FF&F News & Events


IRS delays application of repair regulations until 2014

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To the great relief of many business taxpayers (and the tax practitioners who serve them), the IRS has delayed until 2014 the application of the sweeping new regulations on the capitalization of expenditures relating to tangible property that were introduced last December. Businesses no longer need to comply with these regulations in their 2012 financial statements.

What’s more, the IRS promises that when it releases final, revised regulations sometime in 2013, they will be fine tuned to respond more directly to many of the complaints leveled against them over the course of the past eleven months.  What’s more, the latest announcement by the IRS also contains a win-win for businesses that would have benefited from immediate application of the regulations: these businesses have the option of complying, which in some cases, can increase the overall size of deductions for repairs, maintenance, and other expenditures to business property.

To the great relief of many business taxpayers (and the tax practitioners who serve them), the IRS has delayed until 2014 the application of the sweeping new regulations on the capitalization of expenditures relating to tangible property that were introduced last December. Businesses no longer need to comply with these regulations in their 2012 financial statements.

What’s more, the IRS promises that when it releases final, revised regulations sometime in 2013, they will be fine tuned to respond more directly to many of the complaints leveled against them over the course of the past eleven months.  What’s more, the latest announcement by the IRS also contains a win-win for businesses that would have benefited from immediate application of the regulations: these businesses have the option of complying, which in some cases, can increase the overall size of deductions for repairs, maintenance, and other expenditures to business property.

Better regulations in 2013

The IRS announced that it expects to issue final rules on the deduction and capitalization of expenditures related to tangible property in 2013. It promises that the final regulations will be different from the temporary regulations in several respects. They will take into consideration all comments received on 2012 regulations, including comments requesting relief for small businesses. In addition, certainde minimis rules, dispositions and a safe harbor for routine maintenance may be revised in a manner that might affect, and in certain cases simplify, taxpayers’ implementation of the rules when the regulations are issued in final form.

The IRS anticipates that the final regulations will apply to tax years beginning on or after January 1, 2014, but at that time will permit taxpayers to apply the final regulations to tax years beginning on or after January 1, 2012.  Businesses choosing to apply the provisions of the existing regulations to tax years beginning on or after January 1, 2012, and before the applicability date of the final regulations may continue to obtain the automatic consent to change their methods of accounting.  This represents another important concession on the part of the IRS.

For further details on how these concessions on the part of the IRS may help your business not only comply with these rules, but also benefit from them, please contact this office.