Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 642, 1274, 1288, 7872, and other sections of the Code, tables set forth the rates for May 2017.

This revenue procedure provides guidance under the Protecting Americans for Tax Hikes Act of 2015 (PATH Act) regarding amendments to (i) expensing section 179 property, (ii) the additional first year depreciation deduction under section 168(k), and (iii) the qualified Indian reservation property depreciation provision under section 168(j).

This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for April 2017 used under § 417(e)(3)(D), the 24-month average segment rates applicable for April 2017, and the 30-year Treasury rates. These rates reflect the application of § 430(h)(2)(C)(iv), which was added by the Moving Ahead for Progress in the 21st Century Act, Public Law 112–141 (MAP-21) and amended by section 2003 of the Highway and Transportation Funding Act of 2014 (HATFA).

Notice inviting public comment on recommendations for the 2017–2018 Priority Guidance Plan.

This revenue ruling provides various prescribed rates for federal income tax purposes for May 2017 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.

This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I).

Generally, except for certain plans under sections 104 and 105 of the Pension Protection Act of 2006 and CSEC plans under § 414(y), § 430 of the Code specifies the minimum funding requirements that apply to single-employer plans pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. To the extent provided under § 430(h)(2)(C)(iv), these segment rates are adjusted by the applicable percentage of the 25-year average segment rates for the period ending September 30 of the year preceding the calendar year in which the plan year begins.^[1] However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates.

Notice 2007–81, 2007–44 I.R.B. 899, provides guidelines for determining the monthly corporate bond yield curve, and the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Consistent with the methodology specified in Notice 2007–81, the monthly corporate bond yield curve derived from March 2017 data is in Table I at the end of this notice. The spot first, second, and third segment rates for the month of March 2017 are, respectively, 2.06, 3.95, and 4.75.

The 24-month average segment rates determined under § 430(h)(2)(C)(i) through (iii) must be adjusted pursuant to § 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates. For plan years beginning before 2021, the applicable minimum percentage is 90% and the applicable maximum percentage is 110%. The 25-year average segment rates for plan years beginning in 2015, 2016, and 2017 were published in Notice 2014–50, 2014–40 I.R.B. 590, Notice 2015–61, 2015–39 I.R.B. 408, and Notice 2016–54, 2016–40 I.R.B. 429, respectively.

The three 24-month average corporate bond segment rates applicable for April 2017 without adjustment for the 25-year average segment rate limits are as follows:

Based on § 430(h)(2)(C)(iv), the 24-month averages applicable for April 2017 adjusted to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates, are as follows:

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in § 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88–73, 1988–2 C.B. 383, provides guidelines for determining the weighted average interest rate. The rate of interest on 30-year Treasury securities for March 2017 is 3.08 percent. The Service determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond maturing in February 2047. For plan years beginning in the month shown below, the weighted average of the rates of interest on 30-year Treasury securities and the permissible range of rates used to calculate current liability are as follows:

In general, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a 24-month average. Notice 2007–81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the minimum present value segment rates determined for March 2017 are as follows:

The principal author of this notice is Tom Morgan of the Office of the Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS participated in the development of this guidance. For further information regarding this notice, contact Mr. Morgan at 202-317-6700 or Tony Montanaro at 202-317-8698 (not toll-free numbers).

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (Service) invite public comment on recommendations for items that should be included on the 2017–2018 Priority Guidance Plan.

The Treasury Department’s Office of Tax Policy and the Service use the Priority Guidance Plan each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The 2017–2018 Priority Guidance Plan will identify guidance projects that the Treasury Department and the Service intend to work on as priorities during the period from July 1, 2017, through June 30, 2018.

The Treasury Department and the Service recognize the importance of public input in formulating a Priority Guidance Plan that focuses resources on guidance items that are most important to taxpayers and tax administration. Published guidance plays an important role in increasing voluntary compliance by helping to clarify ambiguous areas of the tax law. The published guidance process is most successful if the Treasury Department and the Service have the benefit of the experience and knowledge of taxpayers and practitioners who must apply the rules implementing the internal revenue laws. This input is of particular importance in light of Executive Order 13771 (82 FR 9339) and other recent executive orders that may affect the number or type of guidance projects that can be issued during the 2017–2018 plan year.

As is the case whenever significant tax legislation is enacted, the Treasury Department and the Service will dedicate substantial resources during the current plan year to published guidance projects necessary to implement various provisions of tax legislation enacted over the past several years or that may be enacted during the plan year. The Treasury Department and the Service will continue to evaluate the priority of each guidance project taking into account this tax legislation, as well as other developments occurring during the 2017–2018 plan year.

In reviewing recommendations and selecting projects for inclusion on the 2017–2018 Priority Guidance Plan, the Treasury Department and the Service will consider the following:

Please submit recommendations by June 1, 2017, for possible inclusion on the original 2017–2018 Priority Guidance Plan. Taxpayers may, however, submit recommendations for guidance at any time during the year. The Treasury Department and the Service may update the 2017–2018 Priority Guidance Plan periodically to reflect additional guidance that the Treasury Department and the Service intend to publish during the plan year. The periodic updates allow the Treasury Department and the Service to respond to the need for additional guidance that may arise during the plan year.

Taxpayers are not required to submit recommendations for guidance in any particular format. Taxpayers should, however, briefly describe the recommended guidance and explain the need for the guidance. In addition, taxpayers may include an analysis of how the issue should be resolved. For recommendations to modify, streamline, or withdraw existing regulations or other guidance, taxpayers should explain how the changes would reduce taxpayer cost and/or burden or benefit tax administration. It would be helpful if taxpayers suggesting more than one guidance project prioritize the projects by order of importance. If a large number of projects are being suggested, it would be helpful if the projects were grouped in terms of high, medium, or low priority. Requests for guidance in the form of petitions for rulemaking will be considered with other recommendations for guidance in accordance with the considerations described in this notice.

Taxpayers may mail comments to:

or hand deliver comments Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

Alternatively, taxpayers may submit comments electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS–2017–0008 in the search field on the regulations.gov homepage to find this notice and submit comments). All recommendations for guidance submitted by the public in response to this notice will be available for public inspection and copying in their entirety. For further information regarding this notice, contact Emily M. Lesniak of the Office of Associate Chief Counsel (Procedure and Administration) at (202) 317-3400 (not a toll-free number).

This revenue procedure provides guidance under §§ 124(c)(2), 124(d), 124(e), 143(b), and 167(b) of the Protecting Americans From Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016, Pub. L. No. 114–113, 129 Stat. 2242 (Dec. 18, 2015). Sections 124(c)(2), (d), and (e) of the PATH Act amend § 179 of the Internal Revenue Code by (i) making permanent the treatment of qualified real property as § 179 property under § 179(f), (ii) making permanent the permission granted under § 179(c)(2) to revoke without the consent of the Commissioner of Internal Revenue (Commissioner) any election made under § 179 and any specification contained in that election, and (iii) allowing certain air conditioning or heating units to be eligible as § 179 property under § 179(d)(1). Section 143(b) of the PATH Act amends § 168(k) by (i) extending the placed-in-service date for property to qualify for the additional first year depreciation deduction, (ii) modifying the definition of qualified property under § 168(k)(2), (iii) extending and modifying the election under § 168(k)(4) to increase the alternative minimum tax (AMT) credit limitation in lieu of the additional first year depreciation deduction, (iv) adding § 168(k)(5), which allows a taxpayer to elect to deduct the additional first year depreciation for certain plants bearing fruits and nuts before such plants are placed in service, (v) adding § 168(k)(6), which provides a phase down of the additional first year depreciation deduction percentage for future taxable years, and (vi) adding § 168(k)(7), which allows a taxpayer to elect not to deduct additional first year depreciation for any class of property. Section 167(b) of the PATH Act amends § 168(j) by adding new § 168(j)(8), which allows a taxpayer to elect not to apply § 168(j) for any class of property. This revenue procedure does not reflect any proposed technical corrections to the PATH Act. This revenue procedure also does not provide guidance relating to the extension and modification of the election under § 168(k)(4) to increase the AMT credit limitation in lieu of the additional first year depreciation deduction. The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) anticipate issuing guidance regarding the extension and modification of the election under § 168(k)(4) in a separate revenue procedure.

.01 Modifications to § 179.

(1) Section 179(a) allows a taxpayer to elect to treat the cost (or a portion of the cost) of any § 179 property as an expense for the taxable year in which the taxpayer places the property in service. Section 179(b)(1) and (2) prescribe a dollar limitation on the aggregate cost of § 179 property that can be treated as an expense under § 179(a). The dollar limitation is the amount under § 179(b)(1) (the § 179(b)(1) limitation), reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the taxable year exceeds the amount under § 179(b)(2) (the § 179(b)(2) limitation). For taxable years beginning after 2014, the § 179(b)(1) limitation is $500,000 and the § 179(b)(2) limitation is $2,000,000. Pursuant to § 179(b)(6), these limitation amounts are adjusted for inflation for taxable years beginning after 2015. For taxable years beginning in 2016, section 3.03 of Rev. Proc. 2016–14, 2016–9 I.R.B. 365, provides that the § 179(b)(1) limitation and the § 179(b)(2) limitation, adjusted for inflation, are $500,000 and $2,010,000, respectively. For taxable years beginning in 2017, section 3.25 of Rev. Proc. 2016–55, 2016–45 I.R.B. 707, provides that the § 179(b)(1) limitation and the § 179(b)(2) limitation, adjusted for inflation, are $510,000 and $2,030,000, respectively.

(2) Section 179(b)(3)(A) provides that a taxpayer’s § 179 deduction for any taxable year, after application of the § 179(b)(1) and (2) limitations, is limited to the taxpayer’s taxable income for that taxable year that is derived from the taxpayer’s active conduct of any trade or business during that taxable year (taxable income limitation). Section 179(b)(3)(B) provides that the amount of any cost of § 179 property elected to be expensed in a taxable year that is disallowed as a § 179 deduction under the taxable income limitation may be carried forward for an unlimited number of years and may be deducted under § 179(a) in a future year, subject to the same limitations.

(3) If a taxpayer elects to apply § 179(f), § 179(f)(1) provides that § 179 property includes qualified real property, as defined in § 179(f)(2). Prior to amendment by the PATH Act, § 179(f) applied to qualified real property placed in service in any taxable year beginning in 2010, 2011, 2012, 2013, or 2014. Section 124(c)(1) of the PATH Act extended the application of § 179(f) to qualified real property placed in service in any taxable year beginning after 2009 and before 2016. As a result of the amendment by § 124(c)(1) of the PATH Act, § 179(f)(3) provided that the maximum amount of qualified real property that may be expensed under § 179(a) for any taxable year beginning after 2009 and before 2016 was $250,000. Further, § 179(f)(4) provided that, notwithstanding § 179(b)(3)(B), a taxpayer that elected to apply § 179(f) and elected to expense under § 179(a) the cost (or a portion of the cost) of qualified real property placed in service during any taxable year beginning after 2009 and before 2016 could not carry over to any taxable year beginning after 2015 the amount of any cost of such property that was disallowed as a § 179 deduction under the taxable income limitation of § 179(b)(3)(A). To the extent that any § 179 deduction attributable to qualified real property was not allowed to be carried over to a taxable year beginning after 2015, that amount was required to be treated as an amount for which an election under § 179 was not made and as property placed in service on the first day of the taxpayer’s last taxable year beginning in 2015 for purposes of computing depreciation. Rev. Proc. 2016–48, 2016–37 I.R.B. 348, provides guidance under § 124(c)(1) of the PATH Act.

Section 124(c)(2) of the PATH Act further amends § 179(f) by making permanent the treatment of qualified real property as § 179 property if the taxpayer elects to apply § 179(f). Section 124(c)(2) of the PATH Act also amends § 179(f) by striking paragraphs (3) and (4). Section 124(g)(2) of the PATH Act provides that the amendments made by § 124(c)(2) of the PATH Act apply to taxable years beginning after December 31, 2015. Section 3.01 of this revenue procedure addresses the application of these revised rules.

(4) Section 179(c) provides the rules for making and revoking elections under § 179 (§ 179 election). Pursuant to § 179(c)(1), a § 179 election is made in the manner prescribed by regulations. Prior to amendment by § 124(d) of the PATH Act, § 179(c)(2) provided that a § 179 election for taxable years beginning after 2002 and before 2015 may be revoked by the taxpayer with respect to any § 179 property. Section 1.179–5(c)(1) of the Income Tax Regulations provides that for any taxable year beginning after 2002 and before 2008, a taxpayer is permitted to make or revoke a § 179 election without the consent of the Commissioner on an amended Federal tax return for that taxable year. Section 1.179–5(c) was promulgated in 2005 and has not been amended to reflect the extensions of § 179(c)(2) to taxable years beginning before 2015. However, in 2008, the Treasury Department and the IRS issued Rev. Proc. 2008–54, 2008–2 C.B. 722. Section 7 of Rev. Proc. 2008–54 provides that for a taxable year beginning after 2007 and before the last year provided in § 179(c)(2) for revoking a § 179 election by a taxpayer for any § 179 property, the taxpayer will be permitted to make a § 179 election on an amended return for that taxable year without the Commissioner’s consent. Section 7 of Rev. Proc. 2008–54 further provides that until § 1.179–5(c) is amended to incorporate this guidance, taxpayers may rely on such guidance.

Section 124(d) of the PATH Act amends § 179(c)(2) to make permanent the permission granted to a taxpayer to revoke a § 179 election for any § 179 property without the Commissioner’s consent. This amendment applies to taxable years beginning after 2014. As a result, some taxpayers are uncertain about whether a § 179 election for taxable years beginning after 2014 may be made on an amended Federal tax return without the Commissioner’s consent. Section 3.02 of this revenue procedure provides the rules for making such a § 179 election.

(5) Section 179(d)(1) defines the term “§ 179 property.” Prior to amendment by the PATH Act, § 179(d)(1) defined § 179 property as property that is: (A)(i) tangible property to which § 168 applies, or (ii) computer software, as defined in § 197(e)(3)(B), that is described in § 197(e)(3)(A)(i), to which § 167 applies, and that is placed in service in a taxable year beginning after 2002 and before 2015; (B) § 1245 property, as defined in § 1245(a)(3); and (C) acquired by purchase for use in the active conduct of a trade or business. Prior to amendment by the PATH Act, § 179(d)(1) further provided that § 179 property does not include any property described in § 50(b) and does not include air conditioning or heating units.

Section 124(b) of the PATH Act amends § 179(d)(1)(A)(ii) to make permanent the treatment of computer software, as defined in § 197(e)(3)(B), that is described in § 197(e)(3)(A)(i), to which § 167 applies, as § 179 property. This amendment applies to taxable years beginning after 2014. Section 124(e) of the PATH Act also amends § 179(d)(1) to allow air conditioning or heating units to be § 179 property. This amendment applies to taxable years beginning after 2015.

Some taxpayers have inquired about what types of air conditioning or heating units qualify as § 179 property. Section 3.03 of this revenue procedure addresses this issue.

.02 Modifications to § 168(k).

(1) Prior to amendment by the PATH Act, § 168(k)(1) allowed a 50-percent additional first year depreciation deduction for qualified property that, as provided by § 168(k)(2)(A), was acquired by a taxpayer after 2007 and placed in service by the taxpayer before 2015 (before 2016 in the case of property described in § 168(k)(2)(B) or (C)). Section 143(a)(1) of the PATH Act amends § 168(k)(2)(A) by extending the placed-in-service date to before 2016 (before 2017 in the case of property described in § 168(k)(2)(B) or (C)), and extending other dates in § 168(k)(2) by changing “January 1, 2015” each place it appears to “January 1, 2016.” Rev. Proc. 2016–48 provides guidance under § 143(a)(1) of the PATH Act.

(2) Section 143(b)(1) of the PATH Act further amends § 168(k)(2) by extending the placed-in-service date to before 2020 (before 2021 in the case of property described in § 168(k)(2)(B) or (C)), and by modifying the definition of qualified property. As amended by § 143(b)(1) of the PATH Act, qualified property under § 168(k)(2)(A) includes property that is qualified improvement property instead of qualified leasehold improvement property. The term “qualified improvement property” is defined in § 168(k)(3), as amended by § 143(b)(2) of the PATH Act. Further, qualified property no longer has to meet the acquisition date requirements in § 168(k)(2)(A)(iii) as in effect before the enactment of the PATH Act. Section 143(b)(1) of the PATH Act also modifies the property described in § 168(k)(2)(B) and (C), including by imposing a new acquisition date requirement, and modifies the special rules under § 168(k)(2)(E) by deleting the related party rules in § 168(k)(2)(E)(iv) that were in effect before the enactment of the PATH Act.

Section 143(b)(5) of the PATH Act amends § 168(k) by adding § 168(k)(6) to the Code. It provides that the additional first year depreciation deduction percentage of 50 percent is phased down beginning for qualified property placed in service after December 31, 2017 (after December 31, 2018, for property described in § 168(k)(2)(B) or (C)). The percentage is 40 percent for qualified property placed in service in 2018 (in 2019 for property described in § 168(k)(2)(B) or (C), determined by substituting “2019” for “2020” in § 168(k)(2)(B)(i)(III) and (ii), and § 168(k)(2)(E)(i)), and is 30 percent for qualified property placed in service in 2019 (in 2020 for property described in § 168(k)(2)(B) or (C)).

Section 143(b)(6)(D) of the PATH Act further amends § 168(k) by adding § 168(k)(7) to the Code. It allows a taxpayer to elect not to deduct additional first year depreciation for any class of property placed in service by the taxpayer in the same taxable year. This election is similar to the election provided under § 168(k)(2)(D)(iii) as in effect before the enactment of the PATH Act.

Pursuant to § 143(b)(7)(A) of the PATH Act, these amendments apply to property placed in service after December 31, 2015. Sections 4.01 through 4.04 of this revenue procedure address the application of these revised rules.

(3) Section 143(b)(4) of the PATH Act also amends § 168(k) by adding § 168(k)(5) to the Code. It allows a taxpayer to elect to deduct additional first year depreciation for any specified plant that is planted before January 1, 2020, or grafted before that date to a plant that has already been planted, by the taxpayer in the ordinary course of its farming business, as defined in § 263A(e)(4). If the taxpayer makes this election, the additional first year depreciation deduction is allowable for any specified plant for the taxable year in which that specified plant is planted or grafted and that specified plant is not treated as qualified property under § 168(k) in the plant’s placed-in-service year. The percentage of the additional first year depreciation deduction is (i) 50 percent for any specified plant planted or grafted after 2015 and before 2018, (ii) 40 percent for any specified plant planted or grafted during 2018, and (iii) 30 percent for any specified plant planted or grafted during 2019.

A specified plant is defined in § 168(k)(5)(B) as (i) any tree or vine that bears fruits or nuts, and (ii) any other plant that will have more than one yield of fruits or nuts and that generally has a pre-productive period of more than two years from the time of planting or grafting to the time at which such plant begins bearing fruits or nuts. The term “specified plant” does not include any property that is planted or grafted outside of the United States.

Section 143(b)(7)(C) of the PATH Act provides that § 168(k)(5) applies to specified plants, as defined in § 168(k)(5)(B), planted or grafted after December 31, 2015.

Section 4.05 of this revenue procedure provides procedures for making the election to apply § 168(k)(5) (§ 168(k)(5) election). The Treasury Department and IRS understand that some taxpayers are uncertain as to whether, if such election is made for a specified plant, a § 179 election for the specified plant in its placed-in-service year is based on the adjusted basis of the specified plant, or on the original cost of the specified plant by recapturing the additional first year depreciation deduction. To address this uncertainty, section 4.05 of this revenue procedure also clarifies how the § 168(k)(5) election interacts with the § 179 election.

.03 Modification to § 168(j).

(1) Section 168(j) provides that for purposes of § 168(a), the applicable recovery period for qualified Indian reservation property is determined in accordance with the table contained in § 168(j)(2) instead of the table contained in § 168(c). The term “qualified Indian reservation property” is defined in § 168(j)(4). Section 168(j) does not apply to property placed in service after December 31, 2016.

(2) Section 167(b) of the PATH Act amends § 168(j) by redesignating paragraph (8), as amended by § 167(a) of the PATH Act, as paragraph (9), and by adding new paragraph (8). New § 168(j)(8) allows a taxpayer to elect not to apply § 168(j) for all property that is in the same class of property and placed in service in the same taxable year (the § 168(j)(8) election). Once made, this election is irrevocable. Section 167(c)(2) of the PATH Act provides that the amendments made by § 167(b) of the PATH Act apply to taxable years beginning after December 31, 2015. Section 5 of this revenue procedure provides the procedures for making the § 168(j)(8) election.

.04 Subsequent References. Unless otherwise specifically stated, all references in the subsequent sections of this revenue procedure to § 168(k), § 168(j), and § 179 are to § 168(k), § 168(j), and § 179 as in effect after the enactment of the PATH Act.

.01 Qualified Real Property. For any taxable year beginning after December 31, 2015, the § 179(b)(1) and (2) limitation amounts, and the carryover rules in § 179(b)(3)(B) and § 1.179–3(a), apply to qualified real property placed in service by the taxpayer during that taxable year, if the taxpayer elects to apply § 179(f).

.02 Making § 179 Elections by Amended Returns. For any taxable year beginning after 2014, a taxpayer may make a § 179 election with respect to any § 179 property without the Commissioner’s consent on an amended Federal tax return for the taxable year in which the taxpayer places in service the § 179 property. The Treasury Department and the IRS intend to amend § 1.179–5(c) to incorporate the guidance set forth under this section 3.02. Until § 1.179–5(c) is amended, taxpayers may rely on the guidance set forth in this section 3.02.

.03 Air Conditioning or Heating Units Qualifying as § 179 Property.

(1) In general. Except as provided in section 3.03(2) of this revenue procedure, an air conditioning or heating unit qualifies as § 179 property if such unit is § 1245 property, depreciated under § 168, acquired by purchase for use in the active conduct of the taxpayer’s trade or business, and placed in service by the taxpayer in a taxable year beginning after 2015. For example, portable air conditioners, such as window air conditioning units, and portable heaters, such as portable plug-in unit heaters, that are placed in service by the taxpayer in a taxable year beginning after 2015 may qualify as § 179 property under § 179(d)(1) and § 1.179–4(a). Except as provided in section 3.03(2) of this revenue procedure, an example of an air conditioning or heating unit that will not qualify as § 179 property is any component of a central air conditioning or heating system of a building, including motors, compressors, pipes, and ducts, whether the component is in, on, or adjacent to a building. See § 1.48–1(e)(2).

(2) Qualified real property. If a component of a central air conditioning or heating system of a building meets the definition of qualified real property, as defined in § 179(f)(2), and the component is placed in service by the taxpayer in a taxable year beginning after 2015, the component may qualify as § 179 property if the taxpayer elects to apply § 179(f).

.01 In General. The § 168(j)(8) election applies to all qualified Indian reservation property, as defined in § 168(j)(4), that is in the same class of property and placed in service in the same taxable year. If the § 168(j)(8) election is made for a class of property that is qualified Indian reservation property placed in service during the taxable year, the applicable recovery period for that property for purposes of § 168(a) is determined in accordance with the table contained in § 168(c), and the depreciation adjustments under § 56 and the regulations under § 56 apply to that property for purposes of computing the taxpayer’s alternative minimum taxable income. Once made, the § 168(j)(8) election is irrevocable.

.02 Definition of Class of Property. For purposes of § 168(j)(8) and this section 5, the term “class of property” means each class of property described in the table contained in § 168(j)(2) (for example, 3-year property).

.03 Time and Manner for Making the § 168(j)(8) Election.

(1) In general. Except as provided in section 5.03(2) of this revenue procedure, the § 168(j)(8) election must be made by the due date, including extensions, of the Federal tax return for the taxable year in which the taxpayer places in service the qualified Indian reservation property. Except as provided in section 5.03(2) of this revenue procedure, the § 168(j)(8) election must be made in the manner prescribed on Form 4562, Depreciation and Amortization, and its instructions.

(2) Deemed election. This section 5.03(2) applies to a taxpayer that did not make the § 168(j)(8) election within the time and in the manner provided in section 5.03(1) of this revenue procedure for a class of property that is qualified Indian reservation property placed in service by the taxpayer in its taxable year of less than 12 months beginning and ending in 2016. If this section 5.03(2) applies, the taxpayer will be treated as making the § 168(j)(8) election for a class of property that is qualified Indian reservation property if the taxpayer, on its timely filed Federal tax return for that taxable year, determined depreciation for that class of property under the general depreciation system of § 168(a) by using the applicable recovery period for that class of property in accordance with the table contained in § 168(c).

Section 7 of Rev. Proc. 2008–54 is obsoleted for taxable years beginning after 2014.

This revenue procedure is effective April 20, 2017.

The principal author of this revenue procedure is Elizabeth Binder of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Ms. Binder at (202) 317-7005 (not a toll-free number).