United States

Guidance on tangible property regulations proves favorable for clubs


Until new guidance was released by the IRS on Feb. 13, 2015, most private clubs were required to file one or more Forms 3115 to comply with the new tangible property regulations. After many requests from small businesses and tax professionals, the IRS issued Revenue Procedure 2015-20 to provide relief to entities or individuals who qualify as "small business taxpayers." Small business taxpayers are defined as taxpayers with total assets of less than $10 million or average annual gross receipts of $10 million or less for the prior three tax years. Qualifying under the new revenue procedure does not exempt private clubs from the tangible property regulations. Instead, the small business taxpayer relief allows qualifying private clubs to adopt the new tangible property regulations on a prospective basis, starting with the 2014 tax year, instead of on a retrospective basis. While Form 3115 may not be required under Rev. Proc. 2015-20, private clubs that meet the small business classification may still require elections (e.g., the de minimis election) on the 2014 tax return to be in compliance.

Private clubs that do not meet the small business taxpayer classification will still be required to adopt the IRS's tangible property regulations on a retrospective basis, requiring compliance through preparation and submission of one or more Forms 3115.

Taxpayers and tax professionals across the United States have been preparing for the compliance burden caused by the new tangible property regulations since the release on Sept. 13, 2013. The regulations identify rules and safe harbors for the capitalization and deduction of costs related to the acquisition, maintenance, improvement and disposition of tangible assets. With respect to private clubs, the assets affected by the tangible property regulations include clubhouses, dining areas, golf courses and other tangible property. For more information on the regulations, please see our tangible property regulations resource center.

Frank Lucas

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