Title: 
Headings: 
SECTION
 
1.
 
PURPOSE
 

SECTION
 
2.
 
BACKGROUND
 

SECTION
 
3.
 
SCOPE
 

.02
 
Exclusions.
  
This
 
revenue
 
procedure
 
does
 
not
 
apply:
   

.03
 
Scope
 
determined
 
at
 
entity
 
level
 
for
 
consolidated
 
groups
 
and
 
pass-through
 

SECTION
 
4.
 
DEFINITIONS
 

The
 
following
 
definitions
 
apply
 
solely
 
for
 
the
 
purposes
 
of
 
this
 
revenue
 
procedure:
 

SECTION
 
5.
 
REMODEL-REFRESH
 
SAFE
 
HARBOR
 
METHOD
 
OF
 
ACCOUNTING
 

         
(ii)
 
Time
 
and
 
manner
 
of
 
revoking
 
prior
 
year’s
 
partial
 
disposition
 
election.
  
If,
 

      
(c)
 
Qualified
 
taxpayer
 
does
 
not
 
revoke
 
the
 
partial
 
disposition
 
election.
  
If,
 

(ii)
 
Original
 
qualified
 
buildings
 
(including
 
their
 
structural
 
components).
  
A
 

.04
 
Treatment
 
of
 
excluded
 
remodel-refresh
 
costs.
  
Excluded
 
remodel-refresh
 


(1)
 
Treatment
 
of
 
amounts
 
eligible
 
for
 
safe
 
harbor
 
for
 
small
 
taxpayers
 
under
 

SECTION
 
6.
 
EXAMPLES
  

SECTION
 
7.
 
CHANGE
 
IN
 
METHOD
 
OF
 
ACCOUNTING
  

.02
 
Automatic
 
change.
   


 
Description
 
of
 
change.
   

   
(5)
 
Reduced
 
filing
 
requirement
 
for
 
qualified
 
small
 
taxpayers.
  
A
 
qualified
 
small
 

   
(7)
 
Designated
 
automatic
 
accounting
 
method
 
change
 
number.
  
The
 
designated
 


(a)
 
Reduced
 
filing
 
requirement
 
for
 
qualified
 
small
 
taxpayers.
  
A
 
qualified
 

   
(7)
 
Designated
 
automatic
 
accounting
 
method
 
change
 
number.
  
The
 
designated
 

SECTION
 
8.
 
EFFECT
 
ON
 
OTHER
 
DOCUMENTS
  

SECTION
 
9.
 
EFFECTIVE
 
DATE
 

SECTION
 
10.
 
DRAFTING
 
INFORMATION
 

Appendix
 
A
 

Documentation
 
Standards
 

Example
 
Schedule
 
of
 
Qualified
 
Costs
 
Subject
 
to
 
Remodel-Refresh
 
Safe
 
Harbor
 

 
Change
 
Between
 
Beginning
 
of
 
Year
 
and
 
End
 
of
 
Year
 
Applicable
 
Financial
 
Statement
 
("AFS")
 
Fixed
 
Assets
 

AFS
 
Additions
 
Converted
 
to
 
Capitalized
 
Cost
 
Additions
 
for
 
Tax:
 

Qualified
 
Costs
 
Subject
 
to
 
Safe
 
Harbor:
 

Qualified
 
Costs
 
Subject
 
to
 
Safe
 
Harbor:
 
$
                
XXX


Content: .04
 
Although
 
§
 
1.263(a)-3
 
provides
 
several
 
examples
 
that
 
apply
 
the
 
improvement
 
criteria
 
and
 
the
 
unit
 
of
 
property
 
rules
 
to
 
remodel
 
or
 
refresh
 
costs,
 
many
 
remodel-refresh
 
projects
 
are
 
more
 
complicated
 
and
 
diverse
 
than
 
the
 
scenarios
 
included
 
in
 
the
 
examples. Because
 
remodel-refresh
 
projects
 
frequently
 
involve
 
work
 
performed
 
on
 
building
 
structures
 
and
 
a
 
variety
 
of
 
building
 
systems,
 
the
 
final
 
tangible
 
property
 
regulations
 
generally
 
require
 
taxpayers
 
performing
 
remodel-refresh
 
projects
 
to
 
apply
 
separate
 
legal
 
analyses
 
to
 
many
 
different
 
components
 
of
 
the
 
building. These
 
analyses
 
become
 
especially
 
difficult
 
in
 
situations
 
where,
 
as
 
part
 
of
 
their
 
remodel-refresh
 
projects,
 
taxpayers
 
adapt
 
portions
 
of
 
space
 
to
 
a
 
new
 
and
 
different
 
use. Moreover,
 
the
 
application
 
of
 
the
 
improvement
 
rules
 
to
 
particular
 
buildings
 
can
 
be
 
complex
 
because
 
remodel-
refresh
 
projects
 
vary
 
so
 
much
 
in
 
frequency,
 
quality,
 
and
 
degree. Consequently,
 
taxpayers
 
and
 
the
 
IRS
 
frequently
 
encounter
 
questions
 
regarding
 
whether
 
the
 
costs
 
for
 
a
 
particular
 
remodel-refresh
 
project
 
should
 
be
 
characterized
 
as
 
repairs,
 
maintenance,
 
or
 
an
 
improvement
 
of
 
the
 
taxpayers’
 
property,
 
causing
 
taxpayers
 
and
 
the
 
IRS
 
to
 
expend
 
significant
 
resources
 
on
 
this
 
factually
 
intensive
 
issue. .05
 
In
 
addition,
 
§
 
263A
 
requires
 
the
 
capitalization
 
of
 
the
 
direct
 
and
 
allocable
 
indirect
 
costs
 
of
 
real
 
or
 
tangible
 
property
 
produced
 
by
 
a
 
taxpayer
 
for
 
use
 
in
 
its
 
trade
 
or
 
business
 
or
 
acquired
 
for
 
resale. See
 
also
 
§
 
1.263A-1(a)(3)(ii). Section
 
263A
 
and
 
its
 
regulations
 
apply
 
to
 
a
 
retail
 
or
 
restaurant
 
taxpayer’s
 
self-constructed
 
property
 
and,
 
therefore,
 
require
 
the
 
capitalization
 
of
 
the
 
direct
 
and
 
allocable
 
indirect
 
costs
 
of
 
property
 

 
constructed,
 
built,
 
installed,
 
or
 
improved
 
during
 
a
 
remodel-refresh
 
project. See
 

 
1.263A-2(a)(1). Thus,
 
the
 
rules
 
under
 
§
 
263A
 
require
 
taxpayers
 
to
 
apply
 
an
 
additional
 
analysis
 
to
 
their
 
remodel-refresh
 
projects
 
to
 
determine
 
which
 
costs
 
must
 
be
 
capitalized
 
as
 
the
 
direct
 
or
 
allocable
 
indirect
 
costs
 
of
 
producing
 
property
 
used
 
in
 
their
 
trade
 
or
 
business.