In an attempt to bring clarity to a complicated area of tax law, the IRS and Treasury recently issued final tangible property capitalization regulations. Since many taxpayers keep spare parts on hand and/or own tangible property that they maintain, repair or improve, it is important to understand the changes to this area of tax law. These final regulations address the proper characterization and tax treatment of expenditures related to these maintenance, repair, and improvement activities.
How do these final regulations affect you and your business? To put it simply, depending on your specific facts and circumstances, these final regulations may:
- provide tax saving opportunities (e.g., changing the useful lives of capitalized property, accelerating depreciation) and/or
- require changes to your business' capitalization and expensing policies to comply with the final regulations, effective January 1, 2014
The final regulations, consisting of over 100 pages of new law, remain an extremely technical and complex matter. For an overview summary of the final regulations, simply follow this link. In addition to the overview, we want to take this opportunity to offer assistance on this matter.
Applying the final regulations, and determining what benefits are to be had, or compliance work is needed will require additional procedures, which would be outside the scope of the normal year-end work.
Before proceeding with any work, we are asking that if you are interested in our assistance on this specific matter, please contact us directly and let us know. At that point, we will prepare a proposal and engagement letter, addressing the estimated fees associated with the engagement.
If you do not contact us, we will conclude that you are comfortable with your current accounting policies and procedures (as they specifically relate to the final regulations on repair and capitalization), and we will not incur additional time on the matter.
Please feel free to call or email us with any questions. As always, we look forward to hearing from you.
