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Rev. Proc. 2018-31: List of automatic changes, accounting methods

List of automatic changes, accounting methods

The IRS today released an advance version of Rev. Proc. 2018-31 that provides an updated list of automatic changes to which the automatic change procedures in Rev. Proc. 2015-13, as clarified and modified by Rev. Proc. 2015-33 and as modified by Rev. Proc. 2017-59, and by section 17.02 of Rev. Proc. 2016-1, apply. The definitions in section 3 of Rev. Proc. 2015-13 also apply to today’s revenue procedure.

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Read Rev. Proc. 2018-31 [PDF 1 MB]

The purpose of this report is to provide text of today’s 333-page revenue procedure.

"Significant changes"

Rev. Proc. 2018-31 indicates that “significant changes” to Rev. Proc. 2017-30 include:

  • Section 6.11, relating to a change in the depreciation of leasehold improvements, modified to remove paragraph (2)(b), relating to the temporary waiver of the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, because it is obsolete. The waiver of the eligibility rule in section 5.01(1)(d) of Rev. Proc. 2015-13 continues to apply to this change.
  • Section 6.18, relating to the revocation of the partial disposition election under the remodel-refresh safe harbor described in Rev. Proc. 2015-56, is obsolete and is removed from the revenue procedure in its entirety.
  • Section 11.10, relating to a change to the remodel-refresh safe harbor described in Rev. Proc. 2015-56, is modified to remove paragraph (2), relating to the temporary waiver of the eligibility rules in sections 5.01(1)(d) and (f) of Rev. Proc. 2015-13, because they are obsolete.

Because of the amendments made to sections 263A, 448, and 471 by the new U.S. tax law (Pub. L. No. 115-97, enacted December 22, 2017), the IRS and Treasury Department expect to issue a revenue procedure providing procedures for making changes implementing measures under the new law. The following sections of Rev. Proc. 2017-30 are modified:

  • Section 12.01, relating to certain uniform capitalization (UNICAP) methods used by resellers and reseller-producers, is modified to provide that a small reseller, as defined in section 12.01(3)(b) of Rev. Proc. 2018-31 is not permitted to make a change in method of accounting described in section 12.01(1)(a)(i) of Rev. Proc, 2018-31 for any tax year beginning after December 31, 2017.
  • Section 15.03, relating to taxpayers changing to overall cash receipts and disbursements (cash) method, and section 21.03 (now section 22.03 of Rev. Proc. 2018-31), relating to the small taxpayer exception from requirement to account for inventories under section 471, are modified to provide that these changes do not apply for any tax year beginning after December 31, 2017. 
  • Because of the amendments made to section 118 by the new tax law, section 15.14, relating to nonshareholder contributions to capital, is modified to provide that the change described in section 15.14(1)(a)(ii) does not apply to contributions made after December 22, 2017. 
  • Pursuant to Notice 2018-35, section 16.07, relating to changes for advance payments, is modified to provide that the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, does not apply to a taxpayer that changes to a method of accounting provided under section 16.07(1)(a)(i) of today’s revenue procedure for the taxpayer’s first or second tax year ending on or after May 9, 2018. 
  • Because of the amendments made to section 451 by the new tax law, section 16.07 also is modified to provide that a taxpayer is not permitted to make a change in method of accounting described in section 16.07(1)(a)(ii) of Rev. Proc. 2018-31 for any tax year beginning after December 31, 2017. 

Other "significant changes" to Rev. Proc. 2017-30 include:

  • Section 21.15 (now section 22.15 of Rev. Proc. 2018-31), relating to sales-based vendor chargebacks, is modified to remove paragraph (2), relating to the temporary waiver of the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13, because it is obsolete.
  • Section 23.01 (now section 24.01 of Rev. Proc. 2018-31), relating to certain taxpayers that have elected the mark-to-market method of accounting under section 475(e) or (f), is modified to provide that the waiver of the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 no longer applies to this change. The waiver of the eligibility rule in section 5.01(1)(d) of Rev. Proc. 2015-13 continues to apply to this change.
  • Section 23.02 (now section 24.02 of Rev. Proc. 2018-31), relating to a taxpayer changing its method of accounting for securities or commodities from the mark-to-market method of accounting described in section 475 to a realization method of accounting, is modified to provide that the waiver of the eligibility rule in section 5.01(1)(f) of Rev. Proc. 2015-13 no longer applies to this change. The waiver of the eligibility rule in section 5.01(1)(d) of Rev. Proc. 2015-13 continues to apply to this change. 

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