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Federal Register / Vol. 86, No. 2 / Tuesday, January 5, 2021 / Rules and Regulations this section, the third sentence of paragraph a3 of this section, and paragraphs a4ii and a5 of this section apply for taxable years beginning on or after January 5, 2021 .
However, for a taxable year beginning after December 31, 2017, and before January 5, 2021, a taxpayer may apply the paragraphs described in the first sentence of this paragraph f2, provided the taxpayer follows all the applicable rules contained in the regulations under section 263A for such taxable year and all subsequent taxable years.
Par. 6. Section 1.263A4 is amended:
1. In paragraph a1, by revising the last sentence.
2. In paragraph a2iiA1, by removing the language section 464c and adding in its place the language with section 461k.
3. By redesignating paragraphs a3
and 4 as paragraphs a4 and 5
respectively.
4. By adding new paragraph a3.
5. By revising the paragraph d subject heading.
6. In paragraph d1, by revising the last sentence and adding a new sentence at the end of the paragraph.
7. In paragraph d3i, by removing the last sentence.
8. By revising paragraph d3ii.
9. By redesignating paragraph d5 as paragraph d7.
10. By adding new paragraphs d5
and 6
11. By adding paragraph e5.
12. By redesignating paragraph f as paragraph g.
13. By adding new paragraph f.
14. By revising the subject headings of newly-redesignated paragraphs g and g1, and by revising newly-designated paragraph g2.
The revisions and additions read as follows:

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1.263A4 Rules for property produced in a farming business.

a 1 Except as provided in paragraphs a2, a3, and e of this section, taxpayers must capitalize the costs of producing all plants and animals unless the election described in paragraph d of this section is made.

3 Exemption for certain small business taxpayers. For taxable years beginning after December 31, 2017, see 1.263A1j for an exception in the case of a small business taxpayer that meets the gross receipts test of section 448c and 1.4482c.

d Election not to have section 263A
apply under section 263Ad31

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Except as provided in paragraph d5 and 6 of this section, the election is a method of accounting under section 446. An election made under section 263Ad3 and this paragraph d is revocable only with the consent of the Commissioner.

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ii Nonautomatic election. Except as provided in paragraphs d5 and 6 of this section, a taxpayer that does not make the election under this paragraph d as provided in paragraph d3i of this section must obtain the consent of the Commissioner to make the election by filing a Form 3115, Application for Change in Method of Accounting, in accordance with 1.4461e3.

5 Revocation of section 263Ad3
election to permit exemption under section 263Ai. A taxpayer that elected under section 263Ad3 and paragraph d3 of this section not to have section 263A apply to any plant produced in a farming business that wants to revoke its section 263Ad3 election, and in the same taxable year, apply the small business taxpayer exemption under section 263Ai and 1.263A1j may revoke the election in accordance with the applicable administrative guidance as published in the Internal Revenue Bulletin see 601.601d2iib of this chapter. A revocation of the taxpayers section 263Ad3 election under this paragraph d5 is not a change in method of accounting under sections 446 and 481 and 1.4461 and 1.481
1 through 1.4815.
6 Change from applying exemption under section 263Ai to making a section 263Ad3 election. A taxpayer whose method of accounting is to not capitalize costs under section 263A
based on the exemption under section 263Ai, that becomes ineligible to use the exemption under section 263Ai, and is eligible and wants to elect under section 263Ad3 for this same taxable year to not capitalize costs under section 263A for any plant produced in the taxpayers farming business, must make the election in accordance with the applicable administrative guidance as published in the Internal Revenue Bulletin see 601.601d2iib of this chapter. An election under section 263Ad3 made in accordance with this paragraph d6 is not a change in method of accounting under sections 446 and 481 and 1.4461 and 1.481
1 through 1.4815.

e
5 Special temporary rule for citrus plants lost by reason of casualty.

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Section 263Ad2A provides that if plants bearing an edible crop for human consumption were lost or damaged while in the hands of the taxpayer by reason of freezing temperatures, disease, drought, pests, or casualty, section 263A
does not apply to any costs of the taxpayer of replanting plants bearing the same type of crop whether on the same parcel of land on which such lost or damaged plants were located or any other parcel of land of the same acreage in the United States. The rules of this paragraph e5 apply to certain costs that are paid or incurred after December 22, 2017, and on or before December 22, 2027, to replant citrus plants after the loss or damage of citrus plants.
Notwithstanding paragraph e2 of this section, in the case of replanting citrus plants after the loss or damage of citrus plants by reason of freezing temperatures, disease, drought, pests, or casualty, section 263A does not apply to replanting costs paid or incurred by a taxpayer other than the owner described in section 263Ad2A if i The owner described in section 263Ad2A has an equity interest of not less than 50 percent in the replanted citrus plants at all times during the taxable year in which such amounts were paid or incurred and the taxpayer holds any part of the remaining equity interest; or ii The taxpayer acquired the entirety of the equity interest in the land of that owner described in section 263Ad2A and on which land the lost or damaged citrus plants were located at the time of such loss or damage, and the replanting is on such land.
f Change in method of accounting.
Except as provided in paragraphs d5
and 6 of this section, any change in a taxpayers method of accounting necessary to comply with this section is a change in method of accounting to which the provisions of sections 446
and 481 and 1.4461 through 1.4467
and 1.4811 through 1.4813 apply.
g Applicability dates1 In general.
2 Changes made by Tax Cuts and Jobs Act Pub. L. 11597. Paragraphs a3, d5, d6, and e5 of this section apply for taxable years beginning on or after January 5, 2021.
However, for a taxable year beginning after December 31, 2017, and before January 5, 2021, a taxpayer may apply the paragraphs described in the first sentence of this paragraph g2, provided that the taxpayer follows all the applicable rules contained in the regulations under section 263A for such taxable year and all subsequent taxable years.

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