SECTION 9. COMPUTER SOFTWARE EXPENDITURES (§§ 162, 167, and 197)

.01 Computer software expenditures .

(1) Description of change . This change applies to a taxpayer that wants to change its method of accounting for the costs of computer software to a method described in Rev. Proc. 2000-50, 20002 C.B. 601, as modified by Rev. Proc. 2007-16, 2007-1 C.B. 358. Section 5 of Rev. Proc. 2000-50 describes the methods applicable to the costs of developing computer software. Section 6 of Rev. Proc. 2000-50 describes the method applicable to the costs of acquired computer software. Section 7 of Rev. Proc. 2000-50 describes the method applicable to leased or licensed computer software. Section 13206 of Public Law 115-97, 131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and Jobs Act (TCJA), amended § 174 to treat the costs of software development as

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research or experimental expenditures, effective for amounts paid or incurred in taxable years beginning after December 31, 2021. In accordance, 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 the TCJA is in effect.

(2) Scope . This change applies to all costs of computer software as defined in section 2 of Rev. Proc. 2000-50. However, this change does not apply to any computer software that is subject to amortization as an “amortizable section 197 intangible” as defined in § 197(c) and the regulations thereunder, or to costs that a taxpayer has treated as research and experimentation expenditures under § 174.

(3) Inapplicability . This change does not apply to costs of developing computer software that are paid or incurred in taxable years for which § 174 as amended by § 13206 of the TCJA is in effect.

(4) Statement required . If a taxpayer is changing to the method described in section 5.01(2) of Rev. Proc. 2000-50, the taxpayer must attach to its Form 3115 a statement providing the information required in section 8.02(2) of Rev. Proc. 2000-50.

(5) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 9.01 is “18.”

(6) Contact information . For further information regarding a change under this section, contact Bruce Chang at (202) 317-7005 (not a toll-free number).