Immediate Action Required for Taxpayers with Real Property Trade or Business Elections
Revenue Procedure 2026-17 has been released, delivering urgent transition relief to taxpayers affected by the sweeping legislative changes in the One Big Beautiful Bill Act, commonly referred to as the OBBBA or OB3. This new guidance provides a fast-track framework for withdrawing or modifying elections under IRC §163(j)(7) and making late elections under §168(k)(7)—actions previously considered irrevocable. This relief is especially important given the OBBBA’s restoration of more favorable Adjusted Taxable Income (ATI) rules and the return of 100% bonus depreciation, both of which dramatically alter the economic impact of earlier tax decisions.
Who Is Impacted?
The OBBBA has fundamentally changed bonus depreciation and ATI add‑back rules, making it more advantageous for many businesses to reconsider their previous elections under Section 163(j). Taxpayers who made these elections for tax years beginning in 2022, 2023, or 2024—including domestic businesses and certain multinational groups—are encouraged to review their options immediately.
Key Relief Provisions
The new Revenue Procedure authorizes relief for those who chose to be classified as an electing real property trade or business, electing farming business or excepted regulated utility trade or business. These elections previously exempted taxpayers from §163(j) interest limits but required use of the Alternative Depreciation System (ADS), which eliminated eligibility for bonus depreciation. With the OBBBA’s updates, many taxpayers may now find these elections less beneficial and should consider the withdrawal process now available.
What You Need to Do
Revenue Procedure 2026-17 introduces clear terminology and procedures for “withdrawal elections,” “late elections” and “CFC group elections.” It outlines the steps for withdrawing a §163(j)(7) election, including filing amended returns or administrative adjustment requests and the necessary depreciation adjustments. It also explains how to make a late §168(k)(7) election to opt out of bonus depreciation where needed.
Urgent Deadlines
Taxpayers seeking relief must act without delay. Amended returns must be filed by the earlier of: (1) October 15, 2026, or (2) the end of the applicable period of limitations for the relevant tax year. Importantly, taxpayers amending 2022 returns that were filed on time and without extension may have a shorter deadline—do not wait to review your status.
Additional Guidance for Multinational Groups
The Revenue Procedure also provides details for late elections and revocations, especially for businesses transitioning from ADS to MACRS depreciation after a withdrawal. It addresses procedures for Controlled Foreign Corporation (CFC) group elections, which can now be made early or revoked, offering new flexibility for multinational groups under the revised law. These provisions apply to elections for tax years beginning after December 31, 2021.
Take Action Now
Revenue Procedure 2026‑17 marks a significant opportunity for taxpayers to unwind previously irrevocable elections and realign their tax strategies with current law. Businesses should act now to leverage accelerated depreciation and reduce compliance risk during this time of rapid legislative change.
Contact Us
For more information on this topic, please contact a member of Withum’s Real Estate Services Team.
