Content area
Full Text
REV. PROC. 2000-50
SECTION 1. PURPOSE
This revenue procedure provides guidelines on the treatment of the costs of computer software.
SECTION 2. DEFINITION
For the purpose of this revenue procedure, "computer software" is any program or routine (that is, any sequence of machine-readable code) that is designed to cause a computer to perform a desired function or set of functions, and the documentation required to describe and maintain that program or routine. It includes all forms and media in which the software is contained, whether written, magnetic, or otherwise. Computer programs of all classes, for example, operating systems, executive systems, monitors, compilers and translators, assembly routines, and utility programs as well as application programs, are included. Computer software also includes any incidental and ancillary rights that are necessary to effect the acquisition of the title to, the ownership of, or the right to use the computer software, and that are used only in connection with that specific computer software. Computer software does not include any data or information base described in 1.197-2(b)(4) of the Income Tax Regulations (for example, data files, customer lists, or client files) unless the data base or item is in the public domain and is incidental to a computer program. Nor does it include any cost of procedures that are external to the computer's operation.
SECTION 3. BACKGROUND
.01 In the preamble to the final regulations issued January 25, 2000, under 167(f) and 197 of the Internal Revenue Code (T.D. 8865, 2000-7 LR.B. 589), the Internal Revenue Service advised taxpayers that they may not rely on the procedures in Rev. Proc. 69-21, 1969-2 C.B. 303, to the extent the procedures are inconsistent with 167(f) or 197, or the final regulations thereunder.
.02 Except as otherwise expressly provided, 446(e) and 1.446-1(e) provide that a taxpayer must obtain the consent of the Commissioner of Internal Revenue before changing a method of accounting for federal income tax purposes. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions deemed necessary to permit a taxpayer to obtain consent to change a method of accounting.
SECTION 4. SCOPE
This revenue procedure applies to all costs of computer software as defined in section 2 of this revenue procedure. This revenue...