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Final Section 263(a) Tangible Property “Repair” Regulations

On Friday, September 13, 2013, the Internal Revenue Service filed with the Federal Register the text of the much-anticipated final tangible property regulations, which will be published in the September 19 issue. The text of the final regulations may be found at

The final regulations provide guidance to taxpayers on the treatment of costs paid to acquire, produce, or improve tangible property under sections 162(a) and 263(a).

These regulations address a number of areas, including:

  1. de minimis expenses
  2. materials and supplies
  3. repairs and maintenance

These regulations follow and supersede the temporary regulations issued in December 2011. In general, these final regulations are effective for taxable years beginning on or after January 1, 2014.

These regulations do not finalize or remove the 2011 temporary regulations under section 168 regarding general asset accounts and disposition of property subject to section 168, which are addressed in a separate Notice of Proposed Rulemaking.

These regulations will not be issued as final regulations until after the period for submitting comments has expired and a public hearing has been held. The text of the Notice may be found at

Next Steps

The Service published Rev. Procs. 2012-19 and 2012-20 following the issuance of the temporary regulations. The Service is expected to update these two revenue procedures, providing additional guidance on implementation of the final regulations, use of statistical sampling, and calculation of the section 481(a) adjustments. All taxpayers should plan to assess whether their capitalization policies, procedures, and accounting methods are in compliance with these final regulations.

Please contact your GBQ tax advisor to discuss the impact of these regulations specific to you and your business.

This article originally appeared in BDO USA, LLP’s “BDO Knows: Federal Tax” newsletter (September 2013).  Copyright © 2013 BDO USA, LLP.  All rights reserved.

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