If you had called Willard personally to ask, “What’s happening lately with various business tax issues that I need to know about?”… Here’s what he’d say:
New Tangibles Regulations
(Dec. 2011) The “New (proposed) Tangibles Regulations” (“T-Regs” for short) are complicated, different and somewhat controversial. Effective January 1, these wide-reaching Regulations clarify, expand (and, in some cases, reverse) the standards for the proper capitalization of specific expenditures associated with tangible property. At the same time, they provide allowances for deductions for “repair” expenses and certain other de minimis or safe harbor amounts.
IRS Notice 2012-73 Hints at Relief for Smaller Businesses
In IRS Notice 2012-73, the Service said that it anticipates that the final Regulations will contain changes from the temporary Regulations. As a result, the Regulations now will apply to taxable years beginning on or after January 1, 2014. That’s a 2-year postponement of the “drop-dead” date for implementing the new provisions.
Will LIFO Be Around Next Year?
The answer is that no one can really be sure. Earlier this year, the Obama Administration again included a proposal to eliminate the use of LIFO as part of its 2013 Revenue Proposals. The Administration’s proposal – if it were to come to pass – at least would provide a 2-year stay of execution if broad repeal were to be the fate of LIFO. Also, in the meantime, there has been one bill introduced to immediately repeal the use of LIFO by certain major integrated oil companies.
There has been a lot of speculation over the possibility that the blending of International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) would automatically result in the “effective repeal” of the use of the LIFO method for U.S. businesses. Many who lobbied Congress to repeal LIFO have argued that, as a practical matter, the repeal of LIFO was inevitable as soon as U.S. GAAP reporting standards (which permit LIFO) were absorbed and eliminated via “convergence” with global or European-style IFRS. The “inevitability” of the demise of LIFO based on this assumption is now in considerable doubt.
Related Dangerous Proposals … Repeal of LCM Methods
Many discussions (pro or con) of the repeal of LIFO by Congress to “cure” the “deficit problem” seem to consistently minimize or entirely overlook one important fact. That fact is that whenever legislative proposals have been set forth to eliminate LIFO, these proposals also include – almost as a “throw-away” – the elimination of two other significant inventory methods of accounting … namely the use of the lower-of-cost-or-market (LCM) method and the subnormal goods method.
ARTICLES & SUMMARIES
- Tangibles Regulations Executive Summary (Dec. 2011)