The IRS is working on additional guidance in response to Congress' modification and planned phaseout for bonus depreciation of property, according to Kathleen Reed, chief of Branch 7 in the IRS's Income Tax and Accounting Division.
The changes, made as part of the Protecting Americans from Tax Hikes Act (Pub. L. No. 114-113), extends bonus depreciation to property acquired and placed in service through 2019, but phases out the benefit by gradually cutting the depreciation percentage from 50 percent to 30 percent. The Act also provides an election to modify bonus depreciation to include certain trees, vines and plants bearing fruit or nuts to be eligible for bonus depreciation when planted or grafted, rather than when placed in service. It also allows taxpayers to elect to accelerate the use of prior year minimum tax credits in lieu of bonus depreciation under special rules for property placed in service during 2015. Beginning in 2016, the act modifies the minimum tax credit rules by increasing the amount of unused minimum tax credits that may be claimed in lieu of bonus depreciation.
Reed, speaking at the Jan. 29 American Bar Association Section of Taxation midyear conference in Los Angeles, said the new law's phase-outs and changes to elections have already prompted questions from tax professionals, prompting the IRS to work on new guidance.