Depreciation

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Tangible Property Repair Regulations

December 23, 2013

On Sept. 19, 2013, the IRS and Treasury Department published final regulations under Sections 162(a) and 263(a) on the deduction and capitalization of expenditures related to tangible property (the “2013 Final Repair Regulations”). NBAA closely monitored the nearly decade long effort to finalize these regulations and submitted detailed comments for consideration by the IRS and Treasury Department.

All aircraft operators face regular questions regarding what costs should be capitalized and what costs should be expensed for tax purposes. Operators often have questions regarding high dollar expenditures related to engine and airframe inspections and overhauls. This regulations project has provided some clarity and guidance for answering those questions. 

Of particular interest to NBAA Members are new examples and additional discussion in the final regulations on the treatment of items such as routine maintenance, inspections and engine overhauls. For example, at the request of NBAA a new example is included in the final regulations to clarify that a heavy maintenance visit, while extensive, did not restore the aircraft to a like-new condition, even though the work was performed after the end of the aircraft’s class life.

The 2013 Final Repair Regulations generally apply to tax years beginning on or after Jan. 1, 2014, but taxpayers must carefully review the rules to determine specific effective dates.

The NBAA Tax Committee reviewed the final regulations and Committee members Richard C. Farley, Jr., and Glenn J. Hediger prepared an article to summarize key issues for NBAA Members.

Review the full article "Final Capitalization Regulations Aim to Reduce Taxpayer and Government Conflicts" (84 KB, PDF)

For more information regarding the issues described in this document, contact Richard C. Farley, Jr. of PricewaterhouseCoopers LLP at (646) 471-4084 or richard.c.farley@us.pwc.com or Glenn J. Hediger of Aviation Financial Consulting, LLC at (703) 346-1449 or hediger_cpa@yahoo.com.

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