The IRS has released new guidance (Rev. Proc. 2012-39) modifying and clarifying the procedures for accounting method changes involving Section 381(a) transactions, the safe harbor for expenses for repairing or improving electric transmission and distribution property under Rev. Proc. 2011-43, and designers who are allocated a Section 179D deduction for energy-efficient commercial building property.
Rev. Proc. 2012-39 waives the scope limitation in Rev. Proc. 2011-14 that precludes a taxpayer from making an automatic method change for a taxable year in which the taxpayer engages in a Section 381(a) transaction. Rev. Proc. 2012-39 also modifies both Rev. Proc. 2011-14 and Rev. Proc. 97-27 to waive the scope limitation that precludes taxpayers who are under examination from seeking consent to change to an accounting method other than the principal or carryover method.
Rev. Proc. 2012-39 also addresses the rules in Rev. Proc. 2011-14 allowing taxpayers in the business of transporting, delivering or selling electricity to change their method of accounting to the safe harbor method of accounting described in Rev. Proc. 2011-43. The scope limitations of Section 4.02 of Rev. Proc. 2011-14 generally do not apply to a taxpayer that changes to the method of accounting provided in Rev. Proc. 2011-43 for its first or second taxable year ending after Dec. 30, 2010. Rev. Proc. 2012-39 extends the wavier of scope limitations to the third taxable year ending after Dec. 30, 2010, because the IRS learned that many electrical transmission or distribution companies needed more time to change their method of accounting to the safe harbor method.
Finally, Rev. Proc. 2012-39 states that some taxpayers have interpreted the automatic method change related to Section 179D as set forth in the Appendix to Rev. Proc. 2011-14 as applying to designers. Rev. Proc. 2012-39 clarifies that a designer who receives an allocation of a Section 179D deduction from the owner of a commercial building is making a permanent change to its income. Thus, Rev. Proc. 2012-39 makes clear that designers may not use the automatic change provided for in Rev. Proc. 2011-14. Designers allocated a Section 179D deduction for commercial building property placed in service in a prior taxable year may file an amended return for the taxable year in which the property was placed in service (if that taxable year is open) to claim the Section 179D deduction.
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