IRS Logo
Print - Click this link to Print this page

Mixed Service Costs Information Document Request (IDR) #5

This IDR relates to your change in method of accounting for determining the capitalizable portion of mixed service costs.  The total IRC section 481(a) adjustment for the tax year mm/dd/yy is ($$$$$).

Please provide the following information relating to this accounting method change:

1.  All schedules and written procedures used to compute the 481(a) adjustment for mixed service costs.

2.  Provide all written instructions and interview notes, surveys, and responses that were used to classify service departments as capitalizable service departments, deductible service departments, or mixed service cost departments.

3.  If fieldwork and computations were completed by an outside firm, provide all worksheets, detailed computations, written procedures, interview notes, surveys, and responses, and all other documents prepared by that firm.

4.  Provide a schedule of mixed service costs for each mixed service department, by account and amount, that were included in the computation (for all production activities) under the simplified service cost method elected with the method change request.

5.  An election of the simplified service cost method under regulation 1.263A-1(h) requires that you have eligible property.  Please indicate what categories of eligible property you have and the basis for such determination.  See regulation 1.263A-1(h)(2).

6.  Identify the self-constructed assets that are the subject of this method change request, and provide an overall schedule summarizing the direct, indirect, and mixed service costs by account and amount that were allocated to these assets as of the beginning of the year of change under the old method and the proposed method.   

7.  You have indicated that you previously used a facts and circumstances method of allocating mixed service costs.  Please provide records by account, amount, and allocation methodology (i.e. labor dollars, labor hours, etc.) to explain how the mixed service costs capitalized to self-constructed assets were determined for years prior to the proposed year of change.

8.  Provide records by account, amount and allocation methodology (i.e. labor dollars, labor hours, etc.) to explain how the capitalizable service costs are allocated between production activities under the proposed method.  Include an explanation of how the factor or relationship used in the allocation reasonably relates the service costs to the production activities to which the costs are allocated as required by Treas. Reg. § 1.263A-1(g)(4)(i).

9.  What costs, by account and amount, were expensed under the proposed method that would have been capitalized under the prior method?

10.  What costs, by account and amount, were capitalized under the proposed method that would have been expensed under the prior method?

11.  Provide records by account, amount, and allocation methodology to explain how additional section 263A costs are allocated to specific assets (including self-constructed assets and inventory) on hand at year-end under the proposed method.  Include a detailed description of the proposed facts and circumstances method(s) used for these allocations with an explanation of how the method(s) meet(s) the reasonable allocation test of Treas. Reg. § 1.263A-1(f)(4).

12.  Provide the records and a detailed description of the methodology used to identify the accounts and amounts that qualified for the de minimus rule exception pursuant to Section 1.263A-1(g)(4)(ii) under the proposed method for the year of change.

13a.  With regard to this change in method of accounting and in light of the regulations under Section 263A, please indicate which of the following is true: 

A) Are you a “reseller” of electricity (and/or natural gas) 

B) Are you a “producer” of electricity (and/or natural gas)

C) Are you both a “reseller” and “producer” of electricity (and/or natural gas)

Please justify and explain your selected classification.

13b. If you are a reseller of electricity (and/or natural gas) where are your retail sales facilities under regulation 1.263A-3(c)(5)(ii)(B)(1) and/or point(s) of sale?

Please justify and explain your answer and incorporate comments on how you categorize, for purposes of Section 263A, your transmission and distribution costs (as classified under FERC’S uniform system of accounts).

13c. If you are a producer of electricity (and/or natural gas) where does your production activity end [i.e. where is (are) your point(s) of sale]?

Please justify and explain your answer and incorporate comments on how you have categorized, for purposes of Section 263A, your transmission and distribution costs (as classified under FERC’S uniform system of accounts).

13d. If you are both a reseller and producer of electricity (and/or natural gas) please answer both questions (13b) and (13c) above. 

14. This change in method of accounting may impact other tax return items (i.e. fuel inventories, resale inventory, sale of assets, other section 481 computations, etc.).  Please identify these items and demonstrate what impact this change has on them.

Please furnish these records in an electronic format to the extent electronic records were used to perform the analysis.

Page Last Reviewed or Updated: 29-Nov-2013