In Revenue Procedure 2025-23, the IRS updates the list and substantive content of certain automatic accounting method changes. Revenue Procedure 2025-23 makes numerous changes to existing automatic change guidance, as highlighted in the Significant Developments section of the Revenue Procedure.

This Alert summarizes certain notable revisions. Specific reference should be made to the relevant method change section of the procedure in undertaking eligibility for and implementation of any automatic accounting method change. This Revenue Procedure may be subsequently modified as the IRS issues guidance during the next year and before reissuing the entire Revenue Procedure.

Significant changes to prior automatic accounting method procedures in Revenue Procedure 2024-23

Clarification of language relating to the IRC Section 481(a) adjustment

Revenue Procedure 2025-23 clarifies the following sections on the IRC Section 481(a) adjustment by adding "'for any taxable year in which the election was made'" to the second sentence of:

• Section 3.07(2), which addresses wireline network asset maintenance allowance and units of property accounting methods under Revenue Procedure 2011-27
• Section 3.08(2), which addresses wireless network asset maintenance allowance and units of property accounting methods under Revenue Procedure 2011-28
• Section 3.11(3)(a), which addresses cable network asset capitalization accounting methods under Revenue Procedure 2015-12

Removal or clarification of certain obsolete language

Revenue Procedure 2025-23 removes Section 6.22 of Revenue Procedure 2024-23, which addresses late elections under IRC Section 168(j)(8), 168(l)(3)(D) and 181(a)(1), because it is obsolete.

Revenue Procedure 2025-23 also modifies the following list of automatic changes to remove language because it is obsolete:

• Section 7.01 — Changes to accounting method for specified research or experimental (SRE) expenditures: Removes Section 7.01(3)(a), which allowed accounting method changes for SRE expenditures for a year of change that is the taxpayer's first tax year beginning after December 31, 2021. Removes from newly designated Section 7.01(3)(a) references to a year of change later than the first tax year beginning after December 31, 2021.
• Section 15.01 — Changes in overall method from the cash receipts and disbursements method to an accrual method: Removes the first sentence of Section 15.01(5), which allowed a temporary waiver of the eligibility rule in Section 5.01(1)(e) of Revenue Procedure 2015-13 when disregarding any prior overall accounting method change to the cash method implemented using the provisions of Revenue Procedure 2001-10, as modified by Revenue Procedure 2011-14, or Revenue Procedure 2002-28, as modified by Revenue Procedure 2011-14.
• Section 16.08 — Changes in the timing of income recognition under IRC Section 451(b) and (c): Removes Section 16.08(4)(a)(iv), which addresses special IRC Section 481(a) adjustment rules when the temporary eligibility waiver applies, and Sections 16.08(4)(a)(v)(C) and 16.08(4)(a)(v)(D), which include examples to illustrate the special IRC Section 481(a) adjustment rules under Section 16.08(4)(a)(iv).
• Section 19.01 — Changes in accounting method for certain exempt long-term construction contracts from the percentage-of-completion method to an exempt contract method in Treas. Reg. Section 1.460-4(c), or to stop capitalizing costs under IRC Section 263A for certain home construction contracts: Removes references to Prop. Reg. Section 1.460-3(b)(1)(ii) on the inapplicability of the change under Section 19.01.
• Section 19.02 — Changes in accounting method under IRC Section 460 to rely on interim guidance in Section 8 of Notice 2023-63: Removes Section 19.02(3)(a) on the treatment of SRE expenditures under IRC Section 460 for the taxpayer's first tax year beginning after December 31, 2021.
• Certain paragraphs of Section 22: Removes references to Prop. Reg. Section 1.471-1(b).

Additionally, Revenue Procedure 2025-23 removes the reference to the temporary waiver of the eligibility rule in 5.01(1)(f) (addressing whether the taxpayer has made or requested a change for the same item during any of the five tax years ending with the year of change) of Revenue Procedure 2015-13 in:

• Section 6.04 — Change in general asset account treatment due to a change in the use of MACRS property
• Section 6.05 — Changes in accounting method for depreciation due to a change in the use of MACRS property
• Section 16.08 — Changes in the timing of income recognition under IRC Section 451(b) and (c)

Changes to other existing automatic change guidance

In addition to amplifying and modifying Revenue Procedure 2023-24, Revenue Procedure 2025-23 also modifies several other revenue procedures and rulings (previously issued as stand-alone guidance) on automatic method changes. These include the following:

• Revenue Procedure 2011-46, Book safe harbor under the nonaccrual-experience method: Modifies Section 5.02(3)(a) to clarify that the statement filed in lieu of a Form 3115 is considered a Form 3115 for purposes of the automatic method change procedures of Revenue Procedure 2015-13 and waives the duplicate filing requirement
• Revenue Procedure 2007-48, Safe harbor treatment of rotable spare parts: Establishes that the eligibility rule in Section 5.01(1)(f) of Revenue Procedure 2015-13 does not apply to an accounting method change in Section 5.06 of Revenue Procedure 2007-48 and made under Section 22.08 of Revenue Procedure 2025-23
• Revenue Ruling 2004-62, Business expenses pertaining to post-establishment fertilization of timber stand: Requires taxpayers to use the automatic change procedures in Revenue Procedure 2015-13 to make an accounting method change to comply with Revenue Ruling 2004-62
• Revenue Ruling 2000-7, Permitting taxpayers to recover missed depreciation for eligible disposed assets: Establishes that taxpayers must use the automatic change procedures of Revenue Procedure 2015-13 to conform with Revenue Ruling 2000-7

Effective date

As noted, Revenue Procedure 2025-23 is effective for Forms 3115 that are filed (i) on or after June 9, 2025, for a year of change ending on or after October 31, 2024, and (ii) under the automatic change procedures of Revenue Procedure 2015-13.

Revenue Procedure 2025-23 has transition rules for Forms 3115 previously filed under the non-automatic change procedures in Revenue Procedure 2015-13 and that now qualify for an automatic change. Under those rules, a taxpayer that has a Form 3115 pending with the National Office on June 9, 2025, may choose to make the accounting method change under the automatic change procedures of Revenue Procedure 2015-13. Taxpayers must notify the National Office contact person for the Form 3115 that they intend to make the automatic accounting method change before the later of (i) July 9, 2025, or (ii) the issuance of a letter ruling granting or denying consent for the change. If the taxpayer timely notifies the National Office that it is converting the Form 3115 to the automatic change procedures in Revenue Procedure 2015-13, the National Office will send a letter to the taxpayer acknowledging its request and will return the user fee submitted with the Form 3115.

The taxpayer must resubmit a Form 3115 that conforms to the automatic change procedures, with a copy of the letter from the National Office to the IRS in Ogden, UT, by the earlier of (i) the 30th calendar day after the date of the National Office's letter, or (ii) the date the taxpayer must file the duplicate of the Form 3115 under Section 6.03(1)(a)(i)(B) of Revenue Procedure 2015-13. For purposes of the eligibility rules in Section 5 of Revenue Procedure 2015-13, the IRS will consider the duplicate copy of the resubmitted Form 3115 as filed on the date the taxpayer originally filed the Form 3115 under the non-automatic change procedures.

Revenue Procedure 2025-23 also has rules for Forms 3115 filed for accounting method changes that can no longer be made under the automatic change procedures and a transition rule for taxpayers that properly filed a duplicate copy of Form 3115 before June 9, 2025, for an accounting method change that still qualifies under the automatic change procedures.

Implications

Section 7.01 of Revenue Procedure 2025-23 does not make changes to the limited audit protection provisions. Section 7.01(6) allows audit protection for taxpayers that did not previously make a change to conform to IRC Section 174 (for a change for tax years beginning in 2024 and later) but does not allow audit protection for taxpayers that did not previously make a change to conform to IRC Section 174 (for a change for tax years beginning in 2022 and 2023). Therefore, taxpayers that are non-compliant longer (i.e., make a change for a tax year beginning in 2024) benefit more than taxpayers that conform to the statute earlier (i.e., make a change for a tax year beginning in 2023).

Section 7.01 of Revenue Procedure 2025-23 also does not extend the relief from automatic change restrictions for (1) changing the same item within five years and (2) making changes in the tax year the trade or business goes out of existence. This means that a taxpayer that previously made a change to conform to IRC Section 174 in the past (2022, 2023, 2024) and wants to modify its method for a tax year beginning in 2025 will need to file a non-automatic change request. Similarly, if a taxpayer wants to make a change to adopt Section 7 of Revenue Procedure 2023-63 for a 2025 tax year (the year the entity terminates), it will need to file a non-automatic change request. Taxpayers will have to file each of those requests by the last day of the tax year that begins in 2025. The five-year-same-item rule restriction for 2025 method changes presents another advantage to a taxpayer that that did not make a change to conform to IRC Section 174 in tax years beginning in 2022, 2023 or 2024 versus a taxpayer that conformed to the statute in tax years beginning before 2025; this is because the restriction will not impact a non-compliant taxpayer (which can still file an automatic change) but will require a compliant taxpayer to file a non-automatic change request.

Section 15.08, as previously indicated, is modified to indicate that a change for foreign income taxes is not automatic. The Office of Chief Counsel is actively processing accounting method changes in this context on a non-automatic basis. That said, former Revenue Procedure 2024-23 did not expressly exclude this type of method change from the automatic provisions.