Tangible property regs. amended to implement delayed effective date

BY SALLY P. SCHREIBER, J.D.

On Friday, the IRS released technical amendments to T.D. 9564 that, in response to numerous comments from taxpayers, delay the effective date of the temporary regulations it issued in December 2011 governing whether tangible property expenses could be deducted or had to be capitalized. Those regulations were supposed to apply to tax years beginning on or after Jan. 1, 2012 (T.D. 9564), but will now apply to tax years beginning on or after Jan. 1, 2014, instead. However, taxpayers are permitted to apply the temporary regulations for tax years beginning on or after Jan. 1, 2012, and before the applicability date of the final regulations. This makes the use of the temporary regulations optional until the final regulations are issued. (The IRS originally announced that it would make this change in Notice 2012-73, released on Nov. 20.)

In the preamble to the technical amendments, the IRS repeated its concern that taxpayers may be expending resources to comply with the temporary regulations that may not be consistent with the coming final regulations the IRS intends to issue in 2013. Taxpayers that choose to apply the temporary regulations early can continue to rely on Rev. Procs. 2012-19 and 2012-20 for guidance on accounting method changes.

In general, the amendments specify that the provisions apply to tax years beginning on or after Jan. 1, 2014, but under an optional early application subsection, taxpayers may choose to apply the temporary regulations to tax years beginning on or after Jan. 1, 2012. These amendments affect the following regulation effective date provisions:

  1. Temp. Regs. Secs. 1.162-3T(j)(1) and (2)—Materials and supplies.
  2. Temp. Regs. Secs. 1.162-4T(c)(1) and (2)—Repairs.
  3. Temp. Regs. Secs. 1.162-11T(c)(1) and (2)—Rentals.
  4. Temp. Regs. Secs. 1.165-2T(d)(1) and (2)—Obsolescence of nondepreciable property.
  5. Temp. Regs. Secs. 1.167(a)-4T(b)(1) and (2)—Leased property.
  6. Temp. Regs. Secs. 1.167(a)-7T(f)(1) and (2)—Accounting for depreciable property.
  7. Temp. Regs. Secs. 1.167(a)-8T(h)(1) and (2)—Retirements.
  8. Temp. Regs. Secs. 1.168(i)-1T(m)(1) and (2)—General asset accounts.
  9. Temp. Regs. Secs. 1.168(i)-7T(e)(1) and (2)—Accounting for MACRS property.
  10. Temp. Regs. Secs. 1.168(i)-8T(i)(1) and (2)—Dispositions of MACRS property.
  11. Temp. Regs. Secs. 1.263(a)-1T(g)(1) and (2)—Capital expenditures in general.
  12. Temp. Regs. Secs. 1.263(i)-2T(k)(1) and (2)—Amounts paid to acquire or produce tangible property.
  13. Temp. Regs. Secs. 1.263(i)-3T(p)(1) and (2)—Amounts paid to improve tangible property.
  14. Temp. Regs. Secs. 1.263(i)-6T(c)(1) and (2)—Election to deduct or capitalize certain expenditures.
  15. Temp. Regs. Secs. 1.263A-1T(m)(1) and (2)—Uniform capitalization of costs.
  16. Temp. Regs. Secs. 1.1016-3T(j)(3)(i) and (ii)—Exhaustion, wear and tear, obsolescence, amortization, and depletion for periods since February 13, 1913. 

The technical amendments are scheduled to be published in the Federal Register on Dec. 17, 2012.

Sally P. Schreiber ( sschreiber@aicpa.org ) is a JofA senior editor.

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