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IRS Provides Relief From Tangible Property Regulations Form 3115 Filing

February 17, 2015

In September 2014, the IRS issued the final Tangible Property Regulations (TPRs), which required many taxpayers to file Form 3115, Application for Change in Accounting Method, to comply with the TPRs. On Friday, February 13, 2015, the IRS issued Rev. Proc. 2015-20, offering relief from the Form 3115 reporting requirements for small business taxpayers. A small business taxpayer is defined as one with total assets of less than $10 million as of the first day of the taxable year, or average annual gross receipts of $10 million or less for the prior three tax years. Under Rev. Proc. 2015-20, small business taxpayers can make the required change in method of accounting to comply with the final TPRs without having to file Form 3115.

The IRS noted that small business taxpayers still have the option to file Form 3115 in order to retain a clear record of a change in method of accounting or to make permissible concurrent automatic changes on the same form. Additionally, taxpayers making a late partial disposition election would still need to file Form 3115.

Taxpayers are still required to make relevant annual elections (e.g. de minimis safe harbor and safe harbor for small taxpayers) on their federal tax returns. The TPRs still apply to all taxpayers with business or rental tangible property.

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