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 Proc . 2000-50 is obsolete for costs of developing software paid or incurred in taxable years beginning after December 31, 2021 .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 .

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revenue procedure is not a determination by the Commissioner that the taxpayer has properly determined the taxable year in which the taxpayer begins the active trade or business to which the start-up expenditures relate and does not create any presumption that the proposed taxable year in which the taxpayer begins the active trade or business to which the start-up expenditures relate is permissible under § 195(c) (2). The director will ascertain whether the taxpayer’s determination of the taxable year in which the taxpayer begins the active trade or business to which the start-up expenditures relate is permissible.

(3) Designated automatic account- ing method change number . The designated automatic accounting method change number for a change to a method of accounting under this section 10. 01 is “223. ”

(4) Contact information . For further information regarding a change under this section, contact Elizabeth Binder at (202) 317-7005 (not a toll-free number).. 02 Organizational expenditures under § 248

(1) Description of change and scope (a) Applicability . This change applies to a corporation that wants to change its method of accounting under § 248 to change:

(i) the characterization of an item as an organizational expenditure;

(ii) the determination of the taxable year in which the corporation begins business to which the organizational expenditures relate; or

(iii) the amortization period of an organizational expenditure to 180 months.

(b) Inapplicability . This change does not apply to:

(i) organizational expenditures paid or incurred before October 23, 2004; or

(ii) organizational expenditures paid or incurred after October 22, 2004, and before August 17, 2011, if the period of limitations on assessment of tax for the taxable year the election under § 1. 2481(c) is deemed made has expired. (2) No rulings (a) Characterization of items . The consent granted under section 9 of Rev. Proc. 2015-13 for a change specified in section 10. 02(1)(a)(i) of this revenue procedure is not a determination by the Commissioner that the corporation has properly

characterized an item as an organizational expenditure and does not create any presumption that the proposed characterization of an item as an organizational expenditure is permissible under § 248(b) and § 1. 248-1(b). The director will ascertain whether the corporation’s characterization of an item as an organizational expenditure is permissible.

(b) When the corporation begins busi- ness . The consent granted under section 9 of Rev. Proc. 2015-13 for a change specified in section 10.02(1)(a)(ii) of this revenue procedure is not a determination by the Commissioner that the corporation has properly determined the taxable year in which the corporation begins business to which the organizational expenditures relate and does not create any presumption that the proposed taxable year in which the corporation begins business to which the organizational expenditures relate is permissible under § 1. 248-1(d). The director will ascertain whether the corporation’s determination of the taxable year in which the corporation begins business to which the organizational expenditures relate is permissible.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 10. 02 is “228. ” (4) Contact information . For further information regarding a change under this section, contact Benjamin Masselli at (202) 317-7003 (not a toll-free number)..

03 Organization fees under § 709 (1) Description of change and scope (a) Applicability . This change applies to a partnership that wants to change its method of accounting under § 709 to change:

(i) the characterization of an item as an organizational expense;

(ii) the determination of the taxable year in which the partnership begins business to which the organizational expenses relate; or

(iii) the amortization period of an organizational expense to 180 months.

(b) Inapplicability . This change does not apply to:

(i) organizational expenses paid or incurred before October 23, 2004; or

(ii) organizational expenses paid or incurred after October 22, 2004, and

before August 17, 2011, if the period of limitations on assessment of tax for the taxable year the election under § 1. 7091(b) is deemed made has expired. (2) No rulings (a) Characterization of items . The consent granted under section 9 of Rev. Proc. 2015-13 for a change specified in section 10. 03(1)(a)(i) of this revenue procedure is not a determination by the Commissioner that the partnership has properly characterized an item as an organizational expense and does not create any presumption that the proposed characterization of an item as an organizational expense is permissible under § 709(b)(3). The director will ascertain whether the partnership’s characterization of an item as an organizational expense is permissible.

(b) When the partnership begins busi- ness . The consent granted under section 9 of Rev. Proc. 2015-13 for a change specified in section 10.03(1)(a)(ii) of this revenue procedure is not a determination by the Commissioner that the partnership has properly determined the taxable year in which the partnership begins business to which the organizational expenses relate and does not create any presumption that the proposed taxable year in which the partnership begins business to which the organizational expenses relate is permissible under § 1. 709-2(c). The director will ascertain whether the partnership’s determination of the taxable year in which the partnership begins business to which the organizational expenses relate is permissible.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 10. 03 is “229. ” (4) Contact information . For further information regarding a change under this section, contact Elizabeth Zanet at (202) 317-5279 (not a toll-free number).