Pub. 3 2013-2014 Issue 3

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S November • December 2013 9 repair regulations is complex and the effects do not stop there. Specifically, many taxpayers will be required to change their existing income tax accounting methods for various types of expenditures to comply with the final regulations. The effect of the accounting method change(s) may result in an immediate impact on taxable income. The IRS previously provided account- ingmethod change procedures under the temporary regulations. We anticipate updated accounting method change guidance for the final regulations from the IRS. Because the repair regulations are so far-reaching and complex, it is vital for businesses and their advisors to become intimately familiar with their content in order to ensure accurate implementation. The following are some key takeaways from the more than 220 pages of final regulations: Effective Date: The repair regulations generally are effective for tax years beginning on or after January 1, 2014. However, taxpayers may choose to apply the final regulations to taxable years beginning on or after January 1, 2012. In addition, some taxpayers relied on portions of the temporary regulations for years beginning on or after January 1, 2012, and before Janu- ary 1, 2014. These taxpayers will need to compare the position taken under the temporary regulations to the position available under the final regulations to determine if a subsequent change in accounting method is required in 2014 to comply with the guidance under the final regulations. Differences in the final regulations from the temporary regulations: The vast majority of the provisions in the final regulations remained unchanged. However, there are several noteworthy revisions that might affect—and in certain cases, simplify—taxpayers’ implementation of the rules: • The final regulations adopt a revised and simplified de minimis rule by eliminating the ceiling rule and replacing it with a safe harbor to allow expensing only if the amount paid does not exceed $5,000 per invoice, or per item as substantiated by the invoice. However, the safe harbor was not expanded to taxpayers without audited financial statements. Instead, the final regulations added a de minimis safe harbor for taxpayers without audited financials of $500 per invoice, or per item as substantiated by the invoice. • The final regulations added a safe harbor to the rules governing improvements to buildings for qualifying small taxpayers—those with gross receipts of $10 million or less. • The final regulations extend the routine maintenance safe harbor to buildings. • The final regulations refine several of the criteria for defining betterments and restorations to tangible property. The 2011 temporary regulations regard- ing general asset accounts (GAA) and dispo- sition of property subject toModified Accel- eratedCost Recovery System(MACRS) were not finalized. Instead, to address significant changes in this area, the Treasury Depart- ment and IRS issued proposed regulations concurrently with the final repair regula-  FINAL REPAIR  continued on page 11