The Tax Cuts and Jobs Act (TCJA) inadvertently treated QIP as 39-year property, which made it ineligible for bonus depreciation.
On Friday, April 17, 2020, the IRS issued Revenue Procedure 2020-25, which explains how a taxpayer can retroactively correct previously-filed tax returns to claim bonus depreciation on property that was previously ineligible for it. The Revenue Procedure applies to QIP placed in service after December 31, 2017.
The Revenue Procedure describes two scenarios in which the depreciation changes are not applicable:
Updating previously depreciated QIP under this Revenue Procedure is considered changing from an impermissible method of accounting to a permissible method of accounting. This also applies to the missed opportunity to take bonus depreciation previously. As such, the Revenue Procedure describes two ways a taxpayer can make this change:
Form 3115 is commonly used to make an impermissible to permissible change to previously deducted depreciation or amortization. The IRS has a listing of automatic changes that can be used when completing Form 3115. The latest listing of designated automatic accounting method change numbers, or DCNs, can be found in Revenue Procedure 2019-43. As of this date of this writing, any DCN related to automatic changes in depreciation is located in Section 6 of that Revenue Procedure.
Revenue Procedure 2020-25 issues a new DCN to use on Form 3115 when requesting to change depreciation for previously placed-in-service QIP. That DCN is “244.”