SECTION 4. MODIFICATION OF

SECTION 19 OF REV. PROC. 2025-23

.01 Section 19.01 is modified to read as follows:

.01 Small business taxpayer exceptions from requirement to account for certain long-term construction contracts under § 460 or to capitalize costs under § 263A for certain contracts .

(1) Description of change . This change applies to a taxpayer that wants to change its method of accounting:

(a) For exempt construction contracts described in § 460(e)(1)(B), from the percentage-of-completion method of accounting described in § 1.460-4(b) to an exempt contract method of accounting described in § 1.460-4(c);

(b) For contracts entered into in taxable years beginning on or before July 4, 2025, to stop capitalizing costs under § 263A for home construction contracts described in § 460(e)(1)(A), as in effect prior to amendment by Public Law 119-21, 139 Stat. 189 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA), that meet the requirements of § 460(e)(1) (B)(i) and (ii); or

(c) For contracts entered into in taxable years beginning after July 4, 2025, to stop capitalizing costs under § 263A for residential construction contracts described in § 460(e)(1)(A), as amended by the OBBBA, that meet the requirements of § 460(e)(1)(B)(i) and (ii).

(2) Inapplicability . This change does not apply in the first taxable year in which a taxpayer enters into a particular type of contract for which the taxpayer may adopt a permissible method of accounting. For example, the change described in section 19.01(1)(a) of this revenue procedure does not apply in the first taxable year in which the taxpayer enters into a nonresidential long-term construction contract that meets the requirements of § 460(e)(1)(B). In such case, the adoption of a permissible exempt contract method of accounting described in § 1.460-4(c) for such contract is not a change in method of accounting under § 446(e) and § 1.446-1(e)(2). See Rev. Rul. 92-28, 1992-1 C.B. 153.

(3) Manner of making change . This change is made on a cut-off basis and applies only to contracts entered into on or after the first day of the year of change that are subject to the method change. Accordingly, a § 481(a) adjustment is neither permitted nor required.

(4) Reduced filing requirement . A taxpayer is required to complete only the following information on Form 3115 (Rev. December 2022) to make this change:

(a) The identification section of page 1 (above Part I);

(b) The signature section at the bottom of page 1;

(c) Part I; (d) Part II, all lines except line 16; (e) Part IV, line 25; and (f) Schedule D, Part I. (5) Certain eligibility rules inapplica- ble . The eligibility rules in section 5.01(1) (d) and (f) of Rev. Proc. 2015-13 do not apply to a change described in section 19.01(1)(c) of this revenue procedure for the taxpayer’s first or second taxable year beginning after July 4, 2025.

(6) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 19.01 is “236.” (7) Contact information . For further information regarding changes under this section, contact Michael Finn at (202) 317-4718 (not a toll-free number). .02 Section 19.03 of Rev. Proc. 202523 is added to read as follows: .03 Certain residential construction contracts excepted from the requirement

under § 460 and subject to capitalization under § 263A .

(1) Description of change . This change applies to a taxpayer that wants to change its method of accounting for residential construction contracts (as defined in § 460(e)(4)(B)) that are entered into in taxable years beginning after July 4, 2025:

(a) From the percentage-of-completion method of accounting described in § 1.460-4(b) or the percentage-of-completion/capitalized-cost method of accounting described in § 1.460-4(e) to an exempt contract method of accounting described in § 1.460-4(c); or

(b) To start capitalizing costs under § 263A for contracts that do not meet the requirements of § 460(e)(1)(B)(i) and (ii).

(2) Inapplicability . This change does not apply in the first taxable year in which a taxpayer enters into a particular type of contract for which the taxpayer may adopt a permissible method of accounting. For example, the change described in section 19.03(1)(a) of this revenue procedure does not apply in the first taxable year in which a taxpayer enters into a residential construction contract as defined in § 460(e) (4)(B). In such cases, the adoption of a permissible exempt contract method of accounting described in § 1.460-4(c) for such contracts is not a change in method of accounting under § 446(e) and § 1.4461(e)(2). (3) Manner of making change . This change is made on a cut-off basis and applies only to contracts entered into on or after the first day of the year of change that are subject to the method change. Accordingly, a § 481(a) adjustment is neither permitted nor required.

(4) Reduced filing requirement . A taxpayer is required to complete only the following information on Form 3115 (Rev. December 2022) to make this change:

(a) The identification section of page 1 (above Part I);

(b) The signature section at the bottom of page 1;

(c) Part I; (d) Part II, all lines except line 16; (e) Part IV, line 25; and (f) Schedule D, Part I. (5) Transition rule . If, on or before September 21, 2026, a taxpayer filed a Federal income tax return for a taxable year beginning after July 4, 2025, the tax

September 21, 2026 410 Bulletin No. 2026–39

payer is deemed to have complied with the general procedures under § 446(e), § 1.446-1(e), and this section 19.03 to change its method of accounting for contracts described in section 19.03(1) of this revenue procedure if the taxpayer properly applied the methods of accounting provided in section 19.03(1)(a) or (b), respectively, of this revenue procedure for such taxable year.

(6) Certain eligibility rules inapplica- ble . The eligibility rules in section 5.01(1) (d) and (f) of Rev. Proc. 2015-13 do not apply to a change described in this section 19.03 for the taxpayer’s first or second taxable year beginning after July 4, 2025.

(7) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 19.03 is “275.” (8) Contact information . For further information regarding changes under this section, contact Michael Finn at (202) 317-4718 (not a toll-free number).