Final And Proposed Regulations On New 100% Depreciation Released By IRS

WASHINGTON — The Treasury Department and the Internal Revenue Service today released final regulations (PDF) and additional proposed regulations (PDF) under section 168(k) of the Internal Revenue Code on the new 100% additional first year depreciation deduction that allows businesses to write off most depreciable business assets in the year they are placed in service by the business.

The regulations released today on IRS.gov have been submitted to the Federal Register and may vary slightly from the published documents due to minor editorial changes. The documents published in the Federal Register will be the official documents.

The final regulations finalize the proposed regulations issued in August 2018 which implement several provisions included in the Tax Cuts and Jobs Act (TCJA). The proposed regulations contain new provisions not addressed previously.

The 100% additional first year depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.

The deduction applies to qualifying property acquired and placed in service after September 27, 2017. The final regulations provide clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property. The final regulations also provide rules for qualified film, television and live theatrical productions.

Additionally, in the proposed regulations, the Treasury Department and IRS propose rules regarding (i) certain property not eligible for the additional first year depreciation deduction, (ii) a de minimis use rule for determining whether a taxpayer previously used property; (iii) components acquired after Sept. 27, 2017, of larger property for which construction began before Sept. 28, 2017; and (iv) other aspects not dealt with in the previous August 2018 proposed regulations. The proposed regulations also withdraw and repropose rules regarding application of the used property acquisition requirements (i) to consolidated groups, and (ii) to a series of related transactions.

For details on claiming the deduction or electing out of claiming it, see the final regulations or the instructions to Form 4562, Depreciation and Amortization (Including Information on Listed Property). For tax years that include September 28, 2017, see Rev. Proc. 2019-33 (PDF) for further information about making a late election or revoking an election.

Taxpayers who elect out of the 100% depreciation deduction must do so on a timely-filed return. Those who have already timely filed their 2018 return and did not elect out but still wish to do so have six months from the original deadline, without an extension, to file an amended return.

For more information about this and other TCJA provisions, visit IRS.gov/taxreform.

New Lease Accounting Standard

Although it is a difficult business climate right now, Neikirk, Mahoney & Smith are dedicated to bringing up-to-date news focused on the accounting sector to ease your hardships, such as with new standards such as the new lease accounting standard being implemented. LeaseQuery took a survey and the results were considerably under anticipated: 67 percent reported actual difficulty which nearly doubled 37 percent whom anticipated difficulty.

The Financial Accounting Standards Board has proposed a postponed deadline to take effective January 2021, which would give businesses one-year extension to implement the leases standard. Accounting Today reports, “The LeaseQuery survey found that over half of public companies (54 percent) have already completed their transition to the new standard, seven months after the deadline. But only 5 percent of private companies have completed the transition, with 58 percent of the companies polled saying they’re still in the early stages of assessing their implementation plans.”

Even if the delay is approved, both public and private companies alike need to proceed immediately with transition. LeaseQuery CEO George Azih comments, “While organizations await the FASB decision, one thing is clear: a delay is just a false sense of security. Transitioning to the new standard is a complex, time-consuming process, even when you have the best team and tools on your side. Private companies, nonprofits and government organization should continue to move transition plans forward, and with haste.”

More about the hardships of this transition can be found at accoutingtoday.com or to see the full results of the survey, visit leasequery.com.