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the election to capitalize repairs. That balance
is recovered over the remainder of the 15-year AICPA RESOURCES
life of the asset. The difference only becomes Articles
greater as the bonus depreciation rate continues
“Change Is Coming: Accounting Method Changes Under the Tangible
to phase down over the years. Of course, the
Property Regulations,” JofA, April 13, 2015
aforementioned roof, which is ineligible for bonus
“A Renewed Chance to Revisit Old Assets for Repairs and Maintenance
depreciation, maintains the difference associated
Expense,” The Tax Adviser, April 2020
with expensing as a repair rather than capitalizing.
As an offset, if a taxpayer wants to continue to “Benefiting From New Tangible Property Regulations and Disposal
Provisions,” The Tax Adviser, Sept. 2016
capitalize and depreciate, a careful examination
of the assets disposed of, including a partial- The Tax Adviser and Tax Section
disposition election, can provide some offset to the
Subscribe to the award-winning magazine The Tax Adviser. AICPA Tax
unfavorable impact of capitalizing the repairs. Section members receive a subscription in addition to access to a tax
resource library, member-only newsletter, and four free webcasts. The
THE PASSAGE OF TIME Tax Section is leading tax forward with the latest news, tools, webcasts,
client support, and more. Learn more at us.aicpa.org/tax-section. The
Nearly a decade has passed since the IRS first
current issue of The Tax Adviser and many other resources are available at
published the final regulations on capitalizing
thetaxadviser.com.
costs paid to acquire or improve tangible prop-
erty. Taxpayers reviewed the rules and likely
implemented them by filing several accounting
method changes. Now that taxpayers have been
following the final rules since 2014, it may be nonautomatic filing procedures.
time to review and refresh tax decisions to reflect Section 11.08 of Rev. Proc. 2022-14 provides
the taxpayer’s current policies and practices. many of the automatic change procedures,
Did the taxpayer implement a new enterprise including changes for deducting repairs or
resource planning (ERP) system, acquire a busi- capitalizing improvements, treatment of materi-
ness, or expand into a new trade or business? Was als and supplies, and capitalizing costs related
the taxpayer itself acquired by new owners? Have to the acquisition or production of tangible
book policies changed with regard to expensing property. Sections 6.12, 6.13, 6.14, and 6.15 of
amounts as de minimis or as repairs? Did the the same revenue procedure generally provide the
book treatment of materials and supplies, includ- automatic procedures for dispositions of tangible
ing spare parts, change? Has the taxpayer’s tax property, whether in single, multiple, or general
position changed with respect to NOLs, interest asset accounts. Most of the elections, as noted
expense limitations, or foreign taxes? These are just above, are made annually and are therefore not
a few starting questions that may help determine changes to a method of accounting.
whether a taxpayer wants or needs to consider ac-
counting method changes that are related to small TIME TO REEXAMINE ELECTIONS AND
(or large) business changes over time. METHODS
The tangible property regulations affected most
ACCOUNTING METHOD CHANGES business taxpayers in 2014. Taxpayers filed
If a taxpayer discovers it may need or want to method changes, began making new elections
make a change under the tangible property regu- annually, and developed procedures related to
lations, the next question is whether that change capitalizing tangible assets. Since then, a host
is automatic. Generally, Section 5.01(f) of Rev. of changes in tax law, regulations, and book
Proc. 2015-13 precludes a taxpayer from making standards have continued to affect taxpayers’
an automatic method change for an item if a overall tax filing positions. The years 2022 and
method change was filed for the same item in the 2023 will be no exception, with certain provi-
prior five years. For taxpayers that filed method sions of the TCJA beginning to expire or phase
changes for the 2014 tax year, that limitation out. As planning for 2022 tax returns (and 2023
has now expired (probably after 2018). The good estimates and provisions) begins, now may be the
news is that, for most taxpayers, making changes time to examine the methods and elections used
in the method of accounting will likely be to see if making a change may result in a better
automatic rather than having to go through the overall tax position now and in future years. ■

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