SECTION 7. CHANGE — Internal Revenue Bulletin 2015-49

OF ACCOUNTING

.01 In general . Except as provided in section 7.02(1), a change to the remodelrefresh safe harbor method of accounting provided in section 5.02 for remodel-refresh costs is a change in method of accounting to which the provisions of §§ 446 and 481, and the corresponding regulations, apply. A qualified taxpayer that wants to change to the method of accounting described in this revenue procedure must use the automatic change procedures in Rev. Proc. 2015–13, 2015–5 I.R.B. 419, or its successor, except as otherwise provided in section 7.02.

.02 Automatic change . (1) Rev. Proc. 2015–14 is modified to add new section 6.43 to read as follows:

6.43 Revocation of partial disposition election under the remodel-refresh safe harbor described in Rev. Proc. 2015–56

(1) Description of change . (a) Applicability . This change applies to a qualified taxpayer as defined in section 4.01 of Rev. Proc. 2015–56 and that is within the scope of Rev. Proc. 2015–56 and wants to revoke a partial disposition election, as provided in section 5.02(4)(b)(ii)(B) of Rev. Proc. 2015–56 , related to a qualified building, as defined in section 4.02 of Rev. Proc. 2015–56 , for which the qualified taxpayer uses the remodel-refresh safe harbor method of accounting provided in section 5.02 of Rev. Proc. 2015–56. See section 10.13 for making a change to this safe harbor method of accounting.

(b) Inapplicability . The IRS will treat the revocation of the partial disposition election specified in section 6.43(1)(a) as a change in method of accounting only for the taxable years specified in section 6.43(2). This treatment does not apply to a qualified taxpayer, as described in section 6.43(1)(a), that makes this revocation before or after the time specified in section 6.43(2), and any such revocation is not a change in method of accounting pursuant to § 1.446–1(e)(2)(ii)( d )( 3 )( iii ).

(2) Time for making the change . The change under this section 6.43 must be made for the qualified taxpayer’s first or second taxable year beginning after December 31, 2013.

(3) 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 this change for the qualified taxpayer’s first or second taxable year beginning after December 31, 2013.

(b) Concurrent automatic change . If a qualified taxpayer makes both a change under this section 6.43 and a change under section 10.13 for its first or second taxable year beginning after December 31, 2013, on a single Form 3115 for the same asset for the same year of change in accordance with section 6 . 43(6)(b), the eligibility rules in sections 5.01(1)(d) and (f) of Rev. Proc. 2015–13 do not apply to the qualified taxpayer for either change.

(4) Section 481(a) adjustment period . A qualified taxpayer making this change must take the entire § 481(a) adjustment into account in computing taxable income for the year of change.

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(5) Reduced filing requirement for qualified small taxpayers . A qualified small taxpayer, as defined in section 6.01(4)(b), may complete only the following information on Form 3115 (Rev. December 2009):

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

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

(c) Part I, line 1(a); (d) Part II, all lines except lines 11, 13, 14, 15, and 17; (e) Part IV, lines 24, 25, and 26; and (f) Schedule E. (6) Concurrent automatic change . (a) A qualified taxpayer making this change for more than one asset for the same year of change should file a single Form 3115 for all such assets. The single Form 3115 must provide a single net § 481(a) adjustment for all such changes.

(b) A qualified taxpayer making this change and a change under section 10.13 for the same year of change should file a single Form 3115 for both changes and must enter the designated automatic accounting method change numbers for the changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015–13 for information on making concurrent changes.

(7) Designated automatic accounting method change number . The designated automatic accounting method change number for a change to the method of accounting under this section 6.43 is “221.”

(8) Contact information . For further information regarding a change under this section, contact Elizabeth R. Binder at (202) 317-7003 (not a toll-free number).

(2) Rev. Proc. 2015–14 is modified to add new section 10.13 to read as follows:

10 . 13 Remodel-refresh safe harbor method.

(1) Description of change . (a) Applicability . This change applies to a qualified taxpayer as defined in section 4.01 of Rev. Proc. 2015–56 and within the scope of Rev. Proc. 2015–56 that wants to change to the remodelrefresh safe harbor method of accounting provided in section 5.02 of Rev. Proc. 2015–56 for its qualified costs, including the making of a late general asset account

election as provided under section 5.02(6)(d) of Rev. Proc. 2015–56. (b) Inapplicability . This change does not apply to the following:

(i) The revocation of a partial disposition election that is made pursuant to section 5.02(4)(b)(ii)(B) of Rev. Proc. 2015– 56. See section 6.43 for making this revocation;

(ii) A change in determination of the asset disposed of described in section 5.02(5) of Rev. Proc. 2015–56 (which is made under section 6.38(3)(a) or 6.40(3)(a)). See section 10.13(6)(b) for making the change under section 6.38(3)(a) or 6.40(3)(a) as a concurrent change;

(iii) The making of a late general asset account election not provided under section 5.02(6)(d) of Rev. Proc. 2015–56;

(iv) If section 5.02(4)(c) of Rev. Proc. 2015–56 applies to a qualified building (partial disposition election made in a prior year and the qualified taxpayer did not revoke such election within the time and in the manner provided in section 5.02(4)(b)(ii) of Rev. Proc. 2015–56), any qualified costs paid for that qualified building prior to the year of change for a Form 3115 filed to make the change to the remodel-refresh safe harbor method of accounting under this section 10.13; or

(v) If section 5.02(5)(b) of Rev. Proc. 2015–56 applies to a qualified building (recognized gain or loss under § 1.168(i)–1T or § 1.168(i)–8T, or in a taxable year beginning before January 1, 2012, for disposition of a component of a qualified building) and the qualified taxpayer did not make the required change in method of accounting to be in accord with § 1.168(i)–1(e)(2)(viii) or § 1.168– 8(c)(4) on or before the first taxable year that the qualified taxpayer uses the remodel-refresh safe harbor and take the entire amount of the § 481(a) adjustment into account in computing the qualified taxpayer’s taxable income for that year of change, any qualified costs paid for that qualified building prior to the first taxable year that the qualified taxpayer or the IRS makes the change specified in section 6.38(3)(a) or 6.40(3)(a), as applicable, for that qualified building and takes into account the entire amount of the § 481(a) adjustment in computing taxable income for the year of change.

(2) Certain eligibility rules inapplica- ble .

(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 qualified taxpayer that changes to a method of accounting provided under this section 10.13 for its first or second taxable year beginning after December 31, 2013.

(b) Concurrent automatic change . If a qualified taxpayer makes both a change under this section 10.13 and a change under section 6.37(3)(b), 6.38(3)(a), and/or 6.40 for its first or second taxable year beginning after December 31, 2013, on a single Form 3115 for the same asset for the same year of change in accordance with section 10.13(7)(b), the eligibility rules in sections 5.01(1) (d) and (f) of Rev. Proc. 2015–13 do not apply to the qualified taxpayer for either change.

(3) No audit protection . If section 5.02(4)(c) or 5.02(5)(b) of Rev. Proc. 2015–56 applies to a qualified building (and, in the case of section 5.02(5)(b), the qualified taxpayer does not make the required change on or before the first taxable year that the qualified taxpayer uses the remodel-refresh safe harbor), the qualified taxpayer does not receive audit protection under section 8.01 of Rev. Proc. 2015–13 in connection with this change for that qualified building. See section 8.02(2) of Rev. Proc. 2015–13. (4) Manner of making change . (a) Reduced filing requirement for qualified small taxpayers . A qualified small taxpayer, as defined in section 6.01(4)(b), may complete only the following information on Form 3115 (Rev. December 2009):

(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 IV, lines 24, 25, and 26; (vi) Schedule E; and (vii) if applicable, the election statement described in section 10.13(4)(b)(ii).

(b) Late general asset account election . (i) In general . If under section 5.02(6)(d) of Rev. Proc. 2015–56 the qualified taxpayer is required to make a late general asset account election, the late

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general asset account election change is made using a modified cut-off method under which the unadjusted depreciable basis and the depreciation reserve of the asset as of the beginning of the year of change are accounted for using the new method of accounting. The late general asset account election change requires the general asset account to include a beginning balance for both the unadjusted depreciable basis and the depreciation reserve. The beginning balance for the unadjusted depreciable basis of each general asset account is equal to the sum of the unadjusted depreciable bases as of the beginning of the year of change for all assets included in that general asset account. The beginning balance of the depreciation reserve of each general asset account is equal to the sum of the greater of the depreciation allowed or allowable as of the beginning of the year of change for all assets included in that general asset account.

(ii) Election statement . The qualified taxpayer (including a qualified small taxpayer) must attach to its Form 3115 a statement providing that the qualified taxpayer agrees to the following additional terms and conditions:

(A) The qualified taxpayer consents to, and agrees to apply, all of the provisions of § 1.168(i)–1 to the assets that are subject to the election specified in section 5.02(6)(d) of Rev. Proc. 2015–56; and (B) Except as provided in § 1.168(i)– 1(c)(1)(iii)(A), (e)(3), (g), or (h), the election made by the qualified taxpayer under section 5.02(6)(d) of Rev. Proc. 2015–56 is irrevocable and will be binding on the qualified taxpayer for computing taxable income for the year of change and for all subsequent taxable years with respect to the assets that are subject to this election.

(i) If section 5.02(4)(c) of Rev. Proc. 2015–56 applies to a qualified building, the change to the remodel-refresh safe harbor method of accounting for that qualified building, and any improvements to that qualified building, is made using a cut-off method and applies only to qualified costs paid or incurred for that qualified building, and any improvements to that qualified building, beginning in the year of change for the change made to the remodel-refresh safe harbor method of accounting.

(ii) If section 5.02(5)(b) of Rev. Proc. 2015–56 applies to a qualified building and the qualified taxpayer does not change its present method of accounting to be in accord with § 1.168(i)–1(e)(2)(viii) or § 1.168(i)–8(c)(4), as applicable, on or before the first taxable year that the qualified taxpayer used the remodel-refresh safe harbor and take the entire amount of the § 481(a) adjustment into account in computing the qualified taxpayer’s taxable income for that year of change, the change to the remodel-refresh safe harbor method of accounting for that qualified building, and any improvements to that qualified building, is made using a cut-off method and applies only to qualified costs paid or incurred for that qualified building, and any improvements to that qualified building, beginning in the year of change for the change made to comply with § 1.168(i)–1(e)(2)(viii) or § 1.168(i)–8(c)(4). See section 6.38(3)(a) and section 6.40(3)(a).

(5) Section 481(a) adjustment . (a) In general . A qualified taxpayer changing its method of accounting under this section 10.13 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. However, a § 481(a) adjustment is neither required nor permitted for the late general asset account election under section 5.02(6)(d) of Rev. Proc. 2015–56 or, if section 5.02(4)(c) or 5.02(5)(b) of Rev. Proc. 2015–56 applies to a qualified building, and an improvement to a qualified building (and, in the case of section 5.02(5)(b), the qualified taxpayer did not make the required change on or before the first taxable year that the qualified taxpayer uses the remodel-refresh safe harbor), for the change to the remodel-refresh safe harbor method of accounting for that qualified building and an improvement to that qualified building.

(b) Repair allowance property . A qualified taxpayer changing to the method of accounting provided under this section 10.13 must not include in the § 481(a) adjustment any amount attributable to property for which the qualified 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.

ing under this section 10.13 may use statistical sampling in determining the § 481(a) adjustment only by following the sampling procedures provided in Rev. Proc. 2011–42, 2011–37 I.R.B. 318.

(6) Concurrent automatic change . (a) A qualified taxpayer making this change for more than one asset for the same year of change should file a single Form 3115 for all such assets. The single Form 3115 must provide a single net § 481(a) adjustment for all such changes.

(b) A qualified taxpayer making this change, a change under section 6.38(3)(a) or 6.43, and any change listed in section 6.37(4)(b) or section 6.40 for the same year of change should file a single Form 3115 for all such changes and must enter the designated automatic accounting method change numbers for the changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015–13 for information on making concurrent changes.

(8) Contact information . For further information regarding a change under this section, contact Elizabeth R. Binder at (202) 317-7003 (not a toll-free number).