[Federal Register Volume 76, Number 248 (Tuesday, December 27, 2011)]
[Proposed Rules]
[Pages 81128-81131]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32246]



  Federal Register / Vol. 76, No. 248 / Tuesday, December 27, 2011 / 
Proposed Rules  

[[Page 81128]]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-168745-03]
RIN 1545-BE18


Guidance Regarding Deduction and Capitalization of Expenditures 
Related to Tangible Property

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations, notice of public hearing, and withdrawal of previously 
proposed regulations.

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SUMMARY: Appearing elsewhere in this issue of the Federal Register, the 
IRS is issuing temporary regulations that provide guidance on the 
application of sections 162(a) and 263(a) of the Internal Revenue Code 
(Code) to amounts paid to acquire, produce, or improve tangible 
property. The temporary regulations clarify and expand the standards in 
the current regulations under sections 162(a) and 263(a), and provide 
certain bright-line tests (for example, a de minimis rule for certain 
acquisitions) for applying these standards. The temporary regulations 
also provide guidance under section 168 regarding the accounting for, 
and dispositions of, property subject to section 168. The temporary 
regulations also amend the general asset account regulations. The 
temporary regulations will affect all taxpayers that acquire, produce, 
or improve tangible property. The text of the temporary regulations 
published in the Federal Regulations also serves as the text of these 
proposed regulations. This document also provides notice of public 
hearing on these proposed regulations and withdraws the proposed 
regulations published in the Federal Register on March 10, 2008 (73 FR 
47).

DATES: Written and/or electronic comments and requests for a public 
hearing must be received by March 26, 2012. Requests to speak and 
outlines of topics to be discussed at the public hearing scheduled for 
April 4, 2012 at 10 a.m., must be received by March 21, 2012.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-168745-03), Room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
168745-03), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC 20224, or sent electronically, via the 
Federal eRulemaking Portal at www.regulations.gov (IRS REG-168745-03). 
The public hearing will be held in the IRS Auditorium, Internal Revenue 
Building, 1111 Constitution Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations 
under sections 162 and 263, Merrill D. Feldstein and Alan Williams, 
Office of Associate Chief Counsel (Income Tax and Accounting) (202) 
622-4950; concerning the proposed regulations under sections 165, 167, 
168, 263A, and 1016, Kathleen Reed and Patrick Clinton, Office of 
Associate Chief Counsel (Income Tax and Accounting) (202) 622-4930; and 
concerning submission of comments, the hearing, and/or to be placed on 
the building access list to attend the hearing, 
[email protected].

SUPPLEMENTARY INFORMATION: 

Background and Explanation of Provisions

    Temporary regulations appearing elsewhere of this issue of the 
Federal Register amend the Income Tax Regulations (26 CFR part 1) 
relating to sections 162, 165, 167, 168, 263(a), 263A, and 1016. The 
temporary regulations set forth rules relating to amounts paid to 
acquire, produce, or improve tangible property. The temporary 
regulations also provide guidance regarding the accounting for, and 
dispositions of, property subject to section 168. The temporary 
regulations also amend the general asset account regulations. The text 
of the temporary regulations also serves as the text of these proposed 
regulations. The preamble to the temporary regulations explains the 
temporary regulations and these proposed regulations.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866, as supplemented by Executive Order 13563. Therefore, a 
regulatory assessment is not required. It also has been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
does not apply to these regulations, and, because the regulation does 
not impose a collection of information on small entities, the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. 
Pursuant to section 7805(f), this regulation has been submitted to the 
Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. Comments are requested on all aspects of the proposed 
rules. In addition, the IRS and Treasury Department specifically 
request comments on the clarity of the proposed rules and how they may 
be made easier to understand. All comments will be available for public 
inspection and copying.
    A public hearing has been scheduled for April 4, 2012, beginning at 
10 a.m. in the IRS Auditorium, Internal Revenue Building, 1111 
Constitution Avenue NW., Washington, DC. Due to building security 
procedures, visitors must enter at the Constitution Avenue entrance. In 
addition, all visitors must present photo identification to enter the 
building. Because of access restrictions, visitors will not be admitted 
beyond the immediate entrance area more than 30 minutes before the 
hearing starts. For information about having your name placed on the 
building access list to attend the hearing, see the FOR FURTHER 
INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit electronic or 
written comments and an outline of the topics to be discussed and the 
time to be devoted to each topic (signed original and eight (8) copies) 
by March 21, 2012. A period of 10 minutes will be allotted to each 
person for making comments. An agenda showing the scheduling of the 
speakers will be prepared after the deadline for receiving outlines has 
passed. Copies of the agenda will be available free of charge at the 
hearing.

Drafting Information

    The principal authors of these regulations are Merrill D. Feldstein 
and Katherine Reed, Office of the Associate Chief Counsel (Income Tax 
and Accounting). However, other personnel from the IRS and Treasury 
Department participated in their development.

Withdrawal of Proposed Amendments to the Regulations

    Accordingly, under the authority of 26 U.S.C. 7805, the notice of 
proposed rulemaking (REG-168745-03) published

[[Page 81129]]

in the Federal Register on March 10, 2008, (73 FR 46) is withdrawn.

Proposed Amendment to the Regulations

    Accordingly, 26 CFR Part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by adding 
an entry in numerical order to read as follows:

    Authority:  26 U.S.C. 7805 * * *

    Section 1.168(i)-1T also issued under 26 U.S.C. 168(i)(4). * * *

    Par. 2. Section 1.162-3 is revised to read as follows:


Sec.  1.162-3  Materials and Supplies.

    [The text of the proposed amendments to Sec.  1.162-3 is the same 
as the text of Sec.  1.162-3T(a) through (i) published elsewhere in 
this issue of the Federal Register].
    Par. 3. Section 1.162-4 is revised to read as follows:


Sec.  1.162-4  Repairs.

    [The text of the proposed amendments to Sec.  1.162-4 is the same 
as the text of Sec.  1.162-4T(a) through (c) published elsewhere in 
this issue of the Federal Register].


Sec.  1.162-6  [Removed]

    Par. 4. Section 1.162-6 is removed.
    Par. 5. Section 1.162-11 is amended by:
    1. Revising paragraph (b).
    2. Adding paragraph (c).
    The revision and addition reads as follows:


Sec.  1.162-11  Rentals.

* * * * *
    (b) [The text of the proposed amendments to Sec.  1.162-11(b) is 
the same as the text of Sec.  1.162-11T(b) published elsewhere in this 
issue of the Federal Register].
    (c) [The text of the proposed amendments to Sec.  1.162-11(c) is 
the same as the text of Sec.  1.162-11T(c) published elsewhere in this 
issue of the Federal Register].
    Par. 6. Section 1.165-2 is amended by:
    1. Revising paragraph (c).
    2. Adding paragraph (d).
    The addition and revision read as follows:


Sec.  1.165-2  Obsolescence of nondepreciable property.

* * * * *
    (c) [The text of the proposed amendments to Sec.  1.165-2(c) is the 
same as the text of Sec.  1.165-2T(c) published elsewhere in this issue 
of the Federal Register].
    (d) [The text of the proposed amendments to Sec.  1.165-2(d) is the 
same as the text of Sec.  1.165-2T(d) published elsewhere in this issue 
of the Federal Register].
    Par. 7. Section 1.167(a)-4 is revised to read as follows:


Sec.  1.167(a)-4  Leased property.

    [The text of the proposed amendments to Sec.  1.167(a)-4 is the 
same as the text of Sec.  1.167(a)-4T(a) through (b)(4) published 
elsewhere in this issue of the Federal Register].
    Par. 8. Section 1.167(a)-7 is amended by adding paragraphs (e) and 
(f) to read as follows:


Sec.  1.167(a)-7  Accounting for depreciable property.

* * * * *
    (e) [The text of the proposed amendments to Sec.  1.167(a)-7(e) is 
the same as the text of Sec.  1.167(a)-7T(e) published elsewhere in 
this issue of the Federal Register].
    (f) [The text of the proposed amendments to Sec.  1.167(a)-7(f) is 
the same as the text of Sec.  1.167(a)-7T(f) published elsewhere in 
this issue of the Federal Register].
    Par. 9. Section 1.167(a)-8 is amended by adding paragraphs (g) and 
(h). The addition reads as follows:


Sec.  1.167(a)-8  Retirements.

* * * * *
    (g) [The text of the proposed amendments to Sec.  1.167(a)-8(g) is 
the same as the text of Sec.  1.167(a)-8T(g) published elsewhere in 
this issue of the Federal Register].
    (h) [The text of the proposed amendments to Sec.  1.167(a)-8(h) is 
the same as the text of Sec.  1.167(a)-8T(h) published elsewhere in 
this issue of the Federal Register].
    Par. 10. Section 1.168(i)-0 is amended by:
    1. Adding entries in the table of contents for paragraphs (b)(5), 
(b)(6), and (c)(3).
    2. Redesignating the entry in the table of contents for paragraph 
(d)(2) as the entry for paragraph (d)(4) and adding paragraphs (d)(2) 
and (d)(3).
    3. Redesignating the entry in the table of contents for paragraph 
(e)(2)(v) as the entry for (e)(2)(ix), and adding a new paragraph 
(e)(2)(v) and paragraphs (e)(2)(vi), (vii), and (viii).
    4. Redesignating the entry in the table of contents for paragraph 
(e)(3)(vi) as the entry for paragraph (e)(3)(vii) and adding a new 
paragraph (e)(3)(vi).
    5. Redesignating the entry in the table of contents for paragraph 
(h)(2) as the entry for paragraph (h)(3) and adding new paragraph 
(h)(2).
    6. Removing the entries in the table of contents for paragraphs 
(l)(1), (2), and (3) and redesignating the entries in the table of 
contents for paragraphs (k)(1), (2), and (3) as the entries for 
paragraphs (l)(1), (2), and (3), respectively.
    7. Redesignating the entry in the table of contents for paragraph 
(j) as the entry for paragraph (k) and redesignating the entry in the 
table of contents for paragraph (i) as paragraph (j), and adding a new 
paragraph (i).
    8. Adding paragraph (m).
    The additions read as follows:


Sec.  1.168(i)-0  Table of contents for the general asset account 
rules.

* * * * *


Sec.  1.168(i)-1  General asset accounts.

* * * * *
    (b) * * *
    (5) and (6) [The entries in the table of contents for the proposed 
amendments to Sec.  1.168(i)-1(b)(5) and (6) are the same as the 
entries in the table of contents for Sec.  1.168(i)-1T(b)(5) and (6) 
published elsewhere in this issue of the Federal Register].
    (c) * * *
    (3) [The entry in the table of contents for the proposed amendments 
to Sec.  1.168(i)-1(c)(3) is the same as the entry in the table of 
contents for Sec.  1.168(i)-1T(c)(3) published elsewhere in this issue 
of the Federal Register].
    (d) * * *
    (2) and (3) [The entries in the table of contents for the proposed 
amendments to Sec.  1.168(i)-1(d)(2) and (d)(3) are the same as the 
entries in the table of contents for Sec.  1.168(i)-1T(d)(2) and (3) 
published elsewhere in this issue of the Federal Register].
* * * * *
    (e) * * *
    (2) * * *
    (v) through (viii) [The entries in the table of contents for the 
proposed amendments to Sec.  1.168(i)-1(e)(2)(v) through (viii) are the 
same as the entries in the table of contents for Sec.  1.168(i)-
1T(e)(2)(v) through (viii) published elsewhere in this issue of the 
Federal Register].
* * * * *
    (e)(3) * * *
    (vi) [The entry in the table of contents for the proposed 
amendments to Sec.  1.168(i)-1(e)(3)(vi) is the same as the entry in 
the table of contents for Sec.  1.168(i)-1T(e)(3)(vi) published 
elsewhere in this issue of the Federal Register].
* * * * *
    (h) * * *
    (2) [The entry in the table of contents for the proposed amendments 
to Sec.  1.168(i)-1(h)(2) is the same as the

[[Page 81130]]

entry in the table of contents for Sec.  1.168(i)-1T(h)(2) published 
elsewhere in this issue of the Federal Register].
* * * * *
    (i) [The entry in the table of contents for the proposed amendments 
to Sec.  1.168(i)-1(i) is the same as the entry in the table of 
contents for Sec.  1.168(i)-1T(i) published elsewhere in this issue of 
the Federal Register].
* * * * *
    (m) [The entry in the table of contents for the proposed amendments 
to Sec.  1.168(i)-1(m) is the same as the entry in the table of 
contents for Sec.  1.168(i)-1T(m) published elsewhere in this issue of 
the Federal Register].
    Par. 11. Section 1.168(i)-1 is amended by:
    1. Revising paragraphs (a) through (l)(1); and
    2. Adding paragraph (m).
    The revisions and additions read as follows:


Sec.  1.168(i)-1  General asset accounts.

    (a) through (l)(1) [The text of the proposed amendments to Sec.  
1.168(i)-1(a) through (l)(1) is the same as the text of Sec.  1.168(i)-
1T(a) through (l)(1) published elsewhere in this issue of the Federal 
Register].
* * * * *
    (m) [The text of the proposed amendments to Sec.  1.168(i)-1(m) is 
the same as the text of Sec.  1.168(i)-1T(m) published elsewhere in 
this issue of the Federal Register].
    Par. 12. Section 1.168(i)-7 is added to read as follows:


Sec.  1.168(i)-7  Accounting for MACRS property.

    [The text of the proposed amendments to Sec.  1.168(i)-7 is the 
same as the text of Sec.  1.168(i)-7T published elsewhere in this issue 
of the Federal Register].
    Par. 13. Section 1.168(i)-8 is added to read as follows:


Sec.  1.168(i)-8  Dispositions of MACRS property.

    [The text of the proposed amendments to Sec.  1.168(i)-8 is the 
same as the text of Sec.  1.168(i)-8T published elsewhere in this issue 
of the Federal Register].
    Par. 14. Section 1.263(a)-0 is amended by:
    1. Revising the section headings to the table of contents for 
Sec. Sec.  1.263(a)-2 and 1.263(a)-3.
    2. Adding entries to the table of contents for Sec. Sec.  1.263(a)-
1, 1.263(a)-2, and 1.263(a)-3.
    The revisions and additions read as follows:


Sec.  1.263(a)-0  Table of contents.

* * * * *
    Sec.  1.263(a)-1 Capital expenditures; in general.
    (a) through (g) [The entries in the table of contents for the 
proposed amendments to Sec.  1.263(a)-1(a) through (g) are the same 
as the entries in the table of contents for Sec.  1.263(a)-1T(a) 
through (g) published elsewhere in this issue of the Federal 
Register].
    Sec.  1.263(a)-2 Amounts paid to acquire or produce tangible 
property.
    (a) through (k) [The entries in the table of contents for the 
proposed amendments to Sec.  1.263(a)-2(a) through (k) are the same 
as the entries in the table of contents for Sec.  1.263(a)-2T(a) 
through (k) published elsewhere in this issue of the Federal 
Register].
    Sec.  1.263(a)-3 Amounts paid to improve tangible property.
    (a) through (p) [The entries in the table of contents for the 
proposed amendments to Sec.  1.263(a)-3(a) through (p) are the same 
as the entries in the table of contents for Sec.  1.263(a)-3T(a) 
through (p) published elsewhere in this issue of the Federal 
Register].
* * * * *
    Par. 15. Section 1.263(a)-1 is revised to read as follows:


Sec.  1.263(a)-1  Capital expenditures; in general.

    [The text of the proposed amendments to Sec.  1.263(a)-1 is the 
same as the text of Sec.  1.263(a)-1T published elsewhere in this issue 
of the Federal Register].
    Par. 16. Section 1.263(a)-2 is revised to read as follows:


Sec.  1.263(a)-2  Amounts paid to acquire or produce tangible property.

    [The text of the proposed amendments to Sec.  1.263(a)-2 is the 
same as the text of Sec.  1.263(a)-2T published elsewhere in this issue 
of the Federal Register].
    Par. 17. Section 1.263(a)-3 is revised to read as follows:


Sec.  1.263(a)-3  Amounts paid to improve tangible property.

    [The text of the proposed amendments to Sec.  1.263(a)-3 is the 
same as the text of Sec.  1.263(a)-3T published elsewhere in this issue 
of the Federal Register].
    Par. 18. Section 1.263(a)-6 is added to read as follows:


Sec.  1.263(a)-6  Election to deduct or capitalize certain 
expenditures.

    [The text of the proposed amendments to Sec.  1.263(a)-6 is the 
same as the text of Sec.  1.263(a)-6T published elsewhere in this issue 
of the Federal Register].
    Par. 19. Section 1.263A-1 is amended by:
    1. Adding paragraph (b)(14).
    2. Revising paragraph (c)(4).
    3. Revising paragraph (e)(2)(i)(A).
    4. Revising paragraph (e)(3)(ii)(E).
    5. Revising paragraph (l).
    6. Adding paragraph (m).
    The additions and revisions read as follows:


Sec.  1.263A-1  Uniform capitalization of costs.

* * * * *
    (b) * * *
    (14) [The text of the proposed amendments to Sec.  1.263A-1(b)(14) 
is the same as the text of Sec.  1.263A-1T(b)(14) published elsewhere 
in this issue of the Federal Register].
* * * * *
    (c) * * *
    (4) [The text of the proposed amendments to Sec.  1.263A-1(c)(4) is 
the same as the text of Sec.  1.263A-1T(c)(4) published elsewhere in 
this issue of the Federal Register].
* * * * *
    (e) * * *
    (2) * * *
    (i) * * *
    (A) [The text of the proposed amendments to Sec.  1.263A-
1(e)(2)(i)(A) is the same as the text of Sec.  1.263A-1T(e)(2)(i)(A) 
published elsewhere in this issue of the Federal Register].
* * * * *
    (3) * * *
    (ii) * * *
    (E) [The text of the proposed amendments to Sec.  1.263A-
1(e)(3)(ii)(E) is the same as the text of Sec.  1.263A-1T(e)(3)(ii)(E) 
published elsewhere in this issue of the Federal Register].
* * * * *
    (l) [The text of the proposed amendments to Sec.  1.263A-1(l) is 
the same as the text of Sec.  1.263A-1T(l) published elsewhere in this 
issue of the Federal Register].
    (m) [The text of the proposed amendments to Sec.  1.263A-1(m) is 
the same as the text of Sec.  1.263A-1T(m) published elsewhere in this 
issue of the Federal Register].
    Par. 20. Section 1.1016-3 is amended by:
    1. Revising paragraphs (a)(1)(ii) and (j)(1).
    2. Adding paragraph (j)(3).
    The addition and revision read as follows:


Sec.  1.1016-3  Exhaustion, wear and tear, obsolescence, amortization, 
and depletion for periods since February 13, 1913.

    (a) * * *
    (1) * * *
    (ii) [The text of the proposed amendments to Sec.  1.1016-
3(a)(1)(ii) is the same as the text of Sec.  1.1016-3T(a)(1)(ii) 
published elsewhere in this issue of the Federal Register].
* * * * *

[[Page 81131]]

    (j) * * *
    (1) [The text of the proposed amendments to Sec.  1.1016-3(j)(1) is 
the same as the text of Sec.  1.1016-3T(j)(1) published elsewhere in 
this issue of the Federal Register].
* * * * *
    (3) [The text of the proposed amendments to Sec.  1.1016-3T(j)(3) 
is the same as the text of Sec.  1.1016-3T(j)(3) published elsewhere in 
this issue of the Federal Register].

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2011-32246 Filed 12-23-11; 8:45 am]
BILLING CODE 4830-01-P