Understanding Revenue Procedure 2015-20 and Its Impact on Building Owners

The Tangible Property Regulations (TPRs), enacted in 2013, set the rules for determining whether changes, improvements, renovations, repairs, and maintenance performed on any asset after it’s put in service should be depreciated or expensed. These regulations are mandatory and affect all trades and businesses in the United States.

Initially, the IRS required every business to file Form 3115 to indicate their switch to the TPRs from their previous methods. This form is notoriously complex; the IRS estimates it takes 36 hours to learn and 24 hours to complete. Given this, the CPA community strongly opposed the requirement, arguing that it was an excessive burden. For a CPA with 100 clients, the process could take up to 2,400 hours, equating to more than a year’s worth of work just for these forms.

In response to the outcry, the IRS released Revenue Procedure 2015-20. This procedure allows small businesses — those with total assets or average annual revenues of $10 million or less — to bypass the usual process for implementing an accounting method change, including the requirement to file Form 3115. While this seemed like a reprieve, it only meant that small businesses could skip the form, not the new regulations themselves.

Many tax accountants mistakenly believed that Revenue Procedure 2015-20 nullified the need to adopt the new TPRs. However, this is not the case; the regulations still mandate an accounting method change. Misunderstanding or ignoring these regulations can lead to complications and potential issues with the IRS.

If you are a tax accountant or a taxpayer and find yourself confused by these regulations, it’s crucial to seek guidance. The TPRs are complex but designed to be taxpayer-friendly when properly understood and applied. For more detailed assistance or a free presentation on the basics, do not hesitate to reach out. Understanding and complying with these mandatory regulations is essential for all businesses.

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