Rev. Proc. 2023-24 — Internal Revenue Bulletin 2023-28

LIST OF AUTOMATIC CHANGES��1212

SECTION 1. GROSS INCOME (§ 61) ��1212 .01 Up-front Payments for Network Upgrades received by Utilities��1212

SECTION 2. COMMODITY CREDIT LOANS (§ 77)��1212 .01 Treating amounts received as loans��1212

SECTION 3. TRADE OR BUSINESS EXPENSES (§ 162)��1212 .01 Advances made by a lawyer on behalf of clients��1212 .02 ISO 9000 Costs��1212 .03 Restaurant or tavern smallwares packages��1212 .04 Timber grower fertilization costs ��1212 .05 Materials and supplies��1213 .06 Repair and maintenance costs��1213 .07 Wireline network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011-27��1213 .08 Wireless network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011-28��1213 .09 Method of accounting under Rev. Proc. 2011-43 for taxpayers in the business of transporting, delivering, or selling

electricity��1213 .10 Method of accounting under Rev. Proc. 2013-24 for taxpayers in the business of generating steam or electric power.��1213 .11 Cable network asset capitalization methods of accounting under Rev. Proc. 2015-12��1213 .12 Natural gas transmission and distribution property method of accounting under Rev. Proc. 2023-15��1214

SECTION 4. BAD DEBTS (§ 166)��1217 .01 Change from reserve method to specific charge-off method ��1217 .02 Conformity election by bank after previous election automatically revoked��1217

SECTION 5. INTEREST EXPENSE (§ 163) AND AMORTIZABLE BOND PREMIUM (§ 171)��1218 .01 Revocation of § 171(c) election ��1218 .02 Change to comply with § 163(e)(3) ��1218

SECTION 6. DEPRECIATION OR AMORTIZATION (§ 56(a)(1), 167, 168, 197, 280F(a), or 1502, OR FORMER

§ 56(g)(4)(A), 168, 1400I, 1400L, or 1400N(d))��1218 .01 Impermissible to permissible method of accounting for depreciation or amortization��1218 .02 Permissible to permissible method of accounting for depreciation ��1223 .03 Sale, lease, or financing transactions��1225 .04 Change in general asset account treatment due to a change in the use of MACRS property��1226 .05 Change in method of accounting for depreciation due to a change in the use of MACRS property��1227 .06 Depreciation of qualified non-personal use vans and light trucks��1227 .07 Impermissible to permissible method of accounting for depreciation or amortization for disposed depreciable or

amortizable property��1228 .08 Tenant construction allowances ��1229

Bulletin No. 2023–28 1207 July 10, 2023

.09 Safe harbor method of accounting for determining the depreciation of certain tangible assets used by wireless

telecommunications carriers under Rev. Proc. 2011-22��1230 .10 Partial dispositions of tangible depreciable assets to which the IRS’s adjustment pertains (§ 168; § 1.168(i)-8)��1230 .11 Depreciation of leasehold improvements (§§ 167, 168, and 197; § 1.167(a)-4)��1231 .12 Permissible to permissible method of accounting for depreciation of MACRS property (§ 168; §§ 1.168(i)-1,

1.168(i)-7, and 1.168(i)-8)��1232 .13 Disposition of a building or structural component (§ 168; § 1.168(i)-8)��1234 .14 Dispositions of tangible depreciable assets (other than a building or its structural components) (§ 168; § 1.168(i)-8)��1237 .15 Dispositions of tangible depreciable assets in a general asset account (§ 168(i)(4); § 1.168(i)-1)��1240 .16 Summary of certain changes in methods of accounting related to dispositions of MACRS property��1242 .17 Depreciation of fiber optic transfer node and fiber optic cable used by a cable system operator (§§ 167 and 168)��1244 .18 Qualified improvement property placed in service after December 31, 2017 (§ 168)��1244 .19 Certain late elections under §§ 168 and 1502 or revocation of certain elections under § 168 (§ 168(g)(7), (k)(5), (k)

(7), and (k)(10); §§ 1.168(k)-2 and 1.1502-68)��1245 .20 Change in depreciation as a result of applying the additional first year depreciation regulations (§ 168(k);

§§ 1.168(k)-2 and 1.1502-68)��1246 .21 Depreciation of tangible property under § 168(g) by controlled foreign corporations.��1248 .22 Late elections under § 168(j)(8), § 168(l)(3)(D), and § 181(a)(1).��1248

SECTION 7. RESEARCH AND EXPERIMENTAL EXPENDITURES (§ 174)��1249 .01 Changes to a different method or different amortization period��1249 .02 Specified Research or Experimental Expenditures��1250

SECTION 8. ELECTIVE EXPENSING PROVISIONS (§ 179D) ��1252 .01 Deduction for Energy Efficient Commercial Buildings (§ 179D) ��1252

SECTION 9. COMPUTER SOFTWARE EXPENDITURES (§§ 162, 167, and 197)��1252 .01 Computer software expenditures��1252

SECTION 10. START-UP EXPENDITURES AND ORGANIZATIONAL FEES (§§ 195, 248 AND 709)��1252 .01 Start-up expenditures��1252 .02 Organizational expenditures under § 248��1253 .03 Organization fees under § 709��1253

SECTION 11. CAPITAL EXPENDITURES (§ 263) ��1254 .01 Package design costs��1254 .02 Line pack gas or cushion gas��1254 .03 Removal costs��1254 .04 Distributor commissions��1255 .05 Intangibles��1255 .06 Rotable spare parts safe harbor method.��1255 .07 Repairable and reusable spare parts ��1255 .08 Tangible property ��1256 .09 Railroad track structure expenditures��1259 .10 Remodel-refresh safe harbor method ��1259

SECTION 12. UNIFORM CAPITALIZATION (UNICAP) METHODS (§ 263A)��1261 .01 Certain uniform capitalization (UNICAP) methods used by resellers and reseller-producers��1261 .02 Certain uniform capitalization (UNICAP) methods used by producers and reseller-producers��1264 .03 Impact fees ��1265 .04 Change to capitalizing environmental remediation costs under § 263A��1265 .05 Change in allocating environmental remediation costs under § 263A��1265 .06 Safe harbor methods under § 263A for certain dealerships of motor vehicles��1265 .07 Change to not apply § 263A to one or more plants removed from the list of plants that have a preproductive period

in excess of 2 years.��1266 .08 Change to a reasonable allocation method described in § 1.263A-1(f)(4) for self-constructed assets��1266 .09 Real property acquired through foreclosure��1267

July 10, 2023 1208 Bulletin No. 2023–28

. 10 Sales-Based Royalties��1267 .11 Treatment of Sales-Based Vendor Chargebacks under a Simplified Method��1267 .12 U.S. ratio method ��1268 .13 Depletion��1269 .14 Interest capitalization ��1270 .15 Change to not apply § 263A to replanting costs for lost or damaged citrus plants pursuant to § 263A(d)(2)(C) ��1270 .16 Small business taxpayer exception from requirement to capitalize costs under § 263A ��1270 .17 Recharacterizing costs under the simplified resale method, simplified production method, or the modified

simplified production method��1271 .18 Late revocation of elections under § 263A(d)(3)��1272

SECTION 13. LOSSES, EXPENSES AND INTEREST WITH RESPECT TO TRANSACTIONS BETWEEN

RELATED TAXPAYERS (§ 267)��1272 .01 Change to comply with § 267��1272

SECTION 14. DEFERRED COMPENSATION (§ 404)��1272 .01 Deferred compensation��1272 .02 Grace period contributions��1273

SECTION 15. METHODS OF ACCOUNTING (§ 446)��1273 .01 Change in overall method from the cash method, or from an accrual method with regard to purchases and sales of

inventories and the cash method for all other items, to an accrual method ��1273 .02 Multi-year insurance policies for multi-year service warranty contracts��1275 .03 Nonaccrual-experience method��1276 .04 Interest accruals on short-term consumer loans—Rule of 78’s method��1276 .05 Film producer’s treatment of certain creative property costs��1277 .06 Deduction of incentive payments to health care providers��1277 .07 Change by bank for uncollected interest.��1277 .08 Change from the cash method to an accrual method for specific items��1278 .09 Multi-year service warranty contracts��1278 .10 Overall cash method for specified transportation industry taxpayers��1279 .11 Change to overall cash/hybrid method for certain banks��1280 .12 Change to overall cash method for farmers��1281 .13 Nonshareholder contributions to capital under § 118��1281 .14 Debt issuance costs��1282 .15 Transfers of interties under the safe harbor described in Notice 2016-36 (§ 118).��1282 .16 Change to or from the net asset value (NAV) method.��1282 .17 Small business taxpayer changing the overall method of accounting to the 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��1283

SECTION 16. TAXABLE YEAR OF INCLUSION (§ 451)��1284 .01 Accrual of interest on nonperforming loans��1284 .02 Advance rentals��1284 .03 State or local income or franchise tax refunds ��1285 .04 Capital Cost Reduction Payments��1285 .05 Credit card annual fees��1285 .06 Retainages��1285 .07 Change in applicable financial statements (AFS) for purposes of applying certain revenue recognition methods of

accounting. ��1285 .08 Changes in the timing of income recognition under § 451(b) and (c) ��1287

SECTION 17. OBLIGATIONS ISSUED AT DISCOUNT (§ 454)��1294 .01 Series E, EE or I U.S. savings bonds��1294

SECTION 18. PREPAID SUBSCRIPTION INCOME (§ 455)��1294 .01 Prepaid subscription income��1294

Bulletin No. 2023–28 1209 July 10, 2023

SECTION 19. SPECIAL RULES FOR LONG-TERM CONTRACTS (§ 460)��1294 .01 Small business taxpayer exceptions from requirement to account for certain long-term contracts under § 460 or to

capitalize costs under § 263A for certain home construction contracts��1294

SECTION 20. TAXABLE YEAR INCURRED (§ 461)��1294 .01 Timing of incurring liabilities for employee compensation��1295

(1) Self-insured employee medical benefits��1295 (2) Bonuses��1295 (3) Vacation pay, sick pay, and severance pay ��1296 (4) Commissions ��1296 .02 Timing of incurring liabilities for real property taxes, personal property taxes, state income taxes, and

state franchise taxes��1297 .03 Timing of incurring liabilities under a workers’ compensation act, tort, breach of contract, or violation of law ��1297 .04 Timing of incurring certain liabilities for payroll taxes ��1298 .05 Cooperative advertising��1298 .06 Timing of incurring certain liabilities for services or insurance��1299 .07 Rebates and allowances��1299 .08 Ratable accrual of real property taxes��1299 .09 California Franchise Taxes��1299 .10 Gift cards issued as a refund for returned goods��1299 .11 Timing of incurring liabilities under the recurring item exception to the economic performance rules ��1300 .12 Economic performance safe harbor for ratable service contracts��1300 .13 Timing of incurring inventory costs��1300 .14 Alternative Cost Method��1300

SECTION 21. RENT (§ 467)��1302 .01 Change from an improper method of inclusion of rental income or expense to inclusion in accordance with

the rent allocation��1302

SECTION 22. INVENTORIES (§ 471)��1302 .01 Cash discounts��1302 .02 Estimating inventory “shrinkage”��1303 .03 Qualifying volume-related trade discounts��1303 .04 Impermissible methods of identification and valuation of inventories. ��1303 .05 Core Alternative Valuation Method��1304 .06 Replacement cost for automobile dealers’ parts inventory��1304 .07 Replacement cost for heavy equipment dealers’ parts inventory��1305 .08 Rotable spare parts ��1305 .09 Advance Trade Discount Method��1305 .10 Permissible methods of identification and valuation of inventories.��1305 .11 Change in the official used vehicle guide utilized in valuing used vehicles��1306 .12 Invoiced advertising association costs for new vehicle retail dealerships ��1306 .13 Rolling-average method of accounting for inventories��1307 . 14 Sales-Based Vendor Chargebacks��1307 .15 Certain changes to the cost complement of the retail inventory method ��1307 . 16 Certain changes within the retail inventory method��1307 .17 Change from currently deducting inventories to permissible methods of identification and valuation of inventories.��1308 .18 Small business taxpayer § 471(c) inventory methods.��1308 .19 Changes within a § 471(c) inventory method. ��1309 .20 Change from a small business taxpayer § 471(c) inventory method to an inventory method under § 471(a).��1310

SECTION 23. LAST-IN, FIRST-OUT (LIFO) INVENTORIES (§ 472)��1310 .01 Change from the LIFO inventory method��1310 .02 Determining current-year cost under the LIFO inventory method��1311 .03 Alternative LIFO inventory method for retail automobile dealers��1312 .04 Used vehicle alternative LIFO method��1312 .05 Determining the cost of used vehicles purchased or taken as a trade-in��1313

July 10, 2023 1210 Bulletin No. 2023–28

.06 Change to the inventory price index computation (IPIC) method ��1313 .07 Changes within the inventory price index computation (IPIC) method��1314 .08 Changes to the Vehicle-Pool Method��1315 .09 Changes within the used vehicle alternative LIFO method ��1315 .10 Changes to dollar-value pools of manufacturers��1315

SECTION 24. MARK-TO-MARKET ACCOUNTING METHOD (Including § 475)��1316 .01 Commodities dealers, securities traders, and commodities traders electing to use the mark-to-market method of

accounting under § 475(e) or (f)��1316 .02 Taxpayers requesting to change their method of accounting from the mark-to-market method of accounting

described in § 475 to a realization method��1317

SECTION 25. BANK RESERVES FOR BAD DEBTS (§ 585)��1318 .01 Changing from the § 585 reserve method to the § 166 specific charge-off method��1318

SECTION 26. INSURANCE COMPANIES (§§ 807, 816, 832, 833)��1319 .01 Safe harbor method of accounting for premium acquisition expenses��1319 .02 Certain changes in method of accounting for organizations to which § 833 applies��1320 .03 Change in qualification as life/nonlife insurance company under § 816 ��1320 .04 Changes in basis of computing reserves under § 807(f)��1320

SECTION 27. DISCOUNTED UNPAID LOSSES (§ 846)��1322 .01 Composite method for discounting unpaid losses��1322

SECTION 28. REAL ESTATE MORTGAGE INVESTMENT CONDUIT (REMIC) (§§ 860A-860G)��1322 .01 REMIC Inducement Fees��1322

SECTION 29. FUNCTIONAL CURRENCY (§ 985)��1323 .01 Change in functional currency ��1323

SECTION 30. ORIGINAL ISSUE DISCOUNT (§§ 1272, 1273)��1323 .01 De minimis original issue discount (OID) ��1323 .02 Proportional method of accounting for OID on a pool of credit card receivables��1323

SECTION 31. MARKET DISCOUNT BONDS (§ 1278)��1324 .01 Revocation of § 1278(b) election��1324

SECTION 32. SHORT-TERM OBLIGATIONS (§ 1281)��1324 .01 Interest income on short-term obligations��1324 .02 Stated interest on short-term loans of cash method banks ��1325

EFFECTIVE DATE��1325

EFFECT ON OTHER DOCUMENTS��1326

PAPERWORK REDUCTION ACT��1327

SIGNIFICANT CHANGES��1327

DRAFTING INFORMATION��1331

LIST OF AUTOMATIC CHANGES CONTACT LIST��1332

Bulletin No. 2023–28 1211 July 10, 2023

This revenue procedure provides the List of Automatic Changes to which the automatic change procedures in 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, by Rev. Proc. 2021-26, 2021-22 I.R.B. 1163, by Rev. Proc. 2017-59, 2017-48 I.R.B. 543, and by section 17.02(b) and (c) of Rev. Proc. 2016-1, 2016-1 I.R.B. 1, apply. The definitions in section 3 of Rev. Proc. 2015-13 apply to this revenue procedure.

LIST OF AUTOMATIC CHANGES