December 10, 2025 | By: Eric Lucas, Partner, Complex Tax Accounting Methods and Elections

As calendar year 2025 draws to a close, businesses should act quickly to assess whether non-automatic accounting method changes or transactional planning may provide tax savings or minimize tax exposures. For example, timely planning may be critical for developers in the renewable energy space that want to change their method of accounting to maximize the costs included in basis under section 263A for purposes of determining investment tax credits (ITCs) under sections 48 and 48E. The IRS requires the following method changes under section 263A be filed under the non-automatic consent procedures: (1) a change either to or from the direct reallocation method or the step-allocation method for allocating mixed service costs; or (2) a change to use a reasonable facts and circumstances-based allocation method.

Accounting method changes that are not described in the automatic consent procedure (Rev. Proc. 2025-23) or are otherwise prohibited from being filed automatically, must be filed as non-automatic changes with the IRS National Office (using Form 3115) before the end of the year of change (December 31 for calendar year taxpayers). Thus, companies that want to change their section 263A methods described above for 2025 to enhance ITCs must file Form 3115 and pay the IRS user fee by the end of the year.

Businesses may also benefit by implementing “transactional planning” techniques before year-end as part of their broader year-end tax planning strategy. Several techniques may either increase or decrease 2025 taxable income, depending on a company’s objectives. Examples include:

  • Planning the placed in-service date for property subject to bonus depreciation
  • Changing contract terms (for example, adjusting payment due dates or shipment dates)
  • Prepaying or deferring payment liabilities
  • Changing the terms of bonus plans
  • Prepaying or deferring payments to controlled parties
  • Changing prepaid service contracts

The close of 2025 is a key moment for taxpayers to evaluate potential method changes and year-end planning strategies that may reduce tax exposure or enhance incentives. Early action is critical for changes requiring non-automatic consent.

Connect with a member of the Leo Berwick team to discuss how these opportunities may apply to your business.