SECTION 2. BACKGROUND

.01 Section 167(a) of the Internal Revenue Code provides that there is allowed as a depreciation deduction a reasonable allowance for the exhaustion and wear and tear of property used in a trade or business or held for the production of income. The depreciation deduction provided by § 167(a) for tangible property placed in service after 1986 generally is determined under § 168, which prescribes two methods of accounting for determining depreciation allowances: (1) the general depreciation system in § 168(a); and (2) the alternative depreciation system in § 168(g). Under either depreciation system, a taxpayer computes the depreciation deduction by using a prescribed depreciation method, recovery period, and convention. The applicable recovery period for purposes of § 168(a) or § 168(g) is determined by reference to class life or by statute.

Rev. Proc. 87–56, 1987–2 C.B. 674, as clarified and modified by Rev. Proc. 88–22, 1988–1 C.B. 785, provides the class lives of property for computing the depreciation allowance under § 168. That revenue procedure establishes two broad categories of depreciable assets: (1) asset classes 00.11 through 00.4, which consist of specific assets used in all business activities; and (2) asset classes 01.1 through 80.0, which consist of assets used in specific business activities.

.02 Taxpayers and the Internal Revenue Service often do not agree which asset class of Rev. Proc. 87–56 includes the tangible assets used by wireless telecommunications carriers to provide wireless telecommunication services. To minimize disputes regarding the depreciation of these assets, this revenue procedure provides a safe harbor method of accounting for determining the recovery periods of these assets.

.03 Except as otherwise expressly provided by the Code or the regulations thereunder, § 446(e) and § 1.446–1(e)(2) of the

May 2, 2011 737 2011–18 I.R.B.

recovery period of 5 years for purposes of § 168(a) and 9.5 years for purposes of § 168(g);

(4) Dedicated heating, ventilation, and air conditioning (HVAC) equipment and dedicated power (including battery backup system) for the computer-based switching equipment and related equipment at the MTSO in asset class 48.121 with a recovery period of 5 years for purposes of § 168(a) and 9.5 years for purposes of § 168(g); and

(5) All other equipment at the MTSO that is not described in asset classes 00.11 through 00.4 as personal property with no class life with a recovery period of 7 years for purposes of § 168(a) and 12 years for purposes of § 168(g).

.02 The following wireless telecommunication assets located at the taxpayer’s cell sites as included in an asset class of Rev. Proc. 87–56 unless otherwise stated:

(1) The hut and its foundation: (a) The hut itself as personal property with no class life with a recovery period of 7 years for purposes of § 168(a) and 12 years for purposes of § 168(g); and

(b) Cement slab or foundation upon which the hut is installed in asset class 00.3 with a recovery period of 15 years for purposes of § 168(a) and 20 years for purposes of § 168(g);

(2) Base station controller (or generational equivalent), base transceiver station (or generational equivalent), their own weather proof enclosure or cabinet (including any equipment integrated into or built into the base station controller or base transceiver station; for example, this equipment might include HVAC and power equipment, alarms, enhanced 911 service equipment, or the RET central control unit (CCU) controller), and associated cables in asset class 48.121 with a recovery period of 5 years for purposes of § 168(a) and 9.5 years for purposes of § 168(g);

(3) Cabling (for example, copper T–1 lines or fiber cabling) connecting the cell site to the MTSO as property to which § 168(e)(3)(E)(ii) applies and, therefore, with a recovery period of 15 years for purposes of § 168(a) and 24 years for purposes of § 168(g);

(4) Dedicated HVAC equipment and dedicated power (including batteries and generators) for the equipment within the hut in asset class 48.121 with a recovery

Income Tax Regulations require a taxpayer to secure the consent of the Commissioner before changing a method of accounting for federal income tax purposes. Section 1.446–1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions necessary to permit a taxpayer to obtain consent to change a method of accounting.