Insights: Article

Repair Regulations - Effective Application Delayed, But...

By Andrea Mouw

January 27, 2017

ALERT

The IRS, on November 20, released an advance copy of Notice 2012-73 (Notice).  The Notice indicates the IRS intends to issue final regulations regarding the deduction and capitalization of expenditures related to tangible property in 2013, with an effective date beginning on or after January 1, 2014, rather than January 1, 2012 as provided when the temporary regulations were introduced. But, that does not mean that taxpayers should put plans to implement changes on hold. 

The Notice also indicates that the IRS anticipates that final regulations will revise the following IRS sections, and in some cases, simplify:

  • De Minimis Rule: § 1.263(a)-2T(g);
  • Dispositions: §§ 1.168(i)-1T and 1.168(i)-8T; and
  • Safe Harbor for Routine Maintenance: § 1.263(a)-3T(g).

The Notice permits taxpayers to apply the temporary regulations for taxable years beginning on or after January 1, 2012, and before the effective date of the final regulations.  Taxpayers electing to adopt the temporary regulations prior to taxable years beginning on or after January 1, 2014, may continue to obtain the automatic consent under Rev. Proc. 2012-19 and Rev. Proc. 2012-20.

This means that taxpayers may defer applying the temporary regulations to tax years beginning on or after January 1, 2014, but, taxpayers also have the option to apply the temporary regulations for tax years beginning on or after January 1, 2012, and before the applicability date of the final regulations.

BACKGROUND

On August 21, 2006, the IRS published proposed amendments to the regulations under section 263(a) relating to amounts paid to acquire, produce, or improve tangible property.  On March 10, 2008, the IRS issued new proposed regulations regarding the deduction and capitalization of expenditures related to tangible property.  On December 27, 2011, after considering the written comments and the statements at the public hearing, the IRS published temporary regulations regarding the deduction and capitalization of expenditures related to tangible property.  The temporary regulations generally apply to taxable years beginning on or after January 1, 2012.  The IRS received numerous written comments on the 2011 temporary regulations and held a public hearing on May 9, 2012. The IRS is considering the written comments received as well as the statements from the public hearing as they draft the final regulations.

RECOMMENDATIONS

While the IRS has provided a temporary reprieve from implementing the repair regulations, there may still be some opportunities for those who adopt the regulations early.  Also, those taxpayers that will need to deal with the changes now have the time to put systems and procedures in place in anticipation of adopting the repair regulations in a less time constrained manner.

For example, it still may still be advisable to retroactively elect to treat your building(s) as a general asset account, implement a capitalization policy for financial statement purposes, or to take advantage of other provisions in the temporary regulations.

Latest Insights

September 25, 2018
Article
As the largest tax reform legislation in the past 30 years becomes reality, it is important to stay up-to-date on planning opportunities and how reform may impact you and your business. Our Tax Reform: Practical Insights examples aim to break down…
September 24, 2018
Article
Since the Affordable Care Act became reality, businesses have been scrambling to figure out what compliance looks like and how best to comply.
September 24, 2018
Article
In auto dealerships, showrooms, car lots and implement dealerships, there is a constant flurry of activity. One area that can easily get overlooked is cybersecurity.
September 24, 2018
Article
The recent US Supreme Court decision that overturned Quill in the South Dakota v Wayfair case has many states making or considering law changes related to sales tax compliance for out-of-state sellers.
September 21, 2018
Article
In the wake of Hurricane Florence and its footprint, devastating results are being experienced by communities and businesses. As a result of these catastrophes, businesses will turn to insurance carriers for recovery of covered losses. Current…
September 20, 2018
Firm News
Eide Bailly LLP announced the winners of its 2018 Nonprofit Resourcefullness Awards, recognizing creative and sustainable revenue ideas from nonprofits in Arizona, Colorado, Minnesota, North Dakota and Utah.
September 19, 2018
Article
The IRS has started sending out Letter 5699 asking businesses to verify if they should have filed Forms 1094/1095-C. These forms are required for all ALEs.
September 19, 2018
Recorded Webinar
Are you considering doing business or having employees in Pennsylvania? Have you had issues with your state tax filing? Join our state and local tax team for some helpful insights into Pennsylvania tax filings.
September 19, 2018
Recorded Webinar
Are you considering doing business or having employees in Nevada? Have you had issues with your state tax filing? Join our state and local tax team for some helpful insights into North Dakota tax filings. This webinar will cover registration,…