IRS Announces Delay in Effective Date of Tangible Property Regulations

By: Joshua Diamond – Staff Accountant

Throughout the past year, Alpern Rosenthal has communicated the issuance, and follow-up guidance, regarding the Temporary Tangible Property Regulations.  In general, the Temporary Regulations provide guidance on the treatment of amounts paid to acquire, produce, or improve tangible property, materials and supplies, dispositions of tangible property and depreciation.

IRS Notice 2012-73, issued 11/20/12, announced that the Regulations are now effective for tax years beginning on, or after, January 1, 2014. The previously issued Temporary Regulations were to have taken effect for the 2012 tax year.  The delay allows taxpayers additional time and therefore they can await the issuance of Final Regulations.   IRS Notice 2012-73 also announced that, in addition to the effective date delay, the Treasury Department expects to issue Final Regulations sometime during 2013.  While taxpayers may choose to delay implementation of the Regulations to the anticipated effective date, the Notice provides that taxpayers may choose to apply the Final Regulations to tax years beginning on, or after, January 1, 2012. Further, taxpayers have the option to apply the Temporary Regulations to tax years beginning on, or after, January 1, 2012 and before the applicability date of the Final Regulations; while still providing taxpayers automatic consent to change a method of accounting.   
 
Finally, the Notice indicates that the Treasury expects changes from the issued Temporary Regulations. Specifically, the Treasury anticipates the Final Regulations will include changes related to the de minimis expensing rule, dispositions, and the safe harbor for routine maintenance.  Specific details of the expected changes have not been provided by the Treasury or the IRS.

Most taxpayers are affected by the Temporary Regulations originally set to take effect January 1, 2012; and, are now greatly affected by the issuance of this Notice.  The delay of the effective date allows taxpayers more time to prepare for the changes resulting from the Temporary Regulations and the anticipated issuance of the Final Regulations.  While the effective date of the Temporary Regulations has been delayed, and taxpayers await release of the Final Regulations, it will still be important to begin to understand the general concepts and rules provided by the Temporary Regulations.   A careful understanding of the provisions related to tangible property can be undertaken now, in advance of the issuance of the Final Regulations, so that taxpayers are well ahead of the curve before the expected effective date of January 1, 2014.  The tax professionals of Alpern Rosenthal are continuously monitoring this area and are available to assist in the understanding and implementation of the Regulations. 

If you have any questions or concerns regarding this please contact your Alpern Rosenthal representative.