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established timber stand, to treat such costs as ordinary and

95. Self-constructed tangible personal property

necessary business expenses deductible under section 162.

produced on a routine and repetitive basis (section

Scope limitations do not apply. See Rev. Rul. 2004-62, 2004-25

263A) — for an applicant’s first tax year ending on or after

I.R.B. 1072.

August 2, 2005, from accounting for mixed service costs under

87. Change in general asset account treatment due to a

the simplified service cost method to a method that allocates

change in the use of MACRS property (section 168) — to the

such costs using reasonable factors or relationships under a

method of accounting provided in Regulations sections

direct reallocation method, a step-allocation method, or any

1.168(i)-1(c)(2)(ii)(E) and 1.168(i)-1(h)(2). This change is made

other reasonable allocation method (as defined under the

on a cut-off basis. See Regulations section 1.168(i)-1(l)(2)(ii).

principles of Regulations section 1.263A-1(f)(4)) as provided in

88. Change in method of accounting for depreciation due

Regulations section 1.263A-1(g)(4), or from accounting for

to a change in the use of MACRS property (section 168) —

additional section 263A costs under the simplified production

to the method of accounting provided in Regulations section

method to a facts-and-circumstances method as provided in

1.168(i)-4. See Regulations section 1.168(i)-4(g)(2).

Regulations section 1.263A-1(f), when the self-constructed

89. Depreciation of qualified non-personal use vans and

assets are not produced on a routine and repetitive basis

light trucks (section 280F) — for certain vehicles placed in

(mass-produced or the applicable recovery period of the

service before July 7, 2003, to a method of accounting in

property is longer than 3 years). Scope limitations do not apply.

accordance with Regulations section 1.280F-6(f)(2). See

Audit protection does not apply if the applicant’s method of

Regulations section 1.280F-6(f)(2)(iv).

accounting for mixed service costs or additional section 263A

90. Insurance companies’ incentive payments to health

costs is an issue under consideration at the time the application

care providers (section 832) — for deducting provider

is filed with the IRS National Office. The section 481(a)

incentive payments, to the method of including those payments

adjustment period is two tax years for a net positive adjustment.

in discounted unpaid losses without regard to section 404.

The applicant can request this change and designated

Scope limitations do not apply if the change is made for the

automatic accounting method change numbers 77

applicant’s first or second tax year ending on or after December

(environmental remediation costs) and 92 (allocation of

31, 2003. See Rev. Proc. 2004-41, 2004-30 I.R.B. 90.

environmental remediation costs to production) on a single

91. Up-front network upgrade payments made to utilities

Form 3115, but must comply with the ordering rules of

(section 451) — to a safe harbor method provided in section

Regulations section 1.263A-7(b)(2). See Temporary

5.01 of Rev. Proc. 2005-35, 2005-28 I.R.B. 76. Scope

Regulations sections 1.263A-1T(h)(2)(i)(D) and

limitations do not apply if the change is made for the applicant’s

1.263A-2T(b)(2)(i)(D).

first tax year ending on or after July 11, 2005, or for a prior year

96. Replacement cost method for heavy equipment

of change pursuant to section 6.03 of Rev. Proc. 2005-35. See

dealers’ parts inventory (section 472) — to the replacement

Rev. Proc. 2005-35.

cost method for heavy equipment dealers’ parts inventory

92. Allocation of environmental remediation costs to

described in Rev. Proc. 2006-14, 2006-4 I.R.B. 350. Complete

production (section 263A) — to a method that allocates under

Schedule D, Parts II and III, of Form 3115, as applicable. Audit

section 263A environmental remediation costs to the inventory

protection and scope limitations do not apply in certain cases.

produced during the tax year such costs are incurred. Scope

This change is made on a cut-off basis. See Rev. Proc.

limitations do not apply if the change is made for the applicant’s

2006-14.

first or second tax year ending after February 6, 2004. An

97. Depreciation of qualified revitalization building in the

applicant that filed a Form 3115 on or before July 20, 2005, to

expanded area of a renewal community (section 1400I) — for

comply with Rev. Rul. 2004-18, 2004-8 I.R.B. 509, for its first

a qualified revitalization building that is placed in service by the

tax year ending after February 6, 2004, or was not required to

applicant after December 31, 2001, in the area of a renewal

change its method of accounting to comply with Rev. Rul.

community that was expanded by the U.S. Department of

2004-18, and files Form 3115 to comply with Rev. Proc.

Housing and Urban Development and for which the applicant

2005-42, 2005-28 I.R.B. 67, for its first tax year ending after

receives a retroactive commercial revitalization expenditure

June 20, 2005, may effect the change using either a section

allocation. This change applies only if the applicant filed the

481(a) adjustment or a cut-off method. An applicant requesting

federal tax return for the placed-in-service year of that building

this change and another automatic change under section 263A

on or before the date the applicant received the retroactive

may file one Form 3115 to make both changes, but must

commercial revitalization expenditure allocation. This change

comply with the ordering rules of Regulations section

must be filed with the applicant’s federal tax return for the

1.263A-7(b)(2). See Rev. Rul. 2005-42.

taxable year that includes the date on which the commercial

93. Election to not treat qualified New York Liberty Zone

revitalization agency makes the retroactive commercial

(Liberty Zone) leasehold improvement property as 5-year

revitalization expenditure allocation, or with the applicant’s

property for purposes of section 168 (sections 168 and

federal tax return for the first tax year succeeding the tax year

1400L(c)) — for Liberty Zone leasehold improvement property

that included the date on which the commercial revitalization

placed in service by the applicant after September 10, 2001,

agency made the retroactive commercial revitalization

during the 2000, 2001, 2002, 2003, or 2004 tax year, to elect

expenditure allocation. Scope limitations do not apply. See Rev.

not to use the 5-year recovery period or 9-year recovery period,

Proc. 2006-16, 2006-9 I.R.B. 539.

as applicable, provided under section 1400L(c). This change

98. Insurance contracts acquired in an assumption

must be filed with the applicant’s federal tax return for the tax

reinsurance transaction (section 197) — for an applicant’s

year that includes June 29, 2005, or with the applicant’s federal

first tax year ending after April 10, 2006, for certain acquisitions

tax return for the first tax year succeeding the tax year that

of insurance contracts that apply the rules of Temporary

included June 29, 2005. Scope limitations do not apply. See

Regulations section 1.197-2T(g)(5)(ii) to transactions occurring

Rev. Proc. 2005-43, 2005-29 I.R.B. 107.

prior to April 10, 2006, to comply with Regulations section

94. Credit card cash advance fees (section 1272) — to a

1.197-2(g)(5). This change does not apply if the applicant’s

method that treats credit card cash advance fees as creating or

proper treatment of any such property is an issue under

increasing OID on a pool of credit card loans that includes the

consideration in an examination, before an Appeals office, or

cash advances that give rise to the fees. Scope limitations do

before a Federal court. Scope limitations do not apply. See

not apply if the change is made for the applicant’s first or

Regulations section 1.197-2(g)(5).

second tax year ending on or after December 31, 2004. See

99. Elections to treat participations and residuals under

Rev. Proc. 2005-47, 2005-32 I.R.B. 269.

the income forecast method (section 167(g)) — for property

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Instructions For Form 3115 - Application For Change In Accounting Method - Internal Revenue Service - 2006 Page 15

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