The U.S. Treasury Department and IRS today released for publication in the Federal Register final regulations (T.D. 9843) under section 263A concerning allocation of costs to certain property produced or acquired for resale by a taxpayer under the “simplified methods.”
The final regulations [PDF 457 KB] provide:
In general, the rules under these final regulations are mandatory, and thus require manufacturers with average gross receipts of more than $50 million to change their methods of accounting if they use the simplified production method to allocate additional 263A costs currently.
The IRS today released an advance version of Rev. Proc. 2018-56 [PDF 203 KB] regarding procedures by which a taxpayer may obtain automatic consent to make certain method changes to conform to today’s final regulations—for instance, a change to comply with the new definition of section 471 costs or a change to the modified simplified production method (MSPM).
Rev. Proc. 2018-56 modifies Rev. Proc. 2018-31.
The final regulations are to be published in the Federal Register on November 20, 2018, and apply for tax years beginning on or after November 20, 2018.
For any tax year that begins before November 20, 2018, and ends after November 20, 2018, the IRS will not challenge return positions that are consistent with all of the final regulations.
Today’s release finalizes regulations that were proposed in September 2012. The proposed regulations:
Read a KPMG report from September 2012 with initial impressions about the proposed regulations: TaxNewsFlash [PDF 1.02 MB]
The preamble to today’s release includes a summary of comments received in response to the proposed regulations and an explanation of responses to these comments, as reflected in the final regulations.
A future report from KPMG will examine the mechanics of the final regulations.
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