Taxpayers can expect the IRS to issue regulations implementing the 2017 tax law’s full expensing provision in less than two months, according to Kathleen Reed, Branch 7 Chief in the IRS Office of Chief Counsel (Income Tax and Accounting).
Tax professionals will recall that the tax law amended Section 168(k) to permit businesses to immediately and fully write off purchases of qualified property and capital, effective for items bought and placed into service after Sept. 27, 2017. Beginning in 2023, the allowance winds down from 100 percent bonus depreciation—also known as full expensing—to 80 percent, and tapers by another 20 percentage points each following year.
Reed, speaking at the May meeting of the American Bar Association Section of Taxation in Washington, DC, said “A lot of rules are already under the existing regulations. We are just looking to see which ones have to be changed, but the package will be a complete package.”
Reed added that old rules governing the code section will stay in place, as “they apply to prior years and are necessary for examinations,” and she said the IRS “will consider” allowing taxpayers to rely on the proposed rules before they become final.
Reed said she is “anticipating” issuing the proposed rules by “late June or early July.”
The IRS is still deciding whether taxpayers will be able to rely on the guidance prior to it becoming final, Reed said at a later panel.
The IRS is pretty far along in writing the regulations, Reed said, but is still considering some issues. Among items the IRS is discussing is whether there need to be rules to prevent related parties from buying used property from one another to take advantage of the depreciation rules. The IRS is also looking into issues surrounding depreciating property constructed by the taxpayer, she said.