United States

Articles on compliance with new tangible property and repair rules


As many readers are aware, the IRS issued new regulations governing how taxpayers deduct and capitalize costs to acquire, maintain, repair, and improve tangible assets in late 2011. These complex tax rules impact practically all taxpayers, including private clubs, that own tangible assets, use materials and supplies, or incur repairs. While the effective date of these new regulations was intended to take effect as of this year, a new effective date was announced late in 2012. Now, most taxpayers with tangible property may be required to file at least two (and up to 19) Forms 3115 to change their methods of tax accounting to comply with the rules, which will generally be effective for tax years beginning on or after Jan. 1, 2014.

Changes in accounting for the various aspects of the new rules may necessitate changes in processes and fixed asset software systems for capturing, accounting for, and maintaining the required information for tax purposes.

In appreciation of the scope and complexity of these new rules, the IRS is applying a moratorium for the 2012 and 2013 tax years. During the moratorium, the IRS will not be auditing tangible property and repair transactions for most taxpayers. The IRS may extend its moratorium an additional year. During 2013, taxpayers do have the opportunity to early adopt these new rules, which can provide a good opportunity to optimally plan for compliance by their 2014 tax years.

In further appreciation of the scope and complexity of these new rules, McGladrey will offer articles throughout this year to address considerations for private clubs. While these are articles might not replace a direct conversation with a McGladrey professional about the specifics surrounding a particular club, they will offer practical suggestions in an effort to help readers comply with these rules effectively and advantageously. Questions from readers are welcome at any time throughout the year.