SECTION 10. CAPITAL — Internal Revenue Bulletin 2015-5

EXPENDITURES (§ 263)

.01 Package design costs . (1) Description of change . (a) Applicability . This change applies to a taxpayer that wants to change its method of accounting for package design costs that are within the scope of Rev. Proc. 97–35, 1997–2 C.B. 448, as modified by Rev. Proc. 98–39, 1998–1 C.B. 1320, to one of the three alternative methods of accounting for package design costs described in section 5 of Rev. Proc. 97–35, which are: (i) the capitalization method, (ii) the design-by-design capitalization and 60–month amortization method, and (iii) the pool-of-cost capitalization and 48-month amortization method.

(b) Inapplicability . This change does not apply to a taxpayer that wants to change to the capitalization method for costs of developing or modifying any package design that has an ascertainable useful life.

(2) Additional requirements . If a taxpayer is changing its method of accounting for package design costs to the capitalization method or the design-by-design capitalization and 60-month amortization method, the taxpayer must attach a statement to its timely filed Form 3115. The statement must provide a description of

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each package design, the date on which each was placed in service, and the cost basis of each (as determined under sections 5.01(2) or 5.02(2) of Rev. Proc. 97– 35). (3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 10.01 is “19.” (4) Contact information . For further information regarding a change under this section, contact Deena Devereux at (202) 317-7003 (not a toll-free number). .02 Line pack gas or cushion gas . (1) Description of change . This change applies to a taxpayer that wants to change its method of accounting for line pack gas or cushion gas to a method consistent with the holding in Rev. Rul. 97–54, 1997–2 C.B. 23. Rev. Rul. 97–54 holds that the cost of line pack gas or cushion gas is a capital expenditure under § 263, the cost of recoverable line pack gas or recoverable cushion gas is not depreciable, and the cost of unrecoverable line pack gas or unrecoverable cushion gas is depreciable under §§ 167 and 168.

(2) Additional requirements . A taxpayer that changes its method of accounting for unrecoverable line pack gas or unrecoverable cushion gas under this section 10.02 must change to a permissible method of accounting for depreciation for the cost of that gas as part of this change.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 10.02 is “20.” (4) Contact information . For further information regarding a change under this section, contact Deena Devereux at (202) 317-7003 (not a toll-free number). .03 Removal costs . (1) Description of change . (a) Applicability . This change applies to a taxpayer that wants to change its method of accounting for certain costs in the retirement and removal of a depreciable asset to conform 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 § 1.263(a)–3(g)(2)(i).

(b) Inapplicability . This change does not apply to a taxpayer that wants to

change its method of accounting for removal costs in the disposal of a component of a unit of property where the disposal of the component is not a disposition for federal tax purposes. To make that change, see section 10.11 of this revenue procedure.

(c) Manner of making change . A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following information on Form 3115:

(i) The identification section of page 1 (above Part I);

(ii) The signature section at the bottom of page 1;

(iii) Part I, line 1(a); (iv) Part II, all lines except lines 11, 13, 14, 15, and 17; (v) Part II, line 13, if the change is to depreciating property;

(vi) Part IV, lines 25 and 26; and (vii) Schedule E, if applicable. (2) Additional requirements . (a) Except for assets for which depreciation is determined in accordance with § 1.167(a)–11 (ADR), the taxpayer’s proposed method of treating removal costs for assets accounted for in a multiple asset account must be consistent with the taxpayer’s method of treating salvage proceeds. See Rev. Rul. 74–455, 1974–2 C.B. 63. (See section 6.02 of this revenue procedure for changing a taxpayer’s present method of treating salvage proceeds.)

(b) If this change involves assets that are public utility property within the meaning of § 168(i)(10) or former § 167(l)(3)(A), the taxpayer must comply with the terms and conditions in section 6.01(3)(b)(v) of this revenue procedure. (3) Certain eligibility rule inapplica- ble . The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015–13, 2015–5 I.R.B. 419, does not apply to this change.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 10.03 is “21.” (5) Contact information . For further information regarding a change under this section, contact Deena Devereux at (202) 317-7003 (not a toll-free number). .04 Distributor commissions . (1) Description of change .

(a) Applicability . This change applies to a taxpayer that wants to change from currently deducting distributor commissions (as defined by section 2 of Rev. Proc. 2000–38, 2002–2 C.B. 310, as modified by Rev. Proc. 2007–16, 2007–1 C.B. 358) to a method of capitalizing and amortizing distributor commissions using the distribution fee period method, the 5-year method, or the useful life method (all described in Rev. Proc. 2000–38).

(b) Inapplicability . This change does not apply to an amortizable section 197 intangible (including any property for which a timely election under § 13261(g)(2) of the Revenue Reconciliation Act of 1993, 1993–3 C.B. 1, 128, was made). (2) Manner of making change . This change is made on a cut-off basis and applies only to distributor commissions paid or incurred on or after the beginning of the year of change. Accordingly, a § 481(a) adjustment is neither permitted nor required.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 10.04 is “47.” (4) Contact information . For further information regarding a change under this section, contact Deena Devereux at (202) 317-7003 (not a toll-free number). .05 Intangibles . (1) Description of change . This change applies to a taxpayer that wants to change its treatment of an item to a method of accounting permitted by §§ 1.263(a)–4, 1.263(a)–5, and 1.167(a)–3(b). See Rev. Proc. 2006–12, 2006–1 C.B. 310, as modified by Rev. Proc. 2006–37, 2006–2 C.B. 499, for the specific requirements, information, and documentation required for this change.

(2) Section 481(a) adjustment . In computing the § 481(a) adjustment for this change, the taxpayer takes into account only amounts paid or incurred in taxable years ending on or after January 24, 2002. See section 5 of Rev. Proc. 2006–12 for detailed rules for computing the § 481(a) adjustment and reporting it on Form 3115.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 10.05 is “78.”

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(4) Contact information . For further information regarding a change under this section, contact Deena Devereux at (202) 317-7003 (not a toll-free number). .06 Rotable spare parts safe harbor method .

(1) Description of change . This change applies to a taxpayer 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, and wants to change its method of accounting for the rotable spare parts to the safe harbor method of accounting provided in Rev. Proc. 2007–48, 2007–2 C.B. 110. The taxpayer must meet the requirements in section 4.01 of Rev. Proc. 2007–48 to use this safe harbor method of accounting.

(2) Change from safe harbor method . A taxpayer that is required to change its method of accounting from the safe harbor method under section 5.06 of Rev. Proc. 2007–48, must make the change under section 21.09 of this revenue procedure.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 10.06 is “109.” (4) Contact information . For further information regarding a change under this section, contact Deena Devereux at (202) 317-7003 (not a toll-free number). .07 Repairable and reusable spare parts.

(1) Description of change . (a) Applicability . This change applies to a taxpayer that wants to change its method of accounting to treat repairable and reusable spare parts as depreciable property to conform with the holdings in Rev. Rul. 69–200, 1969–1 C.B. 60, and Rev. Rul. 69–201, 1969–1 C.B. 60. This change applies to repairable and reusable spare parts that: are owned by the taxpayer at the beginning of the year of change; are used to repair equipment owned by the taxpayer; are acquired by the taxpayer for a specific type of equipment at the time that the related equipment is acquired; usually have the same useful life as the related equipment; and have been placed in service by the taxpayer after 1986. A taxpayer making a change in method of accounting under this

section 10.07 may treat its repairable and reusable spare parts as tangible property for which depreciation is allowable at the time that the related equipment is placed in service by the taxpayer. The method of computing depreciation for the repairable and reusable spare parts is the same method of computing depreciation for the related equipment.

(b) Inapplicability . This change does not apply to:

(i) A taxpayer that is currently capitalizing and depreciating the cost of its repairable and reusable spare parts, or that is currently capitalizing the cost of its repairable and reusable spare parts and treating these parts as nondepreciable property (but see section 6.01 of this revenue procedure for making a change from an impermissible to a permissible method of accounting for depreciation);

(ii) A taxpayer that is using an impermissible method of accounting for depreciation for the related equipment for which the repairable and reusable spare parts are acquired, unless the taxpayer concurrently changes its method to use a permissible method of accounting for depreciation under section 6 of this revenue procedure;

(iii) A repairable and reusable spare part that meets the definition of rotable spare parts, temporary spare parts, or standby emergency spare parts in § 1.162– 3(c)(2) or (3), for which the cost was paid or incurred by the taxpayer in a taxable year beginning on or after January 1, 2014 (or in a taxable year beginning on or after January 1, 2012, if the taxpayer chooses to apply § 1.162–3 to amounts paid or incurred in those taxable years), and for which the taxpayer did not make the election under § 1.162–3(d) to capitalize and depreciate such repairable and reusable spare part; or

(iv) a taxpayer that chooses to apply § 1.162–3T to a repairable and reusable spare part that meets the definition of rotable spare parts or temporary spare parts in § 1.162–3T(c)(2), for which the cost was paid or incurred by the taxpayer in a taxable year beginning on or after January 1, 2012, and before January 1, 2014, and for which the taxpayer did not make the election under § 1.162–3T(d) to capitalize and depreciate such repairable and reusable spare part.

(2) Additional requirements . (a) To change a method of accounting under this section 10.07, a taxpayer (including a qualified small taxpayer as defined in section 6.01(4)(b) of this revenue procedure) must complete Schedule E of Form 3115 for the repairable and reusable spare parts and also attach the following information to the completed Form 3115:

(i) A description of the repairable and reusable spare parts;

(ii) A list of related equipment for which the repairable and reusable spare parts are acquired; and

(iii) A complete description of the method of computing depreciation (for example, depreciation method, recovery period, convention, and applicable asset class under Rev. Proc. 87–56, 1987–2 C.B. 674, as clarified and modified by Rev. Proc. 88–22, 1988–1 C.B. 785) that the taxpayer uses for the related equipment for which the repairable and reusable spare parts are acquired.

(b) Reduced filing requirement for qualified small taxpayers . A qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, is required to complete only the following information on Form 3115:

(i) The identification section of page 1 (above Part I);

(ii) The signature section at the bottom of page 1;

(iii) Part I; (iv) Part II, all lines except lines 11, 13, 14, 15, and 17; and (v) Part IV, all lines except line 24. (3) Concurrent automatic change . (a) A taxpayer making both this change and a change to a UNICAP method under section 11.01, 11.02, 11.09, or 11.13 of this revenue procedure (as applicable) for the same year of change should file a single Form 3115 for both changes, in which case the taxpayer must enter the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015–13, 2015–5 I.R.B. 419, for information on making concurrent changes. For example, a qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, must include on the single Form 3115 the information required by section 10.07(2)(b) of this revenue procedure and

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the information required by the lines on Form 3115, applicable to the UNICAP method change, including Part II line 12 and 13, Part IV, and Schedule D, and must include a separate response to each line on Form 3115 that is applicable to both changes (such as Part II lines 4b, 5c, 12, and, as applicable for this change, Part IV) for which the taxpayer’s response is different for this change and the change to a UNICAP method.

(b) A taxpayer making both this change and a change to a permissible method of accounting for depreciation for repairable and reusable spare parts, or for the related equipment for which the repairable and reusable spare parts are acquired, under section 6 of this revenue procedure (as applicable) for the same year of change should file a single Form 3115 for both changes, in which case the taxpayer must enter the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015–13 for information on making concurrent changes. For example, a qualified small taxpayer must include on the single Form 3115 the information required to be completed on Form 3115 by a qualified small taxpayer under this revenue procedure for each change in method of accounting included on that Form 3115.

(c) A taxpayer making this change also may establish pools for the repairable and reusable spare parts or may identify disposed repairable and reusable spare parts in accordance with section 6.37 of this revenue procedure. A taxpayer making both this change and the change under section 6.37 of this revenue procedure for the same year of change should file a single Form 3115 for both changes, in which case the taxpayer must enter the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015–13 for information on making concurrent changes. For example, a qualified small taxpayer must include on the single Form 3115 the information required to be completed on Form 3115 by a qualified small taxpayer under this revenue procedure for each change in method of accounting included on that Form 3115.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 10.07 is “121”. (5) Contact information . For further information regarding a change under this section, contact Deena Devereux at (202) 317-7003 (not a toll-free number). .08 Reserved . .09 Reserved . .10 Reserved . .11 Tangible property . (1) Description of change . (a) Applicability . This change, as described in Rev. Proc. 2014–16, 2014–9 I.R.B. 606, applies to a taxpayer that wants to make a change to a method of accounting specified in section 10.11(3) of this revenue procedure and permitted under:

(i) Section 1.162–3, § 1.162–4, § 1.263(a)–1, § 1.263(a)–2, or § 1.263(a)–3 (the final tangible property regulations) for taxable years beginning on or after January 1, 2012;

(ii) Section 1.162–3T, § 1.162–4T, § 1.263(a)–2T, or § 1.263(a)–3T of the temporary Income Tax Regulations (T.D. 9564, 76 Fed. Reg. 81060, as contained in 26 CFR part 1 edition revised as of Apr. 1, 2013) (the temporary tangible property regulations) for a taxable year beginning on or after January 1, 2012, and before January 1, 2014; or

(iii) Section 1.446–1(e)(2)(ii)( d )(2) if the property for which the taxpayer is otherwise changing its method of accounting under this section is depreciable under either the present or the proposed method of accounting.

(b) Inapplicability . This change does not apply to:

(i) A taxpayer that wants to change its method of accounting for dispositions of depreciable property, including a change in the asset disposed of (but see sections 6.29, 6.30, 6.31, 6.33, 6.34, and 6.35 of this revenue procedure);

(ii) Amounts paid or incurred for certain materials and supplies that the taxpayer has elected to capitalize and depreciate under § 1.162–3(d);

(iii) Amounts paid or incurred to which the taxpayer has elected to apply the de minimis safe harbor under § 1.263(a)– 1(f);

(iv) Amounts paid or incurred for employee compensation or overhead that the taxpayer has elected to capitalize under § 1.263(a)–2(f)(2)(iv)(B);

(v) Amounts paid or incurred to which the taxpayer has elected to apply the safe harbor for small taxpayers under § 1.263(a)–3(h);

(vi) Amounts paid or incurred for repair and maintenance costs that the taxpayer has elected to capitalize under § 1.263(a)–3(n); or

(vii) Amounts paid or incurred to facilitate the acquisition or disposition of assets that constitute a trade or business (but see section 10.05 of this revenue procedure).

(2) Certain eligibility rules temporarily inapplicable .

(a) In general . The eligibility rules in sections 5.01(1)(d) and (f) of Rev. Proc. 2015–13, 2015–5 I.R.B. 419, do not apply to a taxpayer that makes one or more changes in method of accounting under this section for any taxable year beginning before January 1, 2015.

(b) Concurrent automatic change . If the taxpayer makes both a change under this section 10.11 and a change to a UNICAP method under section 11.01, 11.02, 11.09, or 11.13 of this revenue procedure (as applicable) for any taxable year beginning before January 1, 2015, on a single Form 3115 for the same year of change in accordance with section 10.11(5) of this revenue procedure, the eligibility rules in sections 5.01(1)(d) and (f) of Rev. Proc. 2015–13 do not apply to the taxpayer for either change. See section 6.03(1)(b) of Rev. Proc. 2015–13 for information on making concurrent changes.

(3) Covered changes . This section 10.11 only applies to the following changes in methods of accounting:

(a) Changes under the final tangible property regulations .

(i) A change to deducting amounts paid or incurred to acquire or produce nonincidental materials and supplies in the taxable year in which they are first used in the taxpayer’s operations or consumed in the taxpayer’s operations in accordance with §§ 1.162–3(a)(1) and 1.162–3(c)(1);

(ii) A change to deducting amounts to acquire or produce incidental materials and supplies in the taxable year in which

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paid or incurred in accordance with §§ 1.162–3(a)(2) and 1.162–3(c)(1);

(iii) A change to deducting amounts paid or incurred to acquire or produce non-incidental rotable and temporary spare parts in the taxable year which the taxpayer disposes of the parts in accordance with §§ 1.162–3(a)(3) and 1.162– 3(c)(2); (iv) A change to the optional method of accounting for rotable and temporary spare parts in accordance with § 1.162– 3(e); (v) A change to deducting amounts paid or incurred for repair and maintenance in accordance with § 1.162–4, including a change, if any, in identifying the unit of property under § 1.263(a)–3(e) or, in the case of a building, identifying the building structure or building systems under § 1.263(a)–3(e)(2) for purposes of making the change to deducting the amounts;

(vi) A change to capitalizing amounts paid or incurred for improvements to tangible property in accordance with § 1.263(a)–3 and, if depreciable, to depreciating such property under § 167 or § 168, including a change, if any, in identifying the unit of property under § 1.263(a)–3(e) or, in the case of a building, identifying the building structure or building systems under § 1.263(a)–3(e)(2) for purposes of making the change to capitalizing the amounts;

(vii) A change by a dealer in property to deduct amounts paid or incurred for commissions and other costs that facilitate the sale of property in accordance with § 1.263(a)–1(e)(2);

(viii) A change by a non-dealer in property to capitalizing amounts paid or incurred for commissions and other costs that facilitate the sale of property in accordance with § 1.263(a)–1(e);

(ix) A change to capitalizing amounts paid or incurred to acquire or produce property in accordance with § 1.263(a)–2, and if depreciable, to depreciating such property under § 167 or § 168;

(x) A change to deducting amounts paid or incurred in the process of investigating or otherwise pursuing the acquisition of real property if the amounts meet the requirements of § 1.263(a)–2(f)(2)(iii); and

(xi) A change to the optional regulatory accounting method in accordance

with § 1.263(a)–3(m) to determine whether amounts paid or incurred to repair, maintain, or improve tangible property are treated as deductible expenses or capital expenditures.

(b) Changes under the temporary tan- gible property regulations.

(i) A change to deducting amounts paid or incurred to acquire or produce nonincidental materials and supplies in the taxable year in which they are used or consumed in the taxpayer’s operations in accordance with §§ 1.162–3T(a)(1) and 1.162–3T(c)(1); (ii) A change to deducting amounts to acquire or produce incidental materials and supplies in the taxable year in which they are paid or incurred in accordance with §§ 1.162–3T(a)(2) and 1.162– 3T(c)(1); (iii) A change to deducting the amounts paid or incurred to acquire or produce non-incidental rotable and temporary spare parts in the taxable year which the taxpayer disposes of the parts in accordance with §§ 1.162–3T(a)(3) and 1.162–3T(c)(2); (iv) A change to the optional method of accounting for rotable and temporary spare parts in accordance with § 1.162– 3T(e); (v) A change to deducting amounts paid or incurred for repair and maintenance in accordance with § 1.162–4T, including a change, if any, in identifying the unit of property under § 1.263(a)– 3T(e) or, in the case of a building, identifying the building structure or building systems under § 1.263(a)–3T(e)(2) for purposes of making the change to deducting the amounts;

(vi) A change to capitalizing amounts paid or incurred for improvements to tangible property in accordance with § 1.263(a)–3T and, if depreciable, to depreciating such property under § 167 or § 168, including a change, if any, in identifying the unit of property under § 1.263(a)–3T(e) or, in the case of a building, identifying the building structure or building systems under § 1.263(a)– 3T(e)(2) for purposes of making the change to capitalizing the amounts;

(vii) A change by a dealer in property to deduct amounts paid or incurred for commissions and other costs that facilitate

the sale of property in accordance with § 1.263(a)–1T(d);

(viii) A change by a non-dealer in property to capitalizing amounts paid or incurred for commissions and other costs that facilitate the sale of property in accordance with § 1.263(a)–1T(e);

(ix) A change to capitalizing amounts paid or incurred to acquire or produce property in accordance with § 1.263(a)– 2T, and if depreciable, to depreciating such property under § 167 or § 168;

(xi) A change to apply the de minimis rule under § 1.263(a)–2T(g) to amounts paid or incurred to acquire or produce a unit of property; and

(xii) A change to the optional regulatory accounting method in accordance with § 1.263(a)–3T(k) to determine whether amounts paid or incurred to repair, maintain, or improve tangible property are treated as deductible expenses or capital expenditures.

(4) Manner of making change . (a) Form 3115 . In addition to the other information required on line 12 of Form 3115, the taxpayer must include the following:

(i) The citation to the paragraph of the final tangible property regulations or temporary tangible property regulations that provides for the proposed method, or methods, of accounting to which the taxpayer is changing (for example, § 1.162– 3(a), § 1.263(a)–3(i), § 1.263(a)–3(k)); and

(ii) If the taxpayer is changing any unit(s) of property under § 1.263(a)–3(e) (or § 1.263(a)–3T(e)) or, in the case of a building, is changing the identification of any building structure(s) or building system(s) under § 1.263–3(e)(2) (or § 1.263– 3T(e)(2)) for purposes of determining whether amounts are deducted as repair and maintenance costs under section § 1.162–4 (or § 1.162–4T) or capitalized as improvement costs under § 1.263(a)–3 (or § 1.263(a)–3T), the taxpayer must include a detailed description of the unit(s) of property, building structure(s), or buildings system(s) used under its present method of accounting and a detailed de

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scription of the unit(s) of property, building structure(s), and building system(s) under its proposed method of accounting, together with a citation to the paragraph of the final regulation or temporary regulation under which the unit of property is permitted.

(iii) A taxpayer changing its method of accounting under this section 10.11 to capitalizing amounts paid or incurred and to depreciating such property under § 167 or § 168, as applicable, must complete Schedule E of Form 3115.

(i) The identification section of page 1 (above Part I);

(ii) The signature section at the bottom of page 1;

(iii) Part I, line 1(a); (iv) Part II, all lines except lines 11, 13, 14, 15, and 17; (v) Part II, line 13, if the change is to depreciating property;

(vi) Part IV, lines 25 and 26; and (vii) Schedule E, if applicable. (5) Concurrent automatic change . (a) A taxpayer making two or more changes in method of accounting pursuant to this section 10.11 should file a single Form 3115 for all of these changes and must enter the designated automatic accounting method change numbers for all of these changes on the appropriate line on the Form 3115.

(b) A taxpayer making both one or more changes in method of accounting pursuant to this section 10.11 and a change to a UNICAP method under section 11 of this revenue procedure (as applicable) for the same year of change should file a single Form 3115 that includes all of these changes and must enter the designated automatic accounting method change numbers for all of these changes on the appropriate line on that Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015–13 for information on making concurrent changes. For example, a qualified small taxpayer, as defined in section 6.01(4)(b) of this revenue procedure, must include on the single Form 3115 the in

formation required by section 10.11(4)(b) of this revenue procedure for this change and the information required by the lines on Form 3115, applicable to the UNICAP method change, including Part II lines 12 and 13, Part IV, and Schedule D, and must include a separate response to each line on Form 3115 that is applicable to both changes (such as Part II lines 4b, 5c, 12, and, as applicable for this change, Part IV) for which the taxpayer’s response is different for this change and the change to a UNICAP method.

(6) Section 481(a) adjustment . (a) In general . Except as provided in section 10.11(6)(b) of this revenue procedure, a taxpayer changing to a method of accounting provided in this section 10.11 must apply § 481(a) and take into account any applicable § 481(a) adjustment in the manner provided in section 7.03 of Rev. Proc. 2015–13.

(b) Limited adjustment for certain changes .

(i) Final tangible property regulations . A taxpayer changing to a method of accounting under § 1.162–3 (except § 1.162–3(e)), § 1.263(a)–2(f)(2)(iii), § 1.263(a)–2(f)(3)(ii), § 1.263(a)–3(m), § 1.263A–1(e)(2)(i)(A), and § 1.263A–1(e)(3)(ii)(E) is required to calculate a § 481(a) adjustment as of the first day of the taxpayer’s taxable year of change that takes into account only amounts paid or incurred in taxable years beginning on or after January 1, 2014. Optionally, a taxpayer may take into account amounts paid or incurred in taxable years beginning on or after January 1, 2012. (ii) Temporary tangible property regu- lations . A taxpayer changing to a method of accounting under § 1.162–3T (except § 1.162–1T(e)), § 1.263(a)–2T(f)(2)(iii), § 1.263(a)–2T(f)(3)(ii), § 1.263(a)–2T(g), § 1.263(a)–3T(k), § 1.263A–1T(e)(2)(i)(A), and § 1.263A–1T(e)(3)(ii)(E) is required to calculate a section § 481(a) adjustment as of the first day of the year of change that takes into account only amounts paid or incurred in taxable years beginning on or after January 1, 2012, for a year of change beginning on or after January 1, 2012, and ending before January 1, 2014. For guidance on computing a § 481(a) adjustment see sections 11.03 and 11.04 of Rev. Proc. 2015–13.

(c) Itemized listing on Form 3115 . A taxpayer changing to a method of accounting provided in this section 10.11 must include on Form 3115, Part IV, line 25, the total § 481(a) adjustment for each change in method of accounting being made. If the taxpayer is making more than one change in method of accounting under the final tangible property regulations, the taxpayer (including a qualified small taxpayer) must include on an attachment to Form 3115:

(i) The information required by Part IV, line 25 for each change in method of accounting (including the amount of the § 481(a) adjustment for each change in method of accounting, which includes the portion of the § 481(a) adjustment attributable to UNICAP);

(ii) The information required by Part II, line 12 of Form 3115 for each change; and

(iii) The citation to the paragraph of the final tangible property regulations or temporary tangible property regulations that provides for each proposed method of accounting.

(d) Repair allowance property . A taxpayer changing to a method of accounting provided by § 1.263(a)–3 of the final tangible property regulations or § 1.263(a)–3T of the temporary tangible property regulations under this section 10.11 must not include in the § 481(a) adjustment any amount attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)–11(d)(2) for any taxable year in which the repair allowance election was made.

(e) Statistical Sampling . Except for any change in accounting method for which a taxpayer is required to compute a § 481(a) adjustment under section 10.11(6)(b) of this revenue procedure, a taxpayer changing its method of accounting under this section 10.11 may use statistical sampling in determining the § 481(a) adjustment by following the guidance provided in Rev. Proc. 2011–42, 2011–37 I.R.B. 318.

(7) Designated automatic accounting method change number . See the following table for the designated automatic accounting method change numbers (DCN) for the changes in method of accounting under this section 10.11.

(a) Changes under the final tangible property regulations.

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Description of Change DCN Citation

A change to deducting amounts paid or incurred for repair and mainte- 184 §§ 1.162–4, 1.263(a)–3 nance or a change to capitalizing amounts paid or incurred for improvements to tangible property and, if depreciable, to depreciating such property under § 167 or § 168. Includes a change, if any, in the method of identifying the unit of property, or in the case of a building, identifying the building structure or building systems for the purpose of making this change.

Change to the regulatory accounting method. 185 § 1.263(a)–3(m)

Change to deducting non-incidental materials and supplies when used or 186 §§ 1.162–3(a)(1), (c)(1) consumed.

Change to deducting incidental materials and supplies when paid or incurred.

Change to deducting non-incidental rotable and temporary spare parts when disposed of.

187 §§ 1.162–3(a)(2), (c)(1)

188 § 1.162–3(a)(3), (c)(2)

Change to the optional method for rotable and temporary spare parts. 189 § 1.162–3(e)

Change by a dealer in property to deduct commissions and other costs 190 § 1.263(a)–1(e)(2) that facilitate the sale of property.

Change by a non-dealer in property to capitalizing commissions and other costs that facilitate the sale of property.

Change to capitalizing acquisition or production costs and, if depreciable, to depreciating such property under § 167 or § 168.

Change to deducting certain costs for investigating or pursuing the acquisition of real property (whether and which).

(b) Changes under the temporary tangible property regulations .

191 § 1.263(a)–1(e)(1)

192 § 1.263(a)–2

193 § 1.263(a)–2(f)(2)(iii)

Description of Change DCN Citation

A change to deducting amounts paid or incurred for repair and mainte- 162 §§ nance or a change to capitalizing amounts paid or incurred for improve- 1.263(a)–3T ments to tangible property and, if depreciable, to depreciating such property under § 167 or § 168. Includes a change, if any, in the method of identifying the unit of property, or in the case of a building, identifying the building structure or building systems for the purpose of making this change.

162 §§ 1.162–4T,

1.263(a)–3T

Change to the regulatory accounting method. 163 § 1.263(a)–3T(k)(2)

Change to deducting non-incidental materials and supplies when used or 164 §§ 1.162–3T(a)(1), consumed. (c)(1)

164 §§ 1.162–3T(a)(1),

consumed. (c)(1)

Change to deducting incidental materials and supplies when paid or in- 165 §§ curred. (c)(1)

Change to deducting non-incidental rotable and temporary spare parts 166 § 1.162–3T(a)(3), when disposed of.

165 §§ 1.162–3T(a)(2),

166 § 1.162–3T(a)(3), (c)(2)

Change to the optional method for rotable and temporary spare parts. 167 § 1.162–3T(e)

Change by a dealer in property to deduct commissions and other costs 168 § 1.263(a)–1T(d)(1) that facilitate sales.

Change to applying the de minimis rule 169 §§ 1.263(a)–2T(g),

1.263A–1T(b)(14)

Change to deducting certain costs for investigating or pursuing the acqui- 170 § 1.263(a)–2T(f)(2)(iii) sition of real property.

Change by non-dealer in property to capitalizing commissions and other costs that facilitate sales.

Change to capitalizing acquisition or production costs and, if depreciable, to depreciating such property under § 167 or § 168.

172 § 1.263(a)–1T(d)(1)

173 §1.263(a)–2T

Bulletin No. 2015–5 511 February 2, 2015

(8) Contact information . For further information regarding a change under this section, contact Lewis Saideman at (202) 317-5100 (not a toll-free number ) . .12 Railroad track structure expendi- tures .

(1) Description of change . This change applies to a taxpayer that wants to change its method of accounting for railroad track structures to:

(a) the safe harbor method provided in Rev. Proc. 2002–65, 2002–2 C.B. 700; or

(b) the safe harbor method provided in Rev. Proc. 2001–46, 2001–2 C.B. 263.

(2) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 10.12 is “213.” (3) Contact information . For further information regarding a change under this section contact Gwen Turner at (202) 3177003 (not a toll-free number).