-13 apply to this revenue

procedure.

LIST OF AUTOMATIC CHANGES

SECTION 1. GROSS INCOME (§ 61)

.01 Up-front Payments for Network

Upgrades received by Utilities.

(1) Description of change. This change

applies to a Utility that wants to change

its method of accounting for Up-front

Payments to the safe harbor method

described in Rev. Proc. 2005-35, 2005-2

C.B. 76. In general, this change applies to

a Utility that receives an Up-front Payment

from a Generator to finance Network

Upgrades to the Utility’s Transmission

System. For federal income tax purposes,

if an Up-front Payment is made pursuant

to an Interconnection Agreement that satisfies all of the conditions of section 5.02

of Rev. Proc. 2005-35, a Utility may treat

that Up-front Payment as not being taxable income under § 61 when received

(the safe harbor method). In addition, a

Utility that uses the safe harbor method is

not entitled to any deduction for its reimbursements of the Up-front Payment. To

the extent that Federal Energy Regulatory

Commission (FERC) interest is deductible, it must be properly allocated to the

periods in which it accrues. A Utility

using the safe harbor method must comply with all other applicable provisions of

Rev. Proc. 2005-35. See Rev. Proc. 200535 for the definitions of certain terms for

purposes of this change.

(2) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

1.01 is “91.”

(3) Contact information. For further

information regarding a change under this

July 10, 2023

section, contact William E. Blanchard at

(202) 317-3900 (not a toll-free number).

SECTION 2. COMMODITY CREDIT

LOANS (§ 77)

.01 Treating amounts received as loans.

(1) Description of change. This change

applies to a taxpayer that wants to change

its method of accounting for loans received

from the Commodity Credit Corporation

from including the loan amount in gross

income for the taxable year in which

each loan is received to treating each loan

amount as a loan.

(2) Certain 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 this change.

(3) Manner of making change. This

change is made on a cut-off basis and

applies only to loans received from the

Commodity Credit Corporation on or

after the beginning of the year of change.

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

(4) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

2.01 is “1.”

(5) Contact information. For further

information regarding a change under this

section, contact Michael Finn at (202)

317-4718 (not a toll-free number).

SECTION 3. TRADE OR BUSINESS

EXPENSES (§ 162)

.01 Advances made by a lawyer on

behalf of clients.

(1) Description of change. This change

applies to a lawyer who advances money

to pay for costs of litigation or for other

expenses on behalf of clients, and who

wants to change the method of accounting for such advances from treating

them as deductible business expenses

to treating them as loans to clients. This

change applies to cases handled either

on a non-contingent or a contingent

fee basis. See Pelton & Gunther, P.C.

v. Commissioner, T.C. Memo. 1999339 (non-contingent fee); Canelo v.

Commissioner, 53 T.C. 217 (1969), aff’d

per curiam, 447 F.2d 484 (9th Cir. 1971)

(contingent fee).

1212

(2) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

3.01 is “2.”

(3) Contact information. For further

information regarding a change under this

section, contact Alicia Lee-Won at (202)

317-7003 (not a toll-free number).

.02 ISO 9000 costs.

(1) Description of change. This change

applies to a taxpayer that wants to change

its method of accounting for costs incurred

to obtain, maintain, and renew ISO 9000

certification to conform with Rev. Rul.

2000-4, 2000-1 C.B. 331, as modified by

this revenue procedure.

(2) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

3.02 is “3.”

(3) Contact information. For further

information regarding a change under this

section, contact Alicia Lee-Won at (202)

317-7003 (not a toll-free number).

.03 Restaurant or tavern smallwares

packages.

(1) Description of change. This change

applies to a taxpayer engaged in the trade

or business of operating a restaurant or

tavern (within the meaning of section

4.01 of Rev. Proc. 2002-12, 2002-1 C.B.

374) that wants to change its method of

accounting for the costs of smallwares to

the smallwares method described in Rev.

Proc. 2002-12, as modified by this revenue procedure.

(2) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

3.03 is “4.”

(3) Contact information. For further

information regarding a change under this

section, contact Renay France at (202)

317-7003 (not a toll-free number).

.04 Timber grower fertilization costs.

(1) Description of change. This change

applies to a timber grower that wants to

change its method of accounting to treat

post-establishment fertilization costs of

an established timber stand as ordinary

and necessary business expenses deductible under § 162. See Rev. Rul. 2004-62,

2004-1 C.B. 1072, as modified by this revenue procedure.

Bulletin No. 2023–28

(2) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

3.04 is “86.”

(3) Contact information. For further

information regarding a change under this

section, contact Maria Castillo Valle at

(202) 317-7003 (not a toll-free number).

.05 Materials and supplies. See section

11.08 of this revenue procedure.

.06 Repair and maintenance costs. See

section 11.08 of this revenue procedure.

.07 Wireline network asset maintenance allowance and units of property

methods of accounting under Rev. Proc.

2011-27.

(1) Description of change. This change

applies to a wireline telecommunications

carrier that is within the scope of Rev.

Proc. 2011-27, 2011-18 I.R.B. 740, and

wants to change its treatment of wireline

network asset expenditures to use either

(a) the wireline network asset maintenance allowance method of accounting,

or (b) all or some of the units of property

described in Rev. Proc. 2011-27.

(2) Section 481(a) adjustment. In general, a change to the wireline network

asset maintenance allowance method of

accounting or to use all or some of the units

of property specified in Rev. Proc. 201127 requires an adjustment under § 481(a).

The § 481(a) adjustment shall not include

any amount attributable to property for

which the taxpayer elected to apply the

repair allowance under § 1.167(a)-11(d)

(2).

(3) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

3.07 is “158.”

(4) Contact information. For further

information regarding a change under this

section, contact Ian Heminsley at (202)

317-5100 (not a toll-free number).

.08 Wireless network asset maintenance allowance and units of property

methods of accounting under Rev. Proc.

2011-28.

(1) Description of change. This change

applies to a wireless telecommunications

carrier that is within the scope of Rev.

Proc. 2011-28, 2011-18 I.R.B. 743, and

wants to change its treatment of wireless

network asset expenditures to use either

Bulletin No. 2023–28

(a) the wireless network asset maintenance allowance method of accounting,

or (b) all or some of the units of property

described in Rev. Proc. 2011-28.

(2) Section 481(a) adjustment. In general, a change to the wireless network

asset maintenance allowance method of

accounting or to use all or some of the units

of property specified in Rev. Proc. 201128 requires an adjustment under § 481(a).

The § 481(a) adjustment does not include

any amount attributable to property for

which the taxpayer elected to apply the

repair allowance under § 1.167(a)-11(d)

(2).

(3) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

3.08 is “159.”

(4) Contact information. For further

information regarding a change under this

section, contact Samuel Terhaar at (202)

317-5100 (not a toll-free number).

.09 Method of accounting under Rev.

Proc. 2011-43 for taxpayers in the business of transporting, delivering, or selling

electricity.

(1) Description of change. This change

applies to a taxpayer that is within the

scope of Rev. Proc. 2011-43, 2011-37

I.R.B. 326, and wants to change its treatment of transmission and distribution

property expenditures to use the method

of accounting described in Rev. Proc.

2011-43.

(2) Section 481(a) adjustment. A taxpayer must take the entire net § 481(a)

adjustment into account (whether positive

or negative) in computing taxable income

for the year of change. The § 481(a)

adjustment does not include any amount

attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)-11(d)(2) for any

taxable year in which the election was

made. For guidance regarding permissible § 481(a) calculation methodologies,

see section 7.02 and Appendix A of Rev.

Proc. 2011-43.

(3) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

3.09 is “160.”

(4) Contact information. For further

information regarding a change under this

1213

section, contact Nathaniel Kupferman at

(202) 317-5100 (not a toll-free number).

.10 Method of accounting under Rev.

Proc. 2013-24 for taxpayers in the business

of generating steam or electric power.

(1) Description of change. This change

applies to a taxpayer that is within the

scope of Rev. Proc. 2013-24, 2013-22

I.R.B. 1142, and wants to change its treatment of generation property expenditures

to use all or some of the unit of property

definitions and the corresponding major

component definitions described in Rev.

Proc. 2013-24.

(2) Section 481(a) adjustment.

(a) A taxpayer must take the entire net

§ 481(a) adjustment into account (whether

positive or negative) in computing taxable

income for the year of change. For guidance regarding the use of extrapolation in

computing a § 481(a) adjustment, see sections 6.02 and Appendix B of Rev. Proc.

2013-24.

(b) A taxpayer changing to this method

of accounting must not include in the

§ 481(a) adjustment any amount attributable to property for which the taxpayer

elected to apply the repair allowance

under § 1.167(a)–11(d)(2) for any taxable

year in which the repair allowance election was made.

(3) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

3.10 is “182.”

(4) Contact information. For further

information regarding a change under

this section, contact Morgan Lawrence at

(202) 317-7011 (not a toll-free number).

.11 Cable network asset capitalization

methods of accounting under Rev. Proc.

2015-12.

(1) Description of change. This change

applies to a cable system operator that is

within the scope of Rev. Proc. 2015-12,

2015-2 I.R.B. 266, and wants to make

one or more of the following changes in

method of accounting:

(a) Change its treatment of cable network asset expenditures to the cable

network asset maintenance allowance

method of accounting provided in section

5 of Rev. Proc. 2015-12;

(b) Change to use any of the unit of

property definitions provided in section 6

of Rev. Proc. 2015-12;

July 10, 2023

customer drop costs described in section

7.01(1) of Rev. Proc. 2015-12;

(d) Change to use the safe harbor

allocation method for installations and

customer drop costs described in section

7.01(2) of Rev. Proc. 2015-12; or

(e) Change to deduct the labor costs

associated with installing customer premises equipment under section 7.02 of Rev.

Proc. 2015-12.

(2) Concurrent automatic change. A

taxpayer that wants to make one or more

changes in method of accounting pursuant to

this section 3.11 and a change to a UNICAP

method under section 12 of this revenue procedure for the same year of change should

file a single Form 3115 that includes all of

these changes and must enter the designated

automatic accounting method change numbers for all of these changes on the appropriate line on the Form 3115. See section

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

(3) Section 481(a) adjustment.

(a) In general, a change to one or more

of the changes in method of accounting

described in section 3.11(1) of this revenue procedure requires an adjustment

under § 481(a). The § 481(a) adjustment

shall not include any amount attributable

to property for which the taxpayer elected

to apply the repair allowance under

§ 1.167(a)-11(d)(2).

(b) Itemized listing on Form 3115. The

taxpayer must include on Form 3115 (Rev.

December 2022), Part IV, line 26, the total

§ 481(a) adjustment for all changes in

methods of accounting being made. If the

taxpayer is making more than one change

in method of accounting under Rev. Proc.

2015-12, the taxpayer must include on an

attachment to Form 3115:

(i) the information required by Part

IV, line 26 for each change in method of

accounting (including the amount of the

§ 481(a) adjustment for each change in

method of accounting, which includes the

portion of the § 481(a) adjustment attributable to UNICAP);

(ii) the information required by Part

II, line 14 of Form 3115 that is associated

with each change; and

(iii) the citation to the paragraph of

Rev. Proc. 2015-12 that provides for each

proposed method of accounting.

July 10, 2023

(4) Designated automatic accounting method change number. The designated automatic accounting method

change number for a change to a method

of accounting provided in section 5 or 6

of Rev. Proc. 2015-12 is “208.” The designated automatic accounting method

change number for a change to a method

of accounting provided in section 7 of

Rev. Proc. 2015-12 is “209.”

(5) Contact information. For further

information regarding a change under this

section, contact Elizabeth Boone at (202)

317-5100 (not a toll-free number).

.12 Natural gas transmission and distribution property method of accounting

under Rev. Proc. 2023-15.

(1) Description of change.

(a) Applicability. This change applies to

a taxpayer that is within the scope of Rev.

Proc. 2023-15 and wants to change its treatment of natural gas transmission and distribution property costs to use the natural

gas transmission and distribution property

safe harbor method of accounting (NGSH

Method) described in Rev. Proc. 2023-15.

Specifically, this change applies to a taxpayer that wants to change to “the safe harbor method for linear property” or “the safe

harbor method for non-linear property” and

other applicable rules in accordance with

Rev. Proc. 2023-15, including the making of a late general asset account election

as required under section 5.08(2) of Rev.

Proc. 2023-15. This change also applies to

a taxpayer that previously changed to the

safe harbor method for linear property and

wants to change to the safe harbor method

for non-linear property for a subsequent

taxable year.

(b) Inapplicability. This change does

not apply to the making of a late general

asset account election other than in accordance with section 5.08(2) of Rev. Proc.

2023-15.

(2) Certain eligibility rules temporarily

inapplicable.

(a) In general. The eligibility rules in

section 5.01(1)(d) and (f) of Rev. Proc.

2015-13 do not apply to a taxpayer that

changes to the NGSH Method provided

in Rev. Proc. 2015-13 for its first, second,

or third taxable year ending after May 1,

2023.

(b) Concurrent automatic change.

(i) If a taxpayer makes both a change

under this section 3.12 and a change under

1214

section 6.12(3)(b) and/or section 6.15 of

this revenue procedure for linear property

and/or non-linear property for its first,

second, or third taxable year ending after

May 1, 2023, on a single Form 3115 for

the same asset for the same year of change

in accordance with section 3.12(6)(b)

of this revenue procedure, the eligibility

rules in section 5.01(1)(d) and (f) of Rev.

Proc. 2015-13 do not apply to the taxpayer

for these changes.

(ii) If a taxpayer makes both a change

under this section 3.12 and a change under

section 11.08, 12.01, 12.02, 12.08, and/or

12.12 of this revenue procedure, as applicable, for its linear property or non-linear

property costs in its first, second, or third

taxable year ending after May 1, 2023, on

a single Form 3115 for the same year of

change in accordance with section 3.12(6)

Rev. Proc. 2015-13 do not apply to the

taxpayer for these changes.

(3) Manner of making change.

(a) Late general asset account election.

(i) The late general asset account election change described in section 5.08(2)

of Rev. Proc. 2023-15 is made using a

modified cut-off method under which

the unadjusted depreciable basis and

the depreciation reserve of the asset as

of the beginning of the year of change

are accounted for using the proposed

method of accounting. The late general

asset account election change requires

each general asset account to include

a beginning balance for both the unadjusted depreciable basis and the depreciation reserve. The beginning balance for

the unadjusted depreciable basis of each

general asset account is equal to the sum

of the unadjusted depreciable bases as of

the beginning of the year of change for

all assets included in that general asset

account. The beginning balance of the

depreciation reserve of each general asset

account is equal to the sum of the greater

of the depreciation allowed or allowable

as of the beginning of the year of change

for all assets included in that general asset

account.

(ii) For the late general asset account

election change described in section

5.08(2) of Rev. Proc. 2023-15, the taxpayer must attach to its Form 3115 a statement providing that the taxpayer agrees

Bulletin No. 2023–28

to the following additional terms and

conditions:

(A) The taxpayer consents to, and

agrees to apply, all the provisions of

§ 1.168(i)-1 to the assets that are subject

to the election specified in section 5.08(2)

of Rev. Proc. 2023-15; and

(B)

Except

provided

§ 1.168(i)-1(c)(1)(ii)(A), (e)(3), (g), or

(h), the election made by the taxpayer

under section 5.08(2) of Rev. Proc. 202315 is irrevocable and will be binding

on the taxpayer for computing taxable

income for the year of change and for all

subsequent taxable years with respect to

the assets that are subject to this election.

(b) Cut-off basis for certain changes.

Except for changes to make a late general

asset account election described in section

3.12(3)(a) of this revenue procedure, a

change to the NGSH Method described in

Rev. Proc. 2023-15 is made on a cut-off

basis and applies only to natural gas transmission and distribution property costs

paid or incurred beginning in or after the

year of change if(i) Sections 5.08(2)(a)(ii) and 6.04 of

Rev. Proc. 2023-15 apply (the taxpayer

changes to the NGSH Method described

in Rev. Proc. 2023-15 for the first, second,

or third taxable year ending after May 1,

2023, on a cut-off basis); or

(ii) Section 5.08(2)(a)(iii) of Rev. Proc.

2023-15 applies (the taxpayer changes to

the NGSH Method described in Rev. Proc.

2023-15 for the fourth taxable year ending

after May 1, 2023, or for any subsequent

taxable year).

described in Rev. Proc. 2023-15 applies

to any asset that is public utility property within the meaning of § 168(i)(10),

the taxpayer must attach a statement to

its Form 3115 agreeing to the following

additional terms and conditions:

(i) A normalization method of accounting (within the meaning of § 168(i)(9))

will be used for the public utility property

subject to the Form 3115;

(ii) As of the beginning of the year

of change, the taxpayer will adjust its

deferred tax reserve account or similar

account in the taxpayer’s regulatory books

of account by the amount of the deferral

of federal income tax liability associated

with the § 481(a) adjustment applicable

Bulletin No. 2023–28

to the public utility property subject to the

Form 3115; and

(iii) Within 30 calendar days of filing

the federal income tax return for the year

of change, the taxpayer will provide a

copy of the completed Form 3115 to any

regulatory body having jurisdiction over

the public utility property subject to the

Form 3115.

(4) Section 481(a) adjustment.

(a) In general. Except as provided in

section 3.12(3)(b) of this revenue procedure, a taxpayer changing its methods of

accounting under this section 3.12 must

take the entire net § 481(a) adjustment

into account, whether positive or negative, in computing taxable income for the

year of change in the manner provided in

section 7.03 of Rev. Proc. 2015-13. The

entire net § 481(a) adjustment includes all

aspects of the NGSH Method described in

Rev. Proc. 2023-15, including a change

to the methods of accounting permitted

under § 1.168(i)-1 pursuant to section

5.08(2) of Rev. Proc. 2023-15. However,

a § 481(a) adjustment is neither required

nor permitted for the late general asset

account election described in section

5.08(2) of Rev. Proc. 2023-15. Further,

a § 481(a) adjustment is neither required

nor permitted if the taxpayer chooses to

change to the NGSH Method on a cutoff basis under section 6.04 of Rev. Proc.

2023-15 or if the taxpayer changes to this

method during the time described in section 5.08(2)(a)(iii) of Rev. Proc. 2023-15.

(b) Repair allowance property. A taxpayer changing its method of accounting

under this section 3.12 must not include

in the § 481(a) adjustment any amount

attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)-11(d)(2) for any

taxable year in which the repair allowance

election was made.

to capitalize repair and maintenance

costs. A taxpayer changing its method of

accounting under this section 3.12 must

not include in the § 481(a) adjustment

any amount attributable to property for

which the taxpayer elected to capitalize repair and maintenance costs under

§ 1.263(a)-3(n) for any taxable year in

which this election was made.

(d) Statistical sampling. A taxpayer

changing to the NGSH Method under this

1215

section 3.12 may use statistical sampling

in determining the § 481(a) adjustment

amount attributable to any single taxable

year by following the guidance provided

in Rev. Proc. 2011-42, 2011-37 I.R.B.

318.

(e) Extrapolation. A taxpayer changing

to the NGSH Method under this section

3.12 may use the extrapolation methodology provided in Appendix B to Rev. Proc.

2023-15 (Appendix B) in determining the

§ 481(a) adjustment amount if the taxpayer is within the scope of section 1.02

of Appendix B. Extrapolation methodologies not permitted in Appendix B are not

permitted under the NGSH Method.

(5) No audit protection for certain taxpayers. If a taxpayer chooses to change

to the NGSH Method described in Rev.

Proc. 2023-15 on a cut-off basis as permitted under section 6.04 of Rev. Proc.

2023-15 or is required to change on a cutoff basis under section 5.08(3)(b)(i) of

Rev. Proc. 2023-15, the taxpayer does not

receive audit protection under section 8.01

of Rev. Proc. 2015-13 in connection with

this change.

(6) Concurrent automatic changes.

(a) A taxpayer making changes under

this section 3.12 for more than one asset

for the same year of change must file a single Form 3115 for all such assets. The single Form 3115 must provide a single net

§ 481(a) adjustment for all such changes.

(b) A taxpayer making changes under

this section 3.12 and changes under section 6.12(3)(b) and/or section 6.15 of this

revenue procedure for linear property or

non-linear property costs for the same

year of change must 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 on the Form 3115. See

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

for information on making concurrent

changes.

this section 3.12 and also making a coordinating change to its linear property or

non-linear property costs under section

11.08, 12.01, 12.02, 12.08, and/or 12.12

of this revenue procedure, as applicable,

must file a single Form 3115 for the same

year of change for all these changes, provided that the taxpayer is not prohibited

from filing an automatic change under

July 10, 2023

the eligibility rules under section 5 of

Rev. Proc. 2015-13. For changes required

to be filed on a single Form 3115 under

this section, the taxpayer must enter the

designated automatic accounting method

change numbers for all changes on the

appropriate line on the Form 3115. See

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

for information on making concurrent

changes.

(d) A taxpayer that changes to a method

of accounting under this section 3.12 for

taxable years ending after the third taxable year ending after May 1, 2023 and

is also required to change its method of

accounting to properly capitalize its linear property or non-linear property costs

under § 263(a) and/or § 263A under section 5.08(3)(b)(ii) of Rev. Proc. 2023-15,

must file a single Form 3115 for the same

year of change for all these changes, provided that the taxpayer is not prohibited

from filing an automatic change under the

eligibility rules set out in section 5 of Rev.

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

changes required to be filed on a single

Form 3115 under this paragraph, the taxpayer must enter the designated automatic

accounting method change numbers for

all changes on the appropriate line on the

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

Proc. 2015-13 for information on making

concurrent changes.

(7) Examples. The following examples

illustrate this section 3.12. In each example, it is assumed that the taxpayer (a) is

a C corporation, on an accrual method of

accounting and using a calendar taxable

year, (b) is within the scope of Rev. Proc.

2023-15, (c) placed in service natural gas

transmission property or distribution property that is described in section 4 of Rev.

Proc. 2023-15 and is MACRS property,

(d) did not make a general asset account

election for any natural gas transmission

property or distribution property placed

in service by the taxpayer in any taxable

year before the first taxable year that the

taxpayer uses the NGSH Method, (e) is

changing its methods of accounting for

both linear property and non-linear property under the NGSH Method for the same

taxable year, and (f) is not changing to the

NGSH Method on a cut-off basis under

section 6.04 of Rev. Proc. 2023-15. Unless

otherwise stated, it also is assumed that (a)

the cost of the replacements before Year

July 10, 2023

1 were not capitalized under § 263(a), (b)

the cost of the replacements before Year 1

would not have been capitalized if the taxpayer used the NGSH Method provided

under sections 5.02, 5.03, 5.04, 5.06, and

5.07 of Rev. Proc. 2023-15 for such prior

taxable years, and (c) the taxpayer’s natural gas transmission and distribution property expenditures are not per se capital

expenditures under section 5.05(1)(a)-(f),

(i), or (j) of Rev. Proc. 2023-15. Further, it

is assumed that § 1.168(i)-1(e)(3) (special

rules for certain dispositions of assets in

general asset accounts) does not apply for

the first taxable year that the taxpayer uses

the NGSH Method. Moreover, for purposes of these examples, “Year 1” refers

to the taxpayer’s first taxable year ending

after May 1, 2023, “Year 2” refers to the

taxpayer’s second taxable year ending

after May 1, 2023, and “Year 4” refers to

the taxpayer’s fourth taxable year ending

after May 1, 2023.

(a) Example 1. (i) X is a local natural gas distribution company. Before Year 1, X owned and placed

in service natural gas distribution property at a cost

of $120 million before any dispositions or additions.

Before Year 1, X replaced parts of such property

that had an original cost of $10 million and incurred

$12 million for the cost of such replacements. On its

Federal income tax returns before Year 1, X recognized losses upon the dispositions of that $10 million

of property, capitalized $12 million for the cost of

the replacements of that property under § 263(a), and

deducted depreciation of $800,000 on such $12 million. X files a Form 3115 with its Federal income tax

return for Year 1 to change its methods of accounting to use the NGSH Method described in Rev. Proc.

2023-15.

(ii) Because Year 1 is X’s first taxable year ending after May 1, 2023, section 5.08(2)(a)(i) and (3)

(a) of Rev. Proc. 2023-15 apply. Pursuant to section

5.08(3)(a) of Rev. Proc. 2023-15, the per se capital

expenditure rules in section 5.05(1)(g) and (h) of

Rev. Proc. 2023-15 do not apply to the replacement

cost of $12 million that X capitalized under § 263(a)

on its Federal income tax returns before Year 1.

Accordingly, this $12 million cost of the replacements is not treated as a per se capital expenditure

under the NGSH Method. Therefore, at the beginning of Year 1, X is treated under Rev. Proc. 202315 as owning natural gas distribution property at a

cost of $110 million ($120 million - $10 million).

Under section 5.08(2)(a)(i) of Rev. Proc. 2023-15, X

must make a late general asset account election on its

Form 3115 to include in general asset accounts all of

the $110 million of natural gas distribution property

that X owns at the beginning of Year 1. These general asset accounts also must include the total depreciation allowed or allowable before the beginning of

Year 1 for such property as the beginning balances

of the depreciation reserves. The late general asset

account election change is made on a modified cutoff method and, therefore, a § 481(a) adjustment is

1216

neither required nor permitted for the late general

asset account election change.

(iii) On its Form 3115 to change to the NGSH

Method provided under Rev. Proc. 2023-15, the

net negative § 481(a) adjustment for this change is

$11,200,000 (deduction of $12 million for the cost

of the replacements before Year 1 less depreciation

of $800,000 for such replacement assets before Year

1) and is deducted in computing X’s taxable income

for Year 1.

(b) Example 2. (i) The facts are the same as in

Example 1, except that X files a Form 3115 with

its Federal income tax return for Year 2 to change

its method of accounting to use the NGSH Method

described in Rev. Proc. 2023-15, and, before Year

2, X deducted depreciation of $1,000,000 on the

replacement cost of $12 million.

(ii) Because X filed its method change in Year

2, the special rule under section 5.08(3)(a) of Rev.

Proc. 2023-15 does not apply to the replacement

cost of $12 million that X capitalized under § 263(a)

on its Federal income tax returns before Year 1.

Accordingly, section 5.05(1)(g) and (h) of Rev. Proc.

2023-15 apply to the replacement cost of $12 million

that X capitalized on its Federal income tax returns

before Year 2. The total cost of $12 million for this

replacement is a per se capital expenditure, and must

be capitalized, under the NGSH Method.

(iii) At the beginning of Year 2, X is treated

under the NGSH Method as owning natural gas distribution property at a cost of $122 million ($120

million - $10 million + $12 million). Under section

5.08(2)(a)(i) of Rev. Proc. 2023-15, X must make a

late general asset account election on its Form 3115

to include in general asset accounts all of the $122

million of natural gas distribution property that

X owns at the beginning of Year 2. These general

asset accounts also must include the total depreciation allowed or allowable before the beginning of

Year 2 for such property as the beginning balances

of the depreciation reserves. The late general asset

account election change is made on a modified cutoff method and, therefore, a § 481(a) adjustment is

neither required nor permitted for the late general

asset account election.

(iv) On its Form 3115 to change to the NGSH

Method under Rev. Proc. 2023-15, the net § 481(a)

adjustment for this change is zero. Under its present

method of accounting and under the NGSH Method

(proposed method of accounting), X properly capitalized the $12 million for the cost of the replacements

before Year 1 and claimed depreciation for such

replacement assets before Year 2.

in service natural gas distribution property at a cost

of $120 million before any dispositions or additions.

Before Year 1, Y replaced parts of such property

that had an original cost of $10 million and incurred

$12 million for the cost of such replacements. On its

Federal income tax returns before Year 1, Y recognized losses upon the dispositions of that $10 million

of property, and deducted $12 million for the cost

of the replacements of such property under § 162(a).

During Year 1, Y replaced a part of the natural gas

distribution property that had an original cost of $2

million and incurred $3 million for the cost of such

replacements. If Y had capitalized the $15 million for

Bulletin No. 2023–28

the cost of the replacements, the total depreciation

allowed or allowable for these assets would have

been $1 million before Year 2. On its Federal income

tax return for Year 1, Y recognized a loss upon the

disposition of that $2 million of property, and

deducted $3 million for the cost of the replacements

under § 162(a). Y files a Form 3115 with its Federal

income tax return for Year 2 to change its method

of accounting to use the NGSH Method described in

Rev. Proc. 2013-15.

(ii) Because Y filed its method change for Year

2, section 5.08(2)(a)(i) of Rev. Proc. 2023-15 applies

to this change. However, the special rule under section 5.08(3)(a) of Rev. Proc. 2023-15 would apply

only if Y had filed its method change for Year 1.

Accordingly, section 5.05(1)(g) and (h) of Rev. Proc.

2023-15 apply to the replacement cost of $12 million

that Y deducted under § 162(a) on its Federal income

tax returns before Year 1, and to the replacement cost

of $3 million that Y deducted under § 162(a) on its

Federal income tax return for Year 1. Therefore, the

total cost of $15 million for these replacements is a

per se capital expenditure, and must be capitalized,

under the NGSH Method.

(iii) At the beginning of Year 2, Y is treated under

Rev. Proc. 2023-15 as owning natural gas distribution property at a cost of $123 million ($120 million $10 million + $12 million - $2 million + $3 million).

Under section 5.08(2)(a)(i) of Rev. Proc. 2023-15, Y

must make a late general asset account election on its

Form 3115 to include in general asset accounts all of

the $123 million of natural gas distribution property

that Y owns at the beginning of Year 2. These general

asset accounts also must include the total depreciation allowed or allowable before the beginning of

Year 2 for such property as the beginning balances

of the depreciation reserves. The late general asset

account election change is made on a modified cutoff method and, therefore, a § 481(a) adjustment is

neither required nor permitted for the late general

asset account election.

(iv) On its Form 3115 to change to the NGSH

Method of Rev. Proc. 2023-15, the net positive

§ 481(a) adjustment for this change is $14 million

($15 million for the cost of the replacements before

Year 2 less depreciation allowed or allowable of $1

million for such replacement assets before Year 2)

and is taken into account in computing Y’s income

in the manner provided in section 3.12(4)(a) of this

revenue procedure.

(d) Example 4. (i) Z is a local natural gas distribution company. Before Year 4, Z owned and placed

in service natural gas distribution property at a cost

of $150 million before any dispositions or additions.

Before Year 4, Z replaced parts of such property

that had an original cost of $30 million and incurred

$45 million for the cost of such replacements. On its

Federal income tax returns before Year 4, Z recognized losses upon the dispositions of that $30 million of property, capitalized $45 million for the cost

of the replacements under § 263(a), and deducted

depreciation of $15 million on such $45 million. Z

files a Form 3115 with its Federal income tax return

for Year 4 to change its method of accounting to use

the NGSH Method described in Rev. Proc. 2013-15.

Assume Z is eligible to file Form 3115 for Year 4

under the automatic change procedures in Rev. Proc.

2015-13.

Bulletin No. 2023–28

(ii) At the beginning of Year 4, Z owns natural

gas distribution property at a cost of $165 million

($150 million - $30 million + $45 million). Because

Year 4 is Z’s fourth taxable year ending after May 1,

2023, sections 5.08(2)(a)(iii) and 5.08(3)(b) of Rev.

Proc. 2023-15 apply. Accordingly, under section

5.08(2)(a)(iii) of Rev. Proc. 2023-15, Z must make

a late general asset account election on its Form

3115 to include in general asset accounts all of the

$165 million of natural gas distribution property that

Z owns at the beginning of Year 4. These general

asset accounts also must include the total depreciation allowed or allowable before the beginning of

Year 4 for such property as the beginning balances

of the depreciation reserves. The late general asset

account election change is made using a modified

cut-off method and, therefore, a § 481(a) adjustment

is neither permitted nor required for the late general

asset account election.

(iii) Because sections 5.08(2)(a)(iii) and 5.08(3)

(b) of Rev. Proc. 2023-15 apply, Z’s change to the

NGSH Method described in Rev. Proc. 2023-15,

applies only to natural gas transmission and distribution property expenditures paid or incurred by Z

beginning in Year 4 and is made on a cut-off basis.

Therefore, a § 481(a) adjustment is neither required

nor permitted for the change to the NGSH Method

described in Rev. Proc. 2023-15.

(e) Example 5. (i) The facts are the same as

in Example 4, except that, on its Federal income

tax returns before Year 4, Z improperly deducted

$45 million for the cost of the replacements under

§ 162(a). Such $45 million of replacement costs

should have been capitalized under § 263(a). If Z

had capitalized the $45 million for the cost of the

replacements, the total depreciation allowed or

allowable for such assets would have been $15 million before Year 4.

(ii) Because Year 4 is Z’s fourth taxable year

ending after May 1, 2023, sections 5.08(2)(a)(iii) and

5.08(3)(b) of Rev. Proc. 2023-15 apply. Pursuant to

section 5.08(3)(b) of Rev. Proc. 2023-15, Z must also

change its method of accounting to capitalize under

§ 263(a) the $45 million for the cost of the replacements incurred before Year 4. The net positive

§ 481(a) adjustment for this coordinating change is

$30 million ($45 million for the cost of the replacements before Year 4 less depreciation allowed or

allowable of $15 million for such replacement assets

before Year 4). Z takes this net positive § 481(a)

adjustment of $30 million into account in computing

Z’s taxable income in the manner provided in section

3.12(4)(a) of this revenue procedure.

(iii) Z owns natural gas distribution property at

a cost of $165 million ($150 million - $30 million +

$45 million) at the beginning of Year 4. Accordingly,

Z must make a late general asset account election on

its Form 3115 to include in general asset accounts

all of the $165 million of natural gas distribution

property that Z owns at the beginning of Year 4.

These general asset accounts also must include the

total depreciation allowed or allowable before the

beginning of Year 4 for such property as the beginning balances of the depreciation reserves. The late

general asset account election change is made using

a modified cut-off method and, therefore, a § 481(a)

adjustment is neither permitted nor required for the

late general asset account election.

1217

(iv) Because sections 5.08(2)(a)(iii) and 5.08(3)

(b) of Rev. Proc. 2023-15 apply, Z’s change to

the NGSH Method provided under sections 5.02,

5.03, 5.04, 5.06, and 5.07 of Rev. Proc. 2023-15,

applies only to natural gas transmission and distribution property expenditures paid or incurred by Z

beginning in Year 4 and is made on a cut-off basis.

Therefore, a § 481(a) adjustment is neither required

nor permitted for the change to the NGSH Method

described in Rev. Proc. 2023-15.

(v) Pursuant to section 3.12(6)(c) and section

5.08(3)(b) of Rev. Proc. 2023-15 the change to

capitalize the replacement costs of $45 million, the

late general asset account election change, and the

change to use the NGSH Method provided under

Rev. Proc. 2023-15 must be included on the same

Form 3115 filed by Z for Year 4.

(8) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change to the methods of

accounting under this section 3.12 is

“269.”

(9) Contact information. For further

information regarding a change under this

section, contact Hyowon Lee or Merrill

Feldstein at (202) 317-5100 (not a tollfree number).

SECTION 4. BAD DEBTS (§ 166)

.01 Change from reserve method to

specific charge-off method.

(1) Description of change. This change

applies to a taxpayer (other than a bank

as defined in § 585(a)(2)) that wants to

change its method of accounting for bad

debts from a reserve method (or other

improper method) to a specific charge-off

method that complies with § 166. For procedures applicable to banks, see § 585(c)

and the regulations thereunder and section

25 of this revenue procedure.

(2) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

4.01 is “5.”

(3) Contact information. For further

information regarding a change under this

section, contact Renay France at (202)

317-7003 (not a toll-free number).

.02 Conformity election by bank after

previous election automatically revoked.

(1) Description of change. This change

applies to a bank that wants to change

its method of accounting for bad debts

by making the conformity election under

§ 1.166‑2(d)(3)(iii)(C)(3).

July 10, 2023

(2) Applicability. This change

only applies to a bank (as defined in

§ 1.166‑2(d)(4)(i)) that:

(a) is subject to supervision by Federal

authorities, or by state authorities maintaining substantially equivalent standards;

(b) has previously adopted or elected

to change to the method of accounting for

bad debts described in § 1.166-2(d)(3);

(iv)(C);

(d) meets the express determination

requirement of § 1.166‑2(d)(3)(iii)(D) for

the year of change; and

(e) now seeks the consent of the

Commissioner to make an election under

§ 1.166‑2(d)(3)(iii)(C)(3).

(3) Certain 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 this change.

(4) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

4.02 is “211.”

(5) Contact information. For further

information regarding a change under this

section, contact K. Scott Brown at (202)

317-6945 (not a toll-free number).

SECTION 5. INTEREST EXPENSE

(§163) AND AMORTIZABLE BOND

PREMIUM (§ 171)

.01 Revocation of § 171(c) election.

(1) Description of change. This change

applies to a taxpayer that wants to change its

method of accounting for amortizable bond

premium by revoking its § 171(c) election.

Under § 171(c), a taxpayer that holds certain taxable bonds may elect to amortize any

bond premium on the bonds in accordance

with regulations prescribed by the Secretary.

Sections 1.171-1 through 1.171-5 provide

rules relating to the amortization of bond

premium by a taxpayer. Section 1.171-4

provides the procedures to make a § 171(c)

election to amortize bond premium.

(2) Revocation of election. The revocation of a § 171(c) election applies to all

taxable bonds that are held by the taxpayer

on the first day of the first taxable year for

which the revocation is effective (year of

change), and to all taxable bonds that are

subsequently acquired by the taxpayer.

July 10, 2023

(3) Manner of making change. This

change is made using a cut-off basis and

applies only to taxable bonds held on or

after the beginning of the year of change.

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

Under the cut-off basis, for taxable

bonds held at the beginning of the year

of change, the taxpayer may not amortize any remaining bond premium on the

bonds. Because the cut-off basis is prescribed for this change, the basis of any

bond, adjusted for amounts previously

amortized during the period of the election, is not affected by the revocation.

(4) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

5.01 is “16.”

(5) Additional requirements. On a

statement attached to the Form 3115, the

taxpayer must provide:

(a) the reason(s) for revoking the election; and

(b) a description of the method by

which, and the date on which, the taxpayer made the § 171(c) election that is

proposed to be revoked.

(6) Audit protection. Any audit protection applicable to this change under section

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

419, does not preclude the Commissioner

from examining the method used by the

taxpayer to determine the amount of amortizable bond premium under § 171(b) for

a taxable year prior to the year of change.

(7) Contact information. For further

information regarding a change under this

section, contact William E. Blanchard at

(202) 317-3900 (not a toll-free number).

.02 Change to comply with § 163(e)(3).

(1) Description of change. This change

applies to a taxpayer that wants to change

its method or methods of accounting to

comply with the requirements of § 163(e)

(3), which defers certain deductions

attributable to original issue discount debt

instruments held by related foreign persons. Any portion of the original issue discount will not be allowable as a deduction

to the U.S. person issuer until paid.

(2) Accelerated § 481(a) adjustment

period in certain situations. In addition

to the circumstances set forth in section

7.03(4) of Rev. Proc. 2015-13, 2015-5

I.R.B. 419, the § 481 adjustment period

1218

provided in section 7.03 of Rev. Proc.

2015-13 will be accelerated for a U.S. person with a remaining balance of a § 481(a)

adjustment that arose by reason of a

change in method of accounting described

in this section 5.02 if a debt instrument

subject to the change is paid off, retired,

or significantly modified within the meaning of § 1.1001-3 prior to the end of the

§ 481(a) adjustment period. The portion

of the remaining § 481(a) adjustment

attributable to the debt instrument must

be taken into account in the taxable year

the debt instrument is paid off, retired, or

significantly modified within the meaning

of § 1.1001-3.

(3) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

5.02 is “212.”

(4) Contact information. For further

information regarding a change under

this section, contact Anisa Afshar at (202)

317-6934 (not a toll-free number).

SECTION 6. DEPRECIATION OR

AMORTIZATION (§ 56(a)(1), 167, 168,

197, 280F(a), or 1502, OR FORMER

§ 56(g)(4)(A), 168, 1400I, 1400L, or

1400N(d))

.01 Impermissible to permissible

method of accounting for depreciation or

amortization.

(1) Description of change.

(a) Applicability. This change applies

to a taxpayer that wants to change from an

impermissible to a permissible method of

accounting for depreciation or amortization (depreciation) for any item of depreciable or amortizable property under the

taxpayer’s present or proposed method of

accounting:

(i) for which the taxpayer used the

impermissible method of accounting in at

least two taxable years immediately preceding the year of change (but see section

6.01(1)(b) of this revenue procedure for

property placed in service in the taxable

year immediately preceding the year of

change);

(ii) for which the taxpayer is making

a change in method of accounting under

§ 1.446-1(e)(2)(ii)(d);

(iii) for which depreciation is determined under § 56(a)(1), § 56(g)(4)(A)

Bulletin No. 2023–28

(as in effect on the day before the date

of enactment of Public Law 115-97, 131

Stat. 2054 (Dec. 22, 2017), commonly

referred to as the Tax Cuts and Jobs Act

(TCJA)), § 167, § 168, § 197, § 1400I,

or § 1400L(c), under § 168 prior to its

amendment in 1986 (former § 168), or

under any additional first year depreciation deduction provision of the Code (for

example, § 168(k), § 168(l), § 1400L(b),

or § 1400N(d)); and

(iv) that is owned by the taxpayer at

the beginning of the year of change (but

see section 6.07 of this revenue procedure

for property disposed of before the year of

change).

(b) Taxpayer has not adopted a method

of accounting for the item of property. If a

taxpayer does not satisfy section 6.01(1)

(a)(i) of this revenue procedure for an item

of depreciable or amortizable property

because this item of property is placed in

service by the taxpayer in the taxable year

immediately preceding the year of change

(“1-year depreciable property”), the taxpayer may change from the impermissible

method of determining depreciation to the

permissible method of determining depreciation for the 1-year depreciable property

by filing a Form 3115 for this change,

provided the § 481(a) adjustment reported

on the Form 3115 includes the amount of

any adjustment that is attributable to all

property (including the 1-year depreciable property) subject to the Form 3115.

Alternatively, the taxpayer may change

from the impermissible method of determining depreciation to the permissible

method of determining depreciation for

a 1-year depreciable property by filing an

amended federal income tax return, or an

administrative adjustment request under

§ 6227 (AAR), as applicable, for the property’s placed-in-service year prior to the

date the taxpayer files its federal income

tax return for the taxable year succeeding

the placed-in-service year.

not apply to:

(i) any property to which § 1016(a)(3)

(regarding property held by a tax-exempt

organization) applies;

(ii) a taxpayer that is required under

§ 263A and the regulations thereunder to

capitalize the costs with respect to which

the taxpayer wants to change its method

of accounting under this section 6.01 if

Bulletin No. 2023–28

the taxpayer is not capitalizing these costs,

unless the taxpayer concurrently changes

its method to capitalize these costs in

conjunction with a change to a UNICAP

method under section 12.01, 12.02, 12.08,

or 12.12 of this revenue procedure (as

applicable);

(iii) any property for which a taxpayer

is making a change in depreciation under

§ 1.446-1(e)(2)(ii)(d)(2)(vi) or (vii);

(iv) any property subject to § 167(g)

regarding property depreciated under the

income forecast method;

(v) any § 1250 property that a taxpayer

is reclassifying to an asset class of Rev.

Proc. 87-56, 1987-2 C.B. 674 (as clarified and modified by Rev. Proc. 88-22,

1988-1 C.B. 785), or Rev. Proc. 83-35,

1983-1 C.B. 745, as appropriate, that does

not explicitly include § 1250 property (for

example, asset class 57.0, Distributive

Trades and Services);

(vi) any property for which a taxpayer is revoking a timely valid election,

or making a late election, under § 167,

§ 168, § 179, § 1400I, § 1400L(c), former

§ 168, § 13261(g)(2) or (3) of the Revenue

Reconciliation Act of 1993 (1993 Act),

1993-3 C.B. 1, 128 (relating to amortizable § 197 intangibles), or any additional

first year depreciation deduction provision of the Code (for example, § 168(k),

§ 168(l), § 1400L(b), or § 1400N(d)). A

taxpayer may request consent to revoke or

make the election by submitting a request

for a letter ruling under Rev. Proc. 2023-1,

2023-1 I.R.B. 1 (or successor). However,

if a taxpayer is revoking or making an

election under § 179, see § 179(c) and

§ 1.179-5. See § 1.446-1(e)(2)(ii)(d)(3)

(iii);

(vii) any property for which depreciation is determined under § 56(g)(4)(A)

(as in effect on the day before the date of

enactment of the TCJA) or § 167 (other

than under § 168, § 1400I, § 1400L(c),

former § 168, or any additional first year

depreciation deduction provision of the

Code (for example, § 168(k), § 168(l),

§ 1400L(b), or § 1400N(d))) and a taxpayer

is changing the useful life of the property.

A change in the useful life of property is

corrected by adjustments in the applicable

taxable year provided under § 1.446-1(e)

(2)(ii)(d)(5)(iv). However, this section

6.01(1)(c)(vii) does not apply if the taxpayer is changing to or from a useful life,

1219

recovery period, or amortization period

that is specifically assigned by the Code

(for example, § 167(f)(1), § 168(c)), the

regulations thereunder, or other guidance

published in the Internal Revenue Bulletin

and, therefore, this change is a change

in method of accounting (unless section

6.01(1)(c)(xv) of this revenue procedure

applies). See § 1.446-1(e)(2)(ii)(d)(3)(i);

(viii) any depreciable property for

which the use changes in the hands of the

same taxpayer. See § 1.446-1(e)(2)(ii)(d)

(3)(ii). But see sections 6.04 and 6.05 of

this revenue procedure for changing to

the methods of accounting provided in

§ 1.168(i)-1(c)(2)(ii)(I) or § 1.168(i)-1(h)

(2), and § 1.168(i)-4, respectively;

(ix) any property for which depreciation is determined in accordance

with § 1.167(a)-11 (regarding the Class

Life Asset Depreciation Range System

(ADR));

(x) any change in method of accounting involving a change from deducting the

cost or other basis of any property as an

expense to capitalizing and depreciating

the cost or other basis, or vice versa (but

see section 11.08 of this revenue procedure for making such a change in method

of accounting under the final tangible

property regulations);

(xi) any change in method of accounting involving a change from one permissible method of accounting for the property

to another permissible method of accounting for the property. For example:

(A) a change from the straight-line

method of depreciation to the income

forecast method of depreciating for videocassettes. See Rev. Rul. 89-62, 1989-1

C.B. 78; or

(B) a change from charging the depreciation reserve with costs of removal and

crediting the depreciation reserve with

salvage proceeds to deducting costs of

removal as an expense (provided the costs

of removal are not required to be capitalized under any provision of the Code,

such as § 263(a)) and including salvage

proceeds in taxable income (see section

6.02 of this revenue procedure for making

this change for property for which depreciation is determined under § 167);

(xii) any change in method of accounting involving both a change from treating the cost or other basis of the property

as nondepreciable or nonamortizable

July 10, 2023

property to treating the cost or other basis

of the property as depreciable or amortizable property and the adoption of a method

of accounting for depreciation requiring

an election under § 167, § 168, § 1400I,

§ 1400L(c), former § 168, § 13261(g)(2)

or (3) of the 1993 Act, or any additional

first year depreciation deduction provision of the Code (for example, § 168(k),

§ 168(l), § 1400L(b), or § 1400N(d)) (for

example, a change in the treatment of

the space consumed in landfills placed in

service in 2006 from nondepreciable to

depreciable property (assuming section

6.01(1)(c)(xiii) of this revenue procedure

does not apply) and the making of an

election under § 168(f)(1) to depreciate

this property under the unit-of-production

method of depreciation under § 167);

(xiii) any change in method of accounting for any item of income or deduction

other than depreciation, even if the change

results in a change in computing depreciation under § 1.446-1(e)(2)(ii)(d)(2)(i),

(ii), (iii), (iv), (v), (vi), (vii), or (viii). For

example, a change in method of accounting involving:

(A) a change in inventory costs (for

example, when property is reclassified

from inventory property to depreciable

property, or vice versa) (but see section

11.02 of this revenue procedure for making a change in method of accounting

from inventory property to depreciable

property for unrecoverable line pack gas

or unrecoverable cushion gas, and section 11.06 of this revenue procedure for

making a change in method of accounting

from inventory property to depreciable

property for rotable spare parts); or

(B) a change in the character of a transaction from sale to lease, or vice versa (but

see section 6.03 of this revenue procedure

for making this change);

(xiv) a change from determining

depreciation under § 168 to determining

depreciation under former § 168 for any

property subject to the transition rules in

§ 203(b) or § 204(a) of the Tax Reform

Act of 1986, 1986-3 (Vol. 1) C.B. 1,

60-80;

(xv) any change in the placed-in-service date of a depreciable or amortizable

property. This change is corrected by

adjustments in the applicable taxable year

provided under § 1.446-1(e)(2)(ii)(d)(5)

(v);

July 10, 2023

(xvi) any property for which the taxpayer has claimed a federal income tax

credit (e.g., the rehabilitation credit under

§ 47), unless the change does not alter the

amount of the federal income tax credit;

(xvii) any qualified improvement property, as defined in § 168(e)(6), placed in

service by the taxpayer after December

31, 2017, to which section 6.18 of this

revenue procedure applies;

(xviii) any property to which section

4 or 5 of Rev. Proc. 2020-22, 2020-18

I.R.B. 745, applies. (See sections 4.02

and 4.03, or 5.02 of Rev. Proc. 2020-22,

as applicable, for making any changes to

depreciation for such property.);

(xix) any change in method of accounting to which section 6.20 of this revenue

procedure applies; or

(xx) the change in method of accounting specified in section 6.21 of this revenue procedure. However, an original

Form 3115 for such change in method of

accounting may be filed under this section 6.01 instead of section 6.21 of this

revenue procedure if the duplicate copy

was properly filed under this section 6.01

before May 11, 2021.

(2) Certain eligibility rules inapplicable. The eligibility rule in section 5.01(1)

(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.

419, does not apply to this change. If

during any of the five taxable years ending with the year of change, a taxpayer

requested or made a change in method of

accounting from expensing to capitalizing, or vice versa, the cost or other basis

of an asset, the eligibility rule in section

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

applicable to a change under this section

6.01 for that same asset.

(3) Additional requirements. A

taxpayer also must comply with the

following:

(a) Permissible method of accounting

for depreciation. A taxpayer must change

to a permissible method of accounting for

depreciation for the item of depreciable

or amortizable property. The permissible

method of accounting is the same method

that determines the depreciation allowable

for the item of property (as provided in

section 6.01(7) of this revenue procedure).

(b) Statements required. A taxpayer

(including a qualified small taxpayer as

defined in section 6.01(4)(b) of this revenue procedure) must provide the following

1220

statements, if applicable, and attach them

to the completed Form 3115:

(i) a detailed description of the present

and proposed methods of accounting. A

general description of these methods of

accounting is unacceptable (for example,

MACRS to MACRS, erroneous method

to proper method, claiming less than the

depreciation allowable to claiming the

depreciation allowable);

(ii) to the extent not provided elsewhere on the Form 3115, a statement

describing the taxpayer’s business or

income-producing activities. Also, if the

taxpayer has more than one business or

income-producing activity, a statement

describing the taxpayer’s business or

income-producing activity in which the

item of property at issue is primarily used

by the taxpayer;

(iii) to the extent not provided elsewhere on the Form 3115, a statement of

the facts and law supporting the proposed

method of accounting, new classification

of the item of property, and new asset

class in, as appropriate, Rev. Proc. 87-56

or Rev. Proc. 83-35. If the taxpayer is the

owner and lessor of the item of property

at issue, the statement of the facts and law

supporting the new asset class also must

describe the business or income-producing activity in which that item of property

is primarily used by the lessee;

(iv) to the extent not provided elsewhere on the Form 3115, a statement

identifying the year in which the item

of property was placed in service by the

taxpayer;

(v) if any item of property is public

utility property within the meaning of

§ 168(i)(10) or former § 167(i)(3)(A),

as applicable, a statement providing that

the taxpayer agrees to the following additional terms and conditions:

(A) a normalization method of accounting (within the meaning of former § 167(i)

(3)(G), former § 168(e)(3)(B), or § 168(i)

(9), as applicable) will be used for the

public utility property subject to the Form

3115;

(B) as of the beginning of the year

of change, the taxpayer will adjust its

deferred tax reserve account or similar

reserve account in the taxpayer’s regulatory books of account by the amount of

the deferral of federal income tax liability

associated with the § 481(a) adjustment

Bulletin No. 2023–28

applicable to the public utility property

subject to the Form 3115; and

the federal income tax return for the year

of change, the taxpayer will provide a

copy of the completed Form 3115 to any

regulatory body having jurisdiction over

the public utility property subject to the

Form 3115;

(vi) if the taxpayer is changing the classification of an item of § 1250 property

placed in service after August 19, 1996, to

a retail motor fuels outlet under § 168(e)

(3)(E)(iii), a statement containing the following representation: “For purposes of

§ 168(e)(3)(E)(iii) of the Internal Revenue

Code, the taxpayer represents that (A) 50

percent or more of the gross revenue generated from the item of § 1250 property is

from the sale of petroleum products (not

including gross revenue from related services, such as the labor cost of oil changes

and gross revenue from the sale of nonpetroleum products such as tires and oil

filters), (B) 50 percent or more of the floor

space in the item of property is devoted

to the sale of petroleum products (not

including floor space devoted to related

services, such as oil changes and floor

space devoted to nonpetroleum products

such as tires and oil filters), or (C) the item

of § 1250 property is 1,400 square feet or

less.”; and

(vii) if the taxpayer is changing the

classification of an item of property from

§ 1250 property to § 1245 property under

§ 168 or former § 168, a statement of the

facts and law supporting the new § 1245

property classification, and a statement

containing the following representation:

“Each item of depreciable property that is

the subject of the Form 3115 filed under

section 6.01 of Rev. Proc. 2023-24 for

the year of change beginning [Insert the

date], and that is reclassified from [Insert,

as appropriate: nonresidential real property, residential rental property, qualified

leasehold improvement property, qualified restaurant property, qualified retail

improvement property, qualified improvement property as defined in § 168(e)(6)

(as amended by § 13204 of the TCJA),

19-year real property, 18-year real property, or 15-year real property] to an asset

class of [Insert, as appropriate, either:

Rev. Proc. 87-56, 1987-2 C.B. 674, or

Rev. Proc. 83-35, 1983-1 C.B. 745] that

Bulletin No. 2023–28

does not explicitly include § 1250 property, is § 1245 property for depreciation

purposes.”

(4) Reduced filing requirement for

qualified small taxpayers.

(a) In general. A qualified small taxpayer, as defined in section 6.01(4)(b)

of this revenue procedure, is required to

complete only the following information

on Form 3115 (Rev. December 2022) to

make this change:

(i) The identification section of page 1

(above Part I);

(ii) The signature section at the bottom

of page 1;

(iii) Part I;

(iv) Part II, all lines except lines 13,

15b, 16c, 17, and 19;

(v) Part IV, all lines except line 25; and

(vi) Schedule E.

(b) Definition of qualified small taxpayer. A “qualified small taxpayer”

is a taxpayer whose average annual

gross receipts, as determined under

§ 1.263(a)-3(h)(3), for the three preceding taxable years is less than or equal to

$10,000,000.

(5) Section 481(a) adjustment.

Because the adjusted basis of the property is changed as a result of a method

change made under this section 6.01 (see

section 6.01(6) of this revenue procedure), items are duplicated or omitted.

Accordingly, this change is made with

a § 481(a) adjustment. This adjustment

may result in either a negative § 481(a)

adjustment (a decrease in taxable income)

or a positive § 481(a) adjustment (an

increase in taxable income) and may be

a different amount for regular tax, alternative minimum tax, and adjusted current

earnings purposes. This § 481(a) adjustment equals the difference between the

total amount of depreciation taken into

account in computing taxable income

for the property under the taxpayer’s

present method of accounting (including

the amount attributable to any property

described in section 6.01(1)(b) of this

revenue procedure that is included in

the taxpayer’s Form 3115), and the total

amount of depreciation allowable for the

property under the taxpayer’s proposed

method of accounting (as determined

under section 6.01(7) of this revenue procedure, and including the amount attributable to any property described in section

1221

6.01(1)(b) of this revenue procedure that

is included in the taxpayer’s Form 3115),

for open and closed years prior to the

year of change. However, the amount of

the § 481(a) adjustment must be adjusted

to account for the proper amount of the

depreciation allowable that is required to

be capitalized under any provision of the

Code (for example, § 263A) at the beginning of the year of change.

(6) Basis adjustment. As of the beginning of the year of change, the basis of

depreciable property to which this section

6.01 applies must reflect the reductions

required by § 1016(a)(2) for the depreciation allowable for the property (as

determined under section 6.01(7) of this

revenue procedure).

(7) Meaning of depreciation allowable.

(a) In general. Section 6.01(7) of this

revenue procedure provides the amount

of the depreciation allowable determined

under § 56(a)(1), § 56(g)(4)(A) (as in

effect on the day before the date of enactment of the TCJA), § 167, § 168, or § 197,

or former § 168, § 1400I, or § 1400L(c).

This amount, however, may be limited by

other provisions of the Code (for example,

§ 280F).

(b) Section 56(a)(1) property. The

depreciation allowable for any taxable

year for property for which depreciation is

determined under § 56(a)(1) is determined

by using the depreciation method, recovery period, and convention provided for

under § 56(a)(1) that applies for the property’s placed-in-service date.

depreciation allowable for any taxable

year for property for which depreciation

is determined under § 56(g)(4)(A) (as in

effect on the day before the date of enactment of the TCJA) is determined by using

the depreciation method, recovery period

or useful life, as applicable, and convention provided for under § 56(g)(4)(A)

(as in effect on the day before the date of

enactment of the TCJA) that applies for

the property’s placed-in-service date.

(d) Section 167 property. Generally,

for any taxable year, the depreciation

allowable for property for which depreciation is determined under § 167, is determined either:

(i) under the depreciation method

adopted by the taxpayer for the property;

July 10, 2023

(ii) if that depreciation method does not

result in a reasonable allowance for depreciation or the taxpayer has not adopted

a depreciation method for the property, under the straight-line depreciation

method.

For determining the estimated useful

life and salvage value of the property, see

§ 1.167(a)-1(b) and (c), respectively.

The depreciation allowable for any taxable year for property subject to § 167(f)

(regarding certain property excluded from

§ 197) is determined by using the depreciation method and useful life prescribed

in § 167(f). If computer software is depreciated under § 167(f)(1) and is qualified

property (as defined in § 168(k)(2) as

amended by the TCJA and § 1.168(k)-2),

qualified property (as defined in § 168(k)

(2) as in effect on the day before the date

of enactment of the TCJA and § 1.168(k)1), 50-percent bonus depreciation property (as defined in § 168(k)(4) (as in effect

on the day before the date of enactment of

the Economic Stimulus Act of 2008, Pub.

L. No. 110-185, 122 Stat. 613 (February

13, 2008)) and § 1.168(k)-1), qualified

disaster assistance property (as defined in

§ 168(n)(2) (as in effect on the day before

the date of enactment of the Tax Technical

Corrections Act of 2018, Pub. L. No.

115-141, Division U, 132 Stat. 1211

(March 23, 2018)), qualified New York

Liberty Zone (Liberty Zone) property

(as defined in § 1400L(b)(2) (as in effect

on the day before the date of enactment

of the Tax Technical Corrections Act of

2018) and § 1.1400L(b)-1), qualified Gulf

Opportunity Zone (GO Zone) property

(as defined in § 1400N(d)(2) (as in effect

on the day before the date of enactment

of the Tax Technical Corrections Act

of 2018) and sections 2.02 and 2.03 of

Notice 2006-77, 2006-2 C.B. 590, as clarified, modified, and amplified by Notice

2007-36, 2007-1 C.B. 1000), specified

Gulf Opportunity Zone extension property (GO Zone extension property) (as

defined in § 1400N(d)(6) (as in effect

on the day before the date of enactment

of the Tax Technical Corrections Act of

2018) and section 4 of Notice 2007-36),

or qualified Recovery Assistance (RA)

property (as defined in sections 2.02 and

2.03 of Notice 2008-67, 2008-32 I.R.B.

307), the depreciation allowable for that

computer software under § 167(f)(1) is

July 10, 2023

also determined by taking into account the

additional first year depreciation deduction provided by § 168(k), § 168(n) (as in

effect on the day before the date of enactment of the Tax Technical Corrections

Act of 2018), § 1400L(b) (as in effect on

the day before the date of enactment of the

Tax Technical Corrections Act of 2018),

or § 1400N(d) (as in effect on the day

before the date of enactment of the Tax

Technical Corrections Act of 2018), or

by § 15345(a)(1) and (d)(1) of the Food,

Conservation, and Energy Act of 2008,

Pub. L. No. 110-246, 122 Stat. 1651 (June

18, 2008), as applicable, unless the taxpayer made a timely valid election not to

deduct any additional first year depreciation for the computer software.

(e) Section 168 property. The depreciation allowable for any taxable year

for property for which depreciation is

determined under § 168, is determined as

follows:

(i) by using either:

(A) the general depreciation system in

§ 168(a); or

(B) the alternative depreciation system in § 168(g) if the property is required

to be depreciated under the alternative

depreciation system pursuant to § 168(g)

(1) or other provisions of the Code (for

example, property described in § 263A(e)

(2)(A) or § 280F(b)(1)). Property required

to be depreciated under the alternative

depreciation system pursuant to § 168(g)

(1) includes property in a class (as set out

in § 168(e)) for which the taxpayer made

a timely valid election under § 168(g)(7);

(ii) if the property is qualified property,

50-percent bonus depreciation property,

qualified disaster assistance property,

Liberty Zone property, GO Zone property, GO Zone extension property, or RA

property, by also taking into account the

additional first year depreciation deduction provided by § 168(k), § 168(n) (as in

effect on the day before the date of enactment of the Tax Technical Corrections

Act of 2018), § 1400L(b) (as in effect

on the day before the date of enactment

of the Tax Technical Corrections Act of

2018), or § 1400N(d) (as in effect on the

day before the date of enactment of the

Tax Technical Corrections Act of 2018),

or by § 15345(a)(1) and (d)(1) of the

Food, Conservation, and Energy Act of

2008, as applicable, unless the taxpayer

1222

made a timely valid election not to deduct

the additional first year depreciation (or

made a deemed election not to deduct

the additional first year depreciation; for

further guidance, see, for example, Rev.

Proc. 2002-33, 2002-1 C.B. 963, Rev.

Proc. 2003-50, 2003-2 C.B. 119, Notice

2006-77, Notice 2008-67, section 5 of

Rev. Proc. 2011-26, 2011-16 I.R.B. 664,

Rev. Proc. 2015-48, 2015-40 I.R.B. 469,

or Rev. Proc. 2019-33, 2019-34 I.R.B.

662) for the class of property (as defined

in § 1.168(k)-2(f)(1)(ii), § 1.168(k)-1(e)

(2), § 1.1400L(b)-1(e)(2), or section 4.02

of Notice 2006-77, as applicable) in which

that property is included;

(iii) if the property is qualified second generation biofuel plant property (as

defined in § 168(l)(2) and (3)) or qualified cellulosic biofuel plant property (as

defined in former § 168(l)(2) and (3)),

by also taking into account the additional

first year depreciation deduction provided

by § 168(l)(1), unless the taxpayer made

a timely valid election not to deduct the

additional first year depreciation for the

property; and

(iv) if the property is qualified reuse and

recycling property (as defined in § 168(m)

(2)), by also taking into account the additional first year depreciation deduction

provided by § 168(m)(1), unless the taxpayer made a timely valid election not to

deduct the additional first year depreciation for the property.

(f) Section 197 property. The amortization allowable for any taxable year for

an amortizable § 197 intangible (including

any property for which a timely election

under § 13261(g)(2) of the 1993 Act was

made) is determined in accordance with

§ 1.197-2(f).

(g) Former § 168 property. The depreciation allowable for any taxable year for

property subject to former § 168 is determined by using either:

(i) the accelerated method of cost

recovery applicable to the property (for

example, for 5-year property, the recovery

method under former § 168(b)(1)); or

(ii) the straight-line method applicable

to the property if the property is required

to be depreciated under the straight-line

method (for example, property described

in former § 168(f)(2) or former § 280F(b)

(2)) or if the taxpayer elected to determine the depreciation allowance under

Bulletin No. 2023–28

the optional straight-line percentage (for

example, the straight-line method in former § 168(b)(3)).

(h) Qualified revitalization building.

The depreciation allowable for any taxable year for any qualified revitalization

building (as defined in § 1400I(b)(1) (as in

effect on the day before the date of enactment of the Tax Technical Corrections Act

of 2018)) for which the taxpayer has made

a timely valid election under § 1400I(a) is

determined as follows:

(i) if the taxpayer elected to deduct

one-half of any qualified revitalization

expenditures (as defined in § 1400I(b)(2)

and as limited by § 1400I(c) (as in effect

on the day before the date of enactment

of the Tax Technical Corrections Act of

2018)) chargeable to a capital account

with respect to the qualified revitalization

building for the taxable year in which the

building is placed in service by the taxpayer, the depreciation allowable for the

qualified revitalization building’s placedin-service year is equal to one-half of the

qualified revitalization expenditures for

the building and the depreciation allowable for the remaining depreciable basis

of the qualified revitalization building for

its placed-in-service year and subsequent

taxable years is determined using the

general depreciation system of § 168(a)

or the alternative depreciation system of

§ 168(g), as applicable; or

(ii) if the taxpayer elected to amortize

all of the qualified revitalization expenditures chargeable to a capital account

with respect to the qualified revitalization building ratably over the 120-month

period beginning with the month in which

the building is placed in service, the

depreciation allowable for the qualified

revitalization expenditures is determined

in accordance with this election and the

depreciation allowable for the remaining

depreciable basis of the qualified revitalization building is determined using the

general depreciation system of § 168(a)

or the alternative depreciation system of

§ 168(g), as applicable.

(i) Qualified New York Liberty Zone

leasehold improvement property. The

depreciation allowable for any taxable

year for qualified New York Liberty

Zone leasehold improvement property (as

defined in § 1400L(c)(2) (as in effect on

the day before the date of enactment of the

Bulletin No. 2023–28

Tax Technical Corrections Act of 2018))

is determined by using the depreciation

method and recovery period prescribed in

§ 1400L(c) (as in effect on the day before

the date of enactment of the Tax Technical

Corrections Act of 2018) unless the taxpayer made a timely valid election under

§ 1400L(c)(5) (as in effect on the day

before the date of enactment of the Tax

Technical Corrections Act of 2018) not to

use that recovery period.

(8) Concurrent automatic change.

(a) A taxpayer making this change for

more than one asset for the same year of

change should file a single Form 3115 for

all such assets and provide a single net

§ 481(a) adjustment for all the changes

included in that Form 3115. If one or more

of the changes in that single Form 3115

generate a negative § 481(a) adjustment

and other changes in that same Form 3115

generate a positive § 481(a) adjustment,

the taxpayer may provide a single negative

§ 481(a) adjustment for all the changes

that are included in that Form 3115 generating such adjustment and a single positive

§ 481(a) adjustment for all the changes

that are included in that Form 3115 generating such adjustment. For example,

a taxpayer files a single Form 3115 to

change the depreciation methods, recovery periods, and/or conventions under

§ 168(a) resulting from the reclassification of two computers from nonresidential

real property to 5-year property, one office

desk from nonresidential real property to

7-year property, and two office desks from

5-year property to 7-year property. On

that Form 3115, the taxpayer must provide either (i) a single net § 481(a) adjustment that covers all the changes resulting

from all of these reclassifications, or (ii)

a single negative § 481(a) adjustment

that covers the changes resulting from the

reclassifications of the two computers and

one office desk from nonresidential real

property to 5-year property and 7-year

property, respectively, and a single positive § 481(a) adjustment that covers the

changes resulting from the reclassifications of the two office desks from 5-year

property to 7-year property.

(b) A taxpayer making both this change

and a change to a UNICAP method under

section 12.01, 12.02, 12.08, or 12.12 of

this revenue procedure (as applicable)

for the same year of change should file

1223

a single Form 3115 for both changes, in

which case the taxpayer must 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. For example, a qualified small

taxpayer must include on the single Form

3115 the information required by section

6.01(4)(a) of this revenue procedure for

this change and the information required

by the lines on Form 3115 applicable

to the UNICAP method change, including Part II lines 14 and 15, Part IV, and

Schedule D, and must include a separate

response to each line on Form 3115 that

is applicable to both changes (such as

Part II lines 6b, 7, 8b, 14, and, as applicable for this change, Part IV) for which

the taxpayer’s response is different for

this change and the change to a UNICAP

method.

(9) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

6.01 is “7.”

(10) Contact information. For further

information regarding a change under this

section, contact James Liechty at (202)

317-7005 (not a toll-free number).

.02 Permissible to permissible method

of accounting for depreciation.

(1) Description of change. This change

applies to a taxpayer that wants to change

from a permissible method of accounting

for depreciation under § 56(g)(4)(A)(iv)

(as in effect on the day before the date of

enactment of Public Law 115-97, 131 Stat.

2054 (Dec. 22, 2017), commonly referred

to as the Tax Cuts and Jobs Act (TCJA))

or § 167 to another permissible method of

accounting for depreciation under § 56(g)

(4)(A)(iv) (as in effect on the day before

the date of enactment of the TCJA) or

§ 167. Pursuant to § 1.167(a)-7(a) and (c),

a taxpayer may account for depreciable

property either by treating each individual

asset as an account or by combining two

or more assets in a single account and, for

each account, depreciation allowances are

computed separately.

(2) Applicability.

(a) In general. This change applies to

any taxpayer wanting to make a change

in method of accounting for depreciation

July 10, 2023

specified in section 6.02(4) of this revenue

procedure for the property in an account:

(i) for which the present and proposed

methods of accounting for depreciation

specified in section 6.02(4) of this revenue

procedure are permissible methods for the

property under § 56(g)(4)(A)(iv) (as in

effect on the day before the date of enactment of the TCJA) or § 167; and

(ii) that is owned by the taxpayer at the

beginning of the year of change.

(b) Inapplicability. This change does

not apply to:

(i) a taxpayer that is required under

§ 263A and the regulations thereunder to

capitalize the costs with respect to which

the taxpayer wants to change its method

of accounting under this section 6.02 if

the taxpayer is not capitalizing these costs,

unless the taxpayer concurrently changes

its method to capitalize these costs in

conjunction with a change to a UNICAP

method under section 12.01, 12.02, 12.08,

or 12.12 of this revenue procedure (as

applicable);

(ii) any property to which § 1016(a)(3)

(regarding property held by a tax-exempt

organization) applies;

(iii) any property described in § 167(f)

(regarding certain property excluded from

§ 197);

(iv) any property subject to § 167(g)

(regarding property depreciated under the

income forecast method);

(v) any property for which depreciation

is determined under § 56(a)(1), § 56(g)

(4)(A)(i), (ii), (iii), or (v) (as in effect on

the day before the date of enactment of

the TCJA), § 168, § 1400I (as in effect

on the day before the date of enactment

of the Tax Technical Corrections Act

of 2018, Pub. L. No. 115-141, Division

U, 132 Stat. 1211 (March 23, 2018)),

§ 1400L(c) (as in effect on the day before

the date of enactment of the Tax Technical

Corrections Act of 2018), § 168 prior to its

amendment in 1986 (former § 168), or any

additional first year depreciation deduction provision of the Code (for example,

§ 168(k), § 168(l), § 1400L(b) (as in effect

on the day before the date of enactment

of the Tax Technical Corrections Act of

2018), or § 1400N(d) (as in effect on the

day before the date of enactment of the

Tax Technical Corrections Act of 2018));

(vi) any property that the taxpayer

elected under § 168(f)(1) or former

July 10, 2023

§ 168(e)(2) to exclude from the application of, respectively, § 168 or former

§ 168;

(vii) any property for which depreciation is determined in accordance with

§ 1.167(a)-11 (ADR);

(viii) any depreciable property for

which the taxpayer is changing the depreciation method pursuant to § 1.167(e)-1(b)

(change from declining-balance method

to straight-line method), § 1.167(e)-1(c)

(certain changes for § 1245 property), or

§ 1.167(e)-1(d) (certain changes for § 1250

property). These changes must be made

prospectively and are not permitted under

the cited regulations for property for which

the depreciation is determined under § 168,

§ 1400I (as in effect on the day before the

date of enactment of the Tax Technical

Corrections Act of 2018), § 1400L(c) (as in

effect on the day before the date of enactment of the Tax Technical Corrections Act

of 2018), former § 168, or any additional

first year depreciation deduction provision of the Code (for example, § 168(k),

§ 168(l), § 1400L(b) (as in effect on the

day before the date of enactment of the

Tax Technical Corrections Act of 2018), or

§ 1400N(d) (as in effect on the day before

the date of enactment of the Tax Technical

Corrections Act of 2018)); or

(ix) any distributor commissions (as

defined by section 2 of Rev. Proc. 200038, 2000-2 C.B. 310, as modified by Rev.

Proc. 2007-16, 2007-1 C.B. 358) for which

the taxpayer is changing the useful life

under the distribution fee period method

or the useful life method (both described

in Rev. Proc. 2000-38). A change in this

useful life is corrected by adjustments in

the applicable taxable year provided under

§ 1.446-1(e)(2)(ii)(d)(5)(iv).

(3) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)

(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.

419, does not apply to this change.

(4) Changes covered. This section 6.02

only applies to the following changes in

methods of accounting for depreciation:

(a) a change from the straight-line

method to the sum-of-the-years-digits

method, the sinking fund method, the

unit-of-production method, or the declining-balance method using any proper percentage of the straight-line rate;

(b) a change from the declining-balance method using any percentage of the

1224

straight-line rate to the sum-of-the-yearsdigits method, the sinking fund method,

or the declining-balance method using a

different proper percentage of the straightline rate;

the declining-balance method using any

proper percentage of the straight-line rate,

or the straight-line method;

(d) a change from the unit-of-production method to the straight-line method;

(e) a change from the sinking fund

method to the straight-line method, the

unit-of-production method, the sum-ofthe-years-digits method, or the declining-balance method using any proper

percentage of the straight-line rate;

(f) a change in the interest factor used

in connection with a compound interest

method or sinking fund method;

(g) a change in averaging convention as

set forth in § 1.167(a)-10(b). However, as

specifically provided in § 1.167(a)-10(b),

in any taxable year in which an averaging convention substantially distorts the

depreciation allowance for the taxable

year, it may not be used (see Rev. Rul.

73-202, 1973-1 C.B. 81);

(h) a change from charging the depreciation reserve with costs of removal and

crediting the depreciation reserve with

salvage proceeds to deducting costs of

removal as an expense and including salvage proceeds in taxable income as set

forth in § 1.167(a)-8(e)(2). See Rev. Rul.

74-455, 1974-2 C.B. 63. This section 6.02

applies to this change, however, only if:

(i) the change is applied to all items in

the account for which the change is being

made; and

(ii) the removal costs are not required

to be capitalized under any provision of

the Code (for example, § 263(a), § 263A,

or § 280B);

(i) a change from crediting the depreciation reserve with the salvage proceeds

realized on normal retirement sales to

computing and recognizing gains and

losses on the sales (see Rev. Rul. 70-165,

1970-1 C.B. 43);

(j) a change from crediting ordinary income (including the combination

method of crediting the lesser of estimated

salvage value or actual salvage proceeds

to the depreciation reserve, with any

excess of salvage proceeds over estimated

Bulletin No. 2023–28

salvage value credited to ordinary income)

with the salvage proceeds realized on normal retirement sales, to computing and

recognizing gains and losses on the sales

(see Rev. Rul. 70-166, 1970-1 C.B. 44);

(k) a change from item accounting for

specific assets to multiple asset accounting (pooling) for the same assets, or vice

versa;

(l) a change from one type of multiple

asset accounting (pooling) for specific

assets to a different type of multiple asset

accounting (pooling) for the same assets;

(m) a change from one method

described in Rev. Proc. 2000-38 for amortizing distributor commissions (as defined

by section 2 of Rev. Proc. 2000-38) to

another method described in Rev. Proc.

2000-38 for amortizing distributor commissions; or

(n) a change from pooling to a single

asset, or vice versa, for distributor commissions (as defined by section 2 of Rev.

Proc. 2000-38) for which the taxpayer is

using the distribution fee period method

or the useful life method (both described

in Rev. Proc. 2000-38).

(5) Additional requirements. A

taxpayer also must comply with the

following:

(a) Basis for depreciation. At the

beginning of the year of change, the basis

for depreciation of property to which this

change applies is the adjusted basis of the

property as provided in § 1011 at the end

of the taxable year immediately preceding the year of change (determined under

taxpayer’s present method of accounting

for depreciation). If applicable under the

taxpayer’s proposed method of accounting for depreciation, this adjusted basis is

reduced by the estimated salvage value of

the property (for example, a change to the

straight-line method).

(b) Rate of depreciation. The rate of

depreciation for property changed to:

(i) the straight-line or the sum-of-theyears-digits method of depreciation must

be based on the remaining useful life of

the property as of the beginning of the

year of change; or

(ii) the declining-balance method of

depreciation must be based on the useful life of the property measured from

the placed-in-service date, and not the

expected remaining life from the date the

change becomes effective.

Bulletin No. 2023–28

changes in method of depreciation to

the sum-of-the-years-digits or declining-balance method, the property must

meet the requirements of § 1.167(b)-0 or

§ 1.167(c)-1, as appropriate.

(d) Public utility property. If any item

of property is public utility property within

the meaning of former § 167(l)(3)(A), the

taxpayer (including a qualified small taxpayer as defined in section 6.01(4)(b) of

this revenue procedure) must attach to

the Form 3115 a statement providing that

the taxpayer agrees to the following additional terms and conditions:

(i) a normalization method of accounting within the meaning of former § 167(l)

(3)(G) will be used for the public utility

property subject to the Form 3115; and

(ii) within 30 calendar days of filing the

federal income tax return for the year of

change, the taxpayer will provide a copy

of the completed Form 3115 to any regulatory body having jurisdiction over the

public utility property subject to the Form

3115.

(6) Reduced filing requirement for qualified small taxpayers. A qualified small

taxpayer, as defined in section 6.01(4)(b)

of this revenue procedure, is required to

complete only the following information

on Form 3115 (Rev. December 2022) to

make this change:

(a) The identification section of page 1

(above Part I);

(b) The signature section at the bottom

of page 1;

(d) Part II, all lines except lines 13,

15b, 16, 17, and 19;

(e) Part IV, line 25; and

(f) Schedule E.

(7) Section 481(a) adjustment. Because

the adjusted basis of the property is not

changed as a result of a method change

made under this section 6.02, no items are

being duplicated or omitted. Accordingly,

a § 481(a) adjustment is neither required

nor permitted.

(8) Concurrent automatic change.

(a) A taxpayer making this change for

more than one asset for the same year of

change should file a single Form 3115 for

all such assets.

(b) A taxpayer making both this change

and a change to a UNICAP method under

section 12.01, 12.02, 12.08, or 12.12 of

1225

this revenue procedure (as applicable)

for the same year of change should file

a single Form 3115 for both changes, in

which case the taxpayer must 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. For example, a qualified small

taxpayer must include on the single Form

3115 the information required by section

6.02(6) of this revenue procedure for this

change and the information required by

the lines on Form 3115 applicable to the

UNICAP method change, including Part

II lines 14 and 15, Part IV, and Schedule

D, and must include a separate response to

each line on Form 3115 that is applicable

to both changes (such as Part II lines 6b, 7,

8b, 14, and, as applicable for this change,

Part IV) for which the taxpayer’s response

is different for this change and the change

to a UNICAP method.

(9) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

6.02 is “8.”

(10) Contact information. For further

information regarding a change under

this section, contact Bruce Chang at (202)

317-7005 (not a toll-free number).

.03 Sale, lease, or financing

transactions.

(1) Description of change and scope.

(a) Applicability. This change applies

to a taxpayer that wants to change its

method of accounting from:

(i) improperly treating property as sold

by the taxpayer to properly treating property as leased or financed by the taxpayer;

(ii) improperly treating property as

leased by the taxpayer to properly treating property as sold or financed by the

taxpayer;

(iii) improperly treating property as

financed by the taxpayer to properly

treating property as sold or leased by the

taxpayer;

(iv) improperly treating property as

purchased by the taxpayer to properly

treating property as leased by the taxpayer; and

(v) improperly treating property as

leased by the taxpayer to properly treating

property as purchased by the taxpayer.

July 10, 2023

(b) Inapplicability. This change does

not apply to:

(i) a rent-to-own dealer that wants to

change its method of accounting for rentto-own contracts described in section 3 of

Rev. Proc. 95-38, 1995-2 C.B. 397; or

(ii) a taxpayer that holds assets for sale

or lease, if any asset so held is not the subject of a sale or lease transaction as of the

beginning of the year of change.

(2) Manner of making the change.

(a) Required statement. A taxpayer

changing its method of accounting under

this section 6.03 must submit a statement

with the Form 3115 that provides the

name of the counterparty to the sale, lease,

or financing transactions as of the beginning of the year of change.

(b) Section 481(a) adjustment. A

change under this section 6.03 is made

with a § 481(a) adjustment.

(3) No ruling on the characterization of

any transaction as a sale, lease, or financing transaction. The consent granted

under section 9 of Rev. Proc. 2015-13 for

a change specified in this section 6.03 is

not a determination by the Commissioner

that the taxpayer has properly characterized any transaction as a sale, lease, or

financing transaction and does not create

any presumption that the proposed characterization of any transaction as a sale,

lease, or financing transaction is permissible. The director will ascertain whether

the taxpayer’s characterization of any

transaction as a sale, lease, or financing

transaction is permissible.

(4) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

6.03 is “10.”

(5) Contact information. For further

information regarding a change under this

section, contact Edward Schwartz at (202)

317-7006 (not a toll-free number).

.04 Change in general asset account

treatment due to a change in the use of

MACRS property.

(1) Description of change.

(a) Applicability. This change applies

to a taxpayer that wants to change the

method of accounting for general asset

account treatment of MACRS property (as defined in § 1.168(b)-1(a)(2))

to the method of accounting provided in

§ 1.168(i)-1(c)(2)(ii)(I) or § 1.168(i)-1(h)

July 10, 2023

(2), which applies when there is a change

in the use of MACRS property pursuant to

§ 1.168(i)-4(d).

(b) Taxpayer has not adopted a

method of accounting for the item of

property. If a taxpayer does not satisfy

section 6.04(1)(a) of this revenue procedure for an item of MACRS property

because a change in the use of this item

of MACRS property occurred in the

taxable year immediately preceding the

year of change (1-year change in use

property), the taxpayer may change from

the impermissible method for general

asset account treatment to the permissible method provided in § 1.168(i)-1(c)

(2)(ii)(I) or § 1.168(i)-1(h)(2) for the

1-year change in use property by filing

a Form 3115. Alternatively, the taxpayer may change from the impermissible method for general asset account

treatment to the permissible method

provided in § 1.168(i)-1(c)(2)(ii)(I) or

§ 1.168(i)-1(h)(2) for a 1-year change in

use property by filing an amended federal

income tax return, or an administrative

adjustment request under § 6227 (AAR),

as applicable, for the year of change in

the use of such property provided such

filing occurs prior to the date the taxpayer files its federal income tax return

for the taxable year succeeding the year

of change in the use of such property.

(i) The change described in section

6.04(1)(a) of this revenue procedure does

not apply to any property to which section 4.05 of Rev. Proc. 2020-22, 2020-18

I.R.B. 745, applies unless the taxpayer

and property are within the scope of Rev.

Proc. 2021-28, 2021-27 I.R.B. 5. (See sections 4.02 and 4.03 of Rev. Proc. 2020-22,

as applicable, for making such changes for

such property.); and

(ii) The change described in section

6.04(1)(a) of this revenue procedure does

not apply to any property to which section 5.04 of Rev. Proc. 2020-22, 202018 I.R.B. 745, applies. (See section 5.02

of Rev. Proc. 2020-22 for making such

change for such property.).

(2)

Certain

eligibility

rules

inapplicable.

(a) In general. The eligibility rule in

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

2015-5 I.R.B. 419, does not apply to a taxpayer making this change.

1226

(b) Special rule. The eligibility rule

in section 5.01(1)(f) of Rev. Proc. 201513, 2015-5 I.R.B. 419, does not apply to

a taxpayer within the scope of section 3

of Rev. Proc. 2021-28, 2021-27 I.R.B.

5, making this change for any residential

rental property within the scope of section

3 of Rev. Proc. 2021-28 for a taxable year

beginning in 2019, 2020, 2021, or 2022.

(3) Manner of making change.

(a) The change is made on a modified

cut-off basis (as defined in § 1.446-1(e)

(2)(ii)(d)(5)(iii)) and, thus, the adjusted

depreciable basis of the MACRS property

as of the beginning of the year of change

is recovered using the proposed method of

accounting for general asset account treatment. Accordingly, a § 481(a) adjustment

is neither permitted nor required. See

§ 1.168(i)-1(h)(2)(ii) and (iii) for more

information regarding how to establish

the general asset account when a change

in the use of MACRS property occurs pursuant to § 1.168(i)-4(d).

(b) Reduced filing requirement for qualified small taxpayers. A qualified small

taxpayer, as defined in section 6.01(4)(b)

of this revenue procedure, is required to

complete only the following information

on Form 3115 (Rev. December 2022) to

make this change:

(i) The identification section of page 1

(above Part I);

(ii) The signature section at the bottom

of page 1;

(iii) Part I;

(iv) Part II, all lines except lines 13,

15b, 16, 17, and 19;

(v) Part IV, line 25; and

(vi) Schedule E, all lines except lines 1,

4c, 5, 6, 7b, and 7c.

(4) Concurrent automatic change.

(a) A taxpayer making this change for

more than one asset for the same year of

change should file a single Form 3115 for

all such assets.

(b) A taxpayer making this change and a

change under section 6.05, section 6.12(3)

(b), and/or section 6.15 of this revenue procedure for the same year of change should

file a single Form 3115 for all such changes

and must enter the designated automatic

accounting method change numbers for

the changes on the appropriate line on the

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

Proc. 2015-13 for information on making

concurrent changes.

Bulletin No. 2023–28

(5) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

6.04 is “87.”

(6) Contact information. For further

information regarding a change under this

section, contact Elizabeth Binder at (202)

317-7005 (not a toll-free number).

.05 Change in method of accounting

for depreciation due to a change in the use

of MACRS property.

(1) Description of change.

(a) Applicability. This change applies

to a taxpayer that wants to (i) change

the method of accounting for depreciation of MACRS property (as defined

in § 1.168(b)-1(a)(2)) to the method of

accounting for depreciation provided in

§ 1.168(i)-4, which applies when there

is a change in the use of MACRS property, or (ii) revoke the election provided

in § 1.168(i)-4(d)(3)(ii) to disregard a

change in the use of MACRS property.

See § 1.168(i)-4(g)(2).

(b) Taxpayer has not adopted a

method of accounting for the item of

property. If a taxpayer does not satisfy

section 6.05(1)(a)(i) of this revenue procedure for an item of MACRS property

because a change in the use of this item

of MACRS property occurred in the taxable year immediately preceding the year

of change (1-year change in use property), the taxpayer may change from the

impermissible method of determining

depreciation to the permissible method

of determining depreciation provided in

§ 1.168(i)-4 for the 1-year change in use

property by filing a Form 3115 for this

change, provided the § 481(a) adjustment

reported on the Form 3115 includes the

amount of any adjustment that is attributable to all property (including the 1-year

change in use property) subject to the

Form 3115. Alternatively, the taxpayer

may change from the impermissible

method of determining depreciation to

the permissible method of determining

depreciation provided in § 1.168(i)-4

for a 1-year change in use property by

filing an amended federal income tax

return, or an administrative adjustment

request under § 6227 (AAR), as applicable, for the year of change in the use of

such property provided such filing occurs

prior to the date the taxpayer files its

Bulletin No. 2023–28

federal income tax return for the taxable

year succeeding the year of change in the

use of such property.

(i) The change described in section

6.05(1)(a)(i) of this revenue procedure

does not apply to any property to which

section 4.05 of Rev. Proc. 2020-22, 202018 I.R.B. 745, applies unless the taxpayer

and property are within the scope of Rev.

Proc. 2021-28, 2021-27 I.R.B. 5. (See sections 4.02 and 4.03, or 5.02 of Rev. Proc.

2020-22, as applicable, for making such

change for such property.);

(ii) The change described in section

6.05(1)(a)(i) of this revenue procedure

does not apply to any property to which

section 5.04 of Rev. Proc. 2020-22, 202018 I.R.B. 745, applies. (See section 5.02

of Rev. Proc. 2020-22 for making such

change for such property.); and

(iii) The change described in this section 6.05 does not apply to any property

that is not owned by the taxpayer at the

beginning of the year of change.

(2)

Certain

eligibility

rules

inapplicable.

(a) In general. The eligibility rule in

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

2015-5 I.R.B. 419, does not apply to a taxpayer making this change.

(b) Special rule. The eligibility rule

in section 5.01(1)(f) of Rev. Proc. 201513, 2015-5 I.R.B. 419, does not apply to

a taxpayer within the scope of section 3

of Rev. Proc. 2021-28, 2021-27 I.R.B.

5, making this change for any residential

rental property within the scope of section

3 of Rev. Proc. 2021-28 for a taxable year

beginning in 2019, 2020, 2021, or 2022.

(3) Reduced filing requirement for qualified small taxpayers. A qualified small

taxpayer, as defined in section 6.01(4)(b)

of this revenue procedure, is required to

complete only the following information

on Form 3115 (Rev. December 2022) to

make this change:

(a) The identification section of page 1

(above Part I);

(b) The signature section at the bottom

of page 1;

(d) Part II, all lines except lines 13,

15b, 16, 17, and 19;

(e) Part IV, all lines except line 25; and

(f) Schedule E, all lines except lines 1,

4c, 5, 6, 7b, and 7c.

1227

(4) Section 481(a) adjustment. A taxpayer changing its method of accounting

under this section 6.05 is required to calculate a § 481(a) adjustment as of the first

day of the year of change as if the proposed method of accounting had always

been used by the taxpayer beginning with

the taxable year in which the change in the

use of the MACRS property occurred by

the taxpayer.

(5) Concurrent automatic change.

(a) A taxpayer making this change for

more than one asset for the same year of

change should file a single Form 3115 for

all such assets and provide a single net

§ 481(a) adjustment for all the changes

included in that Form 3115. If one or

more of the changes in that single Form

3115 generate a negative § 481(a) adjustment and other changes in that same Form

3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single

negative § 481(a) adjustment for all the

changes that are included in that Form

3115 generating such adjustment and a

single positive § 481(a) adjustment for all

the changes that are included in that Form

3115 generating such adjustment.

(b) A taxpayer making this change

and a change under section 6.04, section

6.12(3)(b), and/or section 6.15 of this

revenue procedure for the same year of

change should file a single Form 3115

for all such changes and must enter the

designated automatic accounting method

change numbers for the changes on the

appropriate line on the Form 3115. See

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

for information on making concurrent

changes.

(6) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

6.05 is “88.”

(7) Contact information. For further

information regarding a change under this

section, contact Elizabeth Binder at (202)

317-7005 (not a toll-free number).

.06 Depreciation of qualified non-personal use vans and light trucks.

(1) Description of change. This change

applies to a taxpayer that wants to change

the method of accounting for depreciation

for certain vehicles in accordance with

§ 1.280F-6(f)(2)(iv). Section 1.280F-6(f)

(2)(iv) applies to a truck or van that is

July 10, 2023

a qualified nonpersonal use vehicle as

defined under § 1.274-5T(k), was placed

in service by the taxpayer before July 7,

2003, and was treated by the taxpayer as

a passenger automobile under § 1.280F6T as in effect prior to July 7, 2003. If the

taxpayer files Form 3115, in accordance

with § 1.280F-6(f)(2)(iv), the treatment

of the truck or van will be changed from

property to which § 280F(a) applies to

property to which § 280F(a) does not

apply.

(2) Reduced filing requirement for qualified small taxpayers. A qualified small

taxpayer, as defined in section 6.01(4)(b)

of this revenue procedure, is required to

complete only the following information

on Form 3115 (Rev. December 2022) to

make this change:

(a) The identification section of page 1

(above Part I);

(b) The signature section at the bottom

of page 1;

(d) Part II, all lines except lines 13,

15b, 16, 17, and 19;

(e) Part IV, all lines except line 25; and

(f) Schedule E.

(3) Concurrent automatic change. A

taxpayer making this change for more

than one asset for the same year of change

should file a single Form 3115 for all such

assets and provide a single net § 481(a)

adjustment for all the changes included

in that Form 3115. If one or more of the

changes in that single Form 3115 generate

a negative § 481(a) adjustment and other

changes in that same Form 3115 generate a positive § 481(a) adjustment, the

taxpayer may provide a single negative

§ 481(a) adjustment for all the changes

that are included in that Form 3115 generating such adjustment and a single positive

§ 481(a) adjustment for all the changes

that are included in that Form 3115 generating such adjustment.

(4) Designated automatic accounting

method change number. The designated

automatic accounting method change

number for a change under this section

6.06 is “89.”

(5) Contact information. For further

information regarding a change under this

section, contact Bernard Harvey at (202)

317-7005 (not a toll-free number).

.07 Impermissible to permissible

method of accounting for depreciation or

July 10, 2023

amortization for disposed depreciable or

amortizable property.

(1) Description of change. This change

applies to a taxpayer that wants to make

the change in method of accounting for

depreciation or amortization (depreciation) provided under section 3 of Rev.

Proc. 2007-16, 2007-1 C.B. 358, for an

item of depreciable or amortizable property that has been disposed of by the taxpayer. Section 3 of Rev. Proc. 2007-16

allows a taxpayer to make a change in

method of accounting for depreciation for

the disposed property if the taxpayer used

an impermissible method of accounting

for depreciation for the property under

which the taxpayer did not take into

account any depreciation allowance, or

did take into account some depreciation

but less than the depreciation allowable,

in the year of change (as defined in section

6.07(4) of this revenue procedure) or any

prior taxable year.

(2) Applicability.

(a) In general. Except as provided in

section 6.07(2)(b) of this revenue procedure, this section 6.07 applies to a taxpayer

that is changing from an impermissible

method of accounting for depreciation

to a permissible method of accounting

for depreciation for any item of depreciable or amortizable property subject to

§§ 167, 168, 197, 1400I, or 1400L(c), to

former § 168, or to any additional first

year depreciation deduction provision of

the Code (for example, § 168(k), § 168(l),

§ 1400L(b), or § 1400N(d)):

(i) that has been disposed of by the

taxpayer during the year of change (as

defined in section 6.07(4) of this revenue

procedure); and

(ii) for which the taxpayer did not take

into account any depreciation allowance,

or did take into account some depreciation but less than the depreciation allowable (hereinafter, both are referred to as

“claimed less than the depreciation allowable”), in the year of change (as defined in

section 6.07(4) of this revenue procedure)

or any prior taxable year.

(b) Inapplicability. This section 6.07

does not apply to:

(i) any property to which § 1016(a)(3)

(regarding property held by a tax-exempt

organization) applies;

(ii) any property for which a taxpayer

is revoking a timely valid depreciation

1228

election, or making a late depreciation

election, under the Code or regulations

thereunder, or under other guidance published in the Internal Revenue Bulletin

(including under § 13261(g)(2) or (3) of

the Revenue Reconciliation Act of 1993

(1993 Act), 1993-3 C.B. 1, 128 (relating

to amortizable § 197 intangibles));

(iii) any property for which the taxpayer deducted the cost or other basis of

the property as an expense; or

(iv) any property disposed of by the

taxpayer in a transaction to which a nonrecognition section of the Code applies

(for example, § 1031, transactions subject to § 168(i)(7)(B)). However, this

section 6.07(2)(b)(iv) does not apply to

property disposed of by the taxpayer in a

§ 1031 or § 1033 transaction if the taxpayer elects under § 1.168(i)-6(i) and (j)

to treat the entire basis (that is, both the

exchanged and excess basis (as defined in

§ 1.168(i)-6(b)(7) and (8), respectively)

of the replacement MACRS property (as

defined in § 1.168(i)-6(b)(1)) as property placed in service by the taxpayer

at the time of replacement and treat the

adjusted depreciable basis of the relinquished MACRS property (as defined in

§ 1.168(i)-6(b)(2)) as being disposed of by

the taxpayer at the time of disposition.

(3) Manner of making the change.

(a) Change made on an original return

for the year of change. This change may

be made on a taxpayer’s timely filed

(including any extension) original federal tax return for the year of change (as

defined in section 6.07(4) of this revenue

procedure), provided the taxpayer files the

original Form 3115 in accordance with

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

2015-5 I.R.B. 419.

(b) Change made on an amended

return or an AAR for the year of change.

This change may also be made on an

amended federal income tax return, or

administrative adjustment request under

§ 6227 (AAR), as applicable, for the year

of change (as defined in section 6.07(4) of

this revenue procedure), provided:

(i)(A) the taxpayer files the original

Form 3115 with the taxpayer’s amended

federal income tax return for the year of

change (as defined in section 6.07(4) of this

revenue procedure) prior to the expiration

of the period of limitation for assessment

under § 6501(a) for the taxable year in

Bulletin No. 2023–28

which the item of depreciable or amortizable property was disposed of by the taxpayer, or if applicable (B) the partnership

subject to the centralized partnership audit

regime enacted as part of the Bipartisan

Budget Act of 2015 (BBA partnership)

files the original Form 3115 with its AAR

for the year of change (as defined in section

6.07(4) of this revenue procedure) prior to

the expiration of the applicable period of

limitations for making adjustments under

§ 6235 for the reviewed year as defined in

§ 301.6241-1(a)(8) of the Procedure and

Administration Regulations; and

(ii) the taxpayer’s amended federal

income tax return, or AAR, as applicable, for the year of change (as defined

in section 6.07(4) of this revenue procedure) includes the adjustments to taxable

income and any collateral adjustments to

taxable income or tax liability (for example, adjustments to the amount or character of the gain or loss of the disposed

depreciable or amortizable property)

resulting from the change in method of

accounting for depreciation made by the

taxpayer under this section 6.07.

(4) Year of change. The year of change

for this change is the taxable year in which

the item of depreciable or amortizable

property was disposed of by the taxpayer.

(5) Certain eligibility rules inapplicable. The eligibility rules in sections

5.01(1)(d) and (f) of Rev. Proc. 2015-13

do not apply to this change.

(6) Filing requirements.

(a) Notwithstanding section 6.03(1)(a)

of Rev. Proc. 2015-13, a taxpayer making this change in accordance with section 6.07(3)(b) of this revenue procedure

must attach the original Form 3115 to the

taxpayer’s timely filed amended federal

income tax return, or AAR, as applicable,

for the year of change and must file the

required duplicate copy (with signature)

of the Form 3115 with the IRS in Ogden,

UT, no later than when the original Form

3115 is filed with the amended federal

income tax return, or AAR, as applicable, for the year of change. If a taxpayer

is making this change in accordance with

section 6.07(3)(a) of this revenue procedure, the filing requirements in section

6.03(1)(a) of Rev. Proc. 2015-13 apply.

(b) Reduced filing requirement for qualified small taxpayers. A qualified small

taxpayer, as defined in section 6.01(4)(b)

Bulletin No. 2023–28

of this revenue proced

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