20201104Attachment A.pdf

AVISTA
TAX CHANGE DEFERRAL APPLICATION
ATTACHMENT A
AVISTA CORP.
Form 3115, Application for Change of Accounting Method
METERS
Change in method of accounting for non-incidental materials and
supplies under Treas. Reg. § 1.162-3(a) effective for the taxable year
ended December 31, 2019 under the automatic consent procedures of
Rev. Proc. 2019-43.
Page 1 of 28
Attachment A
Form 3115
(Rev. December 2018)OMB No. 1545-2070
Department of the Treasury
Internal Revenue Service
Name of filer (name of parent corporation if a consolidated group) (see instructions)Identification number (see instructions)
Principal business activity code number (see instructions)
Number, street, and room or suite no. If a P.O. box, see the instructions.Tax year of change begins (MM/DD/YYYY)
Tax year of change ends (MM/DD/YYYY)
City or town, state, and ZIP code Name of contact person (see instructions)
JANE ROHRS
Name of applicant(s) (if different than filer) and identification number(s) (see instructions)Contact person's telephone number
If the applicant is a member of a consolidated group, check this box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .►X
If Form 2848, Power of Attorney and Declaration of Representative, is attached (see instructions for when Form 2848 is
required), check this box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ►X
Individual Cooperative (Sec. 1381)
X Corporation Partnership See instructions.
Controlled foreign corporation (Sec. 957)S corporation Depreciation or Amortization
10/50 corporation (Sec. 904(d)(2)(E))Insurance co. (Sec. 816(a))Financial Products and/or Financial Activities of
Qualified personal service Insurance co. (Sec. 831)Financial Institutions
corporation (Sec. 448(d)(2))Other (specify) ►X Other (specify) ►
Exempt organization. Enter
Code section ►
The taxpayer must attach all applicable statements requested throughout this form.
Information For Automatic Change Request
1
(1) DCN:(2) DCN:(3) DCN:(4) DCN:(5) DCN:(6) DCN:
(7) DCN:(8) DCN:(9) DCN:(10) DCN:(11) DCN:(12) DCN:
b Description ►
2 Do any of the eligibility rules restrict the applicant from filing the requested change using the automatic change
procedures (see instructions)? If "Yes," attach an explanation. . . . . . . . . . . . . . . . . . . . . . . .
3 Has the filer provided all the information and statements required on this form and by the List of Automatic
Changes under which the applicant is requesting a change? See instructions. . . . . . . . . . . . . . . . . . .Complete Part II and Part IV of this form, and, Schedules A through E, if applicable.
Information For All Requests
4 During the tax year of change, did or will the applicant (a) cease to engage in the trade or business to which the
requested change relates, or (b) terminate its existence? See instructions. . . . . . . . . . . . . . . . . . . .
5 Is the applicant requesting to change to the principal method in the tax year of change under Regulations section
1.381(c)(4)-1(d)(1) or 1.381(c)(5)-1(d)(1)?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If "No," go to line 6a.
If "Yes," the applicant cannot file a Form 3115 for this change. See instructions.
Under penalties of perjury, I declare that I have examined this application, including accompanying schedules and statements, and to the best of my
knowledge and belief, the application contains all the relevant facts relating to the application, and it is true, correct, and complete. Declaration of
preparer (other than applicant) is based on all information of which preparer has any knowledge.
Signature of filer (and spouse, if joint return)Date Name and title (print or type)
►
Print/Type preparer's name Preparer's signature Date
Firm's name ►DELOITTE TAX LLP
For Privacy Act and Paperwork Reduction Act Notice, see the instructions.Cat. No. 19280E Form 3115 (Rev. 12-2018)
Application for Change in Accounting Method
▶ Go to www.irs.gov/Form3115 for instructions and the latest information.
Yes No
X
91-0462470
221100
1411 EAST MISSION AVENUE
SPOKANE, WA 99202
N/A [phone]
NON-INCIDENTAL MATERIALS AND
SUPPLIES
its instructions), and (2) any other relevant information, even if not specifically requested on Form 3115.
Caution: To be eligible for approval of the requested change in method of accounting, the taxpayer must provide all information that is relevant to the
AVISTA CORPORATION
186
Part I
Other
1/1/2019
12/31/2019
Enter the applicable designated automatic accounting method change number ("DCN") for the requested automatic change.
Enter only one DCN, except as provided for in guidance published by the IRS. If the requested change has no DCN, check
Yes No
X
MATTHEW MCKINNEY
See instructions.
DANIEL LOUTZENHISER - ASSISTANT
TREASURER
taxpayer or to the taxpayer's requested change in method of accounting. This includes (1) all relevant information requested on this Form 3115 (including
X
X
"Other," and provide both a description of the change and a citation of the IRS guidance providing the automatic change.
Part II
Sign
Here
Preparer
(other than
filer/applicant)
10/1/2020
10/6/2020
Attachment A
Page 1 of 27
Form 3115 (Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 2
Information For All Requests (continued)
6a Does the applicant (or any present or former consolidated group in which the applicant was a member during the
applicable tax year(s)) have any federal income tax return(s) under examination (see instructions)? . . . . . . . . .
If "No," go to line 7a.
b Is the method of accounting the applicant is requesting to change an issue under consideration (with respect to
either the applicant or any present or former consolidated group in which the applicant was a member during the
applicable tax year(s))? See instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c Enter the name and telephone number of the examining agent and the tax year(s) under examination.N/A
Name ►Telephone number ►Tax year(s) ►
d Has a copy of this Form 3115 been provided to the examining agent identified on line 6c? . . . . . . . . . . . . .
7a Does audit protection apply to the applicant's requested change in the method of accounting? See instructions. . . . . . . . . .
If "No," attach an explanation.
b If "Yes," check the applicable box and attach the required statement.
X
X
8a Does the applicant (or any present or former consolidated group in which the applicant was a member during the
applicable tax year(s)) have any federal income tax return(s) before Appeals and/or a federal court? . . . . . . . . . . . . .
If "No," go to line 9.
b Is the method of accounting the applicant is requesting to change an issue under consideration by Appeals and/or
a federal court (for either the applicant or any present or former consolidated group in which the applicant was a
member for the tax year(s) the applicant was a member)? See instructions. . . . . . . . . . . . . . . . . . . .
If "Yes," attach an explanation.
c If "Yes," enter the name of the (check the box) Appeals officer and/or counsel for the government,
telephone number, and the tax year(s) before Appeals and/or a federal court.N/A
Name ►Telephone number ►Tax year(s) ►
d Has a copy of this Form 3115 been provided to the Appeals officer and/or counsel for the government identified
on line 8c? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 If the applicant answered "Yes" to line 6a and/or 8a with respect to any present or former consolidated group,
attach a statement that provides each parent corporation's (a) name, (b) identification number, (c) address, and
(d)tax year(s) during which the applicant was a member that is under examination, before an Appeals office,
and/or before a federal court.N/A
10 If for federal income tax purposes, the applicant is either an entity (including a limited liability company) treated as
a partnership or an S corporation, is it requesting a change from a method of accounting that is an issue under
consideration in an examination, before Appeals, or before a federal court, with respect to a federal income tax
return of a partner, member, or shareholder of that entity?. . . . . . . . . . . . . . . . . . . . . . . .
11a Has the applicant, its predecessor, or a related party requested or made (under either an automatic or
non-automatic change procedure) a change in method of accounting within any of the five tax years ending with
the tax year of change?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If "No," go to line 12.
b If "Yes," for each trade or business, attach a description of each requested change in method of accounting
(including the tax year of change) and state whether the applicant received consent.SEE ATTACHMENT
c If any application was withdrawn, not perfected, or denied, or if a Consent Agreement granting a change was not
signed and returned to the IRS, or the change was not made or not made in the requested year of change, attach
an explanation.N/A
12 Does the applicant, its predecessor, or a related party currently have pending any request (including any
concurrently filed request) for a private letter ruling, change in method of accounting, or technical advice?. . . . . . . .
If "Yes," for each request attach a statement providing (a) the name(s) of the taxpayer, (b) identification number(s),
(c)the type of request (private letter ruling, change in method of accounting, or technical advice), and (d) the
specific issue(s) in the request(s).
13 Is the applicant requesting to change its overall method of accounting? . . . . . . . . . . . . . . . . . . . .
If "Yes," complete Schedule A on page 4 of this form.
Form 3115 ((Rev. 12-2018)
N/A
Yes No
X
X
N/A
N/A
N/A
N/A
Part II
X
X
X
X
Attachment A
Page 2 of 27
Form 3115 ((Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 3
Information For All Requests (continued)
14 If the applicant is either (i) not changing its overall method of accounting, or (ii) is changing its overall method of
accounting and changing to a special method of accounting for one or more items, attach a detailed and
complete description for each of the following (see instructions):SEE ATTACHMENT
a The item(s) being changed.
b The applicant's present method for the item(s) being changed.
c The applicant's proposed method for the item(s) being changed.
d The applicant's present overall method of accounting (cash, accrual, or hybrid).
15a Attach a detailed and complete description of the applicant's trade(s) or business(es). See section 446(d).SEE ATTACHMENT
b If the applicant has more than one trade or business, as defined in Regulations section 1.446-1(d), describe
(i)whether each trade or business is accounted for separately; (ii) the goods and services provided by each trade
or business and any other types of activities engaged in that generate gross income; (iii) the overall method of
accounting for each trade or business; and (iv) which trade or business is requesting to change its accounting
method as part of this application or a separate application.N/A
Note: If you are requesting an automatic method change, see the instructions to see if you are required to
complete Lines 16a-16c.
16a Attach a full explanation of the legal basis supporting the proposed method for the item being changed. Include a
detailed and complete description of the facts that explains how the law specifically applies to the applicant's
situation and that demonstrates that the applicant is authorized to use the proposed method.N/A
b Include all authority (statutes, regulations, published rulings, court cases, etc.) supporting the proposed method.N/A
c Include either a discussion of the contrary authorities or a statement that no contrary authority exists.N/A
17 Will the proposed method of accounting be used for the applicant's books and records and financial statements?
For insurance companies, see the instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If "No," attach an explanation.SEE ATTACHMENT
18 Does the applicant request a conference with the IRS National Office if the IRS National Office proposes an adverse response?
19a If the applicant is changing to either the overall cash method, an overall accrual method, or is changing its method of
accounting for any property subject to section 263A, any long-term contract subject to section 460 (see 19b), or
inventories subject to section 474, enter the applicant's gross receipts for the 3 tax years preceding the tax year of change.N/A
1st preceding 2nd preceding 3rd preceding
year ended: mo. yr.year ended: mo. yr.year ended: mo. yr.
$$$
b If the applicant is changing its method of accounting for any long-term contract subject to section 460, in addition
to completing 19a, enter the applicant's gross receipts for the 4th tax year preceding the tax year of change:N/A
4th preceding year ended: mo. yr.$
Information For Non-Automatic Change Request N/A
20 Is the applicant's requested change described in any revenue procedure, revenue ruling, notice, regulation, or
other published guidance as an automatic change request?. . . . . . . . . . . . . . . . . . . . . . . .
If "Yes," attach an explanation describing why the applicant is submitting its request under the non-automatic
change procedures.
21 Attach a copy of all documents related to the proposed change (see instructions).
22 Attach a statement of the applicant's reasons for the proposed change.
23 If the applicant is a member of a consolidated group for the year of change, do all other members of the
consolidated group use the proposed method of accounting for the item being changed?. . . . . . . . . . . . .
If "No," attach an explanation.
24a $
b If the applicant qualifies for a reduced user fee, attach the required information or certification (see instructions).
Form 3115 ((Rev. 12-2018)
Enter the amount of user fee attached to this application (see instructions). ►
Part III Yes No
NoYesPart II
X
X
Attachment A
Page 3 of 27
Form 3115 ((Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 4
Section 481(a) Adjustment
25 Does published guidance require the applicant (or permit the applicant and the applicant is electing) to implement the
If "Yes," attach an explanation and do not complete lines 26, 27, and 28 below.
26 Enter the section 481(a) adjustment. Indicate whether the adjustment is an increase (+) or a decrease (-) in
used to determine the section 481(a) adjustment. If it is based on more than one component, show the
computation for each component. If more than one applicant is applying for the method change on the
(a)(b)(c)
SEE ATTACHMENT
27
28
Schedule A — Change in Overall Method of Accounting (If Schedule A applies, Part I below must be completed.)
Change in Overall Method (see instructions)
1 Check the appropriate boxes below to indicate the applicant's present and proposed methods of accounting.
Present method:Cash Accrual Hybrid (attach description)
Proposed method:Cash Accrual Hybrid (attach description)
2 Enter the following amounts as of the close of the tax year preceding the year of change. If none, state "None." Also, attach a
statement providing a breakdown of the amounts entered on lines 2a through 2g.
a Income accrued but not received (such as accounts receivable). . . . . . . . . . . . . . . . . . . $
b Income received or reported before it was earned (such as advanced payments). Attach a description of
the income and the legal basis for the proposed method . . . . . . . . . . . . . . . . . . . . . . . . . .
c Expenses accrued but not paid (such as accounts payable) . . . . . . . . . . . . . . . . . . . . . . . . .
d Prepaid expenses previously deducted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e Supplies on hand previously deducted and/or not previously reported . . . . . . . . . . . . . . . . . . . .
f Inventory on hand previously deducted and/or not previously reported. Complete Schedule D, Part II . . . . . . .
g Other amounts (specify). Attach a description of the item and the legal basis for its inclusion in the
calculation of the section 481(a) adjustment. ►
h Net section 481(a) adjustment (Combine lines 2a-2g.) Indicate whether the adjustment is an increase (+)
or decrease (-) in income. Also enter the net amount of this section 481(a) adjustment amount on Part IV,
line 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3 Yes No
4 Attach copies of the profit and loss statement (Schedule F (Form 1040) for farmers) and the balance sheet, if applicable, as of
the close of the tax year preceding the year of change. Also attach a statement specifying the accounting method used when
preparing the balance sheet. If books of account are not kept, attach a copy of the business schedules submitted with the
federal income tax return or other return (such as, tax-exempt organization returns) for that period. If the amounts in Part I,
lines 2a through 2g, do not agree with the amounts shown on both the profit and loss statement and the balance sheet, attach
a statement explaining the differences.
5 Is the applicant making a change to the overall cash method as a small business taxpayer (see instructions)? . . . . Yes No
Change to the Cash Method For Non-Automatic Change Request (see instructions)
Applicants requesting a change to the cash method must attach the following information:
1 A description of inventory items (items whose production, purchase, or sale is an income-producing factor) and materials and
supplies used in carrying out the business.
2 An explanation as to whether the applicant is required to use the accrual method under any section of the Code or regulations.
Form 3115 (Rev. 12-2018)
X
Yes No
Part I
Part IV
X
-
N/A
X
-30,930,774
Amount
Attachment A
Page 4 of 27
Form 3115 (Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 5
Schedule B — Change to the Deferral Method for Advance Payments (see instructions)
1 If the applicant is requesting to change to the deferral method for advance payments, as described in the instructions, attach the following information:
a Explain how the advance payments meet the definition of advance payment, as described in the instructions.
b Does the taxpayer use an applicable financial statement as described in the instructions and, if so, identify it.
c Describe the taxpayer’s allocation method, if there is more than one performance obligation, as defined in the instructions.
d Describe the taxpayer’s legal basis for deferral. See instructions.
e If the applicant is filing under the non-automatic change procedures, see the instructions for the information required.
Schedule C — Changes Within the LIFO Inventory Method (see instructions)
General LIFO Information
Complete this section if the requested change involves changes within the LIFO inventory method. Also, attach a copy of all
Forms 970, Application To Use LIFO Inventory Method, filed to adopt or expand the use of the LIFO method.
1 Attach a description of the applicant's present and proposed LIFO methods and submethods for each of the following
items:
a Valuing inventory (for example, unit method or dollar-value method).
b Pooling (for example, by line or type or class of goods, natural business unit, multiple pools, raw material content, simplified
dollar-value method, inventory price index computation (IPIC) pools, vehicle-pool method, etc.).
c Pricing dollar-value pools (for example, double-extension, index, link-chain, link-chain index, IPIC method, etc.).
d Determining the current-year cost of goods in the ending inventory (such as, most recent acquisitions, earliest acquisitions during
the current year, average cost of current-year acquisitions, rolling-average cost, or other permitted method).
2 If any present method or submethod used by the applicant is not the same as indicated on Form(s) 970 filed to adopt or
expand the use of the method, attach an explanation.
3 If the proposed change is not requested for all the LIFO inventory, attach a statement specifying the inventory to which the
change is and is not applicable.
4 If the proposed change is not requested for all of the LIFO pools, attach a statement specifying the LIFO pool(s) to which the
change is applicable.
5 Attach a statement addressing whether the applicant values any of its LIFO inventory on a method other than cost. For
example, if the applicant values some of its LIFO inventory at retail and the remainder at cost, identify which inventory items
6
Change in Pooling Inventories
1 If the applicant is proposing to change its pooling method or the number of pools, attach a description of the contents of, and
state the base year for, each dollar-value pool the applicant presently uses and proposes to use.
2 If the applicant is proposing to use natural business unit (NBU) pools or requesting to change the number of NBU pools,
attach the following information (to the extent not already provided) in sufficient detail to show that each proposed NBU was
determined under Regulations sections 1.472-8(b)(1) and (2):
a A description of the types of products produced by the applicant. If possible, attach a brochure.
b A description of the types of processes and raw materials used to produce the products in each proposed pool.
c If all of the products to be included in the proposed NBU pool(s) are not produced at one facility, state the reasons for the
separate facilities, the location of each facility, and a description of the products each facility produces.
d A description of the natural business divisions adopted by the taxpayer. State whether separate cost centers are maintained
and if separate profit and loss statements are prepared.
e A statement addressing whether the applicant has inventories of items purchased and held for resale that are not further
processed by the applicant, including whether such items, if any, will be included in any proposed NBU pool.
f A statement addressing whether all items including raw materials, goods-in-process, and finished goods entering into the
entire inventory investment for each proposed NBU pool are presently valued under the LIFO method. Describe any items that
are not presently valued under the LIFO method that are to be included in each proposed pool.
g A statement addressing whether, within the proposed NBU pool(s), there are items both sold to unrelated parties and
transferred to a different unit of the applicant to be used as a component part of another product prior to final processing.
3 If the applicant is engaged in manufacturing and is proposing to use the multiple pooling method or raw material content
pools, attach information to show that each proposed pool will consist of a group of items that are substantially similar. See
Regulations section 1.472-8(b)(3).
4 If the applicant is engaged in the wholesaling or retailing of goods and is requesting to change the number of pools used,
attach information to show that each of the proposed pools is based on customary business classifications of the applicant's
Form 3115 (Rev. 12-2018)
Part II
N/A
N/A
Part I
Attachment A
Page 5 of 27
Form 3115 (Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 6
Schedule D — Change in the Treatment of Long-Term Contracts Under Section 460, Inventories, or Other
Section 263A Assets (see instructions)
Change in Reporting Income From Long-Term Contracts (Also complete Part III on pages 7 and 8.)
1 To the extent not already provided, attach a description of the applicant's present and proposed methods for reporting income
and expenses from long-term contracts. Also, attach a representative actual contract (without any deletion) for the requested
change. If the applicant is a construction contractor, attach a detailed description of its construction activities.
2a Yes No
b Yes No
If line 2b is "No," attach an explanation.
c Is the applicant requesting to use the percentage-of-completion method using cost-to-cost under
Yes No
d If line 2c is “Yes,” in computing the completion factor of a contract, will the applicant use the simplified
Yes No
e If line 2c is "No," is the applicant requesting to use the exempt-contract percentage-of-completion
Yes No
If line 2e is "Yes," attach an explanation of what method the applicant will use to determine a contract's
completion factor.
If line 2e is "No," attach an explanation of what method the applicant is using and the authority for its use.
3a Yes No
b If "Yes," attach a description of the applicant's manufacturing activities, including any required installation
of manufactured goods.
4a Yes No
b Yes No
Change in Valuing Inventories Including Cost Allocation Changes (Also complete Part III on pages 7 and 8.)
1 Attach a description of the inventory goods being changed.
2 Attach a description of the inventory goods (if any) NOT being changed.
3a Is the applicant subject to section 263A? If "No," go to line 4a . . . . . . . . . . . . . . . . . .Yes No
Is the applicant's present inventory valuation method in compliance with section 263A (see instructions)?
If "No," attach a detailed explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4a Check the appropriate boxes in the chart.
Identification methods:
Specific identification . . . . . . . . . . . . . . . . . . . . . . . . . .
FIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (attach explanation) . . . . . . . . . . . . . . . . . . . . . . . .
Valuation methods:
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost or market, whichever is lower. . . . . . . . . . . . . . . . . . . . . . . . .
Retail cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail, lower of cost or market . . . . . . . . . . . . . . . . . . . . . .
Other (attach explanation) . . . . . . . . . . . . . . . . . . . . . . . .
b Enter the value at the end of the tax year preceding the year of change.
5 If the applicant is changing from the LIFO inventory method to a non-LIFO method, attach the following information (see
instructions).
a Copies of Form(s) 970 filed to adopt or expand the use of the method.
b Only for applicants requesting a non-automatic change. A statement describing whether the applicant is changing to the
method required by Regulations section 1.472-6(a) or (b), or whether the applicant is proposing a different method.
c Only for applicants requesting an automatic change. The statement required by section 23.01(5) of Rev. Proc. 2018-31 (or
its successor).
Form 3115 (Rev. 12-2018)
Part I
Inventory Method
Not Being ChangedInventory Method Being Changed
N/A
$$
Present method Present methodProposed method
Attachment A
Page 6 of 27
Form 3115 (Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 7
Method of Cost Allocation (Complete this part if the requested change involves either property subject
to section 263A or long-term contracts as described in section 460). See instructions
Section A — Allocation and Capitalization Methods
Attach a description (including sample computations) of the present and proposed method(s) the applicant uses to capitalize direct
and indirect costs properly allocable to real or tangible personal property produced and property acquired for resale, or to allocate
direct and indirect costs required to be allocated long-term contracts. Include a description of the method(s) used for allocating
indirect costs to intermediate cost objectives such as departments or activities prior to the allocation of such costs to long-term
contracts, real or tangible personal property produced, and property acquired for resale. The description must include the following:
1 The method of allocating direct and indirect costs (for example, specific identification, burden rate, standard cost, or other
reasonable allocation method).
2 The method of allocating mixed service costs (for example, direct reallocation, step-allocation, simplified service cost using the
labor-based allocation ratio, simplified service cost using the production cost allocation ratio, or other reasonable allocation
method).
3 Except for long-term contract accounting methods, the method of capitalizing additional section 263A costs (for example,
simplified production with or without the historic absorption ratio election, simplified resale with or without the historic
absorption ratio election including permissible variations, the U.S. ratio, or other reasonable allocation method).
Section B — Direct and Indirect Costs Required to be Allocated
Check the appropriate boxes showing the costs that are or will be fully included, to the extent required, in the cost of real or tangible
personal property produced or property acquired for resale under section 263A or allocated to long-term contracts under section
460. Mark "N/A" in a box if those costs are not incurred by the applicant. If a box is not checked, it is assumed that those costs are
not fully included to the extent required. Attach an explanation for boxes that are not checked.
1 Direct material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4 Officers' compensation (not including selling activities) . . . . . . . . . . . . . . . . . . . .
5 Pension and other related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 Indirect materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8 Purchasing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 Handling, processing, assembly, and repackaging costs . . . . . . . . . . . . . . . . . . . . . .
10 Offsite storage and warehousing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11 Depreciation, amortization, and cost recovery allowance for equipment and facilities
12 Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14 Taxes other than state, local, and foreign income taxes . . . . . . . . . . . . . . . . . . .
15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17 Maintenance and repairs that relate to a production, resale, or long-term contract activity . . . . . . . .
18 Engineering and design costs (not including section 174 research and experimental
expenses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19 Rework labor, scrap, and spoilage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20 Tools and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21 Quality control and inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22 Bidding expenses incurred in the solicitation of contracts awarded to the applicant . . . . . . . . . .
23 Licensing and franchise costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24 Capitalizable service costs (including mixed service costs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25 Administrative costs (not including any costs of selling or any return on capital) . . . . . . . . . .
26 Research and experimental expenses attributable to long-term contracts . . . . . . . . . . . . . .
27 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28 Other costs (Attach a list of these costs.) . . . . . . . . . . . . . . . . . . . . . . . . .
Form 3115 (Rev. 12-2018)
Part III
Present method Proposed method
Attachment A
Page 7 of 27
Form 3115 (Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 8
Method of Cost Allocation (continued) See instructions.
Section C — Other Costs Not Required To Be Allocated (Complete Section C only if the applicant is requesting to change its
1 Marketing, selling, advertising, and distribution expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2 Research and experimental expenses not included in Section B, line 26 . . . . . . . . . . . . .
3 Bidding expenses not included in Section B, line 22 . . . . . . . . . . . . . . . . . . . . .
4 General and administrative costs not included in Section B . . . . . . . . . . . . . . . . . . .
5 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 Cost of strikes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 Warranty and product liability costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8 Section 179 costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 On-site storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10 Depreciation, amortization, and cost recovery allowance not included in Section B,
11 Other costs (Attach a list of these costs.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule E — Change in Depreciation or Amortization. See instructions.
Applicants requesting approval to change their method of accounting for depreciation or amortization complete this section.
Applicants must provide this information for each item or class of property for which a change is requested.
Note: See the Summary of the List of Automatic Accounting Method Changes in the instructions for information regarding
automatic changes under sections 56, 167, 168, 197, 1400I, 1400L, or former section 168. Do not file Form 3115 with respect to
certain late elections and election revocations. See instructions.
1 Yes
If "Yes," the only changes permitted are under Regulations section 1.167(a)-11(c)(1)(iii).
2 Is any of the depreciation or amortization required to be capitalized under any Code section such as, section
Yes
3 Has a depreciation, amortization, expense, or disposition election been made for the property such as
Yes
4a To the extent not already provided, attach a statement describing the property subject to the change. Include in the description
the type of property, the year the property was placed in service, and the property's use in the applicant's trade or business or
income-producing activity.
b Yes
c Yes
5 To the extent not already provided in the applicant's description of its present method, attach a statement explaining how the
property is treated under the applicant's present method (for example, depreciable property, inventory property, supplies
under Regulations section 1.162-3, nondepreciable section 263(a) property, property deductible as a current expenses, etc.).
6 If the property is not currently treated as depreciable or amortizable property, attach a statement of the facts supporting the
proposed change to depreciate or amortize the property.
7 If the property is currently treated and/or will be treated as depreciable or amortizable property, provide the following
information for both the present (if applicable) and proposed methods:
a The Code section under which the property is or will be depreciated or amortized (for example, section 168(g)).
b The applicable asset class from Rev. Proc. 87-56, 1987-2 C.B. 674, for each asset depreciated under section 168 (MACRS) or
under section 1400L; the applicable asset class from Rev. Proc. 83-35, 1983-1 C.B. 745, for each asset depreciated under
former section 168 (ACRS); an explanation why no asset class is identified for each asset for which an asset class has not
been identified by the applicant.
c The facts to support the asset class for the proposed method.
d The depreciation or amortization method of the property, including the applicable Code section (for example, 200% declining
balance method under section 168(b)(1)).
e The useful life, recovery period, or amortization period of the property.
f The applicable convention of the property.
g Whether the additional first-year special depreciation allowance (for example, as provided by section 168(k), 168(l), 168(m),
168(n), 1400L(b), or 1400N(d)) was or will be claimed for the property. If not, also provide an explanation as to why no special
depreciation allowance was or will be claimed.
h Whether the property was or will be in a single asset account, a multiple asset account, or a general asset account.
N/A
If "Yes," enter the applicable section ►
If "Yes," state the election made ►
Part III
Present method Proposed method
Form 3115 (Rev. 12-2018)
No
No
No
No
No
Attachment A
Page 8 of 27
Avista Corporation EIN: 91-0462470
Form 3115 Attachment – Materials and Supplies FYE: 12/31/2019
Page 1
Part II, Question 11b – Accounting Method Changes in the Past Five Years
Avista Corporation (EIN: 91-0462470) is changing its method of accounting for prepaid expenses under
Treas. Reg. § 1.263(a)-3 effective for the taxable year ended December 31, 2019 under the automatic
consent procedures of Rev. Proc. 2019-43.
Avista Corporation (EIN: 91-0462470) is changing its method of accounting for depreciation effective for
the taxable year ended December 31, 2019 under the automatic consent procedures of Rev. Proc. 2019-43.
Avista Corporation (EIN: 91-0462470) is changing its method of accounting for costs under I.R.C. § 263A
effective for the taxable year ended December 31, 2019 under the automatic consent procedures of Rev.
Proc. 2019-43.
Avista Corporation (EIN: 91-0462470) is changing its method of accounting for deducting repairs and
maintenance costs and its method of identifying the unit of property, effective for the taxable year ended
December 31, 2019 under the automatic consent procedures of Rev. Proc. 2019-43.
Part II, Question 14 – Description of Proposed Change
a. The Applicant is changing its method of accounting for amounts paid to acquire non-incidental
materials and supplies, as defined in Treas. Reg. §§ 1.162-3(a)(1) and (c)(1), that are used or consumed
in the Applicant’s trade or business. The items that are the subject of this request are meters, including
the cost of equipment and installation. The meters are materials and supplies under Treas. Reg. § 1.162-
3(c)(1) in that they have an acquisition cost of $200 or less. The items are non-incidental under Treas.
Reg. § 1.162-3(a)(2) because the Applicant takes a physical inventory of these items at the beginning
and end of the tax year. The cost of the materials and supplies are not required to be capitalized to
inventory under I.R.C. § 263A.
The Applicant has not adopted the International Financial Reporting Standards (“IFRS”) and the
proposed change is not related to the adoption of IFRS.
b. Under its present method of accounting, the Applicant capitalizes the non-incidental materials and
supplies and depreciates the capitalized costs under I.R.C. § 168, using a 20-year recovery period, the
150% declining balance method, and a half-year or mid-quarter convention. The 20-year recovery
period is based on the classification as Electric Utility Transmission and Distribution Plant property or
Gas Utility Distribution Facilities property, pursuant to Rev. Proc. 87-56. Furthermore, the Applicant
has claimed the additional first year depreciation under I.R.C. § 168(k), as applicable, provided it did
not affirmatively elect not to claim such depreciation. The Applicant has not claimed any federal tax
credit related to the item being changed.
c. Under its proposed method of accounting, the Applicant will deduct non-incidental materials and
supplies as defined under Treas. Reg. §§ 1.162-3(a)(1) and (c)(1)(iv) when they are first used or
consumed in the Applicant’s operations in accordance with Treas. Reg. § 1.162-3(c)(1), taking into
account Treas. Reg. § 1.162-3(b).
d. The Applicant’s overall method of account is an accrual method.
Part II, Question 15a – Description of Trade or Business
The Applicant is a regulated electric and gas utility company engaged in the generation, transmission, and
distribution. The Applicant is also involved in the sale of electricity and the distribution of natural gas. Its
Attachment A
Page 9 of 27
Avista Corporation EIN: 91-0462470
Form 3115 Attachment – Materials and Supplies FYE: 12/31/2019
Page 2
principal business activity code is 221100. The Applicant has a single trade or business as described in
Treas. Reg. § 1.446-1(d).
Part II, Question 17 – Book-Tax Conformity
The Applicant will not use the proposed method of account for its books and records or its financial
statements because the proposed method does not conform to Generally Accepted Accounting Principles
(“GAAP”).
Part IV, Question 26 – Section 481(a) Adjustment
The net negative I.R.C. § 481(a) adjustment of ($30,930,774) is equal to the adjusted tax basis of the
materials and supplies as of the first day of the tax year of change. There is no I.R.C. § 263A impact.
Request for Facsimile Transmission Pursuant to Section 9.04(3) of Rev. Proc. 2020-1
The Applicant hereby requests that a facsimile transmission of any document related to this Form 3115 be
sent to the Applicant and the Applicant’s authorized representatives as follows:
Applicant Fax Number
Daniel Loutzenhiser [phone]
Applicant’s Representatives Fax Number
Jane Rohrs [phone]
Matt McKinney [phone]
Jon Ryan [phone]
Attachment A
Page 10 of 27

AVISTA CORP.

Form 3115, Application for Change of Accounting Method

IDD#5

Change in method of accounting for costs under I.R.C. § 263A effective
for the taxable year ended December 31, 2019 under the automatic
consent procedures of Rev. Proc. 2019-43.

Attachment A
Page 11 of 27
Form 3115
(Rev. December 2018)OMB No. 1545-2070
Department of the Treasury
Internal Revenue Service
Name of filer (name of parent corporation if a consolidated group) (see instructions)Identification number (see instructions)
Principal business activity code number (see instructions)
Number, street, and room or suite no. If a P.O. box, see the instructions.Tax year of change begins (MM/DD/YYYY)
Tax year of change ends (MM/DD/YYYY)
City or town, state, and ZIP code Name of contact person (see instructions)
NEVILLE JIANG
Name of applicant(s) (if different than filer) and identification number(s) (see instructions)Contact person's telephone number
If the applicant is a member of a consolidated group, check this box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .►X
If Form 2848, Power of Attorney and Declaration of Representative, is attached (see instructions for when Form 2848 is
required), check this box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ►X
Individual Cooperative (Sec. 1381)
X Corporation Partnership See instructions.
Controlled foreign corporation (Sec. 957)S corporation Depreciation or Amortization
10/50 corporation (Sec. 904(d)(2)(E))Insurance co. (Sec. 816(a))Financial Products and/or Financial Activities of
Qualified personal service Insurance co. (Sec. 831)Financial Institutions
corporation (Sec. 448(d)(2))Other (specify) ►X Other (specify) ►
Exempt organization. Enter
Code section ►
The taxpayer must attach all applicable statements requested throughout this form.
Information For Automatic Change Request
1
(1) DCN:(2) DCN:(3) DCN:(4) DCN:(5) DCN:(6) DCN:
(7) DCN:(8) DCN:(9) DCN:(10) DCN:(11) DCN:(12) DCN:
b Description ►
2 Do any of the eligibility rules restrict the applicant from filing the requested change using the automatic change
procedures (see instructions)? If "Yes," attach an explanation. . . . . . . . . . . . . . . . . . . . . . . .
3 Has the filer provided all the information and statements required on this form and by the List of Automatic
Changes under which the applicant is requesting a change? See instructions. . . . . . . . . . . . . . . . . . .
Complete Part II and Part IV of this form, and, Schedules A through E, if applicable.
Information For All Requests
4 During the tax year of change, did or will the applicant (a) cease to engage in the trade or business to which the
requested change relates, or (b) terminate its existence? See instructions. . . . . . . . . . . . . . . . . . . .
5 Is the applicant requesting to change to the principal method in the tax year of change under Regulations section
1.381(c)(4)-1(d)(1) or 1.381(c)(5)-1(d)(1)?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If "No," go to line 6a.
If "Yes," the applicant cannot file a Form 3115 for this change. See instructions.
Under penalties of perjury, I declare that I have examined this application, including accompanying schedules and statements, and to the best of my
knowledge and belief, the application contains all the relevant facts relating to the application, and it is true, correct, and complete. Declaration of
preparer (other than applicant) is based on all information of which preparer has any knowledge.
Signature of filer (and spouse, if joint return)Date Name and title (print or type)
►
Print/Type preparer's name Preparer's signature Date
Firm's name ►DELOITTE TAX LLP
For Privacy Act and Paperwork Reduction Act Notice, see the instructions.Cat. No. 19280E Form 3115 (Rev. 12-2018)
taxpayer or to the taxpayer's requested change in method of accounting. This includes (1) all relevant information requested on this Form 3115 (including
Sign
Here
Preparer
(other than
filer/applicant)
X
Application for Change in Accounting Method
▶ Go to www.irs.gov/Form3115 for instructions and the latest information.
Yes No
X
91-0462470
221100
1411 EAST MISSION AVENUE
SPOKANE, WA 99202
N/A [phone]
SECTION 263A
its instructions), and (2) any other relevant information, even if not specifically requested on Form 3115.
Caution: To be eligible for approval of the requested change in method of accounting, the taxpayer must provide all information that is relevant to the
AVISTA CORPORATION
Part I
194
"Other," and provide both a description of the change and a citation of the IRS guidance providing the automatic change.
See instructions.
Enter the applicable designated automatic accounting method change number ("DCN") for the requested automatic change.
Enter only one DCN, except as provided for in guidance published by the IRS. If the requested change has no DCN, check
Other
MATTHEW MCKINNEY
1/1/2019
12/31/2019
DANIEL LOUTZENHISER - ASSISTANT
TREASURER
Yes No
X
10/1/2020
10/6/2020
Attachment A
Page 12 of 27
Form 3115 (Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 2
Information For All Requests (continued)
6a Does the applicant (or any present or former consolidated group in which the applicant was a member during the
applicable tax year(s)) have any federal income tax return(s) under examination (see instructions)? . . . . . . . . .
If "No," go to line 7a.
b Is the method of accounting the applicant is requesting to change an issue under consideration (with respect to
either the applicant or any present or former consolidated group in which the applicant was a member during the
applicable tax year(s))? See instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c Enter the name and telephone number of the examining agent and the tax year(s) under examination.N/A
Name ►Telephone number ►Tax year(s) ►
d Has a copy of this Form 3115 been provided to the examining agent identified on line 6c? . . . . . . . . . . . . .
7a Does audit protection apply to the applicant's requested change in the method of accounting? See instructions. . . . . . . . . .
If "No," attach an explanation.
b If "Yes," check the applicable box and attach the required statement.
X
X
8a Does the applicant (or any present or former consolidated group in which the applicant was a member during the
applicable tax year(s)) have any federal income tax return(s) before Appeals and/or a federal court? . . . . . . . . . . . . .
If "No," go to line 9.
b Is the method of accounting the applicant is requesting to change an issue under consideration by Appeals and/or
a federal court (for either the applicant or any present or former consolidated group in which the applicant was a
member for the tax year(s) the applicant was a member)? See instructions. . . . . . . . . . . . . . . . . . . .
If "Yes," attach an explanation.
c If "Yes," enter the name of the (check the box) Appeals officer and/or counsel for the government,
telephone number, and the tax year(s) before Appeals and/or a federal court.N/A
Name ►Telephone number ►Tax year(s) ►
d Has a copy of this Form 3115 been provided to the Appeals officer and/or counsel for the government identified
on line 8c? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 If the applicant answered "Yes" to line 6a and/or 8a with respect to any present or former consolidated group,
attach a statement that provides each parent corporation's (a) name, (b) identification number, (c) address, and
(d) tax year(s) during which the applicant was a member that is under examination, before an Appeals office,
and/or before a federal court.N/A
10 If for federal income tax purposes, the applicant is either an entity (including a limited liability company) treated as
a partnership or an S corporation, is it requesting a change from a method of accounting that is an issue under
consideration in an examination, before Appeals, or before a federal court, with respect to a federal income tax
return of a partner, member, or shareholder of that entity?. . . . . . . . . . . . . . . . . . . . . . . .
11a Has the applicant, its predecessor, or a related party requested or made (under either an automatic or
non-automatic change procedure) a change in method of accounting within any of the five tax years ending with
the tax year of change?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If "No," go to line 12.
b If "Yes," for each trade or business, attach a description of each requested change in method of accounting
(including the tax year of change) and state whether the applicant received consent.SEE ATTACHMENT
c If any application was withdrawn, not perfected, or denied, or if a Consent Agreement granting a change was not
signed and returned to the IRS, or the change was not made or not made in the requested year of change, attach
an explanation.N/A
12 Does the applicant, its predecessor, or a related party currently have pending any request (including any
concurrently filed request) for a private letter ruling, change in method of accounting, or technical advice? . . . . . . . .
If "Yes," for each request attach a statement providing (a) the name(s) of the taxpayer, (b) identification number(s),
(c) the type of request (private letter ruling, change in method of accounting, or technical advice), and (d) the
specific issue(s) in the request(s).
13 Is the applicant requesting to change its overall method of accounting? . . . . . . . . . . . . . . . . . . . .
If "Yes," complete Schedule A on page 4 of this form.
Form 3115 ((Rev. 12-2018)
X
X
X
X
X
Part II
N/A
N/A
N/A
N/A
Yes No
X
N/A
Attachment A
Page 13 of 27
Form 3115 ((Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 3
Information For All Requests (continued)
14 If the applicant is either (i) not changing its overall method of accounting, or (ii) is changing its overall method of
accounting and changing to a special method of accounting for one or more items, attach a detailed and
complete description for each of the following (see instructions):SEE ATTACHMENT
a The item(s) being changed.
b The applicant's present method for the item(s) being changed.
c The applicant's proposed method for the item(s) being changed.
d The applicant's present overall method of accounting (cash, accrual, or hybrid).
15a Attach a detailed and complete description of the applicant's trade(s) or business(es). See section 446(d).SEE ATTACHMENT
b If the applicant has more than one trade or business, as defined in Regulations section 1.446-1(d), describe
(i) whether each trade or business is accounted for separately; (ii) the goods and services provided by each trade
or business and any other types of activities engaged in that generate gross income; (iii) the overall method of
accounting for each trade or business; and (iv) which trade or business is requesting to change its accounting
method as part of this application or a separate application.N/A
Note: If you are requesting an automatic method change, see the instructions to see if you are required to
complete Lines 16a-16c.
16a Attach a full explanation of the legal basis supporting the proposed method for the item being changed. Include a
detailed and complete description of the facts that explains how the law specifically applies to the applicant's
situation and that demonstrates that the applicant is authorized to use the proposed method.SEE ATTACHMENT
b Include all authority (statutes, regulations, published rulings, court cases, etc.) supporting the proposed method.SEE ATTACHMENT
c Include either a discussion of the contrary authorities or a statement that no contrary authority exists.N/A
17 Will the proposed method of accounting be used for the applicant's books and records and financial statements?
For insurance companies, see the instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If "No," attach an explanation.SEE ATTACHMENT
18 Does the applicant request a conference with the IRS National Office if the IRS National Office proposes an adverse response?
19a If the applicant is changing to either the overall cash method, an overall accrual method, or is changing its method of
accounting for any property subject to section 263A, any long-term contract subject to section 460 (see 19b), or
inventories subject to section 474, enter the applicant's gross receipts for the 3 tax years preceding the tax year of change.
1st preceding 2nd preceding 3rd preceding
12 yr.year ended: mo. 12 yr.year ended: mo. 12 yr.
$$$
b If the applicant is changing its method of accounting for any long-term contract subject to section 460, in addition
to completing 19a, enter the applicant's gross receipts for the 4th tax year preceding the tax year of change:N/A
4th preceding year ended: mo. yr.$
Information For Non-Automatic Change Request N/A
20 Is the applicant's requested change described in any revenue procedure, revenue ruling, notice, regulation, or
other published guidance as an automatic change request?. . . . . . . . . . . . . . . . . . . . . . . .
If "Yes," attach an explanation describing why the applicant is submitting its request under the non-automatic
change procedures.
21 Attach a copy of all documents related to the proposed change (see instructions).
22 Attach a statement of the applicant's reasons for the proposed change.
23 If the applicant is a member of a consolidated group for the year of change, do all other members of the
consolidated group use the proposed method of accounting for the item being changed?. . . . . . . . . . . . .
If "No," attach an explanation.
24a $
b If the applicant qualifies for a reduced user fee, attach the required information or certification (see instructions).
Form 3115 ((Rev. 12-2018)
X
1,501,630,693
X
NoYes
Part III
Part II
2018 2017
1,505,015,471
Enter the amount of user fee attached to this application (see instructions). ►
2016
1,549,703,536
Yes No
Attachment A
Page 14 of 27
Form 3115 ((Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 4
Section 481(a) Adjustment
25 Does published guidance require the applicant (or permit the applicant and the applicant is electing) to implement the
requested change in method of accounting on a cut-off basis? . . . . . . . . . . . . . . . . . . . . . . . . .
If "Yes," attach an explanation and do not complete lines 26, 27, and 28 below.
26 Enter the section 481(a) adjustment. Indicate whether the adjustment is an increase (+) or a decrease (-) in
income. ► $Attach a summary of the computation and an explanation of the methodology
used to determine the section 481(a) adjustment. If it is based on more than one component, show the
computation for each component. If more than one applicant is applying for the method change on the
(a)(b)(c)
adjustment attributable to each applicant.SEE ATTACHMENT
27 Is the applicant making an election to take the entire amount of the adjustment into account in the tax year of change?
If "Yes," check the box for the applicable elective provision used to make the election (see instructions).
$50,000 de minimis election Eligible acquisition transaction election
28 Is any part of the section 481(a) adjustment attributable to transactions between members of an affiliated group, a
consolidated group, a controlled group, or other related parties?. . . . . . . . . . . . . . . . . . . . . . . .
Schedule A — Change in Overall Method of Accounting (If Schedule A applies, Part I below must be completed.)
Change in Overall Method (see instructions)
1 Check the appropriate boxes below to indicate the applicant's present and proposed methods of accounting.
Present method:Cash Accrual Hybrid (attach description)
Proposed method:Cash Accrual Hybrid (attach description)
2 Enter the following amounts as of the close of the tax year preceding the year of change. If none, state "None." Also, attach a
statement providing a breakdown of the amounts entered on lines 2a through 2g.
a Income accrued but not received (such as accounts receivable). . . . . . . . . . . . . . . . . . . $
b Income received or reported before it was earned (such as advanced payments). Attach a description of
the income and the legal basis for the proposed method . . . . . . . . . . . . . . . . . . . . . . . . . .
c Expenses accrued but not paid (such as accounts payable) . . . . . . . . . . . . . . . . . . . . . . . . .
d Prepaid expenses previously deducted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e Supplies on hand previously deducted and/or not previously reported . . . . . . . . . . . . . . . . . . . .
f Inventory on hand previously deducted and/or not previously reported. Complete Schedule D, Part II . . . . . . .
g Other amounts (specify). Attach a description of the item and the legal basis for its inclusion in the
calculation of the section 481(a) adjustment. ►
h Net section 481(a) adjustment (Combine lines 2a-2g.) Indicate whether the adjustment is an increase (+)
or decrease (-) in income. Also enter the net amount of this section 481(a) adjustment amount on Part IV,
line 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3 Is the applicant also requesting the recurring item exception under section 461(h)(3)? . . . . . . . . . Yes No
4 Attach copies of the profit and loss statement (Schedule F (Form 1040) for farmers) and the balance sheet, if applicable, as of
the close of the tax year preceding the year of change. Also attach a statement specifying the accounting method used when
preparing the balance sheet. If books of account are not kept, attach a copy of the business schedules submitted with the
federal income tax return or other return (such as, tax-exempt organization returns) for that period. If the amounts in Part I,
lines 2a through 2g, do not agree with the amounts shown on both the profit and loss statement and the balance sheet, attach
a statement explaining the differences.
5 Is the applicant making a change to the overall cash method as a small business taxpayer (see instructions)? . . . . Yes No
Change to the Cash Method For Non-Automatic Change Request (see instructions)
Applicants requesting a change to the cash method must attach the following information:
1 A description of inventory items (items whose production, purchase, or sale is an income-producing factor) and materials and
supplies used in carrying out the business.
2 An explanation as to whether the applicant is required to use the accrual method under any section of the Code or regulations.
Form 3115 (Rev. 12-2018)
X
-136,736,790
Amount
X
Yes No
-
Part I
Part IV
N/A
X
Attachment A
Page 15 of 27
Form 3115 (Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 5
Schedule B — Change to the Deferral Method for Advance Payments (see instructions)
1 If the applicant is requesting to change to the deferral method for advance payments, as described in the instructions, attach the following information:
a Explain how the advance payments meet the definition of advance payment, as described in the instructions.
b Does the taxpayer use an applicable financial statement as described in the instructions and, if so, identify it.
c Describe the taxpayer’s allocation method, if there is more than one performance obligation, as defined in the instructions.
d Describe the taxpayer’s legal basis for deferral. See instructions.
e If the applicant is filing under the non-automatic change procedures, see the instructions for the information required.
Schedule C — Changes Within the LIFO Inventory Method (see instructions)
General LIFO Information
Complete this section if the requested change involves changes within the LIFO inventory method. Also, attach a copy of all
Forms 970, Application To Use LIFO Inventory Method, filed to adopt or expand the use of the LIFO method.
1 Attach a description of the applicant's present and proposed LIFO methods and submethods for each of the following
items:
a Valuing inventory (for example, unit method or dollar-value method).
b Pooling (for example, by line or type or class of goods, natural business unit, multiple pools, raw material content, simplified
dollar-value method, inventory price index computation (IPIC) pools, vehicle-pool method, etc.).
c Pricing dollar-value pools (for example, double-extension, index, link-chain, link-chain index, IPIC method, etc.).
d Determining the current-year cost of goods in the ending inventory (such as, most recent acquisitions, earliest acquisitions during
the current year, average cost of current-year acquisitions, rolling-average cost, or other permitted method).
2 If any present method or submethod used by the applicant is not the same as indicated on Form(s) 970 filed to adopt or
expand the use of the method, attach an explanation.
3 If the proposed change is not requested for all the LIFO inventory, attach a statement specifying the inventory to which the
change is and is not applicable.
4 If the proposed change is not requested for all of the LIFO pools, attach a statement specifying the LIFO pool(s) to which the
change is applicable.
5 Attach a statement addressing whether the applicant values any of its LIFO inventory on a method other than cost. For
example, if the applicant values some of its LIFO inventory at retail and the remainder at cost, identify which inventory items
6
Change in Pooling Inventories
1 If the applicant is proposing to change its pooling method or the number of pools, attach a description of the contents of, and
state the base year for, each dollar-value pool the applicant presently uses and proposes to use.
2 If the applicant is proposing to use natural business unit (NBU) pools or requesting to change the number of NBU pools,
attach the following information (to the extent not already provided) in sufficient detail to show that each proposed NBU was
determined under Regulations sections 1.472-8(b)(1) and (2):
a A description of the types of products produced by the applicant. If possible, attach a brochure.
b A description of the types of processes and raw materials used to produce the products in each proposed pool.
c If all of the products to be included in the proposed NBU pool(s) are not produced at one facility, state the reasons for the
separate facilities, the location of each facility, and a description of the products each facility produces.
d A description of the natural business divisions adopted by the taxpayer. State whether separate cost centers are maintained
and if separate profit and loss statements are prepared.
e A statement addressing whether the applicant has inventories of items purchased and held for resale that are not further
processed by the applicant, including whether such items, if any, will be included in any proposed NBU pool.
f A statement addressing whether all items including raw materials, goods-in-process, and finished goods entering into the
entire inventory investment for each proposed NBU pool are presently valued under the LIFO method. Describe any items that
are not presently valued under the LIFO method that are to be included in each proposed pool.
g A statement addressing whether, within the proposed NBU pool(s), there are items both sold to unrelated parties and
transferred to a different unit of the applicant to be used as a component part of another product prior to final processing.
3 If the applicant is engaged in manufacturing and is proposing to use the multiple pooling method or raw material content
pools, attach information to show that each proposed pool will consist of a group of items that are substantially similar. See
Regulations section 1.472-8(b)(3).
4 If the applicant is engaged in the wholesaling or retailing of goods and is requesting to change the number of pools used,
attach information to show that each of the proposed pools is based on customary business classifications of the applicant's
Form 3115 (Rev. 12-2018)
Part I
N/A
N/A
Attachment A
Page 16 of 27
Form 3115 (Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 6
Schedule D — Change in the Treatment of Long-Term Contracts Under Section 460, Inventories, or Other
Section 263A Assets (see instructions)
Change in Reporting Income From Long-Term Contracts (Also complete Part III on pages 7 and 8.)N/A
1 To the extent not already provided, attach a description of the applicant's present and proposed methods for reporting income
and expenses from long-term contracts. Also, attach a representative actual contract (without any deletion) for the requested
change. If the applicant is a construction contractor, attach a detailed description of its construction activities.
2a Are the applicant's contracts long-term contracts as defined in section 460(f)(1) (see instructions)? . . . . . . Yes No
b If "Yes," do all the contracts qualify for the exception under section 460(e) (see instructions)? . . . . . . . . Yes No
If line 2b is "No," attach an explanation.
c Is the applicant requesting to use the percentage-of-completion method using cost-to-cost under
Regulations section 1.460-4(b)?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes No
d If line 2c is “Yes,” in computing the completion factor of a contract, will the applicant use the simplified
cost-to-cost method described in Regulations section 1.460-5(c)?. . Yes No
e If line 2c is "No," is the applicant requesting to use the exempt-contract percentage-of-completion
method under Regulations section 1.460-4(c)(2)? . . . . . . . . . . . . . . . . . . . . . . . . Yes No
If line 2e is "Yes," attach an explanation of what method the applicant will use to determine a contract's
completion factor.
If line 2e is "No," attach an explanation of what method the applicant is using and the authority for its use.
3a Does the applicant have long-term manufacturing contracts as defined in section 460(f)(2)? . . . . . . . Yes No
b If "Yes," attach a description of the applicant's manufacturing activities, including any required installation
of manufactured goods.
4a Yes No
b Yes No
Change in Valuing Inventories Including Cost Allocation Changes (Also complete Part III on pages 7 and 8.)N/A
1 Attach a description of the inventory goods being changed.
2 Attach a description of the inventory goods (if any) NOT being changed.
3a Is the applicant subject to section 263A? If "No," go to line 4a . . . . . . . . . . . . . . . . . .Yes No
Is the applicant's present inventory valuation method in compliance with section 263A (see instructions)?
If "No," attach a detailed explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Yes No
4a Check the appropriate boxes in the chart.
Identification methods:
Specific identification . . . . . . . . . . . . . . . . . . . . . . . . . .
FIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (attach explanation) . . . . . . . . . . . . . . . . . . . . . . . .
Valuation methods:
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost or market, whichever is lower. . . . . . . . . . . . . . . . . . . . . . . . .
Retail cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail, lower of cost or market . . . . . . . . . . . . . . . . . . . . . .
Other (attach explanation) . . . . . . . . . . . . . . . . . . . . . . . .
b Enter the value at the end of the tax year preceding the year of change.
5 If the applicant is changing from the LIFO inventory method to a non-LIFO method, attach the following information (see
instructions).
a Copies of Form(s) 970 filed to adopt or expand the use of the method.
b Only for applicants requesting a non-automatic change. A statement describing whether the applicant is changing to the
method required by Regulations section 1.472-6(a) or (b), or whether the applicant is proposing a different method.
c Only for applicants requesting an automatic change. The statement required by section 23.01(5) of Rev. Proc. 2018-31 (or
its successor).
Form 3115 (Rev. 12-2018)
$
Inventory Method
Not Being ChangedInventory Method Being Changed
Part I
Present methodProposed method
$
Present method
Attachment A
Page 17 of 27
Form 3115 (Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 7
Method of Cost Allocation (Complete this part if the requested change involves either property subject
to section 263A or long-term contracts as described in section 460). See instructions
Section A — Allocation and Capitalization Methods
Attach a description (including sample computations) of the present and proposed method(s) the applicant uses to capitalize direct
and indirect costs properly allocable to real or tangible personal property produced and property acquired for resale, or to allocate
direct and indirect costs required to be allocated long-term contracts. Include a description of the method(s) used for allocating
indirect costs to intermediate cost objectives such as departments or activities prior to the allocation of such costs to long-term
contracts, real or tangible personal property produced, and property acquired for resale. The description must include the following:
1 The method of allocating direct and indirect costs (for example, specific identification, burden rate, standard cost, or other
reasonable allocation method).SEE ATTACHMENT
2 The method of allocating mixed service costs (for example, direct reallocation, step-allocation, simplified service cost using the
labor-based allocation ratio, simplified service cost using the production cost allocation ratio, or other reasonable allocation
method).SEE ATTACHMENT
3 Except for long-term contract accounting methods, the method of capitalizing additional section 263A costs (for example,
simplified production with or without the historic absorption ratio election, simplified resale with or without the historic
absorption ratio election including permissible variations, the U.S. ratio, or other reasonable allocation method).SEE ATTACHMENT
Section B — Direct and Indirect Costs Required to be Allocated
Check the appropriate boxes showing the costs that are or will be fully included, to the extent required, in the cost of real or tangible
personal property produced or property acquired for resale under section 263A or allocated to long-term contracts under section
460. Mark "N/A" in a box if those costs are not incurred by the applicant. If a box is not checked, it is assumed that those costs are
not fully included to the extent required. Attach an explanation for boxes that are not checked.
1 Direct material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4 Officers' compensation (not including selling activities) . . . . . . . . . . . . . . . . . . . .
5 Pension and other related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 Indirect materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8 Purchasing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 Handling, processing, assembly, and repackaging costs . . . . . . . . . . . . . . . . . . . . . .
10 Offsite storage and warehousing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11 Depreciation, amortization, and cost recovery allowance for equipment and facilities
12 Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14 Taxes other than state, local, and foreign income taxes . . . . . . . . . . . . . . . . . . .
15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17 Maintenance and repairs that relate to a production, resale, or long-term contract activity . . . . . . . .
18 Engineering and design costs (not including section 174 research and experimental
expenses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19 Rework labor, scrap, and spoilage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20 Tools and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21 Quality control and inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22 Bidding expenses incurred in the solicitation of contracts awarded to the applicant . . . . . . . . . .
23 Licensing and franchise costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24 Capitalizable service costs (including mixed service costs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25 Administrative costs (not including any costs of selling or any return on capital) . . . . . . . . . .
26 Research and experimental expenses attributable to long-term contracts . . . . . . . . . . . . . .
27 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28 Other costs (Attach a list of these costs.) . . . . . . . . . . . . . . . . . . . . . . . . .
Form 3115 (Rev. 12-2018)
X
X
X X
X X
X
X X
X X
N/A N/A
X X
X
X
X
X
X
X
X X
X X
X
X
X
X
X X
N/A N/A
X X
X X
X X
X X
X X
X X
N/A N/A
X X
X
X
X X
X
Present method Proposed method
X X
X X
Part III
Attachment A
Page 18 of 27
Form 3115 (Rev. 12-2018)AVISTA CORPORATION 91-0462470 Page 8
Method of Cost Allocation (continued) See instructions.
Section C — Other Costs Not Required To Be Allocated (Complete Section C only if the applicant is requesting to change its
1 Marketing, selling, advertising, and distribution expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2 Research and experimental expenses not included in Section B, line 26 . . . . . . . . . . . . .
3 Bidding expenses not included in Section B, line 22 . . . . . . . . . . . . . . . . . . . . .
4 General and administrative costs not included in Section B . . . . . . . . . . . . . . . . . . .
5 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 Cost of strikes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 Warranty and product liability costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8 Section 179 costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 On-site storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10 Depreciation, amortization, and cost recovery allowance not included in Section B,
11 Other costs (Attach a list of these costs.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule E — Change in Depreciation or Amortization. See instructions.
Applicants requesting approval to change their method of accounting for depreciation or amortization complete this section.
Applicants must provide this information for each item or class of property for which a change is requested.
Note: See the Summary of the List of Automatic Accounting Method Changes in the instructions for information regarding
automatic changes under sections 56, 167, 168, 197, 1400I, 1400L, or former section 168. Do not file Form 3115 with respect to
certain late elections and election revocations. See instructions.
1 Yes
If "Yes," the only changes permitted are under Regulations section 1.167(a)-11(c)(1)(iii).
2 Is any of the depreciation or amortization required to be capitalized under any Code section such as, section
263A? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Yes
3 Has a depreciation, amortization, expense, or disposition election been made for the property such as
the election under sections 168(f)(1), 168(i)(4), 179, 179C, or Regulations section 1.168(i)-8(d)?. . . . . . .Yes
4a To the extent not already provided, attach a statement describing the property subject to the change. Include in the description
the type of property, the year the property was placed in service, and the property's use in the applicant's trade or business or
income-producing activity.
b If the property is residential rental property, did the applicant live in the property before renting it?. . . . . . Yes
c Is the property public utility property? . . . . . . . . . . . . . . . . . . . . . . . . . . . .Yes
5 To the extent not already provided in the applicant's description of its present method, attach a statement explaining how the
property is treated under the applicant's present method (for example, depreciable property, inventory property, supplies
under Regulations section 1.162-3, nondepreciable section 263(a) property, property deductible as a current expenses, etc.).
6 If the property is not currently treated as depreciable or amortizable property, attach a statement of the facts supporting the
proposed change to depreciate or amortize the property.
7 If the property is currently treated and/or will be treated as depreciable or amortizable property, provide the following
information for both the present (if applicable) and proposed methods:
a The Code section under which the property is or will be depreciated or amortized (for example, section 168(g)).
b The applicable asset class from Rev. Proc. 87-56, 1987-2 C.B. 674, for each asset depreciated under section 168 (MACRS) or
under section 1400L; the applicable asset class from Rev. Proc. 83-35, 1983-1 C.B. 745, for each asset depreciated under
former section 168 (ACRS); an explanation why no asset class is identified for each asset for which an asset class has not
been identified by the applicant.
c The facts to support the asset class for the proposed method.
d The depreciation or amortization method of the property, including the applicable Code section (for example, 200% declining
balance method under section 168(b)(1)).
e The useful life, recovery period, or amortization period of the property.
f The applicable convention of the property.
g Whether the additional first-year special depreciation allowance (for example, as provided by section 168(k), 168(l), 168(m),
168(n), 1400L(b), or 1400N(d)) was or will be claimed for the property. If not, also provide an explanation as to why no special
depreciation allowance was or will be claimed.
h Whether the property was or will be in a single asset account, a multiple asset account, or a general asset account.
No
Form 3115 (Rev. 12-2018)
No
No
No
No
Present method Proposed method
N/A
N/A
If "Yes," enter the applicable section ►
If "Yes," state the election made ►
Attachment A
Page 19 of 27
Avista Corporation EIN: 91-0462470
Form 3115 Attachment – 263A FYE: 12/31/2019
Part II, Question 11b – Accounting Method Changes in the Past Five Years
Avista Corporation (EIN: 91-0462470) is changing its method of accounting for depreciation effective for
the taxable year ended December 31, 2019 under the automatic consent procedures of Rev. Proc. 2019-43.

Avista Corporation (EIN: 91-0462470) is changing its method of accounting for non-incidental materials
and supplies under Treas. Reg. § 1.162-3(a) effective for the taxable year ended December 31, 2019 under
the automatic consent procedures of Rev. Proc. 2019-43
Avista Corporation (EIN: 91-0462470) is changing its method of accounting for prepaid expenses under
Treas. Reg. § 1.263(a)-3 effective for the taxable year ended December 31, 2019 under the automatic
consent procedures of Rev. Proc. 2019-43.

Avista Corporation (EIN: 91-0462470) is changing its method of accounting for deducting repairs and
maintenance costs and its method of identifying the unit of property, effective for the taxable year ended
December 31, 2019 under the automatic consent procedures of Rev. Proc. 2019-43.
Part II, Question 14 – Description of Proposed Change
a. The Applicant is changing its method of accounting for capitalizing mixed service costs under
section 263A. The Applicant has not adopted the International Financial Reporting Standards
(“IFRS”) and the proposed change is not related to the adoption of IFRS.

b. The Applicant presently allocates its mixed service costs to two activities or cost objects: (1) the
production of self-constructed assets (including generation, electric transmission and distribution,
and gas distribution plant property, where applicable), and (2) the generation, transmission, and
distribution of electricity, where applicable. Under its present method, any direct materials
allocable to the generation of electricity are capitalized and included in the inventoriable costs of
electricity. Any direct material costs allocable to the repair and maintenance of transmission and
distribution equipment, maintaining continuous transmission and distribution services, or other
transmission and distribution activities are allocated to the transmission and distribution of
electricity. The Applicant elects to capitalize certain period costs with respect to transmission and
distribution activities, and costs related to such activities are allocated to the electricity transmitted
and distributed.

Under the present method, any physical labor costs allocable to the generation of electricity are
capitalized and included in the inventoriable costs of electricity. Any physical labor costs allocable
to the repair and maintenance of transmission and distribution equipment, maintaining continuous
transmission and distribution services, or other transmission and distribution activities are allocated
to the electricity transmitted and distributed.

Thus, under the present method, the direct material or physical labor costs are traced to the cost
objective, such as a function, department, activity, or product on the basis of a cause and effect or
other reasonable relationship between the costs and the cost objective. Those costs traced to the
cost objective related to the production of self-constructed assets are capitalized and included in
the basis of assets produced (either generation, electric transmission, and distribution, or gas
distribution property, where applicable). Those costs traced to the cost objectives related to the
generation, transmission, or distribution of electricity are capitalized and included in the
inventoriable costs of the electricity, where applicable.
Attachment A
Page 20 of 27
Avista Corporation EIN: 91-0462470
Form 3115 Attachment – 263A FYE: 12/31/2019

Under the present method, indirect costs, including mixed service costs, are allocable to
intermediate costs objectives such as departments or activities using cause and effect or reasonable
factors and relationships. Indirect costs are subsequently allocated to non-intermediate costs
objectives using additional reasonable factors and relationships.

c. The Applicant proposes to capitalize and allocate mixed service costs to self-constructed assets
using a method of accounting accepted under the Industry Director Directives issued by the Internal
Revenue Service (“IRS”) in 2009 and 2014, which is further described below (IDD #5).

d. The Applicant’s overall method of accounting is an accrual method.
Part II, Question 15a – Description of Trade or Business
The Applicant is a regulated electric and gas utility company engaged in the generation, transmission, and
distribution. The Applicant is also involved in the sale of electricity and the distribution of natural gas. Its
principal business activity code is 221100. The Applicant has a single trade or business as described in
Treas. Reg. § 1.446-1(d).
Part II, Question 16a-c – Legal Basis for Proposed Change
Treas. Reg. § 1.263A-1(a)(3)(i) provides that taxpayers subject to section 263A must capitalize all direct
costs and certain indirect costs properly allocable to –
(A) real property and tangible personal property produced by the taxpayer; and
(B) real property and personal property described in section 1221(1), which is acquired by the taxpayer
for resale.
Treas. Reg. § 1.263A-1(a)(3)(ii) provides that taxpayers that produce real property and tangible personal
property (producers) must capitalize all the direct costs of producing the property and the property’s
properly allocable share of indirect costs (described in paragraphs (e)(2)(i) and (3) of this section),
regardless of whether the property is sold or used in the taxpayer’s trade or business.
Treas. Reg. § 1.263A-2(a)(1) defines produce to include construct, build, install, manufacture, develop,
improve, create, raise, and grow.
Treas. Reg. § 1.263A-1(a)(3)(iii) provides that retailers, wholesalers, and other taxpayers that acquire
property described in section 1221(1) for resale (resellers) must capitalize the direct costs of acquiring the
property and the property’s properly allocable share of indirect costs (described in paragraphs (e)(2)(ii) and
(3) of this section). See Treas. Reg. § 1.263A-3 for rules relating to resellers. See also section
263A(b)(2)(B), which excepts from section 263A personal property acquired for resale by a small reseller.
Treas. Reg. § 1.263A-1(c) provides the rules related to the general operation of section 263A. Treas. Reg.
§ 1.263A-1(c)(1) provides that under section 263A, taxpayers must capitalize their direct costs and a
properly allocable share of their indirect costs to property produced or property acquired for resale. In order
to determine these capitalizable costs, taxpayers must allocate or apportion costs to various activities,
including production or resale activities. After section 263A costs are allocated to the appropriate
production or resale activities, these costs are generally allocated to the items of property produced or
property acquired for resale during the taxable year and capitalized to the items that remain on hand at the
end of the taxable year.
Attachment A
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Avista Corporation EIN: 91-0462470
Form 3115 Attachment – 263A FYE: 12/31/2019
Treas. Reg. § 1.263A-1(c)(2)(i) provides that any cost which (but for section 263A and the regulations
thereunder) may not be taken into account in computing taxable income for any taxable year is not treated
as a cost properly allocable to property produced or acquired for resale under section 263A and the
regulations thereunder. Thus, for example, if a business meal deduction is limited by section 274(n) to 80
percent of the cost of the meal, the amount properly allocable to property produced or acquired for resale
under section 263A is also limited to 80 percent of the cost of the meal.
Treas. Reg. § 1.263A-1(c)(3) provides that taxpayers subject to section 263A must capitalize all indirect
costs properly allocable to property produced. Indirect costs are properly allocable to property produced
when the cost directly benefits or is incurred by reason of the performance of the production activity.
Additionally, indirect costs may be allocable to both production and resale activities, as well as to other
activities not subject to section 263A. Taxpayers must make a reasonable allocation of indirect costs
between production, resale, and other activities.
Treas. Reg. § 1.263A-1(d)(1) provides that self-constructed assets are assets produced by a taxpayer for use
by the taxpayer in its trade or business. Self-constructed assets are subject to section 263A.
Treas. Reg. § 1.263A-1(e)(3)(ii)(O) includes repairs and maintenance (such as the cost of repairing and
maintaining equipment or facilities) in the indirect costs required to be capitalized.
Treas. Reg. § 1.263A-1(e)(4)(i)(A) defines service costs as a type of indirect costs (e.g., general and
administrative costs) that can be identified specifically with a service department or function or that directly
benefits or are incurred by reason of a service department or function.
Treas. Reg. § 1.263A-1(e)(4)(i)(B) defines service departments as administrative, service, or support
departments that incur service costs. The facts and circumstances of the taxpayer’s activities and business
organization control whether a department is a service department. For example, service departments
include personnel, accounting, data processing, security, legal, and other similar departments.
Treas. Reg. § 1.263A-1(e)(4)(ii)(C) provides that mixed service costs are defined as service costs that are
partially allocable to production or resale activities (capitalizable mixed service costs) and partially
allocable to non-production or non-resale activities (deductible mixed service costs). For example, a
personnel department may incur costs to recruit factory workers, the costs of which are allocable to
production activities, and it may incur costs to develop wage, salary, and benefit policies, the costs of which
are allocable to non-production activities.
Treas. Reg. § 1.263A-1(e)(4)(iv) provides examples of deductible service costs. Specifically, Treas. Reg. §
1.263A-1(e)(4)(iv) provides that costs are incurred in the following departments or function are not
generally allocated to production or resale activities:
(A) Departments or functions responsible for overall management of the taxpayer or for setting overall
policy for all of the taxpayer’s activities or trades or businesses, such as the board of directors
(including their immediate staff), and the chief executive, financial, accounting, and legal officers
(including their immediate staff) of the taxpayer, provided that no substantial part of the cost of
such departments or functions benefit a particular production or resale activity.
(B) Strategic business planning.
(C) General financial accounting
(D) General financial planning (including general budgeting) and financial management (including
bank relations and cash management).
Attachment A
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Avista Corporation EIN: 91-0462470
Form 3115 Attachment – 263A FYE: 12/31/2019
(E) Personnel policy (such as establishing and managing personnel policy in general; developing wage,
salary, and benefit policies; developing employee training programs unrelated to particular
production or resale activities; negotiating with labor unions; and maintaining relations with retired
workers).
(F) Quality control policy.
(G) Safety engineering policy.
(H) Insurance or risk management policy (but not including bid or performance bonds or insurance
related to activities associated with property produced or property acquired for resale).
(I) Environmental management policy (except to the extent that the costs of any system or procedure
benefits a particular production or resale activity.
(J) General economic analysis and forecasting.
(K) Internal audit.
(L) Shareholder, public, and industrial relations.
(M) Tax services.
(N) Marketing, selling, or advertising.
Treas. Reg. § 1.263A-1(f)(3)(i)(A) permits the use of a burden rate method and provides that a burden rate
method allocates an appropriate amount of indirect costs to property produced or property acquired for
resale during a taxable year using predetermined rates that approximate the actual amount of indirect costs
incurred by the taxpayer during the taxable year. Burden rates (such as ratios based on direct costs, hours,
or similar items) may be developed by the taxpayer in accordance with acceptable accounting principles
and applied in a reasonable manner. A taxpayer may allocate different indirect costs on the basis of different
burden rates.
Treas. Reg. § 1.263A-1(f)(4) permits the use of any reasonable method to properly allocate direct and
indirect costs among units of property produced or property acquired for resale during the taxable year.
Treas. Reg. § 1.263A-1(g)(4)(ii) provides a de minimis rule. Under this de minimis rule, for the purposes
of administrative convenience, if 90 percent or more of a mixed service department’s costs are deductible
service costs, a taxpayer may elect not to allocate any portion of the service department’s cost to property
produced or property acquired for resale. For example, if 90 percent of the costs of an electing taxpayer’s
industrial relations department benefit the taxpayer’s overall policy-making activities, the taxpayer is not
required to allocate any portion of these costs to a production activity. Under this election, however, if 90
percent or more of a mixed service department’s costs are capitalized service costs, a taxpayer must allocate
100 percent of the department’s costs to the production or resale activity benefitted. For example, if 90
percent of the costs of an electing taxpayer’s accounting department benefit the taxpayer’s manufacturing
activity, the taxpayer must allocate 100 percent of the costs of the account department to the manufacturing
activity. An election under this paragraph (g)(4)(ii) applies to all of a taxpayer’s mixed service departments
and constitutes the adoption of a (or a change in) method of accounting under section 446.
Treas. Reg. § 1.263A-1(j)(1)(i) provides that a taxpayer subject to section 263A must capitalize an arm’s-
length charge for any section 263A costs (e.g., costs of materials, labor, or services) incurred by a related
person that are properly allocable to the property produced or property acquired for resale by the taxpayer.
Both the taxpayer and the related person must account for the transaction as if an arm’s-length charge had
been incurred by the taxpayer with respect to its property produced or property acquired for resale. For
purposes of this paragraph (j)(1)(i), a taxpayer is considered related to another person if the taxpayer and
such person are described in section 482. Further, for purposes of this paragraph (j)(1)(i), arm’s-length
Attachment A
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Avista Corporation EIN: 91-0462470
Form 3115 Attachment – 263A FYE: 12/31/2019
charge means the arm’s-length charge (or other appropriate charge where permitted and applicable) under
the principles of section 482. Any correlative adjustments necessary because of the arm’s-length charge
requirement of this paragraph (j)(1)(i) shall be determined under the principles of section 482.
Beginning in 2000, a number of electric and gas utilities changed to the simplified service cost method
(“SSCM”) of accounting in order to determine the amount of mixed service costs allocable to self-
constructed assets. See, generally, Treas. Reg. § 1.263A-1(h). In 2005, the IRS eliminated the availability
of the SSCM to determine the amount of mixed service costs allocable to the self-constructed assets
proposed by electric and gas companies. Rev. Rul. 2005-53, 205-35 I.R.C. 425; T.D. 9217, 2005-37 I.R.B.
498. Thus, beginning in 2005, electric and gas utilities used a variety of facts and circumstances
methodologies to determine the amount of mixed service costs allocable to self-constructed assets. Some
companies employed methods specifically set forth in the section 263A regulations, other companies
employed self-developed methods, and yet other companies followed the financial accounting method for
tax purposes.
Until September 2009, there was significant controversy regarding what methods were available to utilities
to determine the amount of mixed service costs allocable to self-constructed assets. On September 15, 2009,
the IRS’ Large and Mid-sized Business Division (“LMSB”) (subsequently, the Large Business and
International Division (“LB&I”)) issued Industry Director Directive Mixed Service Costs #5 (LMSB-04-
0809-033) (“IDD #5”). In IDD #5, LMSB set forth an example of a mixed service costs method considered
relatively less significant to compliance priorities (“the IDD Method”). Since the issuance of IDD #5, LB&I
has allowed a number of companies to use the IDD Method and has encouraged other utilities to accept
exam-imposed changes to the IDD Method.
In October 2014, LB&I issued a supplemental Industry Director Directive to examiners regarding the IDD
Method, Allocating Mixed Service Costs Under I.R.C. Section 263A to Certain Self-Constructed Property
of Electric and Natural Gas Utilities (LB&I-LB7I-04-0814-007). The 2014 guidance applies to electric
utilities, natural gas utilities, and combined electric and natural gas utilities and provides guidance in
determining whether a taxpayer’s method for allocating mixed service costs to certain self-constructed
tangible personal property is appropriate and should not be challenged. The Applicant’s proposed method
of accounting is consistent with the IDD Method described in the above cited LB&I directives.
Part II, Question 17 – Book-Tax Conformity
The Applicant will not use the proposed method of account for its books and records or its financial
statements because the proposed method does not conform to Generally Accepted Accounting Principles
(“GAAP”).
Part IV, Question 26 – Section 481(a) Adjustment
The net negative I.R.C. § 481(a) adjustment is ($136,736,790) and constitutes a decrease to taxable income.
The net I.R.C. § 481(a) adjustment is equal to the difference as of the beginning of the year of change
between the adjusted basis of self-constructed assets as revalued using the Applicant's proposed method
and the adjusted basis of the property as originally valued using the Applicant's former method. The
Applicant is using a three-year averaging convention similar to the three-year revaluation method in Treas.
Reg. § 1.263A-7(d)(2) to determine the amount of mixed service costs capitalizable from 2000 through
2015.

Attachment A
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Avista Corporation EIN: 91-0462470
Form 3115 Attachment – 263A FYE: 12/31/2019
Schedule D, Part III, Section A
The method of allocating (1) direct and indirect costs.
The Applicant’s present method of allocating direct material and physical labor costs to the production of
self-constructed assets (including generation, electric transmission and distribution, and gas distribution
plant assets, where applicable), or generation, transmission, and distribution of electricity (where
applicable) is a method where direct material or physical labor costs are traced to a cost objective, such as
a function, department, activity, or product on the basis of a cause and effect or other reasonable relationship
between the costs and the cost objective. The Applicant does not propose to change these methods.
The Applicant’s present method of allocating indirect costs, other than mixed service costs, is a method
where indirect costs are traced to a cost objective such as function, department, activity or product, on the
basis of a cause and effect or other reasonable relationship between the costs and the cost objective. Those
costs traced to the cost objectives related to the production of self-constructed assets (including generation,
electric transmission and distribution, and gas distribution plant assets, where applicable) will be capitalized
and those costs traced to the cost objectives related to the generation, electric transmission and distribution
activities will be included in the inventoriable costs of electricity, where applicable. The Applicant does not
propose to change these methods.
The method of (2) allocating mixed service costs and (3) capitalizing additional I.R.C. § 263A costs.
The Applicant’s present method of allocating mixed service costs uses reasonable factors and relationships
to allocate the total costs of all mixed service departments to other departments or activities and from those
departments or activities ultimately to particular activities. The Applicant proposes to allocate mixed
service costs to self-constructed assets (including generation, electric transmission and distribution, and gas
distribution plant assets, where applicable) using the method of accounting provided for, and being applied
by, LB&I pursuant to the IDD method. Under this method, the Applicant will identify all mixed service
costs as: Companywide Mixed Service Costs (“CW MSCs”), Electric Transmission & Distribution,
Engineering Mixed Service Costs, Electric Transmission & Distribution Mixed Service Costs (non-
engineering), Gas Mixed Service Costs, Fleet Mixed Service Costs, and Stores Mixed Service Costs.

CW MSCs will be allocated to the Generation, Electric Transmission & Distribution, and Gas
Distribution Functions using the following Headcount ratios:
Generation Employee Headcount x CW MSCs = CW MSCs allocable to Generation
Total Headcount

T&D Employee Headcount x CW MSCs = CW MSCs allocable to Electric T&D
Total Headcount
Gas Employee Headcount x CW MSCs = CW MSCs allocable to Gas Distribution
Total Headcount

Then the CW MSCs allocable to generation will be added to any Generation Mixed Service costs
(“GMSCs”). The sum of these amounts is the Total Generation Mixed Service Costs (“TGMSCs”).
The capitalizable portion of the Total GMSCs will be determined under the following ratio:
Generation Production Headcount x TGMSCs = Capitalizable GMSCs
Total Generation Headcount
Attachment A
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Avista Corporation EIN: 91-0462470
Form 3115 Attachment – 263A FYE: 12/31/2019

The CW MSCs allocable to electric transmission and distribution will be added to the non-
Engineering Mixed Service costs. The sum of these amounts is the Total Electric Transmission and
Distribution Mixed Service Costs (“Total TDMSCs (non-eng)”). The capitalizable portion of the
Total TDMCs (non-eng) will be determined under the following ratio:
T&D Production Headcount x Total = Capitalizable TDMCs
Total T&D Headcount TDMSCs (non-eng)
(non-eng)

The capitalizable portion of Electric Transmission and Distribution Engineering Mixed Service
costs (“Total TDMSCs (eng)”) will be determined under the following ratio:
T&D Production Headcount x Total = Capitalizable TDMSCs (eng)
Total T&D Headcount TDMSCs
(less metering & customer serv) (eng)

The CW MSCs allocable to Gas Distribution will be added to the Gas Distribution Mixed Service
Costs. The sum of these amounts is the Total Gas Distribution Mixed Service Costs (Total Gas
MSCs). The capitalizable portion of the Total Gas Distribution MSCs will be determined under the
following ratio:
Gas Production Headcount x Total = Capitalizable Gas MSCs
Total Gas Headcount (less customer Gas MSCs
collection headcount)

The denominator of this ratio is reduced by the number of the employees engaged in meter reading
and customer collections because engineering does not provide support to these functions.
The capitalizable portion of Fleet Mixed Service Costs and Stores Mixed Service Costs will be
determined under headcount ratios in which the numerator includes the production employees
benefitting from these departments and the denominator includes the total employees benefitting
by these departments. The Applicant will use a single ratio for Fleet and single ratio for Stores.
The sum of the Capitalizable Generation Mixed Service Costs, the Capitalizable Engineering
Electric Transmission and Distribution Mixed Service Costs, the Capitalizable Electric
Transmission and Distribution Mixed Service Costs (non-engineering), the Capitalizable Gas
Distribution Mixed Service Costs, the Capitalizable Fleet Mixed Service Costs, and the
Capitalizable Stores Mixed Service Costs is the Total Capitalizable Mixed Service Costs. The
amount of the Total Capitalizable Mixed Service Costs allocable and capitalizable to self-
constructed assets is determined under the following production ratio:
Total 263A SCA Costs
Total 263A SCA Costs + 263A Costs of Electricity/Gas Sold – (Costs of Purchased Power/Gas * 50%) –
MSCs Capitalized – Interest Capitalized to SCA

Under this ratio the Total 263A SCA Costs are the total tax basis costs of constructing assets (less
interest and mixed service costs). The Costs of Produced Power/Gas are the costs, other than the
acquisition cost of purchased power or purchased gas and other than mixed service costs, required
to be capitalized under section 263A. The Costs of Purchased Power/Gas are the acquisition costs
of purchased electricity and gas.
Attachment A
Page 26 of 27
Avista Corporation EIN: 91-0462470
Form 3115 Attachment – 263A FYE: 12/31/2019
Request for Facsimile Transmission Pursuant to Section 9.04(3) of Rev. Proc. 2020-1
The Applicant hereby requests that a facsimile transmission of any document related to this Form 3115 be
sent to the Applicant as follows:
Applicant Fax Number
Daniel Loutzenhiser [phone]

Applicant’s Representatives Fax Number
Neville Jiang [phone]
Matt McKinney [phone]
Jon Ryan [phone]
Attachment A
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