Form 3115--Application for Change in Accounting Method

Instructions for Form 3115
(Rev. December 2015)

Department of the Treasury
Internal Revenue Service

Application for Change in Accounting Method
Section references are to the Internal Revenue Code unless
otherwise noted.
All references to Rev. Proc. 2015-13 are to Rev. Proc. 2015-13,
2015-5 I.R.B. 419 (as clarified and modified by Rev. Proc.
2015-33), or its successor.
All references to Rev. Proc. 2015-14 and the List of Automatic
Changes are to Rev. Proc. 2015-14, 2015-5 I.R.B. 450, or its
successor.
All references to Rev. Proc. 2016-1 are to Rev. Proc. 2016-1,
2016-1 I.R.B. 1, or its successor (updated annually).

General Instructions
Future Developments

For the latest information about developments related to Form
3115 and its instructions, such as legislation enacted after they
were published, go to www.irs.gov/form3115.

What's New
Change of filing address.
Beginning in January 2016, the copy of Form 3115 for
automatic change requests should be sent to the Covington,
Kentucky Service Center. See the address chart on page 2.
Exempt organizations file at the same address as other filers
of Form 3115. See the address chart on page 2.

Purpose of Form

File Form 3115 to request a change in either an overall method
of accounting or the accounting treatment of any item.

Method Change Procedures
When filing Form 3115, you must determine if the IRS
has issued any new published guidance which includes
CAUTION
revenue procedures, revenue rulings, notices,
regulations, or other relevant guidance in the Internal Revenue
Bulletin. For the latest information, visit www.irs.gov.

!

For general application procedures on requesting accounting
method changes, see Rev. Proc. 2015-13. Rev. Proc. 2015-13
provides procedures for both automatic and non-automatic
changes in method of accounting.
Automatic change procedures. Unless otherwise provided in
published guidance, you must file under the automatic change
procedures if you are eligible to request consent to make a
change in your method of accounting under the automatic
change procedures for the requested year of change. See the
instructions for Part I later, and the List of Automatic Changes.
A Form 3115 filed under these procedures may be reviewed
by the IRS. If it is, you will be notified if information in addition to
that requested on Form 3115 is required or if your request is
denied. No user fee is required. An applicant that timely files and
complies with the automatic change procedures is granted
consent to change its accounting method, subject to review by
the IRS National Office and operating division director.
Ordinarily, you are required to file a separate Form 3115 for
each change in method of accounting. However, in some cases
Jan 14, 2016

you are required or permitted to file a single Form 3115 for
particular concurrent changes in method of accounting. See
section 6.03(1)(b) of Rev. Proc. 2015-13 for more information.
Reduced filing requirement. A qualified small taxpayer
qualifies for a reduced Form 3115 filing requirement for certain
automatic accounting method changes (for example, a change
under section 6.01 of Rev. Proc. 2015-14 (DCN7)). DCN stands
for “Designated automatic accounting method change”. A
qualified small taxpayer is a taxpayer with average annual gross
receipts of less than or equal to $10 million for the three taxable
years preceding the year of change. See Year of Change, later.
For qualifying changes and filing requirements, see the List of
Automatic Changes.
Non-automatic change procedures. If you do not qualify to
file under the automatic change procedures for the requested
change in method of accounting for the requested year of
change, you may be able to file under the non-automatic change
procedures. See Non-automatic change—Scope and Eligibility
Rules, in Part III, later. If the requested change is approved by
the IRS National Office, the filer will receive a letter ruling on the
requested change. File a separate Form 3115 for each unrelated
item or submethod. A user fee is required. See the instructions
for Part III, later, for more information.
Filing exception for certain first-year tangible property
changes. A small business taxpayer may make certain tangible
property changes in method of accounting for its first taxable
year beginning on or after January 1, 2014 without filing a Form
3115. Under these special procedures, the change in method of
accounting is effectively made on a cut-off basis. These special
method change procedures apply to small business taxpayers
making certain method changes to comply with Regulations
sections 1.263(a)-3 and 1.168(i)-8. A small business taxpayer is
a business with total assets of less than $10 million or average
annual gross receipts of less than or equal to $10 million for the
prior three taxable years. For more details about eligibility and
these special method change procedures, see Rev. Proc.
2015-20, 2015-9 I.R.B. 694.

Who Must File

The filer is the entity or person required to file Form 3115,
whether on its own behalf or on behalf of another entity. An
applicant is an entity, a person, or a separate and distinct trade
or business of an entity or a person (for purposes of Regulations
section 1.446-1(d)), whose method of accounting is being
changed.
For a consolidated group of corporations, the common parent
corporation must file Form 3115 for a change in method of
accounting for itself and for any member of the consolidated
group. For example, the common parent corporation of a
consolidated group is the filer when requesting a change in
method of accounting for another member of that consolidated
group (or a separate and distinct trade or business of that
member), and the other member (or trade or business) on
whose behalf Form 3115 is filed is the applicant.
For information on the difference between a filer and an
applicant, see the Name(s) and Signature(s) section, later.
For a Controlled Foreign Corporation (CFC) or 10/50
corporation without a U.S. trade or business, see section 6.02(6)
of Rev. Proc. 2015-13.

Cat. No. 63215H

Internal Revenue Service
Control Clerk
CC:IT&A, Room 4512
1111 Constitution Ave., NW
Washington, DC 20224

Generally, a filer must file a separate Form 3115 for each
applicant seeking consent to change a method of accounting. A
separate Form 3115 and user fee (for non-automatic change
requests) must be submitted for each applicant and each
separate trade or business of an applicant, including a qualified
subchapter S subsidiary (QSub) or a single-member limited
liability company (LLC), requesting a change in method of
accounting. See section 9.02 of Rev. Proc. 2016-1.

In specified circumstances, you are required to send
additional copies of Form 3115 to another IRS
CAUTION
address. For example, another copy of Form 3115
would be sent, when an applicant is under examination, before
an Appeals office, before a federal court, or is a certain foreign
corporation or certain foreign partnership. See section 6.03(3) of
Rev. Proc. 2015-13 for more information. See also Part II, lines 6
and 8, later.

!

However, identical changes in methods of accounting for two
or more of the following in any combination may be included in a
single Form 3115:
1. Members of a consolidated group;
2. Separate and distinct trades or businesses (for purposes
of Regulations section 1.446-1(d)) of that entity or member(s) of
a consolidated group. Separate and distinct trades or
businesses include QSubs and single-member LLCs;
3. Partnerships that are wholly-owned within a consolidated
group; and
4. CFCs and 10/50 corporations that do not engage in a
trade or business within the United States where (i) all controlling
domestic shareholders (as provided in Regulations section
1.964-1(c)(5)) of the CFCs and of the 10/50 corporations, as
applicable, are members of the consolidated group; or (ii) the
taxpayer is the sole controlling domestic shareholder of the
CFCs or of the 10/50 corporations.

Address Chart for Form 3115
File Form 3115 at the applicable IRS address listed below.

For information on what is an identical change in method of
accounting, see section 15.07(4) of Rev. Proc. 2016-1.

When and Where To File
Automatic change requests. Except if instructed differently,
you must file Form 3115 under the automatic change procedures
in duplicate as follows.
Attach the original Form 3115 to the filer's timely filed
(including extensions) federal income tax return for the year of
change. The original Form 3115 attachment does not need to be
signed.
File a copy of the signed Form 3115 to the address provided
in the address chart on this page, no earlier than the first day of
the year of change and no later than the date the original is filed
with the federal income tax return for the year of change. This
signed Form 3115 may be a photocopy. For more on the
signature requirement, see the Name(s) and Signature(s)
section, later.
The IRS does not send acknowledgements of receipt for
automatic change requests.

A non-automatic change
request

An automatic change
request (Form 3115 copy)

Delivery by mail

Internal Revenue Service
Attn: CC:PA:LPD:DRU
P.O. Box 7604
Benjamin Franklin Station
Washington, DC 20044

Internal Revenue Service
201 West Rivercenter Blvd.
PIN Team Mail Stop 97
Covington, KY 41011-1424

Delivery by
private delivery
service

Internal Revenue Service
Attn: CC:PA:LPD:DRU
Room 5336
1111 Constitution Ave., NW
Washington, DC 20224

Internal Revenue Service
201 West Rivercenter Blvd.
PIN Team Mail Stop 97
Covington, KY 41011-1424

Late Application

In general, a filer that fails to timely file a Form 3115 will not be
granted an extension of time to file except in unusual and
compelling circumstances. See section 6.03(4)(b) of Rev. Proc.
2015-13 and the Regulations section 301.9100-3 for the
standards that must be met. For information on the period of
limitations, see section 5.03(2) of Rev. Proc. 2016-1.
However, an automatic 6-month extension from the due date
(excluding any extension) of the federal income tax return to file
Form 3115 may be available for automatic change requests. For
details, see section 6.03(4)(a) of Rev. Proc. 2015-13 and
Regulations section 301.9100-2.
An applicant submitting a ruling request for an extension of
time to file Form 3115 must pay a user fee for its extension
request and, in the case of a non-automatic change request,
also a separate user fee for its accounting method change
request. For the schedule of user fees, see (A)(3)(b), (A)(4), and
(A)(5)(d) in Appendix A of Rev. Proc. 2016-1.

For filing procedures relating to automatic change
requests for certain foreign corporations and foreign
partnerships, see section 6.03(1)(a)(ii) and (iii) of Rev.
Proc. 2015-13.

TIP

Useful Items

Non-automatic change requests. You must file Form 3115
under the non-automatic change procedures during the tax year
for which the change is requested, unless otherwise provided by
published guidance. See section 6.03(2) of Rev. Proc. 2015-13.
File Form 3115 with the IRS National Office at the address listed
in the Address Chart. File Form 3115 as early as possible during
the year of change to provide adequate time for the IRS to
respond prior to the due date of the filer's return for the year of
change.
The IRS normally sends an acknowledgment of receipt within
60 days after receiving a Form 3115 filed under the
non-automatic change procedures. If the filer does not receive
an acknowledgment of receipt for an advance request within 60
days, the filer can inquire to:

You can refer to these items for more information on changing a
method of accounting.

Revenue Procedures (Rev. Proc.)
Rev. Proc. 2016-1. See Rev. Proc. 2016-1. This Rev. Proc.
provides specific and additional procedures for requesting a
change in method of accounting.
Rev. Proc. 2015-13. See Rev. Proc. 2015-13. This Rev. Proc.
provides the automatic and non-automatic method change
procedures to obtain consent of the Commissioner to change a
method of accounting.
Rev. Proc. 2015-14. See Rev. Proc. 2015-14. This Rev. Proc.
contains a list of accounting method changes that may be
eligible to file under the automatic method change procedures.
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3115. Also enter the name of the separate and distinct trade or
business requesting a change in method of accounting on the
fourth line. In the signature section, enter the signature of the
individual who has personal knowledge of the facts and authority
to bind the separate and distinct trade or business of the entity in
the matter, and that person's name and official title in the space
provided.

Rev. Proc. 2015-20. See Rev. Proc. 2015-20. This Rev. Proc.
allows an eligible small business taxpayer to make certain
tangible property changes without filing Form 3115.

Other Item
Pub. 538, Accounting Periods and Methods. See Pub. 538,
Accounting Periods and Methods. This publication provides
general information on accounting methods.

CFC or 10/50 Corporation. For a CFC or 10/50 corporation
with a U.S. trade or business, follow the same rules as for other
corporations. For a CFC or 10/50 corporation that does not have
a U.S. trade or business, Form 3115 filed on behalf of its
controlling domestic shareholder(s) (or common parent) must be
signed by an authorized officer of the designated (controlling
domestic) shareholder that retains the jointly executed consent
as provided for in Regulations section 1.964-1(c)(3)(ii). If there is
more than one shareholder, the statement described in
Regulations section 1.964-1(c)(3)(ii) must be attached to the
application. Also, the controlling domestic shareholder(s) must
provide the written notice required by Regulations section
1.964-1(c)(3)(iii). If the designated (controlling domestic)
shareholder is a member of a consolidated group, then an
authorized officer of the common parent corporation must sign.

Specific Instructions
Name(s) and Signature(s)

Enter the name of the filer on the first line of page 1 of Form
3115.
In general, the filer of Form 3115 is the applicant. However, in
circumstances where Form 3115 is filed on behalf of the
applicant, enter the filer's name and identification number on the
first line of Form 3115 and enter the applicant's name and
identification number on the fourth line. Receivers, trustees, or
assignees must sign any Form 3115 they are required to file.

Estates or trusts. Enter the name of the estate or trust on the
first line of Form 3115. In the signature section, enter the
signature of the fiduciary, personal representative, executor,
administrator, etc., who has personal knowledge of the facts and
legal authority to bind the estate or trust in the matter, and that
person's official title in the space provided.

If Form 3115 is filed for multiple (i) applicants in a
consolidated group of corporations, (ii) CFCs, (iii) wholly-owned
partnerships within a consolidated group, and/or (iv) separate
and distinct trades or businesses (including QSubs, or
single-member LLCs), attach a schedule listing each applicant
and its identification number (where applicable). This schedule
may be combined with the information requested for Part III,
line 24a (regarding the user fee) and Part IV (section 481(a)
adjustment). If multiple names and signatures are required (for
example, in the case of CFCs—see instructions below), attach a
schedule labeled “SIGNATURE ATTACHMENT” to Form 3115,
signed under penalties of perjury using the same language as in
the declaration on page 1 of Form 3115.

Exempt organizations. Enter the name of the organization on
the first line of Form 3115. In the signature section, enter the
signature of a principal officer or other person who has personal
knowledge of the facts and authority to bind the exempt
organization in the matter, and that person's name and official
title in the space provided.
Preparer (other than filer/applicant). If the individual
preparing Form 3115 is not the filer or applicant, the preparer
also must sign, and include the firm's name, where applicable.
Generally, for both automatic and non-automatic changes, the
preparer (if not the filer or applicant) must sign the original and
copies of Form 3115. If Form 3115 is e-filed, the preparer need
not sign the original e-filed Form 3115 but must still complete the
preparer information and if applicable, must sign the duplicate
automatic Form 3115 copy.

Individuals. If Form 3115 is filed for a couple who file a joint
income tax return, enter the names of both spouses on the first
line and the signatures of both spouses on the signature line.
Partnerships. Enter the name of the partnership on the first line
of Form 3115. In the signature section, include the signature of
one of the general partners or limited liability company members
who has personal knowledge of the facts and who is authorized
to sign. Enter that person's name and official title in the space
provided. If the authorized partner is a member of a consolidated
group, then an authorized officer of the common parent
corporation with personal knowledge of the facts must sign.

Identification Number

Enter the filer's taxpayer identification number on the first line of
Form 3115 as follows.
Individuals enter their social security number (SSN). For a
resident or non-resident alien, enter an individual taxpayer
identification number (ITIN). If Form 3115 is for a couple who file
a joint return, enter the identification numbers of both spouses.
All others, enter the employer identification number (EIN).
If the filer is the common parent corporation of a consolidated
group of corporations, enter the EIN of the common parent on
the first line of Form 3115. Enter the EIN of the applicant on the
fourth line if a member of the consolidated group other than, or in
addition to, the common parent is requesting the change in
method of accounting.
If the common parent is filing Form 3115 on behalf of multiple
applicants in a consolidated group of corporations, multiple
CFCs or 10/50 corporations, or multiple and distinct trades or
businesses of a member (including QSubs, or single-member
LLCs), attach a schedule listing each applicant and its
identification number (if applicable).
If the applicant is a foreign entity that is not otherwise required
to have or obtain an EIN, enter “Not applicable” in the space
provided for the identifying number.

Non-consolidated corporations, personal service corporations, S corporations, cooperatives, and insurance companies. Enter the name of the filer on the first line of Form 3115. In
the signature section, enter the signature of the officer who has
personal knowledge of the facts and authority to bind the filer in
the matter. Enter that officer's name and official title in the space
provided.
Consolidated group of corporations. Enter the name of the
common parent corporation on the first line of Form 3115. Also
enter the name(s) of the applicant(s) on the fourth line if a
member of the consolidated group other than, or in addition to,
the parent corporation is requesting a change in method of
accounting. In the signature section, enter the signature of the
officer of the common parent corporation who has personal
knowledge of the facts and authority to bind the common parent
corporation in the matter, and that officer's name and official title
in the space provided.
Separate and distinct trade or business of an entity. Enter
the name of the entity (or common parent corporation if the entity
is a member of a consolidated group) on the first line of Form
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Principal Business Activity Code

Option to Receive Correspondence by Fax

A filer that wants to receive, or wants its authorized
representative to receive, correspondence regarding its Form
3115 (for example, additional information letters or the letter
ruling) by fax must attach to Form 3115 a statement requesting
this service. The attachment must also list the authorized
name(s) and fax number(s) of the person(s) who are to receive
the fax. The listed person(s) must be either authorized to sign
Form 3115, or an authorized representative of the filer that is
included on Form 2848. For further details on the fax
procedures, see section 9.04(3) of Rev. Proc. 2016-1.

If the filer is a business, enter the six-digit principal business
activity (PBA) code of the filer. The principal business activity of
the filer is the activity generating the largest percentage of its
total receipts. See the instructions for the filer's income tax return
for the filer's PBA code and definition of total receipts.
Note. An applicant requesting to change its accounting method
under DCN 33 (change to overall cash method for a qualifying
small business taxpayer) and/or DCN 51 (small taxpayer
exception from requirement to account for inventories under
section 471) in the list of DCNs must also attach to Form 3115
the North American Industry Classification System (NAICS)
code for the applicant's principal business activity. See Rev.
Proc. 2002-28, 2002-1 C.B. 815, for further guidance.

Type of Accounting Method Change
Requested

Check the appropriate box on Form 3115 to indicate the type of
change being requested.
Depreciation or amortization. Check this box for a change
in (1) depreciation or amortization (for example, the depreciation
method or recovery period), (2) the treatment of salvage
proceeds or costs of removal, (3) the method of accounting for
dispositions of depreciable property, or (4) the treatment of
depreciable property from a single asset account to a multiple
asset account (pooling), or vice versa.
Financial products and/or financial activities of financial
institutions. Check this box for a change in the treatment of a
financial product (for example, accounting for debt instruments,
derivatives, mark-to-market accounting), or in the financial
activities of a financial institution (for example, a lending
institution, a regulated investment company, a real estate
investment trust, a real estate mortgage investment conduit).
Other. For non-automatic change requests, check this box if
neither of the above boxes applies to the requested change. In
the space provided, enter a short description of the change and
the most specific applicable Code section(s) for the requested
change (for example, change within section 263A costs;
deduction of warranty expenses, section 461; change to the
completed contract method for long-term contracts, section
460).

Address

Include the suite, room, or other unit number after the street
address. If the Post Office does not deliver mail to the street
address and the filer has a P.O. box, show the box number
instead of the street address.

Year of Change

The year of change is the first tax year the applicant uses the
proposed method of accounting, even if no affected items are
taken into account for that year.
Example. A calendar year taxpayer that has consistently
capitalized certain building repair costs from 2009 to 2014 files a
Form 3115 in 2015 to deduct these repair costs. The year of
change is calendar year 2015.

Contact Person

The contact person must be an individual authorized to sign
Form 3115, or the filer's authorized representative. If this person
is someone other than an individual authorized to sign Form
3115, you must attach Form 2848, Power of Attorney and
Declaration of Representative.

Form 2848, Power of Attorney and Declaration
of Representative

For automatic change requests, this informational
requirement is satisfied by properly completing Part I, line 1 of
Form 3115.

Authorization to (1) represent the filer before the IRS, (2) receive
a copy of the requested letter ruling, or (3) perform any other
act(s) must be properly reflected on Form 2848. For further
details for an authorized representative and a power of attorney,
see sections 9.03(8) and (9) of Rev. Proc. 2016-1.

As noted on Form 3115, the filer must provide all information
relevant to the requested change in method of accounting. All
relevant information includes all information requested on Form
3115, these instructions, and any other relevant information,
even if not specifically identified on Form 3115 or in these
instructions. Table A illustrates for automatic and non-automatic
changes, the Parts of Form 3115 that must be completed. Table
B illustrates the Schedule(s) to be completed for common
method changes.

A Form 2848 must be attached to Form 3115 in order for the
Service to discuss a Form 3115 with filer's representative, even
if the filer's representative prepared and/or signed the Form
3115.

!

CAUTION

If the filer intends to have the authorized representative
receive copies of correspondences regarding its Form
3115, it must check the appropriate box on Form 2848.

Table A: Parts to Complete on Form 3115 for Accounting Method Changes
Information to be completed for automatic and non-automatic change requests
Automatic Change

Part I

Part II

X

X

Non-Automatic Change

X

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Part III

Part IV
X

X

X

Table B: Schedules to Complete on Form 3115 for Common Accounting Method Changes
Information to be completed for common method change requests
Common Method
Changes

Schedule A
Part I

Part II

Accrual to Cash

X

X

Cash to Accrual

X

Schedule B

Schedule C
Part I

Part II

Schedule D
Part I

Part II

Schedule E
Part III

Capitalize to Expense
Expense to Capitalize

X*

Depreciation

X

Long-Term Contracts

X

Inventory Valuation
Change

X

X
X

LIFO Change–Including
Pooling
Change to Deferral
Method for Advanced
Payments

X*

X

X*

X

X

Must fully complete section
Section need not be completed

X*

To be completed if applicable—See instructions regarding Schedules D and E, later

Generally, an applicant is only eligible to use the automatic
change procedures of Rev. Proc. 2015-13 if it satisfies the
following requirements (see section 5.01(1) of Rev. Proc.
2015-13):
1. On the date the applicant files a Form 3115, the change is
described in the List of Automatic Changes;
2. On the date the applicant files a Form 3115, the applicant
meets all requirements for the change provided in the applicable
section of the List of Automatic Changes;
3. The requested change is not to the principal method
under Regulations sections 1.381(c)(4)-1(d)(1) or
1.381(c)(5)-1(d)(1);
4. The requested year of change is not the final year of the
trade or business (but see instructions for Line 4);
5. For an overall method of accounting change, the
applicant has not made or requested an overall method change
during any of the five tax years ending with the year of change;
and
6. The applicant has not made or requested a change for
the same item during any of the five tax years ending with the
year of change.

Part I—Information For Automatic
Change Request
Automatic Changes—Scope and Eligibility
Rules
Line 1a. Enter the DCN on line 1(a). These numbers may be
found in the List of DCNs at the end of the instructions, the List
of Automatic Changes, or in subsequently published guidance.
In general, enter a number for only one change. However, the
numbers for two or more changes may be entered on line 1(a) if
specifically permitted in applicable published guidance to file a
single Form 3115 for particular concurrent changes in method of
accounting. See section 6.03(1)(b) of Rev. Proc. 2015-13. For
example, an applicant requesting both a change to deduct repair
and maintenance costs for tangible property (DCN 184) and a
change to capitalize acquisition or production costs (DCN 192)
may file a single Form 3115 for both changes by including both
DCNs 184 and 192 on line 1(a) of Form 3115.
Line 1b. If the accounting method change is not included in the
List of Automatic Changes or assigned a number in the
published guidance providing the automatic accounting method
change, check the box for line 1(b) and identify the revenue
procedure or other published guidance under which the
automatic accounting method change is being requested.

Note. Some automatic changes in methods of accounting waive
some of the above requirements. These changes may be found
in the List of Automatic Changes or the published guidance
providing the automatic accounting method change.

Line 2. If yes, check yes and provide an explanation as to why
the applicant(s) qualifies to file under the automatic change
procedures. If no, check no. If other published guidance
provides for an automatic change in method of accounting not
listed on the List of Automatic Changes, attach a statement
citing the guidance. An example of this would be, a change from
the cash method under Regulations section 1.448-1(h)(2).

Line 3. The filer must complete Form 3115, including any
required statements or attachments. See Table A earlier, for the
Form 3115 Part(s) required to be completed for all automatic
and non-automatic change requests. See Table B above for a
sample of common method changes and the Form 3115
Schedule(s) to be completed for each. Additionally, see
published guidance for any additional required information or
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year(s) under examination in the designated places on line 6c.
For any present or former consolidated groups, if there is a tax
year under examination, complete the information on line 6c.
Provide a copy of Form 3115 to the examining agent, no later
than the date the filer timely files Form 3115. See section 6.03(3)
(a) of Rev. Proc. 2015-13.

statements. For example, a method change to use the
mark-to-market method of accounting under
section 475(e) or (f), (DCN 64), requires an applicant to file an
additional statement to satisfy the requirement in section 5.04 of
Rev. Proc. 99-17.

Part II—Information For All Requests

Line 7a. In general, audit protection applies when an
application for change in accounting method is granted. See
section 8.01 of Rev. Proc. 2015-13. For exceptions where audit
protection is not provided, see section 8.02 of Rev. Proc.
2015-13. For example, a change made under DCN 10 in the List
of Automatic Changes for an applicant's sale, lease, or financing
transactions does not receive audit protection. See the List of
Automatic Changes for additional method changes not subject
to audit protection. If no audit protection is given for the
requested change, check no and attach an explanation. For
example, if you are making a change under DCN 10, your
explanation is DCN 10. If you are making a change under DCN
7, your explanation could be that none of the items in line 7b
applies. If multiple items are being changed on one Form 3115
and at least one item has audit protection and another item does
not have audit protection, check both yes and no.

Line 4. If no, check the no box. If yes, check the yes box and
attach a statement explaining why the applicant is eligible to
change its method of accounting. For example, specific
guidance may permit an applicant to change its method of
accounting in its final tax year. See section 5.03(2) of Rev. Proc.
2015-13 and sections 6.01 (DCN 7) and 6.17 (DCN 107) of
Rev. Proc. 2015-14.
Ordinarily, the IRS will not consent to a request for a change
in method of accounting when an applicant ceases to engage in
the trade or business or terminates its existence. Generally, an
applicant is considered to cease to engage in a trade or
business if the applicant terminates its existence for federal
income tax purposes, ceases operation of the trade or business,
or transfers substantially all the assets of the trade to another
taxpayer. For example, a cessation of a trade or business occurs
when a trade or business is incorporated or the assets of the
trade or business are contributed to a partnership. See sections
3.04, 5.01, and 5.03 of Rev. Proc. 2015-13.

Line 7b. Generally, the applicant receives audit protection for
tax years prior to the year of change if they fall into one of the
following categories listed below. If Form 3115 is being filed on
behalf of multiple applicants or if multiple items are being
changed on one Form 3115, check all that apply and attach a
statement identifying which category applies to which applicant
or item.

Line 5. When an acquiring corporation operates the trades or
businesses of the parties as separate and distinct trades or
businesses after the date of distribution or transfer, the acquiring
corporation must use a carryover method. See Regulations
sections 1.381(c)(4)-1(a)(2) and 1.381(c)(5)-1(a)(2). On the
other hand, when the acquiring corporation does not operate the
trades or businesses of the parties as separate and distinct
trades or businesses after the date of distribution or transfer, the
acquiring corporation generally will use the principal method.
The applicant does not need to secure the Commissioner's
consent to use the principal method. See Regulations sections
1.381(c)(4)-1(d) and 1.381(c)(5)-1(d)(1).

Not under exam. Check this box if: (A) the applicant is not
under exam, and (B) audit protection applies to the item(s) being
changed. Except for “Other,” the following only apply to
applicants under examination:
3-month window. The three-month window is the period
beginning on the fifteenth day of the seventh month following the
close of the applicant's tax year and ending on the fifteenth day
of the tenth month following the close of the applicant's tax year.
For 52-53 week applicants, the tax year begins on the first day of
the calendar month nearest to the first day of the 52-53 week tax
year. See Rev. Proc. 2015-33. For applicants with a short tax
year ending before the fifteenth day of the tenth month after the
short tax year begins, the three-month window is the period
beginning on the first day of the second month preceding the
month in which the short tax year ends and ending on the last
day of the short tax year. An applicant qualifies under the
three-month window period when (A) it has been under
examination for at least 12 consecutive months as of the first day
of the three-month window, and (B) the method of accounting for
the same item the applicant is requesting to change is not an
issue under consideration. See section 8.02(1)(a) of Rev. Proc.
2015-13. Checking this box satisfies the statement requirement
of section 8.02(1)(a)(iv) of Rev. Proc. 2015-13.
120-day window period. The 120-day window is the
120-day period following the date an examination of the
applicant ends, regardless of whether a subsequent examination
has commenced. An applicant qualifies under the 120-day
window period if Form 3115 is filed in a 120-day window and the
method of accounting for the same item the applicant is
requesting to change is not an issue under consideration. See
section 8.02(1)(b) of Rev. Proc. 2015-13. If the applicant checks
this box, also include the date the examination ended in the
designated space on Line 7b.
Method not before director. The present method is not
before the director when it is: (A) a change from a clearly
permissible method of accounting; or (B) a change from an
impermissible method of accounting and the impermissible
method was adopted subsequent to the tax year(s) under
examination on the date the applicant files Form 3115. Checking

Line 6a. Generally, the applicant is under examination with
respect to a federal income tax return as of the date the
applicant (or filer) is contacted in any manner by a representative
of the IRS for the purpose of scheduling or conducting any type
of examination of the return. See section 3.18 of Rev. Proc.
2015-13.
Line 6b. Generally, the applicant's method of accounting is an
issue under consideration if the examining agent has given the
applicant (or filer) written notification specifically citing the
treatment of the item as an issue under consideration. If an
examining agent does not propose an adjustment for the item
that is an issue under consideration during the examination, the
item continues to be an issue under consideration after the
examination ends only if the issue is placed in suspense. The
applicant's method of accounting is an issue placed in suspense
if the examining agent has given the applicant (or filer) written
notification of the IRS's intent to examine the issue during the
examination of the subsequent tax year(s) to be examined. See
section 3.08 of Rev. Proc. 2015-13. A partnership or an S
corporation has an issue under consideration before
examination if the same item is an issue under consideration in
an examination of a partner, member, or shareholder's federal
income tax return. For consolidated groups, see section 3.08 of
Rev. Proc. 2015-13 for issue under consideration rules.

!

CAUTION

For CFCs and 10/50 corporations, the issue under
consideration rules are different. See section 3.08(4) of
Rev. Proc. 2015-13.

Lines 6c & d. If you answered yes for line 6a, include the name
and telephone number of the examining agent, and the tax
-6-

ending with the requested year of change. For additional details,
see section 9.03(6)(a) of Rev. Proc. 2016-1 and section 11.02(2)
of Rev. Proc. 2015-13.

this box satisfies the statement requirement of section 8.02(1)(c)
(ii) of Rev. Proc. 2015-13.
Change resulting in a negative adjustment. Check this
box if the change results in a negative adjustment. A negative
adjustment occurs where an item (A) results in a negative
section 481(a) adjustment for that item for the year of change;
and (B) would have resulted in a negative section 481(a)
adjustment in each tax year under examination if the change in
method of accounting for that item had been made in the tax
year(s) under examination. Checking this box satisfies the
statement requirement in section 8.02(1)(e)(iii) of Rev. Proc.
2015-13.
CAP. This box applies only to consolidated group members
participating in the compliance assurance process (CAP). In
general, audit protection applies to a new member if the new
member is under audit solely by joining a consolidated group
that participates in CAP. See section 8.02(1)(d), Rev. Proc.
2015-13. Checking this box satisfies the statement requirement
of section 8.02(1)(d)(ii) of Rev. Proc. 2015-13. If the applicant
checks this box, include the date the member joined the
consolidated group in the designated space on Line 7b.
Other. The List of Automatic Changes, or other guidance
published in the I.R.B. may provide applicants with audit
protection. For example, specific guidance may provide a filer
under exam with audit protection. If this box is checked, attach a
statement citing the guidance providing audit protection.
Audit protection at end of exam. If the applicant does not
fall into one of the categories listed above for Line 7b, this box
should generally be checked. The applicant may receive audit
protection at the end of the examination, provided the examining
agent does not propose an adjustment for the same item and the
method of accounting for that same item is not an issue under
consideration. For certain foreign corporations, the applicant
must satisfy additional requirements in order to receive audit
protection at the end of the examination. See section 8.02(1)(f),
Rev. Proc. 2015-13.

Line 12. For further details, see section 9.03(6)(b) of Rev. Proc.
2016-1.
Line 13. If you answered yes, complete Schedule A of Form
3115. For example, an overall method of accounting change
includes a change from an accrual method to the cash receipts
and disbursements method or vice versa. See section 446(c).
Line 14. Provide the information requested in lines 14a–d if the
applicant answered no to question 13 or if the applicant
answered yes to question 13 and also is changing to a special
method of accounting for one or more items. With the
information requested in line 14b, the applicant also is required
to provide a statement of whether or not the applicant has
claimed any federal tax credit relating to the item(s) being
changed. A special method of accounting for an item is a
method of accounting (other than the cash method or an accrual
method) expressly permitted by the Code, regulations, or
guidance published in the I.R.B. that deviates from the rules of
sections 446, 451, and 461 (and the regulations thereunder) that
is applicable to the applicant's overall method of accounting
(proposed overall method if being changed). For example, the
installment method of accounting under section 453, the
mark-to-market method under section 475, and long-term
contract method under section 460 are special methods of
accounting. See section 14.01(3)(d) of Rev. Proc. 2015-14. If the
applicant prepared a Schedule M-3 with its last filed tax return or
expects to file a Schedule M-3 with its next tax return, please
state whether the applicant's proposed change in method of
accounting for federal income tax purposes is related to the
applicant's adoption of the International Financial Reporting
Standards (“IFRS”) for financial statement purposes.
Lines 15a & b. Provide the requested information for each
applicant. For guidance on using different methods of
accounting for each trade or business, see § 446(d).
An applicant may include each member of a consolidated
group, each wholly-owned partnership within a consolidated
group, each separate and distinct trade or business of each
member of a consolidated group or other entity (even if the
change is for all of a member's or other entity's trades or
businesses), and each eligible CFC or 10/50 corporation filing a
single Form 3115 requesting the identical accounting method
change. See also Who Must File, earlier.

For CFCs and 10/50 corporations, the rules for audit
protection are different. See section 8.02 of Rev. Proc.
CAUTION
2015-13 (different rules for the three-month window,
120-day window, audit protection at end of exam).

!

Line 8a. If you answered yes, complete lines 8b–8d.
Line 8b. To determine if the applicant’s method of accounting is
an issue under consideration by Appeals and/or a federal court,
see sections 3.08(2) and 3.08(3) of Rev. Proc. 2015-13.
Line 8c. If you answered yes for line 8a, include the name and
telephone number of the Appeals officer(s) and/or counsel to the
government, as well as the tax year(s) before Appeals and/or
federal court in the designated places.

Lines 16a–c. For non-automatic changes, the applicant is
required to provide a full explanation of the legal basis to support
the proposed method, including all authorities supporting the
proposed method, and a discussion of all contrary authorities.
For further details on what is to be included, see Rev. Proc.
2016-1, sections 7.01(8) (statement of supporting authorities),
9.03(1) (facts and other information), 9.03(2) (statement of
contrary authorities), 9.03(4) (analysis of material facts), and
9.03(7) (statement identifying pending legislation).
For the following automatic method changes, the applicant is
only required to complete Lines 16a–b, unless the information in
Lines 16a–b is otherwise provided in the applicable Form 3115
Schedules A-E: DCN numbers 6, 7, 28, 51, 54, 55, 64, 65, 82,
94, 108, 111, 114, 127, 194, 200 (only for changes listed in
sections 6.37(3)(a)(ix), 6.37(3)(a)(x), and 6.37(3)(b)(viii) in the
List of Automatic Changes), 205 (only for changes listed in
sections 6.38(3)(f) and 6.38(3)(h) in the List of Automatic
Changes), 206 (only for changes listed in sections 6.39(3)(a),
6.39(3)(f), and 6.39(3)(h) in the List of Automatic Changes), 207
(only for changes listed in sections 6.40(3)(a) and 6.40(3)(d) in
the List of Automatic Changes), 211, and 218. Line 16c does not
need to be completed for applicants filing automatic method
changes. For further details on what is to be included, see Rev.

Line 8d. If you answered yes for line 8a, provide a copy of the
signed Form 3115 to the Appeals officer(s) and/or all counsel to
the government, as applicable, no later than the date the filer
timely files Form 3115. See section 6.03(3)(a) of Rev. Proc.
2015-13.
Line 9. If you answered yes to line 6a or 8a, complete line 9.
The information requested on line 9 should be included on a
separate attachment.
Line 10. If you answered yes, attach an explanation. Unless
otherwise provided, the applicant does not receive audit
protection for the requested change if it is an issue under
consideration. See sections 3.08 and 8.02(7) of Rev. Proc.
2015-13.
Line 11a–c. Unless otherwise provided, an applicant is not
eligible to file under the automatic change procedures if the
applicant made or requested a prior overall method change or a
prior item change (for the same item) within the five tax years
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Example 1. Filer is the common parent of a consolidated
group of corporations. Filer files a single Form 3115 on behalf of
itself and two other members of the consolidated group for an
identical change in method of accounting. There are three
applicants (Filer and the two other members of the consolidated
group). Therefore, for a non-automatic change request, all three
applicants are required to pay a user fee. The filer applicant
must submit the regular user fee under section (A)(3)(b)(i) of
Appendix A of Rev. Proc. 2016-1 (or a reduced fee per section
(A)(4) of Appendix A of Rev. Proc. 2016-1, if applicable), and the
two other applicants qualify for the reduced user fee under
section (A)(5)(b) of Appendix A of Rev. Proc. 2016-1.

Proc. 2016-1, sections 7.01(8) (statement of supporting
authorities), 9.03(1) (facts and other information), and 9.03(4)
(analysis of material facts).

TIP

If the automatic DCN number is not specifically listed in
the paragraph above, skip Lines 16a–c.

Line 17. Insurance companies must also attach a statement
indicating whether the proposed method of accounting will be
used for annual statement accounting purposes.
Line 18. For details on requesting and scheduling a
conference, see sections 9.04(4) and 10 of Rev. Proc. 2016-1.

Example 2. Filer is the common parent of a consolidated
group of corporations. Filer is filing a single Form 3115 on behalf
of two other members of the consolidated group for an identical
change in method of accounting. There are two applicants on
Form 3115 (the two members of the consolidated group). Filer is
not changing its method of accounting, and, therefore, does not
pay a fee on account of itself. For a non-automatic change
request, both applicants are required to pay a user fee. One
applicant must submit the regular user fee under section (A)(3)
(b)(i) of Appendix A of Rev. Proc. 2016-1 (or a reduced fee per
section (A)(4) of Appendix A of Rev. Proc. 2016-1, if applicable),
and the other applicant qualifies for the reduced user fee under
section (A)(5)(b) of Appendix A of Rev. Proc. 2016-1.

Lines 19a & b. For the calculation of gross receipts for an
overall accounting method change request and whether an
applicant qualifies as an eligible small business under section
474(c), see section 448(c)(3) and Regulations section
1.448-1T(f)(2)(iv). For the calculation of gross receipts in
determining whether the applicant is a small reseller for
purposes of section 263A or an exempt construction contract
under Regulations section 1.460-3(b), see Regulations section
1.263A-3(b).

Part III—Information For
Non-automatic Change Request

Example 3. Filer, a single taxpayer, files Form 3115 on
behalf of its three separate and distinct trades or businesses.
The request is for an identical change in method of accounting.
Notwithstanding that Filer is a single taxpayer, there are three
applicants on Form 3115. For a non-automatic change request,
all three applicants are required to pay a user fee. One applicant
must submit the regular user fee under section (A)(3)(b)(i) of
Appendix A of Rev. Proc. 2016-1 (or a reduced fee per section
(A)(4) of Appendix A of Rev. Proc. 2016-1, if applicable), and the
other two applicants qualify for the reduced user fee under
section (A)(5)(b) of Appendix A of Rev. Proc. 2016-1.

Non-automatic Change—Scope and Eligibility Rules. An
applicant may not use the non-automatic change procedures if
any of the following eligibility limitations apply at the time Form
3115 is filed with the IRS National Office.
1. The change in accounting method is required to be made
according to a published automatic change procedure, such as
Rev. Proc. 2015-14.
2. The requested year of change is the final year of the trade
or business, unless (A) the change is a result of a transaction to
which section 381(a) applies, or (B) the applicant demonstrates
to the satisfaction of the national office compelling
circumstances, or that it is in the interest of sound tax
administration for the applicant to change in its final year.

Part IV—Section 481(a) Adjustment
Line 25. Ordinarily, an adjustment under section 481(a) is
required for changes in method of accounting. However, for
certain changes in method of accounting, the applicant must
make the change on a cut-off basis or modified cut-off basis.
See for example Regulation section 1.446-1(e)(2)(ii)(d)(5)(iii). In
those cases, there is no section 481(a) adjustment. If multiple
items are being changed on one Form 3115 and at least one
item is changed on a cut-off basis or modified cut-off basis and
another item is changed with a section 481(a) adjustment, check
both yes and no, and attach a statement identifying which
item(s) are being made on a cut-off basis or modified cut-off
basis.
If the accounting method change is an automatic change in
functional currency under section 985 (see section 29.01 of Rev.
Proc. 2015-14), the adjustments required under Regulations
section 1.985-5 must be made on the last day of the tax year
ending before the year of change. Any gain or loss that must be
recognized under Regulations section 1.985-5 is included in
income or earning and profits on the last day of the tax year
ending before the year of change, and is not subject to section
481. Attach a statement showing the adjustment required under
Regulations section 1.985-5. The statement should include the
amount of the adjustment required pursuant to Regulations
section 1.985-5, a summary of the computation of such
adjustment, and an explanation of any other adjustments
required by Regulations section 1.985-5.

Line 20. If you answered yes, attach an explanation describing
why the applicant is not eligible to file a request under the
automatic change procedures.
Line 21. Attach true copies of all contracts, agreements, and
other documents directly related to the proposed change in
method of accounting. See section 9.03(3) of Rev. Proc. 2016-1.
Line 22. Include a statement explaining the reason for the
proposed change. See section 7.01(1)(d) and 9.03(1) of Rev.
Proc. 2016-1.
Line 23. If you answered no to Line 23, a common parent
requesting a change in method of accounting on behalf of a
member of the consolidated group must attach a statement
explaining the method of accounting used by each member of
the consolidated group for the particular item that is the subject
of the method change request. See section 6.02(5) of Rev. Proc.
2015-13.
Lines 24a & b. For non-automatic change requests, you must
pay a user fee for each applicant. Where the filer is not an
applicant, a fee is not required for the filer. See section 15 and
Appendix A of Rev. Proc. 2016-1 for information regarding user
fees, including reduced user fees and user fees for additional
applicants filing identical changes in methods of accounting.
Make your check or money order in U.S. dollars payable to
the Internal Revenue Service.

Line 26. In computing the net section 481(a) adjustment, an
applicant must take into account all relevant accounts. For some
changes (for example, a change that affects multiple accounts),

Note. Filers filing under the automatic change procedures do
not pay a user fee.
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less than $50,000. See section 7.03(3)(c) of Rev. Proc. 2015-13.
An applicant may also elect a one-year section 481(a)
adjustment period for all positive section 481(a) adjustments for
the year of change if an eligible acquisition transaction occurs
during the year of change or in the subsequent tax year on or
before the due date for filing the applicant's federal tax return for
the year of change. For more details about the eligible
acquisition transaction election, see section 7.03(3)(d) of Rev.
Proc. 2015-13.

the section 481(a) adjustment is a net section 481(a)
adjustment. See Example 2, below, and the example in
Schedule A, Part I, Line 2h, later.
Attach a statement showing the (net) section 481(a)
adjustment for each change in method of accounting for each
applicant included in Form 3115. Include a summary of how the
(net) section 481(a) adjustment was computed and an
explanation of the methodology used to determine it. The
summary of computation and explanation must be sufficient to
demonstrate that the (net) section 481(a) adjustment is
computed correctly. If the applicant is a CFC or 10/50
corporation, or a trade or business of a CFC or 10/50
corporation, and if its functional currency is not the U.S. dollar,
state the (net) section 481(a) adjustment in that functional
currency. This statement may be combined with the information
requested on the fourth line on page 1 (list of applicants and
their identification numbers) and on line 24 (user fee).

Line 28. If yes, explain the nature and amount of the section
481 adjustment attributable to the intercompany transaction(s).

Schedule A—Change in Overall
Method of Accounting
Part I—Change in Overall Method

All applicants filing to change their overall method of accounting
must complete Schedule A, Part I, including applicants filing
under DCN's 32, 33, 34, 122, 123, 126, 127, and 128 in the List
of Automatic Changes.

Example 1. Under its present method, XYZ Corporation is
deducting certain costs that are required to be capitalized into
inventory under section 263A. XYZ Corporation is proposing to
change its method of accounting to properly capitalize such
costs. The computation of the section 481(a) adjustment with
respect to the change in method of accounting is demonstrated
as follows:
Beginning inventory for year of change under
proposed method . . . . . . . . . . . . . . . . .
Beginning inventory for year of change under present
method . . . . . . . . . . . . . . . . . . . . . . .
Section 481(a) adjustment . . . . . . . . . . . . . .

Lines 2a–g. Enter the amounts requested on lines 2a through
2g, even though the calculation of some amounts may not have
been required in determining taxable income due to the
applicant's present method of accounting.
Note. Do not include amounts that are not attributable to the
change in method of accounting, such as amounts that correct a
math or posting error or errors in calculating tax liability. In
addition, for a bank changing to an overall cash/hybrid method of
accounting, do not include any amounts attributable to a special
method of accounting. See DCN 127.

$120,000
$100,000
+$20,000

Example 2. WXY Corporation, a calendar year taxpayer, is a
producer and capitalizes costs that are required to be capitalized
into inventory under section 263A. Each February, WXY
Corporation pays a salary bonus to each employee who remains
in its employment as of January 31 for the employee's services
provided in the prior calendar year. Under its present method,
WXY Corporation treats these salary bonuses as incurred in the
tax year the employee provides the related services. For 2016,
WXY Corporation proposes to change its method of accounting
to treat salary bonuses as incurred in the tax year in which all
events have occurred that establish the fact of the liability to pay
the salary bonuses and the amount of the liability can be
determined with reasonable accuracy, pursuant to section
19.01(2) of Rev. Proc. 2015-14. The computation of WXY
Corporation's net section 481(a) adjustment for the change in
method of accounting for salary bonuses is demonstrated as
follows:
Salary bonuses treated as incurred
under the present method, but not
incurred under the proposed
method . . . . . . . . . . . . . . . .
Beginning inventory as of Jan. 1, 2016,
with capitalized salary bonuses
computed under the present
method . . . . . . . . . . . . . . . .
Beginning inventory as of Jan. 1, 2016,
with capitalized salary bonuses,
computed under the proposed
method . . . . . . . . . . . . . . . .
Decrease in beginning inventory as of
Jan. 1, 2016 . . . . . . . . . . . . .
Net section 481(a) adjustment . . .

Line 2b. Enter amounts received or reported as income in a
prior year that were not earned as of the beginning of the year of
change. For example, an advance payment received in a prior
year for goods that were not delivered by the beginning of the
year of change may be reported upon delivery if the taxpayer
qualifies under Regulations section 1.451-5. If any amounts
entered on line 2b are for advance payments, complete
Schedule B.
Line 2h. Enter the net amount, which is the net section 481(a)
adjustment, on line 2h. Also, enter the net section 481(a)
adjustment on page 4, Part IV, line 26.
The following example illustrates how an applicant calculates
the section 481(a) adjustment when changing to an accrual
method, a nonaccrual-experience method, and the recurring
item exception.
Example. ABC Corporation, a calendar year taxpayer using
the cash method of accounting, has the following items of
unreported income and expense on December 31, 2015.
Accrued income . . . . . . . . . . . . . . .
Uncollectible amounts based on
the nonaccrual-experience method . .
Accrued amounts properly deductible
(economic performance has occurred)
Expenses eligible for recurring item
exception . . . . . . . . . . . . . . . . . .

$40,000

$100,000

$92,000

$250,000

. . . . . . .

50,000

. . . . . . .

75,000

. . . . . . .

5,000

ABC Corporation changes to an overall accrual method, a
nonaccrual-experience method, and the recurring item
exception for calendar year 2016. The section 481(a) adjustment
is calculated as of January 1, 2016, as follows.

($8,000)
.

. . . . . . .

+$32,000

Line 27. An applicant may elect a one-year section 481(a)
adjustment period for a positive section 481(a) adjustment that is
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Accrued income (Line 2a)

. . . . . . . . . . .

$250,000

. . . . . . . . . . . . . .

(50,000)

or for payments for which a method under section 5.02(3)(b)(i) or
(iii) of Rev. Proc. 2004-34 applies, must file under the
non-automatic change procedures of Rev. Proc. 2015-13. All
other applicants generally must file under the automatic change
procedures of Rev. Proc. 2015-13.

Less:
Uncollectible amount

Net income accrued but not received

$200,000

. . . .

Line 2. Regulations section 1.451-5 allows applicants using an
accrual method, in certain circumstances, to defer the inclusion
in income of advance payments for goods or items in
accordance with the applicant's financial reports.

Less:
Accrued expenses (Line 2c) . . . . . . . . . .

(75,000)

Expenses deducted as recurring item (Line
2g) . . . . . . . . . . . . . . . . . . . . . . . .

(5,000)

Total expenses accrued but not paid . . . . .
Section 481(a) adjustment . . . . . . . . . . . .

Schedule C—Changes Within the
LIFO Inventory Method

(80,000)
+$120,000

Use this schedule to request a change from one LIFO inventory
method or submethod to another LIFO inventory method or
submethod. All applicants changing within the LIFO inventory
method or submethods must complete Part I. Complete Part II
only if applicable.

Line 3. Check yes if the applicant is requesting to use the
recurring item exception (section 461(h)(3)). The section 481(a)
adjustment must include the amount of the additional deduction
that results from using the recurring item exception.

Part I—General LIFO Information

Line 5. See note under Principal Business Activity Code,
earlier.

Line 6. Applicants changing to the IPIC method must use this
method for all LIFO inventories. This requirement includes
applicants requesting designated automatic accounting method
change numbers 61 or 62 in the List of DCNs.

Part II—Change to the Cash Method For
Non-Automatic Request

Schedule D—Change in the
Treatment of Long-Term Contracts
Under Section 460, Inventories, or
Other Section 263A Assets

Limits on cash method use. Except as provided below, C
corporations and partnerships with a C corporation as a partner
may not use the cash method of accounting. Tax shelters, also,
are precluded from using the cash method. For this purpose, a
trust subject to tax on unrelated business income under section
511(b) is treated as a C corporation with respect to its unrelated
trade or business activities.
The limit on the use of the cash method under section 448
does not apply to:
1. Farming businesses as defined in section 448(d)(1).
2. Qualified personal service corporations as defined in
section 448(d)(2).
3. C corporations and partnerships with a C corporation as a
partner if the corporation or partnership has gross receipts of $5
million or less. See sections 448(b)(3) and (c) to determine if the
applicant qualifies for this exception.

Part I—Change in Reporting Income
From Long-Term Contracts
Line 2a. Under section 460(f), the term long-term contract
means any contract for the manufacture, building, installation, or
construction of property that is not completed in the tax year in
which it is entered into. However, a manufacturing contract will
not qualify as long-term unless the contract involves the
manufacture of (a) a unique item not normally included in
finished goods inventory or (b) any item that normally requires
more than 12 calendar months to complete.
Generally, long-term contracts that do not meet the
exceptions under section 460(e) must be accounted for using
the percentage of completion method. See section 460 and the
related regulations.

For farming corporations and partnerships with a C
corporation as a partner, see section 447 for limits on the use of
the cash method.
Use of the cash method is also limited under Regulations
sections 1.471-1 and 1.446-1(c)(2)(i) if the applicant purchases,
produces, or sells merchandise that is an income-producing
factor in its business. However, for exceptions to this limitation,
see section 14.03 of Rev. Proc. 2015-14.

Line 2b. To qualify for the contract exceptions under section
460(e), the contract must be:
1. A home construction contract as defined in section 460(e)
(6)(A), or
2. Any other construction contract entered into by the
applicant if, at the time the contract is entered into, it is expected
to be completed within 2 years and the applicant's average
annual gross receipts determined under section 460(e)(2) for the
3-year period preceding the tax year the contract was entered
into did not exceed $10 million.

Schedule B—Change to the Deferral
Method for Advance Payments

In general, advance payments must be included in gross income
in the tax year of receipt for federal income tax purposes.
However, an applicant may be entitled to defer the inclusion in
income of certain advance payments, as defined in section 4.01
of Rev. Proc. 2004-34, 2004-1 C.B. 991, or in Regulations
section 1.451-5(a)(1).

Line 2d. Under the simplified cost-to-cost method, only certain
costs are used in determining both (a) costs allocated to the
contract and incurred before the close of the tax year and
(b) estimated contract costs. These costs are: (1) direct material
costs; (2) direct labor costs; and (3) allowable deductions for
depreciation, amortization, and cost recovery allowances on
equipment and facilities directly used to construct or produce the
subject matter of the long-term contract. See Regulations
section 1.460-5(c).

Line 1. Rev. Proc. 2004-34, as modified by Rev. Proc. 2011-18,
2011-5 I.R.B. 443, allows applicants using an accrual method, in
certain circumstances, to defer the inclusion in income of
advance payments to the next tax year. Applicants requesting to
change to the Deferral Method for allocable payments described
in section 5.02(4)(a) of Rev. Proc. 2004-34 (other than allocable
payments described in section 5.02(4)(c) of Rev. Proc. 2004-34)
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Part II—Change in Valuing Inventories Including
Cost Allocation Changes

1. Allocating Direct and Indirect Costs
Specific identification method—Regulations sections
1.263A-1(f)(2) and 1.460-5.
Burden rate method—Regulations sections 1.263A-1(f)(3)(i)
and 1.460-5.
Standard cost method—Regulations sections 1.263A-1(f)(3)
(ii) and 1.460-5.
Any other reasonable allocation method—Regulations
sections 1.263A-1(f)(4) and 1.460-5.

If the applicant is currently using a LIFO inventory method or
submethod and is changing to another LIFO inventory method or
submethod, Schedule D, Part II is not applicable. Use
Schedule C, Changes Within the LIFO Inventory Method.

Line 3. If an applicant is subject to, but not in compliance with,
section 263A, generally on the same Form 3115 the applicant
must first comply with section 263A before changing an
inventory valuation method. The applicant must complete
Schedule D, Part III, Method of Cost Allocation. For exceptions,
see Regulations section 1.263A-7(b)(2).

2. Allocating Mixed Service Costs
Direct reallocation method—Regulations section 1.263A-1(g)
(4)(iii)(A).
Step-allocation method—Regulations section 1.263A-1(g)(4)
(iii)(B).
Simplified service cost method:
Using the labor-based allocation ratio—Regulations section
1.263A-1(h)(4).
Using the production cost allocation ratio—Regulations
section 1.263A-1(h)(5).

Line 5a. If the applicant properly elected the LIFO inventory
method but is unable to furnish a copy of Form(s) 970,
Application to Use a LIFO Inventory Method, attach the following
statement to Form 3115:
“I certify that to the best of my knowledge and belief (name of
applicant) properly elected the LIFO inventory method by filing
Form 970 with its return for the tax year(s) ended (insert date(s))
and otherwise complied with the provisions of section 472(d)
and Regulations section 1.472-3.”

Any other reasonable allocation method—Regulations section
1.263A-1(f)(4).

Line 5c. Attach the two statements required by section 22.01(5)
of Rev. Proc. 2015-14.

3. Capitalizing Additional Section 263A Costs

Part III—Method of Cost Allocation

Simplified production method:
Without historic absorption ratio election—Regulations
section 1.263A-2(b)(3).
With historic absorption ratio election—Regulations section
1.263A-2(b)(4).

Applicants requesting to change their method of accounting for
any property (produced or acquired for resale) subject to section
263A or any long-term contracts as described in section 460
must complete this schedule.
If the change is for noninventory property that is subject to
section 263A, attach a detailed description of the types of
property involved.

Simplified resale method:
Without historic absorption ratio election—Regulations
section 1.263A-3(d)(3).
With historic absorption ratio election—Regulations section
1.263A-3(d)(4).

There are several methods available for allocating and
capitalizing costs under section 263A, and for allocating costs to
long-term contracts. A change to or from any of these methods is
a change in accounting method that requires IRS consent. Using
the applicable regulations and notice listed below, the applicant
should verify which methods are presently being used and the
proposed methods that will be used before completing
Schedule D, Part III. These methods are as follows:

U.S. ratio method—Notice 88-104, 1988-2 C.B. 443.
Any other reasonable allocation method—Regulations section
1.263A-1(f)(4) (including the methods listed above under
Allocating Direct and Indirect Costs).

Schedule E—Change in Depreciation
or Amortization

3. To make or revoke an election under section 13261(g)(2)
or (3) of the Revenue Reconciliation Act of 1993 (relating to
section 197 intangibles);
4. To change the placed-in-service date;
5. To change the salvage value (except for a change in
salvage value to zero when the salvage value is expressly
treated as zero by the Code, the regulations, or other published
guidance); or
6. To change a useful life under section 167 (except for a
change to or from a useful life, recovery period, or amortization
period that is specifically assigned by the Code, the regulations,
or other published guidance).

All applicants requesting to change their method of accounting
for depreciation or amortization must complete Schedule E of
Form 3115. Applicants changing their method of accounting for
depreciation or amortization under the automatic change
procedures should see the depreciation changes in the List of
DCNs below.
Do not file Form 3115:
1. To make an election under section 167, 168, 179, 197, or
1400I;
2. To revoke an election made under one of those sections;

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List of DCNs

additional information concerning the change (not a toll-free
call).

Summary of Automatic Accounting Method
Changes

Each item in the list below:
Designates an automatic accounting method change number
for each change for entry on line 1a of Form 3115.
Briefly describes the accounting method change and its
primary Code section(s).
Indicates in some cases which schedules of Form 3115 to
complete.
Provides a reference to the basic published guidance (for
example, revenue procedure) that provides for the automatic
change, which filers should review prior to completing Part I,
Information For Automatic Change request, on page 1 of Form
3115.

This list includes regulatory automatic changes, changes
provided for in Rev. Proc. 2015-14, and automatic changes
provided for in other guidance. These automatic changes may
be modified or supplemented with additional automatic changes
by subsequently published guidance.
The list provides a brief description of the automatic changes
in method of accounting made using Form 3115. A filer/applicant
may not rely on the list or the descriptions of accounting method
changes in the list as authority for making an accounting method
change. A filer/applicant that is within the scope of, and complies
with, all the applicable provisions of the published guidance that
authorizes each listed change may rely on the applicable
published guidance as authority for its automatic accounting
method change. If any information in the list conflicts with
published guidance, the published guidance applies. Each
automatic method change described in Rev. Proc. 2015-14, as
modified, contains a contact person you may call if you need

Note. Certain retired or obsolete numbers in the List of DCNs
have not been replaced, in order to maintain continuity for the
active DCNs.

!

CAUTION

-12-

In the event the underlying authority for any of the
DCN(s) becomes obsolete or is superseded, then a
change can no longer be made under such DCN.

List of DCNs
No.

Change

1

Commodity Credit Corporation loans (section 77)—for loans received from the Commodity Credit Corporation, from
including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan.
See section 2.01 of Rev. Proc. 2015-14. Note. This change is implemented on a cut-off basis.
Advances made by a lawyer on behalf of clients (section 162)—from treating advances of money to or on behalf of their
clients for litigation or other client expenses as deductible expenses to treating those advances as a loan. See section 3.01 of
Rev. Proc. 2015-14.
ISO 9000 costs (section 162)—to treating the costs as deductible, except to the extent they result in the creation or
acquisition of an asset having a useful life substantially beyond the tax year. See section 3.02 of Rev. Proc. 2015-14.
Restaurant smallwares costs (section 162)—to the smallwares method described in Rev. Proc. 2002-12, 2002-1 C.B. 374
(that is, as materials and supplies that are not incidental under Regulations section 1.162-3). See section 3.03 of Rev. Proc.
2015-14.
Bad debts (section 166)—for an applicant other than a bank, from accounting for bad debts using a reserve or other improper
method to a specific charge-off method that complies with section 166. See section 4.01 of Rev. Proc. 2015-14.
Bad debt conformity for banks (section 166)—for banks other than new banks, to the method that conforms to Regulations
section 1.166-2(d)(3) for the first time the bank makes this change, or to involuntarily revoke this method. This change does not
fall under the procedures of Rev. Proc. 2015-14. Instead, see Regulations section 1.166-2(d)(3). Note. This change is
implemented on a cut-off basis and generally with audit protection, but with some conditions or limitations.
Depreciation or amortization (impermissible to permissible) (sections 56, 167, 168, 197, 280F, 1400I, 1400L, 1400N,
and former section 168)—from an impermissible method to a permissible method for changes allowed under Regulations
section 1.446-1(e)(2)(ii)(d), and for depreciable property owned at the beginning of the year of change. Complete Schedule E of
Form 3115. An applicant changing its method of accounting for depreciation because of a change described in designated
automatic accounting method change number 10 (sale or lease transactions) must file Form 3115 according to the designated
change number 10. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section
6.01 of Rev. Proc. 2015-14.
Depreciation (permissible to permissible) (sections 56 and 167)—from a permissible method to another permissible
method listed in section 6.02 of Rev. Proc. 2015-14. Complete Schedule E of Form 3115. Change is implemented on a modified
cut-off basis. An applicant making a change from a permissible to another permissible method of depreciating MACRS property
must file Form 3115 according to designated change number 200. Additionally, a qualified small taxpayer qualifies for a
reduced Form 3115 filing requirement. See section 6.02 of Rev. Proc. 2015-14.
Sale, lease, or financing transactions (sections 61, 162, 167, 168, and 1012)—from improperly treating property as sold,
leased or, financed to a permissible method as described in section 6.03 of Rev. Proc. 2015-14. See section 6.03 of Rev. Proc.
2015-14. Note. This change is implemented on a cut-off basis and does not receive audit protection.
Obsolete. See change number 7.
Obsolete. See change number 7.
Obsolete. See change number 7.
Obsolete. See change number 7.
Obsolete. See change number 210.
Amortizable bond premium (section 171)—from amortizing bond premium to not amortizing the premium (revoking the
section 171(c) election). See section 5.01 of Rev. Proc. 2015-14. Note. This change is implemented on a cut-off basis and is
also generally made with audit protection, but with conditions or limitations.
Research and experimental expenditures (section 174)—from the capitalization method to another permissible method,
from the expense method to another permissible method, from the deferred expense method to another permissible method,
from the current period of amortization to a different period of amortization under the deferred expense method, or from
treating research and experimental expenditures under any provision of the Internal Revenue Code other than section 174 to
treating such expenditures under section 174. See section 7.01 of Rev. Proc. 2015-14. Note. This change is implemented on a
cut-off basis and does not receive audit protection.
Computer software expenditures (sections 162 and 167)—for costs of developed, acquired, leased, or licensed computer
software, to deductible expenses or capital expenditures and amortization (for developed software), to capital expenditures
and depreciation or amortization (for acquired computer software), or to deductible expenses under Regulations section
1.162-11 (for leased or licensed computer software). Complete Schedule E of Form 3115 for changes relating to acquired
computer software or developed computer software if the change is to capital expenditures and amortization. See section 9.01
of Rev. Proc. 2015-14.
Package design costs (section 263)—to the capitalization method, to the design-by-design capitalization and 60-month
amortization method, or to the pool-of-cost capitalization and 48-month amortization method. See section 10.01 of Rev. Proc.
2015-14.
Line pack gas or cushion gas costs (section 263)—to treating the costs as capital expenditures, the costs of recoverable
amounts as not depreciable, and the costs of unrecoverable amounts as depreciable. A taxpayer that changes its method for
the costs of unrecoverable amounts also must change to a permissible method of depreciation for those costs. Complete
Schedule E of Form 3115 for changes relating to the costs of unrecoverable amounts. See section 10.02 of Rev. Proc. 2015-14.
Removal costs (section 263)—for certain costs incurred in the retirement and removal of depreciable assets, to a method
that conforms with Rev. Rul. 2000-7, 2000-1 C.B. 712 or for removal costs in disposal of a depreciable asset, including a partial
disposition, as described under Regulations section 1.263(a)-3(g)(2)(i). See section 10.03 of Rev. Proc. 2015-14.
Certain uniform capitalization methods used by resellers and reseller-producers (section 263A)—for qualifying
applicants, to a qualifying method or methods. Complete Schedule D, Parts II and III, of Form 3115. See section 11.01 of Rev.
Proc. 2015-14.
Certain uniform capitalization methods used by producers and reseller-producers (section 263A)—for qualifying
applicants, to a qualifying method or methods. Complete Schedule D, Parts II and III, of Form 3115. See section 11.02 of Rev.
Proc. 2015-14.
Obsolete. See change number 17.
Impact fees (section 263A)—for impact fees incurred in connection with the new construction or expansion of a residential
building, to treating the costs as capital expenditures allocable to the building. Complete Schedule E of Form 3115 if the
building is depreciable. See section 11.04 of Rev. Proc. 2015-14.

2
3
4
5
6

7

8

10
11
12
13
14
15
16
17

18

19
20

21
22
23
24
25

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No.
26
28

29

31
32
33
34

35

36
37
38
39
41

42

43

44

45

List of DCNs
Change
Related party transactions (section 267)—for losses, expenses, and qualified stated interest incurred in transactions
between related parties, to disallowing or deferring certain deductions attributable to such transactions in accordance with
section 267. See section 12.01 of Rev. Proc. 2015-14.
Bonus or vacation pay deferred compensation (section 404)—for bonuses that are deferred compensation, from treating
as deductible or capitalizable when accrued, to treating as deductible or capitalizable in the year in which includible in the
employee’s income, and for vacation pay that is deferred compensation, from treating as deductible or capitalizable when
accrued to treating as deductible or capitalizable in the year in which paid to the employee. See section 13.02 of Rev. Proc.
2015-14.
Grace period contributions (section 404)—for contributions made to a section 401(k) qualified cash or deferred
arrangement or matching contributions under section 401(m), from treating contributions made after the end of the tax year but
before the due date of the tax return as being on account of the tax year without regard to when the underlying compensation is
earned to treating such contributions as not being on account of the tax year if they are attributable to compensation earned
after the end of that tax year. See section 13.03 of Rev. Proc. 2015-14.
Multi-year insurance policies for multi-year service warranty contracts (section 446)—for a manufacturer, wholesaler,
or retailer of motor vehicles or other durable consumer goods accounting for multi-year insurance policies for multi-year service
warranty contracts, to capitalizing and amortizing the costs. See section 14.02 of Rev. Proc. 2015-14.
Overall cash method ($1 million) (section 446)—for qualifying applicants changing to the overall cash method. Complete
Schedule A, Part I, of Form 3115. Also, complete Schedule D, Parts II and III, as applicable. See section 14.03 of Rev. Proc.
2015-14.
Overall cash method ($10 million) (section 446)—for qualifying applicants changing to the overall cash method. Complete
Schedule A, Part I, of Form 3115. Also, complete Schedule D, Parts II and III, as applicable. See section 14.03 of Rev. Proc.
2015-14.
First section 448 year (section 448)—for an applicant changing from the cash method for its first section 448 year that
makes the change using the regulation provision in lieu of Rev. Proc. 2015-13. Complete Schedule A, Part I, of Form 3115.
Also, complete Schedule D, Parts II and III, as applicable, of Form 3115. This change does not fall under the procedures of Rev.
Proc. 2015-13. Instead, see Regulations section 1.448-1. (See automatic method change 123 for taxpayers making the change
under Rev. Proc. 2015-13).
Nonaccrual-experience method (section 448)—for an applicant changing: to a safe harbor method provided in Regulations
section 1.448-2(f)(1) (the revenue-based moving average method), (f)(2) (the actual experience method), (f)(3) (the modified
Black Motor method), (f)(4) (the modified moving average method), or (f)(5) (the alternative nonaccrual-experience method); to
a periodic system; from a NAE method to a specific charge-off method; from a sub-method of its current NAE method provided
in Regulations section 1.448-2 regarding applicable periods to another sub-method regarding applicable periods that is
permitted under Regulations section 1.448-2, other than a change to exclude tax years from an applicable period under
Regulations section 1.448-2(d)(6); from a sub-method of its current NAE method provided in Regulations section 1.448-2
regarding tracing of recoveries to another sub-method regarding tracing of recoveries permitted under Regulations section
1.448-2(f)(2)(iii); or, to the NAE book safe harbor method described in section 5.01 of Rev. Proc. 2011-46, 2011-42 I.R.B. 518.
Note. An applicant using the NAE book safe harbor method that wants to make certain changes within the NAE book safe
harbor method (as described in sections 5.02 and 5.03 of Rev. Proc. 2011-46) must attach a statement to its federal income tax
return in lieu of filing a Form 3115. See Rev. Proc. 2011-46, section 14.04 of Rev. Proc. 2015-14, and Rev. Proc. 2006-56,
2006-2 C.B. 1169. Note. Certain changes are made on a cut-off basis.
Interest accrual on non-performing loans (section 451)—for an accrual method bank accounting for qualified stated
interest on non-performing loans, to the method whereby interest is accrued until either the loan is worthless under section 166
and is charged off as a bad debt or the interest is determined to be uncollectible. See section 15.01 of Rev. Proc. 2015-14.
Advance rentals (section 451)—for advance rentals other than advance rentals subject to section 467, to inclusion in gross
income in the tax year received. See section 15.02 of Rev. Proc. 2015-14.
State or local income or franchise tax refunds (section 451)—for an accrual method applicant with state or local income or
franchise tax refunds, to accrue these items in the tax year the applicant receives payments or notice of approval of its refund
claim (whichever is earlier), according to Rev. Rul. 2003-3, 2003-1 C.B. 252. See section 15.03 of Rev. Proc. 2015-14.
Capital cost reduction (CCR) payments (section 451)—for CCR payments (as defined in Rev. Proc. 2002-36, 2002-1 C.B.
993) made by vehicle lessees, to the method that excludes these payments from the applicant’s gross income and from the
applicant’s bases in the purchased vehicles. See section 15.04 of Rev. Proc. 2015-14.
Percentage-of-completion method (PCM) (section 460)—for a taxpayer that wants to, or is required to, change its method
of accounting for long-term contracts to the PCM described in section 1.460-4(b). Complete Schedule D, Parts I and III, of Form
3115. See section 18.01 of Rev. Proc. 2015-14. Note. This change is implemented on a cut-off basis and does not receive audit
protection.
Timing of incurring employee medical benefits liabilities (section 461)—for an applicant with an obligation to pay an
employee’s medical expenses (including medical expenses for retirees and employees who filed claims under a workers’
compensation act) that is neither insured nor paid from a welfare benefit fund, to treatment as a liability incurred in the tax year
in which the applicant’s employee files the claim with the applicant; or, if the applicant has a liability to pay a third party for
medical services to its employees, to treatment as a liability as incurred in the tax year in which the services are provided. See
section 19.01(1) of Rev. Proc. 2015-14.
Timing of incurring real property taxes, personal property taxes, state income taxes, and state franchise taxes
(section 461)—for a qualifying applicant, to treating these taxes as incurred in the tax year in which the taxes are paid, or to
account for these taxes under the recurring item exception to the economic performance rules, or to revoke the ratable accrual
election under section 461(c). See section 19.02 of Rev. Proc. 2015-14.
Timing of incurring workers’ compensation act, tort, breach of contract, or violation of law liabilities (section 461)—
for a qualifying applicant accounting for self-insured liabilities arising under any workers’ compensation act or out of any tort,
breach of contract, or violation of law, to treating the liability as incurred in the tax year in which (a) all the events have occurred
establishing the fact of the liability, (b) the amount of the liability can be determined with reasonable accuracy, and (c) payment
is made to the person to which the liability is owed. See section 19.03 of Rev. Proc. 2015-14.
Timing of incurring certain payroll tax liabilities (section 461)—for FICA and FUTA taxes, state unemployment taxes, and
railroad retirement taxes, to the method under which the applicant may deduct in Year 1 its otherwise deductible FICA and
FUTA taxes, state unemployment taxes, and railroad retirement taxes imposed with respect to year-end wages properly
accrued in Year 1, but paid in Year 2, if the requirements of the recurring item exception are met; or, for state unemployment
taxes and railroad retirement taxes, to the method stated above where the applicant already uses that method of accounting for
FICA and FUTA taxes; or for FICA and FUTA taxes to the safe harbor method provided in Rev. Proc. 2008-25, 2008-1 C.B. 686.
See section 19.04 of Rev. Proc. 2015-14.

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No.
46
47

48

49

50

51

53
54

55

56

57

58

59

60

61

List of DCNs
Change
Cooperative advertising (section 461)—to incurring a liability in the tax year in which these services are performed, provided
the manufacturer is able to reasonably estimate this liability even though the retailer does not submit the required claim form
until the following year. See section 19.05 of Rev. Proc. 2015-14.
Distributor commissions (section 263)—from deducting distributor commissions to capitalizing and amortizing distributor
commissions using the distribution fee period method, the 5-year method, or the useful life method. This change is
implemented on a cut-off basis and applies only to distributor commissions paid or incurred on or after the beginning of the year
of change. See section 10.04 of Rev. Proc. 2015-14. Complete Schedule E of Form 3115.
Cash discounts (section 471)—for cash discounts granted for timely payment, when such discounts approximate a fair
interest rate, from a method of consistently including the price of the goods before discount in the cost of the goods and
including in gross income any discounts taken to a method of reducing the cost of the goods by the cash discounts and
deducting as an expense any discounts not taken, or vice versa. Complete Schedule D, Parts II and III, of Form 3115, as
applicable. See section 21.01 of Rev. Proc. 2015-14.
Estimating inventory shrinkage (section 471)—from the present method of estimating inventory shrinkage in computing
ending inventory to the retail safe harbor method in section 4 of Rev. Proc. 98-29, 1998-1 C.B. 857, or to a method other than
the retail safe harbor method, provided (a) the applicant’s present method of accounting does not estimate inventory shrinkage
and (b) the applicant’s new method of accounting (that estimates inventory shrinkage) clearly reflects income under section
446(b). Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 21.02 of Rev. Proc. 2015-14.
Small taxpayer ($1 million) inventory exception (section 471)—for a qualifying applicant with average annual gross
receipts of $1,000,000 or less (see Rev. Proc. 2001-10, 2001-1 C.B. 272), from the present method of accounting for
inventoriable items (including, if applicable, the method of capitalizing costs under section 263A) to treating inventoriable items
in the same manner as materials and supplies that are not incidental under Regulations section 1.162-3. Complete Schedule A,
Part I, and Schedule D, Parts II and III, of Form 3115, as applicable. See section 21.03 of Rev. Proc. 2015-14.
Small taxpayer ($10 million) inventory exception (section 471)—for a qualifying applicant with average annual gross
receipts of $10,000,000 or less (see Rev. Proc. 2002-28, 2002-1 C.B. 815), from the present method of accounting for
inventoriable items (including, if applicable, the method of capitalizing costs under section 263A) to treating inventoriable items
in the same manner as materials and supplies that are not incidental under Regulations section 1.162-3. Complete Schedule D,
Parts II and III, of Form 3115, as applicable. See section 21.03 of Rev. Proc. 2015-14.
Qualifying volume-related trade discounts (section 471)—to treating qualifying volume-related trade discounts as a
reduction in the cost of merchandise purchased at the time the discount is recognized in accordance with Regulations section
1.471-3(b). Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 21.04 of Rev. Proc. 2015-14.
Impermissible methods of inventory identification and valuation (section 471)—from an impermissible method
described in Regulations sections 1.471-2(f)(1) through (5), including a LIFO taxpayer restoring a write down of inventory below
cost or discontinuing maintaining an inventory reserve; from a method of determining market that is not in accordance with
Regulations section 1.471-2(c) for determining the value of “subnormal goods”; or from a gross profit method; to a permitted
inventory method (identification or valuation, or both). Complete Schedule D, Parts II and III, of Form 3115, as applicable. See
section 21.05 of Rev. Proc. 2015-14.
Core alternative valuation method for remanufactured and rebuilt motor vehicle parts (section 471)—for
remanufacturers and rebuilders of motor vehicle parts and resellers of remanufactured and rebuilt motor vehicle parts that use
the lower of cost or market method to value their inventory of cores, to the safe harbor method of accounting (the Core
alternative valuation method) to value inventories of cores as provided for in Rev. Proc. 2003-20, 2003-1 C.B. 445. Complete
Schedule D, Parts II and III, of Form 3115, as applicable. See section 21.06 of Rev. Proc. 2015-14.
Change from LIFO inventory method (section 472)—for an applicant changing from the LIFO inventory method for its entire
LIFO inventory, or for one or more dollar-value pools within its LIFO inventory, to the permitted method as described in section
22.01(1)(b) of Rev. Proc. 2015-14. Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.01 of
Rev. Proc. 2015-14.
Determining current-year cost under the LIFO inventory method (section 472)—for an applicant changing its method of
determining current-year cost to: (a) the actual cost of the goods most recently purchased or produced (most-recent
acquisitions method); (b) the actual cost of the goods purchased or produced during the tax year in the order of acquisition
(earliest-acquisitions method); (c) the average unit cost equal to the aggregate actual cost of all the goods purchased or
produced throughout the tax year divided by the total number of units so purchased or produced; (d) the specific identification
method; or (e) a rolling-average method if the applicant uses that rolling-average method in accordance with Rev. Proc.
2008-43, 2008-30 I.R.B. 186, as modified by Rev. Proc. 2008-52, 2008-2 C.B. 587. Complete Schedule C, Part I, of Form 3115.
See section 22.02 of Rev. Proc. 2015-14. Note. This change is implemented on a cut-off basis.
Alternative LIFO inventory method (section 472)—for a qualifying applicant that sells new automobiles or new light-duty
trucks, to the Alternative LIFO method described in Rev. Proc. 97-36, 1997-2 C.B. 450, as modified by Rev. Proc. 2008-23,
2008-1 C.B. 664. Complete Schedule C of Form 3115, as applicable. See section 22.03 of Rev. Proc. 2015-14. Note. This
change is implemented on a cut-off basis.
Used vehicle alternative LIFO method (section 472)—for a qualifying applicant that sells used automobiles and used
light-duty trucks, to the Used vehicle alternative LIFO method, as described in Rev. Proc. 2001-23, 2001-1 C.B. 784, as
modified by Announcement 2004-16, 2004-1 C.B. 668 and Rev. Proc. 2008-23, 2008-1 C.B. 664. Complete Schedule C, Part I,
of Form 3115. See section 22.04 of Rev. Proc. 2015-14. Note. This change is implemented on a cut-off basis.
Determining the cost of used vehicles purchased or taken as a trade-in (section 472)—for a qualifying applicant, to a
method of (a) determining the cost of used vehicles acquired by trade-in using the average wholesale price listed by a
consistently used official used car guide on the date of the trade-in; (b) using a different official used vehicle guide for
determining the cost of used vehicles acquired by trade-in; (c) determining the cost of used vehicles purchased for cash using
the actual purchase price of the vehicle; or (d) reconstructing the beginning-of-the-year cost of used vehicles purchased for
cash using values computed by national auto auction companies based on vehicles purchased for cash, where the national
auto auction company selected is consistently used. Complete Schedule C, Part I, of Form 3115. See section 22.05 of Rev.
Proc. 2015-14. Note. This change is implemented on a cut-off basis.
Change to IPIC inventory method (section 472)—for a qualifying applicant, from a non-inventory price index computation
(IPIC) LIFO inventory method to the IPIC method in accordance with all relevant provisions of Regulations section 1.472-8(e)
(3); or, from the IPIC method as described in T.D. 7814, 1982-1 C.B. 84 (the old IPIC method) to the IPIC method as described
in T.D. 8976, 2002-1 C.B. 421 (the new IPIC method), which includes the following required changes (if applicable): from using
80% of the inventory price index (IPI) to using 100% of the IPI to determine the base-year cost and dollar-value of a LIFO
pool(s); from using a weighted arithmetic mean to using a weighted harmonic mean to compute an IPI for a dollar-value
pool(s); and from using a components-of-cost method to define inventory items to using a total-product-cost method to define
inventory items. Complete Schedule C of Form 3115, as applicable. See section 22.06 of Rev. Proc. 2015-14. Note. This
change is implemented on a cut-off basis.

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63

64

65
66
67
68
70
71
72
73

74
75
76

77
78

79
80
81
82

List of DCNs
Change
Changes within IPIC inventory method (section 472)—for one or more of the following changes within IPIC: (a) from the
double-extension IPIC method to the link-chain IPIC method, or vice versa; (b) to or from the 10% method; (c) to a pooling
method described in Regulations section 1.472-8(b)(4) or Regulations section 1.472-8(c)(2), including a change to begin or
discontinue applying one or both of the 5% pooling rules; (d) combine or separate pools as a result of the application of a 5%
pooling rule described in Regulations section 1.472-8(b)(4) or Regulations section 1.472-8(c)(2); (e) change the selection of
BLS tables from Table 3 (Consumer Price Index for All Urban Consumers (CPI-U): U.S. city average, detailed expenditure
categories) of the monthly CPI Detailed Report to Table 9 (Producer price indexes and percent changes for commodity
groupings and individual items, not seasonally adjusted) of the monthly PPI Detailed Report, or vice versa; (f) change the
assignment of one or more inventory items to BLS categories under either Table 3 of the monthly CPI Detailed Report or Table
9 of the monthly PPI Detailed Report; (g) change the representative month when necessitated because of a change in tax year
or a change in method of determining current-year cost made pursuant to section 22.02 of Rev. Proc. 2015-14; or (h) change
from using preliminary BLS price indexes to using final BLS price indexes to compute an inventory price index, or vice versa.
Complete Schedule C of Form 3115, as applicable. See section 22.07 of Rev. Proc. 2015-14. Note. This change is
implemented on a cut-off basis.
Replacement cost method for automobile dealers’ parts inventory (sections 471 and 472)—to the replacement cost
method for automobile dealers’ parts inventory described in Rev. Proc. 2002-17, 2002-1 C.B. 676. Complete Schedule D, Parts
II and III, of Form 3115, as applicable. See section 21.07 of Rev. Proc. 2015-14. Note. This change is implemented on a cut-off
basis.
Mark-to-market (section 475)—for accounting for securities or commodities by commodities dealers, securities traders, and
commodities traders, to the mark-to-market method under section 475(e) or (f). An election statement must be filed earlier than
the due date of Form 3115. See Rev. Proc. 99-17, 1999-1 C.B. 503, for rules relating to this statement. See section 23.01 of
Rev. Proc. 2015-14.
Dealer status changes (section 475)—for an applicant electing out of certain exemptions from securities dealer status, to the
mark-to-market method. This change does not fall under the automatic change procedures of Rev. Proc. 2015-13. Instead, see
Rev. Proc. 97-43, 1997-2 C.B. 494. Note. This change is implemented on a cut-off basis.
Bank reserves for bad debts (section 585)—for a bank (as defined in section 581, including a bank for which a qualified
subchapter S subsidiary (QSub) election is filed) to change from the section 585 reserve method to the section 166 specific
charge-off method. See section 24.01 of Rev. Proc. 2015-14.
Insurance company premium acquisition expenses (section 832)—for certain insurance companies, to a safe harbor
method of accounting for premium acquisition expenses set forth in Rev. Proc. 2002-46, 2002-2 C.B. 105. See section 25.01 of
Rev. Proc. 2015-14.
Discounted unpaid losses (section 846)—for insurance companies other than life insurance companies computing
discounted unpaid losses, to the composite method or to alternative methods set forth in Notice 88-100, 1988-2 C.B. 439, and
Rev. Proc. 2002-74, 2002-2 C.B. 980. See section 26.01 of Rev. Proc. 2015-14.
Functional currency (section 985)—to the use of another functional currency for the applicant or its qualified business unit
(QBU), other than a QBU described in Regulations section 1.985-1(b)(1)(iii). See section 29.01 of Rev. Proc. 2015-14.
Rule of 78s (section 1272)—for stated interest on certain short-term consumer loans, from the Rule of 78s method to the
constant yield method. See section 14.05 of Rev. Proc. 2015-14.
Original issue discount (sections 1272 and 1273)—to the principal-reduction method for de minimis original issue discount
(OID). See section 31.01 of Rev. Proc. 2015-14. Note. This change is implemented on a cut-off basis and does not receive
audit protection.
Market discount bonds (section 1278)—from including market discount currently in income for the tax year to which the
discount is attributable to including market discount in income for the tax year of disposition or partial principal payment
(revoking the section 1278(b) election). Note. This change is implemented on a cut-off basis and is also generally made with
audit protection, but with conditions or limitations. See section 32.01 of Rev. Proc. 2015-14.
Interest income on short-term obligations (section 1281)—to currently including accrued interest and discount in income
(to comply with section 1281). See section 33.01 of Rev. Proc. 2015-14.
Stated interest on short-term loans (section 1281)—for a bank using the cash method of accounting, from accruing stated
interest on short-term loans made in the ordinary course of business to using the cash method to report such interest. See
section 33.02 of Rev. Proc. 2015-14.
Sales of mortgage loans (section 1286)—for accounting for certain sales of mortgage loans in which the seller also enters
into a contract to service the mortgages in consideration for amounts received from interest payments, from a method that is
inconsistent with Rev. Rul. 91-46, 1991-2 C.B. 358, to a method that is consistent with Rev. Rul. 91-46. However, the change is
only an automatic accounting method change for certain taxpayers who are under examination. This change does not fall under
the automatic change procedures of Rev. Proc. 2015-13. Instead, see Rev. Proc. 91-51, 1991-2 C.B. 779.
Environmental remediation costs (section 263A)—for costs incurred to clean up land that a taxpayer contaminated with
hazardous waste from the taxpayer’s manufacturing operations, to capitalizing such costs in inventory costs under section
263A. See section 11.05 of Rev. Proc. 2015-14.
Costs of intangibles and certain transactions (section 263(a))—for amounts paid or incurred to acquire or create
intangibles, or to facilitate an acquisition of a trade or business, a change in the capital structure of a business entity, and certain
other transactions, to a method of accounting provided in Regulations sections 1.263(a)-4, 1.263(a)-5, and 1.167(a)-3(b).
Complete Schedule E of Form 3115 for changes to a method of accounting provided in Regulations section 1.167(a)-3(b). See
section 10.05 of Rev. Proc. 2015-14.
REMIC inducement fees (sections 860A–860G)—for an inducement fee received in connection with becoming the holder of
a noneconomic residual interest in a REMIC, to a safe harbor method provided under Regulations section 1.446-6(e)(1) or (e)
(2). See Rev. Proc. 2004-30, 2004-1 C.B. 950, and section 27.01 of Rev. Proc. 2015-14.
All events test method for credit card annual fees (section 451)—to a method that satisfies the all events test in
accordance with Rev. Rul. 2004-52, 2004-1 C.B. 973. See section 15.05 of Rev. Proc. 2015-14.
Ratable inclusion method for credit card annual fees (section 446)—to the ratable inclusion method for credit card annual
fees. See section 15.05 of Rev. Proc. 2015-14.
Credit card late fees (section 451)—to a method that treats credit card late fees as interest income that creates or increases
OID on the pool of credit card loans to which the fees relate. Note. This change is generally made with audit protection, but has
conditions or limitations. See section 15.06 of Rev. Proc. 2015-14.

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84
85
86
87

88

89

90
91
92
94

96

106

107

108

109

110
111
112

List of DCNs
Change
Full inclusion method for certain advance payments (section 451)—to the full inclusion method as described in section
5.01 of Rev. Proc. 2004-34, 2004-1 C.B. 991. The applicant must be using, or changing to, an overall accrual method of
accounting. See section 15.07 of Rev. Proc. 2015-14.
Deferral method for certain advance payments (section 451)—to the deferral method as described in section 5.02 of Rev.
Proc. 2004-34, 2004-1 C.B. 991 (except as provided in section 8.03 and 8.04(2) of Rev. Proc. 2004-34). The applicant must be
using, or changing to, an overall accrual method of accounting. See section 15.07 of Rev. Proc. 2015-14.
Film producer’s treatment of certain creative property costs (section 446)—to account for creative property costs under
the safe harbor method provided in Rev. Proc. 2004-36, 2004-1 C.B. 1063. See section 14.06 of Rev. Proc. 2015-14.
Timber fertilization costs (section 162)—for costs incurred by a timber grower for the post-establishment fertilization of an
established timber stand, to treat such costs as ordinary and necessary business expenses deductible under section 162. See
section 3.04 of Rev. Proc. 2015-14.
Change in general asset account treatment due to a change in the use of MACRS property (section 168)—to the
method of accounting provided in Regulations sections 1.168(i)-1(c)(2)(ii)(E) and 1.168(i)-1(h)(2) (as in effect before January 1,
2012). Complete Schedule E of Form 3115. Change is implemented on a modified cut-off basis. Additionally, a qualified small
taxpayer qualifies for a reduced Form 3115 filing requirement. See Regulations section 1.168(i)-1(l)(2)(ii) and section 6.09 of
Rev. Proc. 2015-14.
Change in method of accounting for depreciation due to a change in the use of MACRS property (section 168)—to
the method of accounting provided in Regulations section 1.168(i)-4 or to revoke the election provided in Regulations section
1.168(i)-4(d)(3)(ii) to disregard a change in use of MACRS property. Complete Schedule E of Form 3115. Additionally, a
qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See Regulations section 1.168(i)-4(g)(2) and
section 6.10 of Rev. Proc. 2015-14.
Depreciation of qualified non-personal use vans and light trucks (section 280F)—for certain vehicles placed in service
before July 7, 2003, to a method of accounting in accordance with Regulations section 1.280F-6(f)(2)(iv). Complete Schedule E
of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See Regulations
section 1.280F-6(f)(2)(iv) and section 6.11 of Rev. Proc. 2015-14.
Insurance companies’ incentive payments to health care providers (section 446)—for deducting provider incentive
payments, to the method of including those payments in discounted unpaid losses without regard to section 404. See section
14.07 of Rev. Proc. 2015-14.
Up-front network upgrade payments received by utilities (section 61)—to a safe harbor method provided in Rev. Proc.
2005-35, 2005-2 C.B. 76. See section 1.01 of Rev. Proc. 2015-14.
Allocation of environmental remediation costs to production (section 263A)—to a method that allocates under section
263A environmental remediation costs to the inventory produced during the tax year such costs are incurred. See Rev. Rul.
2005-42, 2005-2 C.B. 67, and section 11.06 of Rev. Proc. 2015-14.
Credit card cash advance fees (section 451)—to a method that treats credit card cash advance fees as creating or
increasing original issue discount (OID) on a pool of credit card loans that includes the cash advances that give rise to the fees.
Note. This change is generally made with audit protection, but has conditions or limitations. See section 15.08 of Rev. Proc.
2015-14.
Replacement cost method for heavy equipment dealers’ parts inventory (sections 471 and 472)—to the replacement
cost method for heavy equipment dealers’ parts inventory described in Rev. Proc. 2006-14, 2006-1 C.B. 350. Complete
Schedule D, Parts II and III, of Form 3115, as applicable. See section 21.08 of Rev. Proc. 2015-14. Note. This change is
implemented on a cut-off basis.
Timing of incurring certain liabilities for services or insurance (section 461)—for an applicant that is currently treating
the mere execution of a contract for services or insurance as establishing the fact of the liability under section 461 and wants to
change from that method for liabilities for services or insurance to comply with Rev. Rul. 2007-3, 2007-1 C.B. 350. See section
19.06 of Rev. Proc. 2015-14.
Impermissible to permissible method of accounting for depreciation or amortization for disposed depreciable or
amortizable property (sections 167, 168, 197, 1400I, 1400L(b), 1400L(c), or 1400N(d) or former 168)—for an item of
certain depreciable or amortizable property that has been disposed of by the applicant and for which the applicant did not take
into account any depreciation allowance or did take into account some depreciation but less than the depreciation allowable,
from using an impermissible method of accounting for depreciation to using a permissible method of accounting for
depreciation. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115
filing requirement. See section 6.17 of Rev. Proc. 2015-14.
Change by bank for uncollected interest (section 446)—for a bank (as defined in Regulations section 1.166-2(d)(4)(i)) that
uses an accrual method of accounting; is subject to supervision by federal authorities, or by state authorities maintaining
substantially equivalent standards; and has six or more years of collection experience to change to the safe harbor method of
accounting for uncollected interest (other than interest described in Regulations section 1.446-2(a)(2)) set forth in section 4 of
Rev. Proc. 2007-33, 2007-1 C.B. 1289. See section 14.08 of Rev. Proc. 2015-14.
Rotable spare parts (section 263(a))—for an applicant that maintains a pool or pools of rotable spare parts that are primarily
used to repair customer-owned (or customer-leased) equipment under warranty or maintenance agreements to the safe harbor
method provided in Rev. Proc. 2007-48, 2007-2 C.B. 110. Complete Schedule E of Form 3115. See section 10.06 of Rev. Proc.
2015-14.
Rotable spare parts (section 471)—from the safe harbor method (or a similar method) of treating rotable spare parts as
depreciable assets, in accordance with Rev. Proc. 2007-48, 2007-2 C.B. 110, to treating rotable spare parts as inventoriable
items. See section 21.09 of Rev. Proc. 2015-14.
Advance trade discount method (section 471)—for an accrual method applicant required to use an inventory method of
accounting and maintaining inventories, as provided in section 471, that receives advance trade discounts to the Advance
trade discount method described in Rev. Proc. 2007-53, 2007-2 C.B. 233. See section 21.10 of Rev. Proc. 2015-14.
Changes to the Vehicle-Pool Method (section 472)—for a retail dealer or wholesaler distributor (reseller) of cars and
light-duty trucks to the Vehicle-Pool Method as described in Rev. Proc. 2008-23, 2008-1 C.B. 664. See section 22.08 of Rev.
Proc. 2015-14. Note. This change is implemented on a cut-off basis.

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114

116
117
119
121
122
123

124
125

126
127
128
129

130

131

132

133

List of DCNs
Change
Payroll tax liabilities (section 461)—for an accrual method applicant that wants to change its method for FICA and FUTA
taxes to the safe harbor method provided in Rev. Proc. 2008-25, 2008-1 C.B. 686, which provides that, solely for the purposes
of the recurring item exception, an applicant will be treated as satisfying the requirement in Regulations section 1.461-5(b)(1)(i)
for its payroll tax liability in the same tax year in which all events have occurred that establish the fact of the related
compensation liability and the amount of the related compensation liability can be determined with reasonable accuracy. See
section 19.04 of Rev. Proc. 2015-14.
Rolling-average method of accounting for inventories (sections 471 and 472)—for an applicant required to account for
inventories under section 471 and that uses a rolling-average method to value inventories for financial accounting purposes to
the same rolling-average method to value inventories for federal income tax purposes, in accordance with Rev. Proc. 2008-43,
2008-30 I.R.B.186. See section 21.14 of Rev. Proc. 2015-14. Note. This change must be implemented on a cut-off basis unless
the applicant’s books and records contain sufficient information to compute a section 481(a) adjustment, in which case the
applicant may choose to implement the change with a section 481(a) adjustment.
Obsolete. See change number 7.
Obsolete. See change number 205 or 206, as applicable.
Obsolete. See change number 7.
Repairable and reusable spare parts (section 263(a))—to treat certain repairable and reusable spare parts as depreciable
property in accordance with the holding in Rev. Rul. 69-200, 1969-1 C.B. 60, or Rev. Rul. 69-201, 1969-1 C.B. 60. Complete
Schedule E of Form 3115. See section 10.07 of Rev. Proc. 2015-14.
Overall accrual method other than for the first section 448 year (section 446)—for a qualifying applicant for other than its
first section 448 year, from the overall cash method to an overall accrual method. Complete Schedule A, Part I, of Form 3115.
Also complete Schedule D, Parts II and III, as applicable. See section 14.01 of Rev. Proc. 2015-14.
Change in overall method from the cash method to an accrual method for the first section 448 year (section 446)—
for an applicant that is required by section 448 to change from the overall cash method to an overall accrual method and the
applicant qualifies to make the change under the automatic consent procedures of Regulations sections 1.448-1(g) and (h)(2)
as well as Rev. Proc. 2015-13 for a year of change that is the applicant’s first section 448 year. See Regulations sections
1.448-1(g) and (h)(2), and section 14.01 of Rev. Proc. 2015-14.
Change from the cash method to an accrual method for specific items (section 446)—for a qualifying applicant using an
overall accrual method and accounting for one or more identified specific items of income and expense on the cash method to
an accrual method of accounting for the identified specific item or items. See section 14.09 of Rev. Proc. 2015-14.
Multi-year service warranty contracts (section 446)—for an eligible accrual method manufacturer, wholesaler, or retailer of
motor vehicles or other durable consumer goods that wants to change to the service warranty income method described in
section 5 of Rev. Proc. 97-38, 1997-2 C.B. 479. See Rev. Proc. 97-38 and section 14.10 of Rev. Proc. 2015-14. Note. This
change is implemented on a cut-off basis.
Overall cash method for specified transportation industry taxpayers (section 446)—for “specified transportation
industry taxpayers,” as defined in section 14.11(2) of Rev. Proc. 2015-14, with average annual gross receipts of more than
$10,000,000 and not in excess of $50,000,000 to the overall cash method. See section 14.11 of Rev. Proc. 2015-14.
Change to overall cash/hybrid method for certain banks (section 446)—for an eligible bank, as defined in section
14.12(2)(a) of Rev. Proc. 2015-14, to an overall cash/hybrid method described in section 14.12(2)(b) of Rev. Proc. 2015-14.
See section 14.12 of Rev. Proc. 2015-14.
Change to overall cash method for farmers (section 446)—for a qualifying applicant engaged in the trade or business of
farming to the overall cash method. See section 14.13 of Rev. Proc. 2015-14. Note. For applicants changing from the crop
method, that portion of the change is implemented using a cut-off method.
Nonshareholder contributions to capital under section 118 (section 446)—from excluding from gross income under
section 61 certain payments or the fair market value of property received (including customer connection fees received by a
regulated public utility described in section 118(c)), by characterizing the payments or the fair market value of property as
nontaxable contributions to capital under section 118(a), to including the payments or the fair market value of property in gross
income under section 61. This change also applies to a regulated public utility described in section 118(c) that changes from
including in gross income under section 61 payments or fair market value of property received that are contributions in aid of
construction under section 118(c) and Regulations section 1.118-2 and that meet the requirements of sections 118(c)(1)(B) and
118(c)(1)(C) to excluding from income the payments or the fair market value of the property as nontaxable contributions to
capital under section 118(a). See section 14.14 of Rev. Proc. 2015-14.
Retainages not received under long-term contracts (section 451)—for an accrual method applicant’s retainages under
section 451 to a method consistent with the holding in Rev. Rul. 69-314, 1969-1 C.B. 139. This change does not apply to
retainages under long-term contracts as defined in section 460(f). An applicant changing its method of accounting under this
section must treat all retainages (receivables and payables) in the same manner. See section 15.10 of Rev. Proc. 2015-14.
Series E, EE, or I U.S. savings bonds (section 454)—for a cash method taxpayer changing the taxpayer’s method of
accounting for interest income on Series E, EE, or I U.S. savings bonds from reporting as interest income the increase in
redemption price on a bond occurring in a tax year to reporting this income in the tax year in which the bond is redeemed,
disposed of, or finally matures, whichever is earliest. A statement in lieu of a Form 3115 is authorized for this change. See
section 16.01 of Rev. Proc. 2015-14. Note. This change is implemented on a cut-off basis.
Prepaid subscription income (section 455)—for an accrual method applicant changing its method of accounting for prepaid
subscription income to the method described in section 455 and the related regulations, including an eligible applicant that
wants to make the “within 12 months” election under Regulations section 1.455-2. A statement in lieu of a Form 3115 is
authorized for this change. See section 17.01 of Rev. Proc. 2015-14. Note. This change is implemented on a cut-off basis.
Timing of incurring liabilities for bonuses (section 461)—to treat bonuses as incurred in the tax year in which all events
have occurred that establish the fact of the liability to pay a bonus and the amount of the liability can be determined with
reasonable accuracy. See section 19.01(2) of Rev. Proc. 2015-14.

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135
136

137

138

139

140

141

145

146
147
148
149

150
151
152

153

154

List of DCNs
Change
Timing of incurring liabilities for vacation pay, sick pay, and severance pay (section 461)—to treat vacation pay, sick
pay, and severance pay as incurred in the tax year in which all events have occurred that establish the fact of the liability to pay
vacation pay, sick pay, and severance pay, and the amount of the liability can be determined with reasonable accuracy. The
applicant may make this change if the vacation pay, sick pay, and severance pay vests in that tax year and the vacation pay,
sick pay, and severance pay is received by the employee by the 15th day of the 3rd calendar month after the end of that tax
year. See section 19.01(3) of Rev. Proc. 2015-14.
Rebates and allowances (section 461)—for an accrual method applicant’s liability for rebates and allowances to the
recurring item exception method under section 461(h)(3) and Regulations section 1.461-5. See section 19.07 of Rev. Proc.
2015-14.
Change from an improper method of inclusion of rental income or expense to inclusion in accordance with the rent
allocation (section 467)—for an applicant that is a party to a section 467 rental agreement; and is changing its method for its
fixed rent to the rent allocation method provided in Regulations section 1.467-1(d)(2)(iii). See section 20.01 to Rev. Proc.
2011-15. Note. This change only receives limited audit protection.
Permissible methods of inventory identification and valuation (section 471)—for an applicant changing from one
permissible method of identifying and valuing inventories to another permissible method of identifying and valuing inventories
that is not a change described in another section of Rev. Proc. 2015-14 or in other guidance published in the IRB. See section
21.11 of Rev. Proc. 2015-14.
Change in the official used vehicle guide utilized in valuing used vehicles (section 471)—for a used vehicle dealer
from not using an official used vehicle guide for valuing used vehicles to using an official used vehicle guide for valuing used
vehicles; or from using an official used vehicle guide for valuing used vehicles to using a different official used vehicle guide for
valuing used vehicles. See section 21.12 of Rev. Proc. 2015-14.
Invoiced advertising association costs for new vehicle retail dealerships (section 471)—for an applicant engaged in the
trade or business of retail sales of new automobiles or new light-duty trucks (dealership) from capitalizing certain advertising
costs as acquisition costs under Regulations section 1.471-3(b) to deducting the advertising costs under section 162 as the
advertising services are provided to the dealership. See Regulations section 1.461-4(d)(2)(i), and section 21.13 of Rev. Proc.
2015-14.
Changes within the Used Vehicle Alternative LIFO Method (section 472)—for a taxpayer using the Used Vehicle
Alternative LIFO Method, as described in Rev. Proc. 2001-23, 2001-1 C.B. 784, as modified by Announcement 2004-16,
2004-1 C.B. 668, and Rev. Proc. 2008-23, 2008-1 C.B. 664, to use a different “official used vehicle guide” in conjunction with
the Used Vehicle Alternative LIFO Method, or to a different precise manner of using an official used vehicle guide (for example,
a change in the specific guide category that an applicant uses to represent vehicles of average condition for purposes of
section 4.02(5)(a) of Rev. Proc. 2001-23). See section 22.09 of Rev. Proc. 2015-14. Note. This change is implemented on a
cut-off basis.
Changes to dollar-value pools of manufacturers (section 472)—for a manufacturer that purchases goods for resale
(resale goods) and thus must reassign resale goods from the pool(s) it maintains for the goods it manufactures to one or more
resale pools, and the manufacturer wants to change from using multiple pools described in Regulations section 1.472-8(b)(3)
to using natural business unit (NBU) pools described in Regulations section1.472-8(b)(1), or vice versa; or wants to reassign
items in NBU pools described in Regulations section 1.472-8(b)(1) into the same number or a greater number of NBU pools.
See section 22.10 of Rev. Proc. 2015-14. Note. This change is implemented on a cut-off basis.
Tenant construction allowances (section 168)—for an applicant changing from improperly treating the applicant as having
a depreciable interest in the property subject to the tenant construction allowances for federal income tax purposes to properly
treating the applicant as not having a depreciable interest in such property for federal income tax purposes; or from improperly
treating the applicant as not having a depreciable interest in the property subject to the tenant construction allowances for
federal income tax purposes to properly treating the applicant as having a depreciable interest in such property for federal
income tax purposes. This change is implemented on a cut-off basis and does not receive audit protection. Additionally, a
qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 6.23 of Rev. Proc. 2015-14.
Obsolete. See change number 205.
Obsolete. See change number 206.
Debt issuance costs (section 446)—for an applicant changing its method of accounting to comply with Regulations section
1.446-5, which provides rules for allocating the costs over the term of the debt. See section 14.15 of Rev. Proc. 2015-14.
Ratable accrual of real property taxes (section 461)—for an accrual method applicant for real property taxes that relate to a
definite period of time to the method described in section 461(c) and section 1.461-1(c)(1) (ratable accrual election) for a
taxable year other than the applicant’s first taxable year in which real property taxes are incurred. See section 19.08 of Rev.
Proc. 2015-14.
Retail sales facility safe harbor for a motor vehicle dealership (section 263A)—for a motor vehicle dealership to treat its
sales facility as a retail sales facility as described in section 5.01 of Rev. Proc. 2010-44, 2010-49 I.R.B. 811. See section 11.07
of Rev. Proc. 2015-14.
Reseller without production activities safe harbor for a motor vehicle dealership (section 263A)—for a motor vehicle
dealership to be treated as a reseller without production activities as described in section 5.02 of Rev. Proc. 2010-44, 2010-49
I.R.B. 811. See section 11.07 of Rev. Proc. 2015-14.
Deduction for energy efficient commercial buildings (section 179D)—for an applicant to change its method of accounting
to deduct under section 179D amounts paid or incurred for the installation of energy efficient commercial building property,
subject to the limits of section 179D(b), in the year the property is placed in service. See Rev. Proc. 2012-39, 2012-2 C.B. 470
and section 8.04 of Rev. Proc. 2015-14. Note. This change does not receive audit protection.
Advance payments—change in applicable financial statements (Rev. Proc. 2004-34)—for an applicant using the deferral
method for including advance payments in gross income in accordance with its applicable financial statement (AFS) to change
its method to recognize advance payments in gross income under Rev. Proc. 2004-34 consistent with a changed manner for
recognizing advance payments for its AFS. The requirement in section 6.03(3)(a) of Rev. Proc. 2015-13 to provide an additional
copy of the application to the examining agent(s), appeals officer(s), and counsel to the government, if applicable, applies to
this application. A statement in lieu of a Form 3115 is authorized for this change. See section 15.11 of Rev. Proc. 2015-14.
Note. This change is implemented on a cut-off basis and does not receive audit protection.
California franchise taxes (Rev. Rul. 2003-90)—for an accrual method applicant changing to recognizing its California
franchise tax liability in the tax year following the tax year in which the tax is incurred under the Cal. Rev. & Tax Code. See
section 19.09 of Rev. Proc. 2015-14.

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156
157

158

159

160

161

175
176
177
178
179
181

182

183

184

185

186

List of DCNs
Change
Unearned premiums (section 833)—for a Blue Cross or Blue Shield organization within the meaning of section 833(c)(2) or
an organization described in section 833(c)(3) required to change its method of accounting for unearned premiums because it
fails to meet the MLR requirements of section 833(c)(5). See section 25.02 of Rev. Proc. 2015-14.
Gift cards issued as a refund (Rev. Proc. 2011-17)—for an accrual method applicant who issues gift cards as a refund for
returned goods changing to treat the transaction as the payment of a cash refund and sale of a gift card in the amount of the gift
card, as provided in Rev. Proc. 2011-17, 2011-5 I.R.B. 441. See section 19.10 of Rev. Proc. 2015-14.
Classification of wireless telecommunications assets used by wireless telecommunications carriers (sections 167
and 168)—for applicants that have a depreciable interest in wireless telecommunication assets (as defined in Rev. Proc.
2011-22, 2011-8 I.R.B. 737) used primarily to provide wireless telecommunications or broadband services by mobile phones
that are changing to the method described in Rev. Proc. 2011-22 to determine the recovery periods for depreciation of certain
tangible assets used by wireless telecommunications carriers. Additionally, a qualified small taxpayer qualifies for a reduced
Form 3115 filing requirement. See Rev. Proc. 2011-22 and section 6.26 of Rev. Proc. 2015-14.
Wireline network property (section 263(a))—for certain applicants that have a depreciable interest in wireline network
assets (as described in section 4 of Rev. Proc. 2011-27, 2011-8 I.R.B. 740) used primarily to provide wireline
telecommunication or broadband services that are changing to (a) the wireline network assets maintenance allowance method
described in section 5 of Rev. Proc. 2011-27, or (b) the adoption of all, or some, of the units of property described in section 6 of
Rev. Proc. 2011-27, to determine whether expenditures to maintain, replace, or improve wireline network assets must be
capitalized under section 263(a). See section 3.07 of Rev. Proc. 2015-14.
Wireless network property (section 263(a))—for certain applicants that have a depreciable interest in wireless network
assets (as described in section 4 of Rev. Proc. 2011-28, 2011-8 I.R.B. 743) used primarily to provide wireless
telecommunications or broadband services by mobile phones that are changing to (a) the wireless network asset maintenance
allowance method described in section 5 of Rev. Proc. 2011-28, or (b) the adoption of all, or some, of the units of property
described in section 6 of Rev. Proc. 2011-28, to determine whether expenditures to maintain, replace, or improve wireless
network assets must be capitalized under section 263(a). See section 3.08 of Rev. Proc. 2015-14.
Electric transmission and distribution property (section 263(a))—for certain applicants that have a depreciable interest in
electric transmission or distribution property (as described in section 4 of Rev. Proc. 2011-43, 2011-37 I.R.B. 326) used
primarily to transport, deliver, or sell electricity that are changing to the method described in Rev. Proc. 2011-43, to determine
whether expenditures incurred to maintain, replace, or improve transmission and distribution property are deductible repairs
under section 162 or capitalizable improvements under section 263(a). See section 3.09 of Rev. Proc. 2015-14.
Timing of incurring liabilities under the recurring item exception to the economic performance rules (section 461(h)
(3))—for an applicant changing to a method of accounting to conform to any of the holdings in Rev. Rul. 2012-1, 2012-2 I.R.B.
255, which addresses the “not material” and “better matching” requirements of the recurring item exception and distinguishes
contracts for the provision of services from insurance and warranty contracts. See section 19.11 of Rev. Proc. 2015-14.
Obsolete. See change number 199.
Obsolete. See change number 200.
Obsolete. See change number 205.
Obsolete. See change number 206.
Obsolete. See change number 207.
Plants removed from the list of plants that have a preproductive period in excess of 2 years (section 263A)—for an
applicant that is not a corporation, partnership, or tax shelter required to use an accrual method of accounting and either is
changing to not applying section 263A to the production of a plant or plants that have been removed from the list of plants with
a nationwide weighted average preproductive period in excess of 2 years, or is revoking its section 263A(d)(3) election to not
apply section 263A to the production of a plant or plants that have been removed from the list of plants with a nationwide
weighted average preproductive period in excess of 2 years. See Rev. Proc. 2013-20 and section 11.08 of Rev. Proc. 2015-14.
Steam or electric power generation property (section 263(a))—for an applicant changing its method of accounting for its
treatment of expenditures on generation property (as defined in section 4.01 of Rev. Proc. 2013-24, 2013-22 I.R.B. 1142) to
use all or some of the unit of property definitions and the corresponding major component definitions described in Appendix A
of Rev. Proc. 2013-24, to determine whether expenditures to maintain, replace, or improve generation property must be
capitalized under section 263(a). See section 3.20 of Rev. Proc. 2015-14.
Change to proportional method of accounting for OID on a pool of credit card receivables (section 1272(a)(6))—for
an eligible taxpayer that wants to change to the proportional method of accounting for original issue discount (OID) on a pool of
credit card receivables as described in Rev. Proc. 2013-26, 2013-22 I.R.B. 1160. See section 31.02 of Rev. Proc. 2015-14.
Note. This change is implemented on a cut-off basis.
Deducting repair and maintenance costs or capitalizing improvement costs (sections 162 and 263(a))—for an
applicant changing to deducting amounts paid or incurred for repair and maintenance costs under section 162 and Regulations
section 1.162-4 or changing to capitalizing amounts paid or incurred for improvements to tangible property and, if depreciable,
to depreciating such property under section 168. Includes a change by an applicant in the method of identifying units of
property under Regulations section 1.263(a)-3(e) for purposes of determining whether amounts paid or incurred improve a unit
of property under Regulations section 1.263(a)-3. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115
filing requirement. See section 10.11 of Rev. Proc. 2015-14. Note. A small business taxpayer may qualify to make this change
on a cut-off basis for its first tax year beginning on or after January 1, 2014, without filing a Form 3115 under Rev. Proc. 2015-20.
Change to the regulatory accounting method (section 162)—for a regulated applicant changing its method of accounting
for amounts paid or incurred to repair or maintain tangible property to follow its method of accounting for regulatory accounting
purposes to determine whether an amount paid or incurred improves property under Regulations section 1.263(a)-3, consistent
with Regulations section 1.263(a)-3(m). Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing
requirement. See section 10.11 of Rev. Proc. 2015-14. Note. A small business taxpayer may qualify to make this change on a
cut-off basis for its first tax year beginning on or after January 1, 2014, without filing a Form 3115 under Rev. Proc. 2015-20.
Deducting non-incidental materials and supplies when used or consumed (section 162)—for an applicant changing its
method of accounting for non-incidental materials and supplies to the method of deducting such amounts in the taxable year in
which they are actually used or consumed, consistent with Regulations section 1.162-3. Additionally, a qualified small taxpayer
qualifies for a reduced Form 3115 filing requirement. See section 10.11 of Rev. Proc. 2015-14. Note. A small business taxpayer
may qualify to make this change on a cut-off basis for its first tax year beginning on or after January 1, 2014, without filing a
Form 3115 under Rev. Proc. 2015-20.

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188

189

190

191

192

193

194

195

196

197

198

List of DCNs
Change
Deducting incidental materials and supplies when paid or incurred (section 162)—for an applicant that wants to change
its method of accounting for incidental materials and supplies to the method of deducting such amounts in the taxable year in
which they are paid or incurred, consistent with Regulations section 1.162-3. Additionally, a qualified small taxpayer qualifies for
a reduced Form 3115 filing requirement. See section 10.11 of Rev. Proc. 2015-14. Note. A small business taxpayer may qualify
to make this change on a cut-off basis for its first tax year beginning on or after January 1, 2014, without filing a Form 3115
under Rev. Proc. 2015-20.
Deducting non-incidental rotable and temporary spare parts when disposed (section 162)—for an applicant changing
its method of accounting for costs to acquire or produce non-incidental rotable and temporary spare parts to the method of
deducting such costs in the taxable year in which the taxpayer disposes of the parts, consistent with Regulations section
1.162-3. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 10.11 of Rev.
Proc. 2015-14. Note. A small business taxpayer may qualify to make this change on a cut-off basis for its first tax year
beginning on or after January 1, 2014, without filing a Form 3115 under Rev. Proc. 2015-20.
Change to the optional method for rotable and temporary spare parts (section 162)—for an applicant changing its
method of accounting for rotable and temporary spare parts to the optional method of accounting for rotable and temporary
spare parts (described in Regulations section 1.162-3(e)), consistent with Regulations section 1.162-3. Additionally, a qualified
small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 10.11 of Rev. Proc. 2015-14. Note. A small
business taxpayer may qualify to make this change on a cut-off basis for its first tax year beginning on or after January 1, 2014,
without filing a Form 3115 under Rev. Proc. 2015-20.
Deducting dealer expenses that facilitate the sale of property (section 162)—for an applicant that is a dealer in property
changing its method of accounting for commissions and other costs paid or incurred to facilitate the sale of tangible property to
the method of treating such costs as ordinary and necessary business expenses, consistent with Regulations section
1.263(a)-1(e)(2). Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 10.11
of Rev. Proc. 2015-14. Note. A small business taxpayer may qualify to make this change on a cut-off basis for its first tax year
beginning on or after January 1, 2014, without filing a Form 3115 under Rev. Proc. 2015-20.
Non-dealer expense to facilitate the sale of property (section 263(a))—for an applicant that is not a dealer in property
changing its method of accounting for commissions and other costs paid or incurred to facilitate the sale of property to the
method of capitalizing such costs, consistent with Regulations section 1.263(a)-1(e)(1). Additionally, a qualified small taxpayer
qualifies for a reduced Form 3115 filing requirement. See section 10.11 of Rev. Proc. 2015-14. Note. A small business taxpayer
may qualify to make this change on a cut-off basis for its first tax year beginning on or after January 1, 2014, without filing a
Form 3115 under Rev. Proc. 2015-20.
Capitalizing acquisition or production costs (section 263(a))—for an applicant changing its method of accounting to
capitalizing amounts paid or incurred to acquire or produce property under Regulations section 1.263(a)-2 and, if depreciable,
to depreciating such property under section 168. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing
requirement. See section 10.11 of Rev. Proc. 2015-14. Note. A small business taxpayer may qualify to make this change on a
cut-off basis for its first tax year beginning on or after January 1, 2014, without filing a Form 3115 under Rev. Proc. 2015-20.
Deducting certain costs for investigating or pursuing the acquisition of property (section 162)—for an applicant
changing its method of accounting from capitalizing to deducting amounts paid or incurred in the process of investigating or
otherwise pursuing (a) the acquisition of real property if the amounts meet the requirements of Regulations section 1.263(a)-2(f)
(2)(iii), or (b) the acquisition of real or personal property if the amounts are for employee compensation or overhead costs under
Regulations section 1.263(a)-2(f)(2)(iv), consistent with Regulations section 1.263(a)-2. Additionally, a qualified small taxpayer
qualifies for a reduced Form 3115 filing requirement. See section 10.11 of Rev. Proc. 2015-14. Note. A small business taxpayer
may qualify to make this change on a cut-off basis for its first tax year beginning on or after January 1, 2014, without filing a
Form 3115 under Rev. Proc. 2015-20.
Change to a reasonable allocation method for self-constructed assets (section 263A)—for a producer or a
reseller-producer to a reasonable allocation method under Regulations section 1.263A-1(f)(4) for self-constructed assets or
from not capitalizing a cost subject to section 263A to capitalizing that cost under a reasonable allocation method under
Regulations section 1.263A-1(f)(4) that the producer or reseller-producer is already using for self-constructed assets. See
section 11.09 of Rev. Proc. 2015-14.
Real property acquired through foreclosure (section 263A)—for an applicant that capitalizes costs under section 263A(b)
(2) and Regulations section 1.263A-3(a)(1) to real property acquired through foreclosure, or similar transaction, to an otherwise
permissible method of accounting under which the acquisition and holding costs for real property acquired through foreclosure,
or similar transaction, are not capitalized under section 263A(b)(2) and Regulations section 1.263A-3(a)(1). See section 11.10
of Rev. Proc. 2015-14.
Late partial disposition election (section 168)—for MACRS property for which the applicant is making a late partial
disposition election under Regulations section 1.168(i)-8(d)(2)(i) or 1.168(i)-8(d)(2)(iv) for the disposition of a portion of the
asset. If this change is made under Regulations section 1.168(i)-8(d)(2)(i), this change applies only to the applicant’s taxable
year beginning on or after January 1, 2012, and beginning before January 1, 2015. If this change is made under Regulations
section 1.168(i)-8(d)(2)(iv), this change applies only to the applicant’s first or second taxable year succeeding the applicable
taxable year (as defined in Regulations section 1.168(i)-8(d)(2)(iv)). An applicant making a late partial disposition election under
Regulations section 1.168(i)-8(d)(2)(iii) must file Form 3115 according to change number 198. Complete Schedule E of Form
3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 6.33 of Rev.
Proc. 2015-14.
Revocation of a general asset account (section 168)—for MACRS property for which the applicant is revoking a general
asset account election made under section 6.32(1)(a)(i) of Rev. Proc. 2015-14 or section 6.32(1)(a)(i) of the Appendix of Rev.
Proc. 2011-14; or made under Regulations section 1.168(i)-1, 1.168(i)-1T, or Proposed Regulations section 1.168(i)-1 for
MACRS property placed in service in a taxable year beginning on or after January 1, 2012, and beginning before January 1,
2014. This change applies only to the applicant’s taxable year beginning on or after January 1, 2012, and beginning before
January 1, 2015. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115
filing requirement. See section 6.34 of Rev. Proc. 2015-14.
Partial dispositions of tangible depreciable asset to which the IRS’s adjustment pertains (section 168)—for MACRS
property for which the applicant is making a partial disposition election under Regulations section 1.168(i)-8(d)(2)(iii) to the
disposition of a portion of the asset to which the IRS’s adjustment pertains (as described in Regulations section 1.168(i)-8(d)(2)
(iii)). Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing
requirement. See section 6.35 of Rev. Proc. 2015-14.

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200

201
202

203
204

205

206

207

208

209

210

211
212

213

List of DCNs
Change
Depreciation of leasehold improvements (sections 167, 168, and 197)—for leasehold improvements in which the
applicant has a depreciable interest at the beginning of the year of change, from improperly depreciating or amortizing these
leasehold improvements over the term of the lease (including renewals, if applicable) to properly depreciating or amortizing
these leasehold improvements under section 167(f)(1), 168, or 197, as applicable. Complete Schedule E of Form 3115.
Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 6.36 of Rev. Proc.
2015-14.
Depreciation of MACRS property (permissible to permissible) (section 168)—for MACRS property, from a permissible
method to another permissible method listed in section 6.37(3) of Rev. Proc. 2015-14. Certain changes are made on a modified
cut-off basis or a cut-off basis. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a
reduced Form 3115 filing requirement. See section 6.37 of Rev. Proc. 2015-14. Note. A small business taxpayer may qualify to
make certain changes listed in section 6.37(3) of Rev. Proc. 2015-14 on a cut-off basis for its first tax year beginning on or after
January 1, 2014, without filing a Form 3115 under Rev. Proc. 2015-20.
Sales-based royalties (section 263A)—for sales-based royalties (as described in Regulations section 1.263A-1(e)(3)(ii)(U)
(2)) properly allocable to inventory property for which the applicant is making a change listed in section 11.11(1) of Rev. Proc.
2015-14. See Rev. Proc. 2014-33 and section 11.11 of Rev. Proc. 2015-14.
Sales-based vendor chargebacks under a simplified method (section 263A)—for an applicant changing its method of
accounting to no longer include cost adjustments for sales-based vendor chargebacks (as described in Regulations section
1.471-3(e)(1)) in the formulas used to allocate additional section 263A costs to ending inventory under a simplified method. See
Rev. Proc. 2014-33 and section 11.12 of Rev. Proc. 2015-14.
Sales-based vendor chargebacks (section 471)—for an applicant changing its method of accounting to treat sales-based
vendor chargebacks as a reduction in cost of goods sold in accordance with Regulations section 1.471-3(e)(1). See Rev. Proc.
2014-33 and section 21.15 of Rev. Proc. 2015-14.
Retail inventory method (section 471)—for an applicant using the retail inventory method, a change to: (a) not adjusting the
numerator of the cost complement for an allowance, discount, or price rebate required by Regulations section 1.471-3(e) to
reduce only cost of goods sold; (b) not adjusting the denominator of the cost complement for temporary markups and
markdowns; (c) computing the cost complement using a method described in Regulations section 1.471-8(b)(3) (including
changes from a method described in section 1.471-8(b)(3) to another method described in that section) for a retail LCM
applicant; or (d) adjusting the denominator of the cost complement for permanent markups and markdowns for a retail cost
applicant. See section 21.16 of Rev. Proc. 2015-14. Note. A taxpayer making any of these changes for its first or second
taxable year after December 31, 2014 may use either a section 481(a) adjustment or a cut-off basis to implement the change.
Dispositions of a building or structural component (section 168)—for MACRS property for which the applicant is making
a change listed in section 6.38(3) of Rev. Proc. 2015-14 for disposing of a building or a structural component or disposing of a
portion of a building (including its structural components) to which the partial disposition rule in Regulations section 1.168(i)-8(d)
(1) applies. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing
requirement. See section 6.38 of Rev. Proc. 2015-14. Note. A small business taxpayer may qualify to make this change on a
cut-off basis for its first tax year beginning on or after January 1, 2014, without filing a Form 3115 under Rev. Proc. 2015-20.
Dispositions of tangible depreciable assets (other than a building or its structural components) (section 168)—for
MACRS property for which the applicant is making a change listed in section 6.39(3) of Rev. Proc. 2015-14 for disposing of
section 1245 property or a depreciable land improvement or disposing of a portion of section 1245 property or a depreciable
land improvement to which the partial disposition rule in Regulations section 1.168(i)-8(d)(1) applies. Complete Schedule E of
Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 6.39 of
Rev. Proc. 2015-14. Note. A small business taxpayer may qualify to make this change on a cut-off basis for its first tax year
beginning on or after January 1, 2014, without filing a Form 3115 under Rev. Proc. 2015-20.
Dispositions of tangible depreciable assets in a general asset account (section 168)—for MACRS property for which
the applicant is making a change listed in section 6.40(3) of Rev. Proc. 2015-14 for disposing of an asset subject to a general
asset account election. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced
Form 3115 filing requirement. See section 6.40 of Rev. Proc. 2015-14.
Cable network asset maintenance allowance or unit of property method of accounting (section 263(a))—for certain
applicants that operate and have a depreciable interest in cable network assets used in a cable system that provides video,
high speed internet, and VOIP phone services that are changing to (a) the network maintenance allowance method for cable
network assets described in section 5 of Rev. Proc. 2015-12, 2015-2 I.R.B. 265, or (b) the adoption of all, or some, of the units
of property described in section 6 of Rev. Proc. 2015-12, to determine whether expenditures to maintain, replace, or improve
cable network assets must be capitalized under section 263(a). See section 3.21 of Rev. Proc. 2015-14.
Cable network customer drops and labor costs associated with installing customer premise equipment (section
263(a))—for certain applicants that operate cable systems and (a) are changing to the specific identification method described
in section 7.01(1) of Rev. Proc. 2015-12, or the safe harbor allocation method described in section 7.01(2) of Rev. Proc.
2015-12 for determining whether customer drop costs (including installations) may be deducted under section 162 or must be
capitalized under section 263(a), or (b) are changing to deducting labor costs associated with installing customer premise
equipment under section 7.02 of Rev. Proc. 2015-12. See section 3.21 of Rev. Proc. 2015-14.
Depreciation of fiber optic transfer node and fiber optic cable used by a cable system operator (section 168)—for a
cable system operator within the scope of Rev. Proc. 2015-12 that is changing to the safe harbor method of accounting in
section 8.03 of Rev. Proc. 2015-12 for determining depreciation of a fiber optic transfer node and trunk line consisting of fiber
optic cable used in a cable distribution network providing one-way and two-way communication services. See Rev. Proc.
2015-12 and section 6.42 of Rev. Proc. 2015-14.
Bad debt conformity election by bank after previous election automatically revoked (section 166)—for an eligible bank
changing its method of accounting for bad debts by making the conformity election under Regulations section 1.166-2(d)(3)(iii)
(C)(3). See section 4.02 of Rev. Proc. 2015-14.
Change to comply with section 163(e)(3)—for a taxpayer changing its method or methods of accounting to comply with the
requirements of section 163(e)(3), which defers certain deductions attributable to original issue discount debt instruments held
by related foreign persons. Any portion of the original issue discount will not be allowable as a deduction to the U.S. person
issuer until paid. See section 5.02 of Rev. Proc. 2015-14.
Railroad track structure expenditures (section 263(a))—for a taxpayer changing its method of accounting for track
structures to: (a) the safe harbor method provided in Rev. Proc. 2002-65, 2002-2 C.B. 700; or (b) the safe harbor method
provided in Rev. Proc. 2001-46, 2001-2 C.B. 263. See section 10.12 of Rev. Proc. 2015-14.

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List of DCNs
Change
U.S. ratio method (section 263A)—for a foreign person (as defined in Notice 88-104, as modified by Notice 89-67) required
to capitalize costs under section 263A that is changing its method of accounting to the U.S. ratio method (as described in
Notice 88-104) or that currently uses the U.S. ratio method and is changing to the U.S. ratio method of a different applicable
U.S. trade or business for applying the U.S. ratio method. See section 11.13 of Rev. Proc. 2015-14.
Depletion (section 263A)—for an applicant changing its method of accounting for depletion to treat these amounts as an
indirect cost that is only properly allocable to property that has been sold under Regulations section 1.263A-1(e)(3)(ii)(J). See
section 11.14 of Rev. Proc. 2015-14.
An accrual method taxpayer receiving advance payments (section 451)—that wants to change to a method of
accounting of including advance payments in income in the taxable year of receipt. See section 15.07 of Rev. Proc. 2015-14.
Retainages received under long-term contracts (section 451)—for an accrual method applicant’s retainages under section
451 to a method consistent with the holding in Rev. Rul. 69-314, 1969-1 C.B. 139. This change only applies to retainages under
long-term contracts as defined in section 460(f) that are exempt construction contracts (as defined in Regulations section
1.460-3(b)(1)). An applicant changing its method of accounting under this section must treat all retainages (receivables and
payables) in the same manner. See section 15.10 of Rev. Proc. 2015-14. Note. This change is implemented on a cut-off basis.
Change from the mark-to-market method of accounting to a realization method (section 475)—for a taxpayer changing
its method of accounting for securities or commodities from the mark-to-market method described in section 475 to a
realization method of accounting (for example, by revoking an election under section 475(e), section 475(f)(1), or section 475(f)
(2)). A notification statement must be filed earlier than the due date of the Form 3115. See section 23.02 of Rev. Proc. 2015-14.
Note. This change is generally made with audit protection, but has conditions or limitations. This change is also implemented
on a cut-off basis.
Change in qualification as life/non-life insurance company (section 816)—for a taxpayer changing its qualification under
section 816(a) to move from a life insurance company taxable under Part I of subchapter L to a non-life insurance company
taxable under Part II of subchapter L, or vice versa. See section 25.03 of Rev. Proc. 2015-14. Note. This change does not
receive audit protection.
Economic performance safe harbor for Ratable Service Contracts (section 461)—for an accrual method taxpayer that
wants to change its treatment of Ratable Service Contracts to conform to the safe harbor method provided by Rev. Proc.
2015-39, 2015-33 I.R.B. 197. See section 19.12 of Rev. Proc. 2015-14, as modified by Rev. Proc. 2015-39.

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217

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Privacy Act and Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws
of the United States. Section 446(e) says that you must obtain IRS approval before you change your method of accounting, except
where otherwise provided. To obtain this approval, you are required to provide the information requested on this form. This information
will be used to ensure that you are complying with the applicable laws, and to figure and collect the right amount of tax. Failure to
provide all of the information requested may delay or prevent processing of this form. Providing false information may subject you to
penalties. Routine uses of this information include giving it to the Department of Justice for civil and criminal litigation, and to cities,
states, the District of Columbia, and to U.S. commonwealths and possessions for use in the administration of their tax laws. We may
also disclose this information to other countries under a tax treaty, to federal and state agencies to enforce federal non-tax criminal
laws, or to federal law enforcement and intelligence agencies to combat terrorism.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential,
as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for
individual taxpayers filing this form is approved under OMB control number 1545-0074 and is included in the estimates shown in the
instructions for their individual income tax return. The estimated burden for all other taxpayers who file this form is shown below.
Form
3115
Sch. A
Sch. B
Sch. C
Sch. D
Sch. E

Recordkeeping

Learning about the law
or the form

38 hr., 29 min.
3 hr., 21 min.
1 hr., 25 min.
5 hr., 1 min.
27 hr., 30 min.
3 hr., 49 min.

19 hr., 54 min.
1 hr., 51 min.
30 min.
45 min.
1 hr., 59 min.
1 hr., 59 min.

Preparing and sending
the form to the IRS
23 hr., 48 min.
3 hr., 11 min.
33 min.
2 hr., 4 min.
2 hr., 31 min.
2 hr., 8 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be
happy to hear from you. You can send us comments from www.irs.gov/formspubs/. Click on “More Information” and then on “Give us
feedback.” Or you can send your comments to: Internal Revenue Service, Tax Forms and Publications Division, 1111 Constitution
Ave. NW, IR-6526, Washington, DC 20224. Do not send Form 3115 to this address. Instead, see When and Where to File, earlier.

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