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property using the ADS. The TCJA one or more buildings or structures that or business election was made and for all
also modified the ADS recovery period generally serve as primary residences on subsequent years for which tax returns
of residential rental property placed in a permanent or semipermanent basis; have been filed.
service after Dec. 31, 2017, from 40 provides supplemental assistive, nursing, Sections 6.04 and 6.05 of Rev. Proc.
years down to 30 years but did not apply or other routine medical services; and 2019-43 allow taxpayers that have had
that change to property placed in service has an average customer use of at least a previous change in use for some or all
on or before that date. Rev. Proc. 2019-8 30 days. depreciable assets to file certain auto-
clarified that for real property trades or Examples of qualified residential matic changes in accounting method.
businesses with real property placed in living facilities include nursing homes Rev. Proc. 2021-28 expands the use of
service prior to the date of election, a and similar long-term-care facilities. Sections 6.04 and 6.05 of Rev. Proc.
change in use occurs for such properties, In other words, taxpayers that operate 2019-43 to include taxpayers that made
and the applicable ADS life for resi- qualified residential living facilities the real property trade or business elec-
dential rental property placed in service that did not previously make the real tion in the immediate prior year and
before Jan. 1, 2018, would be 40 years, property trade or business election due waived the five-year scope limitation for
not 30 years. to being uncertain about whether they any change filed for a tax year beginning
After the TCJA, some taxpayers with qualified now have an opportunity to in 2019, 2020, 2021, or 2022. Both of
a trade or business of providing housing make the election and be exempt from those changes made the automatic pro-
in residential living facilities, and which the interest limitation. Consequently, cedures broadly applicable for taxpayers,
also included supplemental assistive, those trades or businesses that de- which is welcome news.
nursing, or routine medical services, preciate property as residential rental Because of that expansion, many tax-
were left wondering if they could also property with a depreciable life of 27.5 payers may choose to file a Form 3115
make the real property trade or busi- years would use the 30-year ADS re- under the modified automatic proce-
ness election under Sec. 163(j) to claim covery period that was provided by the dures instead of amending one or more
that benefit. TCJA and expanded retroactively by tax returns. Unless a taxpayer includes
The Taxpayer Certainty and Disaster the TCDTRA. affected properties in a general asset
Tax Relief Act of 2020 (TCDTRA), account, it would file the change under
Division EE of the Consolidated Ap- Application of 30-year ADS Section 6.05 of Rev. Proc. 2019-43, as
propriations Act, 2021, P.L. 116-260, recovery period modified and amplified by Rev. Proc.
retroactively changed the applicability As discussed above, taxpayers with 2021-28, which requires the taxpayer
of the 30-year ADS recovery period residential rental properties affected to calculate a Sec. 481(a) adjustment as
to include residential rental property by changes enacted in the TCDTRA of the first day of the year of change as
placed in service prior to Jan. 1, 2018, needed guidance to correct their depre- if the proposed method of accounting
that is owned by an electing real prop- ciation. In response, Rev. Proc. 2021-28 had always been used by the taxpayer,
erty trade or business and that had not allows those taxpayers to change from beginning with the tax year in which the
previously been subject to the ADS an impermissible ADS recovery period change in the use of the property by the
prior to making the election. Affected of 40 years to a permissible ADS re- taxpayer occurred.
taxpayers needed guidance that would covery period of 30 years by: (1) filing Real property held by a taxpayer
allow them to effect the changes from an amended federal income tax return that makes the real property trade or
the TCDTRA. no later than April 15, 2022; (2) filing business election is subject to a change
an administrative adjustment request in use as of the effective date of the
Qualified residential living (AAR) for an eligible partnership under election. Affected taxpayers with resi-
facilities the Bipartisan Budget Act of 2015 on dential rental property would recompute
Rev. Proc. 2021-9 provides a safe harbor or before April 15, 2022; or (3) filing depreciation from the date of the real
to taxpayers that operate residential liv- an accounting method change on Form property trade or business election using
ing facilities to be eligible for the real 3115, Application for Change in Account- the 30-year ADS recovery period to
property trade or business election under ing Method. compute the Sec. 481(a) adjustment.
Sec. 163(j). A qualified residential living If a taxpayer chooses the option to It should be noted that taxpayers that
facility is a residential living facility that: file an amended return or an AAR, as include applicable real property in gen-
(1) qualifies as residential rental property applicable, the taxpayer should be aware eral asset accounts would file a method
under Sec. 168(e)(2)(A); or (2) consists that the taxpayer must do so in the change under Section 6.04 of Rev. Proc.
of multiple rental dwelling units within original year that the real property trade 2019-43, as modified and amplified by

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