The Internal Revenue Service and Treasury Department published in the
Federal Register temporary regulations that provide guidance to taxpayers on
the treatment of amounts paid to acquire, produce or improve tangible property
and regarding the accounting for, and dispositions of, property subject to
depreciation. These regulations provide objective standards and bright-line
rules intended to simplify compliance with the capitalization provisions
contained in section 263(a) of the Internal Revenue Code.
The temporary regulations generally are effective for expenditures made on
or after Jan. 1, 2012, and therefore these regulations do not affect taxpayers’
2011 tax returns. The IRS and Treasury Department anticipate publishing
additional guidance that will advise taxpayers regarding how to obtain
automatic consent to change to a method of accounting provided in the temporary
regulations for taxable years beginning on or after Jan. 1, 2012. These
automatic consent requests may be filed beginning with taxpayers’ 2012 tax
returns. Taxpayers may not request a change to a method described in the
temporary regulations on their 2011 tax returns.
The temporary regulations also were released as a notice of proposed
rulemaking, offering taxpayers the opportunity to comment on the rules.
Written comments are requested by March 26, 2012, and a public hearing on the
regulations is scheduled for April 4, 2012.