[Federal Register Volume 69, Number 1 (Friday, January 2, 2004)]
[Proposed Rules]
[Pages 42-43]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31821]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 69, No. 1 / Friday, January 2, 2004 / 
Proposed Rules  

[[Page 42]]



DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-126459-03]
RIN 1545-BC18


Changes in Computing Depreciation

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking; Notice of proposed rulemaking by 
cross-reference to temporary regulations and notice of public hearing.

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations under 
sections 446(e) and 1016(a)(2) of the Internal Revenue Code relating to 
a change in computing depreciation or amortization as well as a change 
from a nondepreciable or nonamortizable asset to a depreciable or 
amortizable asset (or vice versa). The text of those temporary 
regulations also serves as the text of these proposed regulations. This 
document also provides notice of a public hearing on these proposed 
regulations.

DATES: Written or electronic comments must be received by April 1, 
2004. Outlines of topics to be discussed at the public hearing 
scheduled for April 7, 2004, at 10 a.m. must be received by March 17, 
2004.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-126459-03), room 5203, 
Internal Revenue Service, PO Box 7604, Ben Franklin Station, 
Washington, DC 20044. Alternatively, submissions may be hand-delivered 
Monday through Friday between the hours of 8 a.m. and 4 p.m. to 
CC:PA:LPD:PR (REG-126459-03), Courier's Desk, Internal Revenue Service, 
1111 Constitution Avenue, NW., Washington, DC or sent electronically, 
via the IRS Internet site at: http://www.irs.gov/regs.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Sara Logan or Douglas Kim, (202) 622-3110; concerning submissions of 
comments, the hearing, and/or to be placed on the building access list 
to attend the hearing, Sonya Cruse, (202) 622-4693 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION:

Background

    Temporary regulations in the Rules and Regulations section of this 
issue of the Federal Register amend 26 CFR part 1 relating to sections 
167, 446, and 1016 of the Internal Revenue Code (Code). The temporary 
regulations provide guidance under section 446(e) on whether a change 
in computing depreciation or amortization as well as a change from a 
nondepreciable or nonamortizable asset to a depreciable or amortizable 
asset (or vice versa) is a change in method of accounting that requires 
the consent of the Commissioner.
    The text of those temporary regulations also serves as the text of 
these proposed regulations. The preamble to the temporary regulations 
explains the temporary regulations and these proposed regulations.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It also has 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these regulations and, because 
these regulations do not impose on small entities a collection of 
information requirement, the Regulatory Flexibility Act (5 U.S.C. 
chapter 6) does not apply. Therefore, a Regulatory Flexibility Analysis 
is not required. Pursuant to section 7805(f) of the Internal Revenue 
Code, this notice of proposed rulemaking will be submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. The IRS and Treasury Department specifically request 
comments on the clarity of the proposed rules and how they can be made 
easier to understand. All comments will be available for public 
inspection and copying.
    A public hearing has been scheduled for April 7, 2004, beginning at 
10 a.m. in the Auditorium, 7th Floor, Internal Revenue Building, 1111 
Constitution Avenue, NW., Washington, DC. Due to building security 
procedures, visitors must enter at the Constitution Avenue entrance. In 
addition, all visitors must present photo identification to enter the 
building. Because of access restrictions, visitors will not be admitted 
beyond the immediate entrance area more than 30 minutes before the 
hearing starts. For information about having your name placed on the 
building access list to attend the hearing, see the FOR FURTHER 
INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit an outline of 
the topics to be discussed and the time to be devoted to each topic 
(signed original and eight (8) copies) by March 17, 2004. A period of 
10 minutes will be allotted to each person for making comments. An 
agenda showing the scheduling of the speakers will be prepared after 
the deadline for receiving outlines has passed. Copies of the agenda 
will be available free of charge at the hearing.

Drafting Information

    The principal author of these regulations is Sara Logan, Office of 
Associate Chief Counsel (Passthroughs and Special Industries). However, 
other personnel from the IRS and Treasury Department participated in 
their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 reads as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 1.167(e)-1 is amended by revising paragraphs (a) 
and (e) to read as follows:

[[Page 43]]

Sec.  1.167(e)-1  Change in method.

    (a) [The text of the proposed amendment to Sec.  1.167(e)-1(a) is 
the same as the text of Sec.  1.167(e)-1T(a) published elsewhere in 
this issue of the Federal Register].
* * * * *
    (e) Effective date. This section applies on or after December 30, 
2003. For the applicability of regulations before December 30, 2003, 
see Sec.  1.167(e)-1 in effect prior to December 30, 2003 (Sec.  
1.167(e)-1 as contained in 26 CFR part 1 edition revised as of April 1, 
2003).
    Par. 3. Section 1.446-1 is amended by revising paragraphs 
(e)(2)(ii)(a), (e)(2)(ii)(b), (e)(2)(ii)(d), (e)(2)(iii), and (e)(4) to 
read as follows:


Sec.  1.446-1  General rule for methods of accounting.

* * * * *
    (e) * * *
    (2) * * *
    (ii)(a) and (b) [The text of the proposed amendment to Sec.  1.446-
1(e)(2)(ii)(a) and (b) is the same as the text of Sec.  1.446-
1T(e)(2)(ii)(a) and (b) published elsewhere in this issue of the 
Federal Register].
* * * * *
    (d) [The text of this paragraph (e)(2)(ii)(d) is the same as the 
text of Sec.  1.446-1T(e)(2)(ii)(d) published elsewhere in this issue 
of the Federal Register].
    (iii) [The text of the proposed amendment to Sec.  1.446-
1(e)(2)(iii) is the same as the text of Sec.  1.446-1T(e)(2)(iii) 
published elsewhere in this issue of the Federal Register].
* * * * *
    (4) Effective date--(i) In general. Except as provided in 
paragraphs (e)(3)(iii) and (e)(4)(ii) of this section, paragraph (e) of 
this section applies on or after December 30, 2003. For the 
applicability of regulations before December 30, 2003, see Sec.  1.446-
1(e) in effect prior to December 30, 2003 (Sec.  1.446-1(e) as 
contained in 26 CFR part 1 edition revised as of April 1, 2003).
    (ii) Changes involving depreciable or amortizable assets. With 
respect to paragraph (e)(2)(ii)(d) of this section, paragraph 
(e)(2)(iii) Examples 9 through 17 of this section, the addition of the 
language ``certain changes in computing depreciation or amortization 
(see paragraph (e)(2)(ii)(d) of this section)'' to the last sentence of 
paragraph (e)(2)(ii)(a) of this section, and the removal of all 
language regarding useful life and the sentence ``On the other hand, a 
correction to require depreciation in lieu of a deduction for the cost 
of a class of depreciable assets which had been consistently treated as 
an expense in the year of purchase involves the question of the proper 
timing of an item, and is to be treated as a change in method of 
accounting'' from paragraph (e)(2)(ii)(b) of this section--
    (A) For any change in depreciation or amortization that is a change 
in method of accounting, this section applies to such a change in 
method of accounting made for taxable years ending on or after December 
30, 2003; and
    (B) For any change in depreciation or amortization that is not a 
change in method of accounting, this section applies to such a change 
made for taxable years ending on or after December 30, 2003.
    Par. 4. Section 1.1016-3 is amended by revising paragraphs (h) and 
(j) to read as follows:


Sec.  1.1016-3  Exhaustion, wear and tear, obsolescence, amortization, 
and depletion for periods since February 28, 1913.

* * * * *
    (h) [The text of the proposed amendment to Sec.  1.1016-3(h) is the 
same as the text of Sec.  1.1016-3T(h) published elsewhere in this 
issue of the Federal Register].
* * * * *
    (j) Effective date--(1) In general. Except as provided in paragraph 
(j)(2) of this section, this section applies on or after December 30, 
2003. For the applicability of regulations before December 30, 2003, 
see Sec.  1.1016-3 in effect prior to December 30, 2003 (Sec.  1.1016-3 
as contained in 26 CFR part 1 edition revised as of April 1, 2003).
    (2) Depreciation or amortization changes. Paragraph (h) of this 
section applies to a change in depreciation or amortization for 
property subject to section 167, 168, 197, 1400I, 1400L(b), or 
1400L(c), or former section 168 for taxable years ending on or after 
December 30, 2003.

Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 03-31821 Filed 12-30-03; 8:45 am]
BILLING CODE 4830-01-P