SECTION 6. PROCEDURES FOR

FORMER ELIGIBLE SMALL BUSINESS TAXPAYERS TO CHANGE FROM APPLYING § 263A(i) TO MAKING A § 263A(d)(3) ELECTION

.01 In general. A former eligible small business taxpayer may make a § 263A(d)(3) election for plants produced in its farming business in the first taxable year the former small business taxpayer no longer qualifies to use the exemption under § 263A(i), if the taxpayer complies with the procedures provided in this section 6. A § 263A(d)(3) election made under this section 6 is in effect for the taxable year the § 263A(d)(3) election is made (election year), and for any subsequent taxable year that the taxpayer has a valid § 263A(d)(3) election in effect. A former eligible small business taxpayer that follows the procedures under this section 6 to make the § 263A(d)(3) election for the first taxable year the taxpayer no longer qualifies as a small business taxpayer under § 263A(i) is not treated as making a change in method of accounting under § 446(e).

.02 Time and manner of making the § 263A(d)(3) election . A former eligible small business taxpayer makes its § 263A(d)(3) election under this section 6 on its original federal tax return, including extensions, for the first taxable year for

which the taxpayer no longer qualifies to use the exemption under § 263A(i), by:

(1) Following the manner of making the § 263A(d)(3) election provided in § 1.263A-4(d)(3); and

(2) Continuing not to capitalize costs of plants produced in its farming business under § 263A.

.03 Depreciation of property. (1) Newly-acquired property . A former eligible small business taxpayer that makes a § 263A(d)(3) election under this section 6 is required under § 1.263A-4(d)(4)(ii) to apply the ADS to depreciate all property used predominantly in any farming business of the taxpayer and placed in service by the taxpayer in the election year and in any subsequent taxable year during which the § 263A(d)(3) election is in effect. A related person of such former eligible small business taxpayer also is required under § 1.263A‑4(d)(4)(ii) to apply the ADS to depreciate all property used predominantly in any farming business of the related person and placed in service by the related person in the election year and in any subsequent taxable year during which the § 263A(d)(3) election is in effect for the former eligible small business taxpayer, even if the related person qualifies for the exemption under § 263A(i). The additional first year depreciation deduction under § 168(k) is not allowable for any property described in this section 6.03(1). See §§ 1.168(k)-1(b)(2)(ii)(A)( 2 ), 1.168(k)-1(b)(2)(ii)(B)( 1 ), and 1.168(k)‑2(b)(2)(ii)(B). (2) Existing property . A former eligible small business taxpayer that makes a § 263A(d)(3) election under this section 6, or related person, is not required under § 1.263A-4(d)(4)(ii) to apply the ADS to depreciate all property used predominantly in any farming business of the taxpayer or related person and placed in service by the taxpayer or related person in a taxable year prior to the election year.

(3) Failure to use the ADS for new- ly-acquired property .

(a) Former eligible small business taxpayer . If a former eligible small business taxpayer that makes a § 263A(d)(3) election under this section 6 does not determine its depreciation under the ADS for any property described in section 6.03(1) of this revenue procedure for its placedin-service year and the subsequent tax

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able year, then that taxpayer has not made a valid § 263A(d)(3) election under § 1.263A‑4(d)(3)(i) and this section 6. To make such election valid, the taxpayer must obtain the consent of the Commissioner by filing a Form 3115 in accordance with the non-automatic change procedures in Rev. Proc. 2015-13 (or any successor). See § 1.263A-4(d)(3)(ii).

(b) Related person . If a related person of a former eligible small business taxpayer that makes the § 263A(d)(3) election under this section 6 does not determine its depreciation under the ADS for any property described in section 6.03(1) of this revenue procedure, then the related person has adopted an impermissible method of accounting for that item of MACRS property. A change from that impermissible method of accounting to the applicable depreciation method, recovery period, applicable convention under the ADS for the item of MACRS property is a change in method of accounting under § 446(e). See § 1.446-1(e)(2)(ii)( d )( 2 )( i ). A related person that wants to change its method of accounting from that impermissible method of accounting must make the method change by filing Form 3115 in accordance with the automatic change procedures or non-automatic change procedures, as applicable, in Rev. Proc. 2015-13 (or any successor). If the related person is eligible to make this method change under the automatic change procedures, the method change is described in section 6.01 of Rev. Proc. 2019-43 (or any successor). Section 6.03(3)(a) of this revenue procedure, and not this section 6.03(3)(b), applies to a related person if the related person itself is a former eligible small business taxpayer and makes the § 263A(d)(3) election under this section 6.