CCA 200148015: Street lighting depreciation method change denied

Plain-English summary

A taxpayer used an automatic accounting method change procedure to move street lighting equipment out of the electric utility transmission and distribution asset class. Chief Counsel advised the industry director that consent had been denied because the replacement depreciation method was impermissible and thus outside that procedure's scope. The taxpayer had already made the change, so it was instructed to amend the year-of-change return and later returns to use the correct method. The memorandum says a separate letter to the taxpayer explained the reasons for denial, but that letter's text is not included in this PDF.

Ruling snapshot

• Question: Could the taxpayer use the automatic procedure to change how it depreciated street lighting equipment?
• Outcome: Denied; the proposed method was impermissible.
• Key authorities: IRC §§ 168, 481(a); Rev. Proc. 97-37, appendix § 2.01.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
I N T E R N AL R E V E N U E S E R V I C E WASHINGTON, D.C. 20224

‘
August 1, 2001

Number: 200148015
Release Date: 11/30/2001
UIL: 168.20-00
CC:PSI:
446.04-17
RPAUT-115671-98

MEMORANDUM FOR: INDUSTRY DIRECTOR, NATURAL RESOURCES (LM:NR)

FROM: CHIEF, BRANCH 6 (CC:PSI:6)
PASSTHROUGHS AND SPECIAL INDUSTRIES

SUBJECT: DENIAL OF CONSENT FOR CHANGE IN
ACCOUNTING METHOD

In accordance with § 8.07(2)(a) of Rev. Proc. 2001-1, 2001-1 I.R.B. 1, 43, this Chief Counsel Advice advises you that consent for a change in accounting method has been denied to a taxpayer within your jurisdiction. Pursuant to § 6110 (k)(3), this Chief Counsel Advise is not to be cited as precedent.

LEGEND:

Taxpayer =

B
=

C
=

Taxpayer filed the Form 3115 to request permission to change its method of computing depreciation for street lighting equipment under Rev. Proc. 97-37, 1997-2 C. B. 55. Because this change was under an automatic consent revenue procedure, Taxpayer has already made this change.

Taxpayer previously treated equipment used wholly for public street and highway lighting or traffic, fire alarm, police and other signals (collectively, “street lighting”) as included in asset class 49.14, Electric Utility Transmission and Distribution Plant, under both Rev. Proc. 83-35, 1983-1 C. B. 745, and Rev. Proc. 87-56, 1987-2 C. B. 674. Taxpayer believes this classification was improper. Specifically, Taxpayer believes that this property does not belong in asset class 49.14 or any other class.

The method changes would have been effective with the taxable year beginning B and would have resulted in a negative § 481(a) adjustment/decrease in taxable income in the amount of C. The reasons for denial of this consent are explained in the attached copy of our letter to Taxpayer. 2 RPAUT-115671-98

Taxpayer has changed to an impermissible method of accounting. This change is outside the scope of Appendix § 2.01 of Rev. Proc. 97-37 because Taxpayer did not change to a permissible method of accounting. Accordingly, consent to make this change is not granted. Taxpayer should file amended returns for the year of change and subsequent years to reflect the correct method of depreciating street lighting.

If you have any questions on this matter, do not hesitate to call me

CHARLES B. RAMSEY
Chief, Branch 6
Office of Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosure:
Copy of letter to Taxpayer