Tangible property regulations. A discussion about taxpayer considerations

Transcription

1 Tangible property regulations A discussion about taxpayer considerations

2 How will your

3 Key considerations Acquisitions Federal and state income tax Increased tax liability: Capitalization of certain de minimis costs Capitalization of other acquisition costs Materials and Supplies (M&S) Increased tax liability: Capitalization of nonqualifying M&S items Deferred deduction for non-incidental supplies Improvements/ repairs Increased tax liability: Capitalization of certain building and plant component repairs/overhauls Depreciation/ dispositions Increased tax liability: Allowed vs. allowable basis issues Reduced tax liability from certain deductible costs including: Whether and which costs Certain employee compensation and overhead Reduced tax liability: Elect to deduct nonincidental supplies or rotable parts under de minimis rules, if available Elect to capitalize rotable parts in lieu of loss upon disposition Reduced tax liability: Deduct capitalized repairs Includes look-back period New safe harbor for routine maintenance Reduced tax liability: Ability to recognize disposition of structural components using reasonable identi cation methods Includes look-back period Property tax Identify/reduce exposure areas for de minimis costs requiring property tax assessment Identify/reduce exposure for commercial, industrial and personal property (CIP), generally taxable on lien date, not placed in service date Identify/reduce exposure areas for M&S costs requiring personal property tax assessment Reduce liability by deducting currently capitalized repairs Potential for double taxation Reduce liability by deducting currently capitalized dispositions and ghost assets Potential for double taxation Sales and use tax Analyze property by state to determine exempt property (i.e., R&D and manufacturing) Identify material states and determine opportunities and risks at transaction level Operating vs. resale Vendor vs. buyer 1

4 Fixed asset Key considerations Financial accounting Tax return Controversy support Com objec Ernst & Y Compliance Policies, systems, processes and controls Most ef cient compliance Process simpli cations going forward Unicap and cost recovery Planning Strategically staging implementation from Leveraging the rules to accelerate deductions and generate cash Integration of earnings and pro ts planning Engineering Documentation Pro sys improv c nology Typical time frame 2012/2013 implementation options May continue to use current methods May implement temporary rules (section by section) May early-adopt nal rules (section by section) Options A M J J A S O N D J F M A M J Mid-2013 regulations and transition guidance ASC 740 2nd or 3rd quarter event 1 January 2014 Final effective date Book de minimis policy must be in writing by 1 January 2014 Other policies and/or data tracking you would like to have in place need to be live for 2014 tax return Implementation deadline for September 2013 Extended due date for 2012 tax return Finalize tax provision effect 2

5 Information Te any tives oung LLP Real estate Current state assessment Financial statement implications Construction Determine tax positions (e.g., 199) and tax provision Understand your company s expense practices Determine necessary Current state assessment regulations and provisions Identify current reporting expense cess/ tem ements Implementation Operations 2014 and beyond Must apply nal rules J A S O N D J F M A M J J A S Implementation deadline for September 2014 Extended due date for 2013 tax return Implementation deadline for September 2015 extended due date for 2014 tax return Tax department available to work on implementation Tax department unavailable tax provision, tax returns, holidays and vacation 3

6 It is essential for taxpayers to consider their individual facts and circumstances as they assess the impact of the regulations on their business, de ne their ob ectives in addressing the regulations and implement actions associated with those ob ectives. Ernst & oung LLP can help in every step of this process. Flexible Sustainable Our focus in serving clients is to offer a practical and exible approach. We work collaboratively with our clients to shape and understand their ob ectives within the con nes of the tax law. As a co-sourced team, we work together to achieve those ob ectives, ranging from essential compliance with the regulations to advising on and implementing value-added tax planning opportunities presented by the regulations. National, regional and local tax professionals have deep technical knowledge, industry acumen, practical experiences and good working relationships with government of cials. This provides Ernst & oung LLP with an unmatched ability to team with our clients to identify, evaluate and implement leadingedge alternatives when addressing challenging issues within the regulations. Extracting, analyzing, computing and reporting data is a signi cant aspect of implementing the regulations. Complexities are likely to arise at one or several of these stages. Through Ernst & oung LLP s quantitative and qualitative technology tools, coupled with our sophisticated use of statistical sampling, we help to reduce these complexities by offering ef cient data extraction, streamlined analysis and quality deliverables. Building a self-sustaining process is key to any plan of compliance that we recommend and implement for our clients. Equally important is that our approach and interpretations used as part of that process can be sustained under Internal Revenue Service (IRS) exam. Ernst & oung LLP s Tax Controversy and Risk Management professionals are an essential part of our client serving team. Their reputation within the IRS National Of ce, among IRS technical specialists and local exam teams, is unprecedented. Their assistance provided to Compliance Assurance Process (CAP) taxpayers as they implement the regulations has provided, and will continue to provide, highly relevant experience and insights into the IRS approach to auditing and resolving issues concerning the tangible property regulations Ernst & oung LLP consistently delivers an experienced team with a proven track record, one that knows the tax law and tax code, is knowledgeable in industry issues and has an unmatched history of working with Treasury, the IRS and CAP participants. By working together with our clients, we achieve innovation and transformation of the tax function, delivering what your business needs on time, with accuracy and at a fair cost. We convert your challenges into opportunities. 4

7 Flexible Sustainable

8 Ernst & oung Assurance Tax Transactions Advisory About Ernst & oung Ernst & oung 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 & oung refers to the global organization of member firms of Ernst & oung lobal Limited, each of which is a separate legal entity. Ernst & oung lobal Limited, a U company limited by guarantee, does not provide services to clients. For more information about our organization, please visit Ernst & oung LLP is a client-serving member firm of Ernst & oung lobal Limited operating in the US Ernst & oung LLP. All Rights Reserved. SCORE no ED None