Regulation · 2003
Treas. Reg. 1.446-1T(e)(2)(ii)(d)
Treas. Reg. 1.446-1T(e)(2)(ii)(d)(2)(i)
Treasury regulation
Audio summary
A short audio walkthrough of this rule: what it says and why it matters for your study.
What it holds
A change in depreciation method, recovery period, or convention is a change in accounting method. This rule became effective December 30, 2003.
Why it matters for your study: This is the regulatory foundation for using Form 3115 in a cost segregation study. Because a reclassification is a method change, you do not amend old returns. You file Form 3115, take the Section 481(a) catch-up in one year, and get audit protection on the prior years.
Where this comes from
Before this regulation clarified the rule, some practitioners argued that correcting a depreciation classification was just a correction of an error, not a method change. Error corrections require amended returns. Method changes require Form 3115.
Treas. Reg. 1.446-1T(e)(2)(ii)(d) settled the question. Changing a depreciation method, recovery period, or convention is a method change, effective December 30, 2003.
What it establishes
Once a cost segregation reclassification is classified as a method change, the entire method-change framework applies. That framework includes:
Form 3115 as the mechanism. No amended returns are needed.
The Section 481(a) catch-up. All prior missed depreciation comes into the current year as a single deduction.
Audit protection. Under Rev. Proc. 2015-13, a properly filed change generally protects the changed item from IRS scrutiny in the prior years.
How it shows up in a study
When you see Form 3115 attached to the tax return with a cost segregation study, this regulation is the reason it is there. The reclassification is a method change. Form 3115 is the required filing.
The alternative, going back and amending every prior return, is both impractical (statute of limitations may bar some years) and inefficient. This regulation created the path that makes the process clean.
What it does not mean
This regulation says that a depreciation change is a method change. It does not say every method change is automatic. The change still needs to appear on the IRS automatic-changes list (currently Rev. Proc. 2025-23) to proceed without advance IRS consent.
Also, this regulation is the T (temporary) version. It became permanent regulation through the tangible property final regulations, but the citation used in practice often still references the temporary version.
Primary source
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This page explains a tax authority in plain words. It is not tax advice for your situation. The way this authority applies to your property is reviewed by a licensed tax professional. Citation is provided so you or your advisor can read the primary source.