Depreciation Update: New Final and Proposed Bonus Regulations, Changing Bonus Elections, 163(j) ADS Transition

On September 13, 2019, the Treasury Department and the Internal Revenue Service issued final and proposed regulations regarding the first-year bonus depreciation under Section 168(k). The regulations clarify bonus eligible property, binding contract rules, component parts, ADS requirements with floor plan financing, self-constructed property, and more. These new rules could create additional opportunities for additional bonus depreciation for taxpayers.

For years 2016 and 2017, practitioners had little time to consider or had already filed tax returns, when the IRS issued proposed regulations in August 2018 regarding bonus elections under 168(k). To reduce the administrative burden on the IRS and practitioners of processing and filing amended returns, the IRS provided relief in Rev Proc 2019-33. This Rev Proc outlines streamlined procedures for electing in, out, or changing the percentage of bonus depreciation previously taken, which constitutes a change in accounting method.

Section 163(j)(7) allows certain real property and farming entities to elect out of the interest limitation. However, these businesses are required to depreciate certain property under ADS using a longer recovery period. Rev Proc 2019-08 explains how to make the transition to ADS. Not making the change appropriately could lead to the adoption of an impermissible accounting method.

QIP was intended to be eligible for 100% bonus depreciation and a 15-year depreciable life. The drafting error in the recent tax act and the wait for a correction has left practitioners in limbo as to how to handle QIP and resulted in some businesses having higher than anticipated tax bills.

Finally, the 2018 tax act increased first-year depreciation for passenger autos subject to the 280F limitations to $18,000 and provided a safe harbor calculation that allows businesses to deduct first-year depreciation above this threshold in the following year.

Listen as our panel of experts addresses the steps needed to change, revoke, or make bonus depreciation taken, how to calculate ADS depreciation to comply with IRC 163(j), best practices considering QIP uncertainties, and the new vehicle safe harbor.

1. Final and Proposed Bonus Regulations
2. Revenue Procedure 2019-33 Making and Changing Bonus Depreciation Elections
3. ADS depreciation transition and calculation under the exception to IRC 163(j)
4. New vehicle safe harbor deprecation
5. QIP depreciation
6. Section 179
7. Other depreciation considerations after tax reform

The panel will review these and other important issues:

• Final and proposed regulations for bonus depreciation
• Calculating ADS depreciation under the 163(j) exception
• Section 179 opportunities
• Handling QIP deductions without technical corrections
• Filing form 3115 for changes in bonus depreciation

Learning Objectives

After completing this course, you will be able to:

• Identify assets eligible for bonus depreciation changes under Revenue Procedure 2019-33
• Ascertain entities eligible to elect out of the 163(j) interest limitations
• Decide depreciation best practices for QIP property
• Determine vehicles eligible for the new safe harbor calculation

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and sole proprietorships, qualified business income, net operating losses and loss limitations; familiarity with net operating loss carry-backs, carry-forwards and carried interests.

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).