KPMG report: Section 451(b) and specified fees
Overview of certain issues associated with the accounting method change
Overview of certain issues associated with the accounting method change
Section 451(b) requires that certain types of income be included in taxable income no later than when it is included in the taxpayer’s “applicable financial statement” revenue. In section 1.451-3, the U.S. Treasury Department and IRS delayed the application of this requirement for certain “specified fees.” The regulation requires that those fees be included in taxable income when recognized in financial statement revenue, starting in 2023 for calendar year taxpayers. Specified fees are fees that would be treated as original issue discount (OID) (absent the application of section 451(b)) and are included in revenue currently for financial accounting purposes. Lenders receiving specified fees that presently defer the recognition of those fees for tax purposes are required to file a nonautomatic method change request to transition to the new method of accounting.
Read a November 2023 report [PDF 330 KB] prepared by KPMG LLP that provides an overview of certain issues associated with this accounting method change: What’s News in Tax: A Tax Practitioner’s Guide to Section 451(b) and Specified Fees
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