The ABA Tax Section offers a teleconference and webcast today on Review of Regulations on Capitalization of Tangible Assets from 1:00 – 2:30 p.m. EST:

In 2006, proposed regulations under § 263(a) were issued relating to amounts paid to acquire, produce, or improve tangible property and clarifying what amounts must be capitalized rather than deducted currently. The proposed regulations provide (i) tests for determining whether amounts paid are to be capitalized or deducted as repair and maintenance expenditures, (ii) operating rules for applying the tests, and (iii) guidance for determining the unit of property with respect to which the tests apply.

On March 7th, the Treasury Department released re-proposed regulations under § 263(a), relating to the treatment of expenditures with respect to tangible property. With these re-proposed rules, the government has made an important effort to respond to the myriad of comments that were received. The IRS and Treasury have offered a number of simplifying measures and safe harbors. For example, these new proposed regulations provide a book conformity de minimis rule for acquisitions of units of property, a safe harbor for routine maintenance, and an optional simplified method for regulated taxpayers. The regulations attempt more objective measures and standards so that companies can evaluate whether particular repair expenses may be deducted or should be capitalized. Additionally, these new proposed regulations provide significant changes to the rules relating to unit property, restorations, and allow for industry-specific repair allowance methods in the future. Further, this new package makes efforts to ensure that the repair regulations can be read consistently with other existing rules, including for example, § 263A and regulations involving materials and supplies. The program will review the recently released regulations, including consideration of how the regulatory tests and operating rules are different from the earlier proposed regulations.

Speakers:

• Kimberly Koch (IRS Office of Chief Counsel)
• Ellen McElroy (Pepper Hamilton, Washington, D.C.)