Repair Regulations 2012 

The much anticipated regulations governing the capitalization of costs related to tangible property ("Repair Regulations") are released.

The much anticipated regulations governing the capitalization of costs related to tangible property ("Repair Regulations") are expected to be forthcoming. Accordingly, taxpayers will be required to comply with these regulations in the first tax year in which they are effective. We expect the regulations to be effective for tax years beginning after the date of issuance or 2012 for calendar year taxpayers. While we do not know with certainty what will be included in the regulations, all taxpayers should review their current accounting practices for these costs to ensure compliance with the new rules and to consider opportunities for maximizing their tax treatment of such expenditures. We expect that most taxpayers either will need to or will benefit from changing their methods of accounting for repairs and maintenance expenditures to comply with the regulations, even if they have done a repairs study in the past. We expect that certain method changes will be favorable while others will be unfavorable. We will be able to assist in either situation. KPMG is fortunate that one of the authors of the repair regulations, Eric Lucas, has recently joined Washington National Tax practice's Income Tax and Accounting group. In this role at Treasury, Eric was responsible for providing advice on methods of accounting (including the repairs rules), business credits, and other domestic tax issues. Eric, along with other members of WNT's IT&A Group, the local AMCS BU leaders and AMCS practice leadership will assist clients with the application of the new regulations as part of their ongoing tax planning. As many of the repairs studies performed in the past (whether by KPMG or another firm) are currently under exam, it may be appropriate to include TCS in conversations with clients.