The American Institute of CPAs urged the Internal Revenue Service, in a letter Wednesday, to act quickly to relieve the administrative burden on small business taxpayers from the tangible property regulations, often referred to as “repair regulations,” issued earlier this year.

The regulations provide a general framework for distinguishing capital expenditures from supplies, repairs, maintenance and other deductible business expenses.

“As we and our members have discussed with you on multiple occasions, we are particularly concerned about the administrative impact of the low amount ($500) of the de minimis safe harbor threshold for taxpayers without an applicable financial statement, the retrospective application of the rules, and the related administrative burdens on small businesses,” wrote Jeffrey A. Porter, chair of the AICPA Tax Executive Committee. “We are also aware of Circular No. 230 obligations and challenges that practitioners will face when small businesses are unwilling or unable to precisely comply with this complex set of rules.”

“Time is of the essence” Porter continued, because “a significant portion of the burdens placed on small businesses from the transitional requirement of the repair regulations will occur between now and the upcoming filing season.”

The letter’s recommended changes, as follows, are intended to reduce the burden on small business taxpayers and their tax practitioners:

  • Increase the de minimis safe harbor threshold amount for taxpayers without an applicable financial statement from $500 to $2,500 and adjusting the de minimis safe harbor threshold amount on an annual basis for inflation.
  • Allow small businesses to elect to apply the repair regulations prospectively, without calculating adjustments with respect to prior-year tangible property costs.


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