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Federal Register / Vol. 86, No. 2 / Tuesday, January 5, 2021 / Rules and Regulations
provided that the taxpayer follows all the applicable rules contained in the regulations under section 448 for such taxable year and all subsequent taxable years.
Par. 16. Newly-redesignated 1.4483
is amended by revising paragraphs a2
and h to read as follows:
1.4483 Nonaccrual of certain amounts by service providers.

a
2 The taxpayer meets the gross receipts test of section 448c and 1.4481Tf2 in the case of taxable years beginning before January 1, 2018, or 1.4482c in the case of taxable years beginning after December 31, 2017 for all prior taxable years.

h Applicability dates. 1 Except as provided in paragraph h2 of this section, this section is applicable for taxable years ending on or after August 31, 2006.
2 The rules of paragraph a2 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 paragraph described in the first sentence of this paragraph h2, provided that the taxpayer follows all the applicable rules contained in the regulations under section 448 for such taxable year and all subsequent taxable years.
Par. 17. Section 1.4600 is amended by:
1. Adding an entry for 1.4601h3.
2. Revising the entries for 1.460
3b3, 1.4603b3i and ii, and adding entries for 1.4603b3iiA, B, C and D.
3. Removing the entry for 1.460
3b3iii.
4. Adding entries for 1.4603d, 1.4604i, and 1.4606k.
The additions and revisions read as follows:
1.4600 Outline of regulations under section 460.

1.4601

Long-term contracts.

h
3 Changes made by Tax Cuts and Jobs Act Pub. L. 11597.

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1.4603

Long-term construction contracts.

b
3 Gross receipts test of section 448c i In general ii Application of gross receipts test A In general
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B Gross receipts of individuals, etc.
C Partners and S corporation shareholders D Examples 1 Example 1.
2 Example 2.
iii Method of accounting.

d Applicability dates.
1.4604 Methods of Accounting for longterm contracts.

i Applicability date.

1.4606

Look-back method.

k Applicability date.

Par. 18. Section 1.4601 is amended by adding three sentences to the end of paragraph f3 and adding paragraph h3 to read as follows:

1.4601

Long-term contracts.

f
3 A taxpayer may adopt any permissible method of accounting for each classification of contract. Such adoption is not a change in method of accounting under section 446 and the accompanying regulations. For example, a taxpayer that has had only contracts classified as nonexempt long-term contracts and has used the PCM for these contracts may adopt an exempt contract method in the taxable year it first enters into an exempt long-term contract.

h
3 Changes made by Tax Cuts and Jobs Act Pub. L. 11597. Paragraph f3 of this section, and 1.4605d1
and d3, apply for contracts entered into in taxable years beginning on or after January 5, 2021. However, for contracts entered into after December 31, 2017, in a taxable year ending after December 31, 2017, and before January 5, 2021, a taxpayer may apply paragraph f3 of this section, and 1.4605d1
and d3, provided that the taxpayer also applies the applicable rules contained in the regulations under section 460 for such taxable year and all subsequent taxable years.

Par. 19. Section 1.4603 is amended by revising paragraphs b1ii and b3, and adding paragraph d to read as follows:
1.4603 Long-term construction contracts.

b
1
ii Other construction contract, entered into after December 31, 2017, in
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a taxable year ending after December 31, 2017, by a taxpayer, other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting cash method under section 448a3, who estimates at the time such contract is entered into that such contract will be completed within the 2year period beginning on the contract commencement date, and who meets the gross receipts test described in paragraph b3 of this section for the taxable year in which such contract is entered into.

3 Gross receipts testi In general.
A taxpayer, other than a tax shelter prohibited from using the cash method under section 448a3, meets the gross receipts test of this paragraph b3 if it meets the gross receipts test of section 448c and 1.4482c2. This gross receipts test applies even if the taxpayer is not otherwise subject to section 448a.
ii Application of gross receipts test A In general. In the case of any taxpayer that is not a corporation or a partnership, and except as provided in paragraphs b3iiB and C of this section, the gross receipts test of section 448c and the accompanying regulations are applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership.
B Gross receipts of individuals, etc.
Except when the aggregation rules of section 448c2 apply, the gross receipts of a taxpayer other than a corporation or partnership are the amount derived from all trades or businesses of such taxpayer. Amounts not related to a trade or business are excluded from the gross receipts of the taxpayer. For example, an individual taxpayers gross receipts do not include inherently personal amounts, such as personal injury awards or settlements with respect to an injury of the individual taxpayer, disability benefits, Social Security benefits received by the taxpayer during the taxable year, and wages received as an employee that are reported on Form W2.
C Partners and S corporation shareholders. Except when the aggregation rules of section 448c2
apply, each partner in a partnership includes a share of partnership gross receipts in proportion to such partners distributive share as determined under section 704 of items of gross income that were taken into account by the partnership under section 703.
Similarly, a shareholder includes the pro rata share of S corporation gross
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