Tangible property regulations:

Transcription

1 Tangible property regulations: A practice guide to implementation 14 May 2013

2 Disclaimer Ernst & Young refers to the global organization of member firms of Ernst & Young global limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young global limited located in the US. This presentation is 2013 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young and its member firms expressly disclaim any liability in connection with use of this presentation or its contents by any third party. The views expressed by panelists in this session are not necessarily those of Ernst & Young LLP. Page 1

3 Circular 230 disclaimer Any US tax advice contained herein was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice. Page 2

4 Today s presenters Alison Jones Daren Campbell Brandon Carlton Pat Chaback Angela Evans Kim Harrington Dino Lombardi Jeremy Watkins Page 3

5 : starting your implementation efforts Page 4

6 Overview and framework Materialsand supplies Acquisitions Improvements Depreciationand dispositions T 1.263(a)-2T 1.263(a)-3T Definitionof materials and supplies Three categories of deductibility: Incidental Non-incidental Rotablespare parts Election to deduct under de minimis rule Election to capitalize and depreciate Capitalized costs include costs that facilitate acquisition of property Whether and which test for real property May expense employee comp. and overhead De minimis rule: follow audited financial statement expensing up to ceiling (applied to each regarded entity) Greater of: 0.1% of tax gross receipts, or 2.0% of book depreciation/amortization Election to capitalize and depreciate Unit of property generally all functionally interdependent property except for: Buildings Plant property Leased property Improvement defined: Betterment Restoration New or different use Safe harbor for routine maintenance on property other than buildings Safe harbor for certain regulated entities No plan of rehabilitation 1.168(i)-1T,-7T,-8T 1.263(a)-1T Dispositions General rules Required to recognize disposition of structural components Reasonable identification methods Allowed vs. allowable issue General asset accounts Flexibility to recognize (or not) dispositions of assets Annual election One-time retroactive election Remember: coordination with section 263A required for most changes; several sleeper elections Page 5

7 Guidance and what we know TD 9564 temporary regulations Rev. Proc Rev. Proc (Transition guidance) and LB&I directive (stand-down from auditing repairs) Notice Amendments to TD 9564 Final and re-proposed regulations transition guidance ASC 740 event? Effective date Implementation final Temp. regulations modified to be effective for tax years beginning on or after 1 January 2014* Final regulations expected to be effective for tax years beginning on or after 1 January 2014* *certain provisions will be for costs incurred in taxable years beginning on or after 1 January 2014 Page 6

8 Washington insights Page 7

9 Internal Revenue Service activity Page 8

10 Implementation: requirements and options 2012 tax year 2013 tax year 2014 tax year Sept tax year options Continue pre-temporary regulation methods 2013 tax year options Continue pre-temporary regulation methods 2014 tax year options Implementation of the final regulations Implementation final Early implementation of a section(s) of the temporary regulation Early implementation of a section(s) of the temporary regulation Early implementation of a section(s) of the final regulations * Early implementation of a section(s) of the final regulations * Page 9

11 Data and technology Extract Process Load Fixed assets Material and supplies Book policy Current tax methods Assess required changes Collect supporting documentation Compute section 481(a) adjustment Prepare form 3115 Updatefixed assets Configuresource systems Assessment tools Form 3115 generation Page 10

12 Financial reporting considerations Page 11

13 Planning your company s finish Page 12

14 Thanks for participating

15 Ernst & Young Assurance Tax Transactions Advisory About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US Ernst & Young LLP. All Rights Reserved. BSC no This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither Ernst & Young LLP nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.