SECTION 32. SHORT-TERM OBLIGATIONS (§ 1281)

.01 Interest income on short-term obligations .

(1) Description of change .

(a) This change applies to a taxpayer that wants to change its method of accounting to comply with § 1281 for interest income on short-term obligations.

(b) Under § 1281, a holder of certain short-term obligations, including a bank as defined in § 581, must include in gross income any accrued interest income on such obligations, regardless of the holder’s overall method of accounting. Section 1281 applies to all types of interest income, including acquisition discount, original issue discount (OID), and stated interest. See S. Rep. No. 99-313, 99 ^th Cong., 2d Sess. 903 (1986), 1986-3 (Vol. 3) C.B. 903.

(c) Section 1283(a)(1) generally defines a short-term obligation as any bond, debenture, note, certificate, or other evidence of indebtedness that matures in one year or less from its issue date.

(d) Under §§ 1281(a) and 1283(c), a holder of a short-term obligation subject to § 1281 must include in gross income an amount equal to the sum of the daily portions of the acquisition discount or OID, whichever is applicable, on the obligation for each day during the taxable year that the obligation is held by the holder. See § 1283(b), as modified by § 1283(c), to determine the daily portions of acquisition discount or OID. In addition, § 1281(a) requires the holder to include in gross income any stated interest that is payable on the short-term obligation (other than

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EFFECTIVE DATE

stated interest taken into account to determine the amount of the acquisition discount or OID) as it accrues.

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

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 32.01 is “74.”

(4) Contact information . For further information regarding a change under this section, contact William E. Blanchard at (202) 317-3900 (not a toll-free number).

.02 Stated interest on short-term loans of cash method banks .

(1) Description of change . This change applies to a bank that uses the cash receipts and disbursements (cash) method of accounting as its overall accounting method and that wants to change its method of accounting from accruing stated interest on short-term loans made in the ordinary course of business to using the cash method for that interest. For example, see Security State Bank v. Commissioner, 214 F.3d 1254 (10 ^th Cir. 2000), aff’g 111 T.C. 210 (1998), acq ., 20011 C.B. xix; and Security Bank Minnesota v. Commissioner, 994 F.2d 432 (8 ^th Cir. 1993), aff’g 98 T.C. 33 (1992), in which the courts held that § 1281 does not apply to short-term loans made by a cash method bank in the ordinary course of its business.

(2) Certain eligibility rule inapplicable . 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.

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

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 32.02 is “75.”

(5) Contact information . For further information regarding a change under this section, contact William E. Blanchard at (202) 317-3900 (not a toll-free number).

.01 In general . Except as otherwise provided under this EFFECTIVE DATE section, this revenue procedure is effective for a Form 3115 filed on or after January 31, 2022, for a year of change ending on or after May 31, 2021, that is filed under the automatic change procedures of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, as clarified and modified by Rev. Proc. 2015-33, 2015-24 I.R.B. 1067, and as modified by Rev. Proc. 2021-34, 2021-35 I.R.B. 337, Rev. Proc. 2021-26, 2021-22 I.R.B. 1163, Rev. Proc. 2017-59, 2017-48 I.R.B. 543, and section 17.02(b) and (c) of Rev. Proc. 2016-1, 2016-1 I.R.B. 1.

.02 Transition rules . The following transition rules apply:

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(1) Limited time period to convert a Form 3115 filed under the non-automatic change procedures in Rev. Proc. 2015-13 . Except as provided in section 6.22 of this revenue procedure, section 5.02 of Rev. Proc. 2021-34, or section 7.02 of Rev. Proc. 2022-09, as applicable, if before January 31, 2022, a taxpayer properly filed a Form 3115 under the non-automatic change procedures in Rev. Proc. 2015-13 requesting the Commissioner’s consent for a change in method of accounting described in this revenue procedure, and the Form 3115 is pending with the national office on January 31, 2022, the taxpayer may choose to make the change in method of accounting under the automatic change procedures in Rev. Proc. 2015-13 if the taxpayer is otherwise eligible to use this revenue procedure and the automatic change procedures in Rev. Proc. 2015-13. The taxpayer must notify the national office contact person (if unknown, fax the notification to 855-574-9031 or send the notification to the attention of Control Clerk, CC:ITA, Room 4512 at the address specified in section 9.08(6) of Rev. Proc. 2022-1, 2022-1 I.R.B. 1 (or its successor)) for the Form 3115 of the taxpayer’s intent to make the change in method of accounting under the automatic change procedures in Rev. Proc. 2015-13 before the later of (a) March 2, 2022, or (b) the issuance of a letter ruling granting or denying consent for the change. The notification should indicate that the taxpayer chooses to convert the Form 3115 to the automatic change procedures in Rev. Proc. 2015-13. If the taxpayer timely notifies the national office that it chooses to convert the Form 3115 to the automatic change procedures in Rev. Proc. 2015-13, the national office will send a letter to the taxpayer acknowledging its request and will return the user fee submitted with the Form 3115.

A taxpayer converting a Form 3115 to the automatic change procedures in Rev. Proc. 2015-13 for a change in method of accounting described in this revenue procedure must resubmit a Form 3115 that conforms to the automatic change procedures, with a copy of the national office letter sent acknowledging the taxpayer’s request attached, to the IRS in Ogden, UT by the earlier of (a) the 30 ^th calendar day after the date of the national office’s letter acknowledging the taxpayer’s request, or (b) the date the taxpayer is required to file the duplicate copy of the Form 3115 under SECTION 6.03(1)(a)(i)(B) of Rev. Proc. 2015-13. See SECTION 6.03(3) of Rev. Proc. 2015-13 regarding additional required copies of Form 3115.

For purposes of the eligibility rules in SECTION 5 of Rev. Proc. 2015-13, the duplicate copy of the timely resubmitted Form 3115 will be considered filed as of the date the taxpayer originally filed the converted Form 3115 under the non-automatic change procedures in Rev. Proc. 2015-13. This paragraph (1) does not extend the date the taxpayer must file the original (converted) Form 3115 under SECTION 6.03(1)(a)(i)(A) of Rev. Proc. 2015-13.

A Form 3115 filed under the non-automatic change procedures in Rev. Proc. 2015-13 before January 31, 2022, for a change in method of accounting described in this revenue procedure, will be disregarded for purposes of the prior five year change rules in SECTIONS 5.04 and 5.05 of Rev. Proc. 2015-13 if the taxpayer converts the Form 3115 pursuant to this paragraph (1).

(2) Forms 3115 for changes in methods of accounting that can no longer be filed under the automatic change procedures . Except as provided in subsection .02(2)(a) of this EFFECTIVE DATE section, section 5.03 of Rev. Proc. 2021-34, or section 7.02 of Rev. Proc. 2022-09, as applicable, the following transition rules apply to the changes in methods of accounting that can no longer be filed under the automatic change procedures in Rev. Proc. 2015-13 because of changes made in this revenue procedure. An example of such changes in methods of accounting is described in subsection .01(10) of the SIGNIFICANT CHANGES section of this revenue procedure.

(a) If before January 31, 2022, a taxpayer properly filed the original, or the duplicate copy, of a Form 3115 under the automatic change procedures in Rev. Proc. 2015-13 for a change in method of accounting that can no longer be filed under the automatic change procedures in Rev. Proc. 2015-13, the taxpayer may continue to make that change in method of accounting under the automatic change procedures in Rev. Proc. 2015-13 for the year of change. The taxpayer is not

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required to resubmit a duplicate copy of the Form 3115 to the IRS in Ogden, UT under section 6.03(1)(a)(i)(B) of Rev. Proc. 2015-13.

(b) If before January 31, 2022, a taxpayer did not properly file the original, or the duplicate copy, of a Form 3115 under the automatic change procedures in Rev. Proc. 2015-13 for a change in method of accounting that can no longer be filed under the automatic change procedures in Rev. Proc. 2015-13, the taxpayer must make that change in method of accounting under the nonautomatic change procedures in Rev. Proc. 2015-13. Notwithstanding § 1.446-1(e)(3)(i), the taxpayer may file a Form 3115 to request the Commissioner’s consent to change the method of accounting under the non-automatic change procedures in Rev. Proc. 2015-13 for the taxpayer’s last taxable year ending before January 31, 2022, on or before the due date of the federal income tax return for that taxable year. Solely for purposes of this paragraph (2)(b), the due date of the taxpayer’s federal income tax return includes extensions, notwithstanding that the taxpayer may not have extended the due date.

(3) Transition rule for taxpayers that properly filed the duplicate copy of Form 3115 before January 31, 2022 , for a change that continues to qualify under the automatic change procedures.

(a) Option to implement change as described in Rev. Proc. 2019-43 or under this revenue procedure . If, before January 31, 2022, a taxpayer properly filed the duplicate copy of the Form 3115, pursuant to section 6.03(1)(a)(i)(B) of Rev. Proc. 2015-13, requesting consent to change its method of accounting for a change described in Rev. Proc. 2019-43, 2019-48 I.R.B. 1107, as modified prior to January 31, 2022, that continues to be eligible for the automatic change procedures in this revenue procedure, but has not filed its timely filed (including extensions) original Federal income tax return for the year of change implementing the change, the taxpayer may choose to implement the change as described in either Rev. Proc. 2019-43 or this revenue procedure, but not both.

(b) Procedures to implement change as described Rev. Proc. 2019-43. A taxpayer who meets the requirements of paragraph (3)(a) and chooses to implement the change as described in Rev. Proc. 2019-43 is not required to resubmit a duplicate copy of the Form 3115 to the IRS in Ogden, UT. However, if requested by the Director, the taxpayer must provide written substantiation that the duplicate copy of the Form 3115 was filed before January 31, 2022, pursuant to section 6.03(1) (a)(i)(B) of Rev. Proc. 2015-13. Such written substantiation may include proof of mailing or faxing, as appropriate, of the duplicate copy of the Form 3115.

(c) Procedures to implement the change as described in this revenue procedure. A taxpayer who meets the requirements of paragraph (3)(a) and chooses to implement the change as described in this revenue procedure, must resubmit a duplicate copy (with signature) of the Form 3115 to the IRS in Ogden, UT for the year of change under this revenue procedure, pursuant to the requirements of section 6.03(1)(a)(i)(B) of Rev. Proc. 2015-13. The resubmitted duplicate copy must include the following statement on the top of page 1 of the Form 3115: “FILED UNDER REV. PROC. 2022-14, AS PROVIDED IN SECTION .02(3)(c) OF THE EFFECTIVE DATE SECTION OF REV. PROC. 2022-14”. For purposes of the eligibility rules in section 5 of Rev. Proc. 2015-13, the duplicate copy of the resubmitted Form 3115 will be considered filed as of the date the taxpayer originally filed the duplicate copy of the Form 3115 requesting the change under Rev. Proc. 2019-43. This paragraph (3)(c) does not extend the date the taxpayer must file either the resubmitted duplicate copy or original Form 3115 under section 6.03(1)(a) of Rev. Proc. 2015-13. If requested by the Director, the taxpayer must provide written substantiation that the duplicate copy of the Form 3115 requesting the change under Rec. Proc. 2019-43 was filed before January, 31, 2022, pursuant to section 6.03(1)(a)(i)(B) of Rev. Proc. 2015-13. Such written substantiation may include proof of mailing or faxing, as appropriate, of the duplicate copy of the Form 3115.

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EFFECT ON OTHER DOCUMENTS

.01 This revenue procedure amplifies and modifies Rev. Proc. 2019-43, 2019-48 I.R.B. 1107. Rev. Proc. 2019-43, as amplified and modified is superseded in part. The second sentence in the subsection .01 under the EFFECT ON OTHER DOCUMENTS section of Rev. Proc. 2019-43 remains in effect (that is, the second sentences in sections 14.01 and 14.02, and sections 14.04, 14.05, 14.06, and 14.07 of Rev. Proc. 2011-14, 2011-4 I.R.B. 330, remain in effect). All other sections of Rev. Proc. 2019-43 are superseded.

.02 Rev. Proc. 2011-46, 2011-42 I.R.B. 518, is modified as follows:

(1) Section 5.02(3)(a) is modified to remove the first two sentences in the Manner of Making Change section and to substitute the following three new sentences in its place:

(a) In accordance with § 1.446-1(e)(3)(ii), the requirement under § 1.446-1(e)(3)(i) to file a Form 3115 is waived and a statement in lieu of a Form 3115 is authorized for this change. Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, the statement in lieu of a Form 3115 that is permitted under this paragraph 5.02(3)(a) is considered a Form 3115 for purposes of the automatic consent procedures in Rev. Proc. 2015-13. However, the requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc. 201513, is waived.

(2) Section 5.03(2)(a) is modified to remove the first two sentences in the Manner of Making Change section and to substitute the following three new sentences in its place:

(a) In accordance with § 1.446-1(e)(3)(ii), the requirement under § 1.446-1(e)(3)(i) to file a Form 3115 is waived and a statement in lieu of a Form 3115 is authorized for this change. Notwithstanding the definition of Form 3115 in section 3.07 of Rev. Proc. 2015-13, the statement in lieu of a Form 3115 that is permitted under this paragraph 5.03(2)(a) is considered a Form 3115 for purposes of the automatic consent procedures in Rev. Proc. 2015-13. However, the requirement to file the duplicate copy, under section 6.03(1)(a) of Rev. Proc. 2015-13, is waived.

.03 Rev. Rul. 2004-62, 2004-1 C.B. 1072, is modified to remove the second sentence in the CHANGE IN METHOD OF ACCOUNTING section and to substitute the following new two sentences in its place:

A taxpayer that wants to change its method of accounting to comply with this revenue ruling must follow the automatic change procedures in Rev. Proc. 2015-13, 2015-5 I.R.B. 419, (or successor) if the taxpayer is eligible to request such consent under the automatic change procedures therein. The eligibility rules in section 5.01(1) of Rev. Proc. 2015-13 (or successor) apply to a change in method of accounting described in section 3.04 of Rev. Proc. 2022-14, 2022-7 I.R.B. XXX (or successor).

.04 Rev. Rul. 2000-7, 2000-9 C.B. 712, is modified to remove the fourth sentence of the paragraph in the APPLICATION section and to substitute the following new fourth sentence:

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A taxpayer that wants to change its method of accounting to conform with the holding in this revenue ruling must follow the automatic change procedures in Rev. Proc. 2015-13, 2015-5 I.R.B. 419, (or successor) if the taxpayer is eligible to request such consent under the automatic change procedures therein, except that the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 (or successor) does not apply to a change described in section 11.03 of Rev. Proc. 2022-14, 2022-7 I.R.B. XXX (or successor).

.05 Rev. Rul. 2000-4, 2000-1 C.B. 331, is modified to remove the second sentence of the paragraph in the APPLICATION section, and to substitute the following two new sentences in that paragraph in its place:

A taxpayer that wants to change its method of accounting to conform with the holding in this revenue ruling must follow the automatic change procedures in Rev. Proc. 2015-13, 2015-5 I.R.B. 419, (or successor) if the taxpayer is eligible to request such consent under the automatic change procedures therein. The eligibility rules in section 5.01(1) of Rev. Proc. 2015-13 (or successor) apply to a change in method of accounting under section 3.02 of Rev. Proc. 2022-14, 2022-7 I.R.B. XXX (or successor).

.06 Rev. Proc. 2007-48, 2007-2 C.B. 110, is modified to remove section 5.06(1) and to substitute it with the following sentence:

The eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, (or successor) does not apply to a change in method of accounting described in section 5.06 of Rev. Proc. 200748, and made under section 22.08 of Rev. Proc. 2022-14, 2022-7 I.R.B. XXX (or successor).

. 07 Rev. Proc. 2007-16, 2007-1 C.B. 358, is modified as follows:

(1) The second sentence in section 4.01 is modified by substituting “and Rev. Proc. 2015-13, 2015-5 I.R.B. 419” for “and, as applicable, Rev. Proc. 97-27 or Rev. Proc. 2002-9.”

(2) The first sentence in section 4.02 is modified by:

(a) Substituting “the non-automatic change or automatic change procedures of Rev. Proc. 201513” for “Rev. Proc. 97-27 or Rev. Proc. 2002-9, as applicable,”; and

(b) Substituting “(as defined in section 3.19 of Rev. Proc. 2015-13)” for “(as defined in section 5.02(2) of Rev. Proc. 97-27 or section 5.02 of Rev. Proc. 2002-9, as applicable)”.

(c) Section 4.03 is modified by substituting “Rev. Proc. 2015-13,” for “Rev. Proc. 97-27 or Rev. Proc. 2002-9, as applicable,”.

PAPERWORK REDUCTION ACT

The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget under OMB control numbers 1545-0074 for individual filers, 1545-0123 for business filers, and 1545-0047 for tax-exempt filers, in accordance

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SIGNIFICANT CHANGES

with the Paperwork Reduction Act (44 U.S.C. 3507(d)). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. The collections of information in this revenue procedure are in sections 3, 5, 6, 7, 8, 9, 11, 12, 15, 16, 17, 18, 20, 21, 22, 23, 24, 25, 26, 29, 30, 31, and .02(3) of the Effective Date. This information is necessary and will be used to determine whether the taxpayer properly changed to a permitted method of accounting. The collections of information are required for the taxpayer to obtain consent to change its method of accounting.

.01 Significant changes made by this revenue procedure to the List of Automatic Changes in Rev. Proc. 2019-43 include:

(1) Section 20.01, relating to a taxpayer changing its timing of incurring liabilities for employee compensation, is modified to add new paragraph (4) which allows a taxpayer using an overall accrual method of accounting to change its method of accounting for taking into account certain employee commission liabilities;

(2) Section 6.01, relating to impermissible to permissible depreciation method changes, is modified by removing language in paragraph (1)(c)(viii) and paragraph (1)(c)(xvii) allowing a Form 3115 to be filed under 6.01 for certain changes described in sections 6.04, 6.05 and/or 6.19 of this revenue procedure if the original Form 3115 was filed between specified dates beginning and ending before January 31, 2022, because this language is obsolete;

(3) Section 6.18, relating to late elections or revocation of elections under § 168(k)(5), (7), and (10), is modified to clarify the waiver of the eligibility rules in sections 5.01(1)(d) and (f) of Rev. Proc. 2015-13 applies for the taxpayer’s first, second, or third taxable year succeeding the taxpayer’s taxable year beginning in 2016 or 2017 and ending on or after September 28, 2017;

(4) Section 6.19, relating to changes for qualified improvement property placed in service after December 31, 2017, is modified by removing language in paragraph (2) providing for a waiver of the eligibility rules in section 5.01(d) and section 5.01(f) of Rev. Proc. 2015-13 for changes made under section 6.19 for a taxable year for which the original Form 3115 was filed between specified dates beginning and ending before January 31, 2022, because this language is obsolete;

(5) Section 6.20, relating to certain late elections or revocations of elections under sections 168 and 1502, is modified by removing language in paragraph (2) requiring a changes under 6.20(1) (a)(i) and (a)(ii) and (b)(i) and (b)(ii) to be made for a taxable year for which the taxpayer timely files an original federal income tax return between specified dates beginning and ending before January 31, 2022, because this language is obsolete. Section 6.20 is further modified by removing language in paragraph (3) providing for a waiver of the eligibility rules under section 5.01(d) and section 5.01(f) of Rev. Proc. 2015-13 for changes made under section 6.20(1)(a)(i) and (a)(ii) and (b)(i) and (b)(ii) for a taxable year for which the taxpayer timely files an original federal income tax return between specified dates beginning and ending before January 31, 2022, because this language is obsolete;

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(6) Section 6.21, relating to changes in depreciation as a result of applying the additional first year depreciation regulations, is modified by removing language in paragraph (2)(b) providing of a waiver of the eligibility rule in section 5.01(f) of Rev. Proc. 2015-13 for a change for the property or specified plant within the scope of section 4 of Rev. Proc. 2020-50 as modified by section 6.21(1)(b) of this revenue procedure, where the taxpayer files an original federal income tax return between specified dates beginning and ending before January 31, 2022, because this language is obsolete;

(7) Section 6.21, relating to a change in depreciation as a result of applying the additional first year depreciation regulations, is modified to clarify paragraph (3)(b) as follows. First, an amended federal income tax return, or AAR, as applicable, to change from the impermissible method of determining depreciation to the permissible method of determining depreciation for the 1-year Property or 1-year Plant must be filed prior to the date the taxpayer files its federal income tax return for the taxable year succeeding the 1-year Property’s placed-in-service year or 1-year Plant’s planting or grafting year, as applicable. Second, if the 1-year Property or 1-year Plant is within the scope of section 4.03 of Rev. Proc. 2020-50, as modified by section 6.21(1)(b) of this revenue procedure, the taxpayer may change from the impermissible method of determining depreciation to the permissible method of determining depreciation for the 1-year Property or 1-year Plant by filing an amended federal income tax return, or AAR, as applicable, in accordance with section 4.03(4)(a) of Rev. Proc. 2020-50;

(8) Section 6.22, relating to depreciation of tangible property under § 168(g) by controlled foreign corporations, is modified to require any § 481(a) adjustment (or component of a § 481(a) adjustment) from a change under this section that shares all of the same characteristics as any other § 481(a) adjustment (or component) from a change under this section included in the same Form 3115 to be provided as a single § 481(a) adjustment on the Form 3115, and any § 481(a) adjustment (or component) from a change under this section that does not share all of the same characteristics as any other § 481(a) adjustment (or component) from a change under this section included in the same Form 3115 to be provided as a separate § 481(a) adjustment on the Form 3115;

(9) Section 7.01, relating to a change in method of accounting for the treatment of expenditures that qualify as research and experimental expenditures under § 174 as in effect prior to amendment by § 13206 of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and Jobs Act (TCJA), is modified to provide that section 7.01 does not apply to any amount paid or incurred in any taxable year for which § 174 as amended by § 13206 of the TCJA is in effect;

(10) Section 9.01, relating to a change in method of accounting for the costs of computer software to a method described in Rev. Proc. 2000-50, 2000-2 C.B. 601, as modified by Rev. Proc. 2007-16, 2007-1 C.B. 358, is modified to provide that section 5 of Rev. Proc. 2000-50 (costs of developing computer software) does not apply to any amount paid or incurred in any taxable year for which § 174 as amended by § 13206 of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and Jobs Act (TCJA) is in effect;

(11) Section 12.01, relating to certain uniform capitalization (UNICAP) methods used by resellers and reseller-producers, is modified as follows. First, to provide that section 12.01 applies to a taxpayer that uses a historic absorption ratio election with the simplified production method, the modified simplified production method, or the simplified resale method and wants to change to a different method for determining the additional section 263A costs that must be capitalized to ending inventories or other eligible property on hand at the end of the taxable year (that is, to a different simplified method or a facts-and-circumstances method). Second, to remove the transition rule in section 12.01(1)(b)(ii)(B) because this language is obsolete;

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(12) Section 12.02, relating to certain uniform capitalization (UNICAP) methods used by producers and reseller-producers, is modified as follows. First, to provide that section 12.02 applies to a taxpayer that uses a historic absorption ratio election with the simplified production method or the modified simplified production method and wants to change to a different method for determining the additional section 263A costs that must be capitalized to ending inventories or other eligible property on hand at the end of the taxable year (that is, to a different simplified method or a facts-and-circumstances method). Second, to remove the transition rule in section 12.02(1)(b)(ii)(B) because this language is obsolete;

(13) Section 12.14, relating to interest capitization, is modified to provide that section 12.14 does not apply to a taxpayer that wants to change its method of accounting for interest from either capitalizing interest to not capitalizing interest or not capitalizing interest to capitalizing interest for improvements that involve the associated property rules in § 1.263A-11(e)(1)(ii)(B);

(14) Section 13.01, relating to a taxpayer changing its method of accounting to comply with § 267, is clarified to provide such section also applies to a taxpayer that, by reason of the exception in § 1.267(a)-3(c)(4), wants to change its method of accounting with respect to the deduction of amounts owed to a controlled foreign corporation (as defined in § 957) (CFC) that does not have any United States shareholders (as defined in § 951(b)) owning stock of the CFC within the meaning of § 958(a);

(15) Section 15.10, relating to a specified transportation industry taxpayer that wants to change to the overall cash receipts and disbursement (cash) method, has been modified to provide that such taxpayer must have average annual gross receipts of more than the inflation-adjusted amount provided in § 448(c)(4) and not in excess of $50,000,000;

(16) Section 15.17, relating to a change to the overall cash method or to a method of accounting in which a small business taxpayer uses an accrual method for purchases and sales of inventories and uses the cash method for computing all other items of income and expense, is modified to clarify that the acceleration of a § 481(a) adjustment remaining on a prior overall change in method of accounting to an accrual method, as provided in section 15.17(7)(a) of this revenue procedure, applies to a taxpayer making a change described in section 15.17(2)(a) or (b) of this revenue procedure;

(17) Section 16.10 (formerly section 16.12 of Rev. Proc. 2019-43, as modified by Rev. Proc. 2021-34), relating to changes in the timing of income recognition under § 451(b) and (c), is modified as follows. First, paragraph 16.10(4)(b)(ii)(C) is modified to provide that a taxpayer making a change to the full inclusion method under proposed section 1.451-8(a) is not permitted to make the change on a cut-off basis. Second, paragraph 16.10(5) is modified to provide that a change made under section 16.10(2)(a)(iii)(A), (B), (F) and/or (G), section 16.10(2)(a)(iv)(A), (B), (C), (G) and/or (H), or section 16.10(2)(b)(ii)(A), (B), and/or (F) will be disregarded for purposes of section 5.01(1)(f) of Rev. Proc. 2015-13 if: (i) the change is made for the taxpayer’s early application year, as defined in section 16.10(4)(c)(i) or, in the case of a taxpayer that does not apply § 1.451-3 and/or § 1.451-8 for a taxable year beginning before January 1, 2021, for the taxpayer’s first taxable year beginning on or after January 1, 2021, and (ii) the § 481(a) adjustment required to implement the change is zero;

(18) Section 16.10 (formerly section 16.12 of Rev. Proc. 2019-43, as modified by Rev. Proc. 2021-34) is clarified to provide (i) an example on how the 5-year item eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 applies to changes made under section 16.10 and (ii) the situations in which the cost-offset related inventory method changes in sections 16.10(2)(a)(iii)(E), 16.10(2) (a)(iv)(F), and 16.10(2)(b)(ii)(E) apply, and to provide guidance regarding the ordering of concurrent cost-offset and cost-offset related inventory method changes;

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DRAFTING INFORMATION

(19) Section 20.01, relating to a taxpayer changing its timing of incurring liabilities for employee compensation, is modified to provide paragraph (1) does not include any amounts for medical services that are deferred compensation under § 404;

(20) Section 20.12, relating to an accrual method taxpayer changing its treatment of Ratable Service Contracts to conform to the safe harbor method provided by Rev. Proc. 2015-39, is modified to remove paragraph (2), relating to the temporary waiver of the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, because the paragraph is obsolete;

(21) Section 22.18, relating to a small business taxpayer, as defined in section 22.18(2) of this revenue procedure, that wants to change its § 471 method of accounting for inventory, is modified to add paragraph 22.18(5)(c), providing that a change made under section 22.18(1)(b) of this revenue procedure will be disregarded for purposes of section 5.01(1)(f) of Rev. Proc. 2015-13 if: (i) the change is made for the taxpayer’s early application year, as defined in section 16.10(4)(c)(i) or, in the case of a taxpayer that does not apply § 1.471-1(b) for a taxable year beginning before January 5, 2021, for the taxpayer’s first taxable year beginning on or after January 5, 2021, and (ii) the § 481(a) adjustment required to implement the change is zero; and

(22) Section 26.04, relating to a change in basis of computing reserves under § 807(f), is modified as follows. First, paragraphs (2)(a) and (b) are modified to clarify the manner in which a nonlife insurance company implements a change in basis of computing life insurance reserves, to require the netting of § 481(a) adjustments at the level of each item referred to in § 807(c), and to provide that a taxpayer that was an insurance company for the year of change does not accelerate a § 481(a) adjustment merely because it changes from a life insurance company to a nonlife insurance company or vice versa. Second, paragraph (2)(d)(i), relating to the information required to be furnished with a taxpayer’s return or on Form 3115, is removed because § 1.801-5(c) has been removed by T.D. 9911, 2020-45 I.R.B. 966 (November 2, 2020).

The principal author of this revenue procedure is Bruce Chang of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information regarding this revenue procedure, contact Mr. Chang at (202) 317-4870 (not a toll-free number).

For further information regarding a specific change in method of accounting in this revenue procedure, contact the individual listed in the “Contact Person(s)” section located at the end of each section of the revenue procedure (numbers are not toll-free) or see the CONTACT LIST at the end of this revenue procedure. The contact person is with one of the following Offices of Associate Chief Counsel: Corporate (CORP), Financial Institutions and Products (FI&P), Income Tax & Accounting (IT&A), International (INTL), Passthroughs and Special Industries (P&SI), or Employee Benefits, Exempt Organizations, and Employment Taxes (EEE).

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