
INSIGHTS FROM OUR NATIONAL TAX OFFICE	DECEMBER 8, 2015

Increase to the De Minimis Threshold for Taxpayers without Applicable Financial Statements

The IRS recently updated the de minimis threshold for taxpayers without an applicable financial statement (AFS). The previous threshold was $500 on a per-invoice or per-item basis, but taxpayers made it known that they thought this threshold was too low to effectively reduce the administrative burdens of complying with the repair regulation requirements for small taxpayers, and it paled in comparison to the $5,000 safe harbor provided for taxpayers who have an AFS.

Effective Jan. 1

In response to the many taxpayer comments received stating these concerns, the IRS has now raised the de minimis threshold to $2,500 on a per-invoice or per-item basis for those taxpayers without an AFS. This revised threshold is effective for expenditures incurred in taxable years beginning on or after January 1, 2016. For any expenditures incurred before this date, the IRS will not challenge the taxpayer's treatment of de minimis amounts below $2,500 on a per-invoice or per-item basis, or will not further pursue the issue of those items currently under consideration.

Policies and Procedures Needed

In order to elect to utilize the new de minimis safe harbor threshold, there are certain policies and procedures that should be put into place at the beginning of the first taxable year the taxpayer plans to use the revised threshold. We recommend you have a specialist who is familiar with these policies and their relation to the regulations review your capitalization policies and procedures to ensure that any modifications required are in place by January 1, 2016.

For more information, contact your Eide Bailly professional or Andrea Mouw at 612.253.6730.

Eide Bailly's National Tax Office serves as a resource for clients to help analyze complex tax issues related to business decisions. Our professionals are committed to helping clients stay informed about tax news, developments and trends through various specialty areas, including cost segregation studies, wealth transfer, state and local taxation, international tax, IRS controversy and procedures, R&D tax incentives, tax-exempt organizations, tax legislation, accounting methods and pass-through entities.

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This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Eide Bailly LLP and the author do not assume responsibility for any individual's reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique before recommending the technique to a client or implementing it on the client's behalf. To request reprints of this publication, send a written request to RequestReprints@eidebailly.com. © 2015 Eide Bailly LLP.