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May 11, 2021

IRS provides guidance on accounting method changes by CFCs

The IRS has provided guidance (Revenue Procedure 2021-26) on accounting method changes made on behalf of certain controlled foreign corporations (CFCs). Specifically, the guidance (1) temporarily allows CFCs to obtain automatic consent to change their methods accounting for depreciation to the alternative depreciation system under IRC Section 168(g); (2) establishes terms and conditions for CFC accounting method changes to ensure that IRC Section 481(a) adjustments caused by the method changes are properly included in computations of tested income and loss; and (3) clarifies aspects of the "150% rule" that limits audit protection for CFCs and 10/50 corporations.  A Tax Alert is forthcoming.