SECTION 2. BACKGROUND

.01 Amendments to § 168(k) . (1) Prior to amendment by § 13201 of Public Law 115-97 (131 Stat. 2054), commonly referred to as the Tax Cuts and Jobs Act (TCJA), § 168(k)(1) allowed a 50-percent additional first year depreciation deduction for qualified property for the taxable year in which the qualified property is placed in service by the taxpayer. Qualified property was defined in part as property the original use of which begins with the taxpayer.

(2) Section 13201 of the TCJA made several amendments to § 168(k). For ex

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ample, the additional first year depreciation deduction percentage was increased from 50 to 100 percent; the property eligible for the additional first year depreciation deduction was expanded to include certain used depreciable property and certain film, television, or live theatrical productions; the placed-in-service date was extended from before January 1, 2020, to before January 1, 2027 (from before January 1, 2021, to before January 1, 2028, for property described in § 168(k)(2)(B) or (C)); and the date on which a specified plant is planted or grafted by the taxpayer was extended from before January 1, 2020, to before January 1, 2027. (3) Section 13201(d) of the TCJA also amended § 168(k) by adding § 168(k)(9) to the Code. It excludes from the definition of qualified property the following property: any property that is primarily used in a trade or business described in § 163(j)(7) (A)(iv), or any property used in a trade or business that has had floor plan financing indebtedness, as defined in § 163(j)(9), if the floor plan financing interest related to such indebtedness was taken into account under § 163(j)(1)(C).

(4) Section 13201(h) of the TCJA provides the effective dates of the amendments to § 168(k) made by § 13201 of the TCJA. Except as provided in § 13201(h) (2) of the TCJA, these amendments apply to property acquired and placed in service after September 27, 2017. However, property is not treated as acquired after the date on which a written binding contract is entered into for such acquisition. Section 13201(h)(2) of the TCJA provides that these amendments apply to specified plants planted or grafted after September 27, 2017. (5) Unless otherwise provided, all references hereinafter in this revenue procedure to § 168(k) are references to § 168(k) as amended by the TCJA.

.02 Regulations under § 168(k) . (1) On August 8, 2018, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) published a notice of proposed rulemaking (REG-104397-18) in the Federal Register (83 FR 39292; 2018-41 I.R.B. 558) containing proposed regulations under § 168(k) (2018 proposed regulations). Because of the amendments to § 168(k) by the TCJA, the 2018 proposed regu

lations updated existing regulations in § 1.168(k)-1 by providing a new section at § 1.168(k)-2 for property acquired and placed in service after September 27, 2017. The 2018 proposed regulations clarified statutory requirements that must be met for depreciable property to qualify for the additional first year depreciation deduction under § 168(k).

(2) On September 24, 2019, the Treasury Department and the IRS published final regulations adopting the 2018 proposed regulations with modifications in response to comments and testimony as T.D. 9874 (84 FR 50108; 2019-41 I.R.B. 809) (the 2019 final regulations). The 2019 final regulations made several modifications to the 2018 proposed regulations. For example, the 2019 final regulations provide: (a) a 5-year safe harbor for determining if the taxpayer or a predecessor previously had a depreciable interest in used property; (b) a rule for determining whether substantially renovated property was used by the taxpayer or a predecessor before its acquisition; (c) that the acquisition date of property that the taxpayer acquired pursuant to a written binding contract is the later of (i) the date on which the contract was entered into, (ii) the date on which the contract is enforceable under State law, (iii) if the contract has one or more cancellation periods, the date on which all cancellation periods end, or (iv) if the contract has one or more contingency clauses, the date on which all conditions subject to such clauses are satisfied; and (d) that property manufactured, constructed, or produced for a taxpayer by another person under a written binding contract entered into prior to the manufacture, construction, or production of the property for use by the taxpayer in its trade or business or production of income, is self-constructed property for purposes of determining the acquisition date of such property.

(3) Along with the publication of the 2019 final regulations, the Treasury Department and the IRS published the 2019 proposed regulations, which propose amendments to the 2019 final regulations to provide additional guidance beyond that provided in the 2019 final regulations. For example, the 2019 proposed regulations provide rules regarding: (a) property described in § 168(k)(9), as described in section 2.01(3) of this revenue procedure;

(b) whether the taxpayer or a predecessor previously had a depreciable interest in (i) used property where the prior use was de minimis, (ii) property acquired in a series of related transactions, and (iii) property acquired by a consolidated group; (c) a partner’s prior depreciable interest in property held by a partnership; (d) when a contract to acquire a trade or business or an entity is binding; (e) the acquisition date for property not acquired pursuant to a written binding contract; and (f) components acquired or self-constructed after September 27, 2017, for larger self-constructed property for which manufacture, construction, or production began before September 28, 2017.

(4) On November 10, 2020, the Treasury Department and the IRS published final regulations adopting the 2019 proposed regulations with modifications in response to comments and testimony as T.D. 9916 85 FR 71734 (2020 final regulations). The 2020 final regulations made several modifications to the 2019 proposed regulations. For example, the 2020 final regulations modified the rules regarding: (a) whether the taxpayer or a predecessor previously had a depreciable interest in (i) used property where the prior use was de minimis, (ii) property acquired in a series of related transactions, and (iii) property acquired by a consolidated group; and (b) components acquired or self-constructed after September 27, 2017, for larger self-constructed property for which manufacture, construction, or production began before September 28, 2017. The 2020 final regulations also did not retain the rules regarding a partner’s prior depreciable interest in property held by a partnership. These rules will be withdrawn effective January 11, 2021 (85 FR 71587). The rules regarding whether the taxpayer or a predecessor previously had a depreciable interest in property acquired by a consolidated group were moved from § 1.168(k)-2 to § 1.1502-68.

(5) The 2020 final regulations also made a few modifications to the 2019 final regulations. For example, the 2020 final regulations: (a) clarified the application of the 5-year safe harbor for determining if the taxpayer or a predecessor previously had a depreciable interest in used property; (b) clarified the definitions of predecessor and class of property for basis adjustments

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under § 743; and (c) modified the definition of qualified improvement property to reflect the amendments made to § 168(e) (6) by § 2307 of the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136, 134 Stat. 281 (March 27, 2020) (CARES Act).

(6) Hereinafter, the 2019 final regulations and the 2020 final regulations together are referred in this revenue procedure as the Final Regulations.

(7) Section 1.168(k)-2(h) provides the applicability dates of § 1.168(k)-2 in the Final Regulations. Section 1.150268(e) provides the applicability dates of § 1.1502-68 in the Final Regulations.

(8) In general, § 1.168(k)-2(h)(1) and § 1.1502-68(e)(1) of the 2020 final regulations provide that § 1.168(k)-2 and § 1.1502-68 in the Final Regulations, respectively, apply to: (a) depreciable property acquired after September 27, 2017, by the taxpayer and placed in service by the taxpayer during or after the taxpayer’s taxable year that begins on or after January 1, 2021; (b) a specified plant for which the taxpayer properly made an election to apply § 168(k)(5) and that is planted, or grafted to a plant that was previously planted, by the taxpayer during or after the taxpayer’s taxable year that begins on or after January 1, 2021; and (c) components acquired or self-constructed after September 27, 2017, of larger self-constructed property described in § 1.168(k)-2(c)(2) of the 2020 final regulations and placed in service by the taxpayer during or after the taxpayer’s taxable year that begins on or after January 1, 2021.

(9) Section 1.168(k)-2(h)(2) of the 2020 final regulations directs taxpayers to § 1.168(k)-2 of the 2019 final regulations for the applicability of those regulations to taxable years beginning before January 1, 2021. (10) Sections 1.168(k)-2(h)(3) and 1.1502-68(e)(2) of the 2020 final regulations allow a taxpayer to choose to apply the Final Regulations to periods before their specified applicability dates. In general, § 1.168(k)-2(h)(3)(i) and § 1.150268(e)(2)(i) allow a taxpayer to apply both the rules in § 1.168(k)-2 and, to the extent relevant, in § 1.1502-68, of the Final Regulations, in their entirety and in a consistent manner, to: (a) depreciable property acquired and placed in service after Sep

tember 27, 2017, by the taxpayer during the taxpayer’s taxable years ending on or after September 28, 2017; (b) a specified plant for which the taxpayer properly made an election to apply § 168(k)(5) and that is planted, or grafted to a plant that was previously planted, after September 27, 2017, by the taxpayer during the taxpayer’s taxable years ending on or after September 28, 2017; and (c) components acquired or self-constructed after September 27, 2017, of larger self-constructed property described in § 1.168(k)2(c)(2) of the 2020 final regulations and placed in service by the taxpayer during the taxpayer’s taxable years ending on or after September 28, 2017. In the case of property described in § 1.1502-68(e)(2)(i) of the Final Regulations that is acquired in a transaction that satisfies the requirements of § 1.1502-68(c)(1)(ii) or (c)(2)(ii) of the Final Regulations, §§ 1.168(k)-2(h) (3)(ii) and 1.1502-68(e)(2)(ii) of the Final Regulations provide that the taxpayer may apply §§ 1.168(k)-2 and 1.1502-68 of the Final Regulations, in their entirety and in a consistent manner, to such property only if those rules are applied, in their entirety and in a consistent manner, by all parties to the transaction, including the transferor member, the transferee member, and the target, as applicable, and the consolidated groups of which they are members, for the taxable year(s) in which the transaction occurs and the taxable year(s) that includes the day after the deconsolidation date, as defined in § 1.1502-68(a)(2)(iii) of the Final Regulations. Finally, § 1.168(k)2(h)(3)(iii) and § 1.1502-68(e)(2)(iii) of the Final Regulations provide that, once a taxpayer applies the rules of § 1.168(k)2 and, to the extent relevant, the rules of § 1.1502-68, in their entirety, for a taxable year, the taxpayer must continue to apply the rules of § 1.168(k)-2 and, to the extent relevant, the rules of § 1.1502-68, in their entirety, for the taxpayer’s subsequent taxable years.

(11) The preamble to the 2020 final regulations provides that a taxpayer also may rely on § 1.168(k)-2 in the 2019 proposed regulations with respect to depreciable property, including certain components, acquired and placed in service after September 27, 2017, or certain plants planted or grafted after September 27, 2017, as applicable, by the taxpayer during taxable

years ending on or after September 28, 2017, and ending before the taxpayer’s first taxable year that begins on or after January 1, 2021, if (a) the taxpayer follows these proposed regulations in their entirety, except for § 1.168(k)-2(b)(3)(iii)(B)( 5 ) in the 2019 proposed regulations, and in a consistent manner, and (b) all members of a consolidated group consistently rely on the same set of rules. Further, in the case of such property that is acquired in a transaction described in § 1.168(k)-2(b)(3)(v)(C) or (D) in the 2019 proposed regulations, the taxpayer may rely on § 1.168(k)-2 in the 2019 proposed regulations for such property only if the rules are followed, in their entirety and in a consistent manner, by all parties to the transaction, including the transferor member, the transferee member, and the target, as applicable, and the consolidated groups of which they are members, for the taxable year(s) in which the transaction occurs and the taxable year(s) that includes the day after the Deconsolidation Date. For this purpose, the terms transferor member, transferee member, and target have the meanings provided in § 1.168(k)-2(b)(3)(v)(C) and (D) in the 2019 proposed regulations, and the term Deconsolidation Date has the meaning provided in § 1.168(k)-2(b)(3)(v)(C) ( 1 ) in the 2019 proposed regulations.

.03 Elections . (1) Section 168(k)(5)(A) allows a taxpayer to make an election to apply the special rules of § 168(k)(5) to one or more specified plants that are planted, or grafted to a plant that has already been planted, by the taxpayer in the ordinary course of its farming business, as defined in § 263A(e) (4) (§ 168(k)(5) election). The rules and procedures for making the § 168(k)(5) election are set forth in § 1.168(k)-2(f) (2) of the Final Regulations. Pursuant to § 1.168(k)-2(f)(2)(ii) of the Final Regulations, the § 168(k)(5) election must be made by the due date, including extensions, of the Federal income tax return or Form 1065, U.S. Return of Partnership Income, for the taxable year in which the taxpayer planted or grafted the specified plant to which the § 168(k)(5) election applies, and is made in the manner prescribed on Form 4562, Depreciation and Amorti- zation, and its instructions. For specified plants planted, or grafted to a plant that was previously planted, by the taxpayer

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before the applicability date set forth in § 1.168(k)-2(h)(1) of the 2019 final regulations, section 4.05 of Rev. Proc. 201733, 2017-19 I.R.B. 1236, provides the time and manner for making the § 168(k) (5) election, and such procedures are the same as in § 1.168(k)-2(f)(2)(ii) of the Final Regulations. Further, if a taxpayer timely filed its Federal income tax return or Form 1065 for the taxpayer’s taxable year beginning in 2017 and ending on or after September 28, 2017, sections 4.01(2) and 4.02 of Rev. Proc. 2019-33, 2019-34 I.R.B. 662, provide special procedures to allow the taxpayer to make a deemed § 168(k)(5) election or a late § 168(k) (5) election for a specified plant planted, or grafted to a plant that was previously planted, by the taxpayer after September 27, 2017. Also, if a taxpayer timely filed its Federal income tax return or Form 1065 for the taxpayer’s taxable year ending in 2018, 2019, or 2020, and such return was filed on or before April 17, 2020, section 4 of Rev. Proc. 2020-25, 2020-19 I.R.B. 785, as modified by section 8 of this revenue procedure, provides special procedures to allow the taxpayer to make a late § 168(k)(5) election for a specified plant planted, or grafted to a plant that was previously planted, by the taxpayer after September 27, 2017, during such taxable year. Finally, pursuant to § 1.168(k)-2(f) (7) of the 2020 final regulations, the IRS may issue guidance published in the Internal Revenue Bulletin (IRB) that provides alternative procedures for making the § 168(k)(5) election. (2) Section 168(k)(7) allows a taxpayer to make an election not to deduct the additional first year depreciation for any class of property that is qualified property placed in service during the taxable year (§ 168(k)(7) election). The rules and procedures for making the § 168(k)(7) election are set forth in § 1.168(k)-2(f)(1) of the Final Regulations. Section 1.168(k)2(f)(1)(ii) of the Final Regulations defines “class of property” for purposes of the § 168(k)(7) election. Pursuant to § 1.168(k)-2(f)(1)(iii) of the Final Regulations, the § 168(k)(7) election must be made by the due date, including extensions, of the Federal income tax return or Form 1065 for the taxable year in which the qualified property is placed in service by the taxpayer, and is made in the man

ner prescribed on Form 4562, Depreci- ation and Amortization, and its instructions. For qualified property placed in service by the taxpayer before the applicability date set forth in § 1.168(k)-2(h) (1) of the 2019 final regulations, section 4.04 of Rev. Proc. 2017-33 provides the time and manner for making the § 168(k) (7) election, and such procedures are the same as in § 1.168(k)-2(f)(1)(iii) of the Final Regulations. Further, if a taxpayer timely filed its Federal income tax return or Form 1065 for the taxpayer’s taxable year beginning in 2017 and ending on or after September 28, 2017, sections 5.02(2) and 5.03 of Rev. Proc. 2019-33 provide special procedures to allow the taxpayer to make a deemed § 168(k)(7) election or a late § 168(k)(7) election for a class of property that is qualified property acquired by the taxpayer after September 27, 2017, and placed in service by the taxpayer during such taxable year. Also, if a taxpayer timely filed its Federal income tax return or Form 1065 for the taxpayer’s taxable year ending in 2018, 2019, or 2020, and such return was filed on or before April 17, 2020, section 4 of Rev. Proc. 2020-25, as modified by section 8 of this revenue procedure, provides special procedures to allow a taxpayer to make a late § 168(k)(7) election for a class of property that is qualified property acquired by the taxpayer after September 27, 2017, and placed in service by the taxpayer during such taxable year. Finally, pursuant to § 1.168(k)-2(f) (7) of the 2020 final regulations, the IRS may issue guidance published in the IRB that provides alternative procedures for making the § 168(k)(7) election.

(3) Section 168(k)(10) allows a taxpayer to make an election to deduct 50 percent, instead of 100 percent, additional first year depreciation for: (a) all qualified property acquired by the taxpayer after September 27, 2017, and placed in service by the taxpayer during its taxable year that includes September 28, 2017; and (b) all specified plants that are planted, or grafted to a plant that has already been planted, after September 27, 2017, by the taxpayer in the ordinary course of the taxpayer’s farming business during its taxable year that includes September 28, 2017, if the taxpayer makes the § 168(k)(5) election for that taxable year (§ 168(k)(10) elec

tion). The rules and procedures for making the § 168(k)(10) election are set forth in § 1.168(k)-2(f)(3) of the Final Regulations. Pursuant to § 1.168(k)-2(f)(3) (ii) of the Final Regulations, the § 168(k) (10) election must be made by the due date, including extensions, of the Federal income tax return or Form 1065 for the taxpayer’s taxable year that includes September 28, 2017, and is made in the manner prescribed on the 2017 Form 4562, Depreciation and Amortization, and its instructions. For qualified property placed in service, and specified plants planted, or grafted to a plant that was previously planted, by the taxpayer before the applicability date set forth in § 1.168(k)-2(h)(1) of the 2019 final regulations, section 6.02 of Rev. Proc. 2019-33 provides the time and manner for making the § 168(k)(10) election, and such procedures are the same as in § 1.168(k)-2(f)(3)(ii) of the Final Regulations. Further, if a taxpayer timely filed its Federal income tax return or Form 1065 for the taxpayer’s taxable year beginning in 2017 and ending on or after September 28, 2017, sections 6.03(2) and 6.04 of Rev. Proc. 2019-33 provide special procedures to allow the taxpayer to make a deemed § 168(k)(10) election or a late § 168(k)(10) election for all qualified property acquired by the taxpayer after September 27, 2017, and placed in service by the taxpayer during such taxable year, or for all specified plants planted, or grafted to a plant that was previously planted, by the taxpayer after September 27, 2017. Also, if a taxpayer timely filed its Federal income tax return or Form 1065 for the taxpayer’s taxable year that includes September 27, 2017, section 4 of Rev. Proc. 2020-25, as modified by section 8 of this revenue procedure, provides special procedures to allow a taxpayer to make a late § 168(k)(10) election for all qualified property acquired by the taxpayer after September 27, 2017, and placed in service by the taxpayer during such taxable year, or for all specified plants planted, or grafted to a plant that was previously planted, by the taxpayer after September 27, 2017, during such taxable year. Finally, pursuant to § 1.168(k)-2(f)(7) of the 2020 final regulations, the IRS may issue guidance published in the IRB that provides alternative procedures for making the § 168(k) (10) election.

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(4) Section 1.168(k)-2(f)(5) of the Final Regulations provides that, in general, the § 168(k)(5) election, § 168(k)(7) election, and § 168(k)(10) election, once made, may be revoked only by filing a request for a private letter ruling and obtaining the written consent of the Commissioner of Internal Revenue (Commissioner) to revoke the election. Further, if a taxpayer timely filed its Federal income tax return or Form 1065 for the taxpayer’s taxable year beginning in 2017 and ending on or after September 28, 2017, sections 4.03, 5.04, and 6.05 of Rev. Proc. 201933 provide special procedures to allow the taxpayer to revoke its § 168(k)(5) election, § 168(k)(7) election, and § 168(k) (10) election, respectively, made for such taxable year. Also, if a taxpayer timely filed its Federal income tax return or Form 1065 for the taxpayer’s taxable year ending in 2018, 2019, or 2020, and such return was filed on or before April 17, 2020, section 5 of Rev. Proc. 2020-25 provides special procedures to allow a taxpayer to revoke its § 168(k)(5) election or § 168(k) (7) election made for such taxable year. And, if a taxpayer timely filed its Federal income tax return or Form 1065 for the taxpayer’s taxable year that includes September 28, 2017, and such return was filed on or before April 17, 2020, section 5 of Rev. Proc. 2020-25 provides special procedures to allow a taxpayer to revoke its § 168(k)(10) election made for such taxable year. Finally, pursuant to § 1.168(k)2(f)(7) of the 2020 final regulations, the IRS may issue guidance published in the IRB that provides alternative procedures for revoking the § 168(k)(5) election, § 168(k)(7) election, or § 168(k)(10) election.

(5) Section 1.168(k)-2(c)(1) of the 2020 final regulations allows a taxpayer to make an election to treat any acquired or self-constructed component, as described in § 1.168(k)-2(c)(3) of the 2020 final regulations, of the larger self-constructed property, as described in § 1.168(k)-2(c) (2) of the 2020 final regulations, as being eligible for the additional first year depreciation deduction under § 1.168(k)2, assuming all requirements of § 168(k) and § 1.168(k)-2 are met (component election). The rules and procedures for making the component election are set forth in § 1.168(k)-2(c) of the 2020 final

regulations. Pursuant to § 1.168(k)-2(c) (6) of the 2020 final regulations, the component election must be made by the due date, including extensions, of the Federal income tax return or Form 1065 for the taxable year in which the taxpayer placed in service the larger self-constructed property, and is made by attaching a statement to such return or Form 1065 indicating that the taxpayer is making the component election and whether the taxpayer is making the component election for all or some of the components described in § 1.168(k)-2(c)(3) of the 2020 final regulations. Section 1.168(k)-2(c)(7) of the 2020 final regulations provides that, in general, the component election, once made, may be revoked only by filing a request for a private letter ruling and obtaining the written consent of the Commissioner to revoke the component election. Pursuant to § 1.168(k)-2(c)(8) of the 2020 final regulations, the IRS may issue guidance published in the IRB that provides alternative procedures for making, or revoking, the component election.

(6) Pursuant to § 1.168(k)-2(c)(1) of the 2019 proposed regulations, a taxpayer may elect to treat any component acquired or self-constructed after September 27, 2017, of certain larger self-constructed property, as being eligible for the additional first year depreciation deduction under § 1.168(k)-2, assuming all requirements of § 168(k) and § 1.168(k)-2 are met (proposed component election). Specifically, the larger self-constructed property must be manufactured, constructed, or produced beginning before September 28, 2017, qualified property under § 168(k)(2) as in effect before the enactment of the TCJA, and placed in service by the taxpayer after September 27, 2017, during its taxable years ending on or after September 28, 2017, and ending before the taxpayer’s first taxable year that begins on or after January 1, 2021. The time and manner for making the proposed component election are set forth in § 1.168(k)-2(c)(6) of the 2019 proposed regulations, and such procedures are the same as in § 1.168(k)-2(c)(6) of the 2020 final regulations.

(7) Section 1.1502-68(c)(4) of the 2020 final regulations allows a transferee member, as defined in § 1.1502-68(a)(2)(xii), or the target, as defined in § 1.1502-68(a)

(2)(xi), to make an election not to apply the Consolidated Asset Acquisition Rule in § 1.1502-68(c)(1)(i) or the Consolidated Deemed Acquisition Rule in § 1.150268(c)(2)(i), respectively, to all eligible property, as defined in § 1.1502-68(a)(2) (vii), that is acquired or deemed acquired in a transaction that otherwise satisfies the requirements of the Consolidated Asset Acquisition Rule or the Consolidated Deemed Acquisition Rule (designated transaction election). The rules and procedures for making the designated transaction election are set forth in § 1.150268(c)(4) of the 2020 final regulations. Pursuant to § 1.1502-68(c)(4)(ii)(A) and (B) of the 2020 final regulations, the designated transaction election must be made by the due date, including extensions, of the Federal income tax return for the taxable year of the transferee member or target that begins on the day after the deconsolidation date, as defined in § 1.150268(a)(2)(iii), and is made by attaching a statement to such return describing the transaction(s) to which the Consolidated Asset Acquisition Rule or the Consolidated Deemed Acquisition Rule otherwise would apply and stating that the transferee member or the target, as applicable, is not claiming the additional first year depreciation deduction for any eligible property transferred in such transaction(s). Pursuant to § 1.1502-68(c)(4)(ii)(C) of the 2020 final regulations, the IRS may issue guidance published in the IRB that provides alternative procedures for making the designated transaction election. Section 1.1502-68(c)(4)(iii) provides that the designated transaction election, once made, may be revoked only by filing a request for a private letter ruling and obtaining the written consent of the Commissioner to revoke the election.

.04 Method of accounting . (1) Section 446(e) and § 1.446-1(e)(2) 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.

(2) Section 2.05 of Rev. Proc. 201513, 2015-5 I.R.B 419, 425, provides that

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a taxpayer may not request, or otherwise make, a retroactive change in method of accounting, unless specifically authorized by the Commissioner or by statute.

(3) Section 1.446-1(e)(2)(ii)( d )( 3 )( iii ) provides that the making of a late depreciation election or the revocation of a timely valid depreciation election is not a change in method of accounting, except as otherwise expressly provided by the Code, the regulations under the Code, or other guidance published in the Internal Revenue Bulletin.

(4) Section 1.446-1(e)(2)(ii)( d )( 5 ) ( iii ) provides that, except as otherwise expressly provided by the Code, the regulations under the Code, or other guidance published in the Internal Revenue Bulletin, no § 481 adjustment is required or permitted for a change from one permissible method of computing depreciation to another permissible method of computing depreciation for an asset because this change is implemented by either a cut-off method, as described in section 2.07 of Rev. Proc. 2015-13, or a modified cut-off method under which the adjusted depreciable basis of the asset as of the beginning of the year of change is recovered using the new permissible method of accounting, as appropriate. However, a change from an impermissible method of computing depreciation to a permissible method of computing depreciation for an asset results in a § 481(a) adjustment.

(5) With the publication of the 2020 final regulations, guidance is needed under § 168 for taxpayers that want to apply the 2020 final regulations, the 2019 final regulations, and/or the 2019 proposed regulations retroactively. Accordingly, this revenue procedure permits certain taxpayers to file an amended return, administrative adjustment request under § 6227 (AAR), or a Form 3115, Application for Change in Accounting Method, to change their method of accounting for depreciation of certain depreciable property acquired by the taxpayer after September 27, 2017, and placed in service by the taxpayer after September 27, 2017, and during the taxpayer’s taxable years ending on or after September 28, 2017, and ending before the taxpayer’s first taxable year that begins on or after January 1, 2021, and certain plants that are planted or grafted, as

applicable, after September 27, 2017, by the taxpayer during its taxable years ending on or after September 28, 2017, and ending before the taxpayer’s first taxable year that begins on or after January 1, 2021. See section 4 of this revenue procedure for the procedures for changing the depreciation of such property or plants. Further, this revenue procedure permits certain taxpayers to make a late § 168(k) (5) election, a late § 168(k)(7) election, a late § 168(k)(10) election, a late component election, a late designated transaction election, or a late proposed component election, or to revoke a § 168(k)(5) election, a § 168(k)(7) election, a § 168(k) (10) election, or a proposed component election, for certain property or plants for a limited period of time. Because of the administrative burden of filing amended returns and AARs, the Treasury Department and the IRS also have determined that it is appropriate to treat the making of these late elections or the revocation of these elections as a change in method of accounting with a § 481(a) adjustment for a limited period of time. See sections 5 and 6 of this revenue procedure for the procedures to make these late elections or to revoke these elections.