SECTION 10. DRAFTING — Internal Revenue Bulletin 2015-49

INFORMATION

The principal author of this revenue procedure is Elizabeth R. Binder of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Ms. Binder at (202) 3177003 (not a toll-free number).

December 7, 2015 838 Bulletin No. 2015–49

Appendix A

Documentation Standards

In addition to the information required to be included in the Form 3115, qualified taxpayers using the remodel-refresh safe harbor provided by this revenue procedure must document this accounting method with the appropriate books and records, including work papers that identify:

The total cost of book fixed asset additions placed in service, within the meaning of § 1.46–3(d)(1)(ii), for the taxable year, reconciled to total capital expenditures reported in the qualified taxpayer’s Applicable Financial Statement (as defined in § 4.08).
The total cost of tax fixed asset additions placed in service, within the meaning of § 1.46–3(d)(1)(ii), for the taxable year, after all tax reclassifications for tax depreciation attributes and before application of this revenue procedure to remodel-refresh costs, reconciled to the total cost of book fixed asset additions.

The tax depreciation attribute identification should show the adjustments made to determine the adjusted basis of the tax fixed assets under § 1011. In other words, any adjustments required under § 1016 to remodel-refresh costs or excluded remodel-refresh costs for all qualified buildings prior to the following exclusions: (1) Basis adjustments attributable to changes in the qualified taxpayer’s definition of units of property made through a prior

change in accounting implemented before changing to the method provided in this revenue procedure; (2) Adjustments made as described in § 1016(a)(2) or § 1016(a)(3); and (3) Adjustments made that require tax basis to be reduced before depreciation is computed (for example §§ 179 and 179D;

§§ 44 and 50(c)). The summary work papers should identify the tax fixed asset additions subtotaled for each excluded remodel-refresh cost described in section 4.06. For these purposes, the timing rules provided in section 4.04 apply to determine when the fixed asset additions, including excluded remodel-refresh costs, are taken into account.

The summary work papers should describe the methods and procedures used by the qualified taxpayer to identify the tax fixed assets for the excluded remodel-refresh costs. If excluded remodel-refresh costs are identified by fields within the fixed asset system, the description should list the applicable fixed asset system fields, including, for example, the following:

Book classification/life;
Tax classification/life;
Project identifier;
Store or restaurant unit identifier;
Date the store or restaurant is initially placed in service (i.e., new versus existing);
Date the remodel-refresh project assets are placed in service;
Capital expenditure request identifier; and,
Building-type identifier (e.g., retail versus non-retail building; restaurant versus non-restaurant building). The summary work papers should identify source document references for any applicable documentation outside the fixed asset system needed to account for excluded remodel-refresh costs when the fixed asset system does not include pertinent identifiers. For example, reference to source documentation outside the fixed asset system is necessary if the fixed asset system does not identify whether an asset is related to a restoration caused by damage to a qualified building for which the qualified taxpayer is required to take a basis adjustment as a result of a casualty loss under § 165.

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Appendix B Example Schedule of Qualified Costs Subject to Remodel-Refresh Safe Harbor

Change Between Beginning of Year and End of Year Applicable Financial Statement (“AFS”) Fixed Assets

Beginning of year balance of consolidated U.S. fixed assets* $ XXXXXX

Additions during year: XXXXX (1)

Less sales/disposals: (XXX)

Other transfers to/from account: (X)

End of year balance of consolidated U.S. fixed assets:* $ XXXXXX

AFS Additions Converted to Capitalized Cost Additions for Tax:

(1) Additions during year per AFS: $ XXXXX

Less reductions for all tax reclassifications for tax depreciation (XX) attributes:

Capitalized cost additions for tax: $ XXXX (2)

Qualified Costs Subject to Safe Harbor:

(2) Capitalized cost additions for tax: $ XXXX

Less the following excluded remodel-refresh costs for:

Section 1245 property (section 4.06(1)) $ XX

Intangibles per Reg. § 1.263(a)–4(b) (section 4.06(2)) XX

Land or depreciable land improvements (section 4.06(3)) XX

Initial acquisition, production, or lease of qualified building XX (section 4.06(4))

The initial build-out of a leased qualified building, or a portion thereof, for a new lessee (section 4.06(5))

Activities performed to rebrand, refresh, remodel, repair, or maintain a qualified building (section 4.06(6))

Activities performed to ameliorate an existing material condition or defect (section 4.06(7))

Material additions to a qualified building (section 4.06(8)) XX

Restoration costs to a damaged qualified building subject to XX § 165 (section 4.06(9))

Costs to adapt more than 20% of a qualified building to a new or different use (section 4.06(10))

Costs incurred during temporary store or restaurant closings of more than 21 days (section 4.06(11))

Cost of any property for which the qualified taxpayer has claimed a deduction under § 179, § 179D, or § 190 (section 4.06(12))

Total excluded remodel-refresh costs included in AFS additions: $ (XX)

Qualified Costs Subject to Safe Harbor: $ XXX

*Amount should reconcile to applicable BOY or EOY AFS balance sheet fixed assets account.

December 7, 2015 840 Bulletin No. 2015–49