Repair Regulations

On September 13, 2013, the Treasury Department and the IRS released final regulations related to capitalization of specific expenses associated with tangible property, also known as the “repair regulations.”

These new regulations, often referred to as the repair regulations, cover numerous topics, including tangible asset acquisition and disposition, depreciation, de minimis capitalization thresholds, materials, supplies and investigatory costs and other costs that facilitate acquisition of tangible assets. The magnitude of these voluminous regulations will require most, if not all, for-profit businesses to evaluate their current accounting methods for expenses related to repairs, improvements and acquisition of tangible property. In this case, inaction is action; companies that don’t address the regulations lose the ability to file certain automatic accounting method changes.

In general, companies should be aware of the following major changes, effective for taxable years beginning on or after January 1, 2014:

While not effective until January 1, 2014, taxpayers may adopt all or portions of the temporary or final regulations for tax years beginning on or after January 1, 2012. This presents a unique opportunity to early adopt favorable portions of the regulations prior to the effective date.

BKD has dedicated tax advisors who can help you determine what these changes could mean for your organization and how you can work to remain in compliance.

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Rick Klahsen

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Rick Klahsen

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