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Tax Update

IRS Defers Effective Date for Repair Regulations

Friday, November 30, 2012

In Notice 2012-73,1 the IRS announced that its regulations will be amended to delay the effective date of the 2011 temporary tangible property regulations (T.D. 9564) (the 2011 Regulations), which were to apply to tax years beginning on or after Jan. 1, 2012. According to the Notice, the IRS ;will amend the temporary regulations and change the effective date so that the rules will apply to tax years beginning on or after Jan. 1, 2014. Taxpayers may "early adopt" the temporary regulations and apply the rules ;for tax years beginning on or after Jan. 1, 2012. However, if accounting method changes are made to implement the 2011 Regulations, additional accounting method changes will be required when final regulations in this area are issued.

The IRS expects to finalize the tangible property regulations in 2013, and when final, these regulations will also apply ;to tax years beginning on or after Jan. 1, 2014. However, taxpayers may choose to apply them to tax years beginning on or after Jan. 1, 2012.

The Notice indicates that the effective date is being delayed in response to numerous comments from taxpayers regarding complications associated with implementing the 2011 Regulations.2 Concerns have also been raised that certain positions should be revised from the 2011 Regulations. The IRS, recognizing that many taxpayers are spending significant resources to comply with the 2011 Regulations, indicated that when the final regulations are published, several existing positions will be changed. The notice indicates that changes are anticipated in the following areas:

  • the de minimis rule in Temp. Regs. Sec. 1.263(a)-2T(g)

  • the rules for dispositions in Temp. Regs. Secs. 1.168(i)-1T and 1.168(i)-8T, and

  • the safe-harbor rule for routine maintenance in Temp. Regs. Sec.1.263(a)-3T(g).

Procedures in Rev. Procs. 2012-19 and 2012-20 set forth guidance to secure automatic consent to change accounting method to comply with the 2011 Regulations. For taxpayers that seek to early adopt the 2011 Regulations may do so for tax years beginning on or after Jan. 1, 2012. The IRS says it will publish new automatic consent procedures when the final regulations are issued.

Endnotes

1 Notice 2012-73; 2012-51 IRB 1 (November 20, 2012).

2 See, e.g., McElroy, comment letter on behalf of investor-owned hospitals, REG 168745-03, T.D. 9564, 248 DTR GG-1, 12/28/11, released Nov. 6, 2012.

Ellen McElroy

Written by

Ellen McElroy
Phone: 202.220.1589
Fax: 202.220.1665
mcelroye@pepperlaw.com


The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship. Internal Revenue Service rules require that we advise you that the tax advice, if any, contained in this publication was not intended or written to be used by you, and cannot be used by you, for the purposes of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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