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The Service Issues New Draft Version of Form 3115

The Internal Revenue Service (hereinafter the “Service”) issued on July 15th of 2015 their long awaited draft version of their revised Form 3115 entitled “Application for Change in Accounting Method” which incorporates revisions to the process for requesting accounting method changes (e.g., accounting method changes in complying with the Final Treasury Regulations governing Tangible Property; accounting method changes in connection to depreciation adjustments resulting from Cost Segregation Analysis; etc.). The draft version of Form 3115 can be accessed at http://www.irs.gov/pub/irs-dft/f3115–dft.pdf

Once finalized, the latest form will replace the current version, which was previously issued in 2009. The Service requests that comments on the draft Form 3115 be made on Read more

IRS Issues New Administrative Authority In Connection To Controlled Group Allocations Of The Research And Experimentation Tax Credit

IRS Building in WashingtonThe Internal Revenue Service (hereinafter “the Service”) has issued Notice 2013-20 in connection to the allocation of the Research and Experimentation Tax Credit (hereinafter “RTC”) to members of a controlled group. The guidance was in response to modifications made to I.R.C. § 41 as part of the American Taxpayer Relief Act of 2012 (hereinafter “ATRA”).

It should be duly recalled that the ATRA simplified the methodology for allocating the RTC to members of a controlled group of corporations and businesses under common control. Under the prior statute and corresponding treasury regulations, all companies under common control that were required to calculate the RTC at the group level were then required to allocate the RTC to the members of the group based upon each member’s standalone RTC. This allocation methodology was principally onerous when group members were required to use different methods for computing their standalone RTCs. The new law provides that the group RTC will now be allocated to the group members based on members’ proportionate share of Qualified Research Expenses (hereinafter “QREs”).

It should be duly noted that for tax years beginning after Dec. 31, 2011, Notice 2013-20 indicates that the treasury regulations dealing with the RTC allocations for controlled groups (e.g., Treas. Reg. §1.41-6(c) and related examples) no longer apply. In its place, taxpayers should allocate the RTC based on their proportionate share of QREs as outlined within the ATRA. Finally, the notice also indicates that the Service intends to modify Treas. Reg. § 1.41-6 to conform to the new allocation rules.