Breadcrumb Region

Internal Revenue Bulletin: 2017-19

May 8, 2017


Highlights of This Issue

These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations.

INCOME TAX

Rev. Rul. 2017–11 Rev. Rul. 2017–11

Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 642, 1274, 1288, 7872, and other sections of the Code, tables set forth the rates for May 2017.

Rev. Proc. 2017–33 Rev. Proc. 2017–33

This revenue procedure provides guidance under the Protecting Americans for Tax Hikes Act of 2015 (PATH Act) regarding amendments to (i) expensing section 179 property, (ii) the additional first year depreciation deduction under section 168(k), and (iii) the qualified Indian reservation property depreciation provision under section 168(j).

EMPLOYEE PLANS

Notice 2017–27 Notice 2017–27

This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for April 2017 used under § 417(e)(3)(D), the 24-month average segment rates applicable for April 2017, and the 30-year Treasury rates. These rates reflect the application of § 430(h)(2)(C)(iv), which was added by the Moving Ahead for Progress in the 21st Century Act, Public Law 112–141 (MAP-21) and amended by section 2003 of the Highway and Transportation Funding Act of 2014 (HATFA).

ADMINISTRATIVE

Notice 2017–28 Notice 2017–28

Notice inviting public comment on recommendations for the 2017–2018 Priority Guidance Plan.

Preface

The IRS Mission

Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement).

Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period.

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Rev. Rul. 2017–11

This revenue ruling provides various prescribed rates for federal income tax purposes for May 2017 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.

REV. RUL. 2017–11 TABLE 1
Applicable Federal Rates (AFR) for May 2017
Period for Compounding
Annual Semiannual Quarterly Monthly
Short-term
AFR 1.15% 1.15% 1.15% 1.15%
110% AFR 1.27% 1.27% 1.27% 1.27%
120% AFR 1.38% 1.38% 1.38% 1.38%
130% AFR 1.51% 1.50% 1.50% 1.50%
Mid-term
AFR 2.04% 2.03% 2.02% 2.02%
110% AFR 2.24% 2.23% 2.22% 2.22%
120% AFR 2.45% 2.44% 2.43% 2.43%
130% AFR 2.66% 2.64% 2.63% 2.63%
150% AFR 3.07% 3.05% 3.04% 3.03%
175% AFR 3.58% 3.55% 3.53% 3.52%
Long-term
AFR 2.75% 2.73% 2.72% 2.71%
110% AFR 3.02% 3.00% 2.99% 2.98%
120% AFR 3.31% 3.28% 3.27% 3.26%
130% AFR 3.58% 3.55% 3.53% 3.52%
REV. RUL. 2017–11 TABLE 2
Adjusted AFR for May 2017
Period for Compounding
Annual Semiannual Quarterly Monthly
Short-term adjusted AFR .86% .86% .86% .86%
Mid-term adjusted AFR 1.52% 1.51% 1.51% 1.51%
Long-term adjusted AFR 2.04% 2.03% 2.02% 2.02%
REV. RUL. 2017–11 TABLE 3
Rates Under Section 382 for May 2017
Adjusted federal long-term rate for the current month 2.04%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) 2.09%
REV. RUL. 2017–11 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for May 2017
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit 7.55%
Appropriate percentage for the 30% present value low-income housing credit 3.24%
REV. RUL. 2017–11 TABLE 5
Rate Under Section 7520 for May 2017
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest 2.4%

Part III. Administrative, Procedural, and Miscellaneous

Notice 2017–27

Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I).

YIELD CURVE AND SEGMENT RATES

Generally, except for certain plans under sections 104 and 105 of the Pension Protection Act of 2006 and CSEC plans under § 414(y), § 430 of the Code specifies the minimum funding requirements that apply to single-employer plans pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. To the extent provided under § 430(h)(2)(C)(iv), these segment rates are adjusted by the applicable percentage of the 25-year average segment rates for the period ending September 30 of the year preceding the calendar year in which the plan year begins.[1] However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates.

Notice 2007–81, 2007–44 I.R.B. 899, provides guidelines for determining the monthly corporate bond yield curve, and the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Consistent with the methodology specified in Notice 2007–81, the monthly corporate bond yield curve derived from March 2017 data is in Table I at the end of this notice. The spot first, second, and third segment rates for the month of March 2017 are, respectively, 2.06, 3.95, and 4.75.

The 24-month average segment rates determined under § 430(h)(2)(C)(i) through (iii) must be adjusted pursuant to § 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates. For plan years beginning before 2021, the applicable minimum percentage is 90% and the applicable maximum percentage is 110%. The 25-year average segment rates for plan years beginning in 2015, 2016, and 2017 were published in Notice 2014–50, 2014–40 I.R.B. 590, Notice 2015–61, 2015–39 I.R.B. 408, and Notice 2016–54, 2016–40 I.R.B. 429, respectively.

24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES

The three 24-month average corporate bond segment rates applicable for April 2017 without adjustment for the 25-year average segment rate limits are as follows:

Applicable Month First Segment Second Segment Third Segment
April 2017 1.65 3.82 4.76

Based on § 430(h)(2)(C)(iv), the 24-month averages applicable for April 2017 adjusted to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates, are as follows:

For Plan Years Beginning In Adjusted 24-Month Average Segment Rates
Applicable Month First Segment Second Segment Third Segment
2016 April 2017 4.43 5.91 6.65
2017 April 2017 4.16 5.72 6.48

30-YEAR TREASURY SECURITIES INTEREST RATES

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in § 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88–73, 1988–2 C.B. 383, provides guidelines for determining the weighted average interest rate. The rate of interest on 30-year Treasury securities for March 2017 is 3.08 percent. The Service determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond maturing in February 2047. For plan years beginning in the month shown below, the weighted average of the rates of interest on 30-year Treasury securities and the permissible range of rates used to calculate current liability are as follows:

For Plan Years Beginning in 30-Year Treasury Weighted Average Permissible Range
Month Year 90% to 105%
April 2017 2.91 2.62 3.05

MINIMUM PRESENT VALUE SEGMENT RATES

In general, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a 24-month average. Notice 2007–81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the minimum present value segment rates determined for March 2017 are as follows:

First Segment Second Segment Third Segment
2.06 3.95 4.75

DRAFTING INFORMATION

The principal author of this notice is Tom Morgan of the Office of the Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS participated in the development of this guidance. For further information regarding this notice, contact Mr. Morgan at 202-317-6700 or Tony Montanaro at 202-317-8698 (not toll-free numbers).

Table I
Monthly Yield Curve for March 2017
Derived from March 2017 Data
Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield
0.5 1.25 20.5 4.51 40.5 4.78 60.5 4.88 80.5 4.92
1.0 1.47 21.0 4.53 41.0 4.79 61.0 4.88 81.0 4.93
1.5 1.69 21.5 4.54 41.5 4.79 61.5 4.88 81.5 4.93
2.0 1.88 22.0 4.55 42.0 4.79 62.0 4.88 82.0 4.93
2.5 2.04 22.5 4.56 42.5 4.80 62.5 4.88 82.5 4.93
3.0 2.18 23.0 4.57 43.0 4.80 63.0 4.88 83.0 4.93
3.5 2.32 23.5 4.58 43.5 4.80 63.5 4.89 83.5 4.93
4.0 2.45 24.0 4.59 44.0 4.81 64.0 4.89 84.0 4.93
4.5 2.57 24.5 4.60 44.5 4.81 64.5 4.89 84.5 4.93
5.0 2.70 25.0 4.61 45.0 4.81 65.0 4.89 85.0 4.93
5.5 2.82 25.5 4.62 45.5 4.81 65.5 4.89 85.5 4.93
6.0 2.94 26.0 4.62 46.0 4.82 66.0 4.89 86.0 4.93
6.5 3.06 26.5 4.63 46.5 4.82 66.5 4.89 86.5 4.93
7.0 3.18 27.0 4.64 47.0 4.82 67.0 4.90 87.0 4.94
7.5 3.29 27.5 4.65 47.5 4.82 67.5 4.90 87.5 4.94
8.0 3.40 28.0 4.65 48.0 4.83 68.0 4.90 88.0 4.94
8.5 3.50 28.5 4.66 48.5 4.83 68.5 4.90 88.5 4.94
9.0 3.59 29.0 4.67 49.0 4.83 69.0 4.90 89.0 4.94
9.5 3.68 29.5 4.68 49.5 4.83 69.5 4.90 89.5 4.94
10.0 3.77 30.0 4.68 50.0 4.84 70.0 4.90 90.0 4.94
10.5 3.84 30.5 4.69 50.5 4.84 70.5 4.90 90.5 4.94
11.0 3.92 31.0 4.69 51.0 4.84 71.0 4.91 91.0 4.94
11.5 3.98 31.5 4.70 51.5 4.84 71.5 4.91 91.5 4.94
12.0 4.04 32.0 4.71 52.0 4.85 72.0 4.91 92.0 4.94
12.5 4.09 32.5 4.71 52.5 4.85 72.5 4.91 92.5 4.94
13.0 4.14 33.0 4.72 53.0 4.85 73.0 4.91 93.0 4.94
13.5 4.19 33.5 4.72 53.5 4.85 73.5 4.91 93.5 4.94
14.0 4.23 34.0 4.73 54.0 4.85 74.0 4.91 94.0 4.95
14.5 4.26 34.5 4.73 54.5 4.86 74.5 4.91 94.5 4.95
15.0 4.30 35.0 4.74 55.0 4.86 75.0 4.91 95.0 4.95
15.5 4.33 35.5 4.74 55.5 4.86 75.5 4.92 95.5 4.95
16.0 4.35 36.0 4.75 56.0 4.86 76.0 4.92 96.0 4.95
16.5 4.38 36.5 4.75 56.5 4.86 76.5 4.92 96.5 4.95
17.0 4.40 37.0 4.76 57.0 4.87 77.0 4.92 97.0 4.95
17.5 4.42 37.5 4.76 57.5 4.87 77.5 4.92 97.5 4.95
18.0 4.44 38.0 4.76 58.0 4.87 78.0 4.92 98.0 4.95
18.5 4.46 38.5 4.77 58.5 4.87 78.5 4.92 98.5 4.95
19.0 4.47 39.0 4.77 59.0 4.87 79.0 4.92 99.0 4.95
19.5 4.49 39.5 4.78 59.5 4.87 79.5 4.92 99.5 4.95
20.0 4.50 40.0 4.78 60.0 4.88 80.0 4.92 100.0 4.95


[1] Pursuant to § 433(h)(3)(A), the 3rd segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount of the full funding limitation under § 433(c)(7)(C)).

Notice 2017–28

Public Comment Invited on Recommendations for 2017–2018 Priority Guidance Plan

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (Service) invite public comment on recommendations for items that should be included on the 2017–2018 Priority Guidance Plan.

The Treasury Department’s Office of Tax Policy and the Service use the Priority Guidance Plan each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The 2017–2018 Priority Guidance Plan will identify guidance projects that the Treasury Department and the Service intend to work on as priorities during the period from July 1, 2017, through June 30, 2018.

The Treasury Department and the Service recognize the importance of public input in formulating a Priority Guidance Plan that focuses resources on guidance items that are most important to taxpayers and tax administration. Published guidance plays an important role in increasing voluntary compliance by helping to clarify ambiguous areas of the tax law. The published guidance process is most successful if the Treasury Department and the Service have the benefit of the experience and knowledge of taxpayers and practitioners who must apply the rules implementing the internal revenue laws. This input is of particular importance in light of Executive Order 13771 (82 FR 9339) and other recent executive orders that may affect the number or type of guidance projects that can be issued during the 2017–2018 plan year.

As is the case whenever significant tax legislation is enacted, the Treasury Department and the Service will dedicate substantial resources during the current plan year to published guidance projects necessary to implement various provisions of tax legislation enacted over the past several years or that may be enacted during the plan year. The Treasury Department and the Service will continue to evaluate the priority of each guidance project taking into account this tax legislation, as well as other developments occurring during the 2017–2018 plan year.

In reviewing recommendations and selecting projects for inclusion on the 2017–2018 Priority Guidance Plan, the Treasury Department and the Service will consider the following:

  • 1. Whether the recommended guidance resolves significant issues relevant to many taxpayers;

  • 2. Whether the recommended guidance reduces controversy and lessens the burden on taxpayers or the Service;

  • 3. Whether the recommendation involves existing regulations or other guidance that is outdated, unnecessary, ineffective, insufficient, or unnecessarily burdensome and that should be modified, streamlined, expanded, replaced, or withdrawn;

  • 4. Whether the recommended guidance would be in accordance with Executive Order 13771, Executive Order 13777 (82 FR 12285), or other executive orders.

  • 5. Whether the recommended guidance promotes sound tax administration;

  • 6. Whether the Service can administer the recommended guidance on a uniform basis; and

  • 7. Whether the recommended guidance can be drafted in a manner that will enable taxpayers to easily understand and apply the guidance.

Please submit recommendations by June 1, 2017, for possible inclusion on the original 2017–2018 Priority Guidance Plan. Taxpayers may, however, submit recommendations for guidance at any time during the year. The Treasury Department and the Service may update the 2017–2018 Priority Guidance Plan periodically to reflect additional guidance that the Treasury Department and the Service intend to publish during the plan year. The periodic updates allow the Treasury Department and the Service to respond to the need for additional guidance that may arise during the plan year.

Taxpayers are not required to submit recommendations for guidance in any particular format. Taxpayers should, however, briefly describe the recommended guidance and explain the need for the guidance. In addition, taxpayers may include an analysis of how the issue should be resolved. For recommendations to modify, streamline, or withdraw existing regulations or other guidance, taxpayers should explain how the changes would reduce taxpayer cost and/or burden or benefit tax administration. It would be helpful if taxpayers suggesting more than one guidance project prioritize the projects by order of importance. If a large number of projects are being suggested, it would be helpful if the projects were grouped in terms of high, medium, or low priority. Requests for guidance in the form of petitions for rulemaking will be considered with other recommendations for guidance in accordance with the considerations described in this notice.

Taxpayers may mail comments to:

  • Internal Revenue Service

  • Attn: CC:PA:LPD:PR (Notice 2017–28) Room 5203

  • P.O. Box 7604

  • Ben Franklin Station

  • Washington, D.C. 20044

or hand deliver comments Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

  • Courier’s Desk

  • Internal Revenue Service

  • Attn: CC:PA:LPD:PR (Notice 2017–28)

  • 1111 Constitution Avenue, N.W. Washington, D.C. 20224

Alternatively, taxpayers may submit comments electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS–2017–0008 in the search field on the regulations.gov homepage to find this notice and submit comments). All recommendations for guidance submitted by the public in response to this notice will be available for public inspection and copying in their entirety. For further information regarding this notice, contact Emily M. Lesniak of the Office of Associate Chief Counsel (Procedure and Administration) at (202) 317-3400 (not a toll-free number).

Rev. Proc. 2017–33

SECTION 1. PURPOSE

This revenue procedure provides guidance under §§ 124(c)(2), 124(d), 124(e), 143(b), and 167(b) of the Protecting Americans From Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016, Pub. L. No. 114–113, 129 Stat. 2242 (Dec. 18, 2015). Sections 124(c)(2), (d), and (e) of the PATH Act amend § 179 of the Internal Revenue Code by (i) making permanent the treatment of qualified real property as § 179 property under § 179(f), (ii) making permanent the permission granted under § 179(c)(2) to revoke without the consent of the Commissioner of Internal Revenue (Commissioner) any election made under § 179 and any specification contained in that election, and (iii) allowing certain air conditioning or heating units to be eligible as § 179 property under § 179(d)(1). Section 143(b) of the PATH Act amends § 168(k) by (i) extending the placed-in-service date for property to qualify for the additional first year depreciation deduction, (ii) modifying the definition of qualified property under § 168(k)(2), (iii) extending and modifying the election under § 168(k)(4) to increase the alternative minimum tax (AMT) credit limitation in lieu of the additional first year depreciation deduction, (iv) adding § 168(k)(5), which allows a taxpayer to elect to deduct the additional first year depreciation for certain plants bearing fruits and nuts before such plants are placed in service, (v) adding § 168(k)(6), which provides a phase down of the additional first year depreciation deduction percentage for future taxable years, and (vi) adding § 168(k)(7), which allows a taxpayer to elect not to deduct additional first year depreciation for any class of property. Section 167(b) of the PATH Act amends § 168(j) by adding new § 168(j)(8), which allows a taxpayer to elect not to apply § 168(j) for any class of property. This revenue procedure does not reflect any proposed technical corrections to the PATH Act. This revenue procedure also does not provide guidance relating to the extension and modification of the election under § 168(k)(4) to increase the AMT credit limitation in lieu of the additional first year depreciation deduction. The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) anticipate issuing guidance regarding the extension and modification of the election under § 168(k)(4) in a separate revenue procedure.

SECTION 2. BACKGROUND

.01 Modifications to § 179.

(1) Section 179(a) allows a taxpayer to elect to treat the cost (or a portion of the cost) of any § 179 property as an expense for the taxable year in which the taxpayer places the property in service. Section 179(b)(1) and (2) prescribe a dollar limitation on the aggregate cost of § 179 property that can be treated as an expense under § 179(a). The dollar limitation is the amount under § 179(b)(1) (the § 179(b)(1) limitation), reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the taxable year exceeds the amount under § 179(b)(2) (the § 179(b)(2) limitation). For taxable years beginning after 2014, the § 179(b)(1) limitation is $500,000 and the § 179(b)(2) limitation is $2,000,000. Pursuant to § 179(b)(6), these limitation amounts are adjusted for inflation for taxable years beginning after 2015. For taxable years beginning in 2016, section 3.03 of Rev. Proc. 2016–14, 2016–9 I.R.B. 365, provides that the § 179(b)(1) limitation and the § 179(b)(2) limitation, adjusted for inflation, are $500,000 and $2,010,000, respectively. For taxable years beginning in 2017, section 3.25 of Rev. Proc. 2016–55, 2016–45 I.R.B. 707, provides that the § 179(b)(1) limitation and the § 179(b)(2) limitation, adjusted for inflation, are $510,000 and $2,030,000, respectively.

(2) Section 179(b)(3)(A) provides that a taxpayer’s § 179 deduction for any taxable year, after application of the § 179(b)(1) and (2) limitations, is limited to the taxpayer’s taxable income for that taxable year that is derived from the taxpayer’s active conduct of any trade or business during that taxable year (taxable income limitation). Section 179(b)(3)(B) provides that the amount of any cost of § 179 property elected to be expensed in a taxable year that is disallowed as a § 179 deduction under the taxable income limitation may be carried forward for an unlimited number of years and may be deducted under § 179(a) in a future year, subject to the same limitations.

(3) If a taxpayer elects to apply § 179(f), § 179(f)(1) provides that § 179 property includes qualified real property, as defined in § 179(f)(2). Prior to amendment by the PATH Act, § 179(f) applied to qualified real property placed in service in any taxable year beginning in 2010, 2011, 2012, 2013, or 2014. Section 124(c)(1) of the PATH Act extended the application of § 179(f) to qualified real property placed in service in any taxable year beginning after 2009 and before 2016. As a result of the amendment by § 124(c)(1) of the PATH Act, § 179(f)(3) provided that the maximum amount of qualified real property that may be expensed under § 179(a) for any taxable year beginning after 2009 and before 2016 was $250,000. Further, § 179(f)(4) provided that, notwithstanding § 179(b)(3)(B), a taxpayer that elected to apply § 179(f) and elected to expense under § 179(a) the cost (or a portion of the cost) of qualified real property placed in service during any taxable year beginning after 2009 and before 2016 could not carry over to any taxable year beginning after 2015 the amount of any cost of such property that was disallowed as a § 179 deduction under the taxable income limitation of § 179(b)(3)(A). To the extent that any § 179 deduction attributable to qualified real property was not allowed to be carried over to a taxable year beginning after 2015, that amount was required to be treated as an amount for which an election under § 179 was not made and as property placed in service on the first day of the taxpayer’s last taxable year beginning in 2015 for purposes of computing depreciation. Rev. Proc. 2016–48, 2016–37 I.R.B. 348, provides guidance under § 124(c)(1) of the PATH Act.

Section 124(c)(2) of the PATH Act further amends § 179(f) by making permanent the treatment of qualified real property as § 179 property if the taxpayer elects to apply § 179(f). Section 124(c)(2) of the PATH Act also amends § 179(f) by striking paragraphs (3) and (4). Section 124(g)(2) of the PATH Act provides that the amendments made by § 124(c)(2) of the PATH Act apply to taxable years beginning after December 31, 2015. Section 3.01 of this revenue procedure addresses the application of these revised rules.

(4) Section 179(c) provides the rules for making and revoking elections under § 179 (§ 179 election). Pursuant to § 179(c)(1), a § 179 election is made in the manner prescribed by regulations. Prior to amendment by § 124(d) of the PATH Act, § 179(c)(2) provided that a § 179 election for taxable years beginning after 2002 and before 2015 may be revoked by the taxpayer with respect to any § 179 property. Section 1.179–5(c)(1) of the Income Tax Regulations provides that for any taxable year beginning after 2002 and before 2008, a taxpayer is permitted to make or revoke a § 179 election without the consent of the Commissioner on an amended Federal tax return for that taxable year. Section 1.179–5(c) was promulgated in 2005 and has not been amended to reflect the extensions of § 179(c)(2) to taxable years beginning before 2015. However, in 2008, the Treasury Department and the IRS issued Rev. Proc. 2008–54, 2008–2 C.B. 722. Section 7 of Rev. Proc. 2008–54 provides that for a taxable year beginning after 2007 and before the last year provided in § 179(c)(2) for revoking a § 179 election by a taxpayer for any § 179 property, the taxpayer will be permitted to make a § 179 election on an amended return for that taxable year without the Commissioner’s consent. Section 7 of Rev. Proc. 2008–54 further provides that until § 1.179–5(c) is amended to incorporate this guidance, taxpayers may rely on such guidance.

Section 124(d) of the PATH Act amends § 179(c)(2) to make permanent the permission granted to a taxpayer to revoke a § 179 election for any § 179 property without the Commissioner’s consent. This amendment applies to taxable years beginning after 2014. As a result, some taxpayers are uncertain about whether a § 179 election for taxable years beginning after 2014 may be made on an amended Federal tax return without the Commissioner’s consent. Section 3.02 of this revenue procedure provides the rules for making such a § 179 election.

(5) Section 179(d)(1) defines the term “§ 179 property.” Prior to amendment by the PATH Act, § 179(d)(1) defined § 179 property as property that is: (A)(i) tangible property to which § 168 applies, or (ii) computer software, as defined in § 197(e)(3)(B), that is described in § 197(e)(3)(A)(i), to which § 167 applies, and that is placed in service in a taxable year beginning after 2002 and before 2015; (B) § 1245 property, as defined in § 1245(a)(3); and (C) acquired by purchase for use in the active conduct of a trade or business. Prior to amendment by the PATH Act, § 179(d)(1) further provided that § 179 property does not include any property described in § 50(b) and does not include air conditioning or heating units.

Section 124(b) of the PATH Act amends § 179(d)(1)(A)(ii) to make permanent the treatment of computer software, as defined in § 197(e)(3)(B), that is described in § 197(e)(3)(A)(i), to which § 167 applies, as § 179 property. This amendment applies to taxable years beginning after 2014. Section 124(e) of the PATH Act also amends § 179(d)(1) to allow air conditioning or heating units to be § 179 property. This amendment applies to taxable years beginning after 2015.

Some taxpayers have inquired about what types of air conditioning or heating units qualify as § 179 property. Section 3.03 of this revenue procedure addresses this issue.

.02 Modifications to § 168(k).

(1) Prior to amendment by the PATH Act, § 168(k)(1) allowed a 50-percent additional first year depreciation deduction for qualified property that, as provided by § 168(k)(2)(A), was acquired by a taxpayer after 2007 and placed in service by the taxpayer before 2015 (before 2016 in the case of property described in § 168(k)(2)(B) or (C)). Section 143(a)(1) of the PATH Act amends § 168(k)(2)(A) by extending the placed-in-service date to before 2016 (before 2017 in the case of property described in § 168(k)(2)(B) or (C)), and extending other dates in § 168(k)(2) by changing “January 1, 2015” each place it appears to “January 1, 2016.” Rev. Proc. 2016–48 provides guidance under § 143(a)(1) of the PATH Act.

(2) Section 143(b)(1) of the PATH Act further amends § 168(k)(2) by extending the placed-in-service date to before 2020 (before 2021 in the case of property described in § 168(k)(2)(B) or (C)), and by modifying the definition of qualified property. As amended by § 143(b)(1) of the PATH Act, qualified property under § 168(k)(2)(A) includes property that is qualified improvement property instead of qualified leasehold improvement property. The term “qualified improvement property” is defined in § 168(k)(3), as amended by § 143(b)(2) of the PATH Act. Further, qualified property no longer has to meet the acquisition date requirements in § 168(k)(2)(A)(iii) as in effect before the enactment of the PATH Act. Section 143(b)(1) of the PATH Act also modifies the property described in § 168(k)(2)(B) and (C), including by imposing a new acquisition date requirement, and modifies the special rules under § 168(k)(2)(E) by deleting the related party rules in § 168(k)(2)(E)(iv) that were in effect before the enactment of the PATH Act.

Section 143(b)(5) of the PATH Act amends § 168(k) by adding § 168(k)(6) to the Code. It provides that the additional first year depreciation deduction percentage of 50 percent is phased down beginning for qualified property placed in service after December 31, 2017 (after December 31, 2018, for property described in § 168(k)(2)(B) or (C)). The percentage is 40 percent for qualified property placed in service in 2018 (in 2019 for property described in § 168(k)(2)(B) or (C), determined by substituting “2019” for “2020” in § 168(k)(2)(B)(i)(III) and (ii), and § 168(k)(2)(E)(i)), and is 30 percent for qualified property placed in service in 2019 (in 2020 for property described in § 168(k)(2)(B) or (C)).

Section 143(b)(6)(D) of the PATH Act further amends § 168(k) by adding § 168(k)(7) to the Code. It allows a taxpayer to elect not to deduct additional first year depreciation for any class of property placed in service by the taxpayer in the same taxable year. This election is similar to the election provided under § 168(k)(2)(D)(iii) as in effect before the enactment of the PATH Act.

Pursuant to § 143(b)(7)(A) of the PATH Act, these amendments apply to property placed in service after December 31, 2015. Sections 4.01 through 4.04 of this revenue procedure address the application of these revised rules.

(3) Section 143(b)(4) of the PATH Act also amends § 168(k) by adding § 168(k)(5) to the Code. It allows a taxpayer to elect to deduct additional first year depreciation for any specified plant that is planted before January 1, 2020, or grafted before that date to a plant that has already been planted, by the taxpayer in the ordinary course of its farming business, as defined in § 263A(e)(4). If the taxpayer makes this election, the additional first year depreciation deduction is allowable for any specified plant for the taxable year in which that specified plant is planted or grafted and that specified plant is not treated as qualified property under § 168(k) in the plant’s placed-in-service year. The percentage of the additional first year depreciation deduction is (i) 50 percent for any specified plant planted or grafted after 2015 and before 2018, (ii) 40 percent for any specified plant planted or grafted during 2018, and (iii) 30 percent for any specified plant planted or grafted during 2019.

A specified plant is defined in § 168(k)(5)(B) as (i) any tree or vine that bears fruits or nuts, and (ii) any other plant that will have more than one yield of fruits or nuts and that generally has a pre-productive period of more than two years from the time of planting or grafting to the time at which such plant begins bearing fruits or nuts. The term “specified plant” does not include any property that is planted or grafted outside of the United States.

Section 143(b)(7)(C) of the PATH Act provides that § 168(k)(5) applies to specified plants, as defined in § 168(k)(5)(B), planted or grafted after December 31, 2015.

Section 4.05 of this revenue procedure provides procedures for making the election to apply § 168(k)(5) (§ 168(k)(5) election). The Treasury Department and IRS understand that some taxpayers are uncertain as to whether, if such election is made for a specified plant, a § 179 election for the specified plant in its placed-in-service year is based on the adjusted basis of the specified plant, or on the original cost of the specified plant by recapturing the additional first year depreciation deduction. To address this uncertainty, section 4.05 of this revenue procedure also clarifies how the § 168(k)(5) election interacts with the § 179 election.

.03 Modification to § 168(j).

(1) Section 168(j) provides that for purposes of § 168(a), the applicable recovery period for qualified Indian reservation property is determined in accordance with the table contained in § 168(j)(2) instead of the table contained in § 168(c). The term “qualified Indian reservation property” is defined in § 168(j)(4). Section 168(j) does not apply to property placed in service after December 31, 2016.

(2) Section 167(b) of the PATH Act amends § 168(j) by redesignating paragraph (8), as amended by § 167(a) of the PATH Act, as paragraph (9), and by adding new paragraph (8). New § 168(j)(8) allows a taxpayer to elect not to apply § 168(j) for all property that is in the same class of property and placed in service in the same taxable year (the § 168(j)(8) election). Once made, this election is irrevocable. Section 167(c)(2) of the PATH Act provides that the amendments made by § 167(b) of the PATH Act apply to taxable years beginning after December 31, 2015. Section 5 of this revenue procedure provides the procedures for making the § 168(j)(8) election.

.04 Subsequent References. Unless otherwise specifically stated, all references in the subsequent sections of this revenue procedure to § 168(k), § 168(j), and § 179 are to § 168(k), § 168(j), and § 179 as in effect after the enactment of the PATH Act.

SECTION 3. SECTION 179 EXPENSING

.01 Qualified Real Property. For any taxable year beginning after December 31, 2015, the § 179(b)(1) and (2) limitation amounts, and the carryover rules in § 179(b)(3)(B) and § 1.179–3(a), apply to qualified real property placed in service by the taxpayer during that taxable year, if the taxpayer elects to apply § 179(f).

.02 Making § 179 Elections by Amended Returns. For any taxable year beginning after 2014, a taxpayer may make a § 179 election with respect to any § 179 property without the Commissioner’s consent on an amended Federal tax return for the taxable year in which the taxpayer places in service the § 179 property. The Treasury Department and the IRS intend to amend § 1.179–5(c) to incorporate the guidance set forth under this section 3.02. Until § 1.179–5(c) is amended, taxpayers may rely on the guidance set forth in this section 3.02.

.03 Air Conditioning or Heating Units Qualifying as § 179 Property.

(1) In general. Except as provided in section 3.03(2) of this revenue procedure, an air conditioning or heating unit qualifies as § 179 property if such unit is § 1245 property, depreciated under § 168, acquired by purchase for use in the active conduct of the taxpayer’s trade or business, and placed in service by the taxpayer in a taxable year beginning after 2015. For example, portable air conditioners, such as window air conditioning units, and portable heaters, such as portable plug-in unit heaters, that are placed in service by the taxpayer in a taxable year beginning after 2015 may qualify as § 179 property under § 179(d)(1) and § 1.179–4(a). Except as provided in section 3.03(2) of this revenue procedure, an example of an air conditioning or heating unit that will not qualify as § 179 property is any component of a central air conditioning or heating system of a building, including motors, compressors, pipes, and ducts, whether the component is in, on, or adjacent to a building. See § 1.48–1(e)(2).

(2) Qualified real property. If a component of a central air conditioning or heating system of a building meets the definition of qualified real property, as defined in § 179(f)(2), and the component is placed in service by the taxpayer in a taxable year beginning after 2015, the component may qualify as § 179 property if the taxpayer elects to apply § 179(f).

SECTION 4. ADDITIONAL FIRST YEAR DEPRECIATION (§ 168(k))

.01 Qualified Property.

(1) In general. The rules for determining whether depreciable property is eligible for the additional first year depreciation deduction under § 168(k) are similar to the rules in § 168(k) as in effect before the enactment of the PATH Act. However, qualified property under § 168(k)(2)(A) includes property that is qualified improvement property instead of qualified leasehold improvement property. Further, the acquisition date requirement in § 168(k)(2)(A)(iii) and the related party rules in § 168(k)(2)(E)(iv), both as in effect before the enactment of the PATH Act, do not apply. However, a new acquisition date requirement applies for property described in § 168(k)(2)(B) or (C).

(2) Property described in § 168(k)(2)(B) or (C).

(a) Acquisition date requirement. Qualified property includes any property described in § 168(k)(2)(B) or (C). Pursuant to § 168(k)(2)(B)(i)(III) and (C)(i), property is described in § 168(k)(2)(B) or (C) if the property is acquired by the taxpayer before January 1, 2020, or is acquired pursuant to a written contract entered into before January 1, 2020, assuming all other requirements in § 168(k)(2)(B) or (C), as applicable, are met. To determine if the acquisition date requirement is met, rules similar to the rules in § 1.168(k)–1(b)(4) for “qualified property” or for “30-percent additional first year depreciation deduction” apply. However, in applying § 1.168(k)–1(b)(4), § 1.168(k)–1(b)(4)(ii)(A)–(D) and (iv) do not apply.

(b) Certain aircraft. For aircraft described in § 168(k)(2)(C), the nonrefundable deposit requirement in § 168(k)(2)(C)(iii) is satisfied if the purchaser, at the time of the purchase contract, has made a nonrefundable deposit of at least the lesser of 10 percent of the cost of the aircraft or $100,000. See section 5.02 of Rev. Proc. 2008–54.

(3) Application of § 1.168(k)–1. For purposes of the additional first year depreciation deduction, rules similar to the rules in § 1.168(k)–1 for “qualified property” or for “30-percent additional first year depreciation deduction” apply to § 168(k)(2) and (3). However, in applying § 1.168(k)–1(d)(1)(i), the computation of the allowable 50-percent additional first year depreciation deduction is made in accordance with the rules for 50-percent bonus depreciation property and, in applying § 1.168(k)–1(f)(5)(iii)(A), the rules for 50-percent additional first year depreciation deduction apply. In applying § 1.168(k)–1(c) to qualified improvement property, see section 4.02(3) of this revenue procedure.

.02 Qualified Improvement Property.

(1) In general. Section 168(k)(3) defines the term “qualified improvement property” as any improvement to an interior portion of a building that is nonresidential real property if the improvement is placed in service after the date the building was first placed in service. However, qualified improvement property does not include any improvement attributable to the enlargement of the building, any elevator or escalator, or the internal structural framework of the building.

(2) Building was first placed in service. For purposes of § 168(k)(3), the term “first placed in service” means the first time the building is placed in service by any person. See § 1.168(k)–1(c)(1)(iii). A building is first placed in service when first placed in a condition or state of readiness and availability for a specifically assigned function, whether in a trade or business, in the production of income, in a tax-exempt activity, or in a personal activity. See § 1.46–3(d)(1)(ii) and (d)(2).

(3) Application of § 1.168(k)–1(c). Rules similar to the rules in § 1.168(k)–1(c) apply to depreciable property that is qualified improvement property. However, in applying § 1.168(k)–1(c), § 1.168(k)–1(c)(2)(iii), (3)(ii), and (3)(vi) do not apply.

(4) Qualified restaurant property. Qualified property that is placed in service by the taxpayer after December 31, 2015, and that meets the definition of both qualified improvement property and qualified restaurant property, as defined in § 168(e)(7), is eligible for the additional first year depreciation deduction under § 168(k), assuming all other requirements in § 168(k) are met.

(5) Examples. The following examples illustrate the provisions concerning qualified improvement property. Assume that all of the improvements in the examples are required to be capitalized under § 263(a) and/or § 263A.

(a) Example 1 – Qualified improvement property. In 2010, A places in service a new office building. In February 2016, A sells this office building to B at fair market value. B uses the office building in its trade or business. In March 2016, B begins to construct improvements to the interior portion of the office building and places the improvements in service in December 2016. Because the office building was first placed in service in 2010 and the improvements made by B to the interior portion of the office building are placed in service after that date, the improvements that are § 1250 property are qualified improvement property, assuming all other requirements in § 168(k)(3) and § 1.168(k)–1(c), taking into account section 4.02(3) of this revenue procedure, are met.

(b) Example 2 – Qualified improvement property. In 2015, C, a corporation and manufacturer, enters into a written contract with X for X to construct a new building for use by C in its trade or business. The building will house a manufacturing operation and office space. The initial construction plans did not include a private restroom for the owner of C. During the construction of the building, C enters into a written contract with Y to construct a private restroom in the new building for the owner of C. On May 27, 2016, C places in service the building, except for the private restroom. On May 28, 2016, the private restroom in the building for the owner of C is placed in service. Because the building is first placed in service on May 27, 2016, and the private restroom is placed in service on May 28, 2016, the assets in the private restroom that are § 1250 property are qualified improvement property, assuming all other requirements in § 168(k)(3) and § 1.168(k)–1(c), taking into account section 4.02(3) of this revenue procedure, are met.

(c) Example 3 – Qualified improvement property. The facts are the same as in Example 2, except C enters into an amendment to the existing written contract with X, the contractor of the building, for X to construct a private restroom in the building for the owner of C. Because the building is first placed in service on May 27, 2016, and the private restroom is placed in service on May 28, 2016, the result is the same as in Example 2.

(d) Example 4 – Qualified improvement property. D is engaged in the commercial building rental business. In March 2015, D enters into a written contract with Z to construct a multi-story building. Pursuant to this contract, Z constructs a completely finished exterior of the building and a minimally finished interior of the building with only elevators, heating, ventilation, and air conditioning systems, plumbing, restrooms, and concrete floors. In December 2015, D and E entered into a lease agreement providing that E will lease one floor of the new building and E will install on that floor drop ceilings, lighting, interior walls, electrical outlets, carpeting, and trade fixtures necessary for the operation of E’s trade or business (collectively referred to as a build-out). On February 8, 2016, D places in service the new building. On June 4, 2016, E places in service the build-out. Because the building is first placed in service on February 8, 2016, and the build-out is placed in service after that date, the assets of the build-out that are § 1250 property are qualified improvement property, assuming all other requirements in § 168(k)(3) and § 1.168(k)–1(c), taking into account section 4.02(3) of this revenue procedure, are met.

(e) Example 5 – Qualified restaurant property that is qualified improvement property. In 2016, F constructs and places in service an improvement to a restaurant building and that improvement meets the definitions of both qualified restaurant property under § 168(e)(7) and qualified improvement property under § 168(k)(3). Accordingly, the improvement is eligible for the additional first year depreciation deduction provided by § 168(k), assuming all other requirements in § 168(k) are met.

(f) Example 6 – Qualified restaurant property that is not qualified improvement property. In 2016, G constructs and places in service a new restaurant building and that building meets the definition of qualified restaurant property under § 168(e)(7). However, that building is not qualified improvement property under § 168(k)(3). Accordingly, the building is not eligible for the additional first year depreciation deduction provided by § 168(k).

.03 Phase Down of Additional First Year Depreciation Deduction Percentage.

(1) In general. Pursuant to § 168(k)(6), the additional first year depreciation deduction percentage of 50 percent is phased down beginning for qualified property placed in service after December 31, 2017 (after December 31, 2018, for property described in § 168(k)(2)(B) or (C)). The tables below provide the additional first year depreciation deduction percentages for qualified property placed in service by the taxpayer after 2015.

(2) Additional first year depreciation deduction percentages.

(a) The table below provides the additional first year depreciation deduction percentages for qualified property that is not described in § 168(k)(2)(B) or (C):

Placed-in-Service Year Additional First Year Depreciation Deduction Percentage
2016 50%
2017 50%
2018 40%
2019 30%
After 2019 0%

(b) The table below provides the additional first year depreciation deduction percentages for qualified property that is described in § 168(k)(2)(B) or (C):

Placed-in-Service Year Acquired, or Acquired Pursuant to a Written Contract Entered Into: Additional First Year Depreciation Deduction Percentage
2016 Before 2020 50%
2017 Before 2020 50%
2018 Before 2020 50%
2019 Before 2019 40% *
2019 During 2019 30% *
2020 Before 2020 30% **
2020 After 2019 0%
After 2020 Before 2020 or After 2019 0%
* For qualified property described in § 168(k)(2)(B) and placed in service in 2019 but acquired, or acquired pursuant to a written contract entered into, before 2019, the 40% applies only to the property’s unadjusted depreciable basis attributable to the property’s manufacture, construction, or production before January 1, 2019. See § 168(k)(2)(B)(ii) and (6)(A) and § 1.168(k)–1(d)(1)(ii), taking into account section 4.01(3) of this revenue procedure. For qualified property described in § 168(k)(2)(B), placed in service in 2019, and acquired, or acquired pursuant to a written contract entered into, in 2019, the 30% applies only to the property’s unadjusted depreciable basis attributable to the property’s manufacture, construction, or production before January 1, 2020. For qualified property described in § 168(k)(2)(C) and placed in service in 2019, the 30% and 40% apply to the property’s unadjusted depreciable basis.
** For qualified property described in § 168(k)(2)(B) and placed in service in 2020 but acquired, or acquired pursuant to a written contract entered into, before 2020, the 30% applies only to the property’s unadjusted depreciable basis attributable to the property’s manufacture, construction, or production before January 1, 2020. See § 168(k)(2)(B)(ii) and (6)(B) and § 1.168(k)–1(d)(1)(ii), taking into account section 4.01(3) of this revenue procedure. For qualified property described in § 168(k)(2)(C) and placed in service in 2020 but acquired, or acquired pursuant to a written contract entered into, before 2020, the 30% applies to the property’s unadjusted depreciable basis.

.04 Election Not to Deduct the Additional First Year Depreciation.

(1) In general. The rules for making the election under § 168(k)(7) not to deduct the additional first year depreciation (the § 168(k)(7) election) are similar to the rules for making such election under § 168(k)(2)(D)(iii) as in effect before the enactment of the PATH Act. As a result, the § 168(k)(7) election applies to all qualified property that is in the same class of property and placed in service in the same taxable year. If the § 168(k)(7) election is made for a class of property that is qualified property placed in service during the taxable year, no additional first year depreciation deduction is allowable for that property and § 168(k)(2)(F) does not apply to that property. However, that property is still qualified property for purposes of § 168(k), assuming all the requirements of § 168(k)(2) are met. For example, if a calendar-year taxpayer makes the § 168(k)(7) election for a class of property that is qualified property placed in service during 2016, the depreciation adjustments under § 56 and the regulations under § 56 do not apply to the property to which the election applies for purposes of computing the taxpayer’s alternative minimum taxable income. See § 168(k)(2)(G). However, see section 4.04(3) of this revenue procedure for how the election not to deduct the additional first year depreciation applies to a taxpayer with a taxable year beginning in 2015 and ending in 2016.

(2) Application of § 1.168(k)–1(e). Except as provided in section 4.04(3) of this revenue procedure, rules similar to the rules in § 1.168(k)–1(e)(2), (3), (5), and (7) apply for purposes of § 168(k)(7).

(3) Special rules for certain taxpayers. This section 4.04(3) applies to a taxpayer with a taxable year beginning in 2015 and ending in 2016. If such taxpayer makes an election not to deduct the additional first year depreciation for a class of property that is qualified property placed in service during such taxable year, no additional first year depreciation deduction is allowable for that property and § 168(k)(2)(F), as in effect before and after the enactment of the PATH Act, does not apply to that property. The election is made under § 168(k)(2)(D)(iii) as in effect before the enactment of the PATH Act for property placed in service in 2015 and under § 168(k)(7) for property placed in service in 2016. For property placed in service in 2015 to which the election applies, the depreciation adjustments under § 56 and the regulations under § 56 apply to such property for purposes of computing the taxpayer’s alternative minimum taxable income. See § 1.168(k)–1(e)(6). For qualified property placed in service in 2016 to which the election applies, the depreciation adjustments under § 56 and the regulations under § 56 do not apply to such property for purposes of computing the taxpayer’s alternative minimum taxable income. See § 168(k)(2)(G).

.05 Special Rules for Certain Plants Bearing Fruits and Nuts.

(1) Section 168(k)(5) election.

(a) In general. The § 168(k)(5) election applies to one or more specified plants, as defined in § 168(k)(5)(B), planted or grafted by the taxpayer during the taxable year for which the § 168(k)(5) election is made. If a taxpayer makes the § 168(k)(5) election for a specified plant, (i) the additional first year depreciation deduction provided by § 168(k) is allowed for that specified plant for regular tax and alternative minimum tax purposes for the taxable year in which the specified plant is planted or grafted by the taxpayer, (ii) that specified plant is not treated as qualified property under § 168(k) in its placed-in-service year, and (iii) the depreciation deductions under § 168 for that specified plant, after deducting the additional first year depreciation, are allowed for its placed-in-service year and subsequent taxable years. Further, pursuant to § 263A(c)(7) (as added to the Code by § 143(b)(6)(H) of the PATH Act), § 263A does not apply to any amount deducted under the § 168(k)(5) election.

(b) Time and manner for making the § 168(k)(5) election.

(i) In general. Except as provided in section 4.05(1)(b)(ii) of this revenue procedure, the § 168(k)(5) election must be made by the due date, including extensions, of the Federal tax return for the taxable year in which the taxpayer plants or grafts the specified plant to which the election applies. Except as provided in section 4.05(1)(b)(ii) of this revenue procedure, the § 168(k)(5) election must be made in the manner prescribed on Form 4562, Depreciation and Amortization, and its instructions.

(ii) Deemed election. This section 4.05(1)(b)(ii) applies to a taxpayer that did not make the § 168(k)(5) election for a specified plant planted or grafted by the taxpayer after December 31, 2015, on its timely filed Federal tax return for its taxable year beginning in 2015 and ending in 2016 or its taxable year of less than 12 months beginning and ending in 2016. If this section 4.05(1)(b)(ii) applies, the taxpayer will be treated as making the § 168(k)(5) election for that specified plant if the taxpayer:

(A) On that return, deducted the 50-percent additional first year depreciation for that specified plant; and

(B) Did not revoke the deemed election provided under this section 4.05(1)(b)(ii) within the time and in the manner provided in section 4.05(2)(b) of this revenue procedure.

(2) Revocation of the § 168(k)(5) election.

(a) In general. Except as provided in section 4.05(2)(b) of this revenue procedure, the § 168(k)(5) election, once made, may be revoked only with the written consent of the Commissioner. To seek the Commissioner’s consent, the taxpayer must submit a request for a letter ruling pursuant to Rev. Proc. 2017–1, 2017–1 I.R.B. 1 (or successor).

(b) Automatic 6-month extension. If a taxpayer made, or would be treated under section 4.05(1)(ii) of this revenue procedure as having made, the § 168(k)(5) election for a specified plant, an automatic extension of 6 months from the due date, excluding extensions, of the taxpayer’s Federal tax return for the taxable year in which such specified plant is planted or grafted is granted to revoke that election, provided the taxpayer timely filed the taxpayer’s Federal tax return for that taxable year and, within this 6-month extension period, the taxpayer, and all taxpayers whose tax liability would be affected by the § 168(k)(5) election, files an amended Federal tax return for that taxable year in a manner that is consistent with the revocation of the election.

(3) Interaction with § 179. If a taxpayer makes the § 168(k)(5) election for a specified plant, the adjusted basis of that specified plant is reduced by the amount of the additional first year depreciation deduction allowed or allowable under § 168(k), whichever is greater. This remaining adjusted basis is the cost of the specified plant for purposes of § 179, before the application of § 179(d)(3) and § 1.179–4(d).

SECTION 5. ELECTION NOT TO APPLY § 168(j)

.01 In General. The § 168(j)(8) election applies to all qualified Indian reservation property, as defined in § 168(j)(4), that is in the same class of property and placed in service in the same taxable year. If the § 168(j)(8) election is made for a class of property that is qualified Indian reservation property placed in service during the taxable year, the applicable recovery period for that property for purposes of § 168(a) is determined in accordance with the table contained in § 168(c), and the depreciation adjustments under § 56 and the regulations under § 56 apply to that property for purposes of computing the taxpayer’s alternative minimum taxable income. Once made, the § 168(j)(8) election is irrevocable.

.02 Definition of Class of Property. For purposes of § 168(j)(8) and this section 5, the term “class of property” means each class of property described in the table contained in § 168(j)(2) (for example, 3-year property).

.03 Time and Manner for Making the § 168(j)(8) Election.

(1) In general. Except as provided in section 5.03(2) of this revenue procedure, the § 168(j)(8) election must be made by the due date, including extensions, of the Federal tax return for the taxable year in which the taxpayer places in service the qualified Indian reservation property. Except as provided in section 5.03(2) of this revenue procedure, the § 168(j)(8) election must be made in the manner prescribed on Form 4562, Depreciation and Amortization, and its instructions.

(2) Deemed election. This section 5.03(2) applies to a taxpayer that did not make the § 168(j)(8) election within the time and in the manner provided in section 5.03(1) of this revenue procedure for a class of property that is qualified Indian reservation property placed in service by the taxpayer in its taxable year of less than 12 months beginning and ending in 2016. If this section 5.03(2) applies, the taxpayer will be treated as making the § 168(j)(8) election for a class of property that is qualified Indian reservation property if the taxpayer, on its timely filed Federal tax return for that taxable year, determined depreciation for that class of property under the general depreciation system of § 168(a) by using the applicable recovery period for that class of property in accordance with the table contained in § 168(c).

SECTION 6. EFFECT ON OTHER DOCUMENTS

Section 7 of Rev. Proc. 2008–54 is obsoleted for taxable years beginning after 2014.

SECTION 7. EFFECTIVE DATE

This revenue procedure is effective April 20, 2017.

SECTION 8. DRAFTING INFORMATION

The principal author of this revenue procedure is Elizabeth Binder of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Ms. Binder at (202) 317-7005 (not a toll-free number).

Definition of Terms and Abbreviations

Definition of Terms

Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the effect:

Amplified describes a situation where no change is being made in a prior published position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified, below).

Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed.

Distinguished describes a situation where a ruling mentions a previously published ruling and points out an essential difference between them.

Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified, above).

Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted.

Revoked describes situations where the position in the previously published ruling is not correct and the correct position is being stated in a new ruling.

Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is superseded.

Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rulings in the series.

Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study.

Abbreviations

The following abbreviations in current use and formerly used will appear in material published in the Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contributions Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statement of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

Numerical Finding List

Numerical Finding List

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016–27 through 2016–52 is in Internal Revenue Bulletin 2016–52, dated December 26, 2016.

Bulletin 2017–1 through 2017–19

Action on Decision:

Article Issue Link Page
2017-1 2017-7 I.R.B. 2017-7 868
2017-2 2017-15 I.R.B. 2017-15 1072
2017-3 2017-15 I.R.B. 2017-15 1072
2017-4 2017-15 I.R.B. 2017-15 1073


Announcements:

Article Issue Link Page
2017-01 2017-08 I.R.B. 2017-08 941
2017-02 2017-10 I.R.B. 2017-10 1007
2017-03 2017-15 I.R.B. 2017-15 1077
2017-04 2017-16 I.R.B. 2017-16 1106


Notices:

Article Issue Link Page
2017-1 2017-2 I.R.B. 2017-2 367
2017-2 2017-4 I.R.B. 2017-4 539
2017-3 2017-2 I.R.B. 2017-2 368
2017-4 2017-4 I.R.B. 2017-4 541
2017-5 2017-6 I.R.B. 2017-6 779
2017-6 2017-3 I.R.B. 2017-3 422
2017-7 2017-3 I.R.B. 2017-3 423
2017-8 2017-3 I.R.B. 2017-3 423
2017-9 2017-4 I.R.B. 2017-4 542
2017-10 2017-4 I.R.B. 2017-4 544
2017-12 2017-5 I.R.B. 2017-5 742
2017-13 2017-6 I.R.B. 2017-6 780
2017-14 2017-6 I.R.B. 2017-6 783
2017-15 2017-6 I.R.B. 2017-6 783
2017-16 2017-7 I.R.B. 2017-7 913
2017-17 2017-15 I.R.B. 2017-15 1074
2017-18 2017-9 I.R.B. 2017-9 997
2017-19 2017-9 I.R.B. 2017-9 1000
2017-20 2017-11 I.R.B. 2017-11 1010
2017-21 2017-13 I.R.B. 2017-13 1026
2017-22 2017-13 I.R.B. 2017-13 1033
2017-23 2017-16 I.R.B. 2017-16 1100
2017-24 2017-17 I.R.B. 2017-17 1127
2017-25 2017-17 I.R.B. 2017-17 1127
2017-26 2017-17 I.R.B. 2017-17 1129
2017-27 2017-19 I.R.B. 2017-19 1232
2017-28 2017-19 I.R.B. 2017-19 1235


Proposed Regulations:

Article Issue Link Page
REG-137604-07 2017-7 I.R.B. 2017-7 923
REG-128276-12 2017-2 I.R.B. 2017-2 369
REG-103477-14 2017-5 I.R.B. 2017-5 746
REG-112324-15 2017-4 I.R.B. 2017-4 547
REG-127203-15 2017-7 I.R.B. 2017-7 918
REG-131643-15 2017-6 I.R.B. 2017-6 865
REG-134438-15 2017-2 I.R.B. 2017-2 373
REG-112800-16 2017-4 I.R.B. 2017-4 569
REG-123829-16 2017-5 I.R.B. 2017-5 764
REG-123841-16 2017-5 I.R.B. 2017-5 766
REG-133353-16 2017-2 I.R.B. 2017-2 372
REG-134247-16 2017-5 I.R.B. 2017-5 744
REG-135122-16 2017-9 I.R.B. 2017-9 1005


Revenue Procedures:

Article Issue Link Page
2017-1 2017-1 I.R.B. 2017-1 1
2017-2 2017-1 I.R.B. 2017-1 106
2017-3 2017-1 I.R.B. 2017-1 130
2017-4 2017-1 I.R.B. 2017-1 146
2017-5 2017-1 I.R.B. 2017-1 230
2017-7 2017-1 I.R.B. 2017-1 269
2017-12 2017-3 I.R.B. 2017-3 424
2017-13 2017-6 I.R.B. 2017-6 787
2017-14 2017-3 I.R.B. 2017-3 426
2017-15 2017-3 I.R.B. 2017-3 437
2017-16 2017-3 I.R.B. 2017-3 501
2017-18 2017-5 I.R.B. 2017-5 743
2017-19 2017-7 I.R.B. 2017-7 913
2017-21 2017-6 I.R.B. 2017-6 791
2017-22 2017-6 I.R.B. 2017-6 863
2017-23 2017-7 I.R.B. 2017-7 915
2017-24 2017-7 I.R.B. 2017-7 916
2017-25 2017-14 I.R.B. 2017-14 1039
2017-26 2017-13 I.R.B. 2017-13 1036
2017-27 2017-14 I.R.B. 2017-14 1042
2017-28 2017-14 I.R.B. 2017-14 1061
2017-29 2017-14 I.R.B. 2017-14 1065
2017-30 2017-18 I.R.B. 2017-18 1131
2017-31 2017-16 I.R.B. 2017-16 1104
2017-32 2017-17 I.R.B. 2017-17 1109
2017-33 2017-19 I.R.B. 2017-19 1236


Revenue Rulings:

Article Issue Link Page
2017-1 2017-3 I.R.B. 2017-3 377
2017-2 2017-2 I.R.B. 2017-2 364
2017-3 2017-4 I.R.B. 2017-4 522
2017-4 2017-6 I.R.B. 2017-6 776
2017-5 2017-9 I.R.B. 2017-9 1000
2017-6 2017-12 I.R.B. 2017-12 1011
2017-7 2017-10 I.R.B. 2017-10 1009
2017-8 2017-14 I.R.B. 2017-14 1037
2017-10 2017-17 I.R.B. 2017-17 1108
2017-11 2017-19 I.R.B. 2017-19 1230


Treasury Decisions:

Article Issue Link Page
9794 2017-2 I.R.B. 2017-2 273
9795 2017-2 I.R.B. 2017-2 326
9796 2017-3 I.R.B. 2017-3 380
9801 2017-2 I.R.B. 2017-2 355
9802 2017-2 I.R.B. 2017-2 361
9803 2017-3 I.R.B. 2017-3 384
9804 2017-3 I.R.B. 2017-3 406
9806 2017-4 I.R.B. 2017-4 524
9807 2017-5 I.R.B. 2017-5 573
9808 2017-5 I.R.B. 2017-5 580
9809 2017-5 I.R.B. 2017-5 664
9810 2017-6 I.R.B. 2017-6 775
9811 2017-7 I.R.B. 2017-7 869
9814 2017-7 I.R.B. 2017-7 878
9815 2017-9 I.R.B. 2017-9 944
9817 2017-9 I.R.B. 2017-9 968


Effect of Current Actions on Previously Published Items

Finding List of Current Actions on Previously Published Items

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016–27 through 2016–52 is in Internal Revenue Bulletin 2016–52, dated December 26, 2016.

Bulletin 2017–1 through 2017–19

Notices:

Old Article Action New Article Issue Link Page
2002-1 Amplified by Notice 2017-1 2017-2 I.R.B. 2017-2 367
2010-46 Obsoleted by Notice 2017-1 2017-2 I.R.B. 2017-2 367
2016-29 Modified by Notice 2017-6 2017-3 I.R.B. 2017-3 422


Revenue Procedures:

Old Article Action New Article Issue Link Page
2013-22 Clarified by Rev. Proc. 2017-18 2017-05 I.R.B. 2017-05 743
2015-57 Modified by Rev. Proc. 2017-24 2017-07 I.R.B. 2017-07 916


Treasury Decisions:

Old Article Action New Article Issue Link Page
2010-46 Obsoleted by T.D. 9815 2017-09 I.R.B. 2017-9 944


INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletins are available at www.irs.gov/irb/.

We Welcome Comments About the Internal Revenue Bulletin

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov) or write to the

Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave. NW, IR-6230 Washington, DC 20224.