IRS Delays Effective Date of Tangible Property Regulations (article)

IRS Delays Effective Date of Tangible Property Regulations (article)

On November 20, the IRS issued Notice 2012-73, indicating that the IRS and the Treasury Department anticipate issuing final regulations in 2013 regarding the capitalization and deduction of tangible property expenditures and that the final regulations will contain changes from the temporary regulations issued last December. In consideration of these impending changes, the IRS has delayed the effective date of the regulations to tax years beginning on or after January 1, 2014. Taxpayers, however, may still apply the temporary regulations for tax years beginning on or after January 1, 2012.

In Notice 2012-73, the IRS mentions specific sections of the temporary regulations that may be revised, including:

  • The de minimis rule for capitalizing acquisitions of tangible property and materials and supplies,
  • The routine maintenance safe harbor which protects deductions for recurring maintenance activities on tangible personal property, and
  • The disposition rules which include the ability to deduct the remaining basis in structural components of buildings when replaced.

The Notice also indicates that the final regulations will consider comments received requesting relief for small businesses. The de minimis rule in the temporary regulations, in particular, was criticized because it only applied to taxpayers with an Applicable Financial Statement, generally meaning an audited financial statement. This comment from the IRS indicates that the final regulations may loosen that requirement.

While the effective date of the regulations has been delayed until 2014, taxpayers may still apply the temporary regulations for tax years beginning on or after January 1, 2012. Certain accounting method changes necessitated by the temporary regulations can generate current, or facilitate future, deductions. Also, the Temporary Regulations may provide automatic change opportunities to correct existing erroneous methods and provide some degree of audit protection. Therefore, taxpayers should evaluate whether they can benefit from initiating some of these accounting method changes now, rather than simply waiting until 2014. Taxpayers should proceed cautiously, however, with any accounting method changes related to the three areas of the regulations mentioned above. Changing one's accounting method now with respect to dispositions, for example, may require a second accounting method change to comply with the final regulations when issued.

For more information on the tangible property regulations, refer to the InTouch articles referenced below. To determine whether you should consider any of the accounting method changes under the temporary regulations, contact your local CBIZ MHM tax advisor.

InTouch Articles Addressing Tangible Property Regulations


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IRS Delays Effective Date of Tangible Property Regulations (article)On November 20, the IRS issued Notice 2012-73, indicating that the IRS and the Treasury Department anticipate issuing final regulations in 2013 regarding the capitalization and deduction of tangible property expenditures and that the final regulations will contain changes from the temporary regulations issued last December. ...2012-11-26T20:28:00-05:00On November 20, the IRS issued Notice 2012-73, indicating that the IRS and the Treasury Department anticipate issuing final regulations in 2013 regarding the capitalization and deduction of tangible property expenditures and that the final regulations will contain changes from the temporary regulations issued last December.