
INSIGHTS FROM OUR NATIONAL TAX OFFICE	DECEMBER 16, 2015

An IRS Late Year Gift of Increased De Minimis Amount Requires Decisions and Actions

With an issue date of November 24, 2015, the Internal Revenue Service, via Notice 2015-82, has given certain small business owners a potential gift starting in 2016, but it comes with a big string attached. To gain benefit of this potential gift from the IRS in 2016, affected taxpayers are required to make decisions and take actions in the short time period available between November 24 and the end of December 31, 2015.

Threshold Increased to $2,500

Notice 2015-82 increases the de minimis safe harbor threshold amount from $500 on a per-invoice or per-item basis to $2,500 on a per-invoice or per-item basis, for taxpayers without an Applicable Financial Statement (AFS). Affected taxpayers include those that do not have a financial audit or reviewed financial statement used for certain regulatory or non-tax purposes. The revised threshold amount for taxpayers without an AFS is effective for expenditures incurred in taxable years beginning on or after January 1, 2016 and should not be applied to 2015 tax returns.

Requirements Untouched

Although Notice 2015-82 increased the threshold for de minimis expenditures, it did not adjust any of the requirements for utilizing the de minimis safe harbor. Taxpayers must continue to satisfy the requirements provided in the Final Tangible Property Regulations in order to utilize the increased de minimis threshold, including the requirement to have accounting procedures in place as of the beginning of the year in which the taxpayer intends to apply the de minimis safe harbor. The accounting procedures should provide that amounts paid that are less than the threshold amount or are for property with a useful life of less than 12 months will be treated as expenses for tax and book purposes. However, for taxpayers without an AFS, the accounting procedures are not required to be in writing.

Consider Your Options

Taxpayers should consider whether the increased safe harbor threshold is suitable for their business. If so, they should update their accounting procedures prior to January 1, 2016, in order to take advantage of the increased threshold. Taxpayers with existing written accounting procedures should revise their written accounting procedures prior to January 1, 2016.

Please contact your Eide Bailly professional or Andrea Mouw (612.253.6730) or Julie Helms (612.253.6511) for more information.

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.