Instructions for Form 3115

Instructions for Form 3115

Department of the Treasury

Internal Revenue Service

(Rev. December 2022)

Application for Change in Accounting Method

Section references are to the Internal Revenue Code unless

otherwise noted.

All references to Rev. Proc. 2015-13 are to Rev. Proc.

2015-13, 2015-5 I.R.B. 419 (as clarified and modified by

CAUTION Rev. Proc. 2015-33, 2015-24 I.R.B. 1067, and as

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

2021-26, 2021-22 I.R.B. 116; by Rev. Proc. 2017-59, 2017-48

I.R.B. 543, and section 17.02 of Rev. Proc. 2016-1, 2016-1

I.R.B. 1), or any successor.

!

All references to Rev. Proc. 2022-14 and the List of Automatic

Changes are to Rev. Proc. 2022-14, 2022-7 I.R.B. 502 (as

modified by Rev. Proc. 2022-23, 2022-18 I.R.B. 105 and Rev.

Proc. 2023-11, 2023-3 I.R.B. 417) or any successor.

All references to Rev. Proc. 2023-1 are to Rev. Proc. 2023-1,

2023-1 I.R.B. 1, or any successor (updated annually).

Future Developments

For the latest information about developments related to Form

3115 and its instructions, such as legislation enacted after they

were published, go to IRS.gov/Form3115.

What's New

Changes related to the deferral method for advance payments, cost offset methods, and/or the applicable financial

statement income inclusion rule. The instructions for

Schedule B have been updated to include additional information

about accounting method changes relating to the deferral

method for advance payments, cost offset methods, and

methods to conform to the applicable financial statement (AFS)

income inclusion rule under section 451.

Research and experimental expenditures. Effective for

specified research or experimental expenditures paid or incurred

in tax years beginning after 2021, no deduction is allowed for

such expenditures. Instead, you must capitalize and amortize

these amounts over a 5-year period for amounts attributable to

domestic research and over a 15-year period for amounts

attributable to foreign research. See DCN 265 and Rev. Proc.

2023-11, 2023-3 I.R.B. 417.

General Instructions

Purpose of Form

File Form 3115 to request a change in either an overall

accounting method or the accounting treatment of any item.

Method Change Procedures

When filing Form 3115, you must determine if the IRS

has issued any new published guidance which includes

CAUTION revenue procedures, revenue rulings, notices,

regulations, or other relevant guidance in the Internal Revenue

Bulletin (I.R.B ) For the latest information, go to IRS.gov.

!

For general application procedures on requesting accounting

method changes, see Rev. Proc. 2015-13. Rev. Proc. 2015-13

provides procedures for both automatic and non-automatic

accounting method changes.

Feb 7, 2023

Automatic change procedures. Unless otherwise provided in

published guidance, you must file under the automatic change

procedures if you are eligible to request consent to make an

accounting method change under the automatic change

procedures for the requested year of change. See the

instructions for Part I Information for Automatic Change Request,

later, and the List of Automatic Changes in Rev. Proc. 2022-14.

No user fee is required for a Form 3115 filed under the

automatic change procedures. An applicant that timely files and

complies with the automatic change procedures is granted

consent to change its accounting method, subject to review by

the IRS National Office and operating division director. If it is

reviewed by the IRS, you will be notified if information in addition

to that requested on Form 3115 is required or if your request is

denied. Ordinarily, you are required to file a separate Form 3115

for each accounting method change. However, in some cases,

you are required or permitted to file a single Form 3115 for

particular concurrent accounting method changes. See section

6.03(1)(b) of Rev. Proc. 2015-13 for more information.

Note. The List of DCNs (Designated automatic accounting

method change numbers) at the end of these instructions is a list

of many accounting method changes and is presented for

informational purposes only and subject to the most recently

issued revenue procedures.

You may qualify for a reduced Form 3115 filing

TIP requirement for certain DCNs. A reduced Form 3115

filing requirement involves completing only certain lines

and schedules of Form 3115. For qualifying changes and filing

requirements, see Rev. Proc. 2022-14. For example, qualified

small taxpayers are eligible for a reduced Form 3115 filing

requirement for DCNs 7, 8, 21, 88, 89, 107, 121, 145, 157,

184-193, 198, 199, 200, 205, 206, 207, and 222.

Non-automatic change procedures. If you do not qualify to

file under the automatic change procedures for the requested

accounting method change for the requested year of change,

you may be able to file under the non-automatic change

procedures. See Non-automatic change-scope and eligiblity

rules , under Part III, later. If the requested change is approved

by the IRS National Office, the filer will receive a letter ruling on

the requested change. File a separate Form 3115 for each

unrelated item or submethod that is being changed. A user fee is

required. See the instructions for Part III for more information.

Who Must File

The filer is the entity or person required to file Form 3115,

whether on its own behalf or on behalf of another entity. An

applicant is an entity, a person, or a separate and distinct trade

or business of an entity or a person (for purposes of Regulations

section 1.446-1(d)), whose accounting method is being

changed.

For a consolidated group of corporations, the common parent

corporation must file Form 3115 for an accounting method

change for itself and for any member of the consolidated group.

For example, the common parent corporation of a consolidated

group is the filer when requesting an accounting method change

for another member of that consolidated group (or a separate

and distinct trade or business of that member), and the other

Cat. No. 63215H

File Form 3115 with the IRS National Office at the address listed

in the Address Chart for Form 3115 below. Alternatively, Form

3115 may be submitted by secure electronic facsimile or

encrypted electronic mail. File Form 3115 as early as possible

during the year of change to provide adequate time for the IRS to

respond prior to the due date of the filer's return for the year of

change.

member (or trade or business) on whose behalf Form 3115 is

filed is the applicant.

For information on the difference between a filer and an

applicant, see Name(s) and Signature(s), later.

For information on a controlled foreign corporation (CFC) or

10/50 corporation without a U.S. trade or business, see section

6.02(6) of Rev. Proc. 2015-13.

The IRS normally sends an acknowledgment of receipt within

60 days after receiving a Form 3115 filed under the

non-automatic change procedures. If the filer does not receive

an acknowledgment of receipt for a non-automatic change

request within 60 days, the filer can inquire to:

Generally, a filer must file a separate Form 3115 for each

applicant seeking consent to change an accounting method. A

separate Form 3115 and user fee (for non-automatic change

requests) must be submitted for each applicant and each

separate trade or business of an applicant, including a qualified

subchapter S subsidiary (QSub) or a single-member limited

liability company (LLC), requesting an accounting method

change. See section 9.02 of Rev. Proc. 2023-1.

Internal Revenue Service

Control Clerk

CC:IT&A, Room 4512

1111 Constitution Ave. NW

Washington, DC 20224

However, identical accounting method changes for two or

more of the following in any combination may be included in a

single Form 3115.

1. Entities with a common sponsor.

2. Members of a consolidated group;

3. Separate and distinct trades or businesses (for purposes

of Regulations section 1.446-1(d)) of that entity or member(s) of

a consolidated group. Separate and distinct trades or

businesses include QSubs and single-member LLCs;

4. Partnerships that are wholly owned within a consolidated

group; and

5. CFCs and 10/50 corporations that do not engage in a

trade or business within the United States where (i) all controlling

domestic shareholders (as provided in Regulations section

1.964-1(c)(5)) of the CFCs and of the 10/50 corporations, as

applicable, are members of a consolidated group; or (ii) the

taxpayer is the sole controlling domestic shareholder of the

CFCs or of the 10/50 corporations.

In specified circumstances, you are required to send

additional copies of Form 3115 to another IRS

CAUTION address. For example, another copy of Form 3115

would be sent when an applicant is under examination, before

an Appeals office, or before a federal court, or is a certain foreign

corporation or certain foreign partnership. See section 6.03(3) of

Rev. Proc. 2015-13 for more information. Also see the

instructions for Part II, lines 6 and 8, later.

!

Address Chart for Form 3115

File Form 3115 at the applicable IRS address listed below.

For information on what is an identical accounting method

change, see section 15.07(4) of Rev. Proc. 2023-1.

When and Where To File

Automatic change requests. Except if instructed differently,

you must file Form 3115 under the automatic change procedures

in duplicate as follows.

• Attach the original Form 3115 to the filer's timely filed

(including extensions) federal income tax return for the year of

change. The original Form 3115 attachment does not need to be

signed.

• File a copy of the signed Form 3115 (duplicate copy) with the

IRS National Office at the address provided in the Address Chart

for Form 3115, later, no earlier than the first day of the year of

change and no later than the date the original is filed with the

federal income tax return for the year of change. This signed

Form 3115 may be a photocopy. For more on the signature

requirement, see Name(s) and Signature(s), later. Alternatively,

the duplicate copy of the signed Form 3115 may be submitted by

fax.

The IRS does not send acknowledgements of receipt for

automatic change requests.

A non-automatic change

request

An automatic change

request (Form 3115 copy)

Delivery by mail

Internal Revenue Service

Attn: CC:PA:LPD:TSS

P.O. Box 7604

Benjamin Franklin Station

Washington, DC 20044

Internal Revenue Service

Ogden, UT 84201

M/S 6111

Delivery by

private delivery

service

Internal Revenue Service

Attn: CC:PA:LPD:TSS

Room 5336

1111 Constitution Ave. NW

Washington, DC 20224

Internal Revenue Service

1973 N. Rulon White Blvd.

Ogden, UT 84201

Attn: M/S 6111

Delivery by

facsimile

877-773-4950 (Secure)

844-249-8134

Delivery by

encrypted

electronic mail

Userfee@irscounsel.treas.

gov

N/A

Late Application

In general, a filer that fails to timely file a Form 3115 will not be

granted an extension of time to file except in unusual and

compelling circumstances. See section 6.03(4)(b) of Rev. Proc.

2015-13 and Regulations section 301.9100-3 for the standards

that must be met. For information on the period of limitations,

see section 5.03(2) of Rev. Proc. 2023-1.

TIP requests for certain foreign corporations and foreign

However, an automatic 6-month extension from the due date

(excluding any extension) of the federal income tax return to file

Form 3115 may be available for automatic change requests. For

details, see section 6.03(4)(a) of Rev. Proc. 2015-13, and

Regulations section 301.9100-2.

Non-automatic change requests. You must file Form 3115

under the non-automatic change procedures during the tax year

for which the change is requested, unless otherwise provided by

published guidance. See section 6.03(2) of Rev. Proc. 2015-13.

An applicant submitting a ruling request for an extension of

time to file Form 3115 must pay a user fee for its extension

request and, in the case of a non-automatic change request, a

separate user fee for its accounting method change request. For

the schedule of user fees, see section (A)(3)(b), (A)(4), and (A)

(5)(d) in Appendix A of Rev. Proc. 2023-1.

For filing procedures relating to automatic change

partnerships, see section 6.03(1)(a)(ii) and (iii) of Rev.

Proc. 2015-13.

-2-

Useful Items

Non-consolidated corporations, personal service corporations, S corporations, and cooperatives. Enter the name of

the filer on the first line of Form 3115. In the signature section,

enter the signature of the officer who has personal knowledge of

the facts and authority to bind the filer in the matter. Enter that

officer's name and official title in the space provided.

Refer to the following items for more information on changing an

accounting method.

Rev. Proc. 2023-1. See Rev. Proc. 2023-1. This revenue

procedure provides specific and additional procedures for

requesting an accounting method change, including the user fee

for non-automatic method of change requests.

Consolidated group of corporations. Enter the name of the

common parent corporation on the first line of Form 3115. Also

enter the name(s) of the applicant(s) on the fourth line if a

member of the consolidated group other than, or in addition to,

the parent corporation is requesting an accounting method

change. In the signature section, enter the signature of the

officer of the common parent corporation who has personal

knowledge of the facts and authority to bind the common parent

corporation in the matter, and that officer's name and official title

in the space provided.

Rev. Proc. 2015-13. See Rev. Proc. 2015-13. This revenue

procedure provides the automatic and non-automatic method

change procedures to obtain consent of the IRS to change an

accounting method.

Rev. Proc. 2022-14. See Rev. Proc. 2022-14. This revenue

procedure contains a list of accounting method changes that

may be eligible to file under the automatic method change

procedures.

Multiple entities with a common sponsor. Enter the name of

the common sponsor on the first line of Form 3115. Enter on the

fourth line the name of each entity with the common sponsor that

is requesting an accounting method change. In the signature

section, enter the signature of the officer who has personal

knowledge of the facts and authority to bind the common

sponsor and the applicants with that common sponsor in the

matter, and that officer’s name and official title in the space

provided.

Inflation-adjusted amount. Certain automatic accounting

method changes require that the applicant’s average annual

gross receipts for the 3 preceding tax years be at or less than the

“inflation-adjusted amount” (set forth in an annual revenue

procedure) See, for example, DCN 22. For years beginning in

2022, the inflation adjusted amount is $27,000,000. See Rev.

Proc. 2021-45.

Pub. 538, Accounting Periods and Methods. This

publication provides general information on accounting

methods.

Separate and distinct trade or business of an entity. Enter

the name of the entity (or common parent corporation if the entity

is a member of a consolidated group) on the first line of Form

3115. Also enter the name of the separate and distinct trade or

business requesting an accounting method change on the fourth

line. In the signature section, enter the signature of the individual

who has personal knowledge of the facts and authority to bind

the separate and distinct trade or business of the entity in the

matter, and that person's name and official title in the space

provided.

Specific Instructions

Name(s) and Signature(s)

Enter the name of the filer on the first line of page 1 of Form

3115.

In general, the filer of Form 3115 is the applicant. However, in

circumstances where Form 3115 is filed on behalf of the

applicant, enter the filer's name and identification number on the

first line of Form 3115 and enter the applicant's name and

identification number on the fourth line. Receivers, trustees, or

assignees must sign any Form 3115 they are required to file.

CFC or 10/50 corporation. For a CFC or 10/50 corporation

with a U.S. trade or business, enter the name of the designated

(controlling domestic) shareholder that retains the jointly

executed consent as provided for in Regulations section

1.964-1(c)(3)(ii) (or, if the designated shareholder is a member

of a consolidated group, the common parent corporation) on the

first line of Form 3115. Enter the name of the CFC or 10/50

corporation on the fourth line of Form 3115. In addition, a Form

3115 filed on behalf of the CFC or 10/50 corporation by its

controlling domestic shareholder(s) (or the common parent)

must be signed by an authorized officer of the designated

(controlling domestic) shareholder (or the common parent). If

there is more than one shareholder, the statement described in

Regulations section 1.964-1(c)(3)(ii) must be attached to the

application. Also, the controlling domestic shareholder(s) must

provide the written notice required by Regulations section

1.964-1(c)(3)(iii).

If Form 3115 is filed for multiple (i) applicants in a

consolidated group of corporations, (ii) applicants with a

common sponsor, (iii) CFCs, (iv) wholly owned partnerships

within a consolidated group, and/or (v) separate and distinct

trades or businesses (including QSubs or single-member LLCs),

attach a schedule listing each applicant and its identification

number (where applicable). This schedule may be combined

with the information requested for Part III, line 24a (regarding the

user fee), and Part IV (section 481(a) adjustment). If multiple

names and signatures are required (for example, in the case of

CFCs—see instructions below), attach a schedule labeled

“SIGNATURE ATTACHMENT” to Form 3115, signed under

penalties of perjury using the same language as in the

declaration on page 1 of Form 3115.

Estates or trusts. Enter the name of the estate or trust on the

first line of Form 3115. In the signature section, enter the

signature of the fiduciary, personal representative, executor,

administrator, etc., who has personal knowledge of the facts and

legal authority to bind the estate or trust in the matter, and that

person's official title in the space provided.

Individuals. If Form 3115 is filed for a couple who file a joint

income tax return, enter the names of both spouses on the first

line and the signatures of both spouses on the signature line.

Partnerships. Enter the name of the partnership on the first line

of Form 3115. In the signature section, include the signature of

one of the general partners or LLC members who has personal

knowledge of the facts and who is authorized to sign. Enter that

person's name and official title in the space provided. If the

authorized partner is a member of a consolidated group, then an

authorized officer of the common parent corporation with

personal knowledge of the facts must sign.

Exempt organizations. Enter the name of the organization on

the first line of Form 3115. In the signature section, enter the

signature of a principal officer or other person who has personal

knowledge of the facts and authority to bind the exempt

organization in the matter, and that person's name and official

title in the space provided.

Preparer (other than filer/applicant). If the individual

preparing Form 3115 is not the filer or applicant, the preparer

-3-

Form 2848

must also sign, and include the firm's name, where applicable.

Generally, for both automatic and non-automatic changes, the

preparer (if not the filer or applicant) must sign the original and

copies of Form 3115. If Form 3115 is e-filed, the preparer need

not sign the original e-filed Form 3115 but must still complete the

preparer information and, if applicable, must sign the duplicate

automatic Form 3115 copy.

Authorization to (1) represent the filer before the IRS, (2) receive

a copy of the requested letter ruling, or (3) perform any other

act(s) must be properly reflected on Form 2848. For further

details for an authorized representative and a power of attorney,

see section 9.03(8) and (9) of Rev. Proc. 2023-1.

Identification Number

A Form 2848 must be attached to Form 3115 in order for the

IRS to discuss a Form 3115 with the filer's representative, even if

the filer's representative prepared and/or signed the Form 3115.

Enter the filer's taxpayer identification number on the first line of

Form 3115 as follows.

• Individuals enter their social security number (SSN). For a

resident or nonresident alien, enter an individual taxpayer

identification number (ITIN). If Form 3115 is for a couple who file

a joint return, enter the identification numbers of both spouses.

• All others enter the employer identification number (EIN).

• If the filer is the common parent corporation of a consolidated

group of corporations or a common sponsor of multiple entities,

enter the EIN of the common parent or common sponsor on the

first line of Form 3115. If a member of a consolidated group other

than, or in addition to, the common parent, or if an entity with a

common parent, or if an entity with a common sponsor is

requesting an accounting method change, enter the EIN of the

applicant on the fourth line.

• If the common sponsor is filing Form 3115 on behalf of

multiple applicants with that common sponsor, or if the common

parent is filing Form 3115 on behalf of multiple applicants in a

consolidated group of corporations, multiple CFCs or 10/50

corporations, or multiple and distinct trades or businesses of a

member (including QSubs or single-member LLCs), attach a

schedule listing each applicant and its identification number (if

applicable).

• If the applicant is a foreign entity that is not otherwise required

to have or obtain an EIN, enter “Not applicable” in the space

provided for the identifying number.

If the filer intends to have the authorized representative

receive copies of correspondences regarding its Form

CAUTION 3115, it must check the appropriate box on Form 2848.

!

Fax Number for Option To Receive

Correspondence by Fax or Electronic Facsimile

Check the box to indicate whether the filer wants to receive, or

wants its authorized representative to receive, a copy of

correspondence regarding its Form 3115 (for example,

additional information letters or the letter ruling) by fax or

electronic facsimile. If the filer answered yes, the filer must

attach a statement indicating the applicant’s intention to request

to correspond by fax or electronic facsimile and include the

contact person’s fax number. The listed person(s) must be either

authorized to sign the Form 3115 or an authorized

representative of the filer that is included on Form 2848. For

further details on the fax procedures, see section 9.04(3) of Rev.

Proc. 2023-1.

Option To Receive Correspondence by

Encrypted Email Attachment

A filer that wants to receive, or wants its authorized

representative to receive, correspondence regarding its Form

3115 (for example, additional information letters or the letter

ruling) by encrypted email attachment must attach to Form 3115

a statement requesting the service. The request must specify

which email encryption method is to be used and, if the taxpayer

has not already provided the appropriate memorandums of

understanding (MOUs) to use encrypted email attachments,

must include those MOUs. For acceptable email encryption

methods and procedures, see section 9.05(3) of Rev. Proc.

2023-1.

Principal Business Activity Code

If the filer is a business, enter the 6-digit principal business

activity (PBA) code of the filer. The principal business activity of

the filer is the activity generating the largest percentage of its

total receipts. See the instructions for the filer's income tax return

for the filer's PBA code and definition of total receipts.

Address

Include the suite, room, or other unit number after the street

address. If the post office does not deliver mail to the street

address and the filer has a P.O. box, show the box number

instead of the street address.

Type of Accounting Method Change

Requested

Check the appropriate box on Form 3115 to indicate the type of

change being requested.

• Depreciation or amortization. Check this box for a change

in (1) depreciation or amortization (for example, the depreciation

method or recovery period); (2) the treatment of salvage

proceeds or costs of removal; (3) the method of accounting for

dispositions of depreciable property; or (4) the treatment of

depreciable property from a single asset account to a multiple

asset account (pooling), or vice versa.

• Financial products and/or financial activities of financial

institutions. Check this box for a change in the treatment of a

financial product (for example, accounting for debt instruments,

derivatives, mark-to-market accounting), or in the financial

activities of a financial institution (for example, a lending

institution, a regulated investment company, a real estate

investment trust, or a real estate mortgage investment conduit).

• Other. For non-automatic change requests, check this box if

neither of the above boxes applies to the requested change. In

the space provided, enter a short description of the change and

the most specific applicable Code section(s) for the requested

change (for example, change within section 263A costs;

deduction of warranty expenses, section 461; or change to the

Year of Change

The year of change is the first tax year the applicant uses the

proposed accounting method, even if no affected items are

taken into account for that year. Each applicant (and filer, if also

an applicant) must list its respective year of change.

Example. A calendar year taxpayer that has consistently

capitalized certain building repair costs from 2015 to 2020 files a

Form 3115 to change its method of accounting for building repair

costs to begin deducting these repair costs in 2021. The year of

change is calendar year 2021. Each applicant (and filer, if also

an applicant) must list its respective year of change.

Contact Person

The contact person must be an individual authorized to sign

Form 3115, or the filer's authorized representative. If this person

is someone other than an individual authorized to sign Form

3115, you must attach Form 2848, Power of Attorney and

Declaration of Representative.

-4-

Table A: Parts To Complete on Form 3115 for Accounting Method Changes

Information to be completed for automatic and non-automatic change requests

Automatic Change

Part I

Part II

X

X

Non-Automatic Change

Part III

X

X

completed contract method for long-term contracts, section

460).

Part IV

X

X

Part I—Information for Automatic

Change Request

For automatic change requests, this informational

requirement is satisfied by properly completing Part I, line 1, of

Form 3115.

Automatic Changes—Scope and Eligibility

Rules

As noted on Form 3115, the filer must provide all information

relevant to the requested accounting method change. All

relevant information includes all information requested on Form

3115, these instructions, and any other relevant information,

even if not specifically identified on Form 3115 or in these

instructions. Table A illustrates, for automatic and non-automatic

changes, the Parts of Form 3115 that must be completed. Table

B illustrates the Schedule(s) to be completed for common

method changes.

Line 1a. Enter the DCN on line 1a. These numbers may be

found in the List of DCNs at the end of the instructions, the List

of Automatic Changes, or in subsequently published guidance.

In general, enter a number for only one change. However, the

numbers for two or more changes may be entered on line 1a if

specifically permitted in applicable published guidance to file a

single Form 3115 for particular concurrent accounting method

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

example, an applicant requesting both a change to deduct repair

and maintenance costs for tangible property (DCN 184) and a

Table B: Schedules To Complete on Form 3115 for Common Accounting Method Changes

Information to be completed for common method change requests

Common Method

Changes

Schedule A

Part I

Part II

Accrual to Cash

X

X

Cash to Accrual

X

Schedule B

Schedule C

Part I

Part II

Schedule D

Part I

Part II

Schedule E

Part III

X**

Capitalize to Expense

Expense to Capitalize

X*

Depreciation

X

Long-Term Contracts

X

Inventory Valuation

Change

X

X

X

Must fully complete section

Section does not need to be completed.

X*

X

X

LIFO Change—Including

Pooling

Revenue Recognition

Change for Deferral

Method for Advance

Payments, Cost Offset

Methods, and/or

Applicable Financial

Statement Income

Inclusion Rule

X*

To be completed if applicable—See instructions regarding Schedules D and E, later

X** To be completed if applicable—See instructions regarding Schedule B, later.

-5-

X

X*

non-automatic change requests. See Table B for a sample of

common method changes and the Form 3115 Schedule(s) to be

completed for each. Additionally, see published guidance for any

additional required information or statements. For example, an

applicant that wants to use the mark-to-market method of

accounting under section 475(e) or (f) (DCN 64) must, by the

due dates provided in section 5.03 of Rev. Proc. 99-17, file a

statement that satisfies the requirements of section 5.04 of Rev.

Proc. 99-17.

change to capitalize acquisition or production costs (DCN 192)

may file a single Form 3115 for both changes by including both

DCNs 184 and 192 on line 1a of Form 3115.

Line 1b. If the accounting method change is not included in the

List of Automatic Changes or assigned a number in the

published guidance providing the automatic accounting method

change, check the box for “Other” on line 1b and identify the

revenue procedure or other published guidance under which the

automatic accounting method change is being requested.

Part II—Information for All Requests

Line 2. If “Yes,” provide an explanation as to why the

applicant(s) qualifies to file under the automatic change

procedures. If other published guidance provides for an

automatic accounting method change not listed in the List of

Automatic Changes, attach a statement citing the guidance. For

example, for an applicant electing out of certain exemptions from

securities dealer status to the mark-to-market method under

section 475, attach a statement citing Rev. Proc. 97-43. If the

eligibility rules otherwise restrict the applicant from requesting

the change under the automatic change procedures, but such

rules are waived for the requested change, then check “No.”

Line 4. If no, check “No.” If yes, check “Yes” and attach a

statement explaining why the applicant is eligible to change its

accounting method. For example, specific guidance may permit

an applicant to change its method of accounting in its final tax

year. See section 5.03(2) of Rev. Proc. 2015-13 and sections

6.01 (DCN 7) and 6.07 (DCN 107) of Rev. Proc. 2022-14, or any

successor.

Ordinarily, the IRS will not consent to a request for an

accounting method change when an applicant ceases to engage

in the trade or business or terminates its existence. Generally,

an applicant is considered to cease to engage in a trade or

business if the applicant terminates its existence for federal

income tax purposes, ceases operation of the trade or business,

or transfers substantially all the assets of the trade to another

taxpayer. For example, a cessation of a trade or business occurs

when a trade or business is incorporated or the assets of the

trade or business are contributed to a partnership. See sections

3.04, 5.01, and 5.03 of Rev. Proc. 2015-13.

Certain automatic method change requests require

concurrent method changes to be made in order to

CAUTION qualify for the automatic change procedures. For

example, a taxpayer making a change for accrued bonuses

under DCN 133 must make the concurrent UNICAP change if

the taxpayer is subject to section 263A but is not capitalizing the

accrued bonuses under section 263A.

!

Generally, an applicant is only eligible to use the automatic

change procedures of Rev. Proc. 2015-13 if it satisfies the

following requirements (see section 5.01(1) of Rev. Proc.

2015-13).

1. On the date the applicant files a Form 3115, the change is

described in the List of Automatic Changes.

2. On the date the applicant files a Form 3115, the applicant

meets all requirements for the change provided in the applicable

section of the List of Automatic Changes.

3. The requested change is not to the principal method

under Regulations sections 1.381(c)(4)-1(d)(1) or

1.381(c)(5)-1(d)(1).

4. The requested year of change is not the final year of the

trade or business (but see the instructions for line 4).

5. For an overall method of accounting change, the

applicant has not made or requested an overall method change

during any of the 5 tax years ending with the year of change.

6. The applicant has not made or requested a change for

the same item during any of the 5 tax years ending with the year

of change, and

7. In the case of a taxpayer that uses the AFS cost offset

method in Regulations section 1.451-3(c) and/or the advance

payment cost offset method in Regulations section 1.451-8(e)

and wants to make a cost-offset related inventory method

change, as defined in section 5.06 of Rev. Proc. 2015-13, as

modified by section 4.02 of Rev. Proc. 2021-34, 2021-35 I.R.B.

337 (that is described in the List of Automatic Changes) the

taxpayer makes a concurrent change under section 16.10(2)(a)

(iii)(E) and/or section 16.10(2)(a)(iv)(F) or section 16.10(2)(b)(ii)

(E) of Rev. Proc. 2022-14, as applicable.

Line 5. When an acquiring corporation operates the trades or

businesses of the parties as separate and distinct trades or

businesses after the date of distribution or transfer, the acquiring

corporation must use a carryover method. See Regulations

sections 1.381(c)(4)-1(a)(2) and 1.381(c)(5)-1(a)(2). On the

other hand, when the acquiring corporation does not operate the

trades or businesses of the parties as separate and distinct

trades or businesses after the date of distribution or transfer, the

acquiring corporation will generally use the principal method.

The applicant does not need to secure the Commissioner's

consent to use the principal method. See Regulations sections

1.381(c)(4)-1(d)(1) and 1.381(c)(5)-1(d)(1).

Line 6a. Generally, the applicant is under examination with

respect to a federal income tax return as of the date the

applicant (or filer) is contacted in any manner by a representative

of the IRS for the purpose of scheduling or conducting any type

of examination of the return. See section 3.18 of Rev. Proc.

2015-13.

Line 6b. Generally, the applicant's accounting method is an

issue under consideration if the examining agent has given the

applicant (or filer) written notification specifically citing the

treatment of the item as an issue under consideration. If an

examining agent does not propose an adjustment for the item

that is an issue under consideration during the examination, the

item continues to be an issue under consideration after the

examination ends only if the issue is placed in suspense. The

applicant's accounting method is an issue placed in suspense if

the examining agent has given the applicant (or filer) written

notification of the IRS's intent to examine the issue during the

examination of the subsequent tax year(s) to be examined. See

section 3.08 of Rev. Proc. 2015-13. A partnership or an S

corporation has an issue under consideration before

examination if the same item is an issue under consideration in

an examination of a partner’s, member’s, or shareholder's

federal income tax return. For consolidated groups, see section

3.08 of Rev. Proc. 2015-13 for issue under consideration rules.

Note. Some automatic changes in methods of accounting waive

some of the above requirements. These changes may be found

in the List of Automatic Changes or the published guidance

providing the automatic accounting method change.

Line 3. The filer must complete Form 3115, including any

required statements or attachments. See Table A for the Form

3115 Part(s) required to be completed for all automatic and

-6-

• 120-day window period. The 120-day window is the

120-day period following the date an examination of the

applicant ends, regardless of whether a subsequent examination

has commenced. An applicant qualifies under the 120-day

window period if Form 3115 is filed in a 120-day window and the

accounting method for the same item the applicant is requesting

to change is not an issue under consideration. See section

8.02(1)(b) of Rev. Proc. 2015-13. If the applicant checks this

box, also include the date the examination ended in the

designated space on line 7b.

• Method not before the director. The present method is not

before the director when it is (A) a change from a clearly

permissible method of accounting or (B) a change from an

impermissible method of accounting and the impermissible

method was adopted subsequent to the tax year(s) under

examination on the date the applicant files Form 3115. Checking

this box satisfies the statement requirement of section 8.02(1)(c)

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

• Change resulting in a negative adjustment. Check this

box if the change results in a negative adjustment. A negative

adjustment occurs where an item (A) results in a negative

section 481(a) adjustment for that item for the year of change,

and (B) would have resulted in a negative section 481(a)

adjustment in each tax year under examination if the change in

accounting method for that item had been made in the tax

year(s) under examination. Checking this box satisfies the

statement requirement in section 8.02(1)(e)(iii) of Rev. Proc.

2015-13.

• CAP. This box applies only to consolidated group members

participating in the compliance assurance process (CAP). In

general, audit protection applies to a new member if the new

member is under audit solely by joining a consolidated group

that participates in the CAP. See section 8.02(1)(d) of Rev. Proc.

2015-13. Checking this box satisfies the statement requirement

of section 8.02(1)(d)(ii) of Rev. Proc. 2015-13. If the applicant

checks this box, include the date the member joined the

consolidated group in the designated space on line 7b.

• Other. The List of Automatic Changes or other guidance

published in the I.R.B. may provide applicants with audit

protection. For example, specific guidance may provide a filer

under exam with audit protection. If this box is checked, attach a

statement citing the guidance providing audit protection.

• Audit protection at end of exam. If the applicant does not

fall into one of the categories listed above for line 7b, this box

should generally be checked. The applicant may receive audit

protection at the end of the examination, provided the examining

agent does not propose an adjustment for the same item and the

accounting method for that same item is not an issue under

consideration. For certain foreign corporations, the applicant

must satisfy additional requirements in order to receive audit

protection at the end of the examination. See section 8.02(1)(f)

of Rev. Proc. 2015-13.

For CFCs and 10/50 corporations, the issue under

consideration rules are different. See section 3.08(4) of

CAUTION Rev. Proc. 2015-13.

!

Lines 6c and 6d. If you answered “Yes” to line 6a, include the

name and telephone number of the examining agent, and the tax

year(s) under examination in the designated places on line 6c.

For any present or former consolidated groups, if there is a tax

year under examination, complete the information on line 6c.

Provide a copy of Form 3115 to the examining agent no later

than the date the filer timely files Form 3115. See section 6.03(3)

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

Line 7a. In general, audit protection applies when an

application for change in accounting method is granted. See

section 8.01 of Rev. Proc. 2015-13. For exceptions where audit

protection is not provided, see section 8.02 of Rev. Proc.

2015-13. You should answer “Yes” even if you do not receive

audit protection when the change is granted but might receive it

at the end of the exam under section 8.02(1)(f) of Rev. Proc.

2015-13. For example, a change made under DCN 17 for an

applicant that wants to change its treatment of research and

experimental expenditures does not receive audit protection.

See the List of Automatic Changes for additional method

changes not subject to audit protection. If you are making a

change on behalf of one or more applicants that are CFCs or

10/50 corporations and audit protection is unavailable for any

such applicants for one or more years due to the application of

section 8.02(5) of Rev. Proc. 2015-13, you should check “No”

and attach an explanation stating the applicants and the years

for which there is no audit protection under section 8.02(5).

If no audit protection is given for the requested change, check

“No” and attach an explanation. For example, if you are making a

change under DCN 17, your explanation is DCN 17. If you are

making a change under DCN 7, your explanation could be that

none of the items on line 7b apply. If multiple items are being

changed on one Form 3115 and at least one item has audit

protection and another item does not have audit protection,

check both “Yes” and “No.”

Line 7b. Generally, the applicant receives audit protection for

tax years prior to the year of change if they fall into one of the

following categories listed below. If Form 3115 is being filed on

behalf of multiple applicants or if multiple items are being

changed on one Form 3115, check all that apply and attach a

statement identifying which category applies to which applicant

or item. Except for “Not under exam” and “Other,” the following

only apply to applicants under examination.

• Not under exam. Check this box if (A) the applicant is not

under exam, and (B) audit protection applies to the item(s) being

changed.

• 3-month window. The 3-month window is the period

beginning on the 15th day of the 7th month following the close of

the applicant's tax year and ending on the 15th day of the 10th

month following the close of the applicant's tax year. For

52-53-week applicants, the tax year begins on the 1st day of the

calendar month nearest to the 1st day of the 52-53-week tax

year. See Rev. Proc. 2015-33. For applicants with a short tax

year ending before the 15th day of the 10th month after the short

tax year begins, the 3-month window is the period beginning on

the 1st day of the 2nd month preceding the month in which the

short tax year ends and ending on the last day of the short tax

year. An applicant qualifies under the 3-month window period

when (A) it has been under examination for at least 12

consecutive months as of the 1st day of the 3-month window,

and (B) the accounting method for the same item the applicant is

requesting to change is not an issue under consideration. See

section 8.02(1)(a) of Rev. Proc. 2015-13. Checking this box

satisfies the statement requirement of section 8.02(1)(a)(iv) of

Rev. Proc. 2015-13.

For CFCs and 10/50 corporations, the rules for audit

protection are different. See section 8.02 of Rev. Proc.

CAUTION 2015-13 (different rules for the 3-month window,

120-day window, and audit protection at end of exam).

!

Line 8a. If you answered “Yes,” complete lines 8b–d.

Line 8b. To determine if the applicant’s accounting method is

an issue under consideration by Appeals and/or a federal court,

see sections 3.08(2) and 3.08(3) of Rev. Proc. 2015-13.

Line 8c. If you answered “Yes” to line 8a, include the name and

telephone number of the Appeals officer(s) and/or counsel to the

government, as well as the tax year(s) before Appeals and/or

federal court in the designated places.

Line 8d. If you answered “Yes” for line 8a, provide a copy of the

signed Form 3115 to the Appeals officer(s) and/or all counsel to

the government, as applicable, no later than the date the filer

-7-

lines 16a–b is otherwise provided in the applicable Form 3115

Schedules A–E: DCNs 6, 7, 28, 54, 55, 64, 65, 108, 111, 114,

127, 194, and 200 (only for changes listed in sections 6.12(3)(a)

(ix), 6.12(3)(a)(x), and 6.12(3)(b)(viii) in the List of Automatic

Changes; 205 (only for changes listed in sections 6.13(3)(h) and

6.13(3)(j) in the List of Automatic Changes); 206 (only for

changes listed in sections 6.14(3)(a), 6.14(3)(h), and 6.14(3)(j)

in the List of Automatic Changes; 207 (only for changes listed in

sections 6.15(3)(a) and 6.15(3)(d) in the List of Automatic

Changes); 211, 218, 231, 237, 241, 242, 250, 251, 252, 253,

254, 255, and 256. Line 16c does not need to be completed for

applicants filing automatic method changes. For further details

on what is to be included, see Rev. Proc. 2023-1, sections

7.01(9) (statement of supporting authorities), 9.03(1) (facts and

other information), and 9.03(4) (analysis of material facts).

If the automatic DCN is not specifically listed in the paragraph

above, or subsequent guidance released after the issuance of

these instructions, skip lines 16a–c.

timely files Form 3115. See section 6.03(3)(a) of Rev. Proc.

2015-13.

Line 9. If you answered “Yes” to line 6a or 8a, complete line 9.

The information requested on line 9 should be included on a

separate attachment.

Line 10. If you answered “Yes,” attach an explanation. Unless

otherwise provided, the applicant does not receive audit

protection for the requested change if it is an issue under

consideration. See sections 3.08 and 8.02(7) of Rev. Proc.

2015-13.

Lines 11a–c. Unless otherwise provided, an applicant is not

eligible to file under the automatic change procedures if the

applicant made or requested a prior overall method change or a

prior item change (for the same item) within the 5 tax years

ending with the requested year of change. For additional details,

see section 9.03(6)(a) of Rev. Proc. 2023-1 and section 11.02(2)

of Rev. Proc. 2015-13.

Line 17. Insurance companies must also attach a statement

indicating whether the proposed accounting method will be used

for annual statement accounting purposes.

Line 12. For further details, see section 9.03(6)(b) of Rev. Proc.

2022-1.

Line 13. If you answered “Yes,” complete Schedule A of Form

3115. For example, an overall accounting method change

includes a change from an accrual method to the cash receipts

and disbursements method or vice versa. See section 446(c).

Line 18. For details on requesting and scheduling a

conference, see sections 9.04(4) and 10 of Rev. Proc. 2023-1.

Lines 19a and 19b. For certain automatic method changes, the

applicant must demonstrate that it meets the gross receipts test

under section 448(c) to qualify for the change. This gross

receipts test is met if a taxpayer has average annual gross

receipts for the 3 prior tax years at or below the inflation-adjusted

amount. See Useful Items earlier, for guidance on the

inflation-adjusted amounts.

For the calculation of gross receipts for an overall accounting

method change request, whether an applicant qualifies as a

small business taxpayer for purposes of applying sections 263A

and 471, or whether an applicant qualifies as an eligible small

business under section 474(c), see section 448(c) and

Regulations section 1.448-2(c), and, as applicable, Regulations

section 1.263A-1(b)(1)(j) or Regulations section 1.471-1(a)(2).

For the calculation of gross receipts for determining whether

the applicant has an exempt construction contract under

Regulations section 1.460-3(b), for contracts entered into after

December 31, 2017, in tax years ending after December 31,

2017, see section 448(c) and Regulations sections 1.448-2(c)

and 1.460-3(b)(3).

Line 14. Provide the information requested on lines 14a–d if the

applicant answered “No” to question 13 or if the applicant

answered “Yes” to question 13 and is also changing to a special

accounting method for one or more items.

With the information requested on line 14b, the applicant is

also required to provide a statement of whether or not the

applicant has claimed any federal tax credit, grant, or subsidy

relating to the item(s) being changed (for example, the employee

retention credit for a change in method related to payroll taxes).

A special accounting method for an item is an accounting

method (other than the cash method or an accrual method)

expressly permitted by the Code, regulations, or guidance

published in the I.R.B. that deviates from the rules of sections

446, 451, and 461 (and the related regulations) that is applicable

to the applicant's overall accounting method (proposed overall

method if being changed). For example, the installment

accounting method under section 453, the mark-to-market

method under section 475, and the long-term contract method

under section 460 are special methods of accounting. See

section 15.01(2)(d) of Rev. Proc. 2022-14.

Part III—Information for

Non-Automatic Change Request

Lines 15a and 15b. Provide the requested information for each

applicant. For guidance on using different methods of

accounting for each trade or business, see section 446(d).

An applicant may include each member of a consolidated

group, each wholly owned partnership within a consolidated

group, each separate and distinct trade or business of each

member of a consolidated group or other entity (even if the

change is for all of a member's or other entity's trades or

businesses), and each eligible CFC or 10/50 corporation filing a

single Form 3115 requesting the identical accounting method

change. Also see Who Must File, earlier.

Non-automatic change—scope and eligibility rules. An

applicant may not use the non-automatic change procedures if

any of the following eligibility limitations apply at the time Form

3115 is filed with the IRS National Office.

1. The change in accounting method is required to be made

according to a published automatic change procedure, such as

Rev. Proc. 2022-14.

2. The requested year of change is the final year of the trade

or business, unless (a) the change is a result of a transaction to

which section 381(a) applies; or (b) the applicant demonstrates

to the satisfaction of the IRS National Office compelling

circumstances, or that it is in the interest of sound tax

administration for the applicant to change in its final year.

Lines 16a–c. For non-automatic changes, the applicant is

required to provide a full explanation of the legal basis to support

the proposed method, including all authorities supporting the

proposed method, and a discussion of all contrary authorities.

For further details on what is to be included, see Rev. Proc.

2023-1, sections 7.01(9) (statement of supporting authorities),

9.03(1) (facts and other information), 9.03(2) (statement of

contrary authorities), 9.03(4) (analysis of material facts), and

9.03(7) (statement identifying pending legislation).

For the following automatic method changes, the applicant is

only required to complete lines 16a–b, unless the information on

Line 20. If you answered “Yes,” attach an explanation

describing why the applicant is not eligible to file a request under

the automatic change procedures.

-8-

change and next 3 tax years) for a positive section 481(a)

adjustment. However, when an applicant is under examination,

the section 481(a) adjustment period is 2 tax years (year of

change and next tax year) for a positive section 481(a)

adjustment for a requested accounting method change unless

one of the following categories described on line 7b applies:

3-month window, 120-day window period, method not before the

director, or CAP.

For some accounting method changes, there may be special

rules relating to the section 481(a) adjustment period. See, for

example, section 16.10(4)(b)(iv)(D) of Rev. Proc. 2022-14

pertaining to certain section 451 cost offset accounting method

changes resulting from concurrent cost-offset related inventory

method changes.

Also, for certain accounting method changes, the applicant

must make the change on a cut-off basis or modified cut-off

basis. See, for example, Regulations section 1.446-1(e)(2)(ii)(d)

(5)(iii). In those cases, there is no section 481(a) adjustment.

Under a cut-off basis, only the items arising on or after the

beginning of the year of change are accounted for under the new

method of accounting. Any items arising before the year of

change continue to be accounted for under the applicant's

former accounting method.

For a change in accounting method for accruing a foreign

income tax expense, do not compute a section 481(a)

adjustment. Instead, apply the modified cut-off rules in

Regulations section 1.905-1(d)(5). Attach a statement showing,

for each separate statutory or residual grouping, the upward and

downward adjustment (accounted for in the currency in which

the foreign tax liability is denominated) that is required by

Regulations section 1.905-1(d)(5)(ii). Provide a separate upward

and downward adjustment for foreign income taxes for which the

foreign tax credit is disallowed and to which section 275(a)(4)

does not apply. See Regulations section 1.905-1(d)(5) and the

examples in Regulations section 1.905-1(d)(6) for additional

information.

If multiple items are being changed on one Form 3115 and at

least one item is changed on a cut-off basis or modified cut-off

basis and another item is changed with a section 481(a)

adjustment, check both “Yes” and “No” and attach a statement

identifying which item(s) is being made on a cut-off basis or

modified cut-off basis.

An eligible terminated S corporation (as defined in section

481(d)(2)) that is required to change an accounting method as a

result of a revocation of its S corporation election must take into

account the resulting positive or negative section 481(a)

adjustment ratably during the 6-year period beginning with the

year of change. In addition, an eligible terminated S corporation

that is permitted to continue to use the cash method after the

revocation of its S corporation election and that changes to an

overall accrual method for the C corporation’s first tax year after

such revocation may take into account the resulting positive or

negative adjustment required by section 481(a)(2) ratably during

the 6-year period beginning with the year of change. See Rev.

Proc. 2018-44, 2018-37 I.R.B. 426. Section 481(d)(2) defines an

eligible terminated S corporation as any C corporation that (1)

was an S corporation on December 21, 2017; (2) revokes its S

corporation election after December 21, 2017, but before

December 22, 2019; and (3) has the same owners of stock in

identical proportions on December 22, 2017, and the revocation

date.

If the accounting method change is an automatic change in

functional currency under section 985 (see section 29.01 of Rev.

Proc. 2022-14), the adjustments required under Regulations

section 1.985-5 must be made on the last day of the tax year

ending before the year of change. Any gain or loss that must be

recognized under Regulations section 1.985-5 is included in

income or earning and profits on the last day of the tax year

Line 21. Attach true copies of all contracts, agreements, and

other documents directly related to the proposed accounting

method change. See section 9.03(3) of Rev. Proc. 2023-1.

Line 22. Include a statement explaining the reason for the

proposed change. See sections 7.01(1)(d) and 9.03(1) of Rev.

Proc. 2023-1.

Line 23. If you answered “No” to line 23, a common parent

requesting an accounting method change on behalf of a member

of the consolidated group must attach a statement explaining the

accounting method used by each member of the consolidated

group for the particular item that is the subject of the method

change request. See section 6.02(5) of Rev. Proc. 2015-13.

Lines 24a and 24b. For non-automatic change requests, you

must pay a user fee for each applicant. Where the filer is not an

applicant, a fee is not required for the filer. See section 15 and

Appendix A of Rev. Proc. 2023-1 for information regarding user

fees, including reduced user fees and user fees for additional

applicants filing identical changes in methods of accounting.

Pay the user fees through PAY.gov.

Note. Filers filing under the automatic change procedures do

not pay a user fee.

Example 1. Filer is the common parent of a consolidated

group of corporations. Filer files a single Form 3115 on behalf of

itself and two other members of the consolidated group for an

identical accounting method change. There are three applicants

(Filer and the two other members of the consolidated group).

Therefore, for a non-automatic change request, all three

applicants are required to pay a user fee. The filer applicant

must submit the regular user fee under section (A)(3)(b)(i) of

Appendix A of Rev. Proc. 2023-1 (or a reduced fee per section

(A)(4) of Appendix A of Rev. Proc. 2023-1, if applicable), and the

two other applicants qualify for the reduced user fee under

section (A)(5)(b) of Appendix A of Rev. Proc. 2023-1.

Example 2. Filer is the common parent of a consolidated

group of corporations. Filer is filing a single Form 3115 on behalf

of two other members of the consolidated group for an identical

accounting method change. There are two applicants on Form

3115 (the two members of the consolidated group). Filer is not

changing its accounting method and, therefore, does not pay a

fee on account of itself. For a non-automatic change request,

both applicants are required to pay a user fee. One applicant

must submit the regular user fee under section (A)(3)(b)(i) of

Appendix A of Rev. Proc. 2023-1 (or a reduced fee per section

(A)(4) of Appendix A of Rev. Proc. 2023-1, if applicable), and the

other applicant qualifies for the reduced user fee under section

(A)(5)(b) of Appendix A of Rev. Proc. 2023-1. This example

applies similarly to a filer that is the common sponsor of multiple

entities.

Example 3. Filer, a single taxpayer, files Form 3115 on

behalf of its three separate and distinct trades or businesses.

The request is for an identical accounting method change.

Notwithstanding that Filer is a single taxpayer, there are three

applicants on Form 3115. For a non-automatic change request,

all three applicants are required to pay a user fee. One applicant

must submit the regular user fee under section (A)(3)(b)(i) of

Appendix A of Rev. Proc. 2023-1 (or a reduced fee per section

(A)(4) of Appendix A of Rev. Proc. 2023-1, if applicable), and the

other two applicants qualify for the reduced user fee under

section (A)(5)(b) of Appendix A of Rev. Proc. 2023-1.

Part IV—Section 481(a) Adjustment

Line 25. Ordinarily, an adjustment under section 481(a) is

required for accounting method changes. The section 481(a)

adjustment period is generally 1 tax year (year of change) for a

negative section 481(a) adjustment and 4 tax years (year of

-9-

ending before the year of change, and is not subject to section

481. Attach a statement showing the adjustment required under

Regulations section 1.985-5. The statement should include the

amount of the adjustment required pursuant to Regulations

section 1.985-5, a summary of the computation of such

adjustment, and an explanation of any other adjustments

required by Regulations section 1.985-5.

Except if instructed differently, you must attach a statement

showing the (net) section 481(a) adjustment for each change in

method for each applicant included on Form 3115. Include a

summary of how the (net) section 481(a) adjustment was

computed and an explanation of the methodology used to

determine it. The summary of computation and explanation must

be sufficient to demonstrate that the (net) section 481(a)

adjustment is computed correctly. If the applicant is a CFC or

10/50 corporation, or a trade or business of a CFC or 10/50

corporation, and its functional currency is not the U.S. dollar,

state the (net) section 481(a) adjustment in that functional

currency. The statement may be combined with the information

requested on the fourth line on page 1 (list the applicants and

their identification numbers) and on line 24 (user fee).

Salary bonuses treated as incurred

under the present method, but not

incurred under the proposed

method . . . . . . . . . . . . . . . .

Beginning inventory as of January. 1,

2022, with capitalized salary bonuses

computed under the present

method . . . . . . . . . . . . . . . .

Beginning inventory as of January. 1,

2022, with capitalized salary bonuses,

computed under the proposed

method . . . . . . . . . . . . . . . .

Decrease in beginning inventory as of

January. 1, 2022 . . . . . . . . . . .

Net section 481(a) adjustment . . . .

$100,000

$92,000

($8,000)

+$32,000

Line 26. In computing the net section 481(a) adjustment, an

applicant must take into account all relevant accounts. For some

changes (for example, a change that affects multiple accounts),

the section 481(a) adjustment is a net section 481(a)

adjustment. See Example 2 above and the example under

Schedule A, Part l, line 2h, later. If there is more than one

method change requested, the section 481(a) adjustment is

generally separately stated for each method change. However,

some changes may require the netting of section 481(a)

adjustments with those for certain other method changes made

during the same year of change. See, for example, certain

changes under section 16.10 of Rev. Proc. 2022-14.

If an election has been made under Regulations section

1.59A-3(c)(6)(i) to waive an allowed deduction for purposes of

determining the section 59A base erosion and anti-abuse tax,

and the method of accounting for the waived deduction is being

changed, the amount of the net section 481(a) adjustment is

determined without regard to the waived deduction. See

Regulations section 1.59A-3(c)(6)(iii)(D). As a result, a waived

deduction has no effect on the calculation of the amount of a

section 481(a) adjustment. For an example illustrating how to

calculate a section 481(a) adjustment with respect to a method

of accounting for which an applicant has waived deductions, see

Regulations 1.59A-3(d)(9) (Example 9).

Section 481(a) adjustments (or components of section

481(a) adjustments) from changes under DCN 248

CAUTION included in the same Form 3115 must be stated in

accordance with section 6.22(8) of Rev. Proc. 2022-14.

!

Example 1. Under its present method, XYZ Corporation is

deducting certain costs that are required to be capitalized into

inventory under section 263A. XYZ Corporation is proposing to

change its account method to properly capitalize such costs.

The computation of the section 481(a) adjustment with respect

to the accounting method change is demonstrated as follows.

Beginning inventory for year of change under

proposed method . . . . . . . . . . . . . . . . .

Beginning inventory for year of change under present

method . . . . . . . . . . . . . . . . . . . . . . .

Section 481(a) adjustment . . . . . . . . . . . . . .

$40,000

$120,000

$100,000

+$20,000

Example 2. WXY Corporation, a calendar year taxpayer, is a

producer and capitalizes costs that are required to be capitalized

into inventory under section 263A. Each February, WXY

Corporation pays a salary bonus to each employee who remains

in its employment as of January 31 for the employee's services

provided in the prior calendar year. Under its present method,

WXY Corporation treats these salary bonuses as incurred in the

tax year the employee provides the related services. For 2022,

WXY Corporation proposes to change its accounting method to

treat salary bonuses as incurred in the tax year in which all

events have occurred that establish the fact of the liability to pay

the salary bonuses and the amount of the liability can be

determined with reasonable accuracy, pursuant to section

20.01(2) of Rev. Proc. 2022-14. The computation of WXY

Corporation's net section 481(a) adjustment for the change in

accounting method for salary bonuses is demonstrated as

follows.

Line 27. Certain automatic method changes require an

applicant with a section 481(a) adjustment remaining on a prior

change in accounting method to take the remaining portion of

the prior section 481(a) adjustment into account in the year of

change. See, for example, DCNs 234 and 262. If applicable,

enter the amount of the remaining portion of the section 481(a)

adjustment from the prior change.

Line 28. An applicant may elect a 1-year section 481(a)

adjustment period for a positive section 481(a) adjustment that is

less than $50,000. See section 7.03(3)(c) of Rev. Proc. 2015-13.

An applicant may also elect a 1-year section 481(a) adjustment

period for all positive section 481(a) adjustments for the year of

change if an eligible acquisition transaction occurs during the

year of change or in the subsequent tax year on or before the

due date for filing the applicant's federal tax return for the year of

change. For more details about the eligible acquisition

transaction election, see section 7.03(3)(d) of Rev. Proc.

2015-13.

Line 29. If “Yes,” explain the nature and amount of the section

481 adjustment attributable to the intercompany transaction(s).

-10-

Schedule A—Change in Overall

Method of Accounting

Accrued income (line 2a) . . . . . . . . . . . .

Less:

Uncollectible amount

Part I—Change in Overall Method

. . . . . . . . . . . . . .

Net income accrued but not received

All applicants filing to change their overall accounting method

must complete Schedule A, Part I, including applicants filing

under DCNs 122, 126, 127, 128, 233, 257, 258, and 259 in the

List of Automatic Changes.

(50,000)

$200,000

. . . .

Less:

Accrued expenses (line 2c)

Lines 2a–g. Enter the amounts requested on lines 2a through

2g, even though the calculation of some amounts may not have

been required in determining taxable income due to the

applicant's present accounting method. Applicants with an

applicable financial statement changing to an accrual method

and entering an amount on line 2a should complete Schedule B

if the income is subject to section 451(b).

. . . . . . . . . .

(75,000)

Expenses deducted as recurring item

(line 2g) . . . . . . . . . . . . . . . . . . . . .

(5,000)

Total expenses accrued but not paid . . . . .

(80,000)

Section 481(a) adjustment . . . . . . . . . . . .

+$120,000

Line 3. Check “Yes” if the applicant is requesting to use the

recurring item exception (section 461(h)(3)). The section 481(a)

adjustment must include the amount of the additional deduction

that results from using the recurring item exception.

Note. Do not include amounts that are not attributable to the

accounting method change, such as amounts that correct a

math or posting error or errors in calculating tax liability. In

addition, for a bank changing to an overall cash/hybrid method of

accounting, do not include any amounts attributable to a special

method of accounting. See DCN 127.

Line 5. Check "Yes" if the applicant is requesting a change to

the overall cash method or to a method in which a taxpayer uses

an accrual method for purchases and sales of inventories and

uses the cash method for computing all other items of income

and expense under section 15.17 of Rev. Proc. 2022-14 (DCNs

233 and 259). See section 15.17(5)(a) of Rev. Proc. 2022-14 to

determine whether an applicant qualifies as a small business

taxpayer.

Line 2b. Enter amounts received or reported as income in a

prior year that were not earned as of the beginning of the year of

change. For example, an advance payment received in a prior

year for goods that were not delivered by the beginning of the

year of change may be reported in the subsequent year if the

applicant qualifies under Regulations section 1.451-8(c) or (d),

as applicable. If any amounts entered on line 2b are for advance

payments, complete Schedule B.

Part II—Change to the Cash Method for

Non-Automatic Change Request

Limits on cash method use. Except as provided below, C

corporations and partnerships with a C corporation as a partner

may not use the cash method. Tax shelters are also precluded

from using the cash method. For this purpose, a trust subject to

tax on unrelated business income under section 511(b) is

treated as a C corporation with respect to its unrelated trade or

business activities.

The limit on the use of the cash method under section 448

does not apply to the following.

1. Farming businesses as defined in section 448(d)(1).

2. Qualified personal service corporations as defined in

section 448(d)(2).

3. C corporations and partnerships with a C corporation as a

partner that meets the section 448(c) gross receipts test for the

tax year. The gross receipts test is met if a taxpayer has average

annual gross receipts for the 3 prior tax years at or below the

inflation-adjusted amount. See Useful Items, earlier, for

guidance on the inflation-adjusted amount for the applicable tax

year. Also, see section 448(c) and Regulations section

1.448-2(c) to determine if the applicant qualifies for this

exception.

Line 2h. Enter the net amount, which is the net section 481(a)

adjustment, on line 2h. Also, enter the net section 481(a)

adjustment on Part IV, line 26. See the instructions for Part IV,

line 26, earlier.

The following example illustrates how an applicant calculates

the section 481(a) adjustment when changing to an accrual

method, a nonaccrual-experience method, and the recurring

item exception.

Example. ABC Corporation, a calendar year taxpayer using

the cash method of accounting, has the following items of

unreported income and expense on December 31, 2021.

Accrued income . . . . . . . . . . . . . . . . . . . . . .

Uncollectible amounts based on

the nonaccrual-experience method . . . . . . . . .

Accrued amounts properly deductible

(economic performance has occurred) . . . . . . .

Expenses eligible for recurring item

exception . . . . . . . . . . . . . . . . . . . . . . . . .

$250,000

$250,000

50,000

75,000

5,000

ABC Corporation changes to an overall accrual method, a

nonaccrual-experience method, and the recurring item

exception for calendar year 2022. The section 481(a) adjustment

is calculated as of January 1, 2022, as follows.

For farming corporations and partnerships with a C

corporation as a partner, see section 447 for limits on the use of

the cash method.

Use of the cash method is also limited for a taxpayer that is

required to maintain an inventory because the production,

purchase, or sale of merchandise is an income-producing factor.

However, see sections 448(c) and 471(c), and sections 15, 17

(DCNs 233 and 259), and 22.18 of Rev. Proc. 2022-14 (DCN

235) for an exception to this requirement for small business

taxpayers with average annual gross receipts that meet the

gross receipts test.

-11-

Schedule B—Changes Related to the

Deferral Method for Advance

Payments, Cost Offset Methods,

and/or the Applicable Financial

Statement Income Inclusion Rule

determine the AFS income inclusion amount from the sale of

inventory (AFS cost offset method). See Regulations section

1.451-3(c) for the rules relating to the AFS cost offset method.

Applicants using this method for a trade or business that have

advance payments for the sale of inventory must also use the

advance payment cost offset method described in Regulations

section 1.451-8(e). If an applicant chooses to use the AFS cost

offset method and/or the advance payment cost offset method,

as applicable, it must use such method(s) for all items of gross

income in the trade or business that meet the criteria set forth in

Regulations sections 1.451-3(c) and 1.451-8(e), as applicable.

Under the AFS cost offset method and the advance payment

cost offset method, the cost of goods in progress offset must be

determined separately for each item of inventory. Under some

circumstances, an applicant without an AFS may use the

advance payment cost offset method in Regulations section

1.451-8(e). See DCN 253 in section 16.10 of Rev. Proc.

2022-14. Applicants changing to or within a cost offset method

may be required to make concurrent accounting method

changes, including cost-offset related inventory changes, as

defined in section 5.06 of Rev. Proc. 2015-13, as modified by

section 4.02 of Rev. Proc. 2021-34. See DCN 255 in section

16.10 of Rev. Proc. 2022-14.

If the applicant is requesting to change to or within a cost

offset method, attach a detailed description of the present and

proposed methods including the following information.

1. Does the applicant have an AFS as defined in

Regulations section 1.451-3(a)(5)? If so, identify the type of

AFS.

2. Describe any other concurrent proposed cost-offset

related inventory method changes and describe the order in

which the concurrent changes are being implemented. See

section 16.10 of Rev. Proc. 2022-14.

3. Provide a general description of the items of inventory to

which the change applies.

4. Describe how the applicant determines the cost of goods

allocable to each respective item of inventory as required by

Regulations section 1.451-3(c)(3) or Regulations section

1.451-8(e)(4), as applicable.

Line 1. The deferral method for advance payments. In

general, advance payments must be included in gross income in

the tax year of receipt for federal income tax purposes. However,

under Regulations section 1.451-8(c) or (d), an applicant may

defer the inclusion in income of certain advance payments (or a

portion thereof), as defined in Regulations section 1.451-8(a)(1),

to the next tax year. If the applicant is also using the advance

payment cost offset method, the portion of any advance

payment to which the cost offset applies is deferred to the tax

year in which ownership of the good is transferred to the

customer. Under the cost offset method, only the portion of the

payment in excess of costs incurred is recognized by the year

following the year of receipt.

Applicants with or without an applicable financial statement

(AFS), as defined in Regulations section 1.451-3(a)(5), may be

eligible to use a deferral method for advance payments. See

section 451(c), Regulations section 1.451-8, and section 16.10

of Rev. Proc. 2022-14 for more information about the deferral

method for advance payments.

Some applicants requesting to change to the deferral method

must file under the non-automatic change procedures of Rev.

Proc. 2015-13. See section 16.10(3) of Rev. Proc. 2022-14. All

other applicants must generally file under the automatic change

procedures of Rev. Proc. 2015-13.

If the applicant is requesting to change to the deferral method

for advance payments described in Regulations section

1.451-8(c) or (d), attach a detailed description of the present and

proposed methods including the following information.

1. Explain how the payments meet the definition of an

advance payment as defined in Regulations section 1.451-8(a)

(1).

2. Does the applicant have an AFS as defined in

Regulations section 1.451-3(a)(5)? If so, identify the type of

AFS.

3. For applicants with an AFS. Describe the advance

payment allocation method if there is more than one

performance obligation as defined in Regulations section

1.451-3(a)(11).

For applicants without an AFS. If the applicant receives an

advance payment that is attributable to one or more items

described in Regulations section 1.451-8(a)(1)(i)(C), describe

the objective criteria on which the applicant's method is based.

For example, the allocation method may be based on payments

the applicant receives for an item or items it regularly sells or

provides separately.

4. For applicants with an AFS. Under the proposed method,

if the applicant is required to adjust AFS revenue in accordance

with Regulations section 1.451-8(c)(2), describe the specific

adjustments used to arrive at the amount taken into account as

AFS revenue.

Line 3. Methods to conform to the AFS income inclusion

rule. Generally, for an accrual method taxpayer, the all events

test under Regulations section 1.451-1(a) for an item of gross

income, or portion thereof, is met no later than when that item, or

portion thereof, is taken into account as AFS revenue (AFS

income inclusion rule). The AFS income inclusion rule does not

apply to taxpayers that do not have an AFS, as defined in

Regulations section 1.451-3(a)(5), for a tax year. See section

451(b), Regulations section 1.451-3, and DCN 250 in section

16.10 of Rev. Proc. 2022-14 for additional information about

methods to conform to the AFS income inclusion rule.

If the applicant is requesting to change to or within a method

to conform to the AFS income inclusion rule under section

451(b) and Regulations section 1.451-3, attach a detailed

description of the present and proposed methods including the

following information:

1. Identify the type of AFS that is used for purposes of the

AFS income inclusion rule.

2. If the taxpayer is required to allocate transaction price to

multiple items of gross income in accordance with Regulations

section 1.451-3(d), including any item(s) of gross income that is

accounted for under a special method of accounting, describe

the present and proposed allocation method.

3. Under the proposed method, if the applicant is required to

adjust AFS revenue in accordance with Regulations section

1.451-3(b)(2), describe the specific adjustments used to arrive at

the amount taken into account as AFS revenue.

Applicants filing under the non-automatic change procedures

of Rev. Proc. 2015-13 should include all information requested in

the instructions for Schedule B, line 1, and see Rev. Proc.

2015-13 and Non-automatic change scope and eligibility rules

under Part III, earlier, for additional requirements.

Line 2. Cost offset methods. Regulations section 1.451-3(c)

allows taxpayers to use a cost offset accounting method to

-12-

submethod, Schedule D, Part II, is not applicable. Use

Schedule C, Changes Within the LIFO Inventory Method.

4. If under the applicant's proposed method of accounting,

AFS revenue is reduced in accordance with the enforceable

right rules in Regulations section 1.451-3(b)(2)(i)(B), describe

why the applicant does not have an enforceable right to the

reduction amount.

Line 3. If an applicant is subject to, but not in compliance with,

section 263A, generally on the same Form 3115 the applicant

must first comply with section 263A before changing an

inventory valuation method. The applicant must complete

Schedule D, Part III, Method of Cost Allocation. For exceptions,

see Regulations section 1.263A-7(b)(2).

Schedule C—Changes Within the

LIFO Inventory Method

Line 5a. If the applicant properly elected the LIFO inventory

method but is unable to furnish a copy of Form(s) 970,

Application to Use a LIFO Inventory Method, attach the following

statement to Form 3115.

“I certify that to the best of my knowledge and belief [name of

applicant] properly elected the LIFO inventory method by filing

Form 970 with its return for the tax year(s) ended [insert date(s)]

and otherwise complied with the provisions of section 472(d)

and Regulations section 1.472-3.”

Use this schedule to request a change from one LIFO inventory

method or submethod to another LIFO inventory method or

submethod. All applicants changing within the LIFO inventory

method or submethods must complete Part I. Complete Part II

only if applicable.

Part I—General LIFO Information

Line 6. Applicants changing to the inventory price index

computation (IPIC) method must use this method for all LIFO

inventories. This requirement includes applicants requesting

DCN 61 or 62 in the List of DCNs, later.

Line 5c. Attach the two statements required by section 23.01(5)

of Rev. Proc. 2022-14.

Schedule D—Change in the

Treatment of Long-Term Contracts

Under Section 460, Inventories, or

Other Section 263A Assets

Line 6 Applicants requesting to make a cost-offset related

inventory method change, as defined in section 5.06 of Rev.

Proc. 2015-13, as modified by section 4.02 of Rev. Proc.

2021-34, may also be required to make concurrent cost offset

changes under Regulations sections 1.451-3 and/or 1.451-8.

See the changes under DCN 255 in section 16.10 of Rev. Proc.

2022-14. Applicants making concurrent cost offset changes

under Regulations sections 1.451-3 and/or 1.451-8 should also

complete Schedule B, line 2. Concurrent changes may need to

be implemented in a particular order, and special eligibility rules

regarding section 481(a) adjustments may apply. See section

16.10 of Rev. Proc. 2022-14 and section 5.01(1)(g) of Rev. Proc.

2015-13, as modified by section 4.01 of Rev. Proc. 2021-34.

Part I—Change in Reporting Income From

Long-Term Contracts

Line 2a. Under section 460(f), the term “long-term contract”

means any contract for the manufacture, building, installation, or

construction of property that is not completed in the tax year in

which it is entered into. However, a manufacturing contract will

not qualify as long term unless the contract involves the

manufacture of (a) a unique item not normally included in

finished goods inventory, or (b) any item that normally requires

more than 12 calendar months to complete.

Long-term contracts that do not meet the exceptions under

section 460(e) must be accounted for using the percentage of

completion method. See section 460 and the related regulations.

Part III—Method of Cost Allocation

Applicants requesting to change their accounting method for any

property (produced or acquired for resale) subject to section

263A or any long-term contracts as described in section 460

must complete this schedule.

If the change is for noninventory property that is subject to

section 263A, attach a detailed description of the types of

property involved.

Line 2b. To qualify for the exceptions under section 460(e), the

contract must be:

1. A home construction contract as defined in section 460(e)

(5)(A), or

2. Any other construction contract entered into by the

applicant if, at the time the contract is entered into, it is expected

to be completed within 2 years and the applicant's average

annual gross receipts for the 3-year period preceding the tax

year the contract was entered into do not exceed the

inflation-adjusted amount. See Useful items, earlier.

There are several methods available for allocating and

capitalizing costs under section 263A, and for allocating costs to

long-term contracts. A change to or from any of these methods is

a change in accounting method that requires IRS consent. Using

the applicable regulations and notice listed below, the applicant

should verify which methods are presently being used and the

proposed methods that will be used before completing

Schedule D, Part III. These methods are as follows.

1. Allocating Direct and Indirect Costs

Line 2d. Under the simplified cost-to-cost method, only certain

costs are used in determining both (a) costs allocated to the

contract and incurred before the close of the tax year, and

(b) estimated contract costs. These costs are (1) direct material

costs; (2) direct labor costs; and (3) allowable deductions for

depreciation, amortization, and cost recovery allowances on

equipment and facilities directly used to construct or produce the

subject matter of the long-term contract. See Regulations

section 1.460-5(c).

• Specific identification method—Regulations sections

1.263A-1(f)(2) and 1.460-5.

• Burden rate method—Regulations sections 1.263A-1(f)(3)(i)

and 1.460-5.

• Standard cost method—Regulations sections 1.263A-1(f)(3)

(ii) and 1.460-5.

• Any other reasonable allocation method—Regulations

sections 1.263A-1(f)(4) and 1.460-5.

Part II—Change in Valuing Inventories Including

Cost Allocation Changes

2. Allocating Mixed Service Costs

If the applicant is currently using a LIFO inventory method or

submethod and is changing to another LIFO inventory method or

• Direct reallocation method—Regulations section 1.263A-1(g)

(4)(iii)(A).

-13-

• Step-allocation method—Regulations section 1.263A-1(g)(4)

(iii)(B).

• Simplified service cost method:

—Using the labor-based allocation ratio—Regulations

section 1.263A-1(h)(4).

—Using the production cost allocation ratio—Regulations

section 1.263A-1(h)(5).

• Any other reasonable allocation method—Regulations section

1.263A-1(f)(4).

3. To make or revoke an election under section 13261(g)(2)

or (3) of the Revenue Reconciliation Act of 1993 (relating to

section 197 intangibles);

4. To change the placed-in-service date;

5. To change the salvage value (except for a change in

salvage value to zero when the salvage value is expressly

treated as zero by the Code, the regulations, or other published

guidance); or

6. To change a useful life under section 167 (except for a

change to or from a useful life, recovery period, or amortization

period that is specifically assigned by the Code, the regulations,

or other published guidance).

3. Capitalizing Additional Section 263A Costs

• Simplified production method:

List of DCNs

—Without historic absorption ratio election—Regulations

section 1.263A-2(b)(3).

—With historic absorption ratio election—Regulations

section 1.263A-2(b)(4).

• Modified simplified production method:

—Without historic absorption ratio election—Regulations

section 1.263A-2(c)(3).

—With historic absorption ratio election—Regulations

section 1.263A-2(c)(4).

• Simplified resale method:

—Without historic absorption ratio election—Regulations

section 1.263A-3(d)(3).

—With historic absorption ratio election—Regulations

section 1.263A-3(d)(4).

• U.S. ratio method—Notice 88-104, 1988-2 C.B. 443.

• Any other reasonable allocation method—Regulations section

1.263A-1(f)(4) (including the methods listed above under

Allocating Direct and Indirect Costs).

Summary of Automatic Accounting Method

Changes

This list includes regulatory automatic changes, changes

provided for in Rev. Proc. 2022-14, and automatic changes

provided for in other guidance. These automatic changes may

be modified or supplemented with additional automatic changes

by subsequently published guidance.

This list provides a brief description of the automatic changes

in method of accounting made using Form 3115. A filer/applicant

may not rely on the list or the descriptions of accounting method

changes in the list as authority for making an accounting method

change. A filer/applicant that is within the scope of, and complies

with, all the applicable provisions of the published guidance that

authorizes each listed change may rely on the applicable

published guidance as authority for its automatic accounting

method change. If any information in the list conflicts with

published guidance, the published guidance applies. Each

automatic method change described in Rev. Proc. 2022-14, as

modified, contains a contact person you may call if you need

additional information concerning the change (not a toll-free

number).

Schedule E—Change in Depreciation

or Amortization

All applicants requesting to change their accounting method for

depreciation or amortization must complete Schedule E of Form

3115. Attach a statement describing the property subject to the

change. Include the property description, type, placed-in-service

year, and use in the applicant's trade or business or

income-producing activity, and include the type and amount of

any tax credit claimed, subsidy, or grant received, along with any

necessary adjustments to basis required under the Code, with

respect to the property. The statement should include a

description of the incentive received with respect to the property

subject to the change, including whether the type of incentive is

a tax credit, subsidy, grant, or other incentive and whether the

incentive is funded by the federal government, a state or local

government, or an agency or instrumentality thereof. Applicants

changing their accounting method for depreciation or

amortization under the automatic change procedures should see

the depreciation changes in the List of DCNs below.

Each item in the list below:

• Designates an automatic accounting method change number

for each change for entry on line 1a of Form 3115;

• Briefly describes the accounting method change and its

primary Code section(s);

• Indicates in some cases which schedules of Form 3115 to

complete; and

• Provides a reference to the basic published guidance (for

example, revenue procedure) that provides for the automatic

change, which filers should review prior to completing Part I,

Information for Automatic Change Request, on page 1 of Form

3115.

Note. Certain retired or obsolete numbers in the List of DCNs

have not been replaced in order to maintain continuity for the

active DCNs.

Do not file Form 3115:

1. To make an election under section 167, 168, 179, 197, or

former section 1400I;

2. To revoke an election made under one of those sections;

In the event the underlying authority for any of the DCNs

becomes obsolete or is superseded, then a change can

CAUTION no longer be made under such DCN.

!

-14-

List of DCNs

No.

Change

1

Commodity Credit Corporation loans (section 77)—for loans received from the Commodity Credit Corporation, from

including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan.

See section 2.01 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

2

Advances made by a lawyer on behalf of clients (section 162)—from treating advances of money to or on behalf of their

clients for litigation or other client expenses as deductible expenses to treating those advances as a loan. See section 3.01 of

Rev. Proc. 2022-14.

3

ISO 9000 costs (section 162)—to treating the costs as deductible, except to the extent they result in the creation or

acquisition of an asset having a useful life substantially beyond the tax year. See section 3.02 of Rev. Proc. 2022-14.

4

Restaurant smallwares costs (section 162)—to the smallwares method described in Rev. Proc. 2002-12, 2002-1 C.B. 374

(that is, as materials and supplies that are not incidental under Regulations section 1.162-3). See section 3.03 of Rev. Proc.

2022-14.

5

Bad debts (section 166)—for an applicant other than a bank, from accounting for bad debts using a reserve or other improper

method to a specific charge-off method that complies with section 166. See section 4.01 of Rev. Proc. 2022-14.

6

Bad debt conformity for banks (section 166)—for banks other than new banks, to the method that conforms to Regulations

section 1.166-2(d)(3) for the first time the bank makes this change, or to involuntarily revoke this method. This change does not

fall under the procedures of Rev. Proc. 2022-14. Instead, see Regulations section 1.166-2(d)(3). Note. This change is

implemented on a cut-off basis and generally with audit protection, but with some conditions or limitations.

7

Depreciation or amortization (impermissible to permissible) (sections 56, 167, 168, 197, 280F, or former sections

168, 1400I, 1400L, or 1400N)—from an impermissible method to a permissible method for changes allowed under

Regulations section 1.446-1(e)(2)(ii)(d), and for depreciable property owned at the beginning of the year of change. Complete

Schedule E of Form 3115. An applicant changing its method of accounting for depreciation because of a change described in

DCN 10 (sale or lease transactions) must file Form 3115 according to the DCN 10. Additionally, a qualified small taxpayer

qualifies for a reduced Form 3115 filing requirement. See section 6.01 of Rev. Proc. 2022-14.

8

Depreciation (permissible to permissible) (sections 56 and 167)—from a permissible method to another permissible

method listed in section 6.02 of Rev. Proc. 2022-14. Complete Schedule E of Form 3115. Change is implemented on a modified

cut-off basis. An applicant making a change from a permissible to another permissible method of depreciating MACRS property

must file Form 3115 according to DCN 200. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing

requirement. See section 6.02 of Rev. Proc. 2022-14.

10

Sale, lease, or financing transactions (sections 61, 162, 167, 168, and 1012)—from improperly treating property as sold,

leased, or financed to a permissible method as described in section 6.03 of Rev. Proc. 2022-14. See section 6.03 of Rev. Proc.

2022-14. Note. This change is implemented on a cut-off basis.

11

Obsolete. See DCN 7.

12

Obsolete.See DCN 7.

13

Obsolete. See DCN 7.

14

Obsolete.See DCN 7.

15

Obsolete.See DCN 210.

16

Amortizable bond premium (section 171)—from amortizing bond premium to not amortizing the premium (revoking the

section 171(c) election). See section 5.01 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis and is

also generally made with audit protection, but with conditions or limitations.

17

Research and experimental expenditures (section 174)—from the capitalization method to another permissible method,

from the expense method to another permissible method, from the deferred expense method to another permissible method,

from the current period of amortization to a different period of amortization under the deferred expense method, or from

treating research and experimental expenditures under any provision of the Internal Revenue Code other than section 174 to

treating such expenditures under section 174. See section 7.01 of Rev. Proc. 2022-14. Note. This change is implemented on a

cut-off basis and does not receive audit protection. Note. This change does not apply to costs of developing computer software

that are paid or incurred in tax years beginning after December 31, 2021. To make a change for such costs, see DCN 265.

18

Computer software expenditures (sections 162 and 167)—for costs of developed, acquired, leased, or licensed computer

software, to deductible expenses or capital expenditures and amortization (for developed software), to capital expenditures

and depreciation or amortization (for acquired computer software), or to deductible expenses under Regulations section

1.162-11 (for leased or licensed computer software). Complete Schedule E of Form 3115 for changes relating to acquired

computer software or developed computer software if the change is to capital expenditures and amortization. See section 9.01

of Rev. Proc. 2022-14. Note.This change does not apply to costs of developing computer software that are paid or incurred in

tax years beginning after December 31, 2021. To make a change for such costs, see DCN 265.

-15-

List of DCNs

No.

Change

19

Package design costs (section 263)—to the capitalization method, to the design-by-design capitalization and 60-month

amortization method, or to the pool-of-cost capitalization and 48-month amortization method. See section 11.01 of Rev. Proc.

2022-14.

20

Line pack gas or cushion gas costs (section 263)—to treating the costs as capital expenditures, the costs of recoverable

amounts as not depreciable, and the costs of unrecoverable amounts as depreciable. A taxpayer that changes its method for

the costs of unrecoverable amounts must also change to a permissible method of depreciation for those costs. Complete

Schedule E of Form 3115 for changes relating to the costs of unrecoverable amounts. See section 11.02 of Rev. Proc. 2022-14.

21

Removal costs (section 263)—for certain costs incurred in the retirement and removal of depreciable assets, to a method

that conforms with Rev. Rul. 2000-7, 2000-1 C.B. 712, or for removal costs in disposal of a depreciable asset, including a partial

disposition, as described under Regulations section 1.263(a)-3(g)(2)(i). Additionally, a qualified small taxpayer qualifies for a

reduced Form 3115 filing requirement. See section 11.03 of Rev. Proc. 2022-14.

22

Certain uniform capitalization methods used by resellers and reseller-producers (section 263A)—for qualifying

applicants, to a qualifying method or methods. Complete Schedule D, Parts II and III, of Form 3115. See section 12.01 of Rev.

Proc. 2022-14.

23

Certain uniform capitalization methods used by producers and reseller-producers (section 263A)—for qualifying

applicants, to a qualifying method or methods. Complete Schedule D, Parts II and III, of Form 3115. See section 12.02 of Rev.

Proc. 2022-14.

24

Obsolete.See DCN 17.

25

Impact fees (section 263A)—for impact fees incurred in connection with the new construction or expansion of a residential

building, to treating the costs as capital expenditures allocable to the building. Complete Schedule E of Form 3115 if the

building is depreciable. See section 12.03 of Rev. Proc. 2022-14.

26

Related party transactions (section 267)—for losses, expenses, and qualified stated interest incurred in transactions

between related parties, to treating certain deductions attributable to such transactions in accordance with section 267,

including the exception in section 1.267(a)-3(c)(4). See section 13.01 of Rev. Proc. 2022-14.

27

Obsolete.

28

Bonus or vacation pay deferred compensation (section 404)—for bonuses that are deferred compensation, from treating

as deductible or capitalizable when accrued, to treating as deductible or capitalizable in the year in which includible in the

employee’s income, and for vacation pay that is deferred compensation, from treating as deductible or capitalizable when

accrued to treating as deductible or capitalizable in the year in which paid to the employee. See section 14.01 of Rev. Proc.

2022-14.

29

Grace period contributions (section 404)—for contributions made to a section 401(k) qualified cash or deferred

arrangement or matching contributions under section 401(m), from treating contributions made after the end of the tax year but

before the due date of the tax return as being on account of the tax year without regard to when the underlying compensation is

earned to treating such contributions as not being on account of the tax year if they are attributable to compensation earned

after the end of that tax year. See section 14.02 of Rev. Proc. 2022-14.

31

Multi-year insurance policies for multi-year service warranty contracts (section 446)—for a manufacturer, wholesaler,

or retailer of motor vehicles or other durable consumer goods accounting for multi-year insurance policies for multi-year service

warranty contracts, to capitalizing and amortizing the costs. See section 15.02 of Rev. Proc. 2022-14.

32

Obsolete.See DCN 233.

33

Obsolete.See DCN 233.

34

First section 448 year (section 448)—for an applicant changing from the cash method for its first section 448 year that

makes the change using the regulation provision in lieu of Rev. Proc. 2015-13. Complete Schedule A, Part I, of Form 3115.

Also, complete Schedule D, Parts II and III, as applicable, of Form 3115. This change does not fall under the procedures of Rev.

Proc. 2015-13. Instead, see Regulations section 1.448-1. (See DCN 123 for taxpayers making the change under Rev. Proc.

2015-13. For applicants subject to section 447, see DCN 258). Note. This change does not apply for any tax year beginning on

or after January 5, 2021. See, however, DCN 257.

-16-

List of DCNs

No.

Change

35

Nonaccrual-experience method (section 448)—for an applicant changing: to a safe harbor method provided in Regulations

section 1.448-3(f)(1) (the revenue-based moving average method), (f)(2) (the actual experience method), (f)(3) (the modified

Black Motor method), (f)(4) (the modified moving average method), or (f)(5) (the alternative nonaccrual-experience method); to

a periodic system; from an NAE method to a specific charge-off method; from a sub-method of its current NAE method

provided in Regulations section 1.448-3 regarding applicable periods to another sub-method regarding applicable periods that

is permitted under Regulations section 1.448-3, other than a change to exclude tax years from an applicable period under

Regulations section 1.448-3(d)(6); from a sub-method of its current NAE method provided in Regulations section 1.448-3

regarding tracing of recoveries to another sub-method regarding tracing of recoveries permitted under Regulations section

1.448-3(f)(2)(iii); or to the NAE book safe harbor method described in section 5.01 of Rev. Proc. 2011-46, 2011-42 I.R.B. 518.

Note. An applicant using the NAE book safe harbor method that wants to make certain changes within the NAE book safe

harbor method (as described in sections 5.02 and 5.03 of Rev. Proc. 2011-46) must attach a statement to its federal income tax

return in lieu of filing a Form 3115. See Rev. Proc. 2011-46; section 15.03 of Rev. Proc. 2022-14; and Rev. Proc. 2006-56,

2006-2 C.B. 1169. Note. Certain changes are made on a cut-off basis.

36

Interest accrual on non-performing loans (section 451)—for an accrual method bank accounting for qualified stated

interest on non-performing loans, to the method whereby interest is accrued until either the loan is worthless under section 166

and is charged off as a bad debt or the interest is determined to be uncollectible. See section 16.01 of Rev. Proc. 2022-14.

37

Advance rentals (section 451)—for advance rentals other than advance rentals subject to section 467, to inclusion in gross

income in the tax year received. See section 16.02 of Rev. Proc. 2022-14.

38

State or local income or franchise tax refunds (section 451)—for an accrual method applicant with state or local income or

franchise tax refunds, to accrue these items in the tax year the applicant receives payments or notice of approval of its refund

claim (whichever is earlier), according to Rev. Rul. 2003-3, 2003-1 C.B. 252. See section 16.03 of Rev. Proc. 2022-14.

39

Capital cost reduction (CCR) payments (section 451)—for CCR payments (as defined in Rev. Proc. 2002-36, 2002-1 C.B.

993) made by vehicle lessees, to the method that excludes these payments from the applicant’s gross income and from the

applicant’s bases in the purchased vehicles. See section 16.04 of Rev. Proc. 2022-14.

41

Obsolete.

42

Timing of incurring employee medical benefits liabilities (section 461)—for an applicant with an obligation to pay an

employee’s medical expenses (including medical expenses for retirees and employees who filed claims under a workers’

compensation act) that is neither insured nor paid from a welfare benefit fund, to treatment as a liability incurred in the tax year

in which the applicant’s employee files the claim with the applicant; or, if the applicant has a liability to pay a third party for

medical services to its employees, to treatment as a liability as incurred in the tax year in which the services are provided. See

section 20.01(1) of Rev. Proc. 2022-14.

43

Timing of incurring real property taxes, personal property taxes, state income taxes, and state franchise taxes

(section 461)—for a qualifying applicant, to treating these taxes as incurred in the tax year in which the taxes are paid, or to

account for these taxes under the recurring item exception to the economic performance rules, or to revoke the ratable accrual

election under section 461(c). See section 20.02 of Rev. Proc. 2022-14.

44

Timing of incurring workers’ compensation act, tort, breach of contract, or violation of law liabilities (section 461)—

for a qualifying applicant accounting for self-insured liabilities arising under any workers’ compensation act or out of any tort,

breach of contract, or violation of law, to treating the liability as incurred in the tax year in which (a) all the events have occurred

establishing the fact of the liability, (b) the amount of the liability can be determined with reasonable accuracy, and (c) payment

is made to the person to which the liability is owed. See section 20.03 of Rev. Proc. 2022-14.

45

Timing of incurring certain payroll tax liabilities (section 461)—for FICA and FUTA taxes, state unemployment taxes, and

railroad retirement taxes, to the method under which the applicant may deduct in Year 1 its otherwise deductible FICA and

FUTA taxes, state unemployment taxes, and railroad retirement taxes imposed with respect to year-end wages properly

accrued in Year 1, but paid in Year 2, if the requirements of the recurring item exception are met; or, for state unemployment

taxes and railroad retirement taxes, to the method stated above where the applicant already uses that method of accounting for

FICA and FUTA taxes. See section 20.04 of Rev. Proc. 2022-14.

46

Cooperative advertising (section 461)—to incurring a liability in the tax year in which these services are performed, provided

the manufacturer is able to reasonably estimate this liability even though the retailer does not submit the required claim form

until the following year. See section 20.05 of Rev. Proc. 2022-14.

47

Distributor commissions (section 263)—from deducting distributor commissions to capitalizing and amortizing distributor

commissions using the distribution fee period method, the 5-year method, or the useful life method. This change is

implemented on a cut-off basis and applies only to distributor commissions paid or incurred on or after the beginning of the year

of change. See section 11.04 of Rev. Proc. 2022-14. Complete Schedule E of Form 3115.

-17-

List of DCNs

No.

Change

48

Cash discounts (section 471)—for cash discounts granted for timely payment, when such discounts approximate a fair

interest rate, from a method of consistently including the price of the goods before discount in the cost of the goods and

including in gross income any discounts taken to a method of reducing the cost of the goods by the cash discounts and

deducting as an expense any discounts not taken, or vice versa. Complete Schedule D, Parts II and III, of Form 3115, as

applicable. See section 22.01 of Rev. Proc. 2022-14.

49

Estimating inventory shrinkage (section 471)—from the present method of estimating inventory shrinkage in computing

ending inventory to the retail safe harbor method in section 4 of Rev. Proc. 98-29, 1998-1 C.B. 857, or to a method other than

the retail safe harbor method, provided (a) the applicant’s present method of accounting does not estimate inventory shrinkage,

and (b) the applicant’s new method of accounting (that estimates inventory shrinkage) clearly reflects income under section

446(b). Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.02 of Rev. Proc. 2022-14.

50

Obsolete. See DCN 235.

51

Obsolete. See DCN 235.

53

Qualifying volume-related trade discounts (section 471)—to treating qualifying volume-related trade discounts as a

reduction in the cost of merchandise purchased at the time the discount is recognized in accordance with Regulations section

1.471-3(b). Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.03 of Rev. Proc. 2022-14.

54

Impermissible methods of identification and valuation of inventories (section 471)—for an applicant changing from an

impermissible method of identifying or valuing inventories to a permissible method of identifying or valuing inventories.

Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.04 of Rev. Proc. 2022-14.

55

Core alternative valuation method for remanufactured and rebuilt motor vehicle parts (section 471)—for

remanufactures and rebuilders of motor vehicle parts and resellers of remanufactured and rebuilt motor vehicle parts that use

the lower of cost or market method to value their inventory of cores, to the safe harbor method of accounting (the Core

alternative valuation method) to value inventories of cores, as provided for in Rev. Proc. 2003-20, 2003-1 C.B. 445. Complete

Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.05 of Rev. Proc. 2022-14.

56

Change from LIFO inventory method (section 472)—for an applicant changing from the LIFO inventory method for its entire

LIFO inventory, or for one or more dollar-value pools within its LIFO inventory, to the permitted method as described in section

23.01(1)(b) of Rev. Proc. 2022-14. Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 23.01 of

Rev. Proc. 2022-14.

57

Determining current-year cost under the LIFO inventory method (section 472)—for an applicant changing its method of

determining current-year cost to(a) the actual cost of the goods most recently purchased or produced (most-recent acquisitions

method); (b) the actual cost of the goods purchased or produced during the tax year in the order of acquisition

(earliest-acquisitions method); (c) the average unit cost equal to the aggregate actual cost of all the goods purchased or

produced throughout the tax year divided by the total number of units so purchased or produced; (d) the specific identification

method; or (e) a rolling-average method if the applicant uses that rolling-average method in accordance with Rev. Proc.

2008-43, 2008-30 I.R.B. 186, as modified by Rev. Proc. 2008-52, 2008-2 C.B. 587. Complete Schedule C, Part I, of Form 3115.

See section 23.02 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

58

Alternative LIFO inventory method (section 472)—for a qualifying applicant that sells new automobiles or new light-duty

trucks, to the Alternative LIFO Method described in Rev. Proc. 97-36, 1997-2 C.B. 450, as modified by Rev. Proc. 2008-23,

2008-1 C.B. 664. Complete Schedule C of Form 3115, as applicable. See section 23.03 of Rev. Proc. 2022-14. Note. This

change is implemented on a cut-off basis.

-18-

List of DCNs

No.

Change

59

Used Vehicle Alternative LIFO Method (section 472)—for a qualifying applicant that sells used automobiles and used

light-duty trucks, to the Used Vehicle Alternative LIFO Method, as described in Rev. Proc. 2001-23, 2001-1 C.B. 784, as

modified by Announcement 2004-16, 2004-1 C.B. 668, and Rev. Proc. 2008-23, 2008-1 C.B. 664. Complete Schedule C, Part I,

of Form 3115. See section 23.04 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

60

Determining the cost of used vehicles purchased or taken as a trade-in (section 472)—for a qualifying applicant, to a

method of (a) determining the cost of used vehicles acquired by trade-in using the average wholesale price listed by a

consistently used official used car guide on the date of the trade-in; (b) using a different official used vehicle guide for

determining the cost of used vehicles acquired by trade-in; (c) determining the cost of used vehicles purchased for cash using

the actual purchase price of the vehicle; or (d) reconstructing the beginning-of-the-year cost of used vehicles purchased for

cash using values computed by national auto auction companies based on vehicles purchased for cash, where the national

auto auction company selected is consistently used. Complete Schedule C, Part I, of Form 3115. See section 23.05 of Rev.

Proc. 2022-14. Note. This change is implemented on a cut-off basis.

61

Change to IPIC inventory method (section 472)—for a qualifying applicant, from a non-inventory price index computation

(IPIC) LIFO inventory method to the IPIC method in accordance with all relevant provisions of Regulations section 1.472-8(e)

(3); or from the IPIC method as described in T.D. 7814, 1982-1 C.B. 84 (the old IPIC method) to the IPIC method as described

in T.D. 8976, 2002-1 C.B. 421 (the new IPIC method), which includes the following required changes (if applicable): from using

80% of the inventory price index (IPI) to using 100% of the IPI to determine the base-year cost and dollar-value of a LIFO

pool(s); from using a weighted arithmetic mean to using a weighted harmonic mean to compute an IPI for a dollar-value

pool(s); and from using a components-of-cost method to define inventory items to using a total-product-cost method to define

inventory items. Complete Schedule C of Form 3115, as applicable. See section 23.06 of Rev. Proc. 2022-14. Note. This

change is implemented on a cut-off basis.

62

Changes within IPIC inventory method (section 472)—for one or more of the following changes within IPIC: (a) from the

double-extension IPIC method to the link-chain IPIC method, or vice versa; (b) to or from the 10% method; (c) to a pooling

method described in Regulations section 1.472-8(b)(4) or Regulations section 1.472-8(c)(2), including a change to begin or

discontinue applying one or both of the 5% pooling rules; (d) combine or separate pools as a result of the application of a 5%

pooling rule described in Regulations section 1.472-8(b)(4) or Regulations section 1.472-8(c)(2); (e) change the selection of

BLS tables from Table 3 (Consumer Price Index for All Urban Consumers (CPI-U): U.S. city average, detailed expenditure

categories) of the monthly CPI Detailed Report to Table 9 (Producer price indexes and percent changes for commodity

groupings and individual items, not seasonally adjusted) of the monthly PPI Detailed Report, or vice versa; (f) change the

assignment of one or more inventory items to BLS categories under either Table 3 of the monthly CPI Detailed Report or Table

9 of the monthly PPI Detailed Report; (g) change the representative month when necessitated because of a change in tax year

or a change in method of determining current-year cost made pursuant to section 23.02 of Rev. Proc. 2022-14; or (h) change

from using preliminary BLS price indexes to using final BLS price indexes to compute an inventory price index, or vice versa.

Complete Schedule C of Form 3115, as applicable. See section 23.07 of Rev. Proc. 2022-14. Note. This change is

implemented on a cut-off basis.

63

Replacement cost method for automobile dealers’ parts inventory (sections 471 and 472)—to the replacement cost

method for automobile dealers’ parts inventory described in Rev. Proc. 2002-17, 2002-1 C.B. 676. Complete Schedule D, Parts

II and III, of Form 3115, as applicable. See section 22.06 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off

basis.

64

Mark-to-market (section 475)—for accounting for securities or commodities by electing commodities dealers, securities

traders, and commodities traders, to the mark-to-market method under section 475(e) or (f). An election statement must be filed

earlier than the due date of Form 3115. See Rev. Proc. 99-17, 1999-1 C.B. 503, for rules relating to this statement. See section

24.01 of Rev. Proc. 2022-14. In general, for an electing dealer or trader, the election cannot be revoked within 5 tax years of the

election year under the automatic method change described in section 24.02 of Rev. Proc. 2022-14 (DCN 218). Instead, the

dealer or trader must use the non-automatic change procedures in Rev. Proc. 2015-13 to revoke the election and change to a

realization method.

65

Dealer status changes (section 475)—for an applicant electing out of certain exemptions from securities dealer status, to the

mark-to-market method. This change does not fall under the automatic change procedures of Rev. Proc. 2015-13. Instead, see

Rev. Proc. 97-43, 1997-2 C.B. 494. Note. This change is implemented on a cut-off basis.

66

Bank reserves for bad debts (section 585)—for a bank (as defined in section 581, including a bank for which a qualified

subchapter S subsidiary (QSub) election is filed) to change from the section 585 reserve method to the section 166 specific

charge-off method. See section 25.01 of Rev. Proc. 2022-14.

67

Insurance company premium acquisition expenses (section 832)—for certain insurance companies, to a safe harbor

method of accounting for premium acquisition expenses set forth in Rev. Proc. 2002-46, 2002-2 C.B. 105. See section 26.01 of

Rev. Proc. 2022-14.

68

Discounted unpaid losses (section 846)—for insurance companies other than life insurance companies computing

discounted unpaid losses, to the composite method or to alternative methods set forth in Notice 88-100, 1988-2 C.B. 439, and

Rev. Proc. 2002-74, 2002-2 C.B. 980. See section 27.01 of Rev. Proc. 2022-14.

-19-

List of DCNs

No.

Change

70

Functional currency (section 985)—to the use of another functional currency for the applicant or its qualified business unit

(QBU), other than a QBU described in Regulations section 1.985-1(b)(1)(iii). See section 29.01 of Rev. Proc. 2022-14.

71

Rule of 78s (section 1272)—for stated interest on certain short-term consumer loans, from the Rule of 78s method to the

constant yield method. See section 15.04 of Rev. Proc. 2022-14.

72

Original issue discount (sections 1272 and 1273)—to the principal-reduction method for de minimis original issue discount

(OID). See section 30.01 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis and does not receive

audit protection.

73

Market discount bonds (section 1278)—from including market discount currently in income for the tax year to which the

discount is attributable to including market discount in income for the tax year of disposition or partial principal payment

(revoking the section 1278(b) election). Note. This change is implemented on a cut-off basis and is also generally made with

audit protection, but with conditions or limitations. See section 31.01 of Rev. Proc. 2022-14.

74

Interest income on short-term obligations (section 1281)—to currently including accrued interest and discount in income

(to comply with section 1281). See section 32.01 of Rev. Proc. 2022-14.

75

Stated interest on short-term loans (section 1281)—for a bank using the cash method of accounting, from accruing stated

interest on short-term loans made in the ordinary course of business to using the cash method to report such interest. See

section 32.02 of Rev. Proc. 2022-14.

76

Sales of mortgage loans (section 1286)—for accounting for certain sales of mortgage loans in which the seller also enters

into a contract to service the mortgages in consideration for amounts received from interest payments, from a method that is

inconsistent with Rev. Rul. 91-46, 1991-2 C.B. 358, to a method that is consistent with Rev. Rul. 91-46. However, the change is

only an automatic accounting method change for certain taxpayers who are under examination. This change does not fall under

the automatic change procedures of Rev. Proc. 2015-13. Instead, see Rev. Proc. 91-51, 1991-2 C.B. 779.

77

Environmental remediation costs (section 263A)—for costs incurred to clean up land that a taxpayer contaminated with

hazardous waste from the taxpayer’s manufacturing operations, to capitalizing such costs in inventory costs under section

263A. See section 12.04 of Rev. Proc. 2022-14.

78

Costs of intangibles and certain transactions (section 263(a))—for amounts paid or incurred to acquire or create

intangibles, or to facilitate an acquisition of a trade or business, a change in the capital structure of a business entity, and certain

other transactions, to a method of accounting provided in Regulations sections 1.263(a)-4, 1.263(a)-5, and 1.167(a)-3(b).

Complete Schedule E of Form 3115 for changes to a method of accounting provided in Regulations section 1.167(a)-3(b). See

section 11.05 of Rev. Proc. 2022-14.

79

REMIC inducement fees (sections 860A–860G)—for an inducement fee received in connection with becoming the holder of

a noneconomic residual interest in a REMIC, to a safe harbor method provided under Regulations section 1.446-6(e)(1) or (e)

(2). See Rev. Proc. 2004-30, 2004-1 C.B. 950, and section 28.01 of Rev. Proc. 2022-14.

80

All events test method for credit card annual fees (section 451)—to a method that satisfies the all events test in

accordance with Rev. Rul. 2004-52, 2004-1 C.B. 973. See section 16.05 of Rev. Proc. 2022-14.

81

Ratable inclusion method for credit card annual fees (section 446)—to the ratable inclusion method for credit card annual

fees. See section 16.05 of Rev. Proc. 2022-14.

82

Obsolete.

83

Full inclusion method for certain advance payments (section 451)—to the full inclusion method, as described in section

5.01 of Rev. Proc. 2004-34, 2004-1 C.B. 991. The applicant must be using, or changing to, an overall accrual method of

accounting. See section 16.06 of Rev. Proc. 2022-14. Note. This change may not be made for a year of change beginning on or

after January 1, 2021. See, however, DCN 254.

84

Deferral method for certain advance payments (section 451)—to the deferral method as described in section 5.02 of Rev.

Proc. 2004-34, 2004-1 C.B. 991 (except as provided in section 8.03 and 8.04(2) of Rev. Proc. 2004-34). The applicant must be

using, or changing to, an overall accrual method of accounting. See section 16.06 of Rev. Proc. 2022-14. Note. This change

may not be made for a year of change beginning on or after January 1, 2021. See, however, DCN 254.

85

Film producer’s treatment of certain creative property costs (section 446)—to account for creative property costs under

the safe harbor method provided in Rev. Proc. 2004-36, 2004-1 C.B. 1063. See section 15.05 of Rev. Proc. 2022-14.

86

Timber fertilization costs (section 162)—for costs incurred by a timber grower for the post-establishment fertilization of an

established timber stand, to treat such costs as ordinary and necessary business expenses deductible under section 162. See

section 3.04 of Rev. Proc. 2022-14.

-20-

List of DCNs

No.

Change

87

Change in general asset account treatment due to a change in the use of MACRS property (section 168)—to the

method of accounting provided in Regulations sections 1.168(i)-1(c)(2)(ii)(E) and 1.168(i)-1(h)(2) (as in effect before January 1,

2012) or to the method of accounting provided in Regulations section 1.168(i)-1(h)(2) to comply with the 2020 change in law to

retroactively provide a 30-year recovery period under the alternative depreciation system in section 168(g) for certain residential

rental property placed in service before 2018 and held by an electing real property trade or business. Complete Schedule E of

Form 3115. Change is implemented on a modified cut-off basis. Additionally, a qualified small taxpayer qualifies for a reduced

Form 3115 filing requirement. See Regulations section 1.168(i)-1(l)(2)(ii) and section 6.04 of Rev. Proc. 2022-14.

88

Change in method of accounting for depreciation due to a change in the use of MACRS property (section 168)—to

the method of accounting provided in Regulations section 1.168(i)-4 or to revoke the election provided in Regulations section

1.168(i)-4(d)(3)(ii) to disregard a change in use of MACRS property. Complete Schedule E of Form 3115. Additionally, a

qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See Regulations section 1.168(i)-4(g)(2) and

section 6.05 of Rev. Proc. 2022-14. Note. The applicant is required to calculate a section 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 tax

year in which the change in the use of the MACRS property occurred by the applicant.

89

Depreciation of qualified non-personal-use vans and light trucks (section 280F)—for certain vehicles placed in service

before July 7, 2003, to a method of accounting in accordance with Regulations section 1.280F-6(f)(2)(iv). Complete Schedule E

of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See Regulations

section 1.280F-6(f)(2)(iv) and section 6.06 of Rev. Proc. 2022-14.

90

Insurance companies’ incentive payments to health care providers (section 446)—for deducting provider incentive

payments, to the method of including those payments in discounted unpaid losses without regard to section 404. See section

15.06 of Rev. Proc. 2022-14.

91

Up-front network upgrade payments received by utilities (section 61)—to a safe harbor method provided in Rev. Proc.

2005-35, 2005-2 C.B. 76. See section 1.01 of Rev. Proc. 2022-14.

92

Allocation of environmental remediation costs to production (section 263A)—to a method that allocates under section

263A environmental remediation costs to the inventory produced during the tax year such costs are incurred. See Rev. Rul.

2005-42, 2005-2 C.B. 67, and section 12.05 of Rev. Proc. 2022-14.

94

Obsolete.

96

Replacement cost method for heavy equipment dealers’ parts inventory (sections 471 and 472)—to the replacement

cost method for heavy equipment dealers’ parts inventory described in Rev. Proc. 2006-14, 2006-1 C.B. 350. Complete

Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.07 of Rev. Proc. 2022-14. Note. This change is

implemented on a cut-off basis.

106

Timing of incurring certain liabilities for services or insurance (section 461)—for an applicant that is currently treating

the mere execution of a contract for services or insurance as establishing the fact of the liability under section 461 and wants to

change from that method for liabilities for services or insurance to comply with Rev. Rul. 2007-3, 2007-1 C.B. 350. See section

20.06 of Rev. Proc. 2022-14.

107

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

amortizable property (sections 167, 168, or 197; or former sections 168, 1400I, 1400L(b), 1400L(c), or 1400N(d))—for

an item of certain depreciable or amortizable property that has been disposed of by the applicant and for which the applicant

did not take into account any depreciation allowance or did take into account some depreciation but less than the depreciation

allowable, from using an impermissible method of accounting for depreciation to using a permissible method of accounting for

depreciation. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115

filing requirement. See section 6.07 of Rev. Proc. 2022-14.

108

Change by bank for uncollected interest (section 446)—for a bank (as defined in Regulations section 1.166-2(d)(4)(i)) that

uses an accrual method of accounting; is subject to supervision by federal authorities, or by state authorities maintaining

substantially equivalent standards; and has 6 or more years of collection experience to change to the safe harbor method of

accounting for uncollected interest (other than interest described in Regulations section 1.446-2(a)(2)) set forth in section 4 of

Rev. Proc. 2007-33, 2007-1 C.B. 1289. See section 15.07 of Rev. Proc. 2022-14.

109

Rotable spare parts (section 263(a))—for an applicant that maintains a pool or pools of rotable spare parts that are primarily

used to repair customer-owned (or customer-leased) equipment under warranty or maintenance agreements to the safe harbor

method provided in Rev. Proc. 2007-48, 2007-2 C.B. 110. Complete Schedule E of Form 3115. See section 11.06 of Rev. Proc.

2022-14.

110

Rotable spare parts (section 471)—from the safe harbor method (or a similar method) of treating rotable spare parts as

depreciable assets, in accordance with Rev. Proc. 2007-48, 2007-2 C.B. 110, to treating rotable spare parts as inventoriable

items. See section 22.08 of Rev. Proc. 2022-14.

-21-

List of DCNs

No.

Change

111

Advance Trade Discount Method (section 471)—for an accrual method applicant required to use an inventory method of

accounting and maintaining inventories, as provided in section 471, that receives advance trade discounts to the Advance

Trade Discount Method described in Rev. Proc. 2007-53, 2007-2 C.B. 233. See section 22.09 of Rev. Proc. 2022-14.

112

Changes to the Vehicle-Pool Method (section 472)—for a retail dealer or wholesaler distributor (reseller) of cars and

light-duty trucks to the Vehicle-Pool Method as described in Rev. Proc. 2008-23, 2008-1 C.B. 664. See section 23.08 of Rev.

Proc. 2022-14. Note. This change is implemented on a cut-off basis.

113

Payroll tax liabilities (section 461)—for an accrual method applicant that wants to change its method for FICA and FUTA

taxes to the safe harbor method provided in Rev. Proc. 2008-25, 2008-1 C.B. 686, which provides that, solely for the purposes

of the recurring item exception, an applicant will be treated as satisfying the requirement in Regulations section 1.461-5(b)(1)(i)

for its payroll tax liability in the same tax year in which all events have occurred that establish the fact of the related

compensation liability and the amount of the related compensation liability can be determined with reasonable accuracy. See

section 20.04 of Rev. Proc. 2022-14.

114

Rolling-average method of accounting for inventories (sections 471 and 472)—for an applicant required to account for

inventories under section 471 and that uses a rolling-average method to value inventories for financial accounting purposes to

the same rolling-average method to value inventories for federal income tax purposes, in accordance with Rev. Proc. 2008-43,

2008-30 I.R.B.186. See section 22.13 of Rev. Proc. 2022-14. Note. This change must be implemented on a cut-off basis unless

the applicant’s books and records contain sufficient information to compute a section 481(a) adjustment, in which case the

applicant may choose to implement the change with a section 481(a) adjustment.

116

Obsolete. See DCN 7.

117

Obsolete. See DCN 205 or 206, as applicable.

119

Obsolete. See DCN 7.

121

Repairable and reusable spare parts (section 263(a))—to treat certain repairable and reusable spare parts as depreciable

property in accordance with the holding in Rev. Rul. 69-200, 1969-1 C.B. 60, or Rev. Rul. 69-201, 1969-1 C.B. 60. Complete

Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See

section 11.07 of Rev. Proc. 2022-14.

122

Overall accrual method change that is made other than (1) for the applicant’s first section 448 year, (2) mandatory

section 448 year, or (3) because taxpayer is subject to section 447 (section 446)—for a qualifying applicant that makes

a change for a year of change other than in its first section 448 year, mandatory section 448 year, or that is not subject to

section 447, from the overall cash method to an overall accrual method. Complete Schedule A, Part I, of Form 3115. Also

complete Schedule D, Parts II and III, as applicable. See section 15.01 of Rev. Proc. 2022-14. Note. See DCN 123 for a change

in the first section 448 year, DCN 257 for a change made in mandatory section 448 year, or DCN 258 for change made as a

result of applicant being subject to section 447.

123

Change in overall method from the cash method to an accrual method for the first section 448 year (section 446)—

for an applicant that is required by section 448 to change from the overall cash method to an overall accrual method and the

applicant qualifies to make the change under the automatic consent procedures of Regulations sections 1.448-1(g) and (h)(2)

as well as Rev. Proc. 2015-13 for a year of change that is the applicant’s first section 448 year. See Regulations sections

1.448-1(g) and (h)(2), and section 15.01 of Rev. Proc. 2022-14. Note: This change does not apply to tax years beginning on or

after January 5, 2021.

124

Change from the cash method to an accrual method for specific items (section 446)—for a qualifying applicant using an

overall accrual method and accounting for one or more identified specific items of income and expense on the cash method to

an accrual method of accounting for the identified specific item or items. See section 15.08 of Rev. Proc. 2022-14.

125

Multi-year service warranty contracts (section 446)—for an eligible accrual method manufacturer, wholesaler, or retailer of

motor vehicles or other durable consumer goods that wants to change to the service warranty income method described in

section 5 of Rev. Proc. 97-38, 1997-2 C.B. 479. See Rev. Proc. 97-38 and section 15.09 of Rev. Proc. 2022-14. Note. This

change is implemented on a cut-off basis and also has a reduced Form 3115 filing requirement.

126

Overall cash method for specified transportation industry taxpayers (section 446)—for “specified transportation

industry taxpayers,” as defined in section 15.10(2) of Rev. Proc. 2022-14, with average annual gross receipts of more than $10

million and not in excess of $50 million to the overall cash method. See section 15.10 of Rev. Proc. 2022-14.

127

Change to overall cash/hybrid method for certain banks (section 446)—for an eligible bank, as defined in section

15.11(2)(a) of Rev. Proc. 2022-14, to an overall cash/hybrid method described in section 15.12(2)(b) of Rev. Proc. 2022-14.

See section 15.11 of Rev. Proc. 2022-14.

128

Change to overall cash method for farmers (section 446)—for a qualifying applicant engaged in the trade or business of

farming to the overall cash method. See section 15.12 of Rev. Proc. 2022-14. Note. For applicants changing from the crop

method, that portion of the change is implemented using a cut-off basis. For applicants that wish to change to the cash method

for all items of income and expense and an accrual method for purchases and sales of inventories, see DCN 259.

-22-

List of DCNs

No.

Change

129

Nonshareholder contributions to capital under section 118 (section 446)—from excluding from gross income under

section 61 certain payments or the fair market value of property received (including customer connection fees received by a

regulated public utility described in former section 118(c)), by characterizing the payments or the fair market value of property

as nontaxable contributions to capital under section 118(c), to including the payments or the fair market value of property in

gross income under section 61. This change also applies to a regulated public utility described in former section 118(c) that

changes from including in gross income under section 61 payments or the fair market value of property received that are

contributions in aid of construction under former section 118(c) and Regulations section 1.118-2 and that meet the

requirements of former sections 118(c)(1)(B) and 118(c)(1)(C) to excluding from income the payments or the fair market value

of the property as nontaxable contributions to capital under section 118(a). See section 15.13 of Rev. Proc. 2022-14. Note. The

change described in section 15.13(1)(a)(ii) of Rev. Proc. 2022-14 does not apply to contributions made after December 22,

2017.

130

Retainages not received under long-term contracts (section 451)—for an accrual method applicant’s retainages under

section 451 to a method consistent with the holding in Rev. Rul. 69-314, 1969-1 C.B. 139. This change does not apply to

retainages under long-term contracts as defined in section 460(f). An applicant changing its method of accounting under this

section must treat all retainages (receivables and payables) in the same manner. See section 16.07 of Rev. Proc. 2022-14.

131

Series E, EE, or I U.S. savings bonds (section 454)—for a cash method taxpayer changing the taxpayer’s method of

accounting for interest income on series E, EE, or I U.S. savings bonds from reporting as interest income the increase in

redemption price on a bond occurring in a tax year to reporting this income in the tax year in which the bond is redeemed,

disposed of, or finally matures, whichever is earliest. A statement in lieu of a Form 3115 is authorized for this change. See

section 17.01 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

132

Prepaid subscription income (section 455)—for an accrual method applicant changing its method of accounting for prepaid

subscription income to the method described in section 455 and the related regulations, including an eligible applicant that

wants to make the “within 12 months” election under Regulations section 1.455-2. A statement in lieu of a Form 3115 is

authorized for this change. See section 18.01 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

133

Timing of incurring liabilities for bonuses (section 461)—to treat bonuses as incurred in the tax year in which all events

have occurred that establish the fact of the liability to pay a bonus and the amount of the liability can be determined with

reasonable accuracy. See section 20.01(2) of Rev. Proc. 2022-14.

134

Timing of incurring liabilities for vacation pay, sick pay, and severance pay (section 461)—to treat vacation pay, sick

pay, and severance pay as incurred in the tax year in which all events have occurred that establish the fact of the liability to pay

vacation pay, sick pay, and severance pay, and the amount of the liability can be determined with reasonable accuracy. The

applicant may make this change if the vacation pay, sick pay, and severance pay vests in that tax year and the vacation pay,

sick pay, and severance pay is received by the employee by the 15th day of the 3rd calendar month after the end of that tax

year. See section 20.01(3) of Rev. Proc. 2022-14.

135

Rebates and allowances (section 461)—for an accrual method applicant’s liability for rebates and allowances to the

recurring item exception method under section 461(h)(3) and Regulations section 1.461-5. See section 20.07 of Rev. Proc.

2022-14.

136

Change from an improper method of inclusion of rental income or expense to inclusion in accordance with the rent

allocation (section 467)—for an applicant that is a party to a section 467 rental agreement and is changing its method for its

fixed rent to the rent allocation method provided in Regulations section 1.467-1(d)(2)(iii). See section 21.01 of Rev. Proc.

2022-14. Note. This change only receives limited audit protection.

137

Permissible methods of identification and valuation of inventories (section 471)—for an applicant changing from one

permissible method of identifying and valuing inventories to another permissible method of identifying and valuing inventories.

Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.10 of Rev. Proc. 2022-14.

138

Change in the official used vehicle guide utilized in valuing used vehicles (section 471)—for a used vehicle dealer

from not using an official used vehicle guide for valuing used vehicles to using an official used vehicle guide for valuing used

vehicles; or from using an official used vehicle guide for valuing used vehicles to using a different official used vehicle guide for

valuing used vehicles. See section 22.11 of Rev. Proc. 2022-14.

139

Invoiced advertising association costs for new vehicle retail dealerships (section 471)—for an applicant engaged in the

trade or business of retail sales of new automobiles or new light-duty trucks (dealership) from capitalizing certain advertising

costs as acquisition costs under Regulations section 1.471-3(b) to deducting the advertising costs under section 162 as the

advertising services are provided to the dealership. See Regulations section 1.461-4(d)(2)(i), and section 22.12 of Rev. Proc.

2022-14.

-23-

List of DCNs

No.

Change

140

Changes within the Used Vehicle Alternative LIFO Method (section 472)—for a taxpayer using the Used Vehicle

Alternative LIFO Method, as described in Rev. Proc. 2001-23, 2001-1 C.B. 784, as modified by Announcement 2004-16,

2004-1 C.B. 668, and Rev. Proc. 2008-23, 2008-1 C.B. 664, to use a different “official used vehicle guide” in conjunction with

the Used Vehicle Alternative LIFO Method, or to a different precise manner of using an official used vehicle guide (for example,

a change in the specific guide category that an applicant uses to represent vehicles of average condition for purposes of

section 4.02(5)(a) of Rev. Proc. 2001-23). See section 23.09 of Rev. Proc. 2022-14. Note. This change is implemented on a

cut-off basis.

141

Changes to dollar-value pools of manufacturers (section 472)—for a manufacturer that purchases goods for resale

(resale goods) and thus must reassign resale goods from the pool(s) it maintains for the goods it manufactures to one or more

resale pools, and the manufacturer wants to change from using multiple pools described in Regulations section 1.472-8(b)(3)

to using natural business unit (NBU) pools described in Regulations section1.472-8(b)(1), or vice versa; or wants to reassign

items in NBU pools described in Regulations section 1.472-8(b)(1) into the same number or a greater number of NBU pools.

See section 23.10 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

145

Tenant construction allowances (section 168)—for an applicant changing from improperly treating the applicant as having

a depreciable interest in the property subject to the tenant construction allowances for federal income tax purposes to properly

treating the applicant as not having a depreciable interest in such property for federal income tax purposes; or from improperly

treating the applicant as not having a depreciable interest in the property subject to the tenant construction allowances for

federal income tax purposes to properly treating the applicant as having a depreciable interest in such property for federal

income tax purposes. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section

6.08 of Rev. Proc. 2022-14.

146

Obsolete. See DCN 205.

147

Obsolete. See DCN 206.

148

Debt issuance costs (section 446)—for an applicant changing its method of accounting to comply with Regulations section

1.446-5, which provides rules for allocating the costs over the term of the debt. See section 15.14 of Rev. Proc. 2022-14.

149

Ratable accrual of real property taxes (section 461)—for an accrual method applicant for real property taxes that relate to a

definite period of time to the method described in section 461(c) and section 1.461-1(c)(1) (ratable accrual election) for a tax

year other than the applicant’s first tax year in which real property taxes are incurred. See section 20.08 of Rev. Proc. 2022-14.

Note. This change has a reduced Form 3115 filing requirement.

150

Retail sales facility safe harbor for a motor vehicle dealership (section 263A)—for a motor vehicle dealership to treat its

sales facility as a retail sales facility as described in section 5.01 of Rev. Proc. 2010-44, 2010-49 I.R.B. 811. See section 12.06

of Rev. Proc. 2022-14.

151

Reseller without production activities safe harbor for a motor vehicle dealership (section 263A)—for a motor vehicle

dealership to be treated as a reseller without production activities as described in section 5.02 of Rev. Proc. 2010-44, 2010-49

I.R.B. 811. See section 12.06 of Rev. Proc. 2022-14.

152

Deduction for energy efficient commercial buildings (section 179D)—for an applicant to change its method of accounting

to deduct under section 179D amounts paid or incurred for the installation of energy efficient commercial building property,

subject to the limits of section 179D(b), in the year the property is placed in service. See Rev. Proc. 2012-39, 2012-2 C.B. 470,

and section 8.01 of Rev. Proc. 2022-14. Note. This change does not receive audit protection.

153

Certain revenue recognition methods of accounting—change in applicable financial statements (AFS) (section 451)

— for an applicant with an AFS (1) using the deferral method for including advance payments in gross income in accordance

with its AFS to change its method to recognize advance payments in gross income consistent with a changed manner for

recognizing advance payments for its AFS; or (2) that includes amounts in income in accordance with Regulations section

1.451-3 that has a change in the manner in which the item, or portion of it, is taken into account as AFS revenue or has a

change in transaction price allocation to performance allocations to use the new AFS method for purposes of Regulations

section 1.451-3(b)(1) or (d), as applicable. The requirement in section 6.03(3)(a) of Rev. Proc. 2015-13 to provide an additional

copy of the application to the examining agent(s), appeals officer(s), and counsel to the government, if applicable, applies to

this application. A statement in lieu of a Form 3115 is authorized for this change. See section 16.08 of Rev. Proc. 2022-14.

Note. This change is implemented on a cut-off basis or with a section 481(a) adjustment depending on the change being made

and does not receive audit protection. This change does not apply to method changes relating to Rev. Proc. 2004-34, section

451(b), Proposed Regulations section 1.451-3, and Proposed Regulations section 1.451-8 for tax years beginning on or after

January 1, 2021.

154

California franchise taxes (Rev. Rul. 2003-90)—for an accrual method applicant changing to recognizing its California

franchise tax liability in the tax year following the tax year in which the tax is incurred under the Cal. Rev. & Tax Code. See

section 20.09 of Rev. Proc. 2022-14.

155

Unearned premiums (section 833)—for a Blue Cross or Blue Shield organization within the meaning of section 833(c)(2) or

an organization described in section 833(c)(3) required to change its method of accounting for unearned premiums because it

fails to meet or meets anew the MLR requirements of section 833(c)(5). See section 26.02 of Rev. Proc. 2022-14.

-24-

List of DCNs

No.

Change

156

Gift cards issued as a refund (Rev. Proc. 2011-17)—for an accrual method applicant who issues gift cards as a refund for

returned goods changing to treat the transaction as the payment of a cash refund and sale of a gift card in the amount of the gift

card, as provided in Rev. Proc. 2011-17, 2011-5 I.R.B. 441. See section 20.10 of Rev. Proc. 2022-14.

157

Classification of wireless telecommunications assets used by wireless telecommunications carriers (sections 167

and 168)—for applicants that have a depreciable interest in wireless telecommunications assets (as defined in Rev. Proc.

2011-22, 2011-8 I.R.B. 737) used primarily to provide wireless telecommunications or broadband services by mobile phones

that are changing to the method described in Rev. Proc. 2011-22 to determine the recovery periods for depreciation of certain

tangible assets used by wireless telecommunications carriers. Additionally, a qualified small taxpayer qualifies for a reduced

Form 3115 filing requirement. See Rev. Proc. 2011-22 and section 6.09 of Rev. Proc. 2022-14.

158

Wireline network property (section 263(a))—for certain applicants that have a depreciable interest in wireline network

assets (as described in section 4 of Rev. Proc. 2011-27, 2011-8 I.R.B. 740) used primarily to provide wireline

telecommunications or broadband services that are changing to (a) the wireline network assets maintenance allowance method

described in section 5 of Rev. Proc. 2011-27; or (b) the adoption of all, or some, of the units of property described in section 6 of

Rev. Proc. 2011-27, to determine whether expenditures to maintain, replace, or improve wireline network assets must be

capitalized under section 263(a). See section 3.07 of Rev. Proc. 2022-14.

159

Wireless network property (section 263(a))—for certain applicants that have a depreciable interest in wireless network

assets (as described in section 4 of Rev. Proc. 2011-28, 2011-8 I.R.B. 743) used primarily to provide wireless

telecommunications or broadband services by mobile phones that are changing to (a) the wireless network asset maintenance

allowance method described in section 5 of Rev. Proc. 2011-28, or (b) the adoption of all, or some, of the units of property

described in section 6 of Rev. Proc. 2011-28, to determine whether expenditures to maintain, replace, or improve wireless

network assets must be capitalized under section 263(a). See section 3.08 of Rev. Proc. 2022-14.

160

Electric transmission and distribution property (section 263(a))—for certain applicants that have a depreciable interest in

electric transmission or distribution property (as described in section 4 of Rev. Proc. 2011-43, 2011-37 I.R.B. 326) used

primarily to transport, deliver, or sell electricity that are changing to the method described in Rev. Proc. 2011-43, to determine

whether expenditures incurred to maintain, replace, or improve transmission and distribution property are deductible repairs

under section 162 or capitalizable improvements under section 263(a). See section 3.09 of Rev. Proc. 2022-14.

161

Timing of incurring liabilities under the recurring item exception to the economic performance rules (section 461(h)

(3))—for an applicant changing to a method of accounting to conform to any of the holdings in Rev. Rul. 2012-1, 2012-2 I.R.B.

255, which addresses the “not material” and “better matching” requirements of the recurring item exception and distinguishes

contracts for the provision of services from insurance and warranty contracts. See section 20.11 of Rev. Proc. 2022-14.

175

Obsolete. See DCN 199.

176

Obsolete. See DCN 200.

177

Obsolete. See DCN 205.

178

Obsolete. See DCN 206.

179

Obsolete. See DCN 207.

181

Plants removed from the list of plants that have a preproductive period in excess of 2 years (section 263A)—for an

applicant that is not a corporation, partnership, or tax shelter required to use an accrual method of accounting and either is

changing to not applying section 263A to the production of a plant or plants that have been removed from the list of plants with

a nationwide weighted average preproductive period in excess of 2 years, or is revoking its section 263A(d)(3) election to not

apply section 263A to the production of a plant or plants that have been removed from the list of plants with a nationwide

weighted average preproductive period in excess of 2 years. See Rev. Proc. 2013-20 and section 12.07 of Rev. Proc. 2022-14.

182

Steam or electric power generation property (section 263(a))—for an applicant changing its method of accounting for its

treatment of expenditures on generation property (as defined in section 4.01 of Rev. Proc. 2013-24, 2013-22 I.R.B. 1142) to

use all or some of the unit of property definitions and the corresponding major component definitions described in Appendix A

of Rev. Proc. 2013-24, to determine whether expenditures to maintain, replace, or improve generation property must be

capitalized under section 263(a). See section 3.10 of Rev. Proc. 2022-14.

183

Change to proportional method of accounting for OID on a pool of credit card receivables (section 1272(a)(6))—for

an eligible taxpayer that wants to change to the proportional method of accounting for original issue discount (OID) on a pool of

credit card receivables, as described in Rev. Proc. 2013-26, 2013-22 I.R.B. 1160, as modified by Rev. Proc. 2021-35, 2021-35

I.R.B. 355. See section 30.02 of Rev. Proc. 2022-14. Note. This change is implemented on a cut-off basis.

-25-

List of DCNs

No.

Change

184

Deducting repair and maintenance costs or capitalizing improvement costs (sections 162 and 263(a))—for an

applicant changing to deducting amounts paid or incurred for repair and maintenance costs under section 162 and Regulations

section 1.162-4 or changing to capitalizing amounts paid or incurred for improvements to tangible property and, if depreciable,

to depreciating such property under section 167 or 168. Includes a change by an applicant in the method of identifying units of

property under Regulations section 1.263(a)-3(e) for purposes of determining whether amounts paid or incurred improve a unit

of property under Regulations section 1.263(a)-3. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115

filing requirement. See section 11.08 of Rev. Proc. 2022-14.

185

Change to the regulatory accounting method (section 162)—for a regulated applicant changing its method of accounting

for amounts paid or incurred to repair or maintain tangible property to follow its method of accounting for regulatory accounting

purposes to determine whether an amount paid or incurred improves property under Regulations section 1.263(a)-3, consistent

with Regulations section 1.263(a)-3(m). Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing

requirement. See section 11.08 of Rev. Proc. 2022-14.

186

Deducting non-incidental materials and supplies when used or consumed (section 162)—for an applicant changing its

method of accounting for non-incidental materials and supplies to the method of deducting such amounts in the tax year in

which they are actually used or consumed, consistent with Regulations section 1.162-3. Additionally, a qualified small taxpayer

qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2022-14.

187

Deducting incidental materials and supplies when paid or incurred (section 162)—for an applicant that wants to change

its method of accounting for incidental materials and supplies to the method of deducting such amounts in the tax year in which

they are paid or incurred, consistent with Regulations section 1.162-3. Additionally, a qualified small taxpayer qualifies for a

reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2022-14.

188

Deducting non-incidental rotable and temporary spare parts when disposed (section 162)—for an applicant changing

its method of accounting for costs to acquire or produce non-incidental rotable and temporary spare parts to the method of

deducting such costs in the tax year in which the taxpayer disposes of the parts, consistent with Regulations section 1.162-3.

Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc.

2022-14.

189

Change to the optional method for rotable and temporary spare parts (section 162)—for an applicant changing its

method of accounting for rotable and temporary spare parts to the optional method of accounting for rotable and temporary

spare parts (described in Regulations section 1.162-3(e)), consistent with Regulations section 1.162-3. Additionally, a qualified

small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2022-14.

190

Deducting dealer expenses that facilitate the sale of property (section 162)—for an applicant that is a dealer in property

changing its method of accounting for commissions and other costs paid or incurred to facilitate the sale of tangible property to

the method of treating such costs as ordinary and necessary business expenses, consistent with Regulations section

1.263(a)-1(e)(2). Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 11.08

of Rev. Proc. 2022-14.

191

Non-dealer expense to facilitate the sale of property (section 263(a))—for an applicant that is not a dealer in property

changing its method of accounting for commissions and other costs paid or incurred to facilitate the sale of property to the

method of capitalizing such costs, consistent with Regulations section 1.263(a)-1(e)(1). Additionally, a qualified small taxpayer

qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2022-14.

192

Capitalizing acquisition or production costs (section 263(a))—for an applicant changing its method of accounting to

capitalizing amounts paid or incurred to acquire or produce property under Regulations section 1.263(a)-2 and, if depreciable,

to depreciating such property under section 167 or 168. Additionally, a qualified small taxpayer qualifies for a reduced Form

3115 filing requirement. See section 11.08 of Rev. Proc. 2022-14.

193

Deducting certain costs for investigating or pursuing the acquisition of property (section 162)—for an applicant

changing its method of accounting from capitalizing to deducting amounts paid or incurred in the process of investigating or

otherwise pursuing (a) the acquisition of real property if the amounts meet the requirements of Regulations section 1.263(a)-2(f)

(2)(iii); or (b) the acquisition of real or personal property if the amounts are for employee compensation or overhead costs under

Regulations section 1.263(a)-2(f)(2)(iv), consistent with Regulations section 1.263(a)-2. Additionally, a qualified small taxpayer

qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2022-14.

194

Change to a reasonable allocation method for self-constructed assets (section 263A)—for a producer or a

reseller-producer to a reasonable allocation method under Regulations section 1.263A-1(f)(4) for self-constructed assets or

from not capitalizing a cost subject to section 263A to capitalizing that cost under a reasonable allocation method under

Regulations section 1.263A-1(f)(4) that the producer or reseller-producer is already using for self-constructed assets. See

section 12.08 of Rev. Proc. 2022-14.

-26-

List of DCNs

No.

Change

195

Real property acquired through foreclosure (section 263A)—for an applicant that capitalizes costs under section 263A(b)

(2) and Regulations section 1.263A-3(a)(1) to real property acquired through foreclosure, or similar transaction, to an otherwise

permissible method of accounting under which the acquisition and holding costs for real property acquired through foreclosure,

or similar transaction, are not capitalized under section 263A(b)(2) and Regulations section 1.263A-3(a)(1). See section 12.09

of Rev. Proc. 2022-14.

196

Obsolete.

197

Obsolete.

198

Partial dispositions of tangible depreciable asset to which the IRS’s adjustment pertains (section 168)—for MACRS

property for which the applicant is making a partial disposition election under Regulations section 1.168(i)-8(d)(2)(iii) to the

disposition of a portion of the asset to which the IRS’s adjustment pertains (as described in Regulations section 1.168(i)-8(d)(2)

(iii)). Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing

requirement. See section 6.10 of Rev. Proc. 2022-14.

199

Depreciation of leasehold improvements (sections 167, 168, and 197)—for leasehold improvements in which the

applicant has a depreciable interest at the beginning of the year of change, from improperly depreciating or amortizing these

leasehold improvements over the term of the lease (including renewals, if applicable) to properly depreciating or amortizing

these leasehold improvements under section 167(f)(1), 168, or 197, as applicable. Complete Schedule E of Form 3115.

Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 6.11 of Rev. Proc.

2022-14.

200

Depreciation of MACRS property (permissible to permissible) (section 168)—for MACRS property, from a permissible

method to another permissible method listed in section 6.12(3) of Rev. Proc. 2022-14. Certain changes are made on a modified

cut-off basis or a cut-off basis. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a

reduced Form 3115 filing requirement. See section 6.12 of Rev. Proc. 2022-14.

201

Sales-based royalties (section 263A)—for sales-based royalties (as described in Regulations section 1.263A-1(e)(3)(ii)(U)

(2)) properly allocable to inventory property for which the applicant is making a change listed in section 12.10(1) of Rev. Proc.

2022-14. See Rev. Proc. 2014-33 and section 12.10 of Rev. Proc. 2022-14.

202

Sales-based vendor chargebacks under a simplified method (section 263A)—for an applicant changing its method of

accounting to no longer include cost adjustments for sales-based vendor chargebacks (as described in Regulations section

1.471-3(e)(1)) in the formulas used to allocate additional section 263A costs to ending inventory under a simplified method. See

Rev. Proc. 2014-33 and section 12.11 of Rev. Proc. 2022-14.

203

Sales-based vendor chargebacks (section 471)—for an applicant changing its method of accounting to treat sales-based

vendor chargebacks as a reduction in cost of goods sold in accordance with Regulations section 1.471-3(e)(1). See Rev. Proc.

2014-33 and section 22.14 of Rev. Proc. 2022-14.

204

Retail inventory method (section 471)—for an applicant using the retail inventory method, a change to (a) not adjusting the

numerator of the cost complement for an allowance, discount, or price rebate required by Regulations section 1.471-3(e) to

reduce only cost of goods sold; (b) not adjusting the denominator of the cost complement for temporary markups and

markdowns; (c) computing th

This text is long and has been trimmed here. Open the source document for the complete record.