Tax Insight

Updated automatic consent procedures simplify method changes for R&E expenditures and residential construction contracts

Insight
5 minute read
September 15, 2026

What happened?

In Rev. Proc 2026-32, the IRS has updated automatic consent procedures for accounting method changes for provisions affected by the 2025 One Big Beautiful Bill Act (OBBBA) under Sections 174 and 174A for research or experimental (R&E) expenditures and under Section 460(e) for residential construction contracts. The changes are generally effective for Forms 3115 filed after September 4, 2026.

Why is it relevant?

Rev. Proc. 2026-32 streamlines the automatic method change procedures for Section 174A domestic and Section 174 foreign R&E expenditures paid or incurred in tax years beginning on or after January 1, 2025; Section 174 R&E expenditures paid or incurred before 2025 that were subject to capitalization under pre-OBBBA law; and changes made by the OBBBA permitting the use of the completed contract method for residential construction contracts entered into in tax years beginning after July 4, 2025.

Actions to consider

Taxpayers should evaluate the need to change their accounting methods for R&E expenditures or residential construction contracts using the updated automatic procedures under Rev. Proc. 2025-23, as modified by Rev. Proc. 2026-32. Importantly, prompt action may be required for taxpayers with pending non-automatic Form 3115 filings or in-process method changes, due to key deadlines in October and November 2026.