Voglio sapere a riguardo di…

jbell on DSKJLSW7X2PROD with RULES

Federal Register / Vol. 86, No. 2 / Tuesday, January 5, 2021 / Rules and Regulations section 448a3 or not meeting the Section 448 Gross Receipts Test in a taxable year but that becomes eligible to use the cash method under section 448
in the subsequent taxable year.
Proposed 1.4482g3 would have required this small business taxpayer to request consent to change back to the cash method using the non-automatic change procedures in Revenue Procedure 201513 or successor. These final regulations remove the 5-year restriction on making automatic method changes for certain situations.
Sections 263Ai3, 448d7, 460e2B and 471c4 provide that certain changes in method of accounting for the small business exemptions are made with the consent of the Secretary.
A taxpayer must follow the applicable administrative procedures related to a change in method of accounting notwithstanding the deemed consent of the Secretary. See, e.g., Capital One Financial Corporation and Subsidiaries v. Commissioner of Internal Revenue, 130 T.C. 147, 157 2008 a taxpayer forced to change its method of accounting under section 448 must still file a Form 3115 with its return. The Treasury Department and the IRS intend to provide procedural rules relating to changes in method of accounting to implement the final regulations using the automatic method change procedures of Revenue Procedure 2015
13. Those procedural rules will address whether a waiver of the 5-year overall method eligibility rule in section 5.011e of Revenue Procedure 2015
13 is appropriate for small business taxpayers that were required to change from the cash method in one taxable year but are not subsequently limited by section 448.
The Treasury Department and the IRS
have determined that taxpayers that are voluntarily changing that is, not required by section 448 to no longer use the cash method between overall methods are distinguishable from taxpayers that are required to change from the cash method to another method because they no longer meet the Section 448c Gross Receipts Test or become a tax shelter under section 448d3. The procedural guidance is expected to address both fact patterns.
Additionally, the Treasury Department and the IRS intend for the procedural guidance to address similar fact patterns for taxpayers making changes related to the regulations under sections 263Ai, 460e1B and 471c, as discussed in this Summary of Comments and Explanation of Revisions.

VerDate Sep<11>2014

16:32 Jan 04, 2021

Jkt 253001

3. Section 471 Small Business Taxpayer Exemptions A. Inventory Treated as Non-Incidental Materials and Supplies The preamble to the proposed regulations notes that the Treasury Department and the IRS interpret the statutory language of section 471c1B to mean that the property excepted from section 471a by that provision continues to be inventory property even though the general inventory rules under section 471a are not required to be applied to that property. Section 471c1B provides that a qualifying taxpayers method of accounting for inventory for such taxable year emphasis added will not be treated as failing to clearly reflect income if the method treats inventory as non-incidental materials and supplies emphasis added. The Treasury Department and the IRS read the repeated use of the word inventory to mean that Congress intended that inventory property remains inventory property while relieving taxpayers from the general inventory rules of section 471a. To reduce confusion about the nature of property treated as non-incidental materials and supplies under section 471c1Bi, these final regulations refer to the method under that provision of the Code as the section 471c NIMS
inventory method.
The Treasury Department and the IRS
interpret section 471c1Bi as providing three distinct benefits for taxpayers. First, the provision significantly expanded the types of taxpayers permitted to treat their inventory as non-incidental materials and supplies. Under prior administrative guidance, as discussed later in section 3.A.i of this Summary of Comments and Explanation of Revisions, taxpayers with gross receipts of no more than $1 million and taxpayers in certain industries generally not producers or resellers with gross receipts of no more than $10
million were permitted to treat their inventory as non-incidental materials and supplies. Section 471c greatly expanded the availability of this method of accounting to taxpayers in all types of trades or businesses, including producers and resellers, by reference to the increased cap on gross receipts under the Section 448c Gross Receipts Test. Second, treating inventory as nonincidental materials and supplies under 1.4711b5 provides simplification and burden reduction for taxpayers by requiring only certain costs to be capitalized to inventory. For example, a taxpayer using the section 471c NIMS

PO 00000

Frm 00035

Fmt 4700

Sfmt 4700

257

inventory method does not capitalize direct labor costs or any indirect costs to inventory costs. See discussion of direct labor costs later in section 3.A.iii of this Summary of Comments and Explanation of Revisions. Simplification does not indicate that the nature of the property was changed by the TCJA, or that the intent of Congress was to provide immediate expensing of inventory costs. Thirdly, taxpayers, other than a tax shelter under section 448a3, treating inventory as nonincidental materials and supplies under 1.4711b5 are eligible to use the overall cash method of accounting for purchases and sales of merchandise, rather than being required to use an accrual method. See 1.4461a4i.
i. Definition of the Term Used or Consumed The preamble to the proposed regulations provides that the Treasury Department and IRS interpret section 471c1Bi as generally codifying the administrative guidance existing at the time of its enactment that is, Revenue Procedure 200110 20012 IRB 272
and Revenue Procedure 200228 2002
18 IRB 815 and making that method available to significantly more taxpayers. Accordingly, the proposed regulations provided that items of inventory treated as materials and supplies under section 471c are used or consumed in the taxable year in which the taxpayer provides the item to a customer, and the cost of such item is recovered in that taxable year or the taxable year in which the taxpayer pays for or incurs such cost, whichever is later.
Comments were received on the definition of used or consumed in proposed 1.4711b4i as it relates to producers. A commenter asserted that the meaning of the term used or consumed for a producer using the section 471c NIMS inventory supplies method should be consistent with the meaning of the term used or consumed in 1.1623. The commenter states that a producers raw materials are used or consumed when the raw materials enter the taxpayers production process. The commenter states that under section 471c1Bi and 1.1623a1, only section 263A
would limit a producers ability to recover the cost of its raw materials when the raw materials are first used in the production process, and the final regulations should be modified to provide that a producer does not wait until the finished product is provided to a customer to recover the costs of its raw materials. In addition, the commenter states that the policy considerations
E:FRFM05JAR1.SGM

05JAR1