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Department of the Treasury
Internal Revenue Service
Instructions for Form 3115

(Rev. December 2018)

Application for Change in Accounting Method

Section references are to the Internal Revenue Code unless Method Change Procedures
otherwise noted.
When filing Form 3115, you must determine if the IRS
All references to Rev. Proc. 2015-13 are to Rev. Proc. ! has issued any new published guidance which includes
! 2015-13, 2015-5 I.R.B. 419 (as clarified and modified by CAUTION revenue procedures, revenue rulings, notices,
CAUTION Rev. Proc. 2015-33, 2015-24 I.R.B. 1067, and as
regulations, or other relevant guidance in the Internal Revenue
modified by Rev. Proc. 2017-59, 2017-48 I.R.B. 543, and by Bulletin. For the latest information, visit IRS.gov.
section 17.02 of Rev. Proc. 2016-1, 2016-1 I.R.B. 1), or any
successor. For general application procedures on requesting accounting
method changes, see Rev. Proc. 2015-13. Rev. Proc. 2015-13
All references to Rev. Proc. 2018-31 and the List of Automatic provides procedures for both automatic and non-automatic
Changes are to Rev. Proc. 2018-31, 2018-22 I.R.B. 637 (as changes in method of accounting.
modified by Rev. Proc. 2018-60, 2018-51 I.R.B. 1045, Rev. Automatic change procedures. Unless otherwise provided in
Proc. 2018-56, 2018-50 I.R.B. 985, Rev. Proc. 2018-49, 2018-41 published guidance, you must file under the automatic change
I.R.B. 548, Rev. Proc. 2018-44, 2018-37 I.R.B. 426, Rev. Proc. procedures if you are eligible to request consent to make a
2018-40, 2018–34 I.R.B. 320, Rev. Proc. 2018-35, 2018-28 change in your method of accounting under the automatic
I.R.B. 204, and Rev. Proc. 2018-29, 2018-22 I.R.B. 634), or any change procedures for the requested year of change. See the
successor. instructions for Part I later, and the List of Automatic Changes in
All references to Rev. Proc. 2019-1 are to Rev. Proc. 2019-1, Rev. Proc. 2018-31.
2019-1 I.R.B. 1, or any successor (updated annually). A Form 3115 filed under these procedures may be reviewed
by the IRS. If it is, you will be notified if information in addition to
Future Developments that requested on Form 3115 is required or if your request is
For the latest information about developments related to Form denied. No user fee is required. An applicant that timely files and
3115 and its instructions, such as legislation enacted after they complies with the automatic change procedures is granted
were published, go to IRS.gov/Form3115. consent to change its accounting method, subject to review by
the IRS National Office and operating division director.
What's New Ordinarily, you are required to file a separate Form 3115 for
Small business taxpayers. Effective for tax years beginning each change in method of accounting. However, in some cases
after 2017, the Tax Cuts and Jobs Act (P.L. 115-97) expanded you are required or permitted to file a single Form 3115 for
the eligibility of small business taxpayers to use the cash method particular concurrent changes in method of accounting. See
of accounting. The cash method is available for taxpayers that section 6.03(1)(b) of Rev. Proc. 2015-13 for more information.
had average annual gross receipts for the 3 preceding tax years
of $25 million or less. See the instructions for Schedule A, later. Note. The List of DCNs (Designated automatic accounting
Qualifying small business taxpayers are also exempt from the method change number) at the end of these instructions is a list
following accounting rules. of many accounting method changes and is presented for
• The requirement to keep inventories. See section 471(c) and informational purposes only and subject to the most recently
the instructions for Schedule A. issued Revenue Procedures.
• The uniform capitalization rules. See section 263A(i) and the Reduced Form 3115 filing requirement. A qualified small
instructions for Schedule D. taxpayer qualifies for a reduced Form 3115 filing requirement for
• The requirement to use the percentage-of-completion method the following DCNs: 7, 8, 21, 87, 88, 89, 107, 121, 145, 157,
for construction contracts, expected to be completed within two 184–193, 198, 199, 200, 205, 206, 207, and 222. A qualified
years. See section 460(e) and the instructions for Schedule D. small taxpayer is a taxpayer with average annual gross receipts
Advance payments. See the instructions for Schedule B for of less than or equal to $10 million for the 3 tax years preceding
changes to the election to defer advance payments. the year of change. See Year of Change, later. A reduced Form
3115 filing requirement involves completing only certain lines
Terminating S corporations. Special rules apply for eligible and schedules of the Form 3115. For qualifying changes and
terminated S corporations (as defined in section 481(d)(2)) that filing requirements, see the List of Automatic Changes.
change their method of accounting from cash to accrual. See the
instructions for Part IV. Non-automatic change procedures. If you do not qualify to
file under the automatic change procedures for the requested
change in method of accounting for the requested year of
General Instructions change, you may be able to file under the non-automatic change
procedures. See Non-automatic change—scope and eligibility
Purpose of Form rules, in Part III, later. If the requested change is approved by the
File Form 3115 to request a change in either an overall method IRS National Office, the filer will receive a letter ruling on the
of accounting or the accounting treatment of any item. requested change. File a separate Form 3115 for each unrelated
item or submethod. A user fee is required. See the instructions
for Part III, later, for more information.

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The IRS does not send acknowledgements of receipt for
Who Must File automatic change requests.
The filer is the entity or person required to file Form 3115,
whether on its own behalf or on behalf of another entity. An For filing procedures relating to automatic change
applicant is an entity, a person, or a separate and distinct trade TIP requests for certain foreign corporations and foreign
or business of an entity or a person (for purposes of Regulations partnerships, see section 6.03(1)(a)(ii) and (iii) of Rev.
section 1.446-1(d)), whose method of accounting is being Proc. 2015-13.
changed.
Non-automatic change requests. You must file Form 3115
For a consolidated group of corporations, the common parent under the non-automatic change procedures during the tax year
corporation must file Form 3115 for a change in method of for which the change is requested, unless otherwise provided by
accounting for itself and for any member of the consolidated published guidance. See section 6.03(2) of Rev. Proc. 2015-13.
group. For example, the common parent corporation of a File Form 3115 with the IRS National Office at the address listed
consolidated group is the filer when requesting a change in in the Address Chart. File Form 3115 as early as possible during
method of accounting for another member of that consolidated the year of change to provide adequate time for the IRS to
group (or a separate and distinct trade or business of that respond prior to the due date of the filer's return for the year of
member), and the other member (or trade or business) on change.
whose behalf Form 3115 is filed is the applicant. The IRS normally sends an acknowledgment of receipt within
For information on the difference between a filer and an 60 days after receiving a Form 3115 filed under the
applicant, see the Name(s) and Signature(s) section, later. non-automatic change procedures. If the filer does not receive
an acknowledgment of receipt for a non-automatic change
For a controlled foreign corporation (CFC) or 10/50 request within 60 days, the filer can inquire to:
corporation without a U.S. trade or business, see section 6.02(6)
of Rev. Proc. 2015-13. Internal Revenue Service
Control Clerk
Generally, a filer must file a separate Form 3115 for each CC:IT&A, Room 4512
applicant seeking consent to change a method of accounting. A 1111 Constitution Ave. NW
separate Form 3115 and user fee (for non-automatic change Washington, DC 20224
requests) must be submitted for each applicant and each
separate trade or business of an applicant, including a qualified In specified circumstances, you are required to send
subchapter S subsidiary (QSub) or a single-member limited ! additional copies of Form 3115 to another IRS
liability company (LLC), requesting a change in method of CAUTION address. For example, another copy of Form 3115
accounting. See section 9.02 of Rev. Proc. 2019-1. would be sent, when an applicant is under examination, before
However, identical changes in methods of accounting for two an Appeals office, before a federal court, or is a certain foreign
or more of the following in any combination may be included in a corporation or certain foreign partnership. See section 6.03(3) of
single Form 3115. Rev. Proc. 2015-13 for more information. Also see Part II, lines 6
and 8, later.
1. Members of a consolidated group;
2. Separate and distinct trades or businesses (for purposes Address Chart for Form 3115
of Regulations section 1.446-1(d)) of that entity or member(s) of File Form 3115 at the applicable IRS address listed below.
a consolidated group. Separate and distinct trades or
businesses include QSubs and single-member LLCs; A non-automatic change An automatic change
3. Partnerships that are wholly owned within a consolidated request request (Form 3115 copy)
group; and Delivery by mail Internal Revenue Service Internal Revenue Service
4. CFCs and 10/50 corporations that do not engage in a Attn: CC:PA:LPD:DRU Ogden, UT 84201
P.O. Box 7604 M/S 6111
trade or business within the United States where (i) all controlling Benjamin Franklin Station
domestic shareholders (as provided in Regulations section Washington, DC 20044
1.964-1(c)(5)) of the CFCs and of the 10/50 corporations, as Delivery by Internal Revenue Service Internal Revenue Service
applicable, are members of the consolidated group; or (ii) the private delivery Attn: CC:PA:LPD:DRU 1973 N. Rulon White Blvd.
taxpayer is the sole controlling domestic shareholder of the service Room 5336 Ogden, UT 84201
CFCs or of the 10/50 corporations. 1111 Constitution Ave. NW Attn: M/S 6111
Washington, DC 20224
For information on what is an identical change in method of
accounting, see section 15.07(4) of Rev. Proc. 2019-1.

When and Where To File Late Application
Automatic change requests. Except if instructed differently, In general, a filer that fails to timely file a Form 3115 will not be
you must file Form 3115 under the automatic change procedures granted an extension of time to file except in unusual and
in duplicate as follows. compelling circumstances. See section 6.03(4)(b) of Rev. Proc.
• Attach the original Form 3115 to the filer's timely filed 2015-13 and Regulations section 301.9100-3 for the standards
(including extensions) federal income tax return for the year of that must be met. For information on the period of limitations,
change. The original Form 3115 attachment does not need to be see section 5.03(2) of Rev. Proc. 2019-1.
signed.
However, an automatic 6-month extension from the due date
• File a copy of the signed Form 3115 to the address provided
(excluding any extension) of the federal income tax return to file
in the address chart on this page, no earlier than the first day of
Form 3115 may be available for automatic change requests. For
the year of change and no later than the date the original is filed
details, see section 6.03(4)(a) of Rev. Proc. 2015-13 and
with the federal income tax return for the year of change. This
Regulations section 301.9100-2.
signed Form 3115 may be a photocopy. For more on the
signature requirement, see the Name(s) and Signature(s) An applicant submitting a ruling request for an extension of
section, later. time to file Form 3115 must pay a user fee for its extension

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request and, in the case of a non-automatic change request, a the signature section, enter the signature of the officer who has
separate user fee for its accounting method change request. For personal knowledge of the facts and authority to bind the filer in
the schedule of user fees, see (A)(3)(b), (A)(4), and (A)(5)(d) in the matter. Enter that officer's name and official title in the space
Appendix A of Rev. Proc. 2019-1. provided.
Useful Items Consolidated group of corporations. Enter the name of the
common parent corporation on the first line of Form 3115. Also
You can refer to these items for more informationn changing a enter the name(s) of the applicant(s) on the fourth line if a
method of accounting. member of the consolidated group other than, or in addition to,
the parent corporation is requesting a change in method of
Revenue Procedures (Rev. Proc.) accounting. In the signature section, enter the signature of the
Rev. Proc. 2019-1. See Rev. Proc. 2019-1. This Rev. Proc. officer of the common parent corporation who has personal
provides specific and additional procedures for requesting a knowledge of the facts and authority to bind the common parent
change in method of accounting. corporation in the matter, and that officer's name and official title
in the space provided.
Rev. Proc. 2015-13. See Rev. Proc. 2015-13. This Rev. Proc.
provides the automatic and non-automatic method change Separate and distinct trade or business of an entity. Enter
procedures to obtain consent of the Commissioner to change a the name of the entity (or common parent corporation if the entity
method of accounting. is a member of a consolidated group) on the first line of Form
3115. Also enter the name of the separate and distinct trade or
Rev. Proc. 2018-31. See Rev. Proc. 2018-31. This Rev. Proc. business requesting a change in method of accounting on the
contains a list of accounting method changes that may be fourth line. In the signature section, enter the signature of the
eligible to file under the automatic method change procedures. individual who has personal knowledge of the facts and authority
to bind the separate and distinct trade or business of the entity in
Other Item the matter, and that person's name and official title in the space
Pub. 538, Accounting Periods and Methods. This provided.
publication provides general information on accounting CFC or 10/50 corporation. For a CFC or 10/50 corporation
methods. with a U.S. trade or business, follow the same rules as for other
corporations. For a CFC or 10/50 corporation that does not have
a U.S. trade or business, Form 3115 filed on behalf of its
Specific Instructions controlling domestic shareholder(s) (or common parent) must be
signed by an authorized officer of the designated (controlling
Name(s) and Signature(s) domestic) shareholder that retains the jointly executed consent
Enter the name of the filer on the first line of page 1 of Form as provided for in Regulations section 1.964-1(c)(3)(ii). If there is
3115. more than one shareholder, the statement described in
Regulations section 1.964-1(c)(3)(ii) must be attached to the
In general, the filer of Form 3115 is the applicant. However, in application. Also, the controlling domestic shareholder(s) must
circumstances where Form 3115 is filed on behalf of the provide the written notice required by Regulations section
applicant, enter the filer's name and identification number on the 1.964-1(c)(3)(iii). If the designated (controlling domestic)
first line of Form 3115 and enter the applicant's name and shareholder is a member of a consolidated group, then an
identification number on the fourth line. Receivers, trustees, or authorized officer of the common parent corporation must sign.
assignees must sign any Form 3115 they are required to file.
Estates or trusts. Enter the name of the estate or trust on the
If Form 3115 is filed for multiple (i) applicants in a first line of Form 3115. In the signature section, enter the
consolidated group of corporations, (ii) CFCs, (iii) wholly owned signature of the fiduciary, personal representative, executor,
partnerships within a consolidated group, and/or (iv) separate administrator, etc., who has personal knowledge of the facts and
and distinct trades or businesses (including QSubs or legal authority to bind the estate or trust in the matter, and that
single-member LLCs), attach a schedule listing each applicant person's official title in the space provided.
and its identification number (where applicable). This schedule
may be combined with the information requested for Part III, Exempt organizations. Enter the name of the organization on
line 24a (regarding the user fee), and Part IV (section 481(a) the first line of Form 3115. In the signature section, enter the
adjustment). If multiple names and signatures are required (for signature of a principal officer or other person who has personal
example, in the case of CFCs—see instructions below), attach a knowledge of the facts and authority to bind the exempt
schedule labeled “SIGNATURE ATTACHMENT” to Form 3115, organization in the matter, and that person's name and official
signed under penalties of perjury using the same language as in title in the space provided.
the declaration on page 1 of Form 3115. Preparer (other than filer/applicant). If the individual
Individuals. If Form 3115 is filed for a couple who file a joint preparing Form 3115 is not the filer or applicant, the preparer
income tax return, enter the names of both spouses on the first also must sign, and include the firm's name, where applicable.
line and the signatures of both spouses on the signature line. Generally, for both automatic and non-automatic changes, the
preparer (if not the filer or applicant) must sign the original and
Partnerships. Enter the name of the partnership on the first line copies of Form 3115. If Form 3115 is e-filed, the preparer need
of Form 3115. In the signature section, include the signature of not sign the original e-filed Form 3115 but must still complete the
one of the general partners or limited liability company members preparer information and, if applicable, must sign the duplicate
who has personal knowledge of the facts and who is authorized automatic Form 3115 copy.
to sign. Enter that person's name and official title in the space
provided. If the authorized partner is a member of a consolidated Identification Number
group, then an authorized officer of the common parent Enter the filer's taxpayer identification number on the first line of
corporation with personal knowledge of the facts must sign. Form 3115 as follows.
Non-consolidated corporations, personal service corpora- • Individuals enter their social security number (SSN). For a
tions, S corporations, cooperatives, and insurance compa- resident or non-resident alien, enter an individual taxpayer
nies. Enter the name of the filer on the first line of Form 3115. In

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identification number (ITIN). If Form 3115 is for a couple who file A Form 2848 must be attached to Form 3115 in order for the
a joint return, enter the identification numbers of both spouses. IRS to discuss a Form 3115 with the filer's representative, even if
• All others, enter the employer identification number (EIN). the filer's representative prepared and/or signed the Form 3115.
• If the filer is the common parent corporation of a consolidated
If the filer intends to have the authorized representative
group of corporations, enter the EIN of the common parent on
receive copies of correspondences regarding its Form
the first line of Form 3115. Enter the EIN of the applicant on the CAUTION!
3115, it must check the appropriate box on Form 2848.
fourth line if a member of the consolidated group other than, or in
addition to, the common parent is requesting the change in
method of accounting. Option To Receive Correspondence by Fax
• If the common parent is filing Form 3115 on behalf of multiple A filer that wants to receive, or wants its authorized
applicants in a consolidated group of corporations, multiple representative to receive, correspondence regarding its Form
CFCs or 10/50 corporations, or multiple and distinct trades or 3115 (for example, additional information letters or the letter
businesses of a member (including QSubs or single-member ruling) by fax must attach to Form 3115 a statement requesting
LLCs), attach a schedule listing each applicant and its this service. The attachment also must list the authorized
identification number (if applicable). name(s) and fax number(s) of the person(s) who is to receive the
• If the applicant is a foreign entity that is not otherwise required fax. The listed person(s) must be either authorized to sign Form
to have or obtain an EIN, enter “Not applicable” in the space 3115 or an authorized representative of the filer that is included
provided for the identifying number. on Form 2848. For further details on the fax procedures, see
section 9.04(3) of Rev. Proc. 2019-1.
Principal Business Activity Code
If the filer is a business, enter the 6-digit principal business Type of Accounting Method Change
activity (PBA) code of the filer. The principal business activity of
the filer is the activity generating the largest percentage of its Requested
total receipts. See the instructions for the filer's income tax return Check the appropriate box on Form 3115 to indicate the type of
for the filer's PBA code and definition of total receipts. change being requested.
• Depreciation or amortization. Check this box for a change
Note. An applicant requesting to change its accounting method in (1) depreciation or amortization (for example, the depreciation
under DCN 33 (change to overall cash method for a qualifying method or recovery period), (2) the treatment of salvage
small business taxpayer for a tax year beginning before January proceeds or costs of removal, (3) the method of accounting for
1, 2018) and/or DCN 51 (small taxpayer exception from dispositions of depreciable property, or (4) the treatment of
requirement to account for inventories under section 471 for a depreciable property from a single asset account to a multiple
tax year beginning before January 1, 2018) in the List of DCNs asset account (pooling), or vice versa.
must also attach to Form 3115 the North American Industry • Financial products and/or financial activities of financial
Classification System (NAICS) code for the applicant's principal institutions. Check this box for a change in the treatment of a
business activity. See Rev. Proc. 2002-28, 2002-1 C.B. 815, for financial product (for example, accounting for debt instruments,
further guidance. This paragraph does not apply to tax years derivatives, mark-to-market accounting), or in the financial
beginning after December 31, 2017. activities of a financial institution (for example, a lending
institution, a regulated investment company, a real estate
Address investment trust, or a real estate mortgage investment conduit).
Include the suite, room, or other unit number after the street • Other. For non-automatic change requests, check this box if
address. If the post office does not deliver mail to the street neither of the above boxes applies to the requested change. In
address and the filer has a P.O. box, show the box number the space provided, enter a short description of the change and
instead of the street address. the most specific applicable Code section(s) for the requested
change (for example, change within section 263A costs;
Year of Change deduction of warranty expenses, section 461; or change to the
The year of change is the first tax year the applicant uses the completed contract method for long-term contracts, section
proposed method of accounting, even if no affected items are 460).
taken into account for that year. For automatic change requests, this informational
Example. A calendar year taxpayer that has consistently requirement is satisfied by properly completing Part I, line 1, of
capitalized certain building repair costs from 2012 to 2017 files a Form 3115.
Form 3115 in 2018 to deduct these repair costs. The year of As noted on Form 3115, the filer must provide all information
change is calendar year 2018. relevant to the requested change in method of accounting. All
relevant information includes all information requested on Form
Contact Person 3115, these instructions, and any other relevant information,
The contact person must be an individual authorized to sign even if not specifically identified on Form 3115 or in these
Form 3115, or the filer's authorized representative. If this person instructions. Table A illustrates, for automatic and non-automatic
is someone other than an individual authorized to sign Form changes, the Parts of Form 3115 that must be completed. Table
3115, you must attach Form 2848, Power of Attorney and B illustrates the Schedule(s) to be completed for common
Declaration of Representative. method changes.
Form 2848, Power of Attorney and Declaration
of Representative
Authorization to (1) represent the filer before the IRS, (2) receive
a copy of the requested letter ruling, or (3) perform any other
act(s) must be properly reflected on Form 2848. For further
details for an authorized representative and a power of attorney,
see sections 9.03(8) and (9) of Rev. Proc. 2019-1.

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Table A: Parts To Complete on Form 3115 for Accounting Method Changes
Information to be completed for automatic and non-automatic change requests

                                             Part I                   Part II                        Part III           Part IV
Automatic Change                             X                                      X                                   X
Non-Automatic Change                                                                X                X                  X

                                                                      published guidance providing the automatic accounting method 
                                                                      change, check the box for “Other” on line 1(b) and identify the 
Part I—Information for Automatic                                      revenue procedure or other published guidance under which the 
Change Request                                                        automatic accounting method change is being requested.
                                                                      Line 2.         If “Yes,” provide an explanation as to why the 
Automatic Changes—Scope and Eligibility                               applicant(s) qualifies to file under the automatic change 
Rules                                                                 procedures. If other published guidance provides for an 
                                                                      automatic change in method of accounting not listed in the List 
Line 1a. Enter the DCN on line 1(a). These numbers may be             of Automatic Changes, attach a statement citing the guidance. 
found in the List of DCNs at the end of the instructions, the List    An example of this would be a change from the cash method 
of Automatic Changes, or in subsequently published guidance.          under Regulations section 1.448-1(h)(2).
In general, enter a number for only one change. However, the 
numbers for two or more changes may be entered on line 1(a) if                      Generally, an applicant is only eligible to use the automatic 
specifically permitted in applicable published guidance to file a     change procedures of Rev. Proc. 2015-13 if it satisfies the 
single Form 3115 for particular concurrent changes in method of       following requirements (see section 5.01(1) of Rev. Proc. 
accounting. See section 6.03(1)(b) of Rev. Proc. 2015-13. For         2015-13).
example, an applicant requesting both a change to deduct repair                     1. On the date the applicant files a Form 3115, the change is 
and maintenance costs for tangible property (DCN 184) and a           described in the List of Automatic Changes;
change to capitalize acquisition or production costs (DCN 192)                      2. On the date the applicant files a Form 3115, the applicant 
may file a single Form 3115 for both changes by including both        meets all requirements for the change provided in the applicable 
DCNs 184 and 192 on line 1(a) of Form 3115.                           section of the List of Automatic Changes;
Line 1b. If the accounting method change is not included in the                     3. The requested change is not to the principal method 
List of Automatic Changes or assigned a number in the                 under Regulations sections 1.381(c)(4)-1(d)(1) or

Table B: Schedules To Complete on Form 3115 for Common Accounting Method Changes
Information to be completed for common method change requests

Common Method                   Schedule A   Schedule B            Schedule C                        Schedule D         Schedule E
Changes
                              Part I Part II                       Part I             Part II Part I Part II    Part III
Accrual to Cash                 X    X
Cash to Accrual                 X
Capitalize to Expense
Expense to Capitalize                                                                                           X*                   X*
Depreciation                                                                                                                         X
Long-Term Contracts                                                                           X                 X
Inventory Valuation                                                                                  X          X*
Change
LIFO Change–Including                                              X                  X
Pooling
Change to Deferral                                  X
Method for Advanced 
Payments

X  Must fully complete section
   Section need not be completed
X* To be completed if applicable—See instructions regarding Schedules D and E, later

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1.381(c)(5)-1(d)(1); examining agent does not propose an adjustment for the item
4. The requested year of change is not the final year of the that is an issue under consideration during the examination, the
trade or business (but see the instructions for line 4); item continues to be an issue under consideration after the
examination ends only if the issue is placed in suspense. The
5. For an overall method of accounting change, the applicant's method of accounting is an issue placed in suspense
applicant has not made or requested an overall method change if the examining agent has given the applicant (or filer) written
during any of the 5 tax years ending with the year of change; and notification of the IRS's intent to examine the issue during the
6. The applicant has not made or requested a change for examination of the subsequent tax year(s) to be examined. See
the same item during any of the 5 tax years ending with the year section 3.08 of Rev. Proc. 2015-13. A partnership or an S
of change. corporation has an issue under consideration before
examination if the same item is an issue under consideration in
Note. Some automatic changes in methods of accounting waive an examination of a partner, member, or shareholder's federal
some of the above requirements. These changes may be found income tax return. For consolidated groups, see section 3.08 of
in the List of Automatic Changes or the published guidance Rev. Proc. 2015-13 for issue under consideration rules.
providing the automatic accounting method change.
For CFCs and 10/50 corporations, the issue under
Line 3. The filer must complete Form 3115, including any ! consideration rules are different. See section 3.08(4) of
required statements or attachments. See Table A for the Form CAUTION Rev. Proc. 2015-13.
3115 Part(s) required to be completed for all automatic and
non-automatic change requests. See Table B for a sample of Lines 6c and 6d. If you answered “Yes” for line 6a, include the
common method changes and the Form 3115 Schedule(s) to be name and telephone number of the examining agent, and the tax
completed for each. Additionally, see published guidance for any year(s) under examination in the designated places on line 6c.
additional required information or statements. For example, a For any present or former consolidated groups, if there is a tax
method change to use the mark-to-market method of accounting year under examination, complete the information on line 6c.
under section 475(e) or (f) (DCN 64) requires an applicant to file Provide a copy of Form 3115 to the examining agent, no later
an additional statement to satisfy the requirement in section 5.04 than the date the filer timely files Form 3115. See section 6.03(3)
of Rev. Proc. 99-17. (a) of Rev. Proc. 2015-13.
Part II—Information for All Requests Line 7a. In general, audit protection applies when an
application for change in accounting method is granted. See
Line 4. If no, check “No.” If yes, check “Yes” and attach a section 8.01 of Rev. Proc. 2015-13. For exceptions where audit
statement explaining why the applicant is eligible to change its protection is not provided, see section 8.02 of Rev. Proc.
method of accounting. For example, specific guidance may 2015-13. For example, a change made under DCN 10 in the List
permit an applicant to change its method of accounting in its final of Automatic Changes for an applicant's sale, lease, or financing
tax year. See section 5.03(2) of Rev. Proc. 2015-13 and sections transactions does not receive audit protection. See the List of
6.01 (DCN 7) and 6.07 (DCN 107) of Rev. Proc. 2018-31. Automatic Changes for additional method changes not subject
Ordinarily, the IRS will not consent to a request for a change to audit protection.
in method of accounting when an applicant ceases to engage in If no audit protection is given for the requested change, check
the trade or business or terminates its existence. Generally, an “No” and attach an explanation. For example, if you are making a
applicant is considered to cease to engage in a trade or change under DCN 10, your explanation is DCN 10. If you are
business if the applicant terminates its existence for federal making a change under DCN 7, your explanation could be that
income tax purposes, ceases operation of the trade or business, none of the items on line 7b applies. If multiple items are being
or transfers substantially all the assets of the trade to another changed on one Form 3115 and at least one item has audit
taxpayer. For example, a cessation of a trade or business occurs protection and another item does not have audit protection,
when a trade or business is incorporated or the assets of the check both “Yes” and “No.”
trade or business are contributed to a partnership. See sections
3.04, 5.01, and 5.03 of Rev. Proc. 2015-13. Line 7b. Generally, the applicant receives audit protection for
tax years prior to the year of change if they fall into one of the
Line 5. When an acquiring corporation operates the trades or following categories listed below. If Form 3115 is being filed on
businesses of the parties as separate and distinct trades or behalf of multiple applicants or if multiple items are being
businesses after the date of distribution or transfer, the acquiring changed on one Form 3115, check all that apply and attach a
corporation must use a carryover method. See Regulations statement identifying which category applies to which applicant
sections 1.381(c)(4)-1(a)(2) and 1.381(c)(5)-1(a)(2). On the or item. Except for “Not under exam” and “Other,” the following
other hand, when the acquiring corporation does not operate the only apply to applicants under examination.
trades or businesses of the parties as separate and distinct • Not under exam. Check this box if: (A) the applicant is not
trades or businesses after the date of distribution or transfer, the under exam, and (B) audit protection applies to the item(s) being
acquiring corporation generally will use the principal method. changed.
The applicant does not need to secure the Commissioner's • 3-month window. The 3-month window is the period
consent to use the principal method. See Regulations sections beginning on the 15th day of the 7th month following the close of
1.381(c)(4)-1(d)(1) and 1.381(c)(5)-1(d)(1). the applicant's tax year and ending on the 15th day of the 10th
Line 6a. Generally, the applicant is under examination with month following the close of the applicant's tax year. For 52-53
respect to a federal income tax return as of the date the week applicants, the tax year begins on the 1st day of the
applicant (or filer) is contacted in any manner by a representative calendar month nearest to the 1st day of the 52-53 week tax
of the IRS for the purpose of scheduling or conducting any type year. See Rev. Proc. 2015-33. For applicants with a short tax
of examination of the return. See section 3.18 of Rev. Proc. year ending before the 15th day of the 10th month after the short
2015-13. tax year begins, the 3-month window is the period beginning on
the 1st day of the 2nd month preceding the month in which the
Line 6b. Generally, the applicant's method of accounting is an short tax year ends and ending on the last day of the short tax
issue under consideration if the examining agent has given the year. An applicant qualifies under the 3-month window period
applicant (or filer) written notification specifically citing the when (A) it has been under examination for at least 12
treatment of the item as an issue under consideration. If an consecutive months as of the 1st day of the 3-month window,

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and (B) the method of accounting for the same item the government, as well as the tax year(s) before Appeals and/or
applicant is requesting to change is not an issue under federal court in the designated places.
consideration. See section 8.02(1)(a) of Rev. Proc. 2015-13.
Line 8d. If you answered “Yes” for line 8a, provide a copy of the
Checking this box satisfies the statement requirement of section
signed Form 3115 to the Appeals officer(s) and/or all counsel to
8.02(1)(a)(iv) of Rev. Proc. 2015-13.
the government, as applicable, no later than the date the filer
• 120-day window period. The 120-day window is the
timely files Form 3115. See section 6.03(3)(a) of Rev. Proc.
120-day period following the date an examination of the
2015-13.
applicant ends, regardless of whether a subsequent examination
has commenced. An applicant qualifies under the 120-day Line 9. If you answered “Yes” to line 6a or 8a, complete line 9.
window period if Form 3115 is filed in a 120-day window and the The information requested on line 9 should be included on a
method of accounting for the same item the applicant is separate attachment.
requesting to change is not an issue under consideration. See Line 10. If you answered “Yes,” attach an explanation. Unless
section 8.02(1)(b) of Rev. Proc. 2015-13. If the applicant checks otherwise provided, the applicant does not receive audit
this box, also include the date the examination ended in the protection for the requested change if it is an issue under
designated space on line 7b. consideration. See sections 3.08 and 8.02(7) of Rev. Proc.
• Method not before director. The present method is not 2015-13.
before the director when it is (A) a change from a clearly
permissible method of accounting or (B) a change from an Line 11a–c. Unless otherwise provided, an applicant is not
impermissible method of accounting and the impermissible eligible to file under the automatic change procedures if the
method was adopted subsequent to the tax year(s) under applicant made or requested a prior overall method change or a
examination on the date the applicant files Form 3115. Checking prior item change (for the same item) within the 5 tax years
this box satisfies the statement requirement of section 8.02(1)(c) ending with the requested year of change. For additional details,
(ii) of Rev. Proc. 2015-13. see section 9.03(6)(a) of Rev. Proc. 2019-1 and section 11.02(2)
• Change resulting in a negative adjustment. Check this of Rev. Proc. 2015-13.
box if the change results in a negative adjustment. A negative Line 12. For further details, see section 9.03(6)(b) of Rev. Proc.
adjustment occurs where an item (A) results in a negative 2019-1.
section 481(a) adjustment for that item for the year of change,
and (B) would have resulted in a negative section 481(a) Line 13. If you answered “Yes,” complete Schedule A of Form
adjustment in each tax year under examination if the change in 3115. For example, an overall method of accounting change
method of accounting for that item had been made in the tax includes a change from an accrual method to the cash receipts
year(s) under examination. Checking this box satisfies the and disbursements method or vice versa. See section 446(c).
statement requirement in section 8.02(1)(e)(iii) of Rev. Proc. Line 14. Provide the information requested on lines 14a–d if the
2015-13. applicant answered “No” to question 13 or if the applicant
• CAP. This box applies only to consolidated group members answered “Yes” to question 13 and also is changing to a special
participating in the compliance assurance process (CAP). In method of accounting for one or more items. With the
general, audit protection applies to a new member if the new information requested on line 14b, the applicant also is required
member is under audit solely by joining a consolidated group to provide a statement of whether or not the applicant has
that participates in CAP. See section 8.02(1)(d) of Rev. Proc. claimed any federal tax credit relating to the item(s) being
2015-13. Checking this box satisfies the statement requirement changed. A special method of accounting for an item is a
of section 8.02(1)(d)(ii) of Rev. Proc. 2015-13. If the applicant method of accounting (other than the cash method or an accrual
checks this box, include the date the member joined the method) expressly permitted by the Code, regulations, or
consolidated group in the designated space on line 7b. guidance published in the I.R.B. that deviates from the rules of
• Other. The List of Automatic Changes or other guidance sections 446, 451, and 461 (and the related regulations) that is
published in the I.R.B. may provide applicants with audit applicable to the applicant's overall method of accounting
protection. For example, specific guidance may provide a filer (proposed overall method if being changed). For example, the
under exam with audit protection. If this box is checked, attach a installment method of accounting under section 453, the
statement citing the guidance providing audit protection. mark-to-market method under section 475, and the long-term
• Audit protection at end of exam. If the applicant does not contract method under section 460 are special methods of
fall into one of the categories listed above for line 7b, this box accounting. See section 15.01(3)(d) of Rev. Proc. 2018-31. If the
generally should be checked. The applicant may receive audit applicant prepared a Schedule M-3 with its last filed tax return or
protection at the end of the examination, provided the examining expects to file a Schedule M-3 with its next tax return, please
agent does not propose an adjustment for the same item and the state whether the applicant's proposed change in method of
method of accounting for that same item is not an issue under accounting for federal income tax purposes is related to the
consideration. For certain foreign corporations, the applicant applicant's adoption of the International Financial Reporting
must satisfy additional requirements in order to receive audit Standards (IFRS) for financial statement purposes.
protection at the end of the examination. See section 8.02(1)(f)
of Rev. Proc. 2015-13. Lines 15a and 15b. Provide the requested information for each
applicant. For guidance on using different methods of
For CFCs and 10/50 corporations, the rules for audit accounting for each trade or business, see section 446(d).
! protection are different. See section 8.02 of Rev. Proc. An applicant may include each member of a consolidated
CAUTION 2015-13 (different rules for the 3-month window,
120-day window, and audit protection at end of exam). group, each wholly owned partnership within a consolidated
group, each separate and distinct trade or business of each
Line 8a. If you answered “Yes,” complete lines 8b–d. member of a consolidated group or other entity (even if the
change is for all of a member's or other entity's trades or
Line 8b. To determine if the applicant’s method of accounting is businesses), and each eligible CFC or 10/50 corporation filing a
an issue under consideration by Appeals and/or a federal court, single Form 3115 requesting the identical accounting method
see sections 3.08(2) and 3.08(3) of Rev. Proc. 2015-13. change. Also see Who Must File, earlier.
Line 8c. If you answered “Yes” for line 8a, include the name and Lines 16a–c. For non-automatic changes, the applicant is
telephone number of the Appeals officer(s) and/or counsel to the required to provide a full explanation of the legal basis to support

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the proposed method, including all authorities supporting the          to the satisfaction of the IRS National Office compelling 
proposed method, and a discussion of all contrary authorities.         circumstances, or that it is in the interest of sound tax 
For further details on what is to be included, see Rev. Proc.          administration for the applicant to change in its final year.
2019-1, sections 7.01(9) (statement of supporting authorities), 
9.03(1) (facts and other information), 9.03(2) (statement of           Line 20. If you answered “Yes,” attach an explanation 
contrary authorities), 9.03(4) (analysis of material facts), and       describing why the applicant is not eligible to file a request under 
9.03(7) (statement identifying pending legislation).                   the automatic change procedures.
For the following automatic method changes, the applicant is           Line 21. Attach true copies of all contracts, agreements, and 
only required to complete lines 16a–b, unless the information on       other documents directly related to the proposed change in 
lines 16a–b is otherwise provided in the applicable Form 3115          method of accounting. See section 9.03(3) of Rev. Proc. 2019-1.
Schedules A–E: DCNs 6, 7, 28, 51, 54, 55, 64, 65, 82, 94, 108, 
111, 114, 127, 194, 200 (only for changes listed in sections           Line 22.  Include a statement explaining the reason for the 
6.12(3)(a)(ix), 6.12(3)(a)(x), and 6.12(3)(b)(viii) in the List of     proposed change. See section 7.01(1)(d) and 9.03(1) of Rev. 
Automatic Changes), 205 (only for changes listed in sections           Proc. 2019-1.
6.13(3)(h) and 6.13(3)(j) in the List of Automatic Changes), 206       Line 23. If you answered “No” to line 23, a common parent 
(only for changes listed in sections 6.14(3)(a), 6.14(3)(h), and       requesting a change in method of accounting on behalf of a 
6.14(3)(j) in the List of Automatic Changes), 207 (only for            member of the consolidated group must attach a statement 
changes listed in sections 6.15(3)(a) and 6.15(3)(d) in the List of    explaining the method of accounting used by each member of 
Automatic Changes), 211, and 218. Line 16c does not need to            the consolidated group for the particular item that is the subject 
be completed for applicants filing automatic method changes.           of the method change request. See section 6.02(5) of Rev. Proc. 
For further details on what is to be included, see Rev. Proc.          2015-13.
2019-1, sections 7.01(9) (statement of supporting authorities), 
9.03(1) (facts and other information), and 9.03(4) (analysis of        Lines 24a and 24b. For non-automatic change requests, you 
material facts).                                                       must pay a user fee for each applicant. Where the filer is not an 
                                                                       applicant, a fee is not required for the filer. See section 15 and 
    If the automatic DCN is not specifically listed in the             Appendix A of Rev. Proc. 2019-1 for information regarding user 
TIP paragraph above, skip lines 16a–c.                                 fees, including reduced user fees and user fees for additional 
                                                                       applicants filing identical changes in methods of accounting.
Line 17. Insurance companies also must attach a statement              Pay the user fees through www.pay.gov.
indicating whether the proposed method of accounting will be 
used for annual statement accounting purposes.                         Note. Filers filing under the automatic change procedures do 
                                                                       not pay a user fee.
Line 18. For details on requesting and scheduling a 
conference, see sections 9.04(4) and 10 of Rev. Proc. 2019-1.          Example 1.   Filer is the common parent of a consolidated 
                                                                       group of corporations. Filer files a single Form 3115 on behalf of 
Lines 19a and 19b.  For the calculation of gross receipts for an       itself and two other members of the consolidated group for an 
overall accounting method change request, whether an                   identical change in method of accounting. There are three 
applicant qualifies as a small business taxpayer for purposes of       applicants (Filer and the two other members of the consolidated 
applying sections 263A and 471, or whether an applicant                group). Therefore, for a non-automatic change request, all three 
qualifies as an eligible small business under section 474(c), see      applicants are required to pay a user fee. The filer applicant 
section 448(c) and Regulations section 1.448-1T(f)(2)(iv). For         must submit the regular user fee under section (A)(3)(b)(i) of 
tax years beginning before January 1, 2018, the section 448(c)         Appendix A of Rev. Proc. 2019-1 (or a reduced fee per section 
gross receipts test is $5 million or less, and the calculation of      (A)(4) of Appendix A of Rev. Proc. 2019-1, if applicable), and the 
gross receipts in determining whether the applicant is a small         two other applicants qualify for the reduced user fee under 
reseller for purposes of section 263A is described in Regulations      section (A)(5)(b) of Appendix A of Rev. Proc. 2019-1.
section 1.263A-3(b).
                                                                       Example 2.   Filer is the common parent of a consolidated 
For the calculation of gross receipts for determining whether          group of corporations. Filer is filing a single Form 3115 on behalf 
the applicant has an exempt construction contract under                of two other members of the consolidated group for an identical 
Regulations section 1.460-3(b), for contracts entered into after       change in method of accounting. There are two applicants on 
December 31, 2017, in tax years ending after December 31,              Form 3115 (the two members of the consolidated group). Filer is 
2017, see section 448(c) and Temporary Regulations section             not changing its method of accounting and, therefore, does not 
1.448-1T(f)(2)(iv). For the calculation of gross receipts in           pay a fee on account of itself. For a non-automatic change 
determining whether the applicant has an exempt construction           request, both applicants are required to pay a user fee. One 
contract, for contracts entered into before January 1, 2018, see       applicant must submit the regular user fee under section (A)(3)
Regulations section 1.460-3(b)(3).                                     (b)(i) of Appendix A of Rev. Proc. 2019-1 (or a reduced fee per 
                                                                       section (A)(4) of Appendix A of Rev. Proc. 2019-1, if applicable), 
Part III—Information for                                               and the other applicant qualifies for the reduced user fee under 
Non-Automatic Change Request                                           section (A)(5)(b) of Appendix A of Rev. Proc. 2019-1.
                                                                       Example 3.   Filer, a single taxpayer, files Form 3115 on 
Non-automatic change—scope and eligibility rules.            An        behalf of its three separate and distinct trades or businesses. 
applicant may not use the non-automatic change procedures if           The request is for an identical change in method of accounting. 
any of the following eligibility limitations apply at the time Form    Notwithstanding that Filer is a single taxpayer, there are three 
3115 is filed with the IRS National Office.                            applicants on Form 3115. For a non-automatic change request, 
1. The change in accounting method is required to be made              all three applicants are required to pay a user fee. One applicant 
according to a published automatic change procedure, such as           must submit the regular user fee under section (A)(3)(b)(i) of 
Rev. Proc. 2018-31.                                                    Appendix A of Rev. Proc. 2019-1 (or a reduced fee per section 
2. The requested year of change is the final year of the trade         (A)(4) of Appendix A of Rev. Proc. 2019-1, if applicable), and the 
or business, unless (A) the change is a result of a transaction to     other two applicants qualify for the reduced user fee under 
which section 381(a) applies, or (B) the applicant demonstrates        section (A)(5)(b) of Appendix A of Rev. Proc. 2019-1.

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Attach a statement showing the (net) section 481(a)
Part IV—Section 481(a) Adjustment adjustment for each change in method of accounting for each
Line 25. Ordinarily, an adjustment under section 481(a) is applicant included in Form 3115. Include a summary of how the
required for changes in method of accounting. The section (net) section 481(a) adjustment was computed and an
481(a) adjustment period generally is 1 tax year (year of change) explanation of the methodology used to determine it. The
for a negative section 481(a) adjustment and 4 tax years (year of summary of computation and explanation must be sufficient to
change and next 3 tax years) for a positive section 481(a) demonstrate that the (net) section 481(a) adjustment is
adjustment. However, when an applicant is under examination, computed correctly. If the applicant is a CFC or 10/50
the section 481(a) adjustment period is 2 tax years (year of corporation, or a trade or business of a CFC or 10/50
change and next tax year) for a positive section 481(a) corporation, and if its functional currency is not the U.S. dollar,
adjustment for a change in method of accounting requested state the (net) section 481(a) adjustment in that functional
unless one of the following categories described in line 7b currency. This statement may be combined with the information
applies: 3-month window, 120-day window period, method not requested on the fourth line on page 1 (list of applicants and
before the director, or CAP. their identification numbers) and on line 24 (user fee).
Also, for certain changes in method of accounting, the Example 1. Under its present method, XYZ Corporation is
applicant must make the change on a cut-off basis or modified deducting certain costs that are required to be capitalized into
cut-off basis. See, for example, Regulations section 1.446-1(e) inventory under section 263A. XYZ Corporation is proposing to
(2)(ii)(d)(5)(iii). In those cases, there is no section 481(a) change its method of accounting to properly capitalize such
adjustment. Under a cut-off basis, only the items arising on or costs. The computation of the section 481(a) adjustment with
after the beginning of the year of change are accounted for respect to the change in method of accounting is demonstrated
under the new method of accounting. Any items arising before as follows.
the year of change continue to be accounted for under the
applicant's former method of accounting. Beginning inventory for year of change under
If multiple items are being changed on one Form 3115 and at proposed method $120,000
least one item is changed on a cut-off basis or modified cut-off Beginning inventory for year of change under present
basis and another item is changed with a section 481(a) method $100,000
adjustment, check both “Yes” and “No” and attach a statement Section 481(a) adjustment +$20,000
identifying which item(s) are being made on a cut-off basis or
modified cut-off basis.
An eligible terminated S corporation (as defined in section Example 2. WXY Corporation, a calendar year taxpayer, is a
481(d)(2)) that is required to change an accounting method as a producer and capitalizes costs that are required to be capitalized
result of a revocation of its S corporation election must take into into inventory under section 263A. Each February, WXY
account the resulting positive or negative section 481(a) Corporation pays a salary bonus to each employee who remains
adjustment ratably during the 6-year period beginning with the in its employment as of January 31 for the employee's services
year of change. In addition, an eligible terminated S corporation provided in the prior calendar year. Under its present method,
that is permitted to continue to use the cash method after the WXY Corporation treats these salary bonuses as incurred in the
revocation of its S corporation election and that changes to an tax year the employee provides the related services. For 2019,
overall accrual method for the C corporation’s first tax year after WXY Corporation proposes to change its method of accounting
such revocation may take into account the resulting positive or to treat salary bonuses as incurred in the tax year in which all
negative adjustment required by section 481(a)(2) ratably during events have occurred that establish the fact of the liability to pay
the 6-year period beginning with the year of change. See Rev. the salary bonuses and the amount of the liability can be
Proc. 2018-44, 2018-37 I.R.B. 426. Section 481(d)(2) defines an determined with reasonable accuracy, pursuant to section
eligible terminated S corporation as any C corporation that: (1) 20.01(2) of Rev. Proc. 2018-31. The computation of WXY
was an S corporation on December 21, 2017; (2) revokes its S Corporation's net section 481(a) adjustment for the change in
corporation election after December 21, 2017, but before method of accounting for salary bonuses is demonstrated as
December 22, 2019; and (3) has the same owners of stock in follows.
identical proportions on December 22, 2017, and the revocation
date. Salary bonuses treated as incurred
under the present method, but not
If the accounting method change is an automatic change in incurred under the proposed
functional currency under section 985 (see section 29.01 of Rev. method $40,000
Proc. 2018-31), the adjustments required under Regulations Beginning inventory as of Jan. 1, 2019,
section 1.985-5 must be made on the last day of the tax year with capitalized salary bonuses
ending before the year of change. Any gain or loss that must be computed under the present
recognized under Regulations section 1.985-5 is included in method $100,000
income or earning and profits on the last day of the tax year Beginning inventory as of Jan. 1, 2019,
ending before the year of change, and is not subject to section with capitalized salary bonuses,
481. Attach a statement showing the adjustment required under computed under the proposed
Regulations section 1.985-5. The statement should include the method $92,000
amount of the adjustment required pursuant to Regulations Decrease in beginning inventory as of
section 1.985-5, a summary of the computation of such Jan. 1, 2019 ($8,000)
adjustment, and an explanation of any other adjustments Net section 481(a) adjustment +$32,000
required by Regulations section 1.985-5.
Line 26. In computing the net section 481(a) adjustment, an
Line 27. An applicant may elect a 1-year section 481(a)
applicant must take into account all relevant accounts. For some
adjustment period for a positive section 481(a) adjustment that is
changes (for example, a change that affects multiple accounts),
less than $50,000. See section 7.03(3)(c) of Rev. Proc. 2015-13.
the section 481(a) adjustment is a net section 481(a)
An applicant also may elect a 1-year section 481(a) adjustment
adjustment. See Example 2, below, and the example in
period for all positive section 481(a) adjustments for the year of
Schedule A, Part I, line 2h, later.

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change if an eligible acquisition transaction occurs during the Accrued income (line 2a) $250,000
year of change or in the subsequent tax year on or before the
due date for filing the applicant's federal tax return for the year of Less:
change. For more details about the eligible acquisition Uncollectible amount (50,000)
transaction election, see section 7.03(3)(d) of Rev. Proc.
2015-13. Net income accrued but not received $200,000
Less:
Line 28. If “Yes,” explain the nature and amount of the section
481 adjustment attributable to the intercompany transaction(s). Accrued expenses (line 2c) (75,000)
Expenses deducted as recurring item
Schedule A—Change in Overall (line 2g) (5,000)
Method of Accounting Total expenses accrued but not paid (80,000)
Section 481(a) adjustment +$120,000
Part I—Change in Overall Method
All applicants filing to change their overall method of accounting
must complete Schedule A, Part I, including applicants filing
under DCNs 32, 33, 34, 122, 123, 126, 127, 128 and 233 in the Line 3. Check “Yes” if the applicant is requesting to use the
List of Automatic Changes. recurring item exception (section 461(h)(3)). The section 481(a)
adjustment must include the amount of the additional deduction
Lines 2a–g. Enter the amounts requested on lines 2a through that results from using the recurring item exception.
2g, even though the calculation of some amounts may not have
been required in determining taxable income due to the Line 5. This question applies to an applicant requesting a
applicant's present method of accounting. change to the overall cash method under section 15.18 of Rev.
Proc. 2018-31 (DCN 233) for a tax year beginning after
Note. Do not include amounts that are not attributable to the December 31, 2017. See section 15.18(5)(a) of Rev. Proc.
change in method of accounting, such as amounts that correct a 2018-31 to determine whether an applicant qualifies as a small
math or posting error or errors in calculating tax liability. In business taxpayer. See also Rev. Proc. 2018-40, 2018-34 I.R.B.
addition, for a bank changing to an overall cash/hybrid method of 320.
accounting, do not include any amounts attributable to a special
method of accounting. See DCN 127. Part II—Change to the Cash Method For
Non-Automatic Request
Line 2b. Enter amounts received or reported as income in a
prior year that were not earned as of the beginning of the year of Limits on cash method use. Except as provided below, C
change. For example, an advance payment received in a prior corporations and partnerships with a C corporation as a partner
year for goods that were not delivered by the beginning of the may not use the cash method of accounting. Tax shelters, also,
year of change may be reported in the subsequent year if the are precluded from using the cash method. For this purpose, a
applicant qualifies under Rev. Proc. 2004-34, 2004-1 C.B. 991. If trust subject to tax on unrelated business income under section
any amounts entered on line 2b are for advance payments, 511(b) is treated as a C corporation with respect to its unrelated
complete Schedule B. See Notice 2018-35, 2018-18 I.R.B. 520. trade or business activities.
Line 2h. Enter the net amount, which is the net section 481(a) The limit on the use of the cash method under section 448
adjustment, on line 2h. Also, enter the net section 481(a) does not apply to:
adjustment on Part IV, line 26. See the instructions for Part IV, 1. Farming businesses as defined in section 448(d)(1).
line 26, earlier. 2. Qualified personal service corporations as defined in
The following example illustrates how an applicant calculates section 448(d)(2).
the section 481(a) adjustment when changing to an accrual 3. For tax years beginning before January 1, 2018, C
method, a nonaccrual-experience method, and the recurring corporations and partnerships with a C corporation as a partner
item exception. when the corporation or the partnership has gross receipts of $5
Example. ABC Corporation, a calendar year taxpayer using million or less. For tax years beginning after December 31, 2017,
the cash method of accounting, has the following items of C corporations and partnerships with a C corporation as a
unreported income and expense on December 31, 2018. partner when the corporation or the partnership has gross
receipts of $25 million or less (adjusted for inflation). See section
Accrued income $250,000 448(c) to determine if the applicant qualifies for this exception.
Uncollectible amounts based on
the nonaccrual-experience method 50,000 For farming corporations and partnerships with a C
Accrued amounts properly deductible corporation as a partner, see section 447 for limits on the use of
(economic performance has occurred) 75,000 the cash method.
Expenses eligible for recurring item Use of the cash method is also limited for a taxpayer that is
exception 5,000 required to maintain an inventory because the production,
purchase, or sale of merchandise is an income-producing factor.
However, for tax years beginning after December 31, 2017, see
ABC Corporation changes to an overall accrual method, a sections 448(c) and 471(c) and sections 15.18 (DCN 233) and
nonaccrual-experience method, and the recurring item 22.19 of Rev. Proc. 2018-31 (DCN 235) for an exception to this
exception for calendar year 2019. The section 481(a) adjustment requirement for small business taxpayers with average annual
is calculated as of January 1, 2019, as follows. gross receipts of $25 million or less (adjusted for inflation).

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year the contract was entered into do not exceed the $25 million
Schedule B—Change to the Deferral threshold, adjusted for inflation, set forth in section 448(c).
Method for Advance Payments In the case of contracts entered into before January 1, 2018,
In general, advance payments must be included in gross income a $10 million threshold applies.
in the tax year of receipt for federal income tax purposes.
However, an applicant may defer the inclusion in income of Line 2d. Under the simplified cost-to-cost method, only certain
certain advance payments, as defined in section 4.01 of Rev. costs are used in determining both (a) costs allocated to the
Proc. 2004-34, 2004-1 C.B. 991, as modified and clarified by contract and incurred before the close of the tax year and
Rev. Proc. 2011-18, 2011-5 I.R.B. 443, and Rev. Proc. 2013-29, (b) estimated contract costs. These costs are: (1) direct material
2013-33 I.R.B. 141. costs; (2) direct labor costs; and (3) allowable deductions for
depreciation, amortization, and cost recovery allowances on
Line 1. Rev. Proc. 2004-34 allows applicants using an accrual equipment and facilities directly used to construct or produce the
method to defer the inclusion in income of certain advance subject matter of the long-term contract. See Regulations
payments to the next tax year. See Notice 2018-35, 2018-18 section 1.460-5(c).
I.R.B. 520. Applicants requesting to change to the Deferral
Method for allocable payments described in section 5.02(4)(a) of Part II—Change in Valuing Inventories Including
Rev. Proc. 2004-34 (other than allocable payments described in Cost Allocation Changes
section 5.02(4)(c) of Rev. Proc. 2004-34) or for payments for
which a method under section 5.02(3)(b)(i) or (iii) of Rev. Proc. If the applicant is currently using a LIFO inventory method or
2004-34 applies, must file under the non-automatic change submethod and is changing to another LIFO inventory method or
procedures of Rev. Proc. 2015-13. All other applicants generally submethod, Schedule D, Part II, is not applicable. Use
must file under the automatic change procedures of Rev. Proc. Schedule C, Changes Within the LIFO Inventory Method.
2015-13. Line 3. If an applicant is subject to, but not in compliance with,
section 263A, generally on the same Form 3115 the applicant
Schedule C—Changes Within the must first comply with section 263A before changing an
LIFO Inventory Method inventory valuation method. The applicant must complete
Schedule D, Part III, Method of Cost Allocation. For exceptions,
Use this schedule to request a change from one LIFO inventory see Regulations section 1.263A-7(b)(2).
method or submethod to another LIFO inventory method or
submethod. All applicants changing within the LIFO inventory Line 5a. If the applicant properly elected the LIFO inventory
method or submethods must complete Part I. Complete Part II method but is unable to furnish a copy of Form(s) 970,
only if applicable. Application to Use a LIFO Inventory Method, attach the following
statement to Form 3115.
Part I—General LIFO Information “I certify that to the best of my knowledge and belief [name of
Line 6. Applicants changing to the IPIC method must use this applicant] properly elected the LIFO inventory method by filing
method for all LIFO inventories. This requirement includes Form 970 with its return for the tax year(s) ended [insert date(s)]
applicants requesting designated automatic accounting method and otherwise complied with the provisions of section 472(d)
change numbers 61 or 62 in the List of DCNs. and Regulations section 1.472-3.”
Line 5c. Attach the two statements required by section 23.01(5)
Schedule D—Change in the of Rev. Proc. 2018-31.

Treatment of Long-Term Contracts Part III—Method of Cost Allocation
Under Section 460, Inventories, or Applicants requesting to change their method of accounting for
any property (produced or acquired for resale) subject to section
Other Section 263A Assets 263A or any long-term contracts as described in section 460
must complete this schedule.
Part I—Change in Reporting Income
From Long-Term Contracts If the change is for noninventory property that is subject to
section 263A, attach a detailed description of the types of
Line 2a. Under section 460(f), the term “long-term contract” property involved.
means any contract for the manufacture, building, installation, or
construction of property that is not completed in the tax year in There are several methods available for allocating and
which it is entered into. However, a manufacturing contract will capitalizing costs under section 263A, and for allocating costs to
not qualify as long-term unless the contract involves the long-term contracts. A change to or from any of these methods is
manufacture of (a) a unique item not normally included in a change in accounting method that requires IRS consent. Using
finished goods inventory or (b) any item that normally requires the applicable regulations and notice listed below, the applicant
more than 12 calendar months to complete. should verify which methods are presently being used and the
Long-term contracts that do not meet the exceptions under proposed methods that will be used before completing
section 460(e) must be accounted for using the percentage of Schedule D, Part III. These methods are as follows.
completion method. See section 460 and the related regulations.
Line 2b. To qualify for the contract exceptions under section 1. Allocating Direct and Indirect Costs
460(e), the contract must be: • Specific identification method—Regulations sections
1. A home construction contract as defined in section 460(e) 1.263A-1(f)(2) and 1.460-5.
(5)(A), or • Burden rate method—Regulations sections 1.263A-1(f)(3)(i)
2. Any other construction contract entered into by the and 1.460-5.
applicant if, at the time the contract is entered into, it is expected • Standard cost method—Regulations sections 1.263A-1(f)(3)
to be completed within 2 years and the applicant's average (ii) and 1.460-5.
annual gross receipts for the 3-year period preceding the tax • Any other reasonable allocation method—Regulations
sections 1.263A-1(f)(4) and 1.460-5.

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2. Allocating Mixed Service Costs treated as zero by the Code, the regulations, or other published
guidance); or
• Direct reallocation method—Regulations section 1.263A-1(g)
(4)(iii)(A). 6. To change a useful life under section 167 (except for a
• Step-allocation method—Regulations section 1.263A-1(g)(4) change to or from a useful life, recovery period, or amortization
(iii)(B). period that is specifically assigned by the Code, the regulations,
• Simplified service cost method: or other published guidance).
—Using the labor-based allocation ratio—Regulations
section 1.263A-1(h)(4). List of DCNs
—Using the production cost allocation ratio—Regulations
section 1.263A-1(h)(5). Summary of Automatic Accounting Method
• Any other reasonable allocation method—Regulations section Changes
1.263A-1(f)(4). This list includes regulatory automatic changes, changes
provided for in Rev. Proc. 2018-31, and automatic changes
3. Capitalizing Additional Section 263A Costs provided for in other guidance. These automatic changes may
be modified or supplemented with additional automatic changes
• Simplified production method: by subsequently published guidance.
—Without historic absorption ratio election—Regulations
section 1.263A-2(b)(3). The list provides a brief description of the automatic changes
—With historic absorption ratio election—Regulations in method of accounting made using Form 3115. A filer/applicant
section 1.263A-2(b)(4). may not rely on the list or the descriptions of accounting method
• Simplified resale method: changes in the list as authority for making an accounting method
—Without historic absorption ratio election—Regulations change. A filer/applicant that is within the scope of, and complies
section 1.263A-3(d)(3). with, all the applicable provisions of the published guidance that
—With historic absorption ratio election—Regulations authorizes each listed change may rely on the applicable
section 1.263A-3(d)(4). published guidance as authority for its automatic accounting
• U.S. ratio method—Notice 88-104, 1988-2 C.B. 443. method change. If any information in the list conflicts with
• Any other reasonable allocation method—Regulations section published guidance, the published guidance applies. Each
1.263A-1(f)(4) (including the methods listed above under automatic method change described in Rev. Proc. 2018-31, as
Allocating Direct and Indirect Costs). modified, contains a contact person you may call if you need
additional information concerning the change (not a toll-free
Schedule E—Change in Depreciation number).
or Amortization Each item in the list below:
All applicants requesting to change their method of accounting • Designates an automatic accounting method change number
for depreciation or amortization must complete Schedule E of for each change for entry on line 1a of Form 3115.
Form 3115. Applicants changing their method of accounting for • Briefly describes the accounting method change and its
depreciation or amortization under the automatic change primary Code section(s).
procedures should see the depreciation changes in the List of • Indicates in some cases which schedules of Form 3115 to
DCNs below. complete.
Do not file Form 3115: • Provides a reference to the basic published guidance (for
example, revenue procedure) that provides for the automatic
1. To make an election under section 167, 168, 179, 197, or change, which filers should review prior to completing Part I,
1400I; Information for Automatic Change Request, on page 1 of Form
2. To revoke an election made under one of those sections; 3115.
3. To make or revoke an election under section 13261(g)(2) Note. Certain retired or obsolete numbers in the List of DCNs
or (3) of the Revenue Reconciliation Act of 1993 (relating to have not been replaced in order to maintain continuity for the
section 197 intangibles); active DCNs.
4. To change the placed-in-service date; In the event the underlying authority for any of the DCNs
becomes obsolete or is superseded, then a change can
5. To change the salvage value (except for a change in CAUTION!
no longer be made under such DCN.
salvage value to zero when the salvage value is expressly

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List of DCNs
No. Change
1 Commodity Credit Corporation loans (section 77)—for loans received from the Commodity Credit Corporation, from
including the loan amount in gross income for the tax year in which the loan is received treating the loan amount as a loan. to
See section 2.01 of Rev. Proc. 2018-31. Note. This change is implemented on a cut-off basis.
2 Advances made by a lawyer on behalf of clients (section 162) from— treating advances of money to or on behalf of their
clients for litigation or other client expenses as deductible expenses to treating those advances as a loan. See section 3.01 of
Rev. Proc. 2018-31.
3 ISO 9000 costs (section 162)— treating the costs as deductible, except to the extent they result in the creation or to
acquisition of an asset having a useful life substantially beyond the tax year. See section 3.02 of Rev. Proc. 2018-31.
4 Restaurant smallwares costs (section 162) to— the smallwares method described in Rev. Proc. 2002-12, 2002-1 C.B. 374
(that is, as materials and supplies that are not incidental under Regulations section 1.162-3). See section 3.03 of Rev. Proc.
2018-31.
5 Bad debts (section 166)—for an applicant other than a bank, from accounting for bad debts using a reserve or other improper
method a specific charge-off method that complies with section 166. See section 4.01 of Rev. Proc. 2018-31.to
6 Bad debt conformity for banks (section 166)—for banks other than new banks, the method that conforms to Regulations to
section 1.166-2(d)(3) for the first time the bank makes this change, or involuntarily revoke this method. This change does not to
fall under the procedures of Rev. Proc. 2018-31. Instead, see Regulations section 1.166-2(d)(3). Note. This change is
implemented on a cut-off basis and generally with audit protection, but with some conditions or limitations.
7 Depreciation or amortization (impermissible to permissible) (sections 56, 167, 168, 197, 280F, 1400I, 1400L, 1400N,
and former section 168) from— an impermissible method a permissible method for changes allowed under Regulations to
section 1.446-1(e)(2)(ii)(d), and for depreciable property owned at the beginning of the year of change. Complete Schedule E of
Form 3115. An applicant changing its method of accounting for depreciation because of a change described in designated
automatic accounting method change number 10 (sale or lease transactions) must file Form 3115 according to the designated
change number 10. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section
6.01 of Rev. Proc. 2018-31.
8 Depreciation (permissible to permissible) (sections 56 and 167) from— a permissible method another permissible to
method listed in section 6.02 of Rev. Proc. 2018-31. Complete Schedule E of Form 3115. Change is implemented on a modified
cut-off basis. An applicant making a change from a permissible to another permissible method of depreciating MACRS property
must file Form 3115 according to designated change number 200. Additionally, a qualified small taxpayer qualifies for a
reduced Form 3115 filing requirement. See section 6.02 of Rev. Proc. 2018-31.
10 Sale, lease, or financing transactions (sections 61, 162, 167, 168, and 1012) from— improperly treating property as sold,
leased, or financed a permissible method as described in section 6.03 of Rev. Proc. 2018-31. See section 6.03 of Rev. Proc. to
2018-31. Note. This change is implemented on a cut-off basis and does not receive audit protection.
11 Obsolete. See change number 7.
12 Obsolete. See change number 7.
13 Obsolete. See change number 7.
14 Obsolete. See change number 7.
15 Obsolete. See change number 210.
16 Amortizable bond premium (section 171) from— amortizing bond premium not amortizing the premium (revoking the to
section 171(c) election). See section 5.01 of Rev. Proc. 2018-31. Note. This change is implemented on a cut-off basis and
generally also is made with audit protection, but with conditions or limitations.
17 Research and experimental expenditures (section 174)—from the capitalization method another permissible method, to
from the expense method another permissible method, to from the deferred expense method another permissible method, to
from the current period of amortization a different period of amortization under the deferred expense method, or to from
treating research and experimental expenditures under any provision of the Internal Revenue Code other than section 174 to
treating such expenditures under section 174. See section 7.01 of Rev. Proc. 2018-31. Note. This change is implemented on a
cut-off basis and does not receive audit protection.
18 Computer software expenditures (sections 162 and 167)—for costs of developed, acquired, leased, or licensed computer
software, deductible expenses or capital expenditures and amortization (for developed software), capital expenditures to to
and depreciation or amortization (for acquired computer software), or deductible expenses under Regulations section to
1.162-11 (for leased or licensed computer software). Complete Schedule E of Form 3115 for changes relating to acquired
computer software or developed computer software if the change is to capital expenditures and amortization. See section 9.01
of Rev. Proc. 2018-31.

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List of DCNs
No. Change
19 Package design costs (section 263) to— the capitalization method, the design-by-design capitalization and 60-month to
amortization method, or the pool-of-cost capitalization and 48-month amortization method. See section 11.01 of Rev. Proc. to
2018-31.
20 Line pack gas or cushion gas costs (section 263) to— treating the costs as capital expenditures, the costs of recoverable
amounts as not depreciable, and the costs of unrecoverable amounts as depreciable. A taxpayer that changes its method for
the costs of unrecoverable amounts also must change to a permissible method of depreciation for those costs. Complete
Schedule E of Form 3115 for changes relating to the costs of unrecoverable amounts. See section 11.02 of Rev. Proc. 2018-31.
21 Removal costs (section 263)—for certain costs incurred in the retirement and removal of depreciable assets, a method to
that conforms with Rev. Rul. 2000-7, 2000-1 C.B. 712 or for removal costs in disposal of a depreciable asset, including a partial
disposition, as described under Regulations section 1.263(a)-3(g)(2)(i). Additionally, a qualified small taxpayer qualifies for a
reduced Form 3115 filing requirement. See section 11.03 of Rev. Proc. 2018-31.
22 Certain uniform capitalization methods used by resellers and reseller-producers (section 263A)—for qualifying
applicants, a qualifying method or methods. Complete Schedule D, Parts II and III, of Form 3115. See section 12.01 of Rev. to
Proc. 2018-31, as modified by Rev. Proc. 2018-40 and Rev. Proc. 2018-56.
23 Certain uniform capitalization methods used by producers and reseller-producers (section 263A)—for qualifying
applicants, a qualifying method or methods. Complete Schedule D, Parts II and III, of Form 3115. See section 12.02 of Rev. to
Proc. 2018-31, as modified by Rev. Proc. 2018-56.
24 Obsolete. See change number 17.
25 Impact fees (section 263A)—for impact fees incurred in connection with the new construction or expansion of a residential
building, treating the costs as capital expenditures allocable to the building. Complete Schedule E of Form 3115 if the to
building is depreciable. See section 12.03 of Rev. Proc. 2018-31.
26 Related party transactions (section 267)—for losses, expenses, and qualified stated interest incurred in transactions
between related parties, disallowing or deferring certain deductions attributable to such transactions in accordance with to
section 267. See section 13.01 of Rev. Proc. 2018-31.
28 Bonus or vacation pay deferred compensation (section 404)—for bonuses that are deferred compensation, from treating
as deductible or capitalizable when accrued, treating as deductible or capitalizable in the year in which includible in the to
employee’s income, and for vacation pay that is deferred compensation, from treating as deductible or capitalizable when
accrued treating as deductible or capitalizable in the year in which paid to the employee. See section 14.01 of Rev. Proc. to
2018-31.
29 Grace period contributions (section 404)—for contributions made to a section 401(k) qualified cash or deferred
arrangement or matching contributions under section 401(m), from treating contributions made after the end of the tax year but
before the due date of the tax return as being on account of the tax year without regard to when the underlying compensation is
earned treating such contributions as not being on account of the tax year if they are attributable to compensation earned to
after the end of that tax year. See section 14.02 of Rev. Proc. 2018-31.
31 Multi-year insurance policies for multi-year service warranty contracts (section 446)—for a manufacturer, wholesaler,
or retailer of motor vehicles or other durable consumer goods accounting for multi-year insurance policies for multi-year service
warranty contracts, capitalizing and amortizing the costs. See section 15.02 of Rev. Proc. 2018-31.to
32 Overall cash method ($1 million) (section 446)—for qualifying applicants changing the overall cash method. Complete to
Schedule A, Part I, of Form 3115. Also, complete Schedule D, Parts II and III, as applicable. See section 15.03 of Rev. Proc.
2018-31. Note. This change does not apply for any tax year beginning after December 31, 2017.
33 Overall cash method ($10 million) (section 446)—for qualifying applicants changing to the overall cash method. Complete
Schedule A, Part I, of Form 3115. Also, complete Schedule D, Parts II and III, as applicable. See section 15.03 of Rev. Proc.
2018-31. Note. This change does not apply for any tax year beginning after December 31, 2017.
34 First section 448 year (section 448)—for an applicant changing from the cash method for its first section 448 year that
makes the change using the regulation provision in lieu of Rev. Proc. 2015-13. Complete Schedule A, Part I, of Form 3115.
Also, complete Schedule D, Parts II and III, as applicable, of Form 3115. This change does not fall under the procedures of Rev.
Proc. 2015-13. Instead, see Regulations section 1.448-1. (See automatic method change 123 for taxpayers making the change
under Rev. Proc. 2015-13).

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List of DCNs
No. Change
35 Nonaccrual-experience method (section 448)—for an applicant changing: a safe harbor method provided in Regulations to
section 1.448-2(f)(1) (the revenue-based moving average method), (f)(2) (the actual experience method), (f)(3) (the modified
Black Motor method), (f)(4) (the modified moving average method), or (f)(5) (the alternative nonaccrual-experience method); to
a periodic system; from an NAE method to a specific charge-off method; from a sub-method of its current NAE method
provided in Regulations section 1.448-2 regarding applicable periods to another sub-method regarding applicable periods that
is permitted under Regulations section 1.448-2, other than a change to exclude tax years from an applicable period under
Regulations section 1.448-2(d)(6); from a sub-method of its current NAE method provided in Regulations section 1.448-2
regarding tracing of recoveries another sub-method regarding tracing of recoveries permitted under Regulations section to
1.448-2(f)(2)(iii); or, the NAE book safe harbor method described in section 5.01 of Rev. Proc. 2011-46, 2011-42 I.R.B. 518. to
Note. An applicant using the NAE book safe harbor method that wants to make certain changes within the NAE book safe
harbor method (as described in sections 5.02 and 5.03 of Rev. Proc. 2011-46) must attach a statement to its federal income tax
return in lieu of filing a Form 3115. See Rev. Proc. 2011-46, section 15.04 of Rev. Proc. 2018-31, and Rev. Proc. 2006-56,
2006-2 C.B. 1169. Note. Certain changes are made on a cut-off basis.
36 Interest accrual on non-performing loans (section 451)—for an accrual method bank accounting for qualified stated
interest on non-performing loans, the method whereby interest is accrued until either the loan is worthless under section 166 to
and is charged off as a bad debt or the interest is determined to be uncollectible. See section 16.01 of Rev. Proc. 2018-31.
37 Advance rentals (section 451)—for advance rentals other than advance rentals subject to section 467, inclusion in gross to
income in the tax year received. See section 16.02 of Rev. Proc. 2018-31.
38 State or local income or franchise tax refunds (section 451)—for an accrual method applicant with state or local income or
franchise tax refunds, accrue these items in the tax year the applicant receives payments or notice of approval of its refund to
claim (whichever is earlier), according to Rev. Rul. 2003-3, 2003-1 C.B. 252. See section 16.03 of Rev. Proc. 2018-31.
39 Capital cost reduction (CCR) payments (section 451)—for CCR payments (as defined in Rev. Proc. 2002-36, 2002-1 C.B.
993) made by vehicle lessees, the method that excludes these payments from the applicant’s gross income and from the to
applicant’s bases in the purchased vehicles. See section 16.04 of Rev. Proc. 2018-31.
41 Obsolete.
42 Timing of incurring employee medical benefits liabilities (section 461)—for an applicant with an obligation to pay an
employee’s medical expenses (including medical expenses for retirees and employees who filed claims under a workers’
compensation act) that is neither insured nor paid from a welfare benefit fund, treatment as a liability incurred in the tax year to
in which the applicant’s employee files the claim with the applicant; or, if the applicant has a liability to pay a third party for
medical services to its employees, treatment as a liability as incurred in the tax year in which the services are provided. See to
section 20.01(1) of Rev. Proc. 2018-31.
43 Timing of incurring real property taxes, personal property taxes, state income taxes, and state franchise taxes
(section 461)—for a qualifying applicant, treating these taxes as incurred in the tax year in which the taxes are paid, or to to
account for these taxes under the recurring item exception to the economic performance rules, or revoke the ratable accrual to
election under section 461(c). See section 20.02 of Rev. Proc. 2018-31.
44 Timing of incurring workers’ compensation act, tort, breach of contract, or violation of law liabilities (section 461)—
for a qualifying applicant accounting for self-insured liabilities arising under any workers’ compensation act or out of any tort,
breach of contract, or violation of law, treating the liability as incurred in the tax year in which (a) all the events have occurred to
establishing the fact of the liability, (b) the amount of the liability can be determined with reasonable accuracy, and (c) payment
is made to the person to which the liability is owed. See section 20.03 of Rev. Proc. 2018-31.
45 Timing of incurring certain payroll tax liabilities (section 461)—for FICA and FUTA taxes, state unemployment taxes, and
railroad retirement taxes, to the method under which the applicant may deduct in Year 1 its otherwise deductible FICA and
FUTA taxes, state unemployment taxes, and railroad retirement taxes imposed with respect to year-end wages properly
accrued in Year 1, but paid in Year 2, if the requirements of the recurring item exception are met; or, for state unemployment
taxes and railroad retirement taxes, the method stated above where the applicant already uses that method of accounting for to
FICA and FUTA taxes. See section 20.04 of Rev. Proc. 2018-31.
46 Cooperative advertising (section 461) to— incurring a liability in the tax year in which these services are performed, provided
the manufacturer is able to reasonably estimate this liability even though the retailer does not submit the required claim form
until the following year. See section 20.05 of Rev. Proc. 2018-31.
47 Distributor commissions (section 263) from— deducting distributor commissions capitalizing and amortizing distributor to
commissions using the distribution fee period method, the 5-year method, or the useful life method. This change is
implemented on a cut-off basis and applies only to distributor commissions paid or incurred on or after the beginning of the year
of change. See section 11.04 of Rev. Proc. 2018-31. Complete Schedule E of Form 3115.

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List of DCNs
No. Change
48 Cash discounts (section 471)—for cash discounts granted for timely payment, when such discounts approximate a fair
interest rate, from a method of consistently including the price of the goods before discount in the cost of the goods and
including in gross income any discounts taken a method of reducing the cost of the goods by the cash discounts and to
deducting as an expense any discounts not taken, or vice versa. Complete Schedule D, Parts II and III, of Form 3115, as
applicable. See section 22.01 of Rev. Proc. 2018-31.
49 Estimating inventory shrinkage (section 471) from— the present method of estimating inventory shrinkage in computing
ending inventory the retail safe harbor method in section 4 of Rev. Proc. 98-29, 1998-1 C.B. 857, or a method other than to to
the retail safe harbor method, provided (a) the applicant’s present method of accounting does not estimate inventory shrinkage
and (b) the applicant’s new method of accounting (that estimates inventory shrinkage) clearly reflects income under section
446(b). Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.02 of Rev. Proc. 2018-31.
50 Small taxpayer ($1 million) inventory exception (section 471)—for a qualifying applicant with average annual gross
receipts of $1,000,000 or less (see Rev. Proc. 2001-10, 2001-1 C.B. 272), from the present method of accounting for
inventoriable items (including, if applicable, the method of capitalizing costs under section 263A) treating inventoriable items to
in the same manner as materials and supplies that are not incidental under Regulations section 1.162-3. Complete Schedule A,
Part I, and Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.03 of Rev. Proc. 2018-31. Note. This
change does not apply for any tax year beginning after December 31, 2017.
51 Small taxpayer ($10 million) inventory exception (section 471)—for a qualifying applicant with average annual gross
receipts of $10,000,000 or less (see Rev. Proc. 2002-28, 2002-1 C.B. 815), from the present method of accounting for
inventoriable items (including, if applicable, the method of capitalizing costs under section 263A) treating inventoriable items to
in the same manner as materials and supplies that are not incidental under Regulations section 1.162-3. Complete Schedule D,
Parts II and III, of Form 3115, as applicable. See section 22.03 of Rev. Proc. 2018-31. Note. This change does not apply for any
tax year beginning after December 31, 2017.
53 Qualifying volume-related trade discounts (section 471) to— treating qualifying volume-related trade discounts as a
reduction in the cost of merchandise purchased at the time the discount is recognized in accordance with Regulations section
1.471-3(b). Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.04 of Rev. Proc. 2018-31.
54 Impermissible methods of identification and valuation of inventories (section 471)—for an applicant changing from an
impermissible method of identifying or valuing inventories a permissible method of identifying or valuing inventories. to
Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.05 of Rev. Proc. 2018-31.
55 Core alternative valuation method for remanufactured and rebuilt motor vehicle parts (section 471)—for
remanufacturers and rebuilders of motor vehicle parts and resellers of remanufactured and rebuilt motor vehicle parts that use
the lower of cost or market method to value their inventory of cores, the safe harbor method of accounting (the Core to
alternative valuation method) to value inventories of cores as provided for in Rev. Proc. 2003-20, 2003-1 C.B. 445. Complete
Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.06 of Rev. Proc. 2018-31.
56 Change from LIFO inventory method (section 472)—for an applicant changing from the LIFO inventory method for its entire
LIFO inventory, or for one or more dollar-value pools within its LIFO inventory, the permitted method as described in section to
23.01(1)(b) of Rev. Proc. 2018-31. Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 23.01 of
Rev. Proc. 2018-31.
57 Determining current-year cost under the LIFO inventory method (section 472)—for an applicant changing its method of
determining current-year cost : (a) the actual cost of the goods most recently purchased or produced (most-recent to
acquisitions method); (b) the actual cost of the goods purchased or produced during the tax year in the order of acquisition
(earliest-acquisitions method); (c) the average unit cost equal to the aggregate actual cost of all the goods purchased or
produced throughout the tax year divided by the total number of units so purchased or produced; (d) the specific identification
method; or (e) a rolling-average method if the applicant uses that rolling-average method in accordance with Rev. Proc.
2008-43, 2008-30 I.R.B. 186, as modified by Rev. Proc. 2008-52, 2008-2 C.B. 587. Complete Schedule C, Part I, of Form 3115.
See section 23.02 of Rev. Proc. 2018-31. Note. This change is implemented on a cut-off basis.
58 Alternative LIFO inventory method (section 472)—for a qualifying applicant that sells new automobiles or new light-duty
trucks, the Alternative LIFO method described in Rev. Proc. 97-36, 1997-2 C.B. 450, as modified by Rev. Proc. 2008-23, to
2008-1 C.B. 664. Complete Schedule C of Form 3115, as applicable. See section 23.03 of Rev. Proc. 2018-31. Note. This
change is implemented on a cut-off basis.

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                                                 List of DCNs
No. Change
59  Used vehicle alternative LIFO method (section 472)—for a qualifying applicant that sells used automobiles and used 
    light-duty trucks,   the Used vehicle alternative LIFO method, as described in Rev. Proc. 2001-23, 2001-1 C.B. 784, as to
    modified by Announcement 2004-16, 2004-1 C.B. 668 and Rev. Proc. 2008-23, 2008-1 C.B. 664. Complete Schedule C, Part I, 
    of Form 3115. See section 23.04 of Rev. Proc. 2018-31. Note. This change is implemented on a cut-off basis.
60  Determining the cost of used vehicles purchased or taken as a trade-in (section 472)—for a qualifying applicant,   a to
    method of (a) determining the cost of used vehicles acquired by trade-in using the average wholesale price listed by a 
    consistently used official used car guide on the date of the trade-in; (b) using a different official used vehicle guide for 
    determining the cost of used vehicles acquired by trade-in; (c) determining the cost of used vehicles purchased for cash using 
    the actual purchase price of the vehicle; or (d) reconstructing the beginning-of-the-year cost of used vehicles purchased for 
    cash using values computed by national auto auction companies based on vehicles purchased for cash, where the national 
    auto auction company selected is consistently used. Complete Schedule C, Part I, of Form 3115. See section 23.05 of Rev. 
    Proc. 2018-31. Note. This change is implemented on a cut-off basis.
61  Change to IPIC inventory method (section 472)—for a qualifying applicant, from a non-inventory price index computation 
    (IPIC) LIFO inventory method   the IPIC method in accordance with all relevant provisions of Regulations section 1.472-8(e)to
    (3); or, from the IPIC method as described in T.D. 7814, 1982-1 C.B. 84 (the old IPIC method)   the IPIC method as described to
    in T.D. 8976, 2002-1 C.B. 421 (the new IPIC method), which includes the following required changes (if applicable): from using 
    80% of the inventory price index (IPI)   using 100% of the IPI to determine the base-year cost and dollar-value of a LIFO to
    pool(s); from using a weighted arithmetic mean   using a weighted harmonic mean to compute an IPI for a dollar-value to
    pool(s); and from using a components-of-cost method to define inventory items   using a total-product-cost method to define to
    inventory items. Complete Schedule C of Form 3115, as applicable. See section 23.06 of Rev. Proc. 2018-31. Note. This 
    change is implemented on a cut-off basis.
62  Changes within IPIC inventory method (section 472)—for one or more of the following changes within IPIC: (a) from the 
    double-extension IPIC method   the link-chain IPIC method, or vice versa; (b)   or to to from the 10% method; (c)   a pooling to
    method described in Regulations section 1.472-8(b)(4) or Regulations section 1.472-8(c)(2), including a change to begin or 
    discontinue applying one or both of the 5% pooling rules; (d) combine or separate pools as a result of the application of a 5% 
    pooling rule described in Regulations section 1.472-8(b)(4) or Regulations section 1.472-8(c)(2); (e) change the selection of 
    BLS tables from Table 3 (Consumer Price Index for All Urban Consumers (CPI-U): U.S. city average, detailed expenditure 
    categories) of the monthly CPI Detailed Report   Table 9 (Producer price indexes and percent changes for commodity to
    groupings and individual items, not seasonally adjusted) of the monthly PPI Detailed Report, or vice versa; (f) change the 
    assignment of one or more inventory items to BLS categories under either Table 3 of the monthly CPI Detailed Report or Table 
    9 of the monthly PPI Detailed Report; (g) change the representative month when necessitated because of a change in tax year 
    or a change in method of determining current-year cost made pursuant to section 23.02 of Rev. Proc. 2018-31; or (h) change 
    from using preliminary BLS price indexes to using final BLS price indexes to compute an inventory price index, or vice versa. 
    Complete Schedule C of Form 3115, as applicable. See section 23.07 of Rev. Proc. 2018-31. Note. This change is 
    implemented on a cut-off basis.
63  Replacement cost method for automobile dealers’ parts inventory (sections 471 and 472) to—  the replacement cost 
    method for automobile dealers’ parts inventory described in Rev. Proc. 2002-17, 2002-1 C.B. 676. Complete Schedule D, Parts 
    II and III, of Form 3115, as applicable. See section 22.07 of Rev. Proc. 2018-31. Note. This change is implemented on a cut-off 
    basis.
64  Mark-to-market (section 475)—for accounting for securities or commodities by commodities dealers, securities traders, and 
    commodities traders,   the mark-to-market method under section 475(e) or (f). An election statement must be filed earlier than to
    the due date of Form 3115. See Rev. Proc. 99-17, 1999-1 C.B. 503, for rules relating to this statement. See section 24.01 of 
    Rev. Proc. 2018-31.
65  Dealer status changes (section 475)—for an applicant electing out of certain exemptions from securities dealer status,   the to
    mark-to-market method. This change does not fall under the automatic change procedures of Rev. Proc. 2015-13. Instead, see 
    Rev. Proc. 97-43, 1997-2 C.B. 494. Note. This change is implemented on a cut-off basis.
66  Bank reserves for bad debts (section 585)—for a bank (as defined in section 581, including a bank for which a qualified 
    subchapter S subsidiary (QSub) election is filed) to change from the section 585 reserve method   the section 166 specific to
    charge-off method. See section 25.01 of Rev. Proc. 2018-31.
67  Insurance company premium acquisition expenses (section 832)—for certain insurance companies,   a safe harbor to
    method of accounting for premium acquisition expenses set forth in Rev. Proc. 2002-46, 2002-2 C.B. 105. See section 26.01 of 
    Rev. Proc. 2018-31.
68  Discounted unpaid losses (section 846)—for insurance companies other than life insurance companies computing 
    discounted unpaid losses,   the composite method or   alternative methods set forth in Notice 88-100, 1988-2 C.B. 439, and to to
    Rev. Proc. 2002-74, 2002-2 C.B. 980. See section 27.01 of Rev. Proc. 2018-31.
70  Functional currency (section 985)—  the use of another functional currency for the applicant or its qualified business unit to
    (QBU), other than a QBU described in Regulations section 1.985-1(b)(1)(iii). See section 29.01 of Rev. Proc. 2018-31.

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                                                    List of DCNs
No. Change
71  Rule of 78s (section 1272)—for stated interest on certain short-term consumer loans, from the Rule of 78s method   the to
    constant yield method. See section 15.05 of Rev. Proc. 2018-31.
72  Original issue discount (sections 1272 and 1273) to—  the principal-reduction method for de minimis original issue discount 
    (OID). See section 30.01 of Rev. Proc. 2018-31. Note. This change is implemented on a cut-off basis and does not receive 
    audit protection.
73  Market discount bonds (section 1278) from—       including market discount currently in income for the tax year to which the 
    discount is attributable   including market discount in income for the tax year of disposition or partial principal payment to
    (revoking the section 1278(b) election). Note. This change is implemented on a cut-off basis and also generally is made with 
    audit protection, but with conditions or limitations. See section 31.01 of Rev. Proc. 2018-31.
74  Interest income on short-term obligations (section 1281) to—  currently including accrued interest and discount in income 
    (to comply with section 1281). See section 32.01 of Rev. Proc. 2018-31.
75  Stated interest on short-term loans (section 1281)—for a bank using the cash method of accounting, from accruing stated 
    interest on short-term loans made in the ordinary course of business   using the cash method to report such interest. See to
    section 32.02 of Rev. Proc. 2018-31.
76  Sales of mortgage loans (section 1286)—for accounting for certain sales of mortgage loans in which the seller also enters 
    into a contract to service the mortgages in consideration for amounts received from interest payments, from a method that is 
    inconsistent with Rev. Rul. 91-46, 1991-2 C.B. 358,   a method that is consistent with Rev. Rul. 91-46. However, the change is to
    only an automatic accounting method change for certain taxpayers who are under examination. This change does not fall under 
    the automatic change procedures of Rev. Proc. 2015-13. Instead, see Rev. Proc. 91-51, 1991-2 C.B. 779.
77  Environmental remediation costs (section 263A)—for costs incurred to clean up land that a taxpayer contaminated with 
    hazardous waste from the taxpayer’s manufacturing operations,   capitalizing such costs in inventory costs under section to
    263A. See section 12.04 of Rev. Proc. 2018-31.
78  Costs of intangibles and certain transactions (section 263(a))—for amounts paid or incurred to acquire or create 
    intangibles, or to facilitate an acquisition of a trade or business, a change in the capital structure of a business entity, and certain 
    other transactions,   a method of accounting provided in Regulations sections 1.263(a)-4, 1.263(a)-5, and 1.167(a)-3(b). to
    Complete Schedule E of Form 3115 for changes to a method of accounting provided in Regulations section 1.167(a)-3(b). See 
    section 11.05 of Rev. Proc. 2018-31.
79  REMIC inducement fees (sections 860A–860G)—for an inducement fee received in connection with becoming the holder of 
    a noneconomic residual interest in a REMIC,   a safe harbor method provided under Regulations section 1.446-6(e)(1) or (e)to
    (2). See Rev. Proc. 2004-30, 2004-1 C.B. 950, and section 28.01 of Rev. Proc. 2018-31.
80  All events test method for credit card annual fees (section 451) to—  a method that satisfies the all events test in 
    accordance with Rev. Rul. 2004-52, 2004-1 C.B. 973. See section 16.05 of Rev. Proc. 2018-31.
81  Ratable inclusion method for credit card annual fees (section 446) to—  the ratable inclusion method for credit card annual 
    fees. See section 16.05 of Rev. Proc. 2018-31.
82  Credit card late fees (section 451) to—  a method that treats credit card late fees as interest income that creates or increases 
    OID on the pool of credit card loans to which the fees relate. Note. This change is generally made with audit protection, but has 
    conditions or limitations. See section 16.06 of Rev. Proc. 2018-31.
83  Full inclusion method for certain advance payments (section 451) to—  the full inclusion method as described in section 
    5.01 of Rev. Proc. 2004-34, 2004-1 C.B. 991. The applicant must be using, or changing to, an overall accrual method of 
    accounting. See section 16.07 of Rev. Proc. 2018-31.
84  Deferral method for certain advance payments (section 451) to—  the deferral method as described in section 5.02 of Rev. 
    Proc. 2004-34, 2004-1 C.B. 991 (except as provided in section 8.03 and 8.04(2) of Rev. Proc. 2004-34). The applicant must be 
    using, or changing to, an overall accrual method of accounting. See section 16.07 of Rev. Proc. 2018-31 and Notice 2018-35.
85  Film producer’s treatment of certain creative property costs (section 446) to—  account for creative property costs under 
    the safe harbor method provided in Rev. Proc. 2004-36, 2004-1 C.B. 1063. See section 15.06 of Rev. Proc. 2018-31.
86  Timber fertilization costs (section 162)—for costs incurred by a timber grower for the post-establishment fertilization of an 
    established timber stand,   treat such costs as ordinary and necessary business expenses deductible under section 162. See to
    section 3.04 of Rev. Proc. 2018-31.
87  Change in general asset account treatment due to a change in the use of MACRS property (section 168) to—  the 
    method of accounting provided in Regulations sections 1.168(i)-1(c)(2)(ii)(E) and 1.168(i)-1(h)(2) (as in effect before January 1, 
    2012). Complete Schedule E of Form 3115. Change is implemented on a modified cut-off basis. Additionally, a qualified small 
    taxpayer qualifies for a reduced Form 3115 filing requirement. See Regulations section 1.168(i)-1(l)(2)(ii) and section 6.04 of 
    Rev. Proc. 2018-31.

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List of DCNs
No. Change
88 Change in method of accounting for depreciation due to a change in the use of MACRS property (section 168) to—
the method of accounting provided in Regulations section 1.168(i)-4 or to revoke the election provided in Regulations section
1.168(i)-4(d)(3)(ii) to disregard a change in use of MACRS property. Complete Schedule E of Form 3115. Additionally, a
qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See Regulations section 1.168(i)-4(g)(2) and
section 6.05 of Rev. Proc. 2018-31.
89 Depreciation of qualified non-personal use vans and light trucks (section 280F)—for certain vehicles placed in service
before July 7, 2003, a method of accounting in accordance with Regulations section 1.280F-6(f)(2)(iv). Complete Schedule E to
of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See Regulations
section 1.280F-6(f)(2)(iv) and section 6.06 of Rev. Proc. 2018-31.
90 Insurance companies’ incentive payments to health care providers (section 446)—for deducting provider incentive
payments, the method of including those payments in discounted unpaid losses without regard to section 404. See section to
15.07 of Rev. Proc. 2018-31.
91 Up-front network upgrade payments received by utilities (section 61) to— a safe harbor method provided in Rev. Proc.
2005-35, 2005-2 C.B. 76. See section 1.01 of Rev. Proc. 2018-31.
92 Allocation of environmental remediation costs to production (section 263A) to— a method that allocates under section
263A environmental remediation costs to the inventory produced during the tax year such costs are incurred. See Rev. Rul.
2005-42, 2005-2 C.B. 67, and section 12.05 of Rev. Proc. 2018-31.
94 Credit card cash advance fees (section 451) to— a method that treats credit card cash advance fees as creating or
increasing original issue discount (OID) on a pool of credit card loans that includes the cash advances that give rise to the fees.
Note. This change is generally made with audit protection, but has conditions or limitations. See section 16.08 of Rev. Proc.
2018-31.
96 Replacement cost method for heavy equipment dealers’ parts inventory (sections 471 and 472) to— the replacement
cost method for heavy equipment dealers’ parts inventory described in Rev. Proc. 2006-14, 2006-1 C.B. 350. Complete
Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.08 of Rev. Proc. 2018-31. Note. This change is
implemented on a cut-off basis.
106 Timing of incurring certain liabilities for services or insurance (section 461)—for an applicant that is currently treating
the mere execution of a contract for services or insurance as establishing the fact of the liability under section 461 and wants to
change from that method for liabilities for services or insurance to comply with Rev. Rul. 2007-3, 2007-1 C.B. 350. See section
20.06 of Rev. Proc. 2018-31.
107 Impermissible to permissible method of accounting for depreciation or amortization for disposed depreciable or
amortizable property (sections 167, 168, 197, 1400I, 1400L(b), 1400L(c), or 1400N(d), or former 168)—for an item of
certain depreciable or amortizable property that has been disposed of by the applicant and for which the applicant did not take
into account any depreciation allowance or did take into account some depreciation but less than the depreciation allowable,
from using an impermissible method of accounting for depreciation using a permissible method of accounting for to
depreciation. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115
filing requirement. See section 6.07 of Rev. Proc. 2018-31.
108 Change by bank for uncollected interest (section 446)—for a bank (as defined in Regulations section 1.166-2(d)(4)(i)) that
uses an accrual method of accounting; is subject to supervision by federal authorities, or by state authorities maintaining
substantially equivalent standards; and has 6 or more years of collection experience to change the safe harbor method of to
accounting for uncollected interest (other than interest described in Regulations section 1.446-2(a)(2)) set forth in section 4 of
Rev. Proc. 2007-33, 2007-1 C.B. 1289. See section 15.08 of Rev. Proc. 2018-31.
109 Rotable spare parts (section 263(a))—for an applicant that maintains a pool or pools of rotable spare parts that are primarily
used to repair customer-owned (or customer-leased) equipment under warranty or maintenance agreements the safe harbor to
method provided in Rev. Proc. 2007-48, 2007-2 C.B. 110. Complete Schedule E of Form 3115. See section 11.06 of Rev. Proc.
2018-31.
110 Rotable spare parts (section 471) from— the safe harbor method (or a similar method) of treating rotable spare parts as
depreciable assets, in accordance with Rev. Proc. 2007-48, 2007-2 C.B. 110, treating rotable spare parts as inventoriable to
items. See section 22.09 of Rev. Proc. 2018-31.
111 Advance trade discount method (section 471)—for an accrual method applicant required to use an inventory method of
accounting and maintaining inventories, as provided in section 471, that receives advance trade discounts the Advance to
trade discount method described in Rev. Proc. 2007-53, 2007-2 C.B. 233. See section 22.10 of Rev. Proc. 2018-31.

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List of DCNs
No. Change
112 Changes to the Vehicle-Pool Method (section 472)—for a retail dealer or wholesaler distributor (reseller) of cars and
light-duty trucks to the Vehicle-Pool Method as described in Rev. Proc. 2008-23, 2008-1 C.B. 664. See section 23.08 of Rev.
Proc. 2018-31. Note. This change is implemented on a cut-off basis.
113 Payroll tax liabilities (section 461)—for an accrual method applicant that wants to change its method for FICA and FUTA
taxes the safe harbor method provided in Rev. Proc. 2008-25, 2008-1 C.B. 686, which provides that, solely for the purposes to
of the recurring item exception, an applicant will be treated as satisfying the requirement in Regulations section 1.461-5(b)(1)(i)
for its payroll tax liability in the same tax year in which all events have occurred that establish the fact of the related
compensation liability and the amount of the related compensation liability can be determined with reasonable accuracy. See
section 20.04 of Rev. Proc. 2018-31.
114 Rolling-average method of accounting for inventories (sections 471 and 472)—for an applicant required to account for
inventories under section 471 and that uses a rolling-average method to value inventories for financial accounting purposes to
the same rolling-average method to value inventories for federal income tax purposes, in accordance with Rev. Proc. 2008-43,
2008-30 I.R.B.186. See section 22.14 of Rev. Proc. 2018-31. Note. This change must be implemented on a cut-off basis unless
the applicant’s books and records contain sufficient information to compute a section 481(a) adjustment, in which case the
applicant may choose to implement the change with a section 481(a) adjustment.
116 Obsolete. See change number 7.
117 Obsolete. See change number 205 or 206, as applicable.
119 Obsolete. See change number 7.
121 Repairable and reusable spare parts (section 263(a)) to— treat certain repairable and reusable spare parts as depreciable
property in accordance with the holding in Rev. Rul. 69-200, 1969-1 C.B. 60, or Rev. Rul. 69-201, 1969-1 C.B. 60. Complete
Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See
section 11.07 of Rev. Proc. 2018-31.
122 Overall accrual method other than for the first section 448 year (section 446)—for a qualifying applicant for other than its
first section 448 year, from the overall cash method an overall accrual method. Complete Schedule A, Part I, of Form 3115. to
Also complete Schedule D, Parts II and III, as applicable. See section 15.01 of Rev. Proc. 2018-31, as modified by Rev. Proc.
2018-44 and Rev. Proc. 2018-60.
123 Change in overall method from the cash method to an accrual method for the first section 448 year (section 446)—
for an applicant that is required by section 448 to change from the overall cash method an overall accrual method and the to
applicant qualifies to make the change under the automatic consent procedures of Regulations sections 1.448-1(g) and (h)(2)
as well as Rev. Proc. 2015-13 for a year of change that is the applicant’s first section 448 year. See Regulations sections
1.448-1(g) and (h)(2), and section 15.01 of Rev. Proc. 2018-31, as modified by Rev. Proc. 2018-44 and Rev. 2018-60.
124 Change from the cash method to an accrual method for specific items (section 446)—for a qualifying applicant using an
overall accrual method and accounting for one or more identified specific items of income and expense on the cash method to
an accrual method of accounting for the identified specific item or items. See section 15.09 of Rev. Proc. 2018-31.
125 Multi-year service warranty contracts (section 446)—for an eligible accrual method manufacturer, wholesaler, or retailer of
motor vehicles or other durable consumer goods that wants to change the service warranty income method described in to
section 5 of Rev. Proc. 97-38, 1997-2 C.B. 479. See Rev. Proc. 97-38 and section 15.10 of Rev. Proc. 2018-31. Note. This
change is implemented on a cut-off basis and also has a reduced Form 3115 filing requirement.
126 Overall cash method for specified transportation industry taxpayers (section 446)—for “specified transportation
industry taxpayers,” as defined in section 15.11(2) of Rev. Proc. 2018-31, with average annual gross receipts of more than
$10,000,000 and not in excess of $50,000,000 the overall cash method. See section 15.11 of Rev. Proc. 2018-31.to
127 Change to overall cash/hybrid method for certain banks (section 446)—for an eligible bank, as defined in section
15.12(2)(a) of Rev. Proc. 2018-31, an overall cash/hybrid method described in section 15.12(2)(b) of Rev. Proc. 2018-31. to
See section 15.12 of Rev. Proc. 2018-31.
128 Change to overall cash method for farmers (section 446)—for a qualifying applicant engaged in the trade or business of
farming to the overall cash method. See section 15.13 of Rev. Proc. 2018-31, as modified by Rev. Proc. 2018-40. Note. For
applicants changing from the crop method, that portion of the change is implemented using a cut-off method.

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List of DCNs
No. Change
129 Nonshareholder contributions to capital under section 118 (section 446) from— excluding from gross income under
section 61 certain payments or the fair market value of property received (including customer connection fees received by a
regulated public utility described in section 118(c)), by characterizing the payments or the fair market value of property as
nontaxable contributions to capital under section 118(a), including the payments or the fair market value of property in gross to
income under section 61. This change also applies to a regulated public utility described in section 118(c) that changes from
including in gross income under section 61 payments or fair market value of property received that are contributions in aid of
construction under section 118(c) and Regulations section 1.118-2 and that meet the requirements of sections 118(c)(1)(B) and
118(c)(1)(C) excluding from income the payments or the fair market value of the property as nontaxable contributions to to
capital under section 118(a). See section 15.14 of Rev. Proc. 2018-31. Note. The change described in section 15.14(1)(a)(ii) of
Rev. Proc. 2018-31 does not apply to contributions made after December 22, 2017.
130 Retainages not received under long-term contracts (section 451)—for an accrual method applicant’s retainages under
section 451 a method consistent with the holding in Rev. Rul. 69-314, 1969-1 C.B. 139. This change does not apply to to
retainages under long-term contracts as defined in section 460(f). An applicant changing its method of accounting under this
section must treat all retainages (receivables and payables) in the same manner. See section 16.09 of Rev. Proc. 2018-31.
131 Series E, EE, or I U.S. savings bonds (section 454)—for a cash method taxpayer changing the taxpayer’s method of
accounting for interest income on Series E, EE, or I U.S. savings bonds from reporting as interest income the increase in
redemption price on a bond occurring in a tax year reporting this income in the tax year in which the bond is redeemed, to
disposed of, or finally matures, whichever is earliest. A statement in lieu of a Form 3115 is authorized for this change. See
section 17.01 of Rev. Proc. 2018-31. Note. This change is implemented on a cut-off basis.
132 Prepaid subscription income (section 455)—for an accrual method applicant changing its method of accounting for prepaid
subscription income the method described in section 455 and the related regulations, including an eligible applicant that to
wants to make the “within 12 months” election under Regulations section 1.455-2. A statement in lieu of a Form 3115 is
authorized for this change. See section 18.01 of Rev. Proc. 2018-31. Note. This change is implemented on a cut-off basis.
133 Timing of incurring liabilities for bonuses (section 461) to— treat bonuses as incurred in the tax year in which all events
have occurred that establish the fact of the liability to pay a bonus and the amount of the liability can be determined with
reasonable accuracy. See section 20.01(2) of Rev. Proc. 2018-31.
134 Timing of incurring liabilities for vacation pay, sick pay, and severance pay (section 461) to— treat vacation pay, sick
pay, and severance pay as incurred in the tax year in which all events have occurred that establish the fact of the liability to pay
vacation pay, sick pay, and severance pay, and the amount of the liability can be determined with reasonable accuracy. The
applicant may make this change if the vacation pay, sick pay, and severance pay vests in that tax year and the vacation pay,
sick pay, and severance pay is received by the employee by the 15th day of the 3rd calendar month after the end of that tax
year. See section 20.01(3) of Rev. Proc. 2018-31.
135 Rebates and allowances (section 461)—for an accrual method applicant’s liability for rebates and allowances the to
recurring item exception method under section 461(h)(3) and Regulations section 1.461-5. See section 20.07 of Rev. Proc.
2018-31.
136 Change from an improper method of inclusion of rental income or expense to inclusion in accordance with the rent
allocation (section 467)—for an applicant that is a party to a section 467 rental agreement and is changing its method for its
fixed rent the rent allocation method provided in Regulations section 1.467-1(d)(2)(iii). See section 21.01 of Rev. Proc. to
2018-31. Note. This change only receives limited audit protection.
137 Permissible methods of identification and valuation of inventories (section 471)—for an applicant changing from one
permissible method of identifying and valuing inventories another permissible method of identifying and valuing inventories. to
Complete Schedule D, Parts II and III, of Form 3115, as applicable. See section 22.11 of Rev. Proc. 2018-31.
138 Change in the official used vehicle guide utilized in valuing used vehicles (section 471)—for a used vehicle dealer
from not using an official used vehicle guide for valuing used vehicles using an official used vehicle guide for valuing used to
vehicles; or from using an official used vehicle guide for valuing used vehicles using a different official used vehicle guide for to
valuing used vehicles. See section 22.12 of Rev. Proc. 2018-31.
139 Invoiced advertising association costs for new vehicle retail dealerships (section 471)—for an applicant engaged in the
trade or business of retail sales of new automobiles or new light-duty trucks (dealership) from capitalizing certain advertising
costs as acquisition costs under Regulations section 1.471-3(b) deducting the advertising costs under section 162 as the to
advertising services are provided to the dealership. See Regulations section 1.461-4(d)(2)(i), and section 22.13 of Rev. Proc.
2018-31.

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List of DCNs
No. Change
140 Changes within the Used Vehicle Alternative LIFO Method (section 472)—for a taxpayer using the Used Vehicle
Alternative LIFO Method, as described in Rev. Proc. 2001-23, 2001-1 C.B. 784, as modified by Announcement 2004-16,
2004-1 C.B. 668, and Rev. Proc. 2008-23, 2008-1 C.B. 664, use a different “official used vehicle guide” in conjunction with to
the Used Vehicle Alternative LIFO Method, or a different precise manner of using an official used vehicle guide (for example, to
a change in the specific guide category that an applicant uses to represent vehicles of average condition for purposes of
section 4.02(5)(a) of Rev. Proc. 2001-23). See section 23.09 of Rev. Proc. 2018-31. Note. This change is implemented on a
cut-off basis.
141 Changes to dollar-value pools of manufacturers (section 472)—for a manufacturer that purchases goods for resale
(resale goods) and thus must reassign resale goods from the pool(s) it maintains for the goods it manufactures to one or more
resale pools, and the manufacturer wants to change from using multiple pools described in Regulations section 1.472-8(b)(3)
to using natural business unit (NBU) pools described in Regulations section1.472-8(b)(1), or vice versa; or wants to reassign
items in NBU pools described in Regulations section 1.472-8(b)(1) into the same number or a greater number of NBU pools.
See section 23.10 of Rev. Proc. 2018-31. Note. This change is implemented on a cut-off basis.
145 Tenant construction allowances (section 168)—for an applicant changing from improperly treating the applicant as having
a depreciable interest in the property subject to the tenant construction allowances for federal income tax purposes properly to
treating the applicant as not having a depreciable interest in such property for federal income tax purposes; or from improperly
treating the applicant as not having a depreciable interest in the property subject to the tenant construction allowances for
federal income tax purposes properly treating the applicant as having a depreciable interest in such property for federal to
income tax purposes. This change is implemented on a cut-off basis and does not receive audit protection. Additionally, a
qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 6.08 of Rev. Proc. 2018-31.
146 Obsolete. See change number 205.
147 Obsolete. See change number 206.
148 Debt issuance costs (section 446)—for an applicant changing its method of accounting comply with Regulations section to
1.446-5, which provides rules for allocating the costs over the term of the debt. See section 15.15 of Rev. Proc. 2018-31.
149 Ratable accrual of real property taxes (section 461)—for an accrual method applicant for real property taxes that relate to a
definite period of time the method described in section 461(c) and section 1.461-1(c)(1) (ratable accrual election) for a tax to
year other than the applicant’s first tax year in which real property taxes are incurred. See section 20.08 of Rev. Proc. 2018-31.
Note. This change has a reduced Form 3115 filing requirement.
150 Retail sales facility safe harbor for a motor vehicle dealership (section 263A)—for a motor vehicle dealership treat its to
sales facility as a retail sales facility as described in section 5.01 of Rev. Proc. 2010-44, 2010-49 I.R.B. 811. See section 12.06
of Rev. Proc. 2018-31.
151 Reseller without production activities safe harbor for a motor vehicle dealership (section 263A)—for a motor vehicle
dealership be treated as a reseller without production activities as described in section 5.02 of Rev. Proc. 2010-44, 2010-49 to
I.R.B. 811. See section 12.06 of Rev. Proc. 2018-31.
152 Deduction for energy efficient commercial buildings (section 179D)—for an applicant to change its method of accounting
to deduct under section 179D amounts paid or incurred for the installation of energy efficient commercial building property,
subject to the limits of section 179D(b), in the year the property is placed in service. See Rev. Proc. 2012-39, 2012-2 C.B. 470,
and section 8.01 of Rev. Proc. 2018-31. Note. This change does not receive audit protection.
153 Advance payments—change in applicable financial statements (Rev. Proc. 2004-34)—for an applicant using the deferral
method for including advance payments in gross income in accordance with its applicable financial statement (AFS) to change
its method recognize advance payments in gross income under Rev. Proc. 2004-34 consistent with a changed manner for to
recognizing advance payments for its AFS. The requirement in section 6.03(3)(a) of Rev. Proc. 2015-13 to provide an additional
copy of the application to the examining agent(s), appeals officer(s), and counsel to the government, if applicable, applies to
this application. A statement in lieu of a Form 3115 is authorized for this change. See section 16.10 of Rev. Proc. 2018-31.
Note. This change is implemented on a cut-off basis and does not receive audit protection.
154 California franchise taxes (Rev. Rul. 2003-90)—for an accrual method applicant changing recognizing its California to
franchise tax liability in the tax year following the tax year in which the tax is incurred under the Cal. Rev. & Tax Code. See
section 20.09 of Rev. Proc. 2018-31.
155 Unearned premiums (section 833)—for a Blue Cross or Blue Shield organization within the meaning of section 833(c)(2) or
an organization described in section 833(c)(3) required to change its method of accounting for unearned premiums because it
fails to meet the MLR requirements of section 833(c)(5). See section 26.02 of Rev. Proc. 2018-31.
156 Gift cards issued as a refund (Rev. Proc. 2011-17)—for an accrual method applicant who issues gift cards as a refund for
returned goods changing treat the transaction as the payment of a cash refund and sale of a gift card in the amount of the gift to
card, as provided in Rev. Proc. 2011-17, 2011-5 I.R.B. 441. See section 20.10 of Rev. Proc. 2018-31.

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List of DCNs
No. Change
157 Classification of wireless telecommunications assets used by wireless telecommunications carriers (sections 167
and 168)—for applicants that have a depreciable interest in wireless telecommunication assets (as defined in Rev. Proc.
2011-22, 2011-8 I.R.B. 737) used primarily to provide wireless telecommunications or broadband services by mobile phones
that are changing the method described in Rev. Proc. 2011-22 to determine the recovery periods for depreciation of certain to
tangible assets used by wireless telecommunications carriers. Additionally, a qualified small taxpayer qualifies for a reduced
Form 3115 filing requirement. See Rev. Proc. 2011-22 and section 6.09 of Rev. Proc. 2018-31.
158 Wireline network property (section 263(a))—for certain applicants that have a depreciable interest in wireline network
assets (as described in section 4 of Rev. Proc. 2011-27, 2011-8 I.R.B. 740) used primarily to provide wireline
telecommunication or broadband services that are changing (a) the wireline network assets maintenance allowance method to
described in section 5 of Rev. Proc. 2011-27, or (b) the adoption of all, or some, of the units of property described in section 6 of
Rev. Proc. 2011-27, to determine whether expenditures to maintain, replace, or improve wireline network assets must be
capitalized under section 263(a). See section 3.07 of Rev. Proc. 2018-31.
159 Wireless network property (section 263(a))—for certain applicants that have a depreciable interest in wireless network
assets (as described in section 4 of Rev. Proc. 2011-28, 2011-8 I.R.B. 743) used primarily to provide wireless
telecommunications or broadband services by mobile phones that are changing (a) the wireless network asset maintenance to
allowance method described in section 5 of Rev. Proc. 2011-28, or (b) the adoption of all, or some, of the units of property
described in section 6 of Rev. Proc. 2011-28, to determine whether expenditures to maintain, replace, or improve wireless
network assets must be capitalized under section 263(a). See section 3.08 of Rev. Proc. 2018-31.
160 Electric transmission and distribution property (section 263(a))—for certain applicants that have a depreciable interest in
electric transmission or distribution property (as described in section 4 of Rev. Proc. 2011-43, 2011-37 I.R.B. 326) used
primarily to transport, deliver, or sell electricity that are changing the method described in Rev. Proc. 2011-43, to determine to
whether expenditures incurred to maintain, replace, or improve transmission and distribution property are deductible repairs
under section 162 or capitalizable improvements under section 263(a). See section 3.09 of Rev. Proc. 2018-31.
161 Timing of incurring liabilities under the recurring item exception to the economic performance rules (section 461(h)
(3))—for an applicant changing a method of accounting to conform to any of the holdings in Rev. Rul. 2012-1, 2012-2 I.R.B. to
255, which addresses the “not material” and “better matching” requirements of the recurring item exception and distinguishes
contracts for the provision of services from insurance and warranty contracts. See section 20.11 of Rev. Proc. 2018-31.
175 Obsolete. See change number 199.
176 Obsolete. See change number 200.
177 Obsolete. See change number 205.
178 Obsolete. See change number 206.
179 Obsolete. See change number 207.
181 Plants removed from the list of plants that have a preproductive period in excess of 2 years (section 263A)—for an
applicant that is not a corporation, partnership, or tax shelter required to use an accrual method of accounting and either is
changing not applying section 263A to the production of a plant or plants that have been removed from the list of plants with to
a nationwide weighted average preproductive period in excess of 2 years, or is revoking its section 263A(d)(3) election not to
apply section 263A to the production of a plant or plants that have been removed from the list of plants with a nationwide
weighted average preproductive period in excess of 2 years. See Rev. Proc. 2013-20 and section 12.07 of Rev. Proc. 2018-31.
182 Steam or electric power generation property (section 263(a))—for an applicant changing its method of accounting for its
treatment of expenditures on generation property (as defined in section 4.01 of Rev. Proc. 2013-24, 2013-22 I.R.B. 1142) to
use all or some of the unit of property definitions and the corresponding major component definitions described in Appendix A
of Rev. Proc. 2013-24, to determine whether expenditures to maintain, replace, or improve generation property must be
capitalized under section 263(a). See section 3.10 of Rev. Proc. 2018-31.
183 Change to proportional method of accounting for OID on a pool of credit card receivables (section 1272(a)(6))—for
an eligible taxpayer that wants to change the proportional method of accounting for original issue discount (OID) on a pool of to
credit card receivables as described in Rev. Proc. 2013-26, 2013-22 I.R.B. 1160. See section 30.02 of Rev. Proc. 2018-31.
Note. This change is implemented on a cut-off basis.

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List of DCNs
No. Change
184 Deducting repair and maintenance costs or capitalizing improvement costs (sections 162 and 263(a))—for an
applicant changing deducting amounts paid or incurred for repair and maintenance costs under section 162 and Regulations to
section 1.162-4 or changing capitalizing amounts paid or incurred for improvements to tangible property and, if depreciable, to
to depreciating such property under section 168. Includes a change by an applicant in the method of identifying units of
property under Regulations section 1.263(a)-3(e) for purposes of determining whether amounts paid or incurred improve a unit
of property under Regulations section 1.263(a)-3. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115
filing requirement. See section 11.08 of Rev. Proc. 2018-31.
185 Change to the regulatory accounting method (section 162)—for a regulated applicant changing its method of accounting
for amounts paid or incurred to repair or maintain tangible property to follow its method of accounting for regulatory accounting
purposes to determine whether an amount paid or incurred improves property under Regulations section 1.263(a)-3, consistent
with Regulations section 1.263(a)-3(m). Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing
requirement. See section 11.08 of Rev. Proc. 2018-31.
186 Deducting non-incidental materials and supplies when used or consumed (section 162)—for an applicant changing its
method of accounting for non-incidental materials and supplies the method of deducting such amounts in the tax year in to
which they are actually used or consumed, consistent with Regulations section 1.162-3. Additionally, a qualified small taxpayer
qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2018-31.
187 Deducting incidental materials and supplies when paid or incurred (section 162)—for an applicant that wants to change
its method of accounting for incidental materials and supplies the method of deducting such amounts in the tax year in which to
they are paid or incurred, consistent with Regulations section 1.162-3. Additionally, a qualified small taxpayer qualifies for a
reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2018-31.
188 Deducting non-incidental rotable and temporary spare parts when disposed (section 162)—for an applicant changing
its method of accounting for costs to acquire or produce non-incidental rotable and temporary spare parts the method of to
deducting such costs in the tax year in which the taxpayer disposes of the parts, consistent with Regulations section 1.162-3.
Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc.
2018-31.
189 Change to the optional method for rotable and temporary spare parts (section 162)—for an applicant changing its
method of accounting for rotable and temporary spare parts the optional method of accounting for rotable and temporary to
spare parts (described in Regulations section 1.162-3(e)), consistent with Regulations section 1.162-3. Additionally, a qualified
small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2018-31.
190 Deducting dealer expenses that facilitate the sale of property (section 162)—for an applicant that is a dealer in property
changing its method of accounting for commissions and other costs paid or incurred to facilitate the sale of tangible property to
the method of treating such costs as ordinary and necessary business expenses, consistent with Regulations section
1.263(a)-1(e)(2). Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 11.08
of Rev. Proc. 2018-31.
191 Non-dealer expense to facilitate the sale of property (section 263(a))—for an applicant that is not a dealer in property
changing its method of accounting for commissions and other costs paid or incurred to facilitate the sale of property the to
method of capitalizing such costs, consistent with Regulations section 1.263(a)-1(e)(1). Additionally, a qualified small taxpayer
qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2018-31.
192 Capitalizing acquisition or production costs (section 263(a))—for an applicant changing its method of accounting to
capitalizing amounts paid or incurred to acquire or produce property under Regulations section 1.263(a)-2 and, if depreciable,
to depreciating such property under section 168. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing
requirement. See section 11.08 of Rev. Proc. 2018-31.
193 Deducting certain costs for investigating or pursuing the acquisition of property (section 162)—for an applicant
changing its method of accounting from capitalizing deducting amounts paid or incurred in the process of investigating or to
otherwise pursuing (a) the acquisition of real property if the amounts meet the requirements of Regulations section 1.263(a)-2(f)
(2)(iii), or (b) the acquisition of real or personal property if the amounts are for employee compensation or overhead costs under
Regulations section 1.263(a)-2(f)(2)(iv), consistent with Regulations section 1.263(a)-2. Additionally, a qualified small taxpayer
qualifies for a reduced Form 3115 filing requirement. See section 11.08 of Rev. Proc. 2018-31.
194 Change to a reasonable allocation method for self-constructed assets (section 263A)—for a producer or a
reseller-producer a reasonable allocation method under Regulations section 1.263A-1(f)(4) for self-constructed assets or to
from not capitalizing a cost subject to section 263A capitalizing that cost under a reasonable allocation method under to
Regulations section 1.263A-1(f)(4) that the producer or reseller-producer is already using for self-constructed assets. See
section 12.08 of Rev. Proc. 2018-31.

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                                                    List of DCNs
No. Change
195 Real property acquired through foreclosure (section 263A)—for an applicant that capitalizes costs under section 263A(b)
    (2) and Regulations section 1.263A-3(a)(1) to real property acquired through foreclosure, or similar transaction,   an otherwise to
    permissible method of accounting under which the acquisition and holding costs for real property acquired through foreclosure, 
    or similar transaction, are not capitalized under section 263A(b)(2) and Regulations section 1.263A-3(a)(1). See section 12.09 
    of Rev. Proc. 2018-31.
196 Obsolete.
197 Obsolete.
198 Partial dispositions of tangible depreciable asset to which the IRS’s adjustment pertains (section 168)—for MACRS 
    property for which the applicant is making a partial disposition election under Regulations section 1.168(i)-8(d)(2)(iii) to the 
    disposition of a portion of the asset to which the IRS’s adjustment pertains (as described in Regulations section 1.168(i)-8(d)(2)
    (iii)). Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing 
    requirement. See section 6.10 of Rev. Proc. 2018-31.
199 Depreciation of leasehold improvements (sections 167, 168, and 197)—for leasehold improvements in which the 
    applicant has a depreciable interest at the beginning of the year of change, from improperly depreciating or amortizing these 
    leasehold improvements over the term of the lease (including renewals, if applicable)   properly depreciating or amortizing to
    these leasehold improvements under section 167(f)(1), 168, or 197, as applicable. Complete Schedule E of Form 3115. 
    Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 6.11 of Rev. Proc. 
    2018-31.
200 Depreciation of MACRS property (permissible to permissible) (section 168)—for MACRS property, from a permissible 
    method   another permissible method listed in section 6.12(3) of Rev. Proc. 2018-31. Certain changes are made on a modified to
    cut-off basis or a cut-off basis. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a 
    reduced Form 3115 filing requirement. See section 6.12 of Rev. Proc. 2018-31. 
201 Sales-based royalties (section 263A)—for sales-based royalties (as described in Regulations section 1.263A-1(e)(3)(ii)(U)
    (2)) properly allocable to inventory property for which the applicant is making a change listed in section 12.10(1) of Rev. Proc. 
    2018-31. See Rev. Proc. 2014-33 and section 12.10 of Rev. Proc. 2018-31.
202 Sales-based vendor chargebacks under a simplified method (section 263A)—for an applicant changing its method of 
    accounting to no longer include cost adjustments for sales-based vendor chargebacks (as described in Regulations section 
    1.471-3(e)(1)) in the formulas used to allocate additional section 263A costs to ending inventory under a simplified method. See 
    Rev. Proc. 2014-33 and section 12.11 of Rev. Proc. 2018-31.
203 Sales-based vendor chargebacks (section 471)—for an applicant changing its method of accounting to treat sales-based 
    vendor chargebacks as a reduction in cost of goods sold in accordance with Regulations section 1.471-3(e)(1). See Rev. Proc. 
    2014-33 and section 22.15 of Rev. Proc. 2018-31.
204 Retail inventory method (section 471)—for an applicant using the retail inventory method, a change  : (a) not adjusting the to
    numerator of the cost complement for an allowance, discount, or price rebate required by Regulations section 1.471-3(e) to 
    reduce only cost of goods sold; (b) not adjusting the denominator of the cost complement for temporary markups and 
    markdowns; (c) computing the cost complement using a method described in Regulations section 1.471-8(b)(3) (including 
    changes from a method described in section 1.471-8(b)(3) to another method described in that section) for a retail LCM 
    applicant; or (d) adjusting the denominator of the cost complement for permanent markups and markdowns for a retail cost 
    applicant. See section 22.16 of Rev. Proc. 2018-31. Note. A taxpayer making any of these changes for its first or second tax 
    year after December 31, 2014, may use either a section 481(a) adjustment or a cut-off basis to implement the change.
205 Dispositions of a building or structural component (section 168)—for MACRS property for which the applicant is making 
    a change listed in section 6.13(3) of Rev. Proc. 2018-31 for disposing of a building or a structural component or disposing of a 
    portion of a building (including its structural components) to which the partial disposition rule in Regulations section 1.168(i)-8(d)
    (1) applies. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing 
    requirement. See section 6.13 of Rev. Proc. 2018-31. 
206 Dispositions of tangible depreciable assets (other than a building or its structural components) (section 168)—for 
    MACRS property for which the applicant is making a change listed in section 6.14(3) of Rev. Proc. 2018-31 for disposing of 
    section 1245 property or a depreciable land improvement or disposing of a portion of section 1245 property or a depreciable 
    land improvement to which the partial disposition rule in Regulations section 1.168(i)-8(d)(1) applies. Complete Schedule E of 
    Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced Form 3115 filing requirement. See section 6.14 of 
    Rev. Proc. 2018-31.
207 Dispositions of tangible depreciable assets in a general asset account (section 168)—for MACRS property for which 
    the applicant is making a change listed in section 6.15(3) of Rev. Proc. 2018-31 for disposing of an asset subject to a general 
    asset account election. Complete Schedule E of Form 3115. Additionally, a qualified small taxpayer qualifies for a reduced 
    Form 3115 filing requirement. See section 6.15 of Rev. Proc. 2018-31.

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                                                   List of DCNs
No. Change
208 Cable network asset maintenance allowance or unit of property method of accounting (section 263(a))—for certain 
    applicants that operate and have a depreciable interest in cable network assets used in a cable system that provides video, 
    high speed internet, and VOIP phone services that are changing to (a) the network maintenance allowance method for cable 
    network assets described in section 5 of Rev. Proc. 2015-12, 2015-2 I.R.B. 265, or (b) the adoption of all, or some, of the units 
    of property described in section 6 of Rev. Proc. 2015-12, to determine whether expenditures to maintain, replace, or improve 
    cable network assets must be capitalized under section 263(a). See section 3.11 of Rev. Proc. 2018-31.
209 Cable network customer drops and labor costs associated with installing customer premise equipment (section 
    263(a))—for certain applicants that operate cable systems and (a) are changing to the specific identification method described 
    in section 7.01(1) of Rev. Proc. 2015-12, or the safe harbor allocation method described in section 7.01(2) of Rev. Proc. 
    2015-12 for determining whether customer drop costs (including installations) may be deducted under section 162 or must be 
    capitalized under section 263(a), or (b) are changing to deducting labor costs associated with installing customer premise 
    equipment under section 7.02 of Rev. Proc. 2015-12. See section 3.11 of Rev. Proc. 2018-31.
210 Depreciation of fiber optic transfer node and fiber optic cable used by a cable system operator (section 168)—for a 
    cable system operator within the scope of Rev. Proc. 2015-12 that is changing to the safe harbor method of accounting in 
    section 8.03 of Rev. Proc. 2015-12 for determining depreciation of a fiber optic transfer node and trunk line consisting of fiber 
    optic cable used in a cable distribution network providing one-way and two-way communication services. See Rev. Proc. 
    2015-12 and section 6.17 of Rev. Proc. 2018-31.
211 Bad debt conformity election by bank after previous election automatically revoked (section 166)—for an eligible bank 
    changing its method of accounting for bad debts by making the conformity election under Regulations section 1.166-2(d)(3)(iii)
    (C)(3). See section 4.02 of Rev. Proc. 2018-31.
212 Change to comply with section 163(e)(3)—for a taxpayer changing its method or methods of accounting to comply with the 
    requirements of section 163(e)(3), which defers certain deductions attributable to original issue discount debt instruments held 
    by related foreign persons. Any portion of the original issue discount will not be allowable as a deduction to the U.S. person 
    issuer until paid. See section 5.02 of Rev. Proc. 2018-31.
213 Railroad track structure expenditures (section 263(a))—for a taxpayer changing its method of accounting for track 
    structures  : (a) the safe harbor method provided in Rev. Proc. 2002-65, 2002-2 C.B. 700; or (b) the safe harbor method to
    provided in Rev. Proc. 2001-46, 2001-2 C.B. 263. See section 11.09 of Rev. Proc. 2018-31.
214 U.S. ratio method (section 263A)—for a foreign person (as defined in Notice 88-104, as modified by Notice 89-67) required 
    to capitalize costs under section 263A that is changing its method of accounting to the U.S. ratio method (as described in 
    Notice 88-104) or that currently uses the U.S. ratio method and is changing to the U.S. ratio method of a different applicable 
    U.S. trade or business for applying the U.S. ratio method. See section 12.12 of Rev. Proc. 2018-31.
215 Depletion (section 263A)—for an applicant changing its method of accounting for depletion to treat these amounts as an 
    indirect cost that is only properly allocable to property that has been sold under Regulations section 1.263A-1(e)(3)(ii)(J). See 
    section 12.13 of Rev. Proc. 2018-31.
216 An accrual method taxpayer receiving advance payments (section 451)—that wants to change   a method of to
    accounting of including advance payments in income in the tax year of receipt. See section 16.07 of Rev. Proc. 2018-31. Note. 
    This change does not apply to any tax year beginning after December 31, 2017.
217 Retainages received under long-term contracts (section 451)—for an accrual method applicant’s retainages under section 
    451   a method consistent with the holding in Rev. Rul. 69-314, 1969-1 C.B. 139. This change only applies to retainages under to
    long-term contracts as defined in section 460(f) that are exempt construction contracts (as defined in Regulations section 
    1.460-3(b)(1)). An applicant changing its method of accounting under this section must treat all retainages (receivables and 
    payables) in the same manner. See section 16.09 of Rev. Proc. 2018-31. Note. This change is implemented on a cut-off basis.
218 Change from the mark-to-market method of accounting to a realization method (section 475)—for a taxpayer changing 
    its method of accounting for securities or commodities from the mark-to-market method described in section 475   a to
    realization method of accounting (for example, by revoking an election under section 475(e), section 475(f)(1), or section 475(f)
    (2)). A notification statement must be filed earlier than the due date of the Form 3115. See section 24.02 of Rev. Proc. 2018-31. 
    Note. This change is generally made with audit protection, but has conditions or limitations. This change also is implemented 
    on a cut-off basis.
219 Change in qualification as life/non-life insurance company (section 816)—for a taxpayer changing its qualification under 
    section 816(a) to move from a life insurance company taxable under Part I of subchapter L   a non-life insurance company to
    taxable under Part II of subchapter L, or vice versa. See section 26.03 of Rev. Proc. 2018-31. Note. This change does not 
    receive audit protection. 
220 Economic performance safe harbor for Ratable Service Contracts (section 461)—for an accrual method taxpayer that 
    wants to change its treatment of Ratable Service Contracts to conform   the safe harbor method provided by Rev. Proc. to
    2015-39, 2015-33 I.R.B. 197. See section 20.12 of Rev. Proc. 2018-31, as modified by Rev. Proc. 2015-39. 
221 Obsolete.

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List of DCNs
No. Change
222 Remodel–refresh safe harbor method (section 263)—for a qualified taxpayer changing the remodel–refresh safe harbor to
method of accounting provided in section 5.02 of Rev. Proc. 2015-56 for its qualified costs, including the making of a late
general asset account election as provided under section 5.02(6)(d) of Rev. Proc. 2015-56. Additionally, a qualified small
taxpayer qualifies for a reduced Form 3115 filing requirement. See section 11.10 of Rev. Proc. 2018-31. Note. This change is
generally made with audit protection, but has conditions or limitations. Certain changes also are implemented on a cut-off basis.
223 Start-up expenditures (section 195)— for an applicant changing its method of accounting under section 195 change the to
characterization of an item as a start-up expenditure, the determination of the tax year in which the taxpayer begins the active
trade or business to which the start-up expenditures relate, or the amortization period of a start-up expenditure to 180 months.
See section 10.01 of Rev. Proc. 2018-31.
224 Interest capitalization (section 263A)—for an applicant changing its method of accounting for interest from not capitalizing
any interest, capitalizing interest in accordance with its method of accounting for financial reporting purposes, or applying an
improper method of capitalizing interest under Regulations sections 1.263A-8 through -14, with respect to the production of
designated property, capitalizing interest with respect to the production of designated property in accordance with to
Regulations sections 1.263A-8 through -14. See section 12.14 of Rev. Proc. 2018-31.
225 Certain changes within the retail inventory method (section 471)—for an applicant using the retail inventory method that
wants to change from including not including temporary markups and markdowns in determining the retail selling prices of to
goods on hand at the end of the tax year. See section 22.17 of Rev. Proc. 2018-31.
226 Transfer of interties under the safe harbor described in Notice 2016-36 (section 118)—for a utility changing the safe to
harbor method of accounting provided in section III.C of Notice 2016-36 for the treatment under section 118 of a transfer of an
intertie, including a dual-use intertie, by a generator to a utility, or for a utility using the safe harbor method of accounting
provided in section III.C of Notice 2016-36 and is required to terminate that safe harbor method of accounting. See section
15.16 of Rev. Proc. 2018-31. Note. The change from using the safe harbor method of accounting provided in section III.C of
Notice 2016-36 to terminating that safe harbor method of accounting is implemented on a cut-off basis.
227 Change to or from the net asset value (NAV) method (section 446)—for an applicant that holds shares in a money market
fund (MMF) and that wants to change its method of accounting for gain or loss on the shares from a realization method to the
NAV method described in Regulations section 1.446-7 or from the NAV method to a realization method. See section 15.17 of
Rev. Proc. 2018-31. Note. This change is implemented on a cut-off basis and also has a reduced Form 3115 filing requirement.
228 Organizational expenditures under section 248 (section 248)— for a corporation changing its method of accounting under
section 248 change the characterization of an item as an organizational expenditure, the determination of the tax year in to
which the corporation begins business to which the organizational expenditures relate, or the amortization period of an
organizational expenditure to 180 months. See section 10.02 of Rev. Proc. 2018-31.
229 Organization fees under section 709 (section 709)—for a partnership changing its method of accounting under section 709
to change the characterization of an item as an organizational expense, the determination of the tax year in which the
partnership begins business to which the organizational expenses relate, or the amortization period of an organizational
expense to 180 months. See section 10.03 of Rev. Proc. 2018-31.
230 Change from currently deducting inventories to permissible methods of identification and valuation of inventories
(section 471)—for an applicant changing from currently deducting inventories a permissible method of identifying and to
valuing inventories. See section 22.18 of Rev. Proc. 2018-31.
231 Changes in the timing of recognition of income due to the New Standards (section 451)—for an applicant that wants to
change its method of accounting for the recognition of income a method under the new financial accounting standards jointly to
announced by the Financial Accounting Standards Board and the International Accounting Standards Board for: (i) identifying
performance obligations, (ii) allocating transaction price to performance obligations, and/or (iii) considering performance
obligations satisfied. See Rev. Proc. 2018-29, 2018-22 I.R.B. 634, and section 16.11 of Rev. Proc. 2018-31, as modified by
Rev. Proc. 2018-49. Note. A taxpayer making this change may implement the change with either a section 481(a) adjustment
or on a cut-off basis.
232 Change to not apply section 263A to replanting costs for lost or damaged citrus plants pursuant to section 263A(d)
(2)(C)—for certain applicants that currently capitalize costs of replanting citrus plants under section 263A(d)(2), not applying to
section 263A to those costs under section 263A(d)(2)(C). Costs must be paid or incurred after December 22, 2017, and on or
before December 22, 2027. See Rev. Proc. 2018-35, 2018-28 I.R.B. 204, and section 12.15 of Rev. Proc. 2018-31. Note. The
section 481(a) adjustment is calculated by taking into account only amounts paid or incurred after December 22, 2017, and on
or before December 22, 2027.
233 Overall cash method for a small business taxpayer (section 446)—for a qualifying applicant with average annual gross
receipts of $25 million or less (adjusted for inflation) changing the overall cash method. Complete certain lines of Schedule A, to
Part I, of Form 3115. See Rev. Proc. 2018-40 and section 15.18 of Rev. Proc. 2018-31.

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List of DCNs
No. Change
234 Uniform capitalization exception for a small business taxpayer (section 263A)—for a qualifying applicant with average
annual gross receipts of $25 million or less (adjusted for inflation) changing from capitalizing costs under section 263A no to
longer capitalizing costs under section 263A, including for self-constructed assets. See Rev. Proc. 2018-40 and section 12.16
of Rev. Proc. 2018-31.
235 Inventory exception for a small business taxpayer (section 471)—for a qualifying applicant with average annual gross
receipts of $25 million or less (adjusted for inflation) changing its accounting method for inventory items under section 471 to
one of the following methods: (a) treating inventory as non-incidental materials and supplies under Regulations section 1.162-3;
or (b) conforming to the taxpayer’s accounting method reflected in its applicable financial statements, as defined in section
451(b)(3) with respect to the taxable year, or if the taxpayer does not have an applicable financial statement for the taxable
year, the books and records of the taxpayer prepared in accordance with the taxpayer’s accounting procedures. See Rev. Proc.
2018-40 and section 22.19 of Rev. Proc. 2018-31.
236 Long-term contract exception for small business taxpayer (section 460)— for a qualifying applicant with average annual
gross receipts of $25 million or less (adjusted for inflation) (a) changing from the percentage-of-completion accounting method
described in Regulation section 1.460-4(b) for exempt long-term constructions contracts described in section 460(e)(1)(B) to
an exempt contract accounting method described in section 1.460-4(c), or (b) with long-term home construction contracts
defined in section 460(e)(1)(A) changing its accounting method stop capitalizing costs under 263A. Complete Schedule D, to
Part I. See Rev. Proc. 2018-40 and section 19.01 of Rev. Proc. 2018-31.
237 Recharacterizing costs under the simplified resale method, simplified production method, or the modified simplified
production method—for an applicant that uses or is changing the simplified resale method, simplified production method, to
or the modified simplified production method and wants to recharacterize a section 471 cost, as defined section 1.263A-1(d)(2),
as an additional section 263A cost, as defined in section 1.263A-1(d)(3), or vice versa. See Rev. Proc. 2018–56 and section
12.17 of Rev. Proc. 2018-31.
238 Revocation of a historic absorption ratio election—for an applicant that either: (a) uses the simplified resale method with
historic absorption ratio election that wants to revoke its historic absorption ratio election and change to the simplified resale
method without historic absorption ratio election, or (b) uses the simplified production method with historic absorption ratio
election that wants to revoke its historic absorption ratio election and change to the simplified production method without
historic absorption ratio election. This change applies to a taxpayer’s first, second, or third taxable year ending on or after
November 20, 2018. See Rev. Proc. 2018-56 and section 12.18 of Rev. Proc. 2018-31.
239 Changes in the timing of the recognition of income under section 451(b) (section 451)—for an applicant with an
applicable financial statement that uses an accrual method of accounting and wants to change its method of accounting for the
recognition of income to a method that complies with section 451(b), as amended by section 13221 of the Tax Cuts and Jobs
Act (P.L. 115-97). This change applies to taxable years beginning after December 31, 2017. See Rev. Proc. 2018-60 and
section 16.12 of Rev. Proc. 2018-31.

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Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential,
as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for business
taxpayers filing this form is approved under OMB control number 1545-0123 and is included in the estimates shown in the instructions
for their business income tax return. The estimated burden for individual taxpayers filing this form is approved under OMB control
number 1545-0074 and is included in the estimates shown in the instructions for their individual income tax return. The estimated
burden for all other taxpayers who file this form is shown below.

Time Per Response
Recordkeeping 60 hours, 1 minute
Learning 16 hours, 25 minutes
Preparing 20 hours
Sending 32 minutes

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be
happy to hear from you. You can send us comments from IRS.gov/FormComments. Or you can send your comments to: Internal
Revenue Service, Tax Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send
Form 3115 to this address. Instead, see When and Where to File, earlier.

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