Final regulations under Section 263A substantially change the rules for taxpayers using a simplified method to capitalize additional costs to inventory. The final regulations generally apply for tax years beginning on or after November 20, 2018. Thus, calendar-year taxpayers must comply with the regulations for the 2019 tax year. As the end of 2019 approaches, to facilitate timely compliance, taxpayers with inventory subject to UNICAP that have not yet implemented the regulations should, without delay, begin assessing the impact of these regulations and consider their options for accounting method changes needed to comply.
The Section 263A regulations are expected to impact nearly all taxpayers with inventory that are subject to UNICAP. Given the significant complexity of the regulations, and the time required to conduct a UNICAP study, taxpayers should act before year end or sooner to identify required or advantageous accounting method changes and to assess the impact of the regulations for financial reporting. Taxpayers that have not yet complied with the regulations and have not begun a review process may wish to do so without delay.
Partner, Accounting Method and Fixed Asset Services Leader, PwC US