Taxpayers allowed choice of bonus depreciation rules

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Taxpayers allowed choice of bonus depreciation rules

When the IRS issued final bonus depreciation regulations in September (T.D. 9916), it said it planned to issue procedures allowing taxpayers to choose to apply the final regulations in prior tax years or to rely on the proposed regulations issued in September 2019.

In Rev. Proc. 2020-50, the IRS provided guidance for taxpayers wishing to apply the final or proposed regulations under Sec. 168(k) for:

The revenue procedure provides detailed rules for applying the final or proposed regulations as well as revoking or making late bonus depreciation elections.

Whether taxpayers retroactively apply the final regulations or rely on the 2019 proposed regulations, they may make a late election under Sec. 168(k)(5), (k)(7), or (k)(10), and Regs. Sec. 1.168(k)-2(c) of the 2020 final regulations or the 2019 proposed regulations, or Regs. Sec. 1.1502-68(c)(4) of the 2020 final regulations, or to revoke an election under Sec. 168(k)(5), (k)(7), or (k)(10), or Regs. Sec. 1.168(k)-2(c) of the 2019 proposed regulations, for the taxpayer’s tax years ending on or after Sept. 28, 2017, and before the taxpayer’s first tax year that begins on or after Jan. 1, 2021.

To implement these elections, certain taxpayers may file an amended return, an administrative adjustment request, or a Form 3115, Application for Change in Accounting Method, to change their method of accounting for depreciation of certain depreciable property acquired after Sept. 27, 2017, and placed in service after Sept. 27, 2017, and during the taxpayer’s tax years ending on or after Sept. 28, 2017, and ending before the taxpayer’s first tax year that begins on or after Jan. 1, 2021, and certain plants that are planted or grafted, after Sept. 27, 2017, during its tax years ending on or after Sept. 28, 2017, and ending before the taxpayer’s first tax year that begins on or after Jan. 1, 2021.

Sally P. Schreiber, J.D., (Sally.Schreiber@aicpa-cima.com) is a JofA senior editor.

Research & References of Taxpayers allowed choice of bonus depreciation rules|A&C Accounting And Tax Services
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