n-13-18.pdf

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Update of List of Plants, Grown in Commercial Quantities in the United States, Having a
Preproductive Period in Excess of Two Years Based on the Nationwide Weighted
Average Preproductive Period for Such Plant.

Notice 2013-18

PURPOSE
This notice modifies and supersedes Notice 2000-45, 2000-2 C.B. 256, which
provides guidance to taxpayers engaged in the trade or business of farming in
determining whether a plant has a preproductive period in excess of 2 years for
purposes of § 263A(d) and (e) of the Internal Revenue Code.
BACKGROUND
Section 263A requires generally that the direct costs and an allocable share of
indirect costs of real or tangible personal property produced by a taxpayer be
capitalized. Under § 263A, taxpayers generally are required to capitalize the costs of
producing property in a farming business (including animals and plants without regard to
the length of their preproductive period).
Sections 263A(d) and (e) set forth special rules for property produced in the trade
or business of farming. Under § 263A(d)(1) and § 1.263A-4(a)(2) of the Income Tax
Regulations, taxpayers that are not required to use an accrual method by § 447 and are
not tax shelters prohibited from using the cash receipts and disbursements method of
accounting by § 448(a)(3) (“qualified taxpayers”) are not required to capitalize (1) the
costs of producing animals in a farming business, or (2) the costs of producing plants
with a preproductive period of 2 years or less. In addition, under § 263A(d)(3) and
§ 1.263A-4(d), a qualified taxpayer may elect to have § 263A not apply to the costs of

producing plants in a farming business (other than citrus or almond trees). Thus, unless
an election is made to have § 263A not apply in accordance with § 263A(d)(3), qualified
taxpayers generally are required to capitalize the costs of producing plants that have a
preproductive period in excess of 2 years.
Section 263A(e)(3)(B) and § 1.263A-4(b)(2)(i)(B) provide that, for purposes of
determining whether a plant has a preproductive period in excess of 2 years, the
preproductive period of plants grown in commercial quantities in the United States must
be based on the nationwide weighted average preproductive period for such plants.
The legislative history of § 263A explains that Congress expected the Treasury
Department to periodically publish a list of the preproductive periods of various plants
based on the nationwide weighted averages for such plants. See H.R. Rep. No. 426,
99th Cong., 1st Sess. 628 (1985), 1986-3 (Vol. 2) C.B. 628. A proposed list was
included in the preamble of the proposed § 1.263A-4 regulations (REG-208151-91,
1997-2 C.B. 35 [62 Fed. Reg. 44,542]). The Internal Revenue Service (Service) and the
Treasury Department received and considered comments on the proposed list in
preparing Notice 2000-45.
In Notice 2000-45 the Service and the Treasury Department published a
nonexclusive list of plants having a nationwide weighted average preproductive period
in excess of 2 years. The Service and the Treasury Department utilized information
provided by the United States Department of Agriculture to develop the list published in
Notice 2000-45 of plants that have a nationwide weighted average preproductive period
in excess of 2 years. At that time, the Department of Agriculture grouped blueberry,
blackberry, and raspberry plants into one overall category, called “berries.” Blueberry

plants made up the largest share of the berries category, and they have a preproductive
period greater than 2 years. Since that time, the Department of Agriculture has started
tracking blueberry, blackberry, and raspberry plants separately. The Department of
Agriculture’s current data establishes that blackberry and raspberry plants each have a
nationwide weighted average preproductive period of less than 2 years, requiring an
update to the list published in Notice 2000-45. The Service and the Treasury
Department have also determined that papaya plants should be removed from the list
because Department of Agriculture data establishes that papaya plants have a
nationwide weighted average preproductive period of less than 2 years.
DISCUSSION
Notice 2000-45 states that the Service and the Treasury Department intend to
update, as needed, the list of plants that have a nationwide weighted average
preproductive period in excess of 2 years. Based upon information provided by the
Department of Agriculture, for the reasons stated above, the Service and the Treasury
Department have decided to remove raspberry, blackberry, and papaya plants from its
previously published list of plants having a preproductive period in excess of 2 years.
In addition, the Service and the Treasury Department have determined that plants
producing the following crops or yields continue to have a nationwide weighted average
preproductive period in excess of 2 years:
almonds, apples, apricots, avocados, blueberries, cherries,
chestnuts, coffee beans, currants, dates, figs, grapefruit, grapes, guavas,
kiwifruit, kumquats, lemons, limes, macadamia nuts, mangoes, nectarines,

olives, oranges, peaches, pears, pecans, persimmons, pistachio nuts,
plums, pomegranates, prunes, tangelos, tangerines, tangors, and walnuts.
This guidance is not an all-inclusive list of plants that have a nationwide weighted
average preproductive period in excess of 2 years. In the case of other plants grown in
commercial quantities in the United States, the nationwide weighted average
preproductive period must be determined based on available statistical data. § 1.263A-
4(b)(2)(i)(B). The Service and the Treasury Department intend to continue to update
this guidance periodically as needed.
ACCOUNTING METHOD CHANGES
Concurrently with the issuance of this notice, the Service and the Treasury
Department are issuing Revenue Procedure 2013-20 (2013-14 I.R.B. __). Revenue
Procedure 2013-20 modifies Revenue Procedure 2011-14, 2011-4 I.R.B. 330, to
provide procedures for a taxpayer to obtain under § 446(e) the automatic consent of the
Commissioner (1) to not apply § 263A, pursuant to § 263A(d)(1) and § 1.263A-4(a)(2),
to the production of one or more plants that the Service and the Treasury Department
have removed from the list of plants that have a nationwide weighted average
preproductive period in excess of 2 years, or (2) to revoke an election pursuant to
§ 263A(d)(3) and § 1.263A-4(d) to not apply § 263A to the production of a plant or
plants that have been removed from the list of plants that have a nationwide weighted
average preproductive period in excess of 2 years.
EFFECT ON OTHER DOCUMENTS
Notice 2000-45 is modified and superseded.
DRAFTING INFORMATION

The principal author of this notice is Patrick M. Clinton of the Office of Associate Chief
Counsel (Income Tax & Accounting). For further information regarding this notice
contact Patrick M. Clinton at (202) 622-4930 (not a toll-free call).