TaxConnections

Ask Tax Question

Did the IRS issue new TPR compliance safe harbor rules governing the retail and restaurant industries?

Revenue Procedures Tangible Property Regs
TaxConnections Members... Answer This Question Want To be One of Our Tax Experts? Register Here

Tax Professional Answers

User Photo
Peter J. Scalise
Yes, on November 20, 2015, the Internal Revenue Service (hereinafter the “Service”) issued new administrative authority governing the Tangible Property Regulations (hereinafter “TPR”) in connection to the safe harbor rules for the retail and restaurant industries. More specifically, the newly released Revenue Procedure 2015-56 (hereinafter “Rev. Proc. 2015-56) provides a safe harbor method of accounting for taxpayers engaged in the trade or business of operating either a retail establishment or a restaurant for purposes of determining whether expenditures paid or incurred to remodel or refresh a qualified building are:

 Deductible pursuant to I.R.C. § 162(a);
 Requires capitalization treatment as an improvement pursuant to I.R.C. § 263(a); or
 Requires capitalization treatment as the costs of property produced by the taxpayer for use in its trade or business meets the requirements as set forth under I.R.C. § 263A.

Clearly, the scope and application of Rev. Proc. 2015-56 is to reduce disagreements regarding the deductibility or capitalization treatment of remodel-refresh costs incurred by members of the retail and restaurant industries. However as a caveat, the applicability of the safe harbor rules under Rev. Proc. 2015-56 excludes other industries that incur similar costs including but not limited to hotels, casinos, theaters, theme parks, and country clubs.

The safe harbor rules permit a current deduction of 75% of the “qualified costs” incurred by a “qualified taxpayer” in the course of performing a “remodel-refresh project” on a “qualified building,” as defined within Rev. Proc. 2015-56. The taxpayer must then capitalize and recover through depreciation deductions the remaining 25% of the project costs. Furthermore, Rev. Proc. 2015-56 provides a detailed, non-exclusive listing of the “qualified costs” eligible for the safe harbor along with a listing of those costs that are not “qualified costs”.

The Retail Industry Leaders Association (hereinafter the “RILA”) enthusiastically welcomed the new safe harbor rules from the Service regarding the deductibility treatment for qualified costs in connection to store remodels, repairs, and refreshes. Christine Pollack, the Vice President of Government Affairs at RILA indicated that "retailers welcome this safe harbor rule, which helps to ensure that federal tax policy better reflects the real world realities for retail businesses that undergo store remodels and repairs."

For the complete scope and application of Rev. Proc. 2015-56, please utilize the subsequent link to access this form of administrative authority at: www.irs.gov/pub/irs-drop/rp-15-56.pdf
Leave a Comment 54 weeks ago



Meet Leading Tax Advisors

User Photo Kathryn Morgan

Bossier City, Louisiana, USA

Enrolled Agent, Master Tax Advisor

User Photo Peter J. Scalise

New York, New York, USA

Federal Tax Credits & Incentives Practice Leader

User Photo John Stancil

Lakeland, Florida, USA

Tax Advisor/CEO

User Photo John Dundon, II EA

Denver, Colorado, USA

Tax Director

User Photo Steven Potts JD EA IAR

Fullerton, California, USA

Principal

User Photo Devon McCarthy FCCA, EA

Sanford, Florida, USA

President

User Photo Caran Ebert, CPA

Topanga, California, USA

Tax Advisor

User Photo Lisa Nason CPA, MST

Greenville, South Carolina, USA

Managing Shareholder

User Photo Gary Carter, PhD, MT, CPA

Edina, Minnesota, USA

President

User Photo NEERAJ BHATIA, CPA

Santa Clara, California, USA

Tax Principal - President

User Photo Bill Robinson, CPA

Chattanooga, Tennessee, USA

Owner

User Photo Hugo Van Zyl

Stellenbosch, South Africa

Exchange Control & Master Tax Practitioner (SA)

User Photo Douglas Stransky

Boston, Massachusetts, USA

Tax Partner, International Tax

User Photo Larry Stolberg, CPA, CA

Toronto Mississauga Oakville Burlington Hamilton, Canada

Tax Specialist

User Photo Dr. Daniel Erasmus

West Palm Beach, Florida, USA

Managing Partner/EMEA

View/Select our Current List of Tax Topics

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Previous PageNext Page

Contact Us Today