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, 2000-2 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 research or experimental expenditures, effective for amounts paid or incurred in taxable years beginning after December 31, 2021. Section 12 of Notice 202363, 2023-39 I.R.B. 919, as modified by Notice 2024-12, 2024-5 I. R. B. 616, provides that, as a result of the TCJA amendments to § 174 and the rules in sections 3 through 5 of Notice 2023-63, section 5

of Rev. Proc. 2000-50 is obsolete for costs of developing software paid or incurred in taxable years beginning after December 31, 2021. Accordingly, section 5 of Rev. Proc. 2000-50 (costs of developing computer software) applies only to costs of developing computer software paid or incurred in any taxable year beginning on or before December 31, 2021.

(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 beginning after December 31, 2021. (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).