United States

IRS extends eligibility waiver for tangible property method changes

IRS eases taxpayer compliance with the tangible property rules


On Dec. 20, 2016, the IRS released Notice 2017-6 that allows taxpayers who may need to make additional accounting method changes related to complying with the tangible property regulations extra time to file accounting method changes using the automatic consent procedures of Rev. Proc. 2016-39.

The IRS and Treasury released final tangible property regulations in September 2013, and issued final depreciation and disposition regulations in August 2014 (collectively referred to hereafter as the regulations). The regulations generally apply to taxable years beginning on or after Jan. 1, 2014, or, at the option of the taxpayer, to taxable years beginning on or after Jan. 1, 2012. Implementation of the new rules often require a taxpayer to file a Form 3115, Application for Change in Accounting Method. In general, taxpayers may not avail themselves of the automatic consent procedures if they have filed a Form 3115 to the same item in the prior five-years.

However, in order to encourage compliance and ease transition onto the new rules, the IRS waived the prior five-year item change for taxpayers requesting a change in method of accounting for any taxable year beginning before Jan. 1, 2016. Nevertheless, the IRS discovered that taxpayers were in need of additional time. Thus, in a continuing effort to encourage compliance, the IRS issued the notice extending the waiver period to include changes filed for any taxable year beginning before Jan. 1, 2017.

The notice also provides transitional relief for taxpayers with pending non-automatic requests. Specifically, if before Dec. 20, 2016, a taxpayer properly filed a Form 3115 under the non-automatic change procedures for a change in method of accounting under the regulations, and the Form 3115 is pending with the IRS national office, the taxpayer may choose to convert the application to the procedures under the automatic consent procedures. In order to convert the application, the taxpayer will need to notify the IRS national office of the taxpayer’s intent before the later of (a) Jan. 19, 2017, or (b) the issuance of a letter ruling granting or denying consent for the change.

This notice offers welcome relief to taxpayers who may have only partially addressed the regulations or who may need additional changes to address something that the taxpayer may not have gotten perfect the first time around. For instance, a taxpayer may have found additional items in its fixed asset ledger that would have been expensed under the new regulations but were missed when initially implementing the rules.

Taxpayers who are interested in addressing or revisiting the regulations in light of this notice should consult their tax advisors, and taxpayers who have pending non-automatic requests should act quickly if they wish to convert their Form 3115 to the automatic consent procedures.


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