SECTION 8. APPLICATION

.01 A change in a taxpayer’s treatment of costs paid or incurred to develop, purchase, lease, or license computer software to a method described in section 5, 6, or 7 of this revenue procedure is a change in method of accounting to which §§ 446 and 481 apply. However, a change in useful life under the method described in section 5.01(2) or 6.01(2) of this revenue procedure is not a change in method of accounting. Section 1.446–1(e)(2)(ii)( b ).

2000–52 I.R.B. 601 December 26, 2000

.02 A taxpayer that wants to change the taxpayer’s method of accounting under this revenue procedure must follow the automatic change in method of accounting provisions in Rev. Proc. 99–49, 1999–2 C.B. 725 (or its successor), with the following modifications:

(1) In order to assist the Service in processing changes in method of accounting under this section and to ensure proper handling, section 6.02(3)(a) of Rev. Proc. 99–49 is modified to require that a Form 3115, Application for Change in Accounting Method, filed under this section include the statement: “Automatic Change Filed Under Section 8.01 of Rev. Proc. 2000–50.” This statement must be legibly printed or typed at the top of any Form 3115 filed under this revenue procedure.

(2) If a taxpayer is changing to the method described in section 5.01(2) of this revenue procedure, the taxpayer must attach a statement to the Form 3115 stating whether the taxpayer is choosing the 60-month period from the date of completion of the development of the software, or the 36-month period from the placedin-service date of the software.

.03 For taxable years ending on or after December 1, 2000, the Service will not disturb the taxpayer’s treatment of costs of computer software that are handled in accordance with the practices described in this revenue procedure.

.04 For taxable years ending prior to December 1, 2000, the Service will not disturb the taxpayer’s treatment of costs of computer software except to the extent that the taxpayer’s treatment is markedly inconsistent with the practices described in this revenue procedure. For the purpose of applying the preceding sentence to costs described in section 5 of this revenue procedure, the absence of any formal election similar to that required by § 174 or the amortization of capitalized software costs over a period shorter than the 5-year period specified in § 174(b) (but not less than 36 months for costs paid or incurred after August 10, 1993, or, if a valid retroactive election has been made under § 1.197–1T, July 25, 1991) will not characterize the taxpayer’s treatment of the costs as markedly inconsistent with the principles of this revenue procedure. In addition, the amortization of acquired software described in section 6 of this revenue procedure treated as an intangible

asset over a period of 60 months or less, but in no case less than 36 months for costs paid or incurred after August 10, 1993 (or after July 25, 1991, if a valid retroactive election has been made under § 1.197–1T) will not characterize the taxpayer’s treatment of these costs as markedly inconsistent with the principles of this revenue procedure.