Effective date of tangible property regs. delayed

BY SALLY P. SCHREIBER, J.D.
November 20, 2012

The IRS announced on Tuesday that it is delaying 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 (T.D. 9564), which were to apply to tax years beginning on or after Jan. 1, 2012. In Notice 2012-73, in response to numerous comments from taxpayers, the IRS said that it will amend the temporary regulations to make them apply to tax years beginning on or after Jan. 1, 2014, instead, but that taxpayers will be 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 expects to finalize the tangible property regulations in 2013, and when it does they will also apply to tax years beginning on or after Jan. 1, 2014, although taxpayers may choose to apply them to tax years beginning on or after Jan. 1, 2012.

The IRS, recognizing that many taxpayers are expending resources to comply with the regulations, also announced that, when the final regulations are published, the following rules will be revised to simplify them:

  • The de minimis rule in Temp. Regs. Sec. 1.263(a)-2T(g).
  • The rules for dispositions in Temp. Regs. Secs. 1.168(i)-1T and 1.168(i)-8T.
  •  The safe-harbor rule for routine maintenance in Temp. Regs. Sec.1.263(a)-3T(g).

The IRS did not specify how these rules would be simplified, but it did note that it would take into consideration comments requesting relief for small businesses.

Taxpayers who choose to apply the rules in the temporary regulations for tax years beginning on or after Jan. 1, 2012, can use the procedures in Rev. Procs. 2012-19 and 2012-20 to obtain automatic consent to change their accounting method. For taxpayers who choose to apply the provisions of the final regulations to tax years beginning on or after Jan. 1, 2012, the IRS says it will publish new automatic consent procedures when the final regulations are issued.

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

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