SECTION 1. PURPOSE

.01 This revenue procedure modifies Rev. Proc. 97–35, 1997–33 I.R.B. 11, which describes three alternative methods of accounting for package design costs: (1) the capitalization method, (2) the design-by-design capitalization and 60month amortization method, and (3) the pool-of-cost capitalization and 48-month amortization method. A taxpayer with package design costs within the scope of Rev. Proc. 97–35 may change to or adopt any one of these three methods. The procedures for a taxpayer to change to one of these three methods are provided in Rev. Proc. 97–37, 1997–33 I.R.B. 18, which provides simplified and uniform procedures to obtain automatic consent to make this and other changes in methods of accounting.

.02 Rev. Proc. 97–35 is modified to make clear that capitalization under § 263 (and not § 263A) of the Internal Revenue Code is applicable for package design costs incurred in taxable years beginning after December 31, 1993, pursuant to § 1.263A–2(a)(2)(ii) of the Income Tax Regulations. In addition, Rev. Proc. 97– 35 is further modified to make clear that it does not apply to the costs of a package design that is an “amortizable § 197 intangible” as defined in § 197(c). Rev. Proc. 97–35 will appear in 1997–2 C.B. as modified by this revenue procedure.