Capitalization Regs Reproposed


Rather than finalize 18-month-old proposed regulations on capitalization of tangible assets, the Service withdrew the 2006 proposed regulations and reproposed them in revised form March 10. The regulations are intended to better distinguish between repair or maintenance on the one hand versus improvements and provide a standard for “betterment or restoration” of property. The new version preserved many elements from the 2006 release and followed the same general plan. However, it introduced several new rules that took their cue from public commentary on the earlier release, such as a $100 de minimis rule for material and supplies, as well as a safe harbor for routine maintenance. The new proposed regulations (REG-168745-03) also provide that property with an economic useful life of 12 months or less will be considered material or supplies, in harmony with depreciable asset rules of Treas. Reg. § 1.167(a)-1(b). Also, amounts paid to adapt property to a new or different use are now removed from the category of property improvements that materially increase the property’s value and are treated separately.

SPONSORED WHITE PAPER

Preparing the statement of cash flows

This instructive white paper outlines common pitfalls in the preparation of the statement of cash flows, resources to minimize these risks, and four critical skills your staff will need as you approach necessary changes to the process.

RESOURCES

Keeping you informed and prepared amid the COVID-19 crisis

We’re gathering the latest news stories along with relevant columns, tips, podcasts, and videos on this page, along with curated items from our archives to help with uncertainty and disruption.