On 6/1/2022 the IRS updated its Cost Segregation Audit Techniques Guideline (ATG) for the first time since 2017. On Page 1 of the Introduction, the ATG states that it is “…not intended as an official IRS pronouncement. Accordingly, it may not be cited as authority.”   

 Nonetheless, the ATG is quite valuable as it takes readers into the mind of an IRS Examiner, spelling out exactly what he is looking for as he scrutinizes a report. The proactive and thoughtful reader can use this guidance to ensure best practices in his cost segregation studies.  

The 2022 update points out two new areas of focus. The importance of identifying land values is stressed, and an entire new chapter is added on the subject of electrical distribution systems. This seems to imply that future auditors will be taking a close look at these subjects. Director of Engineering Ziv Carmel notes, “Capstan engineers always seek to comply with IRS guidelines regarding electrical load distribution and analysis. We also make certain to confirm land values with the client.” 

Beyond those two areas, this version of the Guidelines updates content to include terms and legislation that were not in existence at the time of the last update:  

• Guide now includes the staggered rules of QIP, QLIP, QRIP, and QRP.  (Table on Page 69) 

• Guide now references the TCJA and nuances regarding the application of IRC Sec. 263A to newly constructed property.  (Page 59 and Others) 

• Guide now includes Rev. Proc. 2022-14, the latest Form 3115 guidance for automatic changes in accounting. (Page 138)  

• Guide now uses updated language to reference the staggered rules relating to IRC Sec. 179. (Table on Page 124) 

Have a question? Contact Bruce Johnson, Capstan Tax Strategies.