Revenue Procedure 2021-26 provides guidance with respect to accounting method changes made on behalf of certain foreign corporations. The procedure accomplishes the following:
- expands, for a limited period, the availability of automatic consent for controlled foreign corporations (“CFCs”) to change their methods of accounting for depreciation to the alternative depreciation system under section 168(g) in order to ease the burden on CFCs of conforming their income and earnings and profits computations with their qualified business asset investment computations;
- prescribes terms and conditions for accounting method changes made on behalf of CFCs, to ensure that section 481(a) adjustments resulting from CFCs’ method changes are properly included in computations of tested income and tested loss;
- clarifies certain aspects of the “150 percent rule” that limits audit protection for CFCs and 10/50 corporations.
The Treasury Department and the IRS previously announced their intention to issue the guidance set forth in this procedure in the Treasury decision containing the final section 951A regulations published on June 21, 2019.
Revenue Procedure 2021-26 will be published in Internal Revenue Bulletin 2021-22 on June 1, 2021.
